Opinion
CA 00-0124-C.
May 11, 2000.
JUDGMENT
In accordance with the memorandum opinion and order entered on this date, it is hereby ORDERED, ADJUDGED, and DECREED that plaintiff's motion to remand be GRANTED and that this action be REMANDED to the Circuit Court of Choctaw County, Alabama from whence it came. Plaintiff's motion for an award of attorney's fees is DENIED. Costs are taxed to the removing parties.
MEMORANDUM OPINION AND ORDER
This cause is before the Court on the plaintiff's motion to remand, as supplemented ( see Docs. 32 41), and the defendants' briefs in opposition to the motion to remand (Docs. 37, 38 40). The parties have consented to the exercise of jurisdiction by the Magistrate Judge, pursuant to 28 U.S.C. § 636(c), for all further proceedings, including disposition of this motion. (See Doc. 45 ("In accordance with the provisions of 28 U.S.C. § 636(c) and Fed.R.Civ.P. 73, the parties in this case consent to have a United States Magistrate Judge conduct any and all proceedings in this case, including the trial, and order the entry of a final judgment, and conduct all post-judgment proceedings.")) Upon consideration of the contents of the briefs, all pertinent material submitted in support of those briefs, ?and the arguments of counsel on April 17, 2000, the Court GRANTS the motion to remand and remands this case to the Circuit Court of Choctaw County, Alabama from whence it came.
As was indicated as a possibility during oral argument, it is decided that the preliminary decision announced orally and memorialized in the Order of April 17, 2000 (Doc. 44), that this Court has subject matter jurisdiction over this action, was wrong and that decision is hereby WITHDRAWN. Accordingly, the submission dates set forth in the April 17, 2000 Order are MOOT.
FINDINGS OF FACT
1. On January 11, 2000, Ora Ruffin filed a five-count complaint in the Circuit Court of Choctaw County, Alabama, against Congress Life Insurance Company, Security Life Insurance Company of America, Corporate Benefit Services of America, Inc., Wisconsin Physicians Service Insurance Corporation, A.B.I. Administrative Services Corporation, Security American Financial Enterprises, Inc., Sentry Corporation, National Health Care Trust, Marshall and Ilsley Trust Company, Conseco Life Insurance Company, Alabama Health Benefits, Inc., Hubert Leon Houston, and numerous fictitious parties, alleging various causes of action arising out of her February 14, 1996 purchase of major medical group insurance coverage for her child, Courtney Ruffin, certificate no. S11229-AL. ( See Doc. 1, COMPLAINT)
13. Plaintiff . . . avers that at the time said certificate of insurance was sold to her, the named Defendants and Defendants described fictitiously as Defendants Nos. 1 through 60, did fail and/or refuse to inform the Plaintiff Ruffin that while the policy and/or certificate in question was sold on the basis of it being a group policy, said Defendants did and would assess premiums and/or increases in premiums on the basis of individual risk factors. Further, said Defendants did fail and/or refuse to inform the Plaintiff Ruffin that said premiums could be raised to such high levels that the Plaintiff would be forced to terminate the policy, in that she would no longer be able to afford the increased premiums.
14. Subsequent to the purchase of the above-described insurance policy, the Plaintiff submitted a claim for her insured son. Thereafter, said Defendants, both named and described fictitiously as Defendants Nos. 1 through 60, did raise her premium rates to such high levels that the Plaintiff was no longer able to afford said coverage. Thereafter, said Defendants did wrongfully terminate the major medical coverage offered by the certificate identified above.(Id.) More specifically, plaintiff asserts claims of negligent, reckless, and/or intentional fraud (id., ¶¶ 19-21), fraud by suppression (id., at ¶¶ 22-24), conspiracy (id., at Par; 25-27), and breach of contract (id., ¶¶ 28-30).
2. This action was removed by all named defendants on February 11, 2000, on the basis that this Court may exercise jurisdiction pursuant to 28 U.S.C. § 1332 since defendant Alabama Health Benefits, Inc., was fraudulently joined in order to defeat federal jurisdiction. (Doc. 1, NOTICE OF REMOVAL) Attached to the notice of removal is the affidavit of Ken Lewis, President of Alabama Health Benefits, Inc. (Doc. 1, Exhibit C)
2. I am currently the President of Alabama Health Benefits, Inc., a defendant in this case. At most times relevant to this case, Alabama Health Benefits functioned as an independent clearing broker to process applications and other paperwork and perform general administrative functions in connection with certain health insurance policies written to certain insureds in Alabama whose coverages were placed through Co-defendant Congress Life Insurance Company ("Congress") by way of its third-party administrator Co-defendant Corporate Benefits Services of America ("CBSA"). Alabama Health Benefits functioned in such capacity with regard to the coverage purchased by the Plaintiff in this case.
3. With regard to the policy the Plaintiff purchased from Congress through her agent, Hubert Leon Houston, Alabama Health Benefits acted as the clearing broker. Neither Alabama Health Benefits nor its employees personally solicited the sale of the Congress Life health insurance product at issue in this case. Rather, Mr. Houston, pursuant to his Agent's Producer's Agreement with CBSA, met with the Plaintiff and took the application, and forwarded the application and other paperwork necessary for underwriting to CBSA. In this case, Alabama Health Benefits had no direct contact with the Plaintiff. For performing such administrative functions, Alabama Health Benefits received an overwrite commission, a small percentage of the commission ultimately paid to the writing agent Mr. Houston.
4. No one at Alabama Health Benefits had any communications or direct contact with Ms. Ruffin. Alabama Health Benefits simply served as a clearinghouse between the independent agent, Hubert Leon Houston, and the third-party administrator, CBSA.
5. Neither I nor any other employee of Alabama Health Benefits had any involvement in the setting of premium rates, the selection of coverage or the decision to pay benefits under the coverage at issue in this lawsuit.
6. Alabama Health Benefits is a wholesale insurance broker. It brokers life, health and disability coverage through numerous carriers. At all times relevant to this lawsuit, Alabama Health Benefits wrote life, health and disability coverage for more than twenty carriers.
7. Hubert Leon Houston was at all times relevant to this case an independent agent. Hubert Leon Houston was never employed by Alabama Health Benefits. No one at Alabama Health Benefits directed or controlled the manner in which Hubert Leon Houston conducted his business or the manner in which he ran his agency.(Id.)
3. Plaintiff filed her motion to remand on March 8, 2000 (see Doc. 32), supplementing same on April 10, 2000 (Doc. 41), solely alleging that there was no fraudulent joinder of parties in order to destroy diversity of citizenship. Most, although by no means all, of the defendants filed their responses to the motion to remand on March 31, 2000 and set forth their reasons why this case should not be remanded to the Circuit Court of Choctaw County, Alabama. (Docs. 37, 38 40)
4. Attached to Alabama Health Benefits' motion to dismiss (Doc. 34), and intended as an attachment to defendant Conseco Life's opposition to the motion to remand (see Doc. 38), is an additional affidavit of Ken Lewis dated March 8, 2000.
