1 JS-6 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 ) 11 ) Case No.: CV 19-10317-CJC(AFMx) RAMIN JAVAHERIAN and LADAN ) 12 ) JAVAHERIAN, ) 13 ) ) 14 Plaintiffs, ) ) 15 v. ) ORDER GRANTING PLAINTIFFS’ ) MOTION TO REMAND [Dkt. 9] 16 ) AMCO INSURANCE COMPANY, et ) 17 al., ) ) 18 ) Defendants. ) 19 ) ) 20 ) 21 22 I. INTRODUCTION 23 24 Plaintiffs Ramin and Ladin Javaherian brought this insurance coverage action 25 against Defendants AMCO Insurance Company (“AMCO”) and SPC Geotechnical, Inc. 26 (“SPC”) in Los Angeles County Superior Court. (Dkt. 9-1 [First Amended Complaint, 27 1 hereinafter “FAC”].) Before the Court is Plaintiffs’ motion to remand. (Dkt. 9 2 [hereinafter “Mot.”].) For the following reasons, that motion is GRANTED.1 3 4 II. BACKGROUND 5 6 This dispute arises from a 2017 water leak that allegedly caused extensive damage 7 to Plaintiffs’ Woodland Hills, California home. (FAC ¶ 7.) Plaintiffs held a 8 homeowner’s insurance policy issued by AMCO, and after the leak occurred, AMCO 9 began investigating Plaintiffs’ insurance claim. (Id. ¶¶ 8–10.) In connection with this 10 investigation, AMCO hired an engineer from Bausley & Associates (“Bausley”) who, 11 after examining Plaintiffs’ home, opined that the interior damage had been caused by a 12 leak in an irrigation supply line. (Id. ¶ 10.) In reliance on this report, AMCO determined 13 that the damage to Plaintiffs’ home was covered by their policy and began to investigate 14 the scope of their loss. (Id. ¶ 11.) 15 16 AMCO retained Defendant SPC Geotechnical as a consultant to evaluate the soil 17 around Plaintiffs’ home and to offer a recommendation on how to repair the foundation. 18 (Id. ¶ 12.) SPC eventually produced a report for AMCO. (Id. ¶ 14.) Although SPC was 19 only retained in connection with restoration, its report also included an opinion on the 20 cause of the damage to the home. (Id.) On this issue, SPC concluded that the damage 21 had been caused by long-term settlement as opposed to the irrigation supply line leak. 22 (Id.) This finding directly contradicted the earlier Bausley report. After issuing the 23 report, Plaintiffs allege that SPC “improperly pressured and influenced Bausley & 24 Associates to change its opinions regarding the cause of the damage in order to create 25 uniformity” with their conclusion regarding the cause of the damage. (Id. ¶ 14.) Bausley 26 27 1 Having read and considered the papers presented by the parties, the Court finds this matter appropriate 1 allegedly buckled under SPC’s pressure, reversed its earlier findings, and provided 2 AMCO with a revised opinion stating that the damage had actually been caused by long- 3 term settlement, not the leak. (Id. ¶ 15.) This reversal spurred AMCO to deny Plaintiffs’ 4 coverage for the damage. (Id.) 5 6 On October 31, 2019, Plaintiffs sued AMCO in Los Angeles Superior Court, 7 asserting state law claims for (1) breach of contract, (2) breach of the implied covenant of 8 good faith and fair dealing, and (3) violation of business and professions code § 17200. 9 (Dkt. 9-1 [Declaration of Sara A. McClain, hereinafter “McClain Decl.”] ¶ 2.) SPC was 10 not named as a defendant in the original Complaint. Plaintiffs are both California 11 citizens for diversity purposes. (Dkt. 1 [Notice of Removal, hereinafter “NOR”] ¶ 8.) 12 AMCO is an insurance company incorporated and headquartered in Iowa. (Id. ¶ 10.) 13 SPC is a California corporation. (FAC ¶ 3.) 14 15 AMCO was served with the Complaint on November 6, 2019. (McClain Decl. 16 ¶ 5.) During a conversation held on November 19, 2019, AMCO represented to 17 Plaintiffs’ counsel that it planned to remove the case. (Dkt. 13 [Declaration of Nicole 18 Hampton, hereinafter “Hampton Decl.”] ¶¶ 3–4.) Plaintiffs’ counsel responded that they 19 would not oppose removal because they were seeking over $75,000 in damages. (Id.) 20 However, the following day, Plaintiffs filed the FAC which, in addition to the claims 21 against AMCO, asserts an intentional interference with contractual relations claim against 22 SPC. (FAC ¶¶ 41–44.) Although the FAC was initially filed on November 20, 2019 as a 23 matter of right, Plaintiffs did not serve it on AMCO or SPC until December 5, 2019—the 24 same day AMCO removed the case. (NOR.) Plaintiffs subsequently filed the instant 25 motion to remand, contending that their addition of SPC destroys complete diversity. 