MEMORANDUM OPINION AND ORDER
VIRGINIA EMERSON HOPKINS, District Judge.
Plaintiff John Brown ("Mr. Brown") initiated this insurance action against Defendants State Farm Fire & Casualty Company ("State Farm") and Donald Taylor, a/k/a Donald Taylor Agency (hereinafter, "Mr. Taylor") (together, "Defendants") in the Circuit Court of Jefferson County on July 20, 2016. (Doc. 1-2).
Pending before the court is Mr. Taylor's Motion To Dismiss, which was filed on August 24, 2016. (Doc. 3). As Mr. Brown did not file either a Motion To Remand or a response to Mr. Taylor's Motion To Dismiss, the court ordered Mr. Brown to respond to Mr. Taylor's Motion and to address Defendants' fraudulent joinder arguments on October 24, 2016. (Doc. 12). Mr. Brown filed a Response on November 4, 2016 (doc. 13), and Defendants filed a Reply on November 21, 2016 (doc. 14).
For the following reasons, the court finds that Mr. Brown is not able to maintain a colorable cause of action against Mr. Taylor. Accordingly, as Mr. Taylor has been fraudulently joined, there is complete diversity in this case. This court retains jurisdiction to determine Mr. Taylor's Motion To Dismiss, which is due to be
II. FACTUAL ALLEGATIONS
Mr. Brown purchased an insurance policy known as a "Homeowners Policy" from Defendant State Farm. (Doc. 1-2 at 9, ¶ 6). The policy was issued effective from August 12, 2014, to August 12, 2015, and insured a single family dwelling, providing coverage for the dwelling, other structures, personal property, and loss of use. Id. at 9-10, ¶7. The policy was underwritten, marketed, sold, and issued to Mr. Brown by State Farm, which acted through and/or in conjunction with Mr. Taylor and his company, Don Taylor Agency. Id. ¶8.
Mr. Brown is a citizen of the state of Alabama. Id. ¶ 1. State Farm is an Illinois corporation, with its principal place of business in the state of Illinois, that is licensed to conduct business within the state of Alabama. Id. ¶2; (Doc. 1 at ¶9). Mr. Taylor is also a citizen of Alabama. (Doc. 1-2 at ¶ 3); (Doc. 1 at ¶ 10).
On October 2, 2014, lightning struck a tree located adjacent to Mr. Brown's home. Id. ¶ 11. The mechanism of the electrical strike and resultant concussion caused damage to the foundation wall of the structure, which allowed water to enter the dwelling and caused significant damage. Id. Almost immediately thereafter, and in accordance with the subject policy provisions, Mr. Brown notified State Farm of the damages to and losses sustained on the property. Id. at 11, ¶ 14. Mr. Brown was contacted by State Farm through its adjuster, but State Farm did not make any effort to determine the amounts of loss or to make any payment to Mr. Brown. Id. at ¶15.
On or about November 21, 2014, Mr. Brown was notified by letter from Amy King, a Fire Claim Representative with State Farm, that the insurance policy did not cover the loss because the lightning strike did not result in the damages to the home. Id. at ¶ 16. State Farm denied Mr. Brown's claim in its entirety. Id. Mr. Brown claims that he has expended large sums for the work necessary to determine the cause of the damage, he has undertaken temporary repairs in order to mitigate the damage, and he has lost the use and value of his property. Id. at ¶18.
A. Diversity Jurisdiction
"It is by now axiomatic that the inferior courts are courts of limited jurisdiction. They are `empowered to hear only those cases within the judicial power of the United States as defined by Article III of the Constitution,' and which have been entrusted to them by a jurisdictional grant authorized by Congress." Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 409 (11th Cir. 1999) (quoting Taylor v. Appleton, 30 F.3d 1365, 1367 (11th Cir. 1994)).
"A necessary corollary to the concept that a federal court is powerless to act without jurisdiction is the equally unremarkable principle that a court should inquire into whether it has subject matter jurisdiction at the earliest possible stage in the proceedings." Univ. of S. Ala., 168 F.3d at 410. "Indeed, it is well settled that a federal court is obligated to inquire into subject matter jurisdiction sua sponte whenever it may be lacking." Id. (citing Fitzgerald v. Seaboard Sys. R.R., 760 F.2d 1249, 1251 (11th Cir. 1985) (per curiam)). Furthermore, "[b]ecause removal jurisdiction raises significant federalism concerns, federal courts are directed to construe removal statutes strictly." Univ. of S. Ala., 168 F.3d at 411 (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 872, 85 L. Ed. 1214 (1941)).