3. With regard to the policy Ora Ruffin purchased from Congress Life Insurance Company, she purchased the policy through Hubert Leon Houston, an independent agent, who ran his own agency. At all times relevant to this case, Mr. Houston had been licensed and/or appointed to place coverage on behalf of other health insurers, in addition to Congress Life Insurance Company and Corporate Benefit Services of America. His office and residence are in Mississippi.
4. At all times relevant to this case, Alabama Health Benefits, Inc. functioned as an independent wholesale broker to process applications and other paperwork and to perform general administrative functions in connection with certain health insurance policies written to certain insureds in Alabama whose coverages were placed through Co-Defendant Congress Life Insurance Company by way of its third-party administrator, Co-Defendant Corporate Benefit Services of America. Alabama Health Benefits, Inc. functioned in such capacity with regard to the coverage purchased by the Plaintiff in this case.
5. At all times relevant to this case, Alabama Health Benefits, Inc. was licensed with over twenty health insurance carriers. Alabama Health Benefits, Inc. did not place coverages exclusively with Congress Life Insurance Company and/or Corporate Benefit Services of America, but rather had the opportunity to place coverage with various insurers. As an independent wholesale broker, it received requests from agents such as Hubert Leon Houston to place coverage on behalf of clients of the agent, such as the Plaintiff.
6. At all times relevant to this case, Alabama Health Benefits, Inc. was a geographical brokerage agency for Corporate Benefit Services of America pursuant to a Regional Director's contract. The contract, a copy of which is attached hereto as Exhibit "1", specifically limits and prohibits Alabama Health Benefits, Inc. from altering, modifying, waiving, or changing any of the terms, rates, or conditions of the company's master policy or certificate; from collecting renewal premiums; from extending time for payment of premiums; and from endorsing checks payable to the company.
7. As a geographical broker for Corporate Benefit Services of America, Alabama Health Benefits, Inc. would receive an overwrite commission, a small percentage of the commission earned by the soliciting agent. Typically, Alabama Health Benefits, Inc. would be contacted by the independent agent and requested to provide a quote. Alabama Health Benefits, Inc. would provide a quote to the agent based on the underwriting factors determined by Corporate Benefit Services of America and/or Congress Life Insurance Company. The independent agent would obtain all necessary information from the proposed insured and complete the application. The independent agent would then forward the application to Alabama Health Benefits, Inc. Alabama Health Benefits, Inc. would review the application for completeness and prepare a transmittal form to Corporate Benefit Services of America. Once coverage was bound, Corporate Benefits Services of America would notify in writing the insured and soliciting agent directly and would provide a copy of such notification to Alabama Health Benefits, Inc. Thereafter, after coverage was in force, Alabama Health Benefits, Inc. continued to act as an intermediary for information between the independent agent and Corporate Benefit Services of America.
8. Ora Ruffin's application was taken February 14, 1996 by Mr. Houston. The application was taken on a form provided by Corporate Benefit Services of America and/or Congress Life Insurance Company. A copy of said application is attached hereto as Exhibit "2." Houston collected a premium from Ora Ruffin and forwarded it to Alabama Health Benefits, Inc. along with the application. Alabama Health Benefits, Inc. forwarded the application and premium check received from the agent to Corporate Benefit Services of America, along with a transmittal form also attached as Exhibit "2."
9. On February 26, 1996, Corporate Benefit Services of America wrote directly to Ora Ruffin. A copy of that letter was provided to Alabama Health Benefits, Inc. and is attached hereto as Exhibit "3."
10. On February 28, 1996, Corporate Benefit Services of America wrote directly to Ora Ruffin. A copy of that letter was sent to Alabama Health Benefits, Inc. and is attached hereto as Exhibit "4".
11. Also on February 28, 1996, Corporate Benefit Services of America wrote directly to the independent soliciting agent, Hubert Houston, informing him that the coverage requested for Ora Ruffin was effective February 22, 1996. A copy of that letter was provided to Alabama Health Benefits, Inc. and is attached hereto as Exhibit "5."
12. On March 5, 1996, Corporate Benefit Services of America wrote directly to Ora Ruffin. A copy of that letter was sent to Alabama Health Benefits, Inc. and is attached hereto as Exhibit "6."
13. On June 14, 1996, Corporate Benefit Services of America wrote directly to Ora Ruffin. A copy of that letter was sent to Alabama Health Benefits, Inc. and is attached hereto as Exhibit "7."
14. On June 24, 1996, Corporate Benefit Services of America wrote directly to Ora Ruffin. A copy of that letter was sent to Alabama Health Benefits, Inc. and is attached hereto as Exhibit "8."
15. On February 5, 1997, Alabama Health Benefits, Inc. wrote to independent agent Houston regarding renewals for March 1, 1997. A copy of this memorandum from Alabama Health Benefits, Inc. to Houston, along with the renewal summary forwarded from Corporate Benefit Services of America, is attached hereto as Exhibit "9."
16. On July 31, 1998, Alabama Health Benefits, Inc. again wrote Houston regarding renewal information on Ora Ruffin. Houston and Alabama Health Benefits, Inc. had been provided a copy from Corporate Benefit Services of America of the renewal benefit form for Ora Ruffin. A copy of the July 31, 1998 memorandum to Houston and renewal benefits alternatives forwarded by Corporate Benefit Services of America are attached hereto as Exhibit "10."
17. On November 30, 1998, Alabama Health Benefit (sic) Services (sic), Inc. again wrote Houston regarding renewal information on Ora Ruffin. A copy of the November 30, 1998 correspondence to independent agent Houston along with the renewal benefits alternatives forwarded to Houston and Alabama Health Benefits, Inc. by Corporate Benefit Services of America are attached as Exhibit "11."
18. On February 8, 1999, Corporate Benefit Services of America wrote Ora Ruffin informing her of benefit changes. Alabama Health Benefits, Inc. and agent Houston were provided a copy of that correspondence attached hereto as Exhibit "12."
19. On June 2, 1999, Corporate Benefit Services of America wrote Ora Ruffin informing her of a notice regarding drug benefit changes effective March 1, 2000. Alabama Health Benefits, Inc. and agent Houston were provided a copy of that correspondence and it is attached hereto as Exhibit "13."
20. The correspondence and communications as set forth in paragraphs 1 through 19 above represent the entire file of Alabama Health Benefits, Inc. involving the policy purchased by Ora Ruffin in which Alabama Health Benefits, Inc. acted as an intermediary between independent agent Houston and Corporate Benefit Services of America or Congress Life.
21. No employee of Alabama Health Benefits, Inc. personally solicited the sale of the Congress Life Company insurance policy at issue in this case. No one at Alabama Health Benefits, Inc. had any communications or direct contact with Ora Ruffin.
22. Neither I nor any employees of Alabama Health Benefits, Inc. had any involvement in the setting of rates, the selection of coverage, or the decision to pay benefits under the coverage at issue in this lawsuit.
23. Houston was at all times relevant to this case an independent agent. Houston was never employed by Alabama Health Benefits, Inc. No one at Alabama Health Benefits, Inc. directed or controlled the manner in which Houston conducted his business or the manner in which he ran his agency.
24. Alabama Health Benefits, Inc. could submit applications to Corporate Benefit Services of America for agents to be licensed, but Alabama Health Benefits, Inc. was not permitted to approve such agents for licensing on behalf of Corporate Benefit Services of America or Congress Life Insurance Company. Only Congress Life Insurance Company or Corporate Benefit Services of America could approve agents.
