Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almd-3_05-cv-00753/USCOURTS-almd-3_05-cv-00753-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 31:3731 Fraud

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IN THE DISTRICT COURT OF THE UNITED STATES FOR THE

MIDDLE DISTRICT OF ALABAMA, EASTERN DIVISION

TONY AND DOROTHY TURNER, )

)

Plaintiffs, )

) CIVIL ACTION NO.

v. ) 3:05cv753-MHT

) (WO)

AMERICAN INTERNATIONAL )

GROUP, INC., et al., )

)

Defendants. )

ORDER

Plaintiffs Tony and Dorothy Turner initially filed

this lawsuit in state court charging defendants with

state-law claims for fraud, misrepresentations,

concealment, negligent and wanton hiring, training, and

supervision, and breach of fiduciary duty, all in

connection with several loans they took out. The Turners

have named several ‘corporate defendants’: American

International Group, Inc., American General Corporation,

American General Finance Inc., Merit Life Insurance

Company, and Yosemite Life Insurance Company; they have

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also named ‘individual defendants’: Kathie Rowell and

Connie Farmer.

Pursuant to 28 U.S.C. § 1441, the corporate defendants

removed this lawsuit from state to federal court,

asserting diversity-of-citizenship jurisdiction under 28

U.S.C. § 1332.

This matter is now before the court on the Turners’

motion to remand and the corporate and individual

defendants’ motion for extension of time to conduct

remand-related discovery. The Turners’ motion will be

granted and the corporate and individual defendants’

motion denied.

I. REMAND STANDARD

Federal courts are courts of limited jurisdiction.

Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375,

(1994); Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095

(11th Cir. 1994). A federal court may hear a case only if

it is authorized to do so by federal law. Kokkonen, 511

U.S. at 377. The party seeking removal has the burden of

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establishing it. Burns, 31 F.3d at 1095. The removal

statute must be strictly construed because it raises

significant federalism concerns. Shamrock Oil & Gas Corp.

v. Sheets, 313 U.S. 100 (1941). All doubts about federalcourt jurisdiction should be resolved in favor of a remand

to state court. Burns, 31 F.3d at 1095.

II. BACKGROUND

In their state-court complaint, the Turners alleged

the following: In 1995, they entered into several loans

with the corporate defendants. As inducements to take out

the loans, the individual defendants told them that

refinancing and consolidating their existing debt into a

single loan with the corporate defendants would save them

money. The individual defendants also advised them to

obtain credit insurance; they explained that the insurance

was a good deal because it offered great value and

protection, it would improve their credit score and

rating, and it would increase their chances of loan

approval. According to the state-court complaint, the

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individual defendants, as well as the corporate

defendants, knew that the representations were false. The

Turners, however, did not discover the falseness of the

representations until within two years of filing their

lawsuit.

III. JURISDICTION

The court agrees with the Turners that there is no

diversity-of-citizenship jurisdiction here to support

removal.

A federal court may assert jurisdiction where the

amount in controversy exceeds $ 75,000, exclusive of costs

and interests, and the parties are citizens of different

States. 28 U.S.C. § 1332(a). When an action is filed in

state court, but the amount in controversy is sufficient

and there is complete diversity, federal law gives the

defendant the right to remove the action to federal court.

Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287

(11th Cir. 1998).

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Complete diversity is lacking where any party on one

side of the suit is from the same state as any party on

the other side. Strawbridge v. Curtiss, 7 U.S. 267 (1806).

Because the Turners, as plaintiffs, and Rowell and Farmer,

as defendants, are all citizens of Alabama, complete

diversity of citizenship does not exist--unless Rowell,

and Farmer are improper defendants. 

The corporate defendants contend that Rowell and

Farmer were fraudulently joined to defeat diversity

jurisdiction. If these defendants were fraudulently

joined, their citizenship is not considered for the

purpose of determining diversity jurisdiction. A removing

party who alleges fraudulent joinder “has the burden of

proving 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.” Pacheo de Perez v. AT&T Co., 139 F.3d

1368, 1380 (11th Cir. 1998) (citations omitted). 

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Here, the corporate defendants argue only the first

type of fraudulent joinder. They assert that there is no

possibility that the Turners can establish a cause of

action against the non-diverse defendants because: (1) the

claims are time-barred; (2) the claims fail as a matter of

law; and (3) the non-diverse defendants were not properly

served. 

The burden of establishing fraudulent joinder “is a

heavy one”; if the plaintiff states “even a colorable

claim against the resident defendant, joinder is proper

and the case should be remanded to state court.” Pacheo de

Perez, 139 F.3d at 1380. A district court must "evaluate

factual allegations in the light most favorable to the

plaintiff and resolve any uncertainties about the

applicable law in the plaintiff's favor". Id. The

corporate defendants have not met this heavy burden. 

