United States District Court, N.D. Alabama, Eastern Division
KEE GOOSTREE, as representative of the ESTATE OF ALTON H. PADGETT, and JEAN G. PADGETT, Plaintiffs,
LIBERTY NATIONAL LIFE INSURANCE COMPANY and ROBERT D. BICE, Defendants.
OWEN BOWDRE CHIEF UNITED STATES DISTRICT JUDGE
filed a putative class action consisting of people located in
Alabama who purchased or owned life insurance policies
through Defendants for which their premiums paid exceed their
death benefits payable. They sued Liberty National Life
Insurance Company and Liberty National insurance agent Robert
D. Bice for various claims relating to Defendants allegedly
recommending and selling insurance policies to Plaintiffs
that were inappropriate for Plaintiffs' needs. On January
11, 2019, Defendants removed this insurance dispute action to
federal court. (Doc. 1). In their notice of removal,
Defendants alleged that the court has diversity of
citizenship jurisdiction over the case and that the court
should disregard the citizenship of Mr. Bice, the insurance
agent, because they asserted that Plaintiffs fraudulently
joined Mr. Bice as a defendant. Plaintiffs did not seek
Liberty National and Mr. Bice each filed a motion to dismiss.
(Docs. 3-4). Mr. Bice's motion to dismiss argues
essentially what Defendants noted in their notice of removal
regarding fraudulent joinder: Plaintiffs' claims against
Mr. Bice are barred by Alabama Code § 6-5-462 and
Plaintiffs failed to state a claim as a matter of law against
Mr. Bice, the non-diverse Defendant.
this case can proceed, the court must ensure that it has
subject matter jurisdiction. See Ex parte McCardle,
74 U.S. (7 Wall.) 506, 514 (1868) (“[W]ithout
jurisdiction the court cannot proceed at all in any cause. .
. . [W]hen [jurisdiction] ceases to exist, the only function
remaining to the court is that of announcing the fact and
dismissing the case.”). Although Plaintiffs did not
move for remand, the court must sua sponte determine
whether it has subject matter jurisdiction. See Univ. of
S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 409 (11th Cir.
1999) (“Indeed, [the law] is well settled that a
federal court is obligated to inquire into subject matter
jurisdiction sua sponte whenever it may be
travel in federal court on diversity of citizenship
jurisdiction, the removing party must prove two elements: (1)
all plaintiffs are completely diverse from all defendants,
and (2) the amount in controversy exceeds $75, 000. 28 U.S.C.
§ 1332. Plaintiffs do not dispute that Liberty National
is diverse from all Plaintiffs or that the amount in
controversy exceeds $75, 000. But Mr. Bice and Plaintiffs are
all citizens of Alabama. Unless Plaintiffs fraudulently
joined Mr. Bice, his citizenship and presence in this case
will defeat diversity jurisdiction.
argue that Plaintiffs fraudulently joined Mr. Bice to defeat
jurisdiction. “When a plaintiff names a non-diverse
defendant solely . . . to defeat federal diversity
jurisdiction, the district court must ignore the presence of
the non-diverse defendant . . . .” Henderson v.
Wash. Nat'l Ins., 454 F.3d 1278, 1281 (11th Cir.
2006). And one way in which a defendant can prove fraudulent
joinder is by demonstrating that under “no possibility
[can] plaintiff establish a cause of action against the
resident defendant.” Id. (quoting Crowne
v. Coleman, 113 F.3d 1536, 1538 (11th Cir. 1997)). So,
whether Plaintiffs have failed to state a claim upon which
relief can be granted against Mr. Bice and whether Plaintiffs
fraudulently joined Mr. Bice to defeat subject matter
jurisdiction are related inquiries.
court ordered Plaintiffs to show cause why Plaintiffs stated
a claim against Mr. Bice. (Doc. 9). The court did not order
briefing on whether jurisdiction exists under CAFA because
the court first wanted to explore diversity of citizenship
jurisdiction. Plaintiffs filed their response on February 11,
2019. (Doc. 12). Liberty Mutual then sought permission from
the court to file a reply brief, (doc. 14), which the court
allowed as to both Defendants. (Doc. 15). On February 28,
2019, Mr. Bice and Liberty Mutual each filed a reply brief.
