B. Jody Sullivan, et al v. Everett Cash Mutual Insurance Co.

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 19-11943
____________________
B. JODY SULLIVAN, CINDY SULLIVAN,
Plaintiffs-Appellants,
versus
EVERETT CASH MUTUAL INSURANCE CO.,
Defendant-Appellee,
WESLEY GREEN, et al.,
Defendants.
____________________
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2 Opinion of the Court 19-11943
Appeal from the United States District Court
for the Northern District of Georgia
D.C. Docket No. 4:18-cv-00207-HLM
____________________
Before J ORDAN, LAGOA , and BRASHER , Circuit Judges.
PER CURIAM:
B. Jody Sullivan and Cindy K. Sullivan, who are citizens of
Georgia, were sued in Georgia superior court in two separate tort
actions—one by Wesley and Beverly Green (also citizens of Geor-
gia) and the other by Manuel Gilbert and other family members
(also citizens of Georgia). The Greens and the Gilberts asserted
continuing trespass and nuisance claims against the Sullivans and
alleged that the value of their respective properties had decreased
due to the operation of the Sullivans’ poultry farm. Everett Cash
Mutual, the Sullivans’ farm insurer, denied coverage in the
Green
and
Gilbert actions, forcing the Sullivans to retain counsel and pay
their own legal fees and costs for the defense of those actions.
The Sullivans sued Everett Cash Mutual in the same Geor-
gia superior court, and named the Greens and the Gilberts as addi-
tional defendants. The Sullivans alleged that Everett Cash Mutual
had breached the insurance contract by failing to tender a defense.
They sought bad faith statutory damages and requested a declara-
tory judgment that Everett Cash Mutual had an ongoing duty to
defend and indemnify them in the
Green and
Gilbert actions.
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19-11943 Opinion of the Court 3
Everett Cash Mutual then removed the Sullivans’ action to
federal court on diversity grounds. Following removal, the district
court (1) denied the Sullivans’ motion to remand after realigning
the Greens and Gilberts as plaintiffs and (2) granted Everett Cash
Mutual’s motions (a) to dismiss the declaratory judgment claim
and (b) for judgment on the pleadings. The Sullivans now appeal
on a number of procedural and substantive grounds. Following
oral argument and a review of the record, we reverse. Everett Cash
Mutual did not establish that the amount in controversy exceeded
$75,000, and as a result the district court should have remanded the
action to Georgia superior court.
I
The Sullivans challenge the district court’s denial of their
motion to remand on a number of grounds. We generally review
de novo whether the district court properly exercised removal ju-
risdiction,
see McGee v. Sentinel Offender Services, LLC, 719 F.3d
1236, 1241 (11th Cir. 2013), and with that standard in mind we ad-
dress the issues presented.
II
The Sullivans argue that, contrary to the district court’s rul-
ing, the Greens and the Gilberts were indispensable—and not nom-
inal—parties in their declaratory judgment action against Everett
Cash Mutual. We agree based on our binding decision in
Ranger
Insurance Company v. United Housing of New Mexico, Inc., 488
F.2d 682, 683-84 (5th Cir. 1974) (holding that, in an insurer’s
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4 Opinion of the Court 19-11943
declaratory judgment action against its insured to determine cov-
erage for claims arising out of an airplane crash, the tort claimants
who had sued the insured were indispensable parties under Rule
19(b)).
But that does not end the matter. Even if the Greens and
Gilberts were indispensable (and not nominal) parties, there was
diversity jurisdiction if the district court correctly realigned them
as plaintiffs with the Sullivans and the amount in controversy ex-
ceeded $75,000. We therefore turn to the realignment and
amount-in-controversy issues.
III
The Sullivans named the Greens and the Gilberts as addi-
tional defendants when they sued Everett Cash Mutual. Because
the Sullivans, the Greens, and the Gilberts are all citizens of Geor-
gia, complete diversity did not exist unless the Greens and the Gil-
berts were realigned as plaintiffs with the Sullivans. The Sullivans
contend that the district court erred in realigning the Greens and
the Gilberts as plaintiffs.
