Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almd-1_07-cv-00923/USCOURTS-almd-1_07-cv-00923-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 31:3731 Fraud

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IN THE UNTIED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF ALABAMA

SOUTHERN DIVISION

DOUGLAS CHERRY, et al., )

)

PLAINTIFFS, ) 

)

v. ) CASE NO. 1:07-cv-923-MEF

)

AIG SUN AMERICA LIFE ASSURANCE ) (WO-Not Recommended for Publication)

COMPANY, et al., )

)

DEFENDANTS. )

MEMORANDUM OPINION AND ORDER

This cause is before the Court on the Motion to Remand (Doc. # 18) filed by Plaintiff

on November 8, 2007. This lawsuit was originally filed in the Circuit Court of Houston

County, Alabama. Defendants removed the case to this Court, arguing that Plaintiff had

fraudulently joined Defendant Maxine Chappell, (“Chappell”) in order to defeat diversity

jurisdiction. Plaintiff seeks remand of this action contending that Chappell was not

fraudulently joined. For the reasons set forth in this Memorandum Opinion and Order, the

Court finds that the Motion to Remand is due to be GRANTED because the common defense

rule prevents this Court from finding fraudulent joinder.

Federal courts are courts of limited jurisdiction. See, e.g., Kokkonen v. Guardian Life

Ins. Co. of Am., 511 U.S. 375, 377 (1994); Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095

(11th Cir. 1994); Wymbs v. Republican State Executive Comm., 719 F.2d 1072, 1076 (11th

Cir. 1983). As such, federal courts only have the power to hear cases that they have been

authorized to hear by the Constitution or the Congress of the United States. See Kokkonen,

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511 U.S. at 377. Because federal court jurisdiction is limited, the Eleventh Circuit favors

remand of removed cases when federal jurisdiction is not absolutely clear. See Burns, 31

F.3d at 1095.

Removal of a case from state to federal court is proper if the case could have been

brought originally in federal court. See 28 U.S.C. § 1441(a). The removing defendant has

the burden of establishing that this a court has subject matter jurisdiction over an action. See

Diaz v. Sheppard, 85 F.3d 1502, 1505 (11th Cir.1996) (stating that the party seeking removal

to federal court has the burden of establishing federal jurisdiction). 

Defendants argue that the Court has jurisdiction over this case due to diversity of

citizenship. The diversity statute confers jurisdiction on the federal courts in civil actions

between citizens of different states, in which the jurisdictional amount of greater than

$75,000, exclusive of interest and costs, is met. See 28 U.S.C. § 1332(a)(1). Diversity

jurisdiction is defeated if any plaintiff shares the same state citizenship with any defendant.

See, e.g., Riley v. Merrill Lynch, Pierce, Fenner & Smith Inc., 292 F.3d 1334, 1337 (11th Cir.

2002). This rule is known as “complete diversity.” Id. at 1338.

From the face of the Complaint it appears that there is not complete diversity of

citizenship in this case because Plaintiffs are citizens of Alabama and Defendant Chappell

is a citizen of Alabama. Defendants argue that, due to the fraudulent joinder of Chappell, the

Court should disregard the citizenship of Chappell for purposes of diversity jurisdiction and

therefore conclude that complete diversity between the parties exists. See, e.g., Owens v. Life

Case 1:07-cv-00923-MEF-SRW Document 29 Filed 02/21/08 Page 2 of 6
 “The plaintiff need not have a winning case against the allegedly fraudulent 1

defendant; he [or she] need only have a possibility of stating a valid cause of action in order

for the joinder to be legitimate.” Triggs v. John Crump Toyota, 154 F.3d 1284, 1287 (11th

Cir. 1998) (emphasis in original). 

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Ins. Co. of Ga., 289 F. Supp. 2d 1319, 1325 (M.D. Ala. 2003); Bullock v. United Benefit Ins.

Co., 165 F. Supp. 2d 1255, 1247 (M.D. Ala. 2001) ((“When a defendant has been

fraudulently joined, the court should disregard his or her citizenship for purposes of

determining whether a case is removable based upon diversity of citizenship.”). Thus, in

order to determine whether complete diversity exists in this case, the Court must address the

issue of fraudulent joinder.

As the United States Supreme Court has long recognized, a defendant’s “right to

removal cannot be defeated by a fraudulent joinder of a residential defendant having no real

connection to the controversy.” Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97 (1921).

The Eleventh Circuit has articulated that joinder may be deemed fraudulent in three

situations:

The first is when there is no possibility that the plaintiff can

prove a cause of action against the resident (non-diverse)

defendant . . . The second is when there is outright fraud in the 1

plaintiff’s pleading of jurisdictional facts . . . [A third situation

arises] where a diverse defendant is joined with a nondiverse

defendant as to whom there is no joint, several or alternative

liability and where the claims against the diverse defendant has

no real connection to the claim against the nondiverse

defendant.

