Jones v. National Union Fire Insurance Company of Pittsburgh PA

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

ROBERT JONES, et al., )

)

Plaintiffs, )

) Civil Action Number

vs. ) 2:19-cv-01047-AKK

)

NATIONAL UNION FIRE

)

INSURANCE COMPANY OF

)

PITTSBURGH, PA, et al.,

)

)

Defendants.

MEMORANDUM OPINION

This action arises from a suit Robert Jones, Angelo Webster, Clarence

Oates, and David Cross commenced in Alabama state court against Cliffs Mining

Services Company, Oak Grove Resources, LLC and Seneca North American Coal,

LLC1 after the plaintiffs suffered injuries while working in a mine operated by

these defendants. See doc. 1-1. The parties settled the underlying suit, and the

plaintiffs subsequently filed alleged consent judgments against Cliffs Mining, Oak

Grove, and Seneca in state court. Doc. 1-2 at 4-15. After the defendants’ insurer,

National Union Fire Insurance Company of Pittsburgh, Pa., failed to fully satisfy

the alleged consent judgments, the plaintiffs initiated this action in the Circuit

Court of Jefferson County, Alabama, seeking direct payment from National Union

1 Seneca was formerly known as Cliffs North American Coal. Doc. 1 at 2, 4.

to satisfy Cliffs Mining’s, Oak Grove’s, and Seneca’s obligations under the alleged

judgments. Doc. 1-1.2

National Union removed this action to this court on the basis of diversity

jurisdiction. Doc. 1.3 While Cliffs Mining consents to the removal, doc. 1-9 at 2,

National Union did not obtain the consent of Oak Grove and Seneca, doc. 1 at 10.

National Union asks the court to find that Oak Grove’s and Seneca’s consent is not

required, id., or, alternatively, to realign Oak Grove and Seneca as plaintiffs, id. at

13-26; doc. 5. National Union and Cliffs Mining also move for judgment on the

pleadings, doc. 20, arguing that the alleged consent judgments do not qualify as

final judgments for purposes of Alabama’s direct-action statute. The plaintiffs

oppose the motion, doc. 23, and move to amend their complaint to clarify that the

judgment they obtained against Cliffs Mining, Oak Grove, and Seneca is based on

the executed settlement agreements, the state court’s order of dismissal, and the

alleged consent judgments filed in the state court, doc. 19. For the reasons

2 The plaintiffs named Cliffs Mining, Oak Grove, and Seneca in this action to comply with case

law holding that they must name the insureds as defendants in a direct-action suit to recover

insurance proceeds from an insurer. See docs. 1 at 3; 1-1; 23 at 4, n.5; see also Chicago Title

Ins. Co. v. Am. Guarantee & Liab. Ins. Co., 892 So. 3d 369, 371 (Ala. 2004). But, the plaintiffs

do not seek any relief from those defendants. Doc. 1 at 7.

3 Complete diversity exists among the parties because the plaintiffs are all citizens of Alabama;

Oak Grove and Seneca are citizens of North, Carolina, and Ohio; Cliffs Mining is a citizen of

Delaware and Minnesota; and National Union is a citizen of Pennsylvania and New York. Doc.

1 at 12. In addition, the amount in controversy requirement is met because the plaintiffs seek to

collect $900,000 still owed to them under the alleged consent judgments. Id. at 11.

explained below, the motion to realign is moot, the motion to amend is due to be

denied as futile, and the motion for judgment on the pleadings is due to be granted.

I. STANDARD OF REVIEW

“Judgment on the pleadings is appropriate where there are no material facts

in dispute and the moving party is entitled to judgment as a matter of law.”

Cannon v. City of W. Palm Beach, 250 F.3d 1299, 1301 (11th Cir. 2001). In ruling

on the motion, the court “must accept the facts alleged in the complaint as true and

view them in the light most favorable to the nonmoving party.” Id. A Rule 12(c)

motion for judgment on the pleadings is analyzed under the same standard as that

of a Rule 12(b)(6) motion to dismiss. Griffin v. SunTrust Bank, Inc., 157 F. Supp.

3d 1294, 1295 (N.D. Ga. 2015). As such, to survive a motion for judgment on the

pleadings, “a complaint must contain sufficient factual matter, accepted as true, to

state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009) (citation and internal quotation marks omitted); see also Losey v.

Warden, 521 F. App’x 717, 719 (11th Cir. 2013) (applying the Iqbal standard to an

appeal concerning a Rule 12(c) judgment on the pleadings). In other words, the

plaintiff must “plead[ ] factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S.

at 678 (citation omitted). Ultimately, this inquiry is a “context-specific task that

requires the reviewing court to draw on its judicial experience and common sense.”

Id. at 679.

