United States District Court, N.D. Alabama, Northwestern Division
MEMORANDUM OPINION
This
opinion addresses doc. no. 37: “Plaintiff's Motion
to Vacate or Amend Judgment Denying Remand, or in the
Alternative, Motion to Reconsider Interlocutory Order Denying
Remand.”[1]
I.
BACKGROUND
The
Franklin County, Alabama Commission (hereafter, either
“plaintiff” or “the Commission”)
commenced this action in the Circuit Court of that same
County against five named defendants:[2] i.e.,
(1) Crista Madden, who formerly resided in
Franklin County, and who, during such residency, was an
employee of the plaintiff, from which she embezzled over a
period of years the sum of $753, 889.21, [3] but who presently
is housed in the Julia Tutwiler State Prison for Women
located in Elmore County, Alabama;[4]
(2) State Farm Fire and Casualty Company, an
Illinois corporation that insured the Franklin County
Commission for employee theft, but which refused to pay the
full amount claimed by that Commission for Madden's
theft;[5]
(3) Lafayette Insurance Company, a Louisiana
corporation[6] that also insured the Franklin County
Commission for employee theft under a policy that had been
purchased through the fourth defendant, Sinclair Lawrence
& Associates, Inc., but Lafayette, like State Farm, also
refused to pay the full amount of the Commission's claim
for Madden's theft;
(4) Sinclair Lawrence & Associates,
Inc., a Russellville, Alabama agency which had
assisted in the procurement of insurance coverage for the
Franklin County Commission through Lafayette Insurance
Company;[7] and,
(5) Debbie Thorn, a citizen of
Alabama[8] who was an employee of Sinclair Lawrence
& Associates during the periods that the Lafayette
Insurance Company policies issued to plaintiff were in force
and effect.[9]
The
complaint filed by the Commission in state court asserts
state law claims for: (1) conversion against Crista Madden;
(2) breach of contract against State Farm Fire and Casualty
Company; (3) breach of contract against Lafayette Insurance
Company; and (4) fraudulent suppression against Sinclair
Lawrence & Associates, Lafayette, and Debbie
Thorn.[10] Lafayette removed the case from state
court, asserting that this court possessed jurisdiction under
the diversity statute, 28 U.S.C. § 1332, [11]because the
Alabama residents named as defendants were fraudulently
joined or misjoined for the purpose of preventing federal
jurisdiction.[12]
Plaintiff
moved to remand, [13] and this court denied that motion in a
memorandum opinion and order entered on May 17,
2019.[14] In doing so, this court first held that
plaintiff's conversion claim against the non-diverse
defendant Crista Madden had been fraudulently misjoined under
Federal Rule of Civil Procedure 20 because the other
defendants would not be jointly and severally liable with
Madden on that claim, [15] and because Madden's numerous
acts of embezzlement “did not arise out of the same
transaction, occurrence, or series of events as the insurance
companies' alleged breach of their insurance contracts or
the alleged fraudulent suppression of material facts by
Sinclair Lawrence & Associates, Lafayette, and
Thorn.” Doc. no. 30 (Memorandum Opinion), at 6-7;
see also, e.g., Colormasters, LLC v.
Research Solutions Group, Inc., No. 4:17-CV-0561-VEH,
2017 WL 3605337, at *3 (N.D. Ala. Aug. 22, 2017) (“The
Eleventh Circuit . . . recognizes a third type of fraudulent
joinder where ‘a diverse defendant is joined with a
nondiverse defendant as to whom there is no joint, several,
or alternative liability and where the claim against the
diverse defendant has no real connection to the claim against
the nondiverse defendant.'”) (quoting Triggs v.
John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir.
1998)).
That
memorandum opinion also held, based upon the Alabama Supreme
Court's opinion in Somnus Mattress Corp. v.
Hilson, __ So.3d __, No. 1170250, 2018 WL 6715777 (Ala.
Dec. 21, 2018), [16] that non-diverse defendants Sinclair
Lawrence & Associates and Debbie Thorn were fraudulently
joined. See, e.g., Stillwell v.
Allstate Insurance Co., 663 F.3d 1329, 1332 (11th Cir.
2011) (“To establish fraudulent joinder, ‘the
removing party has the burden of proving [by clear and
convincing evidence] 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.'”) (quoting Crowe v.
Coleman, 113 F.3d 1536, 1538 (11th Cir. 1997))
(alteration in original).
The
Alabama Supreme Court's decision in the Somnus
Mattress Corp. case stands for the proposition that,
absent a special relationship, the duty of reasonable care
and diligence owed to insured clients by an insurance agency
and its sales agents
does not include an affirmative, continuing
obligation to inform or advise an insured regarding the
availability or sufficiency of insurance coverage. See,
e.g., Peter v. Schumacher Enterprises, Inc., 22
P.3d 481, 482-83, 486 (Alaska 2001); Szelenyi v. Morse,
Payson & Noyes Ins., 594 A.2d 1092, 1094 (Me. 1991);
Sadler v. Loomis, 139 Md.App. 374, 776 A.2d 25, 46
(2001); Robinson v. Charles A. Flynn Ins. Agency, 39
Mass.App.Ct. 902, 653 N.E.2d 207, 207-08 (1995); Harts v.