25. Alabama Health Benefits, Inc. did not withhold its commissions from premiums received, nor did it pay commissions to independent agents such as Houston. Corporate Benefits (sic) Services of America paid all commissions owed to the soliciting agent and directly to the soliciting agent.(See Doc. 34, Affidavit of Ken Lewis)
This letter reads, in pertinent part, as follows:
Thank you for selecting National Health Care Trust for your fully insured group life and medical coverages.
Your administrative kit containing your Certificate of Insurance, medical ID card, and other necessary forms and supplies has been sent to your agent. Please read all materials carefully as the kit contains information important to the administration of your plan.
Please be aware that you are subject to the pre-existing condition limitation of this policy, and to be eligible for coverage, you must be actively at work on the effective date. Dependents must not be hospital confined or disabled.
CORPORATE BENEFIT SERVICES OF AMERICA, INC. is the administrator of your plan. We would be pleased to assist you should you have any questions regarding your coverage. Please feel free to contact us at 800-765-4224.(See Doc. 32, Exhibit D)
This letter reads, in pertinent part, as follows:
We notified you in a letter dated February 8, 1999 of benefit changes which were made by Massachusetts General Life Insurance Company to your health plan effective March 1, 2000.
In addition to those changes, we have been instructed by Massachusetts General Life Insurance Company to notify you of a change in your drug benefit. Effective March 1, 2000, your drug benefit will be as follows:
Inpatient Drugs and Transplant Related Drugs: Subject to Deductible, Coinsurance, Policy Maximums, and all other policy provisions.
All Other Drugs, including Mail Order Drugs: Not Covered.
If you have questions, please contact your Account Service Representative, Judy Zimmerman at 888-969-4664.
(Doc. 32, Exhibit D)
5. Of course, the documents listed in Ken Lewis' March 8, 2000 affidavit are obviously not the entire contents of Alabama Health Benefits' file on Ruffin inasmuch as that file no doubt contains copies of Corporate Benefit Services of America, Inc.'s renewal premium notice and June 14, 1999 letter to plaintiff since the resident defendant was copied with both documents. (See Doc. 32, Exhibit D) The June 14, 1999 letter, written by Account Service Trainer/Auditor Judy Zimmerman, reads as follows:
Our records indicate that your June premium in the amount of $253.38 has been returned from the bank marked "Payment Stopped."
Unfortunately, your insurance coverage has been terminated due to nonpayment of premium effective June 30, 1999. We assume you have obtained other coverage as of June 1, 1999. If you do not have replacement coverage, you are entitled to extend coverage during your 31-day grace period with payment of premium. Please notify us immediately if you do not have new insurance coverage in place beginning June 1, 1999.(Id.) Mr. Lewis' failure to disclose all documents relevant to the relationship between Alabama Health Benefits, Corporate Benefit Services of America, Inc. and Hubert Houston, coupled with the fact that no discovery has been authorized in this action, causes concern over whether Alabama Health Benefits' file contains other documents relating to Ruffin such as a document similar to that sent to Wanda Jones, an insurance agent, by Alabama Health Benefits, Inc. (See Doc. 32, Exhibit C)
Re: CBSA Late Premium Notice for February 1998
We received notice from CBSA that the following clients have not paid their February 1998 premium. If the premium is not received within the grace period, these policies will lapse. Please contact your client concerning the status of their late premium.CLIENT NAME
Billy J. Hamilton
If we can be of assistance in retaining this business[,] [p]lease feel free to contact our office. A lapsed policy pays no benefits to your client and no commission to you.
If you need quotes with other carriers, don't hesitate to call us. We have several quality group and individual carriers with competitive premiums.(Id.)
6. In addition, the Court is unsure whether Alabama Health Benefits has a general agent marketing agreement with Hubert Houston like the one it had with Wanda Jones, (see Doc. 32, Exhibit C, ASSOCIATE GENERAL AGENT MARKETING AGREEMENT), although the Court strongly suspects that such an agreement does exist (see Doc. 41, Exhibit A ("Do you realize that this letter went to only 9 agents out of about 170 agents contracted through our office? The termination letter did not address our agent agreements. Since it was not addressed, we assume that our agent agreements will remain in effect.")).
The Associate General Agent in this agreement is Wanda Jones as signed by her on page 4. This agreement pertains to the products listed in schedule "A", marketed through Alabama Health Benefits and/or Interstate Marketing Service.
Alabama Health Benefits will continue this appointment under the following terms:
(1) Wanda Jones:
(a) Agrees to maintain proper license with each company.
(b) Agrees to produce a minimum production level. The suggested production level will be an average of 10 individual applications per month measured at 90 day intervals, with the understanding that this standard will not apply during the first 90 days.
(c) Agrees to submit, for written approval, all written promotional type material produced by Wanda Jones, to highlight any or all of the plan features of any plans marketed by Alabama Health Benefits.
(d) Shall exert (their) influence to keep in force all individual and group policies marketed by Alabama Health Benefits, unless otherwise instructed by Alabama Health Benefits.
(e) Wanda Jones shall have no authority to alter, modify, waive or change any of the terms, rates or conditions of any underwriting company's policies or contract, nor to perform any act or make any representations about the underwriting companies, or their policies or contracts, other than as expressly authorized in writing by an officer of the company involved in underwriting the case(s) in question. Wanda Jones shall have no authority to collect or receipt for premium or renewals other than the first premium, except a premium paid to the agent of record on reinstatement of a lapse, nor to endorse checks or other forms of payment payable to the administrator or underwriting companies, nor to advertise or publish any matter or thing concerning the administrator or underwriting companies or its policies without written permission of each party, or to do or perform any act or thing other than expressly authorized or permitted by all companies involved.
(f) Should the underwriting company or the administrator for any reason refund any premium on the policy issued, Wanda Jones shall repay or return, on demand, any commissions, options, or other benefit received with respect to such premium.
(g) No assignment of this agreement or any of the commissions or other rights and benefits accruing to Wanda Jones hereunder, shall be valid unless authorized in advance and in writing, by an officer of Alabama Health Benefits.
(h) Wanda Jones agrees to review each application and premium check for completeness and accuracy. Each incomplete application will be returned to the writing agent for completion.
(i) Wanda Jones agrees to forward each application to the office of Alabama Health Benefits. Only with prior approval from Alabama Health Benefits on a case by case basis, can an application be mailed directly to the underwriting company or the administrator: If permission granted, Wanda Jones agrees to mail a copy of the application and check to Alabama Health Benefits.
(2) Alabama Health Benefits:
(a) Agrees to assist Wanda Jones in his/her efforts to acquire business by providing current rate data, brochures and other sales aids or materials it produces for its field force.
(b) If the, case(s) issued by the underwriting companies are placed and in force in accordance with the rules and regulations of the underwriting company and/or the administrator and/or Alabama Health Benefits, as from the time to time promulgated, the underwriting company or the administrator or Alabama Health Benefits will pay commission to Wanda Jones on the commissionable premium paid to the underwriting company or the administrator. Such commission shall be a percentage of the commissionable premium as set forth in schedule A.