Under Rule 15(a), the court must “freely give leave” to amend a complaint

“when justice so requires.” Fed. R. Civ. P. 15(a)(2). Nevertheless, a court has

discretion to deny a plaintiff leave to amend when the amendment would be futile.

See Coventry First, LLC v. McCarty, 605 F.3d 865, 869 (11th Cir. 2010). “Leave

to amend a complaint is futile when the complaint as amended would still be

properly dismissed or be immediately subject to summary judgment for the

defendant.” Cockrell v. Sparks, 510 F.3d 1307, 1310 (11th Cir. 2007) (citing Hall

v. United Ins. Co. of Am., 367 F.3d 1255, 1263 (11th Cir. 2004)).

II. BRIEF FACTUAL AND PROCEDURAL BACKGOUND

A. The Underlying Action

The plaintiffs filed suit against Cliffs Mining, Oak Grove, and Seneca in the

Circuit Court of Jefferson County, Alabama for injuries they suffered in a tragic

accident while working in an underground mine operated by these defendants.

Doc. 1-1 at 8. The parties ultimately settled the plaintiffs’ claims for $3 million.

Id. The parties then filed a joint motion for pro tanto dismissal in the state court,

asking the court “to enter an Order dismissing with prejudice all of the [p]laintiffs’

claims against [those] [d]efendants, on a full and final basis, on the grounds that

these claims have been resolved,” doc. 1-5 at 2.4 The state court granted the

motion and issued an order dismissing with prejudice all of the plaintiffs’ claims

against Cliffs Mining, Oak Grove, and Seneca. Doc. 1-6 at 2.

After Cliffs Mining, Oak Grove, and Seneca failed to make timely payments

required under the settlement agreement, the plaintiffs filed alleged consent

judgments into the state court record. Docs. 1-2 at 4-15; see also doc. 23-1 at 3.

Counsel for those defendants and the plaintiffs signed the alleged consent

judgments, but the state circuit court judge did not. See doc. 1-2 at 4-15. Less

than three weeks later, Oak Grove and Seneca filed a Chapter 11 Bankruptcy

proceeding in the Bankruptcy Court for the Northern District of Alabama, and filed

a suggestion of bankruptcy in the state court. Docs. 1-7; 20-1 at 13. Consistent

with the automatic stay imposed by 11 U.S.C. § 362(a), the state court has taken no

action on the consent judgments filed by the plaintiffs. See docs. 1 at 7; 20-1.

B. The Insurance Policy at Issue

National Union issued a commercial general liability insurance policy to

Cliffs Natural Resources, Inc., the parent corporation of Cliffs Mining, Oak Grove,

and Seneca, which allegedly afforded coverage to those defendants for plaintiffs’

claims. Docs. 1-1 at 8-10; 1-2 at 16-18. The policy provides coverage of up to $3

4 The court may consider the filings in the underlying action because they are central to the

plaintiffs’ proposed amended claims and their authenticity is not in dispute. See Harris v. Ivax

Corp., 182 F.3d 789, 802 n.2 (11th Cir. 1999); Horsley v. Feldt, 304 F.3d 1125, 1134-35 (11th

Cir. 2002); see also docs. 19-1 at 6; 23.

million per occurrence, with a $3 million aggregate limit. Doc. 1-1 at 9. After the

filing of the alleged consent judgments, the plaintiffs demanded payment from

National Union under the policy and pursuant to Alabama Code § 27-23-2 for the

amount remaining due under the alleged judgments. Doc. 1-2 at 3. National

Union refused to pay.

III. ANALYSIS

The plaintiffs assert claims under Alabama’s direct-action statute,

contending that they are entitled to payment under the insurance policy issued by

National Union in order to satisfy the alleged consent judgments entered in their

favor against Cliffs Mining, Oak Grove, and Seneca. Doc. 1-1. The plaintiffs

move for leave to amend their complaint to add allegations clarifying that the final

judgment they seek to enforce “arose from the totality of the proceedings in the

underlying action,” including the executed settlement agreements, the state court’s

order of dismissal, and the alleged consent judgments filed by the plaintiffs. Doc.

19. National Union and Cliffs Mining contend that the proposed amendment is

futile, doc. 22, and they move for judgment on the pleadings, arguing that the

plaintiffs’ claims fail as a matter of law because the state court has not yet issued a

final judgment for purposes of the direct-action statute, doc. 20. The court

addresses the parties’ respective contentions below, beginning with National

Union’s unopposed motion to realign.

A. National Union’s Motion to Realign

As mentioned above, National Union removed this case without obtaining

the consent of Oak Grove and Seneca as required by 28 U.S.C. § 1446(b)(2)(A).