The Supreme Court has said that when the question is
whether the parties should be realigned “the answer is to be found
not in legal learning but in the realities of the record.”
City of In-
dianapolis v. Chase Nat’l Bank of N.Y.C., 314 U.S. 63, 69 (1941) (ci-
tation omitted). The circuits seem to be somewhat divided as to
the appropriate standard of review for realignment determinations.
The majority view appears to be that realignment involves fact-
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19-11943 Opinion of the Court 5
specific inquiries which trigger clear error review.
See, e.g., Pru-
dential Real Est. Affiliates, Inc. v. PPR Realty, Inc., 204 F.3d 867,
872-73 (9th Cir. 2000). Some courts, however, review only the un-
derlying factual findings on realignment for clear error while con-
ducting plenary review as to the ultimate realignment decision.
See Palisades Collection LLC v. Shorts, 552 F.3d 327, 336 (4th Cir.
2008). For our part, we have held that the denial of a motion to
remand based on realignment is reviewed
de novo but that juris-
dictional findings are reviewed for clear error.
See City of Vestavia
Hills v. Gen. Fid. Ins. Co., 676 F.3d 1310, 1313 (11th Cir. 2012). It
may be, therefore, that our rule is much like that of the Fourth Cir-
cuit.
We need not make any definitive pronouncements today as
to the appropriate standard of review for ultimate realignment de-
cisions. The Sullivans and Everett Cash Mutual agree that the clear
error standard governs, and we therefore do not have adversarial
briefing on the issue.
See Br. for Appellants at 12; Br. for Appellee
at 11. And even under
de novo review, the Sullivans cannot prevail
on their challenge to the district court’s realignment decision.
Generally, “[w]hen an insured tortfeasor brings an action
against his insurer for a declaratory judgment as to his coverage
and names the person suing him as a defendant along with his in-
surer, the tort claimant will be realigned as a plaintiff, since the in-
jured party and the insured have an identical interest in having it
held that the insurance covers the accident in question.” Mary Kay
Kane, 20 Fed. Prac. & Proc. Deskbook § 32 (2d ed & Apr. 2022
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6 Opinion of the Court 19-11943
update). The few circuits that have opined on the issue seem to
agree with this proposition.
See Home Ans. Co. of Ill. v. Adco Oil
Co., 154 F.3d 739, 741 (7th Cir. 1998) (“[T]he normal alignment of
parties in a suit seeking a declaration of non-coverage is Insurer
versus Insured and Injured Party.”);
White v. U. S. Fid. & Guar.
Co., 356 F.2d 746, 748 (1st Cir. 1966) (“If [the tort claimant] is a
proper party in this action, he does not belong on the [insurer’s]
side of the fence. His interest is identical with that of [the in-
sured].”).
See also 32A Am. Jur. 2d Fed. Courts § 722 (Nov. 2022
update) (“In an action by an insured against the insurer and a claim-
ant for a declaratory judgment, the claimant will be realigned with
the insured when they have the same interests with respect to the
issue involved.”).
On this record, the district court correctly realigned the
Greens and the Gilberts (the tort claimants) with the Sullivans (the
insureds) as plaintiffs against Everett Cash Mutual. The filings of
the Greens and the Gilberts make clear that their interests as to the
issue of coverage were aligned with those of the Sullivans. First,
the Greens and the Gilberts adopted the Sullivans’ arguments as to
remand, and incorporated all of the Sullivans’ initial disclosures, in-
cluding those concerning their lay and expert witnesses and docu-
ments.
See D.E. 8 at 2; D.E. 27 at 3-4; D.E. 27-1, 27-2, & 27-3. Sec-
ond, the Greens and the Gilberts expressly told the district court
that “their interests are aligned with [the Sullivans] in this matter,
and they have no objection to the [c]ourt granting any relief
sought” against Everett Cash Mutual.
See D.E. 27 at 2-3. Third,
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19-11943 Opinion of the Court 7
the Greens and the Gilberts incorporated the Sullivans’ arguments
in opposition to Everett Cash Mutual’s motion to dismiss the de-
claratory judgment claim.
