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Dolan v. Air Mechanix, LLC

United States District Court, S.D. Georgia, Savannah Division

July 22, 2019

MICHAEL DOLAN; and SHANA DOLAN, Plaintiffs,
v.
AIR MECHANIX, LLC; and AUTO OWNERS INSURANCE COMPANY, Defendants.

          ORDER

          R. STAN BAKER, UNITED STATES DISTRICT JUDGE

         This is a declaratory judgment action brought by Shana and Michael Dolan (“the Dolans”) against Auto Owners Insurance Company (“Auto Owners”) and its insured, Air Mechanix, LLC (“Air Mechanix”). Presently pending before the Court are the Dolans' Motion for Summary Judgment, (doc. 23), and Air Mechanix's Motion to Dismiss, (doc. 25). Both motions have been fully briefed by all parties, (see docs. 29, 31, 33, 36, 38). For the reasons described more fully below, the Court GRANTS Air Mechanix's Motion to Dismiss, (doc. 25), and GRANTS IN PART and DENIES WITHOUT PREJUDICE IN PART Plaintiffs Shana and Michael Dolan's Motion for Summary Judgment, (doc. 23).

         BACKGROUND

         I. Factual Background

         The issues presented to the Court in this lawsuit relate to Auto Owners' handling of payment on a judgment obtained by the Dolans against Auto Owners' insured, Air Mechanix, in a prior lawsuit. (See generally Doc. 1-2.) In that prior suit (hereinafter the “damages suit”), filed in the State Court of Chatham County, Georgia, the Dolans sought damages from Air Mechanix for bodily injury, repair, loss of contents and living expenses related to Air Mechanix's allegedly negligent installation of air conditioning ductwork at their home. (Id.; see also doc. 29-2.) In response, Auto Owners, which insured Air Mechanix pursuant to a commercial general liability (“CGL”) policy, filed a declaratory judgment action in the Superior Court of Chatham County, Georgia, claiming that the CGL policy excluded coverage for certain claims asserted by the Dolans in the damages suit. The declaratory judgment action ultimately resulted in a ruling from the Georgia Court of Appeals regarding the types of damages that were covered by the CGL policy and certain other types of damages that were excluded from coverage or only covered to a limited extent.[1] See Dolan v. Auto Owners Ins. Co., 773 S.E.2d 789 (Ga.Ct.App. 2015).

         In April 2016, a jury returned a verdict in the damages suit in favor of the Dolans and against Air Mechanix with a total damages award of $1 million. (Doc. 32, pp. 2-3; doc. 23-4.) The specific itemized damages awards comprising the $1 million total were as follows: $272, 500.00 for bodily injury to Michael Dolan; $272, 500.00 for bodily injury to Shana Dolan; $200, 000.00 for the cost of repairs; $75, 000.00 for loss of contents for Michael Dolan; $75, 000.00 for loss of contents for Shana Dolan; and $105, 000.00 for additional expenses. (Doc. 32, p. 3; doc. 23-4.) Judgment was entered on May 2, 2016. (Doc. 32, p. 3; doc. 23-5.) The verdict was later affirmed on appeal. See Auto Owners v. Dolan, 803 S.E.2d 104 (Ga.Ct.App. 2017), cert. denied, Air Mechanix, LLC v. Michael Dolan et al., No. S17C1946 (Ga. Jan. 16, 2018).

         On February 7, 2018, Auto Owners (through counsel for Air Mechanix) delivered to counsel for the Dolans a check for $426, 503.27 (the “February 7, 2018 check”). (Doc. 23-7; doc. 32, p. 4.) According to the cover letter accompanying the check, this amount “include[d] those items on the Special Verdict Form which were not mold related, ” as well as “the balance of the coverage under the mold limitation provision of the policy in the amount of $35, 000 together with interest on the amount of the Judgment as allowed under Georgia law.” (Doc. 23-7, p. 1.)