Doc. 1 at 10. Nevertheless, National Union contends that the removal is proper

because these parties’ consent was not required in light of their pending

bankruptcy proceedings, doc. 1 at 10, or, alternatively, because the court should

realign Oak Grove and Seneca as plaintiffs, id. at 13-16; doc. 5.

Oak Grove’s and Seneca’s Chapter 11 Bankruptcy petitions, doc. 1-7,

operate as a stay against “the commencement or continuation, including the

issuance or employment of process, of a judicial, administrative, or other action or

proceeding against the debtor that was or could have been commenced before the

commencement of the [bankruptcy] case . . . , or to recover a claim against the

debtor that arose before the commencement of the [bankruptcy] case . . . .” 11

U.S.C. § 362(a)(1). The “automatic stay” is effective immediately upon the filing

of the bankruptcy petition, and “‘[a]ctions taken in violation of the automatic stay

are void and without effect.’” U.S. v. White, 466 F.3d 1241, 1244 (11th Cir. 2006)

(quoting Borg-Warner Acceptance Corp. v. Hall, 685 F.2d 1306, 1308 (11th Cir.

1982)).

Prior to filing their complaint, the plaintiffs asked the Bankruptcy Court for

relief from the automatic stay so they could demand payment from National Union

to satisfy the alleged consent judgments against Oak Grove and Seneca and, if

necessary, to institute this action. Doc. 1-8. The Bankruptcy Court did not take

any action on the motion, see doc. 1 at 7, and nothing in the record before this

court indicates that the Bankruptcy Court has granted the plaintiffs’ request for

relief.5 Thus, the claims asserted against Oak Grove and Seneca violate the

automatic stay and are void ab initio. See White, 466 F.3d at 1244. Consequently,

Oak Grove and Seneca are not properly named as defendants in this action, and

National Union did not have to obtain their consent prior to removal.6 As a result,

National Union’s motion to realign, doc. 5, is moot.

B. The Plaintiffs’ Motion to Amend and National Union and Cliffs

Mining’s Motion for Judgment on the Pleadings

The plaintiffs assert claims against National Union and Cliffs Mining under

Alabama’s direct-action statute. This statute provides relief based, based in part,

“upon the recovery of a final judgment.” Ala. Code § 27-23-2.7 “The remedy

5 The plaintiffs contend that they filed this action “[a]fter the bankruptcy stay was no longer in

effect.” Doc. 23 at 4. But, the plaintiffs do not cite anything to support that contention.

6 See South Dallas Water Auth. v. Guarantee Co. of North America, USA, 767 F. Supp. 2d 1284,

1298 (S.D. Ala. 2011) (finding that the citizenship of a non-diverse defendant need not be

considered because the claims against that defendant violated the automatic stay and were void).

7 The full text reads: “Upon the recovery of a final judgment against any person, firm, or

corporation by any person . . . for loss or damage on account of bodily injury, or death . . . , if the

defendant in such action was insured against the loss or damage at the time when the right of

action arose, the judgment creditor shall be entitled to have the insurance money provided for in

the contract of insurance between the insurer and the defendant applied to the satisfaction of the

judgment, and if the judgment is not satisfied within 30 days after the date when it is entered, the

provided by [this] section [] can be exercised only after the injured or damaged

party has recovered final judgment against the insured . . . .” Fleming v. Pan

American Fire & Cas. Co., 495 F.2d 535, 540 (5th Cir. 1974) (citing a previous

version of Alabama’s direct-action statute). Stated differently, “the clear wording

of § 27-23-18 and § 27-23-2 [] precludes [a plaintiff] from asserting a direct action

against [an insurer] before a final judgment is rendered against [the insured].”

Knox v. Western World Insurance Co., 893 So. 2d 321, 324 (Ala. 2004). In other

words, the plaintiffs must first establish that a final judgment exists.

National Union and Cliffs Mining contend that they are entitled to a

judgment on the pleadings because the plaintiffs’ complaint and the purported

consent judgments establish that the state court has not yet rendered a final

judgment. Doc. 20. In particular, these defendants argue that the state court has

not signed or initialed and entered the alleged consent judgments as required by

Rule 58 of the Alabama Rules of Civil Procedure. Id. at 2. Under that Rule, “[a]

judge may render . . . a judgment: (1) by executing a separate written document,

judgment creditor may proceed against the defendant and the insurer to reach and apply the

insurance money to the satisfaction of the judgment.” Ala. Code § 27-23-2.

8 Ala. Code § 27-23-1 states as follows: “As to every contract of insurance made between an

insurer and any insured by which such insured is insured against loss or damage on account of

the bodily injury or death by accident of any person for which loss or damage such insured is

responsible, whenever a loss occurs on account of a casualty covered by such contract of

insurance, the liability of the insurer shall become absolute and the payment of the loss shall not

depend upon the satisfaction by the insured of a final judgment against him for loss, or damage,

or death occasioned by the casualty. No such contract of insurance shall be cancelled or annulled

by any agreement between the insurer and the insured after the insured has become responsible

for such loss or damage, and any such cancellation or annulment shall be void.”