See D.E. 22 at 1-2. Fourth, the Sullivans
did not seek any relief from the Greens or the Gilberts, and we have
said that this is a relevant factor in the realignment calculus.
See
Vestavia Hills, 676 F.3d at 1314.
IV
Because the Sullivans “ma[de] an unspecified demand for
damages in state court, [Everett Cash Mutual had to] prove by a
preponderance of the evidence that the amount in controversy
more likely than not exceeds the . . . jurisdictional requirement.”
Roe v. Michelin N. Am., Inc., 613 F.3d 1058, 1061 (11th Cir. 2010)
(internal quotation marks omitted). In applying this burden of
proof, a court can use its “judicial experience and common sense in
determining whether the case stated in a complaint meets federal
jurisdictional requirements.”
Id. at 1062. The Sullivans argue, as
they did below,
see D.E. 7-1 at 20, that Everett Cash Mutual did not
satisfy its burden.
In defending its removal of the Sullivans’ state-court action
to federal court, Everett Cash Mutual asserted that the amount in
controversy exceeded $75,000 because the underlying complaints
filed by the Greens and the Gilberts—as a matter of “common
sense”—more likely than not satisfied the amount in controversy
requirement. Significantly, however, Everett Cash Mutual did not
make any arguments in its opposition to remand about the
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8 Opinion of the Court 19-11943
Sullivans’ claim for statutory bad faith damages under O.C.G.A. §
33-4-6.
See D.E. 11 at 4-5.
In their state-court complaint against Everett Cash Mutual,
the Sullivans sought damages for breach of contract and damages
for the bad-faith denial of a defense and indemnification. They also
requested a declaratory judgment that Everett Cash Mutual had a
duty to defend and indemnify them in the actions filed by the
Greens and the Gilberts. For removal purposes, then, two types of
claim are at issue—the damages claims and the declaratory judg-
ment claim. As noted, however, Everett Cash Mutual did not
make any arguments about the damages claims below. So we fo-
cus only on the declaratory judgment claim.1
Everett Cash Mutual argued that the Sullivans’ action ex-
ceeded $75,000 because of the value of the claims of the Greens and
the Gilberts against the Sullivans. In “actions seeking declaratory
or injunctive relief, it is well established that the amount in contro-
versy is measured by the value of the object of the litigation.”
Hunt
v. Wash. State Apple Adv. Comm’n, 432 U.S. 333, 347 (1977). And
the value in such actions is assessed from the plaintiff’s point of
view: “When a plaintiff seeks injunctive or declaratory relief, the
amount in controversy is the monetary object of the litigation from
the plaintiff’s perspective.”
Fed. Mut. Ins. Co. v. McKinnon
1 Issues not raised below are forfeited,
see, e.g., Ramirez v. Sec’y, U.S. Dept.
of Transp., 686 F.3d 1239, 1249-50 (11th Cir. 2012), and we see no reason to
depart from the general rule here.
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19-11943 Opinion of the Court 9
Motors, LLC, 329 F.3d 805, 807 (11th Cir. 2003) (citation and inter-
nal quotations omitted). Here the “value of that right is meas-
ured,”
Hunt, 432 U.S. at 347, by two things.
The first is the cost of defending the Sullivans in the actions
filed against them by the Greens and the Gilberts.
See Stonewall
Ins. Co. v. Lopez, 544 F.2d 198, 199 (5th Cir. 1976) (“The pecuniary
value of the obligation to defend the separate lawsuit is properly
considered in determining the existence of the jurisdictional [diver-
sity] amount[.]”); 8 Fed. Proc. Forms § 21:5 (June 2022 update)
(“The cost to defend an insured is considered in determining
whether the amount in controversy required for diversity jurisdic-
tion is satisfied in a declaratory action concerning insurance cover-
age.”).