26 (Mot.) AMCO opposes the motion, contending that SPC was fraudulently joined and 27 therefore cannot be used to destroy complete diversity. 1 III. LEGAL STANDARD 2 3 “Federal courts are courts of limited jurisdiction,” possessing “only that power 4 authorized by Constitution and statute.” Gunn v. Minton, 568 U.S. 251, 256 (2013) 5 (internal quotations omitted). A civil action brought in state court may only be removed 6 by the defendant to a federal district court if the action could have been brought there 7 originally. 28 U.S.C. § 1441(a). Federal district courts have diversity jurisdiction over 8 suits where more than $75,000 is in controversy if the citizenship of each plaintiff is 9 different from that of each defendant. 28 U.S.C. § 1332(a). When a case is removed, the 10 burden of establishing subject matter jurisdiction falls on the defendant, and the removal 11 statute is strictly construed against removal jurisdiction. Gaus v. Miles, Inc., 980 F.2d 12 564, 566 (9th Cir. 1992). “Federal jurisdiction must be rejected if there is any doubt as to 13 the right of removal in the first instance.” Id. 14 15 IV. DISCUSSION 16 17 The parties dispute whether the addition of SPC destroys complete diversity. 18 Plaintiffs, both California citizens, argue that complete diversity is not present due to 19 their contractual interference claim against SPC, which is also a California citizen for 20 diversity purposes. AMCO asserts that SPC was fraudulently joined and cannot be used 21 to destroy complete diversity. The Court agrees with Plaintiffs. 22 23 Fraudulently joined defendants do not defeat removal on diversity grounds. 24 Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). When a sufficient 25 showing of fraudulent joinder is made, a court will not consider the citizenship of the 26 fraudulently joined party when determining if there is complete diversity in a case. See 27 Grancare, LLC v. Thrower by and through Mills, 889 F.3d 543, 548 (9th Cir. 2018). 1 defendant, and the failure is obvious according to the settled rules of the state.” Hunter v. 2 Philip Morris USA, 582 F.3d 1039, 1043 (9th Cir. 2009) (internal quotations omitted). 3 4 “A defendant invoking federal court diversity jurisdiction on the basis of 5 fraudulent joinder bears a heavy burden since there is a general presumption against 6 [finding] fraudulent joinder.” See Grancare, 889 F.3d at 548 (internal quotations 7 omitted). Fraudulent joinder must be proven by clear and convincing evidence. 8 Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). This 9 is an exacting standard because “if there is a possibility that a state court would find that 10 the complaint states a cause of action against any of the resident defendants, the federal 11 court must find that the joinder was proper and remand the case to the state court.” 12 Hunter, 582 F.3d at 1046.
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1 JS-6 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 ) 11 ) Case No.: CV 19-10317-CJC(AFMx) RAMIN JAVAHERIAN and LADAN ) 12 ) JAVAHERIAN, ) 13 ) ) 14 Plaintiffs, ) ) 15 v. ) ORDER GRANTING PLAINTIFFS’ ) MOTION TO REMAND [Dkt. 9] 16 ) AMCO INSURANCE COMPANY, et ) 17 al., ) ) 18 ) Defendants. ) 19 ) ) 20 ) 21 22 I. INTRODUCTION 23 24 Plaintiffs Ramin and Ladin Javaherian brought this insurance coverage action 25 against Defendants AMCO Insurance Company (“AMCO”) and SPC Geotechnical, Inc. 26 (“SPC”) in Los Angeles County Superior Court. (Dkt. 9-1 [First Amended Complaint, 27 1 hereinafter “FAC”].) Before the Court