State Farm and Mr. Taylor premise their removal upon this court's diversity jurisdiction. "Diversity jurisdiction exists where the suit is between citizens of different states and the amount in controversy exceeds the statutorily prescribed amount, in this case $75,000." Williams v. Best Buy Co., 269 F.3d 1316, 1319 (11th Cir. 2001) (citing 28 U.S.C. § 1332(a)). Therefore, removal jurisdiction based upon diversity requires: (1) complete diversity of citizenship between the plaintiff(s) and the defendant(s); and (2) satisfaction of the amount in controversy requirement.
Complete diversity requires that every "plaintiff must be diverse from every defendant." Palmer v. Hosp. Auth., 22 F.3d 1559,1564 (11th Cir. 1994). "Citizenship, not residence, is the key fact that must be alleged in the complaint to establish diversity for a natural person." Taylor v. Appleton, 30 F.3d 1365, 1367 (11th Cir. 1994).
Mr. Brown's state court complaint makes an unspecified demand for damages, so the removing Defendants bear the burden of demonstrating that the amount in controversy requirement has been met. Roe v. Michelin N. Am., Inc., 613 F.3d 1058, 1060 (11th Cir. 2010). By alleging that they filed their notice of removal within thirty days of service of the complaint by Mr. Brown, Defendants have invoked Section 1446(b)'s first and less demanding removal mechanism. See 28 U.S.C. § 1446(b)(1).
As another district court in this Circuit has recently stated,
Johnson v. Blackburn, No. 2:16-CV-989, 2016 WL 5816114, at *1 (N.D. Ala. Oct. 5, 2016) (Bowdre, J.) (analyzing the amount in controversy requirement in a notice of removal made within the 30-day period in Section 1446(b)(1)).
In their Notice of Removal, Defendants point to the policy of insurance at the basis of this suit, which has dwelling coverage limits of $270,300, coverage limits of $27,030 for other structures, and personal property coverage limits of $202,725. (Doc. 1 at 17-18, ¶ 24). Defendants also point to Mr. Brown's allegations in the complaint that he had to "expend large sums" to determine the cause of the damage and repair the damage; that he has suffered, and continues to suffer, loss of value and damages to his home and other property; and that the loss of the full use and enjoyment of his home has resulted in "emotional and mental distress." Id. (citing (Doc. 1-2) at ¶¶ 18, 36, 43). Mr. Brown also seeks punitive damages in Counts I-VI of the Complaint. Mr. Brown has not challenged the Defendants' assessment of the amount in controversy. The court finds that Defendants have satisfied their burden of demonstrating that the amount in controversy meets the jurisdictional threshold.
Fraudulent Joinder Principles
The dispute over satisfaction of the citizenship requirement in this case has to do with whether Mr. Brown has fraudulently joined Mr. Taylor as a defendant in the case. "[W]hen there is no possibility that the plaintiff can prove a cause of action against the resident (non-diverse) defendant[,]" fraudulent joinder is established. Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998). Relatedly, if fraudulent joinder is established, then the resident defendant is subject to dismissal as a party and its citizenship is disregarded for diversity requirement purposes. See id.
The Eleventh Circuit extensively addressed the issue of removal based on diversity jurisdiction when a non-diverse defendant has allegedly been fraudulently joined in Crowe v. Coleman, 113 F.3d 1536 (11th Cir. 1997). There, the court stated:
Crowe, 113 F.3d at 1538.
The standard is onerous because, absent fraudulent joinder, a plaintiff has the absolute right to choose his forum. That is, courts must keep in mind that the plaintiff is the master of his complaint and has the right to determine how and where he will fight his battle. As Crowe further recognized:
Crowe, 113 F.3d at 1538.
To establish fraudulent joinder of a resident defendant, the burden of proof on the removing party is a "heavy one[,]" see Crowe, 113 F.3d at 1538 (internal quotation marks omitted) (quoting B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir. Unit A 1981)), requiring clear and convincing evidence and particularity in pleading. Parks, 308 F.2d at 478 (citing Barron and Holtzoff, Federal Practice and Procedure, § 103, p. 478). The court in Crowe explained the framework for analyzing fraudulent joinder as follows:
Crowe, 113 F.3d at 1538 (emphasis added).