See also Ga. Farm Bureau Mut. Ins. Co. v. Martin, 444
S.E.2d 739, 742 n.4 (Ga. 1994) (suggesting that the “appropriate
measure of damages” in a breach of contract action against the in-
surer for failure to defend is “that which [is] ‘traceable to the [in-
surer’s] refusal to defend the action’”) (citation omitted). But Ev-
erett Cash Mutual made no arguments (and presented no evidence)
to the district court about what it would cost to provide a defense
for the Sullivans in the
Green and
Gilbert actions, so it did not meet
its burden on this first point.
The second, which Everett Cash Mutual did rely on, is the
value of the underlying claims by the Greens and the Gilberts
against the Sullivans. The problem for Everett Cash Mutual is that,
in this circuit, a declaratory judgment claim with respect to indem-
nification is generally not ripe until (and if) the insured has been
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10 Opinion of the Court 19-11943
held liable to a third party.
See Mid-Continent Cas. Co. v. Delacruz
Dry Wall Plastering & Stucco, Inc., 766 F. App’x 768, 770 (11th Cir.
2019);
Am. Fid. & Cas. Co. v. Penn. Threshermen & Famers’ Mut.
Cas. Ins. Co., 280 F.2d 453, 461 (5th Cir. 1960).
Accord R. Steven
Rawls et al., 1 Law & Prac. of Ins. Coverage § 12:11 (July 2022 up-
date) (“[A]s a general rule, the duty to indemnify is not ripe for ad-
judication unless and until the insured is held liable in the underly-
ing suit.”). The reason is that, until there is an adverse judgment
against the insured, “the liabilities are contingent and may never
materialize.”
Allstate Ins. Co. v. Emps. Liab. Assur. Co., 445 F.2d
1278, 1281 (5th Cir. 1971).2
As several district courts have held, a claim that is not ripe
under federal law has a value of zero for amount-in-controversy
purposes.
See, e.g., Jensen v. State Farm Fire & Cas. Co., No. 3:20-
CV-01486-IM, 2021 WL 5915117, at *4 (D. Or. Dec. 13, 2021);
Re-
public Vanguard Ins. Co. v. Russell, No. 2:20-CV-1317-RDP, 2021
2 Georgia law seems to allow, in at least some cases, for declaratory judgment
claims relating to indemnification to be resolved along with declaratory judg-
ment claims relating to the duty to defend under O.C.G.A. § 9-4-2.
See ALEA
London Ltd. v. Woodcock, 649 S.E.2d 740, 746-47 (Ga. App. 2007);
Edmond
v. Cont’l Ins. Co., 548 S.E.2d 450, 452-53 (Ga. App. 2001).
But see J. Stephen
Barry, Ga. Prop. & Liab. Ins. Law § 13:1 (Aug. 2022 update) (“Generally, ‘an
insurer’s duty to indemnify is not ripe for adjudication in a declaratory judg-
ment action until the insured is first held liable in the underlying suit.’”) (cita-
tion omitted). Whatever the state of Georgia law may be, we are bound by
Eleventh Circuit precedent, such as
Threshermen & Farmers, as to the ripe-
ness of a declaratory judgment claim relating to indemnification.
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19-11943 Opinion of the Court 11
WL 794464, at *3-4 (N.D. Ala. Mar. 2, 2021);
Brown v. Safeco Inc.
Co. of Ill., No. 6:13-CV-1982-ORL-31, 2014 WL 1478833, at *1
(M.D. Fla. Apr. 14, 2014). That approach makes sense to us. A
claim that is not ripe fails to present a “case or controversy” within
the meaning of Article III, and the “ripeness doctrine protects fed-
eral courts from engaging in speculation or wasting their resources
through the review of potential or abstract disputes.”
Digital Prop-
erties, Inc. v. City of Plantation, 121 F.3d 586, 589 (11th Cir. 1997).
If a claim is not ripe, and cannot be heard by a federal court, its
value means nothing insofar as the amount-in-controversy require-
ment is concerned.
V
We conclude the district court should have remanded the
Sullivans’ action to state court because Everett Cash Mutual failed
to establish that the amount-in-controversy threshold for diversity
jurisdiction was satisfied.
REVERSED.
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