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,
v.
LIBERTY NATIONAL LIFE INSURANCE COMPANY and ROBERT D. BICE, Defendants.
MEMORANDUM OPINION
KARON
OWEN BOWDRE CHIEF UNITED STATES DISTRICT JUDGE.
This
matter comes before the court on Defendant Liberty National
Life Insurance Company's “Joint Motion to Alter or
Amend, ” (doc. 22), and Liberty National and Defendant
Robert D. Bice's “Corrected Joint Motion to Alter
or Amend, ” (doc. 23). Both motions address the
court's recent Memorandum Opinion and Order finding that
Plaintiffs did not fraudulently join Mr. Bice.
On June
17, 2019, this court entered a Memorandum Opinion and Order
in which it held that Plaintiffs did not fraudulently join
Mr. Bice because the court found a possibility existed that
Plaintiffs stated a claim against Mr. Bice for breach of the
duty of good faith and fair dealing. (Docs. 19-20).
Specifically, the court found that Plaintiffs may have stated
a claim against Mr. Bice for breach of duty of good faith and
fair dealing because the Plaintiffs alleged they had a
special relationship with Mr. Bice, which created a duty
toward Plaintiffs. (Doc. 19 at 11-12).
Defendants
now move to amend the court's order under Federal Rule of
Civil Procedure 59(e) because they allege the court committed
a clear error in its ruling. Defendants raise multiple
arguments why the court erred, including that the allegations
of a special relationship came from Plaintiffs'
jurisdictional response brief, not Plaintiffs' complaint.
The court will now consider Defendants' motions to amend
its June 17 Order. (Docs. 22-23).
I.
Background
Plaintiffs
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.
The
Estate of Mr. 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 11-12).
The
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).[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.
On
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
policies.
On
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
jurisdiction.
On
January 15, 2019, Mr. Bice filed his motion to dismiss,
contending that Plaintiffs had failed to state a claim
against him. Because the court was unsure if it had subject
matter jurisdiction, it ordered Plaintiffs to show cause why
Mr. Bice should not be dismissed. (Doc. 9). On June 17, 2019,
this court entered a Memorandum Opinion and Order finding
that Plaintiffs did not fraudulently join Mr. Bice because a
possibility existed that Plaintiffs stated a claim for breach
of the duty of good faith and fair dealing against Mr. Bice.
(Docs. 19-20). Defendants now move for reconsideration of the
June 17 Order.
II.
Standard of Review
Whether
to grant a motion to reconsider under Federal Rule of Civil
Procedure 59(e) or 60(b) is within the discretion of the
trial court. See Smith v. Casey, 741 F.3d 1236, 1241
(11th Cir. 2014). A motion to reconsider “must
demonstrate why the court should reconsider its prior
decision and ‘set forth facts or law of a strongly
convincing nature to induce the court to reverse its prior
decision.'” Fid. & Deposit of Md. v. Am.
Consertech, Inc., No. 06-0338-CG-M, 2008 WL 4080270, at
*1 (S.D. Ala. Aug. 28, 2008) (quoting Cover v. Wal-Mart
Stores, Inc., 148 F.R.D. 294 (M.D. Fla. 1993)).
Three
grounds justify reconsideration of an order: when a party
submits evidence of (1) “an intervening change in
controlling law, ” (2) “the availability of new
evidence, ” or (3) “the need to correct clear
error or manifest injustice.” Wallace v.
Holder, 846 F.Supp.2d 1245, 1248 (N.D. Ala. 2012)
(quoting Summit Med. Ctr. of Ala., Inc. v. Riley,
284 F.Supp.2d 1350, 1355 (M.D. Ala. 2003)).
“[R]econsideration of an order is an extraordinary
remedy and is employed sparingly.” Rueter v.
Merrill Lynce, Pierce, Fenner & Smith, Inc., 440
F.Supp.2d 1256, 1267- 68 (N.D. Ala. 2006). Motions for
reconsideration should not be a “knee-jerk reaction to
an adverse ruling.” Id. (quoting Summit
Med. Ctr. of Ala., Inc., 284 F.Supp.2d at 1355).
III.
Discussion
Defendants
filed two separate motions to amend the order. Only Liberty
National filed the first motion, despite the title as a
“joint” motion. (Doc. 22). Liberty National and
Mr. Bice subsequently filed the corrected joint motion. (Doc.
23). Because the motions are otherwise identical in
substance, the court will FIND AS MOOT the original motion to
amend, (doc. 22), and will only consider the merits of the
corrected motion to amend, (doc. 23).
In
their corrected motion, Defendants contend that the court
committed clear error in its order finding that a possibility
existed that Plaintiffs alleged a claim against Mr. Bice for
breach of duty of fair dealing because of an alleged special
relationship. As one of their arguments for reconsideration,
Defendants maintain that the court relied upon allegations in
Plaintiffs' jurisdictional response brief to find a
special relationship, when the court should have been limited
to Plaintiffs' pleadings in its complaint.
When
considering subject matter jurisdiction in a removal action,
“the status of the case as disclosed by the
plaintiff's complaint is controlling in the case of a
removal, since the defendant must file his petition before
the time for answer or forever lose his right to
remove.” St. Paul Mercury Indem. v. Red Cab
Co., 303 U.S. 283, 291 (1938); see also Pacheco de
Perez v. AT&T Co., 139 F.3d 1368, 1380 (11th Cir.
1998) (“The determination of whether a resident
defendant has been fraudulently joined must be based upon the
plaintiff's pleadings at the time of removal . . .
.”).
In the
June 17 Order, this court found that Plaintiffs alleged a
special relationship existed because Plaintiffs contended
that “‘by and through this long-term
relationship' with Mr. Bice over the 33 years he was
their insurance agent, the Padgetts ‘reposed trust in
him regarding their insurance needs.'” (Doc. 19 at
11 (quoting Doc. 12 at 16)). In that statement, the court
quoted Plaintiffs' argument in their jurisdictional
response brief, (doc. 12), erroneously expecting the factual
statements to accurately reflect those in their complaint.
But the complaint does not allege either a long-term
relationship or that the Padgetts reposed trust in Mr. Bice.
So, the court committed clear error when it relied on
allegations outside of Plaintiffs' pleadings at the time
of the removal, despite the Supreme Court and Eleventh
Circuit precedent to the contrary. See St. Paul Mercury
Indem., 303 U.S. at 291; Pacheco de Perez, 139
F.3d at 1380. Therefore, the court must GRANT Defendants'
motion to amend. (Doc. 23).
The
court will now reconsider whether Plaintiffs fraudulently
joined Mr. Bice. To prove that a co-defendant was
fraudulently joined, a defendant must demonstrate that
“(1) there is no possibility that 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.” Crowe v. Coleman, 113 F.3d 1536, ...