James Cook v. Arch Insurance Company

C.D. California

James Cook v. Arch Insurance Company

DecidedJuly 7, 2020

Docket2:20-cv-02612

StatusUnknown

This text of James Cook v. Arch Insurance Company (James Cook v. Arch Insurance Company) is published on Counsel Stack Legal Research, covering District Court, C.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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James Cook v. Arch Insurance Company, (C.D. Cal. 2020).

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1 2 3 4 5 6 7 8 United States District Court 9 Central District of California 10 Western Division 11 12 JAMES COOK, et al., CV 20-02612 TJH (RAOx)

13 Plaintiffs, 14 v. Order 15 ARCH INSURANCE COMPANY, et al., 16 Defendants. 17 18 The Court has considered the motion of Plaintiffs James Cook and Steven York 19 to remand, together with the moving and opposing papers. 20 In 2015, Cook retained York, an attorney, to represent him in a personal injury 21 lawsuit. Based on errors made by York in 2017 and 2018, Cook’s personal injury 22 claims became barred by the statute of limitations. Consequently, York advised Cook 23 to settle his personal injury claims. 24 On May 1, 2018, Defendant Arch Insurance Company [“Arch”], a citizen of 25 Missouri and New Jersey, issued an errors and omissions liability insurance policy to 26 York. 27 In March, 2019, Cook filed a malpractice action against York. York, then, 28 tendered a malpractice insurance claim to Arch. On April 19, 2019, Defendant Gloria 1 Ha, a California-based claims adjuster for Arch, sent York a letter denying coverage 2 under the policy. Apparently, because he had no insurance coverage, York did not 3 respond to the malpractice complaint. Consequently, on February 5, 2020, a 4 $3,900,000.00 default judgment was entered against York. Thereafter, Arch changed 5 its position regarding coverage, but its attempts to vacate the default judgment against 6 York were unsuccessful. To settle Cook’s malpractice judgment, York assigned to 7 Cook his claims against Arch for breach of contract and bad faith, with Cook reserving 8 only his right to seek recovery from Arch for emotional distress and punitive damages. 9 On February 13, 2020, Cook and York filed this action against Arch and Ha in 10 the Los Angeles Superior Court, alleging the following claims: (1) Breach of contract, 11 against Arch; (2) Breach of the covenant of good faith and fair dealing, against Arch; 12 and (3) Negligence, against Arch and Ha. 13 On March 19, 2020, Arch removed on the basis of diversity jurisdiction. While 14 Cook, York and Ha are all citizens of California, Arch asserted in its notice of removal 15 that Ha was a sham defendant because a valid cause of action was not asserted against 16 her. See Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). While 17 California does recognize a negligent misrepresentation cause of action against claims 18 adjusters, see Bock v. Hansen, 225 Cal. App. 4th 215, 231 (2014), it does not 19 recognize a cause of action for general negligence against claims adjusters, see Sanchez 20 v. Lindsey Modern Claims Servs., Inc., 72 Cal. App. 4th 249, 253 (1999). In their 21 state court complaint, Cook and York asserted only a general negligence cause of action 22 against Ha. 23 On March 26, 2020, Cook and York filed a First Amended Complaint [“FAC”], 24 here, which alleged a negligent misrepresentation claim against Ha in place of the 25 general negligence claim. 26 Cook and York, now, move to remand, arguing that the complete diversity does 27 not exist because Ha is a citizen of California. Cook and York, also, seek attorneys’ 28 fees for the time expended on the motion to remand. 1 Diversity jurisdiction is determined as of the date of the notice of removal. 2 || Strotek Corp v. Air Transport Ass’n. of Am., 300 F.3d 1129, 1131-1132 (9th Cir. 3 || 2002). Because Ha was a sham defendant at the time of removal, her California 4 || citizenship did not defeat diversity. See Ritchey, 139 F.3d at 1318. Accordingly, 5 || removal was proper. Therefore, Cook and York are not entitled to attorneys’ fees. See 6 || Jordan v. Nationstar Mortg. LLC, 781 F.3d 1178, 1184 (9th Cir. 2015). 7 However, after removal, Cook and York amended their complaint to allege, inter 8 || alia, a negligent misrepresentation claim against Ha. Based on the amendment, 9 | complete diversity no longer exists. Consequently, remand is, now, appropriate. See 10 || 28 U.S.C. § 1447(e). 11 12 Accordingly, 13 14 It is Ordsered that the motion to remand be, and hereby is, Granted. 15 16 It is further Ordsered that the request for attorneys’ fees be, and hereby is, 17 || Denies. 18 19 || Date: July 6 , 2020 ae 20 piles i 21 Reto J. Hatter, he. 59 Senior Cited States District Jusge 23 24 25 26 27 28