In a later fraudulent joinder decision, the Eleventh Circuit elaborated:
Pacheco de Perez v. AT & T Co., 139 F.3d 1368, 1380-81 (11th Cir. 1998); see also Tillman v. R.J. Reynolds Tobacco, 340 F.3d 1277, 1279 (11th Cir. 2003) ("[I]f there is a possibility that a state court would find that the complaint states a cause of action against any of the resident defendants, the federal court must find that the joinder was proper and remand the case to the state court."). As long as a plaintiff's claim against a non-diverse defendant is "colorable," fraudulent joinder does not apply and the action is due to be remanded. Pacheco de Perez, 139 F.3d at 1380.
When considering a fraudulent joinder claim, federal courts use state rather than federal pleading standards. Stillwell v. Allstate Ins. Co., 663 F.3d 1329, 1334 (11th Cir. 2011) ("We must necessarily look to the pleading standard applicable in state court, not the plausibility standard prevailing in federal court."); Henderson v. Washington Nat. Ins. Co., 454 F.3d 1278, 1281 (11th Cir. 2006) ("[T]he decision as to the sufficiency of the pleadings is for the state courts, and for a federal court to interpose its judgment would fall short of the scrupulous respect for the institutional equilibrium between the federal and state judiciaries that our federal system demands.").
While the federal plausibility standard asks for "more than a sheer possibility that a defendant has acted unlawfully," the standard for a fraudulent joinder claim under Alabama law is a notice pleading standard. Stillwell, 663 F.3d at 1333; Thomas v. Williams, 21 So.3d 1234, 1236, 1236 n.1 (Ala. Civ. App. 2008) (declining to apply the Twombly standard because "we have notice pleading under Alabama's Rules of Civil Procedure"); ALA. R. CIV. P. 8, Committee Comments ("the prime purpose of pleadings is to give notice").
The standard is met if the "claim for relief gives to the opponent fair notice of the pleader's claim and the grounds upon which it rests," and the complaint cannot be dismissed it if contains "even a generalized statement of facts which will support a claim for relief." McKelvin v. Smith, 85 So.3d 386, 389 (Ala. Civ. App. 2010) (internal citations omitted). When applying the standard, factual allegations must be viewed in the light most favorable to the plaintiff, and any uncertainties about the applicable law must be resolved in the plaintiff's favor. Crowe, 113 F.3d at 1538. Fraudulent joinder must fail if even one claim could possibly state a valid cause of action against even one defendant. Stillwell, 663 F.3d at 1332-33.
Mr. Brown's Complaint asserts claims against Mr. Taylor for Negligent Procurement of Insurance (Count I) and Breach of Contract To Procure Insurance (Count V).
C. Mr. Brown's Negligent Procurement of Insurance Claim
In Count One, Mr. Brown has asserted a negligent procurement of insurance claim against Mr. Taylor. (Doc. 1-2 at 12-15, ¶¶ 21-31). Under Alabama law, a "claim in tort alleging negligent failure of an insurance agent to fulfill a voluntary undertaking to procure insurance . . . requires demonstration of the classic elements of negligence, i.e., `(1) duty, (2) breach of duty, (3) proximate cause, and (4) injury.'" Kanellis v. Pac. Indem. Co., 917 So.2d 149, 155 (Ala. Civ. App. 2005) (citing Albert v. Hsu, 602 So.2d 895, 897 (Ala. 1992)). Once an insurance agent "undertakes to procure insurance for a client," the agent owes a duty "to exercise reasonable skill, care and diligence in effecting" the coverage. Highlands Underwriters Ins. Co. v. Elegante Inns, Inc., 361 So.2d 1060, 1065 (Ala. 1978) (applying the elements of a negligent procurement of insurance claim).
However, contributory negligence is a complete defense to a negligence claim under Alabama law. Alfa Life Ins. Corp. v. Colza, 159 So.3d 1240, 1248 (Ala. 2014) (citing Mitchell v. Torrence Cablevision USA, Inc., 806 So.2d 1254, 1257 (Ala. Civ. App. 2000)). Applying Alabama's strict contributory negligence standard to procurement claims, the Alabama Supreme Court held that "negligent-procurement claim[s] [are] barred by the doctrine of contributory negligence" and judgment as a matter of law in favor of an agent is required "when documents available to the insured clearly indicate that the insurance in fact procured for the insured is not what the insured subsequently claims he or she requested the agent to procure." Alfa, 159 So. 3d at 1253, 1255; see id. at 1252 ("By not reading the documents, they took a risk and put themselves in danger's way. We do not think it unreasonable to conclude as a matter of law that, in this day and age, any adult of sound mind capable of executing a contract necessarily has a conscious appreciation of the risk associated with ignoring documents containing essential terms and conditions related to the transaction that is the subject of the contract.").