is Plaintiffs’ motion to remand. (Dkt. 9 2 [hereinafter “Mot.”].) For the following reasons, that motion is GRANTED.1 3 4 II. BACKGROUND 5 6 This dispute arises from a 2017 water leak that allegedly caused extensive damage 7 to Plaintiffs’ Woodland Hills, California home. (FAC ¶ 7.) Plaintiffs held a 8 homeowner’s insurance policy issued by AMCO, and after the leak occurred, AMCO 9 began investigating Plaintiffs’ insurance claim. (Id. ¶¶ 8–10.) In connection with this 10 investigation, AMCO hired an engineer from Bausley & Associates (“Bausley”) who, 11 after examining Plaintiffs’ home, opined that the interior damage had been caused by a 12 leak in an irrigation supply line. (Id. ¶ 10.) In reliance on this report, AMCO determined 13 that the damage to Plaintiffs’ home was covered by their policy and began to investigate 14 the scope of their loss. (Id. ¶ 11.) 15 16 AMCO retained Defendant SPC Geotechnical as a consultant to evaluate the soil 17 around Plaintiffs’ home and to offer a recommendation on how to repair the foundation. 18 (Id. ¶ 12.) SPC eventually produced a report for AMCO. (Id. ¶ 14.) Although SPC was 19 only retained in connection with restoration, its report also included an opinion on the 20 cause of the damage to the home. (Id.) On this issue, SPC concluded that the damage 21 had been caused by long-term settlement as opposed to the irrigation supply line leak. 22 (Id.) This finding directly contradicted the earlier Bausley report. After issuing the 23 report, Plaintiffs allege that SPC “improperly pressured and influenced Bausley & 24 Associates to change its opinions regarding the cause of the damage in order to create 25 uniformity” with their conclusion regarding the cause of the damage. (Id. ¶ 14.) Bausley 26 27 1 Having read and considered the papers presented by the parties, the Court finds this matter appropriate 1 allegedly buckled under SPC’s pressure, reversed its earlier findings, and provided 2 AMCO with a revised opinion stating that the damage had actually been caused by long- 3 term settlement, not the leak. (Id. ¶ 15.) This reversal spurred AMCO to deny Plaintiffs’ 4 coverage for the damage. (Id.) 5 6 On October 31, 2019, Plaintiffs sued AMCO in Los Angeles Superior Court, 7 asserting state law claims for (1) breach of contract, (2) breach of the implied covenant of 8 good faith and fair dealing, and (3) violation of business and professions code § 17200. 9 (Dkt. 9-1 [Declaration of Sara A. McClain, hereinafter “McClain Decl.”] ¶ 2.) SPC was 10 not named as a defendant in the original Complaint. Plaintiffs are both California 11 citizens for diversity purposes. (Dkt. 1 [Notice of Removal, hereinafter “NOR”] ¶ 8.) 12 AMCO is an insurance company incorporated and headquartered in Iowa. (Id. ¶ 10.) 13 SPC is a California corporation. (FAC ¶ 3.) 14 15 AMCO was served with the Complaint on November 6, 2019. (McClain Decl. 16 ¶ 5.) During a conversation held on November 19, 2019, AMCO represented to 17 Plaintiffs’ counsel that it planned to remove the case. (Dkt. 13 [Declaration of Nicole 18 Hampton, hereinafter “Hampton Decl.”] ¶¶ 3–4.) Plaintiffs’ counsel responded that they 19 would not oppose removal because they were seeking over $75,000 in damages. (Id.) 20 However, the following day, Plaintiffs filed the FAC which, in addition to the claims 21 against AMCO, asserts an intentional interference with contractual relations claim against 22 SPC. (FAC ¶¶ 41–44.) Although the FAC was initially filed on November 20, 2019 as a 23 matter of right, Plaintiffs did not serve it on AMCO or SPC until December 5, 2019—the 24 same day AMCO removed the case. (NOR.) Plaintiffs subsequently filed the instant 25 motion to remand, contending that their addition of SPC destroys complete diversity. 26 (Mot.) AMCO opposes the motion, contending that SPC was fraudulently joined and 27 therefore cannot be used to destroy complete diversity. 