Metro. Prop. & Cas. Ins. Co. v. Butler, 4:15-cv-01244-JEO

METROPOLITAN PROPERTY & CASUALTY INSURANCE COMPANY, Plaintiff, v. DONALD E. BUTLER, et al., Defendants.

No. 4:15-cv-01244-JEO

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA MIDDLE DIVISION

May 20, 2016

MEMORANDUM OPINION

In this diversity action, Plaintiff Metropolitan Property and Casualty Company ("Metropolitan") seeks a declaratory judgment against Defendants Donald E. Butler ("Butler"), Donnetta Ogle ("Donnetta"), Jamie Ogle, Trent Ogle, Dakota Ogle and Kira Ogle (collectively "Defendants") as it relates to coverage under a homeowner's policy issued by Metropolitan. (See Docs.¹ 1, 3, and 23). The action is assigned to the undersigned United States Magistrate Judge pursuant to this court's general order of reference dated January 1, 2015, and the parties have consented to an exercise of plenary jurisdiction under 28 U.S.C. § 636(c). (Doc. 14). Pending before the court is Defendants' motion to dismiss for lack of subject-matter jurisdiction, filed pursuant to FED. R. CIV. P. 12(b)(1). (Doc. 10). The court has also issued an order requiring Metropolitan to show cause why the court, even if might possesses subject matter jurisdiction,should not dismiss the action based on the abstention principles articulated in Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328 (11th Cir. 2005), in light of a parallel civil action that Butler and Donnetta have filed against Metropolitan and two of its agents or employees in Alabama state court. (Doc. 28). Metropolitan has responded to that show cause order (Doc. 29), and Defendants have filed a reply thereto. (Doc. 30). Upon consideration, the court concludes that abstention is warranted under Ameritas and that this case is therefore due to be dismissed without prejudice. Defendants' pending motion to dismiss for lack of jurisdiction will be deemed moot.

I.

On October 19, 2014, a fire occurred at a dwelling owned by Butler in Opelika, Alabama, in Lee County (the "Opelika Property"). (Doc. 23 ¶ 13). The Opelika Property was insured under a homeowner's policy issued to Butler by Metropolitan. (Doc. 3-1, the "Opelika Policy"). Following the fire, Butler submitted a claim under the Opelika Policy, seeking the policy limits of $380,630.00. (Doc. 23 ¶¶ 13, 15). In a letter dated May 20, 2015, Metropolitan denied the claim. (Id. ¶ 27; Doc. 11-4). Metropolitan advised it was doing so for four reasons. (Doc. 11-4). First, Metropolitan said that, under its interpretation of the policy, for a loss to be covered, the named insured, Butler, had to himself reside at the Opelika Property, but Metropolitan had determined that Butler was instead residing in Hokes Bluff, Alabama, in Etowah County, while the Opelika Property was being used as the residence of Butler's daughter Donnetta and her family, the Ogles. (Id. at 1). Second, Metropolitan asserted that Butler had failed to comply with conditions precedent spelled out in the Opelika Policy by failing to submit a properly completed proof of loss and inventory and supporting documentation. (Id. at 1-2). Third, Metropolitan maintained that any potential coverage for the Ogles' claim was contingent on Butler's actuallyresiding at the Opelika Property, and since he did not, Metropolitan said, any claim by the Ogles was also invalid. (Id. at 2). And finally, Metropolitan asserted that the claim was being denied because Donnetta had refused or otherwise failed to submit to an examination under oath, which was also a condition precedent under the policy. (Id.)

On July 21, 2015, Davis Whittelsey, an attorney representing Butler and Donnetta, and who also represents Defendants in this court, sent an email to Metropolitan's lawyer, advising that he, Whittelsey, intended to file an action on behalf of Butler and Donnetta against Metropolitan in the Circuit Court of Lee County, Alabama. (Doc. 11-8 at 2). Whittelsey also attached a copy of a "rough draft" of the proposed state-court complaint, which asserted state law claims for breach of contract, bad faith, fraud, negligence, and wantonness against Metropolitan and two Alabama residents alleged to be its agents or employees. (Id.) Whittelsey concluded by advising that, since he intended to file his action by the close of business on Friday, July 24, 2015, should Metropolitan desire to make a final attempt to settle the dispute within policy limits, its counsel should contact him before then. (Id.)

At 3:52 p.m. on July 24, 2015, with Butler and Donnetta's proposed state-court action still having yet to be filed, Metropolitan filed this action for a declaratory judgment pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201 et seq., founding jurisdiction on the diversity statute, 28 U.S.C. § 1332. (Doc. 1). Metropolitan named as defendants both Butler and Donnetta, plus the latter's husband, Jamie Ogle, and their children. In sum, Metropolitan seeks a judgment declaring that it owes no coverage for the fire loss under the Opelika Policy for the reasons stated in the denial letter of May 20, 2015. (Id.) Metropolitan has since filed an amended complaint on July 30, 2015, clarifying or otherwise correcting its initial pleading. (Doc. 3). Metropolitan has also since filed its now-governing second amended complaint, afterthe court advised it of deficiencies in Metropolitan's previous jurisdictional allegations. (See Docs. 22, 23).

