Opinion
Civil Action No. 01-980, Section "N"; 01-608, Section "N"
October 11, 2001
ORDER AND REASONS
Before the Court is defendant Allstate Insurance Company's Motion for Reconsideration of its Motion to Remand. For the following reasons, the defendant's motion is GRANTED, the order remanding Civil Action No. 01-980 is VACATED, and the case is restored to the Court's docket.
BACKGROUND
On January 23, 2000, a severe hail storm struck the New Orleans metropolitan area, pelting thousands of homes and vehicles with golf ball-sized hail. Over 20,000 residents filed insurance claims for hail damage to their cars and rooftops, and the total cost of the damage was estimated to be over $65 million. In January 2001, several groups of plaintiffs in St. Bernard, Jefferson and Orleans Parishes filed nine separate class action lawsuits against more than seventy-five insurance carriers for allegedly failing to adequately compensate their policy holders for legitimate hail damage claims.
In March 2001, the defendants removed the nine hail damage cases to federal court on the grounds of diversity jurisdiction, and these cases were consolidated into a single proceeding. On May 31, 2001, the Court entered an order remanding all nine cases on the grounds that several non-diverse defendants destroyed diversity jurisdiction.
Defendant Allstate Insurance Company ("Allstate") has filed a motion for reconsideration of the remand order in Civil Action No. 01-980 on the grounds that its case is materially different from the other consolidated cases. Specifically, Allstate argues that, unlike the other cases, the plaintiff in Civil Action No. 01-980 improperly joined a domestic insurance agent, J. W. White Insurance Agency, Inc. ("J. W. White"), as a defendant. Allstate contends that J. W. White has been fraudulently joined and asks the Court to vacate its remand order because both complete diversity and the requisite amount in controversy exist.
LAW AND ANALYSIS
A civil action can be removed from state court if the federal courts have original subject matter jurisdiction over the action. 28 U.S.C. § 1441(a). A civil action is removable based upon the court's diversity jurisdiction "if none of the parties in interest properly joined and served as defendants is a citizen of the state in which such action is brought." 28 U.S.C. § 1441(b). If a defendant is fraudulently joined, the court will disregard the residence of that defendant and allow the exercise of removal jurisdiction. See Jernigan v. Ashland Oil, Inc., 989 F.2d 812, 817 (5th Cir. 1993) (holding that citizenship of improperly joined co-defendants "is to be disregarded for purposes of determining diversity jurisdiction").
In the instant case, the defendants allege that J. W. White has been fraudulently joined, that its presence must be ignored for jurisdictional purposes, and that the case was therefore properly removed to federal court. The standard for determining fraudulent joinder is well-established in the Fifth Circuit. The removing party is required to show that either (1) there is no possibility that the plaintiff would be able to establish a cause of action against the non-diverse defendant under state law, or (2) there has been fraud in the plaintiff's pleading of jurisdictional facts. See Burden v. General Dynamics Corp., 60 F.3d 213, 217 (5th Cir. 1995). After all disputed questions of fact and all ambiguities in the controlling state law are resolved in favor of the non-removing party, the court determines whether that party has any possibility of recovery against the party whose joinder is questioned. See Carriere v. Sears, Roebuck Co., 893 F.2d 98, 100 (5th Cir. 1990).
Allstate contends that J. W. White has been fraudulently joined because there is no possibility that Hood will be able to establish a cause of action against it under Louisiana law. First, Allstate argues that no statutory bad faith claims exist under La. R.S. § 22:658 or § 22:1220 because these statutes apply only to insurers and not to insurance agents such as J. W. White. Hood does not challenge this argument, which the Court finds is correct. See MM Towing Co. v. United Capital Ins. Co., 1998 WL 169694, at *1 (E.D. La. April 9, 1998) (McNamara, J.); Riley v. Transamerica Ins., 923 F. Supp. 882, 888 (E.D.La. 1996) (Vance, J.) (holding that bad faith claims under these statutory provisions lie solely against insurers).
Second, Allstate argues that Hood has failed to allege a cause of action in contract against J. W. White. Under Louisiana law, an agent for a known principal cannot be held personally liable for breach of contract unless the agent personally binds itself or exceeds its authority. See La. Civ. Code Article 3016 ("[a] mandatary who contracts in the name of the principal within the limits of his authority does not bind himself personally for the performance of the contract"); La. Civ. Code Article 3019 ("[a] mandatary who exceeds his authority is personally bound to the third person with whom he contracts, unless that person knew at the time the contract was made that the mandatary had exceeded his authority or unless the principal ratifies the contract"). Hood has made no allegations that J. W. White exceeded its authority, made personal guarantees as to the performance of the contract, or personally bound itself. Accordingly, the Court does not find that Hood can state a claim in contract against J. W. White.