(2) by including the [] judgment in a judicial opinion, (3) by endorsing upon a

motion the words ‘granted,’ ‘denied,’ ‘moot,’ or words of similar import, and

dating and signing or initialing it, (4) by making or causing to be made a notation

in the court records, or (5) by executing and transmitting an electronic document to

the electronic-filing system.” Ala. R. Civ. P. 58(a). Indeed, the state court judge

has not taken any of those actions with respect to the alleged consent judgments.

See doc. 1-2 at 4-15. Thus, the alleged consent judgments have not been rendered

by the state court judge, nor have they been signed or initialed by the judge and

entered into the state court record by the court as required by Rule 58. See Ala. R.

Civ. P. 58(a)-(c). As a result, the alleged consent judgments do not qualify as final

judgments issued by the court in the plaintiffs’ favor.

The plaintiffs do not seriously dispute that conclusion. See doc. 23.9

Instead, they seek leave to amend their complaint to allege that “[f]or purposes of

the direct-action statute, [p]laintiffs obtained and recovered a final judgment and

adjudication in the underlying injury action based on the totality of the proceedings

in the underlying action, including, but not limited to, the executed

settlement/release agreements, the May 3, 2018 Order of Dismissal and the

Consent Judgments.” Doc. 19-1 at 6; see also doc. 23 at 6-8. According to the

9 The plaintiffs contend that the direct-action statute does not require that the court sign or enter

the final judgment and that “[a] final judgment under the direct-action statute can be recovered

via a settlement agreement that fully and finally adjudicates all of the plaintiff’s claims . . . .”

Doc. 23 at 5. To the contrary, by using the term “judgment,” rather than “settlement” or

“agreement,” the statute signals a judgment rendered by a court.

plaintiffs, the Order of Dismissal “equates to a ‘final judgment’ for purposes of

§ 27-23-2.” Doc. 23 at 7. The Order of Dismissal is certainly a final order.

However, by its terms, it only disposed of the claims against Cliffs Mining, Oak

Grove, and Seneca; it does not find those defendants liable to the plaintiffs or

contain any determination of the amount of their liability. See doc. 1-6 at 2. In

other words, the Order of Dismissal contains nothing setting the actual financial

obligations of the insureds that National Union could be required to satisfy.

Consequently, the Order is not a final judgment the plaintiffs could enforce against

National Union under Alabama’s direct-action statute.

The plaintiffs try to avoid that conclusion by contending that the court must

consider the Order of Dismissal in light of the executed settlement agreements that

set the amount of Cliff Mining, Oak Grove, and Seneca’s liability to the plaintiffs.

See doc. 23 at 7-8; see also doc. 19. But, the Order does not refer to or incorporate

the settlement agreements, doc. 1-6 at 2, nor are the confidential settlement

agreements part of the state court record, see doc. 20-1. Similarly, the Order does

not refer to or expressly contemplate the consent judgments the plaintiffs

subsequently filed. See doc. 1-6 at 2. Thus, the amount of the settlement

agreements cannot be read into the state court’s Order of Dismissal.

Finally, the plaintiffs correctly point out that this case is distinguishable

from cases National Union and Cliffs Mining cite in support of their motion

because, unlike here, the injured plaintiffs in those cases initiated claims against an

insurer while the claims against the insured remained pending.'® See doc. 23 at 8-

10. Still, the court is constrained by the clear language of the statute, which

requires the “[r]ecovery of a final judgment” before the plaintiffs can maintain an

action against an insurer to satisfy the judgment. Ala. Code 1975 § 27-23-2

(emphasis added).

IV. CONCLUSION

To close, because the state court has not yet entered a judgment fixing the

amount due to the plaintiffs by the defendants, Ҥ 27-23-2 prevents the [plaintiffs]

from bringing this action at this time and in this posture.” Brown, 894 So. 2d 643,

650 (Ala. 2004). As a result, National Union and Cliffs Mining’s motion for

judgment on the pleadings is due to be granted, and the plaintiffs’ motion to amend

is due to be denied as futile. This action is due to be dismissed without prejudice

to refile after obtaining a final judgment rendered by the state court in the

underlying action. A separate order will be entered.

DONE the 18th day of February, 2020.

— Apa bho te

ABDUL K. KALLON

UNITED STATES DISTRICT JUDGE

See State Farm Mutual Automobile Ins. Co. v. Brown, 894 So. 2d 643, 645 (Ala. 2004); Knox

v. Western World Ins. Co., 893 So. 2d 321, 322 (Ala. 2004).

12