(c) Agrees to pay the commissions referred to in subparagraph (b) to Wanda Jones as long as minimum production requirements are maintained. The commissions shown in schedule A will only apply to applications written after the effective date of this agreement. The override percentage referred to in schedule A is a portion of the override received by Alabama Health Benefits from the underwriting company and/or the administrator. Alabama Health Benefits reserves the right to reduce the override percentage to Wanda Jones, if for any reason, the underwriting company and/or the administrator reduces the percentage paid to Alabama Health Benefits. Wanda Jones's right to these commissions shall end at such time when Wanda Jones or agent appointed to Wanda Jones, is no longer designated as agent of record by the insured individual or participating employer.
(d) Agrees to provide IBM compatible software at no cost if provided by the underwriting company or the administrator. We also agree to make available, at a real discount (40%), the AHB individual/group proposal software with most products listed in schedule A installed.
(e) Agrees to assist Wanda Jones as to status of all applications pending.
(f) Alabama Health Benefits reserves the right to reject license of any producing agent.
(g) Alabama Health Benefits reserves the right to make changes to schedule A if production requirements are not met.
This agreement supersedes any other previous agreements, oral or written, between the parties hereto dealing with the same subject matter, and no oral promises or representations regarding such shall be binding, nor shall the Agreement be modified except with prior consent of all parties hereto.
This agreement may be terminated with or without cause by either party upon thirty (30) days prior written notice by the terminating party to others, which shall be mailed to the last known addresses of said other parties. This agreement shall automatically terminate upon the revocation of the Wanda Jones license, upon the death of the Wanda Jones, if an individual, or upon dissolution of Wanda Jones if a partnership or corporation.
Unless this agreement terminates as stated in above paragraph, this agreement will remain in effect for a period of six months from the effective date of this agreement. This agreement will automatically renew for the next six months unless terminated or a new agreement is signed. The effective date of this agreement is the date shown below as the date of execution.
This particular commission schedule provided the following:
Agent Override Total
Group One — ABI 1st yr. 20% 5% 25% 2nd yr. 10% 2% 12% 3rd thereafter 5% 1% 6%
(Doc. 32, Exhibit C, Schedule A) "Compensation for Wanda Jones is broken down by the normal agent commission and the override percentage paid to Wanda Jones." (Id.)
(Doc. 32, Exhibit C, ASSOCIATE GENERAL AGENT MARKETING AGREEMENT (footnote omitted)) The agreement between Wanda Jones and Alabama Health Benefits was executed on May 26, 1993. (Id.) Finally, the Regional Director Agreement between Alabama Health Benefits and CBSA suggests a stronger tie between all the parties in this case than painted by Ken Lewis as that contract specifically empowers Alabama Health Benefits "[t]o solicit applications for Insurance and to deliver certificates and/or policies of insurance to participants" and "[t]o appoint and contract with sub-agents to solicit insurance on behalf of the Company after completing the necessary license applications." (See Doc. 34, Exhibit 1 to Lewis aff. (emphasis supplied))
7. In a lawsuit filed in the Northern District of Alabama in 1998, Staten v. Congress Life insurance Co., et al., CV-98-PT-55-M, Lori J. Herzog, an employee with Corporate Benefit Services of America, Inc., testified that Alabama Health Benefits is a regional director and marketer of health insurance policies who solicits insurance applicants. (See Doc. 32, Exhibit C, Deposition of Lori Herzog, at 6) Insurance agents would contact individuals on behalf of Alabama Health Benefits for purposes of writing applications for insurance. (Id., at 64) Alabama Health Benefits receives a commission from CBSA derived from premium payments. (Id., at 7)
8. On February 24, 1997, Ken Lewis, then Vice President of Alabama Health Benefits, wrote the following letter to James V. McMahill of CBSA:
On February 18, 1997, we received your letter terminating our Regional Director Agreement with your company. This letter will serve two purposes: one, to ask questions about the termination and second, to serve as an appeal to your decision.
First, I think it appropriate to recap the events that lead (sic) up to your decision. On February 12, 1997, I received a call from Jim Pederson and Craig Nelson. Jim did most of the talking, but I could tell that he and Craig were very upset about a letter we mailed to a few [of] our agents concerning a small block of CBSA group cases we were moving to another carrier. They informed me that our RD contract would be canceled. I was told that we were "cherry picking" the good groups (those with low claims) for this move and leaving all the bad groups (those with high claims) with CBSA.
The next day (2-13-97) B. L. Long and I called Jim Pederson to discuss this action. Jim informed us that moving the business was bad for CBSA, but it appeared that he was more concerned about our letter to the agents than the move itself. He stated that the letter would be detrimental to CBSA. At one point he even made a comment as to how much this would hurt CBSA's reputation when the agents in Alabama received our letter. This last comment really disturbed me and I tried to explain that we only sent the letter to a total of nine agents. How will all the "other" agents know about this?
The following day Jim and Craig called back saying the termination will stand and we would receive a letter to that affect (sic).
Alabama Health Benefits is one of the oldest producers of CBSA business. Our relationship with CBSA goes back 15 years when you specialized in the nursing home business. We have consistently been one of your top producers in the country. We have remained loyal to CBSA and your products, even during the problems with the old NIT business. Considering the legal environment in Alabama, we have worked hard to keep CBSA out of any legal situations.
During these years we made many friends at CBSA. We have consistently marketed your products and services to our agents. In fact, I have regularly told agents that "over the last 15 years, CBSA has given as good or better service than any other carrier." We have always felt very good about our relationship with CBSA. For these reasons we were very disturbed about your decision.
During the last 18 months we have received numerous phone calls from agents and clients complaining about the high rate increases with CBSA in the 359 zip code area. We have also had many calls from agents and clients complaining about the change of network provider to Health Choice. Health Choice has few providers in this area.
In turn, we have talked to Jim Pederson, Craig Nelson, and Bob Stubbie on several occasions in an attempt to correct the high rate increases so new business could be written to correct the problem. We made several other suggestions that we felt would help. We also asked, in their opinion, what we could do on our end to help. We were basically told that nothing could be done.
During the first renewals we advised clients, "Their (CBSA) past rate increases have not been this high and we expect things to get better." We suggested clients to stay with CBSA thinking the next renewals would be lower. But when the next renewals came down high again, we starting (sic) to lose business fast. Many employers were leaving and going elsewhere. Some were leaving because of the rate increase, some because of the network change, but most were leaving due to both.
Again we attempted to find a way to reduce rates on new business explaining the "domino" effect. Employers that could move would and those that couldn't would stay. We again were told there was nothing that could be done and CBSA knew they would be losing business.
With the many phone calls from clients and agents complaining and the threat of legal action from several employers, we had to make a decision as to what would be best for the employers, agents, Alabama Health Benefits, and CBSA as a whole. Since no one at CBSA would, or could, help we had to make a very hard decision. That decision was to move these cases in the 359 zip code area to another carrier. This decision would meet our requirement for due diligence. An agent's primary responsibility is to his client. This decision would solve our problem with the network and the rates. The other carrier used a better network and their rates were more stable. The carrier gave us underwriting concessions that we felt would help move some of the higher risk clients also. This would be helpful to CBSA. Many of the employers with very high claims have already moved to Blue Cross.