         There is no dispute among the parties to this case that the check was intended as a payment of $382, 500.00 of the $1 million judgment amount plus $44, 003.27 in post-judgment interest (at a rate of 6.5% per annum on the $382, 500.00 amount). (Doc. 32, p. 6.) There is also no dispute that $382, 500.00 was the correct principal for the portion of the total judgment for which Auto Owners was responsible under the policy.[2] (See id.) Instead, the dispute which prompted the Dolans to file the lawsuit presently before the Court centers on whether Auto Owners calculated and included the proper amount of post-judgment interest (for which it was responsible) in the check. Auto Owners contends that $44, 003.27 was the proper amount of post-judgment interest because, under the terms of the CGL policy and under Georgia law, it was responsible for the post-judgment interest that had accrued on only the portion of the judgment that it is obligated to pay. (Doc. 31, pp. 4-5.) The Dolans, on the other hand, claim that, pursuant to a specific provision in the CGL policy, Auto Owners was required to pay all of the post-judgment interest that had accrued on the total amount of the judgment (not just on the portion for which Auto Owners was responsible), an amount much higher than $44, 003.27. (Doc. 23-1, pp. 3-5.) The Dolans did not negotiate the check upon receipt, choosing instead to file this lawsuit.

         II. Procedural Background

         The Dolans originally filed this declaratory judgment action in the Superior Court of Chatham County, Georgia. (Doc. 1-2.) In their Complaint, the Dolans allege that Auto Owners “transmitted a partial payment of the Judgment as well as only a portion of the post-judgment interest that was due and owing to the Plaintiffs by Defendant's insurer [Auto Owners].” (Id. at pp. 3-4.) They claim that, pursuant to the policy, Auto Owners is responsible for the interest on the entire amount of the jury verdict award and they specifically seek “a judgment declaring that Defendant Auto Owners Insurance Company is responsible for the entire amount of post-judgment interest that is due upon the jury verdict award of $1, 000, 000.00.” (Id. at pp. 4-5.) The Dolans also named Air Mechanix as a Defendant. (See generally id.)

         Auto Owners, which is a not a citizen of Georgia, removed the case to this Court, claiming that the Court has diversity jurisdiction over the case pursuant to 28 U.S.C. § 1441. (Doc. 1, p. 3.) In the Notice of Removal, Auto Owners acknowledged that both the Dolans and Defendant Air Mechanix are residents of Georgia, which typically would prevent this Court from exercising diversity jurisdiction over the case. (Id. at pp. 2-4.) Auto Owners argued, however, that Defendant Air Mechanix's citizenship should be disregarded by the Court because it was fraudulently joined in the action in an effort to defeat diversity jurisdiction and prevent removal of the case. (Id. at p. 4.) Without Air Mechanix as a Defendant, complete diversity would exist since Auto Owners, which would be the sole remaining Defendant, is not a citizen of Georgia.

         The Dolans have not moved to remand the case back to the State Court. Quite to the contrary, they have filed a Motion for Summary Judgment, seeking an adjudication of the case by this Court. (Doc. 23.) The issue of whether the Court has jurisdiction, however, has been indirectly raised by Air Mechanix through a Motion to Dismiss in which it claims it has been fraudulently joined in this action and that it should be dismissed due to the Dolans' failure to state a claim against it. (Doc. 25.) Surprisingly, despite their having sought an adjudication of the case on the merits by this Court (through their pending Motion for Summary Judgment), the Dolans oppose Air Mechanix's Motion to Dismiss notwithstanding the fact that, were they to prevail (thereby requiring Air Mechanix to remain in the case), the Court would have to remand the case to state court without ruling on the summary judgment motion. (See Doc. 33.)

         In its Motion to Dismiss, Air Mechanix argues that the Dolans' Complaint, on its face, fails to state a claim for relief against it. (Doc. 25, p. 3.) It additionally argues that there is no possibility that the Dolans could state a claim against it through their Complaint because “[t]here is no set of facts under which Air Mechanix, LLC could be responsible for any payment of post judgment interest under the policy of insurance which was issued to it by Auto Owners Insurance Company.” (Id.) Air Mechanix also notes that, in its Answer, it raised (as its second defense) the argument that “it had been improperly joined as a party Defendant.” (Id. at p. 4.)

