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Southern Wholesale Fibers and Recycling, Inc. v. Evanston Insurance Co.

United States District Court, N.D. Alabama, Middle Division

May 21, 2019

SOUTHERN WHOLESALE FIBERS & RECYCLING, INC., Plaintiff,
v.
EVANSTON INSURANCE COMPANY, et al., Defendants.

          MEMORANDUM OPINION

          VIRGINIA EMERSON HOPKINS SENIOR UNITED STATES DISTRICT JUDGE

         This civil action was originally filed on December 10, 2018, in the Circuit Court of DeKalb County, Alabama, by the Plaintiff, Southern Wholesale Fibers & Recycling, Inc. (“Southern”), against the Defendants Evanston Insurance Company (“Evanston”), Thompson Insurance, Inc. (“Thompson”), and Robert W. Grubbs, individually and as an agent for Thompson. (Doc. 1-1 at 3). On January 9, 2019, Evanston removed the case to this Court. (Doc. 1). The case is now before the Court on the Plaintiff's Motion To Remand (the “Motion”). (Doc. 10). For the reasons set out herein, the Motion will be GRANTED and this case will be remanded. In the Motion, Southern also seeks an order pursuant to 28 U.S.C. § 1447(c) requiring Evanston to pay costs and fees associated with the removal. That request will be DENIED

         I. STANDARD FOR REMAND

         “Federal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). “[T]he party seeking to remove [a] case to federal court bears the burden of establishing federal jurisdiction.” Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 752 (11th Cir. 2010) (internal quotations and citations omitted).

That burden goes not only to the issue of federal jurisdiction, but also to questions of compliance with statutes governing the exercise of the right of removal. Albonetti v. GAF Corporation-Chemical Group, 520 F.Supp. 825, 827 (S.D. Texas 1981); Jennings Clothiers of Ft. Dodge, Inc. v. U.S. Fidelity & Guaranty Co., 496 F.Supp. 1254, 1255 (D.Iowa 1980); Fort v. Ralston Purina Company, 452 F.Supp. 241, 242 (E.D.Tenn.1978).

Parker v. Brown, 570 F.Supp. 640, 642 (D.C. Ohio, 1983). The removal statute must be strictly construed against removal, and any doubts should be resolved in favor of remand. See, City of Vestavia Hills v. Gen. Fid. Ins. Co., 676 F.3d 1310, 1313 (11th Cir. 2012) (“[b]ecause removal jurisdiction raises significant federalism concerns, federal courts are directed to construe removal statutes strictly. Indeed, all doubts about jurisdiction should be resolved in favor of remand to state court.”) (citation omitted). Finally, in considering a motion to remand, a court may consider evidence submitted after the removal petition is filed, “‘but only to establish the facts present at the time of removal.'” Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 751 (11th Cir. 2010) (quoting Sierminski v. Transouth Financial Corp., 216 F.3d 945, 949 (11th Cir. 2000)).

         Evanston removed this case alleging that this Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(1) (doc. 1 at 2), which provides, inter alia, that “[t]he district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between . . . citizens of different States.” 28 U.S.C. §1332(a)(1). “Diversity jurisdiction requires complete diversity; every plaintiff must be diverse from every defendant.'” Rivas v. The Bank of New York Mellon, 676 Fed.Appx. 926, 930 (11th Cir. 2017) (quoting, Flintlock Constr. Servs., LLC v. Well-Come Holdings, LLC 710 F.3d 1221, 1224 (11th Cir. 2013) (internal quotation marks omitted)). In the instant case there is no dispute that the Plaintiff, and Defendants Thompson and Grubbs, are all citizens of Alabama. However, Evanston contends that the citizenship of Thompson and Grubbs should be disregarded because they are “fraudulently joined.” Under the doctrine of fraudulent joinder, “[w]hen a plaintiff names a non-diverse defendant solely in order to defeat federal diversity jurisdiction, the district court must ignore the presence of the non-diverse defendant and deny any motion to remand the matter back to state court.” Henderson v. Washington Nat. Ins. Co., 454 F.3d 1278, 1281 (11th Cir. 2006).

         “‘In a removal case alleging fraudulent joinder, the removing party has the burden of proving that either: (1) there is no possibility the plaintiff can establish a cause of action against the resident defendant; or (2) the plaintiff has fraudulently pled jurisdictional facts to bring the resident defendant into state court.'” Berber v. Wells Fargo Bank, N.A., No. 18-11102, 2019 WL 126749, at *3 (11th Cir. Jan. 8, 2019) (quoting Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir.1997)). In the instant case, Evanston argues only there is no possibility that Southern can establish a cause of action against either Thompson or Grubbs. “‘The determination of whether a resident defendant has been fraudulently joined must be based upon the plaintiff's pleadings at the time of removal, supplemented by any affidavits and deposition transcripts submitted by the parties.'” Taylor Newman Cabinetry, Inc. v. Classic Soft Trim, Inc., 436 Fed.Appx. 888, 890 (11th Cir. 2011) (quoting Pacheco de Perez v. AT & T Co., 139 F.3d 1368, 1380 (11th Cir.1998)). The standard for analyzing the claims is “a lax one.” Stillwell v. Allstate Ins. Co., 663 F.3d 1329, 1333 (11th Cir. 2011). As the Eleventh Circuit stated in Stillwell,