You knew that you would be losing business in this area if nothing was done and yet you did nothing. The only thing we did was to speed up what was going to happen anyway. The difference is that what we did was beneficial to our clients and agents. The bottom line would be the same for CBSA. If we are guilty of anything, we are guilty of providing requested service to our clients and agents.
What really disturbed me during the conversation with Jim and Craig was the fact that they did not seem concerned as to why we were taking this action. I hope you can see from above, why we took the action we took. We still feel CBSA is one of the best administrators in the country. However, we feel you made a hasty decision without all the necessary information.
It was commented that we hurt your reputation. We have always supported your organization and said nothing to agents to give them any reason to not do business with CBSA. In fact, we have encouraged agents to do business with CBSA even when your rates were higher than the competitor.
As I stated earlier I do have a few questions. Your letter of termination simply stated you were terminating our agreement "in accordance with Section 8.5 of that agreement." Is this a permanent termination or a temporary termination? Is reconsideration a possibility? Was there anything in our letter that was not true? Do you realize that this letter went to only 9 agents out of about 170 agents contracted through our office?
The termination letter did not address our agent agreements. Since it was not addressed, we assume that our agent agreements will remain in effect.
If we had stopped doing business with CBSA, I might understand your actions. However, we have averaged 43 applications per month since September and have approximately 32 cases pending today. We had taken actions to increase business with CBSA significantly during 1997 with the addition of a new marketing representative (an ex-AMS district manager). This representative is in addition [to] the one hired in May. Within the past 3 weeks, we have visited with 29 agents in person. We have no plans to change our marketing blitz, but unfortunately, now all of that business must be placed with other carriers. We have never stopped promoting your products and in fact, we have agents still writing new business in the 359 area.
(Doc. 41, Exhibit A)
9. On September 8, 1997, Ken Lewis, as President of Alabama Health Services, wrote the following letter to CBSA's Jim Pederson:
I am writing you today to request consideration be given to contracting Alabama Health Benefits, Inc. as a Regional Director in the Alabama and Mississippi regions. Our office had a relationship with CBSA for approximately 15+ years and was a regional director from 1986 until Spring of 1997.
I'm not going to go back to the decision made to cancel our contract with CBSA because that is in the past; I want to look toward the future. Our office is a different place today than it was at that time.
Let me explain why I would like to keep our relationship with CBSA. Of course, there is the fact that we had a long relationship with CBSA and made many friends over the years. It was hard to see this good relationship come to an end. There is also the fact that many carriers have the "chicken little syndrome" and have pulled out of Alabama. (Things have gotten much better, by-the-way) But, let [me] tell you the main reason. You may not know this, but CBSA launched Alabama Health Benefits into the business we're in today. Let me explain:
When I came to Alabama Health Benefits in 1985, B.L. Long was doing business with you working with nursing homes. I was writing personal group business, but truly wanted to start marketing products to other agents. At that time B.L. had a few local agents that he worked with on a split basis. In 1986, B.L. struck a deal with Scott Kellin to market the NIT plan. This provided the opportunity I had been looking for. Immediately, I began developing a list of agents in north Alabama. Then I designed a mailing piece on NIT and got it approved. And then, I mailed it to my list of agents. The response was great and the rest is history. We soon got contracts to market other products and our business took off. So as you can see, I had the plan, B.L. provided the chance, and you provided the product. That is how Alabama Health Benefits really got started as a true insurance marketing firm or wholesaler.
As you know, in June of this year I bought out B.L. Long and I now own 100% of Alabama Health Benefits, Inc. Looking forward to this time, I started making changes in the office two years ago.
Allow me to share a few things with you. Our office is now automated to the extent we track every application, agent, product, carrier, and client by computer. This new system allows us to track the pending status of all applications, including outstanding requirements, and make detailed notes. This allows us to give better service to the agent, client, and the carrier. We are also able to track production by agent, carrier, or product. In doing so, we can keep track of which agents are producing quality business versus those agents writing "not so good" business. We have been able to work out most of the bugs in the new system and will soon be upgrading the computers to make it work even faster.
While automation is great, personal contact can never be replaced. A little over a year ago, I brought in Mark Brittain to assist in marketing. Mark was the only person at that time I would have considered for this position and he has done extremely well. Mark is able to visit with agents in the field on a regular basis. I can't tell you the number of agents who have called thanking me for sending Mark to see them. Many times I am told that we are the only marketing firm that has sent a representative to visit with the agent. Mark is also learning quickly how to handle most office procedures allowing me to get out of the office to visit agent[s] also.
My primary focus has always been to market to other agents. Unfortunately the majority of our business was in our own geographical location. Over the last year we have put emphasis in marketing all over Alabama and it has paid off. Just three years ago, approximately 75% of our group major medical business was located in the 359 zip code area and over 55% of our individual major medical was located in this area. Today, these percentages have been reduced to approximately 49% of the group major medical business and only 35% of the individual major medical business. Our goal is to reduce these figures to around 25% or less of total business. Beginning in December of 1997, we will kick off a marketing campaign aimed at the state of Mississippi.
I understand that our loss ratio with your company has been high, particularly in the 359 zip code area. By reducing the percentage of business in that area, it should help to reduce our overall loss ratio. We are also tracking the agents to see which agents are writing quality business. Our plan is to provide incentives to these agents. By tracking the agents['] production we can also "weed out" the agents who consistently write undesirable business. This is another way of reducing our loss ratio.
The third way of reducing losses is by writing more group business and less individual business. Our concentration is focused on group[s] of five or more. I feel these cases will, in the long run[,] have lower losses than the individual cases and cases of less than 5 lives.
As far as the CBSA business, the only way to reduce our current loss ratio is to move all cases to another carrier or write new "good" business. As you increase rates, many of the good cases will move; however, those that cannot move must stay. We have been successful at moving some of these cases. It's easy to think that with HIPAA we could move all the high loss cases, but many of the employers find the cost of a new plan to be prohibitive. In my opinion, the best way to help this loss ratio is to add new, clean cases to the trust.
Jim, as you know, B.L. and I worked together for several years and although we didn't always agree, he was good to me and I appreciate the opportunity we had to work together. I respect B.L. and we still have a good relationship. That being said I am not B.L. and as you reconsider us as regional director I want you to consider our future and not the past. Whatever happened in the past is history.
With all the changes in our industry, I still feel that we have a great future and I look forward to the years ahead. My father's always taught me that positive thinking brings positive results and negative thinking brings failure. As you reconsider Alabama Health Benefits let me assure you that we will strive to bring you positive results.
I want to ask one favor of you. I think its (sic) only fair that I know your true feelings. You will make the decision whether we do business together or not. In the past when we talked, I could not get a good feeling on how you feel about our relationship. However, if you are not interested in once again assigning Alabama Health Benefits as a regional director, please let me know.