(Docs. 17-18). The parties have fully briefed the issue of
diversity of citizenship jurisdiction, which is now ripe for
allege in this putative class action that Liberty National
operates an unlawful scheme to sell low face value life
insurance policies to low income consumers. Specifically,
they allege that “Liberty National targeted consumers
who are under-educated and/or unsophisticated with respect to
insurance and related financial dealings, the language of the
policies, and methods of determining premium payments whereby
the premiums paid on such policies far exceeded the
policy's face value.” (Doc. 1-1 at 8). The policies
supposedly require Plaintiffs to pay premiums that exceed the
death benefit payable pursuant to the policy. According to
Plaintiffs, the policies generated profits at no risk to
Liberty National and its agents, but provided no economic
benefit to Plaintiffs.
Alton Padgett and Mrs. Jean Padgett are the named Plaintiffs
in this lawsuit. Mr. Padgett died in May 2018 at the age of
88, and Mrs. Padgett is now 82 years old. Mr. Bice has been
their insurance agent since 1985. According to the complaint,
Mr. Bice “knew and understood the Plaintiffs' age,
employment, financial status, lack of dependents, and station
in life.” (Doc. 1-1 at 11). For example, Mr. Bice knew
that Mrs. Padgett was retired and receiving social security
since 1998, and Mr. Padgett was earning less than $16, 000
annually through his job at Piggly Wiggly. Mr. Bice
recommended and induced the Padgetts into purchasing multiple
insurance policies, for which the premiums collectively
exceeded $14, 000 per year. Mr. Bice continuously represented
to the Padgetts that “such additional insurance was
financially appropriate and beneficial to Plaintiffs,
consistent with Plaintiffs' profile, needs and financial
situation” despite his knowledge that “each
successive policy would cost more in premiums than the death
benefit payable under the policy.” (Id. at
Padgetts allege that their “agreement [with Mr. Bice
and Liberty National] contemplated an implied covenant of
good faith and fair dealing.” (Doc. 1-1 at 12). As of
2015, the Padgetts purchased 14 life insurance policies for
which they paid more than $14, 000 per year in premiums for a
collective death benefit of $134, 000 in reliance on Mr.
Bice's recommendations. The initial policy Mr. Padgett
bought from Mr. Bice in 1988 had a death benefit of $6, 701.
(Doc. 1-3 at 1; Doc. 1-5 at 1). The initial policy for Mrs.
Padgett from Mr. Bice in 1989 had a death benefit of $7, 816.
(Doc. 1-3 at 1). In 2017, Mr. Padgett requested to cash out
his insurance policies, which he could no longer afford. Mr.
Bice explained that a “cash out” was not
permitted, but recommended that the Padgetts convert their
policies into a “Reduced, Paid Up” policy. Under
this “Reduced, Paid Up” policy, the Padgetts were
no longer obligated to pay premiums, but the total death
benefit payable under the policies was reduced to $45, 000.
By this time, the Padgetts had paid more than $188, 000 in
premiums on the policies.
October 19, 2018, the Padgetts filed this suit individually
and on behalf of all others similarly situated against
Liberty National and Mr. Bice in the Circuit Court of
Talladega County, Alabama. The complaint alleges eight
claims: breach of contract; breach of implied covenant of
good faith and fair dealing; conversion; rescission; unjust
enrichment; declaratory and injunctive relief; negligence,
willfulness, and/or wantonness in the recommendation and sale
of life insurance policies; and negligent and/or wanton
training and supervision. Four of these claims appear to be
against Mr. Bice: breach of contract; breach of implied
covenant of good faith and fair dealing; declaratory and
injunctive relief; and negligence, willfulness, and/or
wantonness in the recommendation and sale of life insurance
January 11, 2019, Liberty National removed this case to
federal court. Mr. Bice joined in the removal. Liberty
National asserts that this court has diversity of citizenship
jurisdiction over this case. Liberty National is a citizen of
Texas and Nebraska, Mr. Bice is a citizen of Alabama, and
Plaintiffs are citizens of Alabama. Liberty National alleges
that Plaintiffs fraudulently joined Mr. Bice, and so the
court should disregard his citizenship when evaluating
January 15, 2019, Mr. Bice filed his motion to dismiss,
contending that Plaintiffs had ...