Health-Ade, LLC v. The Hanover Insurance Company

• Court: District Court, C.D. California
• Decided: September 6, 2022
• Docket: 2:21-cv-08929
• Status: Unknown

Opinion

Case 2:21-cv-08929-SSS-MAR Document 61 Filed 09/06/22 Page 1 of 7 Page ID #:648

J S - 6 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE CENTRAL DISTRICT OF CALIFORNIA 10 11 Case No. 2:21-cv-08929-SSS-MARx HEALTH-ADE, LLC,

12 Plaintiff, ORDER GRANTING PLAINTIFF’S 13 MOTION TO REMAND [DKT. 25] AND VACATING THE HEARING 14 v. [DKT. 55] 15

16 THE HANOVER INSURANCE

17 COMPANY, et al., Defendants. 18

19 20 21 22 23 24 25 26 27 28 Case 2:21-cv-08929-SSS-MAR Document 61 Filed 09/06/22 Page 2 of 7 Page ID #:649

1 Before the Court is Plaintiff Health-Ade, LLC’s (“Health-Ade”) Motion 2 to Remand this Case to the Superior Court of the State of California for the 3 County of Los Angeles (the “Motion”). [Dkt. 25]. In its Motion, Health-Ade 4 further requests the Court award it attorney fees. [Dkt. 25 at 7–8]. The Motion 5 is fully briefed and ripe for consideration. [Dkts. 25, 34 & 39]. A hearing on this 6 Motion is scheduled for September 16, 2022. [Dkt. 55]. The Court deems this 7 motion appropriate for decision without oral argument. Fed. R. Civ. P. 78; L.R. 8 7-15. For the following reasons, Health-Ade’s Motion is DENIED and the 9 hearing is VACATED.1 10 I. BACKGROUND 11 On August 9, 2021, Health-Ade filed an action against Defendant The 12 Hanover Insurance Company (“Hanover”) in the Superior Court of the State of 13 California for the County of Los Angeles. [Dkt. 1 at 9]2. Health-Ade is a 14 limited liability corporation that, at the time of its state court action, alleged to 15 have a member who was “a resident of and is therefore domiciled within the 16 Commonwealth of Massachusetts.” [Dkt. 1 at 10, ¶2]. Hanover is a corporation 17 with its principal place of business in Massachusetts and does business with 18 persons and entities in Los Angeles County, California. [Dkt. 1 at 10, ¶2]. 19 20 1 Because the facts alleged in the Declaration of James J. Huberty [Dkt. 34-1 at 21 2–4] are not dispositive to the Court’s ruling, the Court declines to rule on Health-Ade’s objections [Dkt. 40]. 22 2 Because court filings are “capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned,” pleadings 23 filed and orders issued in related litigation are proper subjects of judicial notice 24 under Rule 201. See Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (“We may take judicial notice of court filings and other 25 matters of public record”); see also Rodriguez v. Disner, 688 F.3d 645, 660 n.11 26 (9th Cir. 2012) (taking judicial notice of briefs filed in related case). Courts regularly take judicial notice of “undisputed matters of public record, including 27 documents on file in federal or state courts.” Harris v. Cty. of Orange, 682 F.3d 28 1126, 1132 (9th Cir. 2012). -2- Case 2:21-cv-08929-SSS-MAR Document 61 Filed 09/06/22 Page 3 of 7 Page ID #:650

1 On September 17, 2021, Hanover served Health-Ade with Special 2 Interrogatories inquiring about Health-Ade’s member domiciled in 3 Massachusetts. [Dkt. 34-2 at 44–51]. On October 20, 2021, Health-Ade 4 responded to Hanover’s Special Interrogatories. [Dkt. 34-2 at 54–68]. In its 5 responses Health-Ade indicated that one of its members, John R. Bielkevicius, 6 is a resident of Massachusetts, has lived there for 69 years, has no other mailing 7 address, is registered to vote in Massachusetts, has a driver’s license in 8 Massachusetts, and has paid state income taxes in Massachusetts. [Dkt. 34-2 at 9 56–57, lines 27–28, 1–7]. In its Supplemental Responses to Hanover’s Special 10 Interrogatories, Health-Ade stated that Bielkevicius became a member of 11 Health-Ade on March 14, 2013 and ended his membership on August 17, 2021. 12 [Dkt. 34-2 at 77, lines 14–19]. Hanover then removed the case from the 13 Superior Court of the State of California for the County of Los Angeles to this 14 Court on November 12, 2021. [Dkt. 1]. 15 II. Legal Standard 16 Under 28 U.S.C. § 1441(a), “any civil action brought in a State court of 17 which the district courts of the United States have original jurisdiction, may be 18 removed by the defendant. . .to the district court of the United States. . .” The 19 removal statutes are strictly construed and remand to the state court is to be 20 granted where there are doubts as to the right of removal. Jordan v. Nationstar 21 Mortg. LLC, 781 F.3d 1178, 1182 (9th Cir. 2015). District courts must remand 22 the case “[i]f at any time before final judgment it appears that the district court 23 lacks subject matter jurisdiction.” 28 U.S.C. § 1447(c); see also Smith v. Mylan, 24 Inc., 761 F.3d 1042, 1044 (9th Cir. 2014). 25 Where removal is based on diversity of citizenship, diversity must exist 26 when the complaint is filed and when the complaint is removed. Strotek Corp. 27 v. Air Transport Ass’n of America, 300 F.3d 1129, 1131–32 (9th Cir. 2002) 28 (emphasis added) (citing Morongo Band of Mission Indians v. California State -3- Case 2:21-cv-08929-SSS-MAR Document 61 Filed 09/06/22 Page 4 of 7 Page ID #:651

