Mattson et al v. Farudi, et al

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
CARLA G. MATTSON AND JAMES E. 	)
MATTSON TRUST, 	)
)
Plaintiff, 	)
)
v. 	) CIVIL ACTION 23-0474-WS-MU
)
RAHMEEN FARUDI, et al., 	)
)
Defendants. 	)
ORDER
The defendants recently removed this action on the basis of diversity. (Doc. 1).
The plaintiff has moved to remand the action, on the grounds that the resident defendant
(“Fruitdale Pellets”) was not, as the removing defendants assert, fraudulently joined.
(Doc. 9).1
“Fraudulent joinder is a judicially created doctrine that provides an exception to
the requirement of complete diversity.” Triggs v. John Crump Toyota, Inc., 154 F.3d
1284, 1287 (11th Cir. 1998). As applicable here, the removing defendant must show “by
clear and convincing evidence” that “there is no possibility the plaintiff can establish a
cause of action against the resident defendant.” Henderson v. Washington National
Insurance Co., 454 F.3d 1278, 1281 (11th Cir. 2006). “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
1 “Courts have an independent obligation to determine whether subject-matter jurisdiction
exists, even when no party challenges it.” Hertz Corp. v. Friend, 559 U.S. 77, 94 (2010).
Because, “once a federal court determines that it is without subject matter jurisdiction, the court
is powerless to continue,” it “should inquire into whether it has subject matter jurisdiction at the
earliest possible stage in the proceedings.” University of South Alabama v. American Tobacco
Co., 168 F.3d 405, 410 (11th Cir. 1999). The defendants’ thorough treatment of their citizenship
and of the amount in controversy, (Doc. 1), satisfies the Court that the amount in controversy
exceeds $75,000, exclusive of interest and costs, and that all defendants save Fruitdale Pellets are
of diverse citizenship from the plaintiff.
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resident defendants, the federal court must find that the joinder was proper and remand
the case to the state court.” Stillwell v. Allstate Insurance Co., 663 F.3d 1329, 1333 (11th
Cir. 2011) (internal quotes omitted). The possibility “must be reasonable, not merely
theoretical.” Legg v. Wyeth, 428 F.3d 1317, 1325 n.5 (11th Cir. 2005) (internal quotes
omitted). “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 v. AT&T Co., 139 F.3d
1368, 1380 (11th Cir. 1998).
The complaint, (Doc. 1-2 at 10-15), alleges that the plaintiff owned improved real
property (“the Property”) that it leased to the other non-corporate defendants (“Farudi,”
“Taruma,” and “Taruma Fruitdale,” collectively, “the Farudi defendants”).2 Pursuant to
the lease, the Farudi defendants insured the Property with the corporate defendant
(“Nationwide”).3 When the Property was heavily damaged by storm, the Farudi
defendants submitted a claim to Nationwide, which honored the claim. Even though the
policy required Nationwide to remit proceeds only to the plaintiff, Nationwide instead
remitted payments to the Farudi defendants. The Farudi defendants made inadequate
repairs and pocketed the vast majority of the insurance proceeds.
The only factual allegations regarding Fruitdale Pellets are: (1) that it “may claim
some interest to the Subject Property and would benefit from the insurance proceeds” at
issue; (2) that the lease at some point “was subsequently assigned to Fruitdale Pellets”;
(3) that Nationwide had an obligation to make payment only to the plaintiff in order “to
protect Mattson’s rights and those of Fruitdale Pellets”; and (4) that “the insurance
proceeds being diverted to [the Farudi defendants] and Fruitdale Pellets have caused
2 It appears that the lease identifies Taruma as the lessee but that Taruma assigned its
rights under the lease to Taruma Fruitdale. The complaint alleges that both entities are Farudi’s
alter egos.
3 The defendants assert that the correct name of this defendant is Scottsdale Insurance
Company. (Doc. 1 at 1). The complaint, until and unless amended, governs the naming of the
parties.
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Mattson to incur substantial financial detriment, and in turn damaged Fruitdale Pellets.”
(Doc. 1-2 at 11-12).
The complaint asserts six causes of action, carefully identifying the defendants
under each claim. The only claim asserted against Fruitdale Pellets, under Count IV, is
for negligence/wantonness. The Farudi defendants are also defendants under this claim.
After adopting the complaint’s preceding allegations, Count IV alleges that the Farudi
defendants (but not Fruitdale Pellets) “owed a duty” to the plaintiff to see that the claim
filed with Nationwide was proper and that the Farudi defendants (but not Fruitdale
Pellets) “had a duty” to see that the plaintiff was compensated for damage to the Property
or that all insurance proceeds were spent on restoration of the Property. Count IV alleges
that the Farudi defendants (but not Fruitdale Pellets) “breached that duty,” by “causing
the insurance proceeds to be paid to [the Farudi defendants] and Fruitdale Pellets.” The
ad damnum clause then demands damages “from [the Farudi defendants] and Fruitdale
Pellets.” (Doc. 1-2 at 14).
The defendants in their notice of removal devote ten pages to demonstrating that
Fruitdale Pellets was fraudulently joined. (Doc. 1 at 16-25). They make several related
arguments, but one is dispositive. The only claims against Fruitdale Pellets are for
negligence and wantonness, and essential elements of such claims under Alabama law are
the existence of a duty and the breach of such duty.4 The complaint, however, fails to
allege that Fruitdale Pellets owed the plaintiff any duty or that it breached any such duty;
on the contrary, the complaint explicitly limits the existence and breach of duty to the
Farudi defendants. As per Stillwell, there is no “possibility that a state court would find
that [a] complaint” alleging neither the existence of a duty nor the breach of a duty “states
a cause of action” for negligence or wantonness. Id. at 1333. Fruitdale Pellets was thus
fraudulently joined under governing principles.
4 E.g., Perry v. Hancock Fabrics, Inc., 541 So. 2d 521, 522 (Ala. 1989) (“[D]uty and
breach of duty (initial legal liability) are essential elements of causes of action for negligence and
wantonness.”).
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The plaintiff insists that the complaint alleges that Fruitdale Pellets owed and
breached a duty to remit insurance proceeds to the plaintiff. (Doc. 9 at 5). As addressed
above, the complaint alleges no such thing and, on the contrary, pointedly excludes
Fruitdale Pellets from the list of defendants owing and breaching a duty to the plaintiff.
The plaintiff argues that it requires discovery to determine when Fruitdale Pellets
took possession of the Property,5 whether the Farudi defendants have an interest in
Fruitdale Pellets, and whether Fruitdale Pellets in fact received any insurance proceeds.
(Doc. 9 at 4-5). The results of such discovery may or may not enable the plaintiff,
someday, to state a cause of action against Fruitdale Pellets, but that possibility cannot
alter the reality that the complaint as it existed at the time of removal does not state any
cause of action against Fruitdale Pellets and that there is no possibility an Alabama court
would rule otherwise.
For the reasons set forth above, the plaintiff’s motion to remand is denied.
DONE and ORDERED this 18th day of January, 2024.
s/ WILLIAM H. STEELE
UNITED STATES DISTRICT JUDGE
5 According to the plaintiff itself, this occurred in October 2022, almost 18 months after
the final insurance payout. (Doc. 9 at 3-4).
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