“To determine whether the case should be remanded, the district court must evaluate the factual allegations in the light most favorable to the plaintiff and must resolve any uncertainties about state substantive law in favor of the plaintiff.” Crowe, 113 F.3d at 1538.1 In making this determination, “federal courts are not to weigh the merits of a plaintiff's claim beyond determining whether it is an arguable one under state law.” Id. “If there is even a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants, the federal court must find that the joinder was proper and remand the case to the state court.” Coker v. Amoco Oil Co., 709 F.2d 1433, 1440-41 (11th Cir.1983), superceded by statute on other grounds as stated in Georgetown Manor, Inc. v. Ethan Allen, Inc., 991 F.2d 1533 (11th Cir.1993). In other words, “[t]he plaintiff need not have a winning case against the allegedly fraudulent defendant; he need only have a possibility of stating a valid cause of action in order for the joinder to be legitimate.” Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir.1998)
This standard differs from the standard applicable to a 12(b)(6) motion to dismiss. To survive a 12(b)(6) motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). This plausibility standard “asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. In contrast, all that is required to defeat a fraudulent joinder claim is “a possibility of stating a valid cause of action.” Triggs, 154 F.3d at 1287.

Stillwell, 663 F.3d at 1332-33. At the end of the day, this Court may deny the Motion To Remand only if Evanston has carried its burden to prove, by clear and convincing evidence, that there is no possibility that Southern can establish a cause of action against Thompson and/or Grubbs. Henderson, 454 F.3d at 1283. This burden is “a ‘heavy one.'” Crowe, 113 F.3at 1538.

         II. FACTS [1]

         Southern owned two facilities - a plant on Sand Valley Road in Fort Payne, Alabama (the “Sand Valley Road plant”), and an older facility in Ider, Alabama (the “Ider plant”). (Doc. 10-1 at 2, ¶3). Both facilities were insured under policies issued by Evanston, and purchased by Southern through Thompson and its agent Grubbs. (Doc. 1-1 at 5, ¶7; doc.10-1 at 3, ¶¶ 4, 6). According to Terry Romans, the president of Southern,

before January 5, 2017, the Ider facility had $2, 970, 900 in insurance limits for business personal property, and $1, 800, 000 in insurance limits for business income with extra expense. The Sand Valley Road plant had $800, 000 in insurance limits for business personal property, and no insurance for business income with extra expense coverage.

(Doc. 10-1 at 3, ¶4). In the months before January of 2017, Southern expanded the Sand Valley Road plant and moved much of its operations there. (Doc. 10-2, ¶5). During this same time, Southern informed Grubbs and Thompson of these developments, and told Grubbs and Thompson that eventually it would need to transfer the larger business personal property coverage and the business income coverage from the Ider plant to the Sand Valley Road plant. (Doc. 1-1 at 5-6, ¶10; doc. 10-1 at 3, ¶5). According to Roman, Grubbs said that transfer of the coverages “would be fast and easy.” (Doc. 10-1 at 4). Roman stated:

More than once, Mr. Grubbs told Southern that moving the coverages would need only a phone call. Once Southern called him and directed him to make the change, Mr. Grubbs repeatedly assured Southern, he could transfer the coverages immediately.

(Doc. 10-1 at 4, ¶7) (see also doc. 1-1 at 5, ¶10 (“The Plaintiff . . . was informed by the Defendants that all they had to do was make a phone call, when appropriate.”)).

         On January 5, 2017, Southern called Grubbs and told Grubbs to move $2, 000, 000 in business personal property coverage, and $1, 800, 000 in business income coverage, from the Ider location to the Sand Valley Road location due to the fact that the Sand Valley Road site had significantly more equipment and work. (Doc. 10-1 at 4, ¶8) (see also, doc. 1-1 at 6, ¶11 (“Plaintiff . . . requested the Defendants to provide the appropriate changed or transfer of insurance coverage.”)). Two days later, on January 7, 2019, a fire caused significant losses at the Sand Valley Road plant. (Doc. 1-1 at 5, ¶6; doc. 10-1 at 4, ¶9). As explained by Roman in his affidavit:

That same day, Southern called Mr. Grubbs to report the loss and file a claim. Later, Mr. Grubbs told Southern that the requested change of coverages had not been made. The Sand Valley Road site was still covered under the old, lower-limits coverage for business personal property, and had no business income with extra expense coverage. When Southern asked why he had not made the requested change, Mr. Grubbs answered (though this is a paraphrase) that the paperwork needed to secure the additional coverage for Sand Valley Road hadn't gone through.

(Doc. 10-1 at 4-5, ¶9) (see also, doc. 1-1 at 6, ¶11 (“Defendants failed to [secure the coverage].”).

         The loss was adjusted by Evanston under the policy limits which had been in effect prior to January 5, 2017, allegedly leaving Southern with at least $2, 000, 000 in unpaid business personal property losses and lost business income. (Doc. 10-1 at 5). Southern also alleges that there are unpaid and disputed amounts that it seeks from ...


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