Hill v. National Insurance Underwriters, Inc.

641 F. App'x 899
CourtCourt of Appeals for the Eleventh Circuit
DecidedJanuary 14, 2016
DocketNo. 15-14967
StatusPublished
Cited by5 cases

This text of 641 F. App'x 899 (Hill v. National Insurance Underwriters, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eleventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hill v. National Insurance Underwriters, Inc., 641 F. App'x 899 (11th Cir. 2016).

Opinion

JULIE CARNES, Circuit Judge:

Defendants National Insurance Underwriters, Inc; (“NIU”) and Direct General Insurance Agency, Inc, (“Direct General”) appeal the district court’s decision to remand this case to. a Florida state court based on the “local-controversy” exception of the Class Action Fairness Act (“CAFA”), Pub. L. No.. 109-2, 119 Stat. 4 (2005) (codified in scattered sections of 28 U.S.C.). Plaintiff Lisa Hill argues that this Court lacks jurisdiction to consider the appeal, but that even if we did, the district court correctly ruled that the local-controversy exception applies and therefore properly remanded the case. After careful review of the record and the parties’ briefs, we conclude that we have jurisdiction over the appeal, and we further hold that the district court failed to apply the correct legal standard in evaluating the merits of Plaintiff’s motion to remand. Accordingly, we vacate the district court’s order and remand for further proceédings.

I. Background

A. Factual Background

Prior to filing the present action, class counsel for Plaintiff filed a class complaint in Florida state court against Direct General, as well as other “local” Florida defendants, claiming that class members had been sold worthless surplus automobile insurance and seeking damages. Based on CAFA, the defendants in Lemy v. Direct General Finance Co., No. 8:11-cv-2722-T-23AEP (M.D.Fla.), removed the case to the Middle District of Florida and the plaintiffs then moved to remand the case to state court, citing the “local-controversy exception” to CAFA. The district court (“the Lemy court”) denied the motion to remand, finding that the plaintiffs had not shown that the local defendants’ conduct formed a significant basis for the action at issue nor that the plaintiffs sought significant relief against these defendants — both of which showings are necessary for the exception to apply. Ultimately, the Lemy court dismissed with prejudice the complaint, concluding that the plaintiffs had failed to state a claim. See Lemy v. Direct Gen. Fin. Co., 885 F.Supp.2d 1265 (M.D.Fla.2012) and 884 F.Supp.2d 1236 (M.D.Fla.2012). We affirmed both decisions. Lemy v. Direct Gen. Fin. Co., 559 Fed.Appx. 796 (11th Cir.2014).

On November 16, 2012, a few months after the Lemy court had denied the plaintiffs’ motion for reconsideration, class counsel filed a second putative class action, this time in the Seventeenth Judicial Circuit in Broward County, Florida, and named as defendants two of the defendants in Lemy: Direct General and NIU. Plaintiff alleges that NIU,.a Florida corporation, markets insurance products to insurance companies and agencies in Florida, which then sell the policies to the public. One such insurance agency is Direct General, a Tennessee corporation that sells automobile insurance policies to Florida citizens.

Plaintiff alleges that she purchased two insurance products from Direct General: [901]*901(1) a personal injury protection and property damage (“PIP/PD”) automobile insurance policy and (2) Accident Medical Protection (“AMP”), an ancillary insurance product underwritten by Certain Underwriters at Lloyd’s, London. The State of Florida requires that automobile owners purchase “minimum financial responsibility” PIP/PD insurance in order to legally operate their vehicles on Florida roads. According to Plaintiff, NIU and Direct General worked together to use a customer’s purchase of this required “minimum financial responsibility” PIP/PD insurance as an opportunity to sell the customer ancillary insurance products, such as AMP. NIU was the producing agent for the sale of the AMP policies, but Direct General, as the insurance agent, sold the policies through its offices. Direct General was therefore a fiduciary for its insureds.

Plaintiff does not argue that there was anything unlawful or defective about the insurance products themselves; instead she focuses on “the manner in which these products were sold.” Specifically, Direct General allegedly accepted $25 policy fees, in addition to commissions, for the sale of PIP/PD insurance policies. Moreover, Direct General accepted commissions that were well in excess of Lloyd’s standard rates and terms for the AMP policies it sold. And each year an AMP policy was renewed, the insured was charged a $25 policy fee. The $25 policy fees on both these insurance products were charged in breach of the contracts between Direct General and its customers.

Plaintiff accuses NIU of “aidfing] and abett[ing] Direct General in the latter’s violation of its insureds’ loyalty and trust, and/or ... charging] an unlawful policy fee for the AMP policy in violation of Florida law.” Elsewhere in her complaint, Plaintiff alleges that NIU accepted as compensation a $25 policy fee for each ancillary insurance product, which she believes NIU was not permitted to charge or collect under Florida law. At bottom, Plaintiff accuses Defendants of wrongfully charging policy fees and accepting commissions for both PIP/PD and AMP insurance policies.

Based on the above allegations, Plaintiff sues Direct General for breach of contract (Count II) and breach of fiduciary duty (Count III). She seeks a judgment declaring that NIU cannot charge or accept the AMP fee and must return all such fees charged or accepted (Count I). Other claims against NIU include breach of contract (Count V), breach of the implied covenant of good faith and fair dealing (Count VI), and breach of fiduciary duty (Count VII) — all premised on vicarious liability— as well as a claim of aiding and abetting Direct General’s breach of fiduciary duty (Count VIII).

Plaintiff purports to represent two classes, which are defined as follows in her complaint:

a. The PIP/PD Class. All Florida citizens that purchased PIP/PD insurance policies through Direct General in the five-year period before the complaint was filed (“the Class Period”) under which Direct General charged a yearly $25 “policy fee.”
b. The Ancillary Product Class. All Florida citizens that purchased an Ancillary Insurance Product underwritten by Certain Underwriters at Lloyd’s, London from Direct General during the Class Period who have not made a claim under any of the ancillary products.

B. Procedural Background

On December 17, 2012, Direct General timely removed this action to federal court pursuant to CAFA. Under CAFA, federal courts have original jurisdiction over class [902]*902actions in which there is minimal diversity — which is satisfied if at least one plaintiff and one defendant are from different states — and the amount in controversy exceeds $5 million. 28 U.S.C. § 1332(d)(2). Nevertheless, if a case is truly local in nature, as defined by CAFA, “[a] district court shall decline to exercise jurisdiction.” § 1332(d)(4). As discussed in more detail in Part III, for the “local-controversy” exception to apply: (1) at least one defendant must be a citizen of the forum state, (2) the plaintiff class must seek “significant relief’ from that defendant, (3) the local defendant’s conduct must form a “significant basis” for the claims asserted, and (4) no other class action based on the same or similar factual allegations can have been filed against any defendant in the past three years. See § 1332(d)(4)(A)(i)(II), (d)(4)(A)(ii).

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Bluebook (online)
641 F. App'x 899, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hill-v-national-insurance-underwriters-inc-ca11-2016.