Farmers Ins. Exchange, 461 Mich. 1, 597 N.W.2d 47, 48
(1999); Murphy v. Kuhn, 90 N.Y.2d 266, 660 N.Y.S.2d
371, 682 N.E.2d 972, 974 (1997); Nelson v. Davidson,
155 Wis.2d 674, 456 N.W.2d 343, 344 (1990). But see SW
Auto Painting v. Binsfeld, 183 Ariz. 444, 904 P.2d 1268,
1271-72 (1995); Dimeo v. Burns, Brooks & McNeil,
Inc., 6 Conn.App. 241, 504 A.2d 557, 559 (1986).
“That general duty of care excludes an affirmative
obligation to give advice regarding the availability or
sufficiency of coverage for several persuasive reasons. Some
courts have reasoned that insureds are in a better position
[than an insurance agency and its sales agents] to assess
their assets and the risk of loss to which they may be
exposed. See, e.g., Peter, 22 P.3d
at 486; Sadler, 776 A.2d at 40; see also
Annotation, Liability of Insurer or Agent of Insurer for
Failure to Advise Insured as to Coverage Needs, 88
A.L.R.4th 249, 257 (1991) (‘unrealistic to impose on an
insurance agent the ongoing duty of surveillance with respect
to an insured's constantly changing
circumstances'[)]. These courts have also noted that
decisions regarding the amount of insurance coverage are
personal and subjective, based upon a trade-off between cost
and risk. See Peter, 22 P.3d at 486;
Sadler, 776 A.2d at 40. An insurance agent is in
no better position than the insured to predict the extent of
damage that the insured might incur at some time in the
future. See Sadler, 776 A.2d at 40;
Murphy, 90 N.Y.2d 266, 660 N.Y.S.2d 371, 682 N.E.2d
at 976.
“Imposing liability on insurance agents for failing
to advise insureds regarding the sufficiency of their
insurance coverage would ‘remove any burden from the
insured to take care of his or her own financial needs and
expectations in entering the marketplace and choosing from
the competitive products available,'
Nelson, 456 N.W.2d at 346, and would convert agents
into ‘risk managers with guarantor status.'
Sadler, 776 A.2d at 40-41 (quotation omitted);
see also Murphy, 90 N.Y.2d 266, 660 N.Y.S.2d 371,
682 N.E.2d at 976.
Significantly, ‘the creation of a duty to advise could
afford insureds the opportunity to insure after the loss by
merely asserting they would have bought the additional
coverage had it been offered.' Nelson, 456
N.W.2d at 346. ‘This would amount to retroactive
insurance, a concept that turns the entire theory of
insurance on its ear.' Peter, 22 P.3d at 486
(quotation omitted).”
Somnus Mattress Corp., 2018 WL 6715777, at *6 - *7
(quoting Sintros v. Hamon, 148 N.H. 478, 480-81, 810
A.2d 553, 555-56 (2002) (emphasis and alterations supplied).
In
addition to denying plaintiff's motion to remand, this
court's May 17, 2019 memorandum opinion and accompanying
order also: (1) granted the motion to dismiss filed by
defendants Sinclair Lawrence & Associates and Debbie
Thorn, because there was no possibility plaintiff could state
a cause of action against those defendants in view of the
Alabama Supreme Court's holding in the Somnus
Mattress Corp. case; (2) dismissed
plaintiff's conversion claim against defendant Crista
Madden; and (3) retained jurisdiction over the claims
asserted by plaintiff against the diverse insurance
companies, defendants State Farm and Lafayette.[17] The order of
dismissal did not specify, however, whether the dismissal of
plaintiff's claims against defendants Sinclair Lawrence
& Associates, Debbie Thorn, and Crista Madden were with
or without prejudice.[18]
Plaintiff
filed the motion that is the subject of this memorandum
opinion on June 7, 2019.[19]
II.
DISCUSSION OF MOTION TO VACATE OR AMEND
Plaintiff
rests the present motion upon Federal Rule of Civil Procedure
59(e), which does not set forth specific grounds for relief,
but simply states that: “A motion to alter or amend a
judgment must be filed no later than 28 days after the entry
of the judgment.” Fed.R.Civ.P. 59 (e). Accordingly, the
decision of whether the prior memorandum opinion and
accompanying order should be altered or amended is committed,
at least in the first instance, to the sound discretion of
this court. See, e.g., American Home
Assurance Co. v. Glenn Estess & Associates, Inc.,
763 F.2d 1237, 1238-39 (11th Cir. 1985).
The
only acceptable grounds for granting a Rule 59(e) motion are
either newly-discovered evidence, or manifest errors of law
or fact. See, e.g., United States v.
Marion, 562 F.3d 1330, 1335 (11th Cir. 2009) (citing
Arthur v. King, 500 F.3d 1335, 1343 (11th Cir. 2007)
(per curiam)).
A.
Misjoinder - Crista Madden
With
regard to the issue of whether Crista Madden was misjoined,
plaintiff presents only arguments that either were
raised, or that could have been raised, in
support of the prior motion to remand. The motion to vacate
or amend could be denied on that basis alone. See,
e.g., Wilchombe v. TeeVee Toons, Inc., 555
F.3d 949, 957 (11th Cir. 2009) (holding that Rule 59(e) may
“‘not be used to relitigate old matters or to
present arguments or evidence that could have been raised
prior to ...