Triggs, 154 F.3d at 1287. A removing defendant bears the burden of proving fraudulent

Case 1:07-cv-00923-MEF-SRW Document 29 Filed 02/21/08 Page 3 of 6
 It is important to note that the Court should determine its jurisdiction over the case 2

“based upon the plaintiff’s pleadings at the time of removal,” Coker, 709 F.2d 1433, 1440

(11th Cir. 1983), supplemented by any affidavits or deposition transcripts filed by the parties.

“While ‘the proceeding appropriate for resolving a claim of fraudulent joinder is similar to

that used for ruling on a motion for summary judgment under Fed. R. Civ. P. 56(b),’ the

jurisdictional inquiry ‘must not subsume substantive determination’. . . When considering

a motion for remand, federal courts are not to weigh the merits of a plaintiff’s claim beyond

determining whether it is an arguable one under state law.” Crowe v. Coleman, 113 F.3d

1536, 1538 (11th Cir. 1997) (citations omitted).

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joinder. See Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir. 1997) (citation omitted).

This burden on the defendant is a heavy one. It requires the court to evaluate the parties’

factual allegations in the light most favorable to the plaintiff and resolve all uncertainties

about state substantive law in favor of the plaintiff. See id. If there is a possibility that a

state court would find that the complaint states a cause of action against any one of the

resident defendants, the federal court must find that the joinder is proper and remand the case

to the state court. See Coker v. Amoco Oil Co., 709 F.2d 1433, 1440 (11th Cir. 1983). In 2

other words, a motion to remand should be denied only if the court is convinced that there

is “no possibility that the plaintiff can establish any cause of action against the resident

defendant.” See Cabalceta v. Standard Fruit Co., 883 F.2d 1553,1561 (11th Cir. 1989).

The Court has carefully reviewed the Complaint and the submissions of the parties,

and it must conclude that Chappell has not been fraudulently joined. The common defense

rule provides that when a defense to liability is common to diverse and non-diverse

defendants, fraudulent joinder cannot be found. See Poole v. American Int’l Group, Inc.,

414 F. Supp. 2d 1111, 1117 (M.D. Ala. 2006) (Thompson, J.) (citing Boyer v. Snap-On Tools

Case 1:07-cv-00923-MEF-SRW Document 29 Filed 02/21/08 Page 4 of 6
The sole argument raised by Defendants that could theoretically distinguish

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Chappell from the rest of the Defendants is the argument that the arbitration precludes this

action against Chappell because she is an employee of Raymond James, and therefore is in

privity with Raymond James as an agent. However, courts have generally held that

employees are not in privity with their employers for purposes of res judicata. See Quinn v.

Monroe County, 330 F.3d 1320, 1328-33 (11th Cir. 2003) (applying Florida law to hold that

county administrator was not in privity with the county and issue preclusion could not be

invoked based upon earlier administrative findings); United States v. Gurley, 43 F.3d 1188,

1198 (8th Cir. 1994) (“As a general rule, litigation by an employer is not binding on

employees.”) (internal quotation marks omitted); Hayles v. Randall Motor Co., 455 F.2d 169,

174 (10th Cir. 1971) (“The relation of employer and employee does not confer on the

employer any power to represent the employee in litigation.”).

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Corp., 913 F.2d 108 (3rd Cir. 1990) and Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568

(5th Cir. 2004)). Courts applying the common defense rule reason that these attacks on the

joinder of the non-diverse defendant are in reality attacks on the merits of the entire case

because they undermine the claims against both the diverse and non-diverse defendants.

This Court finds that the Defendants’ arguments for fraudulent joinder apply as

equally to the diverse defendants as they do to Chappell. The Defendants are arguing that

Chappell has been fraudulently joined because the Plaintiffs’ claims against her are barred

due to the fact that Plaintiffs have already recovered damages for their claims from Raymond

James & Associates, Inc. through arbitration. All of the arguments Defendants have put

forward for why Plaintiffs’ recovery from Raymond James barrs this action against Chappell

applies equally to all of the other Defendants in this case. Indeed, each Defendants’ Answer 3

to the Complaint raise these arguments as affirmative defenses.

Accordingly, were this Court to rule in Defendants’ favor on the issue of fraudulent

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joinder, this Court would in effect be ruling on the merits of the entire case. A motion for

remand is not the appropriate time for a court to reach the merits of the case. See Crowe v.

Coleman, 113 F.3d 1536, 1538 (11th Cir. 1997).

For the foregoing reasons, it is hereby ORDERED as follows:

(1) Plaintiffs’ Motion to Remand (Doc. # 18) is GRANTED.

(2) Defendants’ Motion for Hearing (Doc. # 27) is DENIED.

(3) Plaintiffs’ Motion to Stay Ruling on Defendants’ Motion for Summary

Judgment Pending Resolution of Plaintiffs’ Motion to Remand (Doc. # 16) is

DENIED AS MOOT.

(4) This case is REMANDED to the Circuit Court of Houston County, Alabama.

(5) The Clerk is DIRECTED to take appropriate steps to effect the remand.

(6) Any pending motions not resolved by this Order are left for resolution by the

Circuit Court of Houston County, Alabama.

DONE this the 21 day of February, 2008. st

 /s/ Mark E. Fuller 

CHIEF UNITED STATES DISTRICT JUDGE

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