(Doc. 41, Exhibit B)
CONCLUSIONS OF LAW
1. "Any civil case filed in state court may be removed by the defendant to federal court if the case could have been brought originally in federal court." Tapscott v. MS Dealer Serv. Corp., 77 F.3d 1353, 1356 (11th Cir. 1996), citing 28 U.S.C. § 1441 (a). Federal courts may exercise diversity jurisdiction over all civil actions where the amount in controversy exceeds $75,000, exclusive of interest and costs, and the action is between citizens of different states. 28 U.S.C. § 1332(a)(1). However, "[b]ecause removal jurisdiction raises significant federalism concerns, federal courts are directed to construe removal statutes strictly. . . . Indeed, all doubts about jurisdiction should be resolved in favor of remand to state court." University of South Alabama v. American Tobacco Co., 168 F.3d 405, 411 (11th Cir. 1999).
2. "[T]he removing party bears the burden of demonstrating federal jurisdiction." Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 n. 4 (11th Cir. 1998) (citation omitted); Tapscott, supra ("A removing defendant has the burden of proving the existence of federal jurisdiction."). Therefore, in this case, the burden is on the removing defendants to establish complete diversity, that is, the plaintiff is diverse from every defendant, Triggs, supra, 154 F.3d at 1287 (citation omitted), and, in addition, to establish by a preponderance of the evidence that the amount in controversy more likely than not exceeds the $75,000 jurisdictional requirement, Tapscott, supra, 77 F.3d at 1357 ("[W]e hold where a plaintiff has made an unspecified demand for damages in state court, a removing defendant must prove by a preponderance of the evidence that the amount in controversy more likely than not exceeds the $50,000 jurisdictional requirement.")
The Court finds that the removing parties have established by a preponderance of the evidence that the amount in controversy exceeds the $75,000 jurisdictional requirement. (See Doc. 1, NOTICE OF REMOVAL, at ¶¶ 18-23; Id., COMPLAINT, at 10 ("WHEREFORE, for all claims stated above, the Plaintiff demands judgment against the Defendants, separately and severally, in such sums of compensatory and punitive damages as a jury may assess after a fair and accurate consideration of the facts of this cause."); Docs. 32 41 (no argument by plaintiff on the issue of amount in controversy))
3. In order to establish complete diversity of citizenship and the removability of this case, the removing parties must show that the joinder of the non-diverse party, Alabama Health Benefits, was fraudulent. Tapscott, 77 F.3d at 1359 ("An action may nevertheless be removable if the joinder of non-diverse parties is fraudulent."); see Sellers v. Foremost Ins. Co., 924 F. Supp. 1116, 1117 (M.D.Ala. 1996) ("The citizenship of a resident defendant fraudulently joined should not be considered by a court for the purpose of determining diversity jurisdiction."). "The burden of establishing fraudulent joinder is a heavy one." Pacheco de Perez v. ATT Co., 139 F.3d 1368, 1380 (11th Cir. 1998).
4. "Fraudulent joinder is a judicially created doctrine that provides an exception to the requirement of complete diversity." Triggs, 154 F.3d at 1287. Joinder has been deemed fraudulent in three situations: (1) when there is no possibility that the plaintiff can prove a cause of action against the resident non-diverse defendant; (2) when the plaintiff has fraudulently pled jurisdictional facts in order to bring the resident defendant into state court; and (3) "where a diverse defendant is joined with a nondiverse defendant as to whom there is no joint, several or alternative liability and where the claim against the diverse defendant has no real connection to the claim against the nondiverse defendant." Id. The removing parties make no argument that the second or third fraudulent joinder situations apply (see Docs. 37-38 40) and therefore, the Court focuses solely upon the first type of fraudulent joinder.
5. "`If there is even 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 was proper and remand the case to the state court.'. . . The plaintiff need not have a winning case against the allegedly fraudulent defendant; he need only have a possibility of stating a valid cause of action in order for the joinder to be legitimate." Triggs, 154 F.3d at 1287 (citation omitted); see also Pacheco de Perez, supra ("Where a plaintiff states even a colorable claim against the resident defendant, joinder is proper and the case should be remanded to state court."); Bedford v. Connecticut Mut. Lfe Ins. Co., 916 F. Supp. 1211, 1214 (M.D.Ala. 1996) ("`The joinder is fraudulent if it is clear that, under the law of the state in which the action is brought, the facts asserted by the plaintiff as the basis for the liability of the resident defendant could not possibly create such liability so that the assertion of the cause of action is as a matter of local law plainly a sham and frivolous.").
6. "The determination of whether a resident defendant has been fraudulently joined must be based upon the plaintiff's pleadings at the time of removal, supplemented by any affidavits and deposition transcripts submitted by the parties. . . . In making its determination, the 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." Pacheco de Perez, 139 F.3d at 1380 (citations omitted); see also Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir. 1997) ("To determine whether the case should be remanded, the district court must evaluate the factual allegations in the light most favorable to plaintiff and must resolve any uncertainties about state substantive law in favor of the plaintiff. . . . The federal court makes these determinations based on the plaintiff's pleadings at the time of removal; but the court may consider affidavits and deposition transcripts submitted by the parties."); Cabalceta v. Standard Fruit Co., 883 F.2d 1553, 1561 (11th Cir. 1989) ("In addressing the issue of fraudulent joinder, the district court should resolve all questions of fact and controlling law in favor of the plaintiff and can consider any submitted affidavits and/or deposition transcripts.").
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." . . . Over and over again, we stress that "the trial court must be certain of its jurisdiction before embarking upon a safari in search of a judgment on the merits."Crowe, supra, 113 F.3d at 1538.
7. The burden is on the defendants "to show that the allegations of the complaint state no possible cause of action against defendant [Alabama Health Benefits] . . . Defendants, however, need only show that Plaintiff ha[s] no possible cause of action in [Alabama] under the allegations of the plaintiff[']s pleadings at the time of removal." Id. "In a fraudulent joinder inquiry, `federal courts are not to weigh the merits of a plaintiff's claim beyond determining whether it is an arguable one under state law.'" Pacheco de Perez, 139 F.3d at 1380-1381 (quoting Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir. 1997)).
In terms of this circuit's law, the main point for us is this one: For a Plaintiff to present an arguable claim against an in-state defendant and, therefore, to require a case removed to federal court to be remanded to state court, the plaintiff need not show that he could survive in the district court a motion for summary judgment filed by that in-state defendant. For a remand, the plaintiff's burden is much lighter than that: after drawing all reasonable inferences from the record in the plaintiff's favor and then resolving all contested issues of fact in favor of the plaintiff, there need only be "a reasonable basis for predicting that the state law might impose liability on the facts involved.". . . Because the procedures are similar while the substantive standards are very different, district courts must exercise extraordinary care to avoid jumbling up motions for remand and motions for summary judgment that come before them.
In the remand context, the district court's authority to look into the ultimate merit of the plaintiff's claims must be limited to checking for obviously fraudulent or frivolous claims. Although we have said that district courts may look beyond the face of the complaint, we emphasize that the district court is to stop short of adjudicating the merits of cases that do not appear readily to be frivolous or fraudulent.Crowe, 113 F.3d at 1541-1542.