On July 28, 2015, four days after the instant declaratory judgment action was commenced, Butler and Donnetta filed their lawsuit against Metropolitan in the Circuit Court of Lee County (the "State Court Action"). (Doc. 11-5). On October 1, 2015, they filed an amended or supplemental complaint in that proceeding. (Doc. 11-6). Butler and Donnetta there assert claims against not only Metropolitan but also its agent, Dena Hamilton; its "senior claim adjuster," Jason Palmer, both of whom are alleged to "reside" in Alabama; and various fictitious defendants. (Docs. 11-5 ¶¶ 4, 5, 6). Metropolitan, Hamilton, and Palmer will at times be referred to collectively as the "State Court Defendants."

In the State Court Action, Butler and Donnetta raise of host of claims, which all arise under Alabama law. (Docs. 11-5, 11-6). Those can be put into three general categories. First, Butler and Donnetta contend that Metropolitan is liable for both breach of contract (Doc. 11-5, Count I) and the tort of bad faith (id., Counts II & III). Those claims stem from Metropolitan's refusal to pay, and its alleged failure to properly investigate, the claimed fire loss under the Opelika Policy.

Second, Butler and Donnetta claim that all three State Court Defendants are liable for various species of fraud. All three State Court Defendants are the subject of claims for fraudulent misrepresentation (Doc. 11-5, Count IV; Doc. 11-6 Count X), while Metropolitan and Hamilton are alleged also liable for fraudulent suppression (Doc. 11-6, Count XI) and "fraudulent deceit." (Id., Count XII). In the third category, the State Court Defendants are alleged to be liable for negligence (Doc. 11-5, Counts V, VII; Doc. 11-6, Count VIII) and wantonness (Doc. 11-5, Count VI; Doc. 11-6, Count IX). The claims against and involvingHamilton (and for which Metropolitan is also alleged to be liable) are based on statements and recommendations she ostensibly made in relation to Butler's purchase of the Opelika Policy. To wit, Butler and Donnetta claim that Hamilton, as Metropolitan's agent, sold Butler not one Metropolitan homeowners policy but two. She sold him the first, they say, in about 2007 to cover his "primary residence" in Hokes Bluff (the "Hokes Bluff Policy") and then convinced him in about February 2012 also to buy the substantially identical Opelika Policy to cover the Opelika property. (See Doc. 11-6 ¶¶ 2-9). Hamilton did so, Butler and Donnetta allege, by telling one "and/or" both of them that the Opelika Policy would provide full insurance coverage for the Opelika premises and that it was the only insurance they needed to do so. (Id. ¶ 8). And in making such statements, Butler and Donnetta maintain, Hamilton (and Metropolitan) knew or should have known, among other things, that Butler had been, and intended to continue, using the Hokes Bluff premises as his primary residence; that the Hokes Bluff Policy had continued to be renewed annually and remained in force at all times relevant; and that while the Opelika premises had been purchased by Butler, they were, in fact, being used by the Ogles as their primary residence and merely as an "additional or second residence" by Butler. (See Doc. 11-5 ¶¶ 15, 19). In turn, Butler and Donnetta's claims against and involving Palmer (and for which Metropolitan is, again, also alleged to be liable) arise out of his adjusting the claim on behalf of Metropolitan. In this vein, Butler and Donnetta contend that Palmer "failed to conduct an appropriate investigation," and they seem to claim or suggest he made the decision to deny the claim. (Doc. 11-5 ¶ 50). They also assert that, following the fire, Palmer misrepresented to Donnetta "and/or" Butler that the losses suffered by them and Donnetta's family were covered under Opelika Policy and that Metropolitan would pay Donnetta's loss of use of the premises. (Doc. 11-6 ¶ 18). Finally, Metropolitan itself is also alleged to have been negligent in its hiring,training, and supervision of Hamilton and Palmer. (Doc. 11-5, Count VII).

Meanwhile, on October 8, 2015, Defendants moved to dismiss this declaratory judgment action for lack of subject-matter jurisdiction under FED. R. CIV. P. 12(b)(1). (Doc. 10). In support, Defendants propose that when their responsive pleading is due, they would also file counterclaims against Metropolitan and claims against Hamilton and Palmer, essentially the same claims that Butler and Donnetta have raised in the State-Court Action. (Doc. 11 at 6-7). And because Hamilton and Palmer are, like Defendants, Alabama citizens, their presence in the action, Defendants maintain, would destroy...