City of Vestavia Hills v. General Fidelity Insurance
2012 U.S. App. LEXIS 7477
| 11th Cir. | 2012Background
- Vestavia Hills won a state-court judgment against Cameron and seeks to collect $442,263; Cameron submitted a coverage claim to General Fidelity, which denied it.
- Vestavia Hills filed a one-count state-court action under Alabama Code § 27-23-2 against Cameron and General Fidelity to reach insurance proceeds.
- General Fidelity removed the case to federal court; the district court realigned Cameron as a plaintiff because the parties’ interests aligned against General Fidelity.
- Vestavia Hills argued the realignment violated Alabama law requiring both insured and insurer as defendants and questioned removal.
- The district court certified and the Eleventh Circuit addressed whether federal removal principles allow realignment and whether it creates a direct-action scenario under 28 U.S.C. § 1332(c).
- The court ultimately held that federal law governs party alignment for removal, realignment was proper, and it did not convert the action into a direct-action suit under § 1332(c).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether realignment is proper for removal purposes | Vestavia Hills argues realignment is inappropriate under Alabama § 27-23-2 | General Fidelity contends realignment reflects actual interests and is proper | Realignment proper; district court did not err |
| Whether realignment contravenes Alabama’s naming statute and undermines remand | Realignment violates statutory requirement to name Cameron as a defendant | Federal removal law governs party status; alignment reflects litigation interests | Statutory naming rules do not control removal; realignment is valid |
| Whether realignment converts the action into a direct action under § 1332(c) | Realignment would convert to a direct action | Realignment does not convert because the claim against insurer cannot be asserted against insured | Not a direct action under § 1332(c); remains removable |
Key Cases Cited
- City of Indianapolis v. Chase Nat'l Bank, 314 U.S. 63 (1941) (federal law governs removal party alignment)
- Northbrook Nat'l Ins. Co. v. Brewer, 493 U.S. 6 (1989) (duty to align parties by dispute's principal matter)
- Weller v. Navigator Marine, Inc., 737 F.2d 1547 (11th Cir.1984) (alignment when parties' interests are same; jurisdictional impact)
- Fortson v. St. Paul Fire & Marine Insurance Co., 751 F.2d 1157 (11th Cir.1985) (direct-action concept under § 1332(c) - depends on nature of claim)
- Andalusia Enterprises, Inc. v. Evanston Insurance Co., 487 F. Supp. 2d 1290 (N.D. Ala. 2007) (realignment implications discussed; distinguish Fortson)
- Azalea Meats, Inc. v. Azalea Meats, Inc., 516 F.2d 509 (5th Cir. 1975) (old direct-action framework; distinguish from Fortson)
- Duffey v. Wheeler, 820 F.2d 1161 (11th Cir. 1987) (derivative-suit alignment context; informs realignment approach)