8. In cases such as this where there has been no discovery as of the time of removal, at least one district court in Alabama has settled on a standard that is equivalent to the standard imposed by Fed.R.Civ.P. 11 in making the remand decision. Wright v. Metropolitan Life Ins. Co., 74 F. Supp.2d 1150, (M.D.Ala. 1999); Sellers v. Foremost Ins. Co., 924 F. Supp. 1116 (M.D.Ala. 1996). That standard is whether the plaintiffs have made "some showing that `the allegations and other factual contentions have evidentiary support or . . . are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.'" Wright, 74 F. Supp.2d at 1153 (ellipsis in original); see also Sellers, 924 F. Supp. at 1118-1119 (same). "Therefore, to block a fraudulent-joinder charge based on lack of legal support, a plaintiff need only show that her claim against a resident defendant is warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law." Wright, 74 F. Supp. at 1153; see also Sellers, 924 F. Supp. at 1119 ("[T]o block a fraudulent-joinder charge based on lack of evidence, a plaintiff who has not been able to engage in full discovery must be able to provide some showing that her claim against the resident defendant has evidentiary support or is likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.").
9. In an attempt to show that the allegations of the complaint state no possible cause of action against Alabama Health Services and that plaintiff has made no showing that her claim against Alabama Health Benefits has any legal or evidentiary support or is likely to have legal or evidentiary support, after a reasonable opportunity for further investigation or discovery, the removing defendants cite this Court to Land Associates, Inc. v. Simmons, 562 So.2d 140 (Ala. 1989), cert. denied sub nom. General American Life Ins. Co. v. Simmons, 499 U.S. 918, 111 S.Ct. 1305, 113 L.Ed.2d 240 (1991), and Broadus v. Essex Ins. Co., 621 So.2d 258 (Ala. 1993) as support for the argument that there is no viable cause of action in Alabama against an insurance broker who is a mere paper clearinghouse. (See, e.g., Doc. 40, at 8) In Land Associates, Inc., the Alabama Supreme Court reversed a jury verdict, based on fraud in the sale of a life insurance policy, against Land Associates on the basis that "[t]here was no evidence that Land Associates served as anything other than a geographical brokerage agency for General American, or that Land Associates exercised any control over Foster or functioned as anything more than a paper clearinghouse between General American and its soliciting agents." Id. at 145. The Supreme Court's analysis leading to this conclusion is instructive:
Simmons testified that Willie Foster, the owner of Foster Insurance Agency, told him that a $10,000 life insurance policy with General American on his wife would be effective "`Just as soon as I get that check, if it's any good.'" Id. at 142. On July 15, 1986, eleven days after Jane Simmons died of a massive heart attack, "the underwriting department of General American made its formal decision that Jane Simmons had not been a `standard risk' when she applied for insurance coverage" on account of "her history of peptic ulcer disease, drug abuse and dependency, and abnormal EKG's indicative of ischemia or heart disease." Id. at 142.
"The test to be applied in determining the existence of an agency relationship under the doctrine of respondeat superior is whether the alleged principal reserved a right of control over the manner of the alleged agent's performance. However, the right to determine if an alleged agent is conforming to the requirements of a contract does not, in itself, establish control." Furthermore, agency is not determined by how the parties characterize their relationship, but by the facts of each case.
The evidence at trial revealed that Land Associates was a geographical brokerage agency for General American. While the contract between General American and Land Associates referred to Land Associates as a general agent, Ed Land, president of Land Associates, testified that that company merely acted as a paper clearinghouse between agents and General American and that Land Associates had no decisionmaking power with regard to the underwriting or acceptance of General American's policies.
Land testified that when Foster initially requested to sell General American policies, he conducted an investigation into Foster's background and forwarded the information resulting from that investigation to General American. It was General American, and not Land, he said, who decided to issue Foster a contract to sell General American's policies.
Foster testified that he was licensed to sell life and health insurance policies through many companies, including General American. Foster received a manual from General American outlining the company's policies, and that manual was made part of his contract. Foster stated that when he sold a policy it was General American, not Land Associates, who paid him.
General American had the authority to hire and fire its agents, to determine the methods by which they were trained, to issue its company training manuals, and to pay its agents their commissions. There is sufficient evidence in the record to support the jury verdict under the theory of respondeat superior in favor of Simmons against General American.Id. at 144-145 (internal citations omitted). The Alabama Supreme Court's analysis in Broadus v. Essex Ins. Co., 621 So.2d 258 (1993), wherein the trial court's grant of summary judgment to the defendants was affirmed, is also instructive:
The following facts are undisputed: Broadus contacted his insurance agent, Jim Van Antwerp, and requested that he procure certain coverage of Broadus's company. Van Antwerp, who owns an independent retail insurance agency and does business with many insurance companies and brokers, contacted The Insurance House. The Insurance House, an independent wholesale insurance broker that assists agents, such as Van Antwerp, in finding insurance companies that provide the kind of coverage needed by the agent's customers, then contacted Essex, which agreed to provide coverage for Broadus. The sole function of The Insurance House with regard to this transaction was to act as an intermediary between Van Antwerp and Essex. The Insurance House obtained information from Van Antwerp concerning the kind of coverage that Broadus wanted and relayed it to Essex. Essex then informed Van Antwerp, through The Insurance House, that it would issue a policy to Broadus on certain terms. Van Antwerp relayed that information to Broadus, who agreed to accept the coverage. Van Antwerp collected the premium, deducted his commission from it, and forwarded the remainder to The Insurance House. The Insurance House, which had the limited authority to bind the coverage under the terms set by Essex, deducted its commission from the amount that it received from Van Antwerp and sent the balance of the premium to Essex. During the term of the policy, The Insurance House continued in its role as an intermediary between Van Antwerp and Essex, passing information back and forth. The Insurance House is not an insurance company and it had no direct contact with Broadus. Van Antwerp was not employed by The Insurance House as a soliciting agent; he served, instead, as an agent for Broadus.
. . .
After Essex denied a claim filed by Broadus, based on an exclusion contained in the policy, Broadus sued Van Antwerp; Van Antwerp's agency; The Insurance House; and Essex, seeking damages for breach of contract, fraud, and bad faith refusal to pay an insurance claim. The trial court entered a summary judgement for The Insurance House and Essex and certified that judgment as final, pursuant to Rule 54(b), Ala.R.Civ.P. Broadus's claims against Van Antwerp and his agency remain pending below.
After carefully studying the record and the briefs in this case, we conclude that the summary judgment was proper. Broadus's "theory of the case" is basically this: The Insurance House, he says, exercised or reserved the right to exercise control over the manner in which Van Antwerp ran his agency, and therefore is vicariously liable under the doctrine of respondeat superior for any misrepresentations that Van Antwerp may have made to Broadus concerning the extent of coverage under the Essex policy. In turn, the theory goes, Essex is liable under general agency law because, according to Broadus, The Insurance House dealt with Van Antwerp as Essex's general agent. The basic problem with this theory, as the trial court found, is that it has no evidentiary support. Whether Van Antwerp had an agency relationship with The Insurance House when he dealt with Broadus so that The Insurance House could be vicariously liable for Van Antwerp's actions depends on whether The Insurance House reserved the right to control the manner in which Van Antwerp ran his agency. Land Associates, Inc. v. Simmons, 562 So.2d 140 (Ala. 1989). The record shows that The Insurance House had no right to, and did not, control Van Antwerp. Van Antwerp acted at all times as an independent insurance agent or broker on behalf of Broadus. The Insurance House acted as an independent wholesale insurance broker, passing information upon request between Van Antwerp and Essex. As we stated in Land Associates, Inc. v. Simmons, supra, at 144, "the right to determine if an alleged agent is conforming to the requirements of a contract does not, in itself, establish control." Van Antwerp and The Insurance House merely cooperated with each other so as to secure insurance coverage for Broadus. By passing information between Essex and Van Antwerp and performing certain administrative duties in connection with the policy on behalf of Essex, The Insurance House did not create the kind of relationship with Van Antwerp that would subject it to liability under the doctrine of respondeat superior.
