Case: 12-14794     Date Filed: 03/10/2014   Page: 1 of 8


                                                             [DO NOT PUBLISH]


                IN THE UNITED STATES COURT OF APPEALS
                         FOR THE ELEVENTH CIRCUIT
                                   _____________
                                    No. 12-14794
                                   _____________


                    D.C. Docket No. 8:11-cv-02722-SDM-AEP


GARDITH S. LEMY, Individually, and
on behalf of all those similarly situated,
MARILYN HILL, Individually, and
on behalf of all those similarly situated,


                                                           Plaintiffs - Appellants,
                                        versus
DIRECT GENERAL FINANCE COMPANY,
DIRECT GENERAL INSURANCE COMPANY,
DIRECT GENERAL INSURANCE AGENCY,
CERTAIN UNDERWRITERS AT LLOYDS, LONDON,
NATIONAL INSURANCE UNDERWRITERS, INC., et al.,


                                                           Defendants - Appellees.


                                    ____________
                    Appeal from the United States District Court
                        For the Middle District of Florida
                                  ____________
                                  (March 10, 2014)
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Before HULL and HILL, Circuit Judges, and PANNELL,* District Judge


PER CURIAM:


       Plaintiffs Gardith Lemy and Marilyn Hill brought this class action in state

court alleging that a group of defendants acted in concert to sell plaintiffs a

worthless insurance product in violation of the Florida Insurance Code. The

product is called surplus lines insurance, which covers things such as ambulance

services and hospital stay bills. Surplus line insurance is regulated by the Florida

insurance code, which provides that it may be sold to supplement general line

insurance under certain conditions.

       Plaintiffs allege that the auto surplus line insurance product sold by

defendants is duplicative of required general line automobile insurance coverage

and is, therefore, worthless. They also claim that defendants’ insurance product is

the result of a scheme to avoid and thereby violate Florida insurance laws and

regulations. The complaint alleges both statutory and common law violations.



______________________

*Honorable Charles A. Pannell, Jr., United States District Judge for the Northern District of
Georgia, sitting by designation.




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Plaintiffs initially sued individually, but later amended to seek redress on behalf of

a class consisting of all Florida purchasers of these insurance policies.

Defendants included two out-of-state entities who removed the action to the district

court under the Class Action Fairness Act (the “CAFA”). Plaintiffs moved to

remand the case under CAFA’s local controversy exception to federal jurisdiction,

which withdraws federal jurisdiction where the class seeks “significant relief” from

a local defendant. The district court held that plaintiffs did not establish the

applicability of this exception to federal jurisdiction and denied the motion to

remand.

       On the merits, the district court dismissed plaintiffs’ complaint with

prejudice, holding that the implicated Florida insurance code sections do not

provide for private enforcement, and that, even if they did, the defendants’ conduct

did not materially violate those sections.

       We review the district court’s order denying remand de novo. Bailey v.

Janssen Pharmaceutica, Inc., 

, 1204 (11th Cir. 2008). We also

review its dismissal of plaintiffs’ claims on the merits de novo. Lanfear v. Home

Depot, Inc., 

, 1275 (11th Cir. 2012). We accept as true the

allegations in the complaint and construe them in the light most favorable to the

plaintiff. 

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1.     The Denial of Remand

       CAFA greatly expands federal jurisdiction over certain class actions, but

provides that district courts should decline to exercise jurisdiction over

significantly “local” controversies. Under CAFA, a local controversy is one in

which at least one local defendant is “significant.” A local defendant is significant

when, inter alia, the plaintiffs are seeking significant relief from him. 28 U.S.C. §

1332(d)(4)(A)(i)(II)(aa). It is the plaintiffs’ burden to show that the local

controversy exception applies. The district court held that plaintiffs in this case did

not meet this burden and denied the motion to remand this action to state court.

We agree.

       First, inasmuch as the relief plaintiffs seek is the restitution of the insurance

premiums paid by the Florida class, the district court compared the shares of

premiums retained by a local defendant to those retained by the foreign defendant.

The district court determined as a matter of fact that the local defendant retained

only 4.5 percent of the total premiums paid by the class, while the foreign

defendant retained 80 percent. 1 In finding this fact, the district court interpreted

the evidence, credited certain testimony, and drew reasonable inferences, as it was
       1
         The district court concluded that plaintiffs presented no evidence concerning the other
local defendant’s potential liability and we find no error in this holding. There is nothing in the
complaint regarding premium sharing and plaintiffs cite to no record evidence regarding the
other local defendant’s share. Furthermore, even using plaintiffs’ suggestion of fourteen percent
does not alter the comparative result.
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entitled to do. This finding of fact is not clearly erroneous. See City of Vestavia

Hills v. General Fidelity Ins. Co., 

, 1313 (11th Cir. 2012).