1 Bd. Of Equalization, 858 F.2d 1376, 1380 (9th Cir. 1988) and Newcombe v. 2 Adolf Coors Co., 157 F.3d 686, 690 (9th Cir. 1998)); see also Price trustee of 3 Vivian Price Family Trust v. AMCO Insurance Company, No. 1:17-cv-01053- 4 DAD-SKO, 2017 WL 4511062, at *2 (E.D. Cal. Oct. 10, 2017) (“As a general 5 rule, diversity jurisdiction requires complete diversity of citizenship both at the 6 time the action was commenced in state court and at the time of removal.”). 7 The exception to the general rule that diversity must exist at the time of filing 8 and removal is the voluntary-involuntary rule. Self v. General Motors Corp., 9 588 F.2d 655, 657 (9th Cir. 1978); see also Price trustee of Vivian Price Family 10 Trust, No. 1:17-cv-01053-DAD-SKO, 2017 WL 4511062 at *2. Per the 11 voluntary-involuntary rule, “[i]f a subsequent voluntary act of the plaintiff 12 brings about a change that renders the case removable. . .the court is instructed 13 to look to the citizenship of the parties on the basis of the pleadings filed at the 14 time of removal.” Price trustee of Vivian Price Family Trust, No. 1:17-cv- 15 01053-DAD-SKO, 2017 WL 4511062 at *2 (internal quotations omitted). 16 III. Discussion 17 Health-Ade argues remand is appropriate because diversity did not exist 18 at the time the complaint was filed in state court. [Dkt. 25 at 5–7]. In addition 19 to its remand argument, Health-Ade argues the Court should award attorney’s 20 fees to Health-Ade because Hanover’s removal was improper. [Dkt. 25 at 7–8]. 21 Hanover argues remand is inappropriate because diversity existed at the time of 22 removal. [Dkt. 34 at 5–8]. Hanover further argues the Court should not award 23 attorney’s fees because it had a good-faith basis for removal. [Dkt. 34 at 8–9]. 24 The Court addresses each issue below. 25 A. Remand 26 The central principle of federal removal based on diversity is that 27 diversity must exist at the time of filing and the time of removal. Strotek Corp., 28 300 F.3d at 1131. In cases that could not otherwise be brought in federal court, -4- Case 2:21-cv-08929-SSS-MAR Document 61 Filed 09/06/22 Page 5 of 7 Page ID #:652

1 a post-filing event may give rise to removal if the post-filing event was due to a 2 voluntary act by the plaintiff. People of State of Cal. By and Through Lungen v. 3 Keating, 986 F.2d 346, 348 (9th Cir. 1993). “Voluntary acts” include plaintiff’s 4 voluntary amendment of the pleadings, plaintiff’s voluntary dismissal of another 5 plaintiff or defendant, or plaintiff’s nonsuit of a defendant. Self v. General 6 Motors Corp., 588 F.2d 655, 659 (9th Cir. 1978); see also Mullin v. General 7 Motors LLC, No. CV 15-7668-DMG (RAOx), 2016 WL 94235, at *3 (C.D. Cal. 8 Jan 7, 2016). 9 Here, at the time Health-Ade filed the initial complaint in state court there 10 was not complete diversity. Hanover’s principal place of business is in 11 Massachusetts. [Dkt. 1 at 10, ¶2]. Health-Ade is an LLC and therefore “[it] is a 12 citizen of every state of which its owners/members are citizens.” Johnson v. 13 Columbia Properties Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006); see 14 also United Food Group, LLC v. Cargill, Inc., No. CV 11-7752-SS, 2015 WL 15 1386996, at *4 (holding that because plaintiff’s sole member was a corporation 16 incorporated in Delaware, plaintiff was a citizen of Delaware). Health-Ade had 17 a member that was a citizen of Massachusetts. [Dkt. 25-1 at 35]. Health-Ade’s 18 Massachusetts member was a member of Health-Ade from March 14, 2013 to 19 August 12, 2021. [Dkt. 25-1 at 35, lines 17–19]. Health-Ade filed its initial 20 complaint on August 9, 2021. [Dkt. 1 at 16]. Because Hanover has its principal 21 place of business in Massachusetts and Health-Ade had a member that was a 22 citizen of Massachusetts at the time of filing, there was no diversity at the time 23 Health-Ade filed its state court action. Because there was no diversity at the 24 time of filing, removal was improper. Strotek Corp., 300 F.3d at 1131. 25 Moreover, Hanover’s basis for removal is misguided. Hanover contends 26 that diversity was created on August 12, 2021, when Health-Ade’s 27 Massachusetts member left Health-Ade. [Dkt. 34 at 6, lines 22–25]. 28 Specifically, Hanover argues that Health-Ade’s loss of the Massachusetts -5- Case 2:21-cv-08929-SSS-MAR Document 61 Filed 09/06/22 Page 6 of 7 Page ID #:653