While Mr. Brown's response acknowledges that Defendants have raised a contributory negligence defense, he has in no way attempted to distinguish Alfa from its applicability in this case. Instead, Mr. Brown relies on Am. Furniture Galleries, Inc. v. McWane, Inc., 477 So.2d 369, 372-73 (Ala. 1985) to support the validity of his negligent procurement claim. However, American Furniture did not concern an insurance dispute and involved neither an insurance agent nor a negligent procurement of insurance claim. As the Alabama Supreme Court directly addressed negligent procurement of insurance claims brought against insurance agents in Alfa, a case more recent than American Furniture and more directly on point, the court finds that Alfa is binding on this action.
The Alabama Supreme Court's holding in Alfa is limited to negligent procurement of insurance claims and does not expressly extend to breach of contract to procure insurance claims.
B. Mr. Brown's Breach of Contract To Procure Insurance Claim
In Count Five, Mr. Brown has asserted a breach of contract to procure insurance claim against Mr. Taylor. (Doc. 1-2 at 23-25, ¶¶ 49-53). Mr. Taylor urges the court to dismiss this claim because (1) he alleges that Mr. Brown's breach of contract to procure insurance and negligent procurement of insurance claims are mutually exclusive actions, and (2) he argues that Mr. Brown's breach of contract to procure insurance claim is defeated by his pending breach of contract and bad faith claims against State Farm. (Doc. 3 at 9-11).
Mr. Brown failed to respond to Mr. Taylor's Motion To Dismiss on his own initiative, and only after the Court's (doc. 12) Order did he file a Response. His Response, however, only addresses the negligent procurement of insurance claim and fails to present any argument whatsoever as to why he believes he has sufficiently established a breach of contract to procure insurance claim. However, due to the impact that this claim has on the court's fraudulent joinder analysis, the court will analyze Mr. Brown's Breach of Contract To Procure Insurance claim as if he had argued in favor of its validity in his Response.
Once parties have come to an agreement on the procurement of insurance, an agent must exercise "reasonable skill, care, and diligence in effecting coverage." Timmerman Ins. Agency v. Miller, 285 Ala. 82, 85 (1969). Under Alabama law, "when an insurance agent or broker, with a view to compensation, undertakes to procure insurance for a client, and unjustifiably or negligently fails to do so, he becomes liable for any damage resulting therefrom." Id. When the agent fails in the fiduciary duties he assumes, he can be sued either for breach of contract or in tort. Highlands Underwriters Ins. Co. v. Elegante Inns, Inc., 361 So.2d 1060, 1065 (Ala. 1978).
Mr. Taylor first argues that negligent procurement claims brought under tort and contract law are mutually exclusive. Mr. Taylor cites to First Ala. Bank of Montgomery, N.A. v. First State Ins. Co., 899 F.2d 1045, 1068 (11th Cir. 1990) (applying Alabama law)
Therefore, Mr. Brown is not barred from bringing a breach of contract to procure insurance claim merely because he has also brought a negligent procurement of insurance claim against Mr. Taylor. Further, because Mr. Brown's negligent procurement of insurance tort claim fails as a matter of law, the court does not need to determine whether these two specific claims are mutually exclusive.
Second, Mr. Taylor argues that Mr. Brown's breach of contract to procure adequate insurance claim is defeated by his pending breach of contract and bad faith claims. The court agrees that, by alleging breach of contract and other contract-based claims against State Farm, Mr. Brown concedes that insurance was in fact procured. This is not a situation where Mr. Taylor altogether failed to procure any insurance for Mr. Brown, nor is it the case that, upon failing to procure that insurance, Mr. Taylor negligently neglected to notify Mr. Brown of his inability to procure coverage. Mr. Brown admits that there was a policy in full force and effect. (Doc. 1-2) at 10, ¶7. Rather, Mr. Brown argues, like in his negligent procurement claim, that Mr. Taylor breached an agreement between them by procuring insurance that was not adequate because it did not cover all types of losses that he requested.
Under Alabama law, "[i]t is the rule that if the policy is accepted by the insured, he is bound thereby even though the policy does not correspond to the preliminary negotiations. The oral negotiations for the policy are merged into the accepted policy." Langley v. Mut. Fire, Marine & Inland Ins. Co., 512 So.2d 752, 766 (Ala. 1987) (citing Smith v. Protective Life Ins. Co., Inc., 355 So.2d 728, 730 (Ala. Civ. App. 1978)) (applying the merger doctrine to a breach of contract to procure insurance claim), overruled on other grounds by Hickox v. Stover, 551 So.2d 259 (Ala. 1989). The principle of the merger doctrine is "well embedded in our law." Langley, 512 So. 2d at 766. "It is familiar law that a contract of insurance is essentially like all other contracts, and governed by general rules of contract . . . all parol negotiations, understandings, and agreements are merged into the written policy." Farmers & Merchants Bank v. Home Ins. Co., 514 So.2d 825, 831 (Ala. 1987) (citing Hartford Fire Ins. Co. v. Shapiro, 270 Ala. 149, 153-55 (Ala. 1960)).