       In Evans v. Walter Industries, Inc., 

, 1164 (11th Cir. 2006),

we explained that plaintiffs must show that the relief they seek from a local

defendant is “a significant portion of the entire relief sought by the class.” We said

that this conclusion may be reached by comparing the relief sought from the local

defendant to that sought from the foreign defendants. 

In this case, the

district court concluded that 4.5 percent of the total relief sought against one of the

local defendants was not significant as compared to the 80 percent sought against

one of the foreign defendants. 2 This conclusion is not error.

       That plaintiffs seek declaratory relief from the local defendants does not

change this result. Plaintiffs’ complaint does not distinguish between the

declaratory relief sought against the local as opposed to the foreign defendants,

and, therefore, this claim does not militate against the conclusion that the leonine

share of the relief sought is that from the foreign defendants.

2.     Dismissal on the Merits




       2
         This comparison does not even factor in the relief sought against some of the other
foreign defendants. Nor does it include the portion of the class that seeks double damages
against only the foreign defendants.
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      The district court held that plaintiffs’ claims rest on allegations of Florida

insurance code violations, but that only one of the cited code sections permits a

private right of action and that the remaining alleged violation fails on the merits.

We agree.

      With the exception of § 627.8405, none of the insurance code sections

claimed to have been violated allows for a private remedy. In QBE Ins. Corp. v.

Chalifonte Condo. Apt. Assoc., Inc., 

, 552 (Fla. 2012), the Florida

Supreme Court explicitly held that “[w]hen a statute merely makes provision to

secure the safety or welfare of the public, it will not be construed as establishing

civil liability.” In rejecting the argument that a private cause of action should be

inferred from violations of the Florida Insurance Code’s language and type-size

requirements, the Court held that “the courts cannot provide a remedy when the

Legislature has failed to do so.” 

The Court concluded that both the

text and the structure of the Florida Insurance Code sections at issue there

displayed a clear legislative intent to deny a private cause of action. 

Florida Supreme Court held that “an insurer’s failure to

comply with [the statute] does not render a noncompliant . . . provision in an

insurance policy void and unenforceable, because the Legislature has not provided

for this penalty.” 

The Court said that the legislature intended that “in

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the absence of an express penalty, courts should assume that a policy provision is

valid despite noncompliance with the Insurance Code.” 

      Following Chalifonte’s instruction, the district court in this case held that the

text and structure of the code sections relied upon by plaintiffs signal a deliberate

intention not to create a private cause of action. Unlike other sections of the code,

the sections said to have been violated here provide for no private enforcement.

Therefore, the district court concluded, no private right of action exists for any of

the insurance code sections at issue here (except § 627.8405).

      Furthermore, the alleged violations of the insurance code sections at issue in

this case do not render the policies void. The district court reasoned that since the

Florida legislature had created a private right of action for some insurance code

violations, but not for others, plaintiffs could not circumvent this legislative

decision by asserting common law claims premised on violations of code sections.

      Finally, the district court considered on the merits plaintiffs’ claim under §

627.8405, Fla. Stat., which does provide a private cause of action for selling an

unregulated insurance product. The court held that the surplus line law of the

Florida Insurance Code does regulate defendants’ auto insurance product, thus

negating plaintiffs’ claim that defendants unlawfully sold an unregulated product.

Furthermore, the district court found no merit in the plaintiffs’ claim that

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defendants’ product constituted membership in an automobile club rather than

insurance because the product provided indemnity as opposed to a service. We

find no error in these conclusions.

       The district court correctly held that plaintiffs cannot assert the claims they

have advanced in their complaint. Their claims rely on code sections that do not

provide for a private right of enforcement. Furthermore, violations of these code

sections do not render the sections void, thus permitting the resurrection of

common law claims. 3 As to plaintiffs’ claim under § 627.8405, the district court

correctly found no merit.

       Accordingly, the judgment of the district court is due to be

       AFFIRMED.




       3
         The district court held that even if plaintiffs were entitled to assert these claims, that, on
the merits, the violations were de minimis. We find no fault with this conclusion.
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