Order — Page 3 of 3

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1 2 3 4 5 6 7 8 United States District Court 9 Central District of California 10 Western Division 11 12 JAMES COOK, et al., CV 20-02612 TJH (RAOx)

13 Plaintiffs, 14 v. Order 15 ARCH INSURANCE COMPANY, et al., 16 Defendants. 17 18 The Court has considered the motion of Plaintiffs James Cook and Steven York 19 to remand, together with the moving and opposing papers. 20 In 2015, Cook retained York, an attorney, to represent him in a personal injury 21 lawsuit. Based on errors made by York in 2017 and 2018, Cook’s personal injury 22 claims became barred by the statute of limitations. Consequently, York advised Cook 23 to settle his personal injury claims. 24 On May 1, 2018, Defendant Arch Insurance Company [“Arch”], a citizen of 25 Missouri and New Jersey, issued an errors and omissions liability insurance policy to 26 York. 27 In March, 2019, Cook filed a malpractice action against York. York, then, 28 tendered a malpractice insurance claim to Arch. On April 19, 2019, Defendant Gloria 1 Ha, a California-based claims adjuster for Arch, sent York a letter denying coverage 2 under the policy. Apparently, because he had no insurance coverage, York did not 3 respond to the malpractice complaint. Consequently, on February 5, 2020, a 4 $3,900,000.00 default judgment was entered against York. Thereafter, Arch changed 5 its position regarding coverage, but its attempts to vacate the default judgment against 6 York were unsuccessful. To settle Cook’s malpractice judgment, York assigned to 7 Cook his claims against Arch for breach of contract and bad faith, with Cook reserving 8 only his right to seek recovery from Arch for emotional distress and punitive damages. 9 On February 13, 2020, Cook and York filed this action against Arch and Ha in 10 the Los Angeles Superior Court, alleging the following claims: (1) Breach of contract, 11 against Arch; (2) Breach of the covenant of good faith and fair dealing, against Arch; 12 and (3) Negligence, against Arch and Ha. 13 On March 19, 2020, Arch removed on the basis of diversity jurisdiction. While 14 Cook, York and Ha are all citizens of California, Arch asserted in its notice of removal 15 that Ha was a sham defendant because a valid cause of action was not asserted against 16 her. See Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). While 17 California does recognize a negligent misrepresentation cause of action against claims 18 adjusters, see Bock v. Hansen, 225 Cal. App. 4th 215, 231 (2014), it does not 19 recognize a cause of action for general negligence against claims adjusters, see Sanchez 20 v. Lindsey Modern Claims Servs., Inc., 72 Cal. App. 4th 249, 253 (1999). In their 21 state court complaint, Cook and York asserted only a general negligence cause of action 22 against Ha. 23 On March 26, 2020, Cook and York filed a First Amended Complaint [“FAC”], 24 here, which alleged a negligent misrepresentation claim against Ha in place of the 25 general negligence claim. 26 Cook and York, now, move to remand, arguing that the complete diversity does 27 not exist because Ha is a citizen of California. Cook and York, also, seek attorneys’ 28 fees for the time expended on the motion to remand. 1 Diversity jurisdiction is determined as of the date of the notice of removal. 2 || Strotek Corp v. Air Transport Ass’n. of Am., 300 F.3d 1129, 1131-1132 (9th Cir. 3 || 2002). Because Ha was a sham defendant at the time of removal, her California 4 || citizenship did not defeat diversity. See Ritchey, 139 F.3d at 1318. Accordingly, 5 || removal was proper. Therefore, Cook and York are not entitled to attorneys’ fees. See 6 || Jordan v. Nationstar Mortg. LLC, 781 F.3d 1178, 1184 (9th Cir. 2015). 7 However, after removal, Cook and York amended their complaint to allege, inter 8 || alia, a negligent misrepresentation claim against Ha. Based on the amendment, 9 | complete diversity no longer exists. Consequently, remand is, now, appropriate. See 10 || 28 U.S.C. § 1447(e). 11 12 Accordingly, 13 14 It is Ordsered that the motion to remand be, and hereby is, Granted. 15 16 It is further Ordsered that the request for attorneys’ fees be, and hereby is, 17 || Denies. 18 19 || Date: July 6 , 2020 ae 20 piles i 21 Reto J. Hatter, he. 59 Senior Cited States District Jusge 23 24 25 26 27 28

Order — Page 3 of 3

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