1 member was a voluntary act justifying removal. [Dkt. 34 at 6, lines 22–25]. 2 However, an LLC member leaving does not constitute a voluntary act by 3 Health-Ade. See, e.g., Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 4 567, 580 (2004) (holding that a post-filing change in citizenship neither alters 5 nor cures diversity jurisdiction at the time of filing); see also Mullin v. General 6 Motors LLC, No. CV 15-7668-DMG (RAOx), 2016 WL 94235, at *3 (C.D. Cal. 7 Jan. 7, 2016). Accordingly, removal was improper and this action should be 8 remanded to state court. 9 B. Attorney Fees 10 Health-Ade argues attorney fees should be awarded pursuant to 28 U.S.C. 11 §§ 1447(c) and 1927 because Hanover knew “diversity of citizenship did not 12 exist between Health-Ade and Hanover at the time of the filing of this action.” 13 [Dkt. 25 at 8, lines 6–9]. Hanover argues attorney fees should not be awarded 14 because it had a good-faith basis for removal. [Dkt. 34 at 8–9]. 15 Under 28 U.S.C. § 1447(c), Court has wide discretion to grant or deny 16 attorney fees when remanding a case. Moore v. Permanente Medical Group, 17 Inc., 981 F.2d 443, 447 (9th Cir. 1992); see 28 U.S.C. § 1447(c). Attorney fees 18 should be denied when the removing party lacked an objectively reasonable 19 basis for seeking removal. Martin v. Franklin Capitol Corp., 546 U.S. 132, 141 20 (2005) (“Absent unusual circumstances, courts may award attorney’s fees under 21 § 1447(c) only where the removing party lacked an objectively reasonable basis 22 for seeking removal. Conversely, when an objectively reasonable basis exists, 23 fees should be denied.”); see also Gardner v. UICI, 508 F.3d 559, 561 (9th Cir. 24 2007). Moreover, for attorney fees to be awarded pursuant to § 1927 the Court 25 must find subjective bad faith. May v. Gladstone, 562 F. Supp. 3d 709, 715 26 (C.D. Cal. 2021); see also 28 U.S.C. § 1927. “Bad faith is present when an 27 attorney knowingly or recklessly raises a frivolous argument or argues a 28 -6- Case □□□□□□□□□□□□□□□□□□□□□ Document 61 Filed 09/06/22 Page 7of7 Page ID #:654

1 || meritorious claim for the purpose of harassing an opponent.” May, 562 F. Supp. 2|| 3d at 715 (quotations omitted). 3 Here, Hanover’s removal was neither unreasonable nor in bad faith. 4 || Hanover removed the action based on Health-Ade’s loss of its Massachusetts 5] member. [Dkt. 34 at 5-6]. While Hanover’s removal was misguided, it does 6 || not rise to the level of being unreasonable or in bad faith. See, e.g., Price 7\| trustee of Vivian Price Family Trust v. AMCO Insurance Company, No. 1:17- & || cv-01053-DAD-SKO, 2017 WL 4511062, at *4 (finding attorney fees should 9 || not be awarded because defendant’s actions in removing the case were not unreasonable); Hall v. GranCare, LLC, No. 15-2201 MMC, 2015 WL 5882001, /] || at *3 (finding attorney fees should not be granted because there was no evidence of unusual circumstances nor was defendant’s removal objectively unreasonable). Further, the removal was not subject to unusual circumstances because Hanover’s removal was based on its special interrogatories, which the 15|| state court allowed. [Dkt. 1 at 32-43]. Accordingly, the Court does not award Health-Ade attorney fees. 17 IV. Conclusion 18 It is therefore ORDERED that Plaintiff Health-Ade’s Motion to Remand □□□ [Dkt. 25] is GRANTED, Health-Ade’s request for attorney fees is DENIED, and 20) the Motion Hearing scheduled for September 16, 2022 is hereby VACATED. 21\| Accordingly, the Court ORDERS this case remanded to the Superior Court of the 22\| State of California in and for the County of Los Angeles. 23 IT IS SO ORDERED. 24 f ( 25 | Dated: September 6, 2022 20 SUNSHINE S¥SYKES 27 United States District Judge 28 -7-