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Gabriel v. Life Options International, Inc.

United States District Court, S.D. Alabama, Northern Division

April 30, 2015

ROBERT GABRIEL, et al., Plaintiffs,


CALLIE V.S. GRANADE, District Judge.

This matter is before the Court on the following motions: Defendant Veritrust's motion to remand (Doc. 20), Plaintiffs' motion to remand (Doc. 24), Defendant Chartis Specialty's opposition to both motions to remand (Doc. 26), Defendant Chartis Specialty's motion to realign (Doc. 27), and Defendant Veritrust's (Doc. 28) and Plaintiffs (Doc. 29) responses in opposition to the motion to realign.

Upon consideration of the motions, the responses of the parties, and for the reasons set forth below, the Court finds that Veritrust Financial's and Plaintiffs motion to remand is due to be denied and Defendant Chartis Specialty's motion to realign is due to be granted.


This case arises from a tangled web of litigation that began in the Circuit Court of Dallas County, Alabama.

On January 17, 2012, Plaintiffs Robert Gabriel, Joseph Habshey, Mary Shanklin, and Carl Most filed suit in the Circuit Court of Dallas County, Alabama, against Michael J. Howard, Life Options International, Inc., Mike Howard Financial Services, Inc. (the "Howard Defendants"), Aragon n/k/a Veritrust Financial, LLC ("Veritrust"), and Northeast Escrow Services, LLC, alleging claims arising from the sale of viatical settlements in the mid-1990's (the "Viatical suit"). (Doc. 1, Exh. B). Plaintiffs alleged that the Howard Defendants, who are an Alabama insurance agent and his affiliated Alabama corporations, sold the viatical settlements while acting as agents for Veritrust, a Securities Broker-Dealer headquartered in Texas. (Doc. 1, Exh. B, pp. 4-9)

Between January 2012 and September 2013, Plaintiffs amended the Complaint in the Viatical suit four times. Veritrust actively defended the Viatical suit, filing answers to all but the fourth amended Complaint. (Doc. 1, Exh. B). The Howard Defendants filed an answer to the Complaint and amended Complaint in May 2012, but never responded to the second, third, and fourth amended Complaints. (Id.) Northeast Escrow never filed a response to any Complaint. On March 29th, 2012, the Circuit Court of Dallas County dismissed the claims against defendant Northern Escrow without prejudice. (Id. at 57).

In the fourth amended complaint, Plaintiffs moved to replace Robert Gabriel with RMG International, a foreign corporation based in the Netherlands, and AZMACOMP, Inc., who the plaintiffs' allege is a foreign corporation doing business by agent in Alabama. (Id. at 204). Curiously, the Court can find no evidence of the existence of AZMACOMP, Inc., let alone its corporate headquarters. The Circuit Court in Dallas County granted the request to replace Plaintiff Robert Gabriel with these two corporations. (Id. at 208).

Before trial, the parties filed a Settlement Status report in the Viatical suit stating that "[t]he Parties have circulated a final confidential settlement agreement and obtained some but not all of the necessary signatures for execution." (Id. at 223). The parties believed the release executed between Plaintiffs and Veritrust releases Plaintiffs' claims against the Howard Defendants, either specifically, by name, or generally, as agents for Veritrust. (Docs. 10, 12).

On April 14, 2014, the "Plaintiffs and Defendants" in the Viatical Lawsuit filed a Joint Motion to Enter Judgment against Veritrust for $5.1 million, with a $100, 000 settlement payment to be paid to Plaintiffs by Veritrust within 10 days. (Doc. 1, Exh. B, p. 225). On April 17, 2014, the Circuit Court of Dallas County entered judgment against Veritrust for $5.1 million. (Id. at 228).

Neither Plaintiffs nor Veritrust moved to dismiss the Viatical Lawsuit after the settlement and entry of judgment against Veritrust. Instead, on June 19, 2014, Plaintiffs filed in the Viatical Lawsuit a post-judgment Fifth Amended Complaint adding Chartis Specialty, an insurance company based in Illinois, as a defendant and asserting judgment creditor insurance garnishment claims under Ala. Code § 27-23-2. (Id. at 229). The Complaint seeks indemnity coverage from Chartis Specialty for the $5.1 million consent judgment under the Chartis Securities Broker/Dealer's Professional Liability Insurance policy issued to Veritrust. (Id.)

On July 11, 2014, Veritrust filed a post-judgment Cross-Claim Complaint against Chartis Specialty alleging claims for breach of contract and bad faith failure to provide a defense to Veritrust in the Viatical Lawsuit. (Id. at 235).

On July 29, 2014, plaintiffs amended their complaint a sixth, and then due to a spelling error, a seventh time, to add Mary Sikora, a Texas resident, as a plaintiff. (Id. at 237-40).

On July 31, 2014, Chartis Specialty removed this action to federal court pursuant to 28 U.S.C. §§ 1331, 1441, and 1446. On August 5, 2014, Chartis then answered plaintiffs complaint (Doc. 6) and Veritrust's cross-claim complaint (Doc.7).

On August 9, 2014, the Howard defendants filed a motion to dismiss the claims against them citing that the mutual settlement in state court released them from the case. (Doc. 12). Furthermore, the Howard Defendants cited a separate action and settlement of Mary Sikora, which released the Howard Defendants from her case as well. (Doc. 10). The court granted the Howard Defendants' motion to dismiss on August 18, 2014. (Doc. 18).

On August 22, 2014, Veritrust filed a motion to remand to state court claiming removal occurred after the one-year time limit, lack of diversity of parties and lack of their own consent as defendants. (Doc. 20). On September 2, 2014, Plaintiffs filed a motion for remand to state court that also claimed lack of diversity, ...

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