         In their Response, the Dolans argue first that Air Mechanix's Motion to Dismiss is untimely and should therefore be denied. (Doc. 33, p. 3.) Next, they confusingly argue that Air Mechanix's Motion to Dismiss for failure to state a claim in this declaratory judgment action must be denied because the Dolans “have already been successful in their cause of action against [Air Mechanix] . . . [in] [t]he underlying [damages] lawsuit” and this lawsuit “is just a derivative of the underlying lawsuit, and [Air Mechanix] has shown no valid reason as to why Plaintiffs would not succeed.” (Id. at p. 5.) Additionally, the Dolans claim that Air Mechanix “is a proper defendant” because “the crux of [the] [C]omplaint is whether one defendant and/or the other are responsible for post-judgment interest on the judgment.” (Id.)

         Before the Court can consider the Dolans' Motion for Summary Judgment asking the Court to make specific declarations as a matter of law, the Court must satisfy itself that it has subject matter jurisdiction to reach the merits of the case.

         DISCUSSION

         I. Subject Matter Jurisdiction and Air Mechanix's Motion to Dismiss

         “Diversity jurisdiction, as a general rule, requires complete diversity-every plaintiff must be diverse from every defendant.” Palmer v. Hosp. Auth. of Randolph Cnty., 22 F.3d 1559, 1564 (11th Cir. 1994) (citations omitted). “As master of her own complaint, a plaintiff may join such claims and parties in a single suit as are permitted under the law and the Federal Rules of Civil Procedure. Of course, a plaintiff's decision to join a non-diverse party has repercussions for purposes of removal jurisdiction. However, a defendant's ‘right of removal cannot be defeated by a fraudulent joinder of a resident defendant having no real connection with the controversy.'” Ferguson v. CitiMortgage, Inc., No. 1:13-CV-01373, 2014 WL 587865, at *2 (N.D.Ga. Feb. 14, 2014) (quoting Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97 (1921)). Moreover, the Court must bear in mind that “federal courts are required to realign the parties in an action to reflect their interests in the litigation.” City of Vestavia Hills v. Gen. Fid. Ins. Co., 676 F.3d 1310, 1313 (11th Cir. 2012) (citing City of Indianapolis v. Chase Nat'l Bank, 314 U.S. 63, 69 (1941)). “[The] parties cannot avoid diversity by their designation of the parties.” Id. “Rather, lower federal courts must look beyond the pleadings and arrange the parties according to their sides in a dispute, as determined by the ‘principal purpose of the suit' and ‘the primary and controlling matter in dispute.' Even where the parties are opposed outside of the subject action, parties with the same interests in the subject action must be aligned together.” Pearson v. Catlin Specialty Ins. Co., No. 5:14-CV-60, 2015 WL 1224104, at *2 (S.D. Ga. March 17, 2015) (citing Vestavia Hills, 676 F.3d at 1313-14).

         Here, Air Mechanix claims it has been fraudulently joined in this lawsuit because the Complaint does not state a claim for relief against it. To establish fraudulent joinder, “the removing party has the burden of proving [by clear and convincing evidence] 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.” Stillwell v. Allstate Ins. Co., 663 F.3d 1329, 1332 (11th Cir. 2011) (citing Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir. 1997)) (bracketed text in original). This burden is a “heavy one.” Id. (internal quotation marks omitted). “[T]he district court must evaluate the factual allegations in the light most favorable to the plaintiff and must resolve any uncertainties about state substantive law in favor of the plaintiff.” Id. at 1333 (citing Crowe, 113 F.3d at 1538). “This Court ‘must necessarily look to the pleading standards applicable in state court, not the plausibility pleading standards prevailing in federal court.'” McKenzie v. King Am. Finishing, Inc., No. 6:12-cv-065, 2012 WL 5473498, at *3 (S.D. Ga. Nov. 9, 2012) (quoting Stillwell, 663 F.3d at 1334). “If there is even a possibility that a state court would find that the complaint states a cause of action the resident defendant, the federal court must find that joinder was proper and remand the case to state court.” Id. (citation omitted). In contrast to the federal pleading standard, Georgia simply requires notice pleading. See O.C.G.A. § 9-11-8. Thus, “it is immaterial whether a pleading states conclusions or facts as long as fair notice is given, and the statement of claim is short and plain.” Carley v. Lewis, 472 S.E.2d 109, 110-11 (Ga.Ct.App. 1996); see also Stillwell, 663 F.3d at 1333 (all that is required to defeat a fraudulent joinder claim is “a possibility of stating a valid cause of action”) (citing Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (1998)).