Finally, Allstate argues that Hood has failed to state a claim in tort against J. W. White. Under Louisiana law, an insured cannot state a claim against an insurance agent absent allegations of specific facts that the agent made intentional or negligent misrepresentations as to facts which it knew or had reason to know were false. See Dorsey v. The Manufacturers Life Ins. Co., 1997 WL 703354, at *7 (E.D. La. Nov. 10, 1997) (Vance, J.). In Dorsey, the court held that the plaintiff stated a cause of action in tort against a defendant insurance agent because the plaintiff assert[ed] a number of specific nondisclosures as well as a general allegation that [the insurance agent] failed to disclose and affirmatively concealed material information given to him by [the insurance company], which should have been transmitted to plaintiff."Id. at *7 In the instant case, Hood's petition contains no factual allegations to support an inference that any statement made by J. W. White was false or misleading. Nor does the petition allege any specific facts that make it reasonable to believe that J. W. White, as agent for Allstate, knew a statement it made was materially false or that it acted in reckless disregard of the truth of those representations. In fact, Hood's only response to Allstate's argument is that "White, on behalf of Allstate, made certain representations, promises and statements to plaintiff regarding coverage under the policy as well as the rights and entitlement to which plaintiff's representative would be entitled under the policy in the event of a loss, including hail damage." Hood's Opp. Mem. at 2. Hood further implies that this vague allegation constitutes a specific claim against the insurance agent. See id. The Court does not agree. After reading the complaint and Hood's opposition memorandum, the Court has no idea what misrepresentations, either specifically or generally, J. W. White allegedly made. The Court finds that, as a matter of law, the plaintiff's petition fails to state a cause of action against J. W. White in tort.
The Court finds that Allstate has carried its burden of proof that there is no possibility that Hood would be able to establish a cause of action against J. W. White under state law. Accordingly, J. W. White's presence will be ignored for jurisdictional purposes, and complete diversity exists between the parties.
Since the parties are diverse, the Court must determine whether the amount in controversy reaches the requisite threshold to establish federal diversity jurisdiction. As the removing defendant, Allstate must prove by a preponderance of the evidence that the jurisdictional amount is satisfied either (1) by demonstrating that it is apparent from the face of the petition that the claims are likely to exceed $75,000 or (2) by setting forth facts in controversy that support a finding of the requisite amount. See Simon v. Wal-Mart Stores, Inc., 193 F.3d 848, 850 (5th Cir. 1999); Luckett v. Delta Airlines, Inc., 171 F.3d 295 (5th Cir. 1999).
Allstate asserts that the putative class plaintiffs' potential entitlement to attorney's fees raises the amount in controversy well above the jurisdictional threshold. In In re: Abbott Laboratories, 51 F.3d 524 (5th Cir. 1995), the Fifth Circuit held that, for purposes of determining the amount in controversy in a class action, attorney's fees may be attributed to the representative plaintiffs. The Fifth Circuit noted that the distribution of attorney's fees in Abbott centered on two Louisiana statutes: Article 595 of the Louisiana Code of Civil Procedure, which provides that attorney's fees may be awarded to the named class representative, and Section 51:137 of the Louisiana Revised Statutes, which mandates a separate award of attorney's fees for antitrust violations.
Because the Abbott court described the presence of Section 51:137 as "key" to its decision, see 51 F.3d at 526, this Court and other courts in the Eastern District of Louisiana have interpreted Abbott as requiring the existence of a separate attorney's fee statute in addition to Article 595 before attorney's fees can be considered. Such a statute exists in the instant case. La. Rev. Stat. § 22:658(B)(1) provides that when an insurance company's failure to make timely payment on a claim "is found to be arbitrary, capricious, or without probable cause," the insurer "shall" be subjected to a penalty of, among other things, "all reasonable attorney fees for the prosecution and collection" of the claim. Because Hood has alleged that Allstate acted in bad faith by arbitrarily failing to pay his claims, the Court finds that he has placed the right to recover attorney's fees in controversy.
See, e.g., Ace Pest Control Co. v. K-Mart Corp., 979 F. Supp. 443 (E.D.La. 1997) (Porteous, J.); Ryder v. Gilbert S. Corp., 2000 WL 1499274 (E.D.La. Sept. 21, 2000) (Sear, J.); Johnson v. Cytec Indus., Inc., 1999 WL 212753 (E.D.La. Apr. 13, 1999) (Vance, J.); Cooper v. Koch Pipeline, 1995 WL 931091 (E.D.La. Dec. 11, 1995) (Fallon, J.).
Having concluded that attorney's fees may be attributed to the representative plaintiff for jurisdictional purposes, the Court must consider whether the fees will exceed the jurisdictional threshold. Allstate contends that the attorney's fees will far exceed the jurisdictional limit due to the inestimable number of putative plaintiffs, but it does not offer evidence in support of this position. Hood does not dispute Allstate's conclusion and adds that the amount of potential damages is over $100 million. In light of the plaintiff's apparent concession that the attorney's fees will exceed $75,000, the Court finds that the requisite amount in controversy has been established.
Because the parties are completely diverse and the requisite amount in controversy exists, the Court finds that it has diversity jurisdiction over the instant case. Accordingly, the May 31, 2001 order remanding Civil Action No. 01-980 is VACATED and the case is restored to this Court's docket. IT IS FURTHER ORDERED that Civil Action No. 01-980 is no longer consolidated with Civil Action No. 01-608.