As the Turners aptly notes, all of the corporate

defendants reasons for asserting that there is no

possibility of recovery for the claims against the nondiverse individuals also arguably compel a lack of recovery

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1. The court says “arguably” because the corporate

defendants have not argued otherwise in this case.

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against the diverse corporations.1

 The Turners’ sole claim

against the corporate defendants is for negligent and

wanton hiring, training and supervision, which requires the

finding of underlying tortious conduct by an employee

before the employer can be held liable. See Stevenson v.

Precision Standard, Inc., 762 So.2d 820, 824 (Ala. 1999)

(citing Big B, Inc. v. Cottingham, 634 So.2d 999 (Ala.

1993)); Nash v. Segars, 682 So. 2d 1364 (Ala. Civ. App.

1996). Accordingly, the arguments for barring state-tort

liability against the non-diverse individual defendants

appear to apply equally to preventing liability for the

diverse corporate defendants. 

While the Eleventh Circuit has not reached this issue,

other circuits, relying on Chesapeake & O.R. Co. v.

Cockrell, 232 U.S. 146 (1914), have applied a “common

defense rule” to fraudulent-joinder claims such that when

a defense to liability is common to diverse and non-diverse

defendants, fraudulent joinder is not found. See e.g.,

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Boyer v. Snap-On Tools Corp., 913 F.2d 108 (3rd Cir. 1990),

cert. denied, 498 U.S. 1085 (1991); Smallwood v. Illinois

Cent. R.R. Co., 385 F.3d 568 (5th Cir. 2004) (en banc),

cert. denied, 125 U.S. 1825 (2005). Additionally, this

court has found the same in Wright v. Metropolitan Life

Ins. Co., 74 F. Supp. 2d 1150, 1154-55 (M.D. Ala. 1999)

(Thompson, J.); see also In re New England Mut. Life Ins.

Co. Sales Practices Litig., 324 F.Supp.2d 288 (D. Mass.

2004) (Keeton, J.)

These courts reason that common defenses are actually

attacks on the merits of the entire case since they

undermine the claims against the diverse and non-diverse

defendants alike. Where the “the improper joinder

allegation[] directed at the [non-diverse] employees

‘manifestly [goes] to the merits of the action as an

entirety, and not to the joinder,’” there is no fraudulent

joinder, Smallwood, 385 F.3d at 575 (quoting Chesapeake,

232 U.S. at 153; rather, “‘it indicate[s] that the

plaintiff's case [is] ill founded as to all the

defendants.’” Id. A court should avoid the “risk of

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moving ... beyond jurisdiction and into a resolution of the

merits.” Id. at 574. Therefore, because the common

defenses are not unique to the non-diverse defendants, they

indicate nothing in particular about the specific reason

the non-diverse individuals were joined. Wright, 74 F.

Supp. 2d at 1155.

Mindful of its duty to resolve not only factual but

legal uncertainties in favor of remand, Pacheo de Perez,

139 F.3d at 1380, the court finds that the corporate

defendants have not shown that the individual defendants

were fraudulently joined in light of the common defense

rule.

IV. DISCOVERY

The corporate and individual defendants seek an

extension of time to conduct remand-related discovery.

Because this discovery would essentially go the merits of

the entire case rather than to fraudulent joinder, it is,

for the reasons given above, inappropriate.

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Accordingly, it is the ORDER, JUDGMENT, and DECREE of

the court as follows:

(1) Defendants American International Group, Inc.,

American General Corporation, American General

Finance Inc., Merit Life Insurance Company,

Yosemite Life Insurance Company, Kathie Rowell,

and Connie Farmer’s motion for extension of time

to conduct remand-related discovery (Doc. No. 19)

is denied.

(2) Plaintiffs Tony and Dorothy Turner’s motion to

remand (Doc. No. 16) is granted and, pursuant to

28 U.S.C. § 1447(c), this cause is remanded to the

Circuit Court of Macon County, Alabama.

It is further ORDERED that defendants American

International Group, Inc., American General Corporation,

American General Finance Inc., Merit Life Insurance

Company, and Yosemite Life Insurance Company’s motion to

stay (Doc. No. 29) is denied.

It is further ORDERED that all other motions are left

for disposition by the state court after remand.

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The clerk of the court is DIRECTED to take appropriate

steps to effect the remand.

DONE, this the 15th day of February, 2006.

 /s/ Myron H. Thompson 

UNITED STATES DISTRICT JUDGE

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