         Examining the Complaint in the light most favorable to the Dolans, the Court concludes that the Complaint fails to state any claim against Air Mechanix, and thus does not give “fair notice” of a “short and plain” claim against it. The Complaint focuses on Auto Owners' responsibilities under the terms of the CGL policy. (See, e.g., Doc. 1-2, p. 4 (“[The Policy] does not have a limiting provision for Auto Owners Insurance Company's responsibility for post-judgment interest.”) (emphasis added); id. (“Plaintiffs contend that Auto Owners Insurance Company is responsible for the interest on the entire amount of the jury verdict award.”) (emphasis added); id. at p. 5 (“WHEREFORE, Plaintiffs . . . pray that this Honorable Court: a) enter a judgment declaring that Defendant Auto Owners Insurance Company is responsible for the entire amount of post-judgment interest that is due upon the jury verdict award of $1, 000, 000.00 . . . .”) (emphasis added).)

         The closest Plaintiffs come to alleging anything resembling a need for a declaration concerning Air Mechanix is in Paragraph 18 of the Complaint, which states: “There is an actual controversy between the parties concerning the obligations of the Defendants under the Auto Owners Insurance Company policy referred to herein.” (Id. at p. 4.) This statement mirrors the Dolans' argument in their Response to Air Mechanix's Motion: that they need to know “whether one defendant and/or the other are responsible for post-judgment interest on the judgment.” (Doc. 33, p. 5.) The Dolans' Complaint-and their summary judgment filings, for that matter- however, do not actually seek any sort of declaration regarding Air Mechanix's responsibility for post-judgment interest, but only seek a declaration regarding Auto Owners' responsibility under the terms of the CGL policy. Thus, under Georgia law, the Complaint did not provide Air Mechanix with “fair notice” that a declaration regarding its responsibility for post-judgment interest is being sought. The mere possibility that Air Mechanix may later be affected by the ruling (for instance, if Auto Owners prevails in this action and the Dolans turn to Air Mechanix for payment of the unpaid interest) does not satisfy the requirement that the Dolans actually allege a cause of action and seek relief against Air Mechanix in the Complaint.

         However, given Air Mechanix's status as the insured under the CGL policy and given the possibility that Air Mechanix could be affected by the Court's ruling in this case, the Court appreciates the Dolans' notion that Air Mechanix could be a proper party to the case. The fact that it is not a proper defendant per the allegations of the Dolans' Complaint does not necessarily mandate its dismissal from the case. The Court must examine whether Air Mechanix should remain in the case but be realigned as a co-plaintiff.

         In determining how to proceed, the Court finds the Eleventh Circuit's opinion in Vestavia Hills v. General Fidelity Insurance instructive, as the underlying facts of that case are analogous to the underlying facts here. In Vestavia Hills, the plaintiff, Vestavia Hills, won a judgment in state court against Cameron. 676 F.3d at 1312. When Vestavia Hills sought to collect on the judgment, Cameron submitted a claim for coverage to its insurer. Id. When the insurer denied the claim, Vestavia Hills filed suit in state court against both the insurer and Cameron pursuant to an Alabama statute that provides a mechanism for a judgment creditor to reach insurance proceeds. Id. The insurer removed the case to the district court based on diversity jurisdiction. Id. Vestavia Hills filed a motion to remand based on the fact that both it and Cameron were Alabama citizens. Id. The district court ...


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