The merger doctrine has been applied to breach of contract to procure insurance claims by the Alabama Supreme Court. Langley, 512 So. 2d at 766. As a district court within this Circuit has summarized,
Concrete Metal Forms, Inc. v. Cole-Farley & Associates, Inc., 2000 WL 1848162, at *5 (S.D. Ala. Dec. 6, 2000).
However, an insurance broker or agent can assume additional duties by express agreement. First Alabama, 899 F.2d at 1068-69. Whether an agent or broker "assumes additional responsibilities depends on the relationship between the parties." Id. at 1068. In First Alabama, the broker assumed additional express duties after giving an oral presentation and submitting a written proposal in order to become the insured's exclusive insurance broker. Id. The Eleventh Circuit held that the merger doctrine did not bar the insured's breach of contract claim against the broker because "this was not merely a contract to procure insurance. [The broker] agreed to `provide the expertise necessary to meet [the insured]'s needs'" by shopping the market and making the insured aware of all alternatives. Id. at 1068-9 (emphasis added).
In his Complaint, Mr. Brown claims he intended that any loss caused by lightning or other peril would be covered. (Doc.1-2 at 10, ¶ 10).
Even under Alabama's notice pleading standards, there is no possibility that an Alabama state court could find, based on the Complaint, that Mr. Taylor has sufficiently pled this claim. Accordingly, Mr. Brown's Breach of Contract to Procure Insurance Claim against Mr. Taylor (Count V) is due to be
C. Mr. Brown's Remaining Claims
Mr. Brown has also asserted claims against State Farm for Breach of Contract (Count II); Bad Faith Refusal To Investigate And/Or Pay a Valid Claim (Counts III and IV); and Negligent Hiring, Training, Monitoring, and Supervision of Licensed Insurance Agents (Count VI).
The language of Counts II, III, IV, and VI is slightly ambiguous as to whether Mr. Brown intended to assert these claims against State Farm, fictitious defendants, and Mr. Taylor, or only against State Farm and fictitious defendants.
Regardless, Mr. Brown has not asserted a viable claim for Breach of Contract or Bad Faith against Mr. Taylor. Under Alabama law, claims for breach of contract and bad faith based on an insurance contract may only be brought against a party to that contract. Ligon Furniture Co. v. O.M. Hughes Ins., Inc., 551 So.2d 283, 285 (Ala. 1989). The complaint does not allege that Mr. Taylor was a party to the insurance contract. In fact, as Mr. Taylor points out, Mr. Brown readily admits that the insurance contract was issued by State Farm to Mr. Brown. (Doc. 1-2 at 26, ¶33) ("A policy of insurance existed between the Plaintiff and the Defendant, State Farm and/or fictitious defendants described therein. . . ."). Therefore, there is no possibility that Mr. Brown can prove either of these claims against Mr. Taylor.
Additionally, to the extent that Count VI is alleged against Mr. Taylor, Mr. Brown also cannot prevail on his negligent hiring and supervision claim as to Mr. Taylor. A negligent hiring and supervision claim may only be maintained against an employer, see Ledbetter v. United Am. Ins. Co., 624 So.2d 1371, 1373 (Ala. 1993), and the Complaint makes clear that Taylor acts as an agent or employee, rather than an employer. See (Doc. 1-2 at 19, ¶ 55) ("It is alleged that Defendant State Farm negligently hired, supervised, monitored, trained and retained its agents and/or employees, including Defendant Donald Taylor."). As the Complaint does not allege that Mr. Taylor was an employer, Mr. Taylor is not a proper defendant for Mr. Brown's negligent hiring, training, monitoring, and supervision claim.
For all of the foregoing reasons, there is no possibility that Mr. Brown can state a viable claim under Alabama law against Mr. Taylor. Therefore, Mr. Taylor was fraudulently joined, and his citizenship is disregarded for purposes of evaluating diversity jurisdiction. Because complete diversity exists between Mr. Brown and State Farm, and as the amount in controversy requirement has been met, this court retains jurisdiction over this action.
Mr. Taylor's Motion To Dismiss (doc. 3) is hereby