Franklin County Commission v. Madden

          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 ...