When an independent agent or broker, such as Van Antwerp, fails to procure insurance coverage for his principal (here Broadus), the principal may sue either for a breach of contract or in tort. See Washington National Ins. Co. v. Strickland, 491 So.2d 872 (Ala. 1985). As previously noted, Broadus's claims against Van Antwerp remain pending below. However, based on the undisputed facts in the present case and because Van Antwerp and The Insurance House acted independently of each other, The Insurance House is not liable for fraud under the doctrine of respondeat superior. It follows, of course, that Essex cannot be liable under Broadus's theory of the case if The Insurance House is not liable. Therefore, we need not determine whether The Insurance House was a general agent for Essex.Id. at 259-261 (footnote omitted).
10. In determining whether there is evidentiary and legal support for plaintiff's claims against Alabama Health Benefits, this Court need clearly identify the thrust of plaintiff's fraud claims. The defendants paint plaintiff's claims as involving nothing more than her lack of knowledge that her insurance premiums would increase and that because Alabama Health Benefits had no authority or input in the setting of premiums, the handling of claims or of notice to the insured of premium increases, it had no involvement in any of the allegations complained of by the plaintiff and therefore, plaintiff has failed to state a claim against it. Unfortunately, however, plaintiff's claims against all the defendants, including Alabama Health Benefits, are more complicated and intriguing than the defendants would have the Court believe. Plaintiff's fraud claims against the defendants are based on her allegations that she was sold a life insurance policy that was represented to her as group insurance with knowledge that premiums were to be assessed or calculated on the basis of individual risk factors, i.e., on the basis of the policy being an individual policy. Having determined the exact scope of plaintiff's claims, the Court considers the evidentiary and legal support for plaintiff's claims.
The Court focuses on plaintiff's fraud claims since that is the sole focus of the Alabama Supreme Court in Land Associates, Inc. and Broadus.
11. There can be no doubt that there is legal support for plaintiff's fraud claims against Alabama Health Benefits because Broadus and Land Associates, Inc. necessarily establish the viability of such claims. In both of those cases, the Alabama Supreme Court, after time for complete and full discovery, considered whether the plaintiffs had proven that corporations in positions similar (but assuredly not identical) to that of Alabama Health Benefits in this case reserved the right to control or exercised control over individuals in positions similar to that of Hubert Houston in this case such that these corporations were vicariously liable under the doctrine of respondeat superior for any misrepresentations, etc., made by individuals similar to Houston to the insureds. As set forth in Crowe, supra, a plaintiff need not show that she can survive a motion for summary judgment filed by the resident defendant; rather, there need only be, as there is here, "`a reasonable basis for predicting that the state law might impose liability on the facts involved.'" Id. at 1542 (citations omitted emphasis in original).
12. Because there can be no doubt that there is legal support for the fraud claims asserted by the plaintiff the sole question becomes whether there is any evidentiary support for plaintiff's fraud claims against Alabama Health Benefits. In this regard, plaintiff need only provide some showing that her fraud claims against the resident defendant have evidentiary support or are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery. At the outset, it is clear that plaintiff's fraud claims against the defendants are very different from those asserted in Broadus and Land Associates, Inc. and it is inherently believable, at least at this point in time, that all the defendants, including Alabama Health Benefits, knew that the policy which Ruffin purchased was being marketed and sold as a group policy, with all attendant benefits of group insurance such as lower premiums, all the while knowing that premiums were going to be calculated on an individual risk basis. That this scenario is believable particularly with respect to the resident defendant is made more clear given the indices of control exercised by Alabama Health Benefits over Hubert Houston. To be sure, this case is not like Broadus where the plaintiff contacted his insurance agent, Van Antwerp, to procure coverage for his company and his agent then contacted The Insurance House who relayed the request for coverage to Essex nor does it appear that it is exactly like Land Associates, Inc., where there was only evidence of a contract between the insurer, General American, and the middleman, Land Associates, and the selling agent, Foster, and the insurer, General American. Rather, here, the evidence clearly suggests that Alabama Health Benefits actively marketed group and individual health insurance plans/policies/products/services to its agents, like Houston, personally meeting with those agents to this end, solicited applicants through its network of insurance agents, was a top producer of CBSA insurance business at the time Ruffin purchased her policy and encouraged agents to do business with CBSA, and maintained general agent marketing agreements with its agents. In light of the foregoing, the Court must find that the allegations of plaintiff's complaints have evidentiary support or, at the very least, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery. Accordingly, the Court concludes that Alabama Health Benefits has not been fraudulently joined as a defendant.
Even though the defendants contend that plaintiff can state no cause of action against Alabama Health benefits, the Court does not consider this to be an attack on the legal viability of the claims so much as it is an attack on the lack of evidentiary support for such claims.
As was stated by plaintiff's counsel during oral argument, without the claim against Alabama Health Benefits, her case against CBSA and Congress Life would be substantially hampered if not entirely destroyed in light of the following language contained in Broadus: "[B]ased on the undisputed facts in the present case and because Van Antwerp and The Insurance House acted independently of each other, The Insurance House is not liable for fraud under the doctrine of respondeat superior. It follows, of course, that Essex cannot be liable under Broadus's theory of the case if The Insurance House is not liable." 621 So.2d at 261.
13. Plaintiff's motion to remand contains a request for an award of attorney's fees due to the defendants' improvident removal of this case to federal court. (Doc. 32, at 8) This Court has broad discretion in determining whether to award attorney's fees under 28 U.S.C. § 1447(c). Whitlock v. Jackson National Life Ins. Co., 32 F. Supp.2d 1286, 1293 (M.D.Ala. 1998) (citations omitted). "The standard that has emerged is whether `from aught that appears, the defendants . . ., have acted reasonably on the basis of the information available at the time of removal.'" Id. (citations omitted).
14. In this case, the Court finds that removal jurisdiction was not patently lacking since the defendants acted reasonably on the basis of the information available to them at the time of removal. Accordingly, the plaintiff's request for an award of attorney's fees is DENIED.
CONCLUSION
The defendants have failed to carry their burden of showing that the allegations of Ora Ruffin's complaint state no possible cause of action under Alabama law against Alabama Health Benefits, Inc. Having failed to show that Alabama Health Benefits, Inc., has been fraudulently joined as a defendant, this Court is without subject matter jurisdiction in this action. For these reasons, plaintiff's motion to remand this case to the Circuit Court of Choctaw County, Alabama (Docs. 32 41) is GRANTED. However. plaintiff's request for an award of attorney's fees is DENIED.