1 III. LEGAL STANDARD 2 3 “Federal courts are courts of limited jurisdiction,” possessing “only that power 4 authorized by Constitution and statute.” Gunn v. Minton, 568 U.S. 251, 256 (2013) 5 (internal quotations omitted). A civil action brought in state court may only be removed 6 by the defendant to a federal district court if the action could have been brought there 7 originally. 28 U.S.C. § 1441(a). Federal district courts have diversity jurisdiction over 8 suits where more than $75,000 is in controversy if the citizenship of each plaintiff is 9 different from that of each defendant. 28 U.S.C. § 1332(a). When a case is removed, the 10 burden of establishing subject matter jurisdiction falls on the defendant, and the removal 11 statute is strictly construed against removal jurisdiction. Gaus v. Miles, Inc., 980 F.2d 12 564, 566 (9th Cir. 1992). “Federal jurisdiction must be rejected if there is any doubt as to 13 the right of removal in the first instance.” Id. 14 15 IV. DISCUSSION 16 17 The parties dispute whether the addition of SPC destroys complete diversity. 18 Plaintiffs, both California citizens, argue that complete diversity is not present due to 19 their contractual interference claim against SPC, which is also a California citizen for 20 diversity purposes. AMCO asserts that SPC was fraudulently joined and cannot be used 21 to destroy complete diversity. The Court agrees with Plaintiffs. 22 23 Fraudulently joined defendants do not defeat removal on diversity grounds. 24 Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). When a sufficient 25 showing of fraudulent joinder is made, a court will not consider the citizenship of the 26 fraudulently joined party when determining if there is complete diversity in a case. See 27 Grancare, LLC v. Thrower by and through Mills, 889 F.3d 543, 548 (9th Cir. 2018). 1 defendant, and the failure is obvious according to the settled rules of the state.” Hunter v. 2 Philip Morris USA, 582 F.3d 1039, 1043 (9th Cir. 2009) (internal quotations omitted). 3 4 “A defendant invoking federal court diversity jurisdiction on the basis of 5 fraudulent joinder bears a heavy burden since there is a general presumption against 6 [finding] fraudulent joinder.” See Grancare, 889 F.3d at 548 (internal quotations 7 omitted). Fraudulent joinder must be proven by clear and convincing evidence. 8 Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). This 9 is an exacting standard because “if there is a possibility that a state court would find that 10 the complaint states a cause of action against any of the resident defendants, the federal 11 court must find that the joinder was proper and remand the case to the state court.” 12 Hunter, 582 F.3d at 1046. Stated another way, if there is a “non-fanciful possibility” that 13 Plaintiff can state a viable state law claim against a defendant, joinder should not be 14 considered fraudulent. See Macey v. Allstate Prop. & Cas. Ins. Co., 220 F. Supp. 2d 15 1116, 1117 (N.D. Cal. 2002). Even if a plaintiff’s claims against a defendant could not 16 withstand a 12(b)(6) motion, that does not mean that the defendant has been fraudulently 17 joined. Before finding fraudulent joinder, a court must also determine “whether a 18 deficiency in the complaint can possibly be cured by granting the plaintiff leave to 19 amend.” See Grancare, 889 F.3d at 549. 20 21 Plaintiffs’ lone claim against SPC is for intentional interference with contractual 22 relations. (FAC ¶¶ 41–44.) Thus, if AMCO can establish that SPC “cannot be held liable 23 on any theory” as to this claim, Plaintiffs’ motion to remand must be denied. See 24 Ritchey, 139 F.3d at 1318. To state a claim for intentional interference with contractual 25 relations, a plaintiff must allege, “(1) a valid contract between plaintiff and a third party; 26 (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to 27 induce a breach or disruption of the contractual relationship; (4) actual breach or 1 Inc. v. Glob. Eagle Entm’t, Inc., 117 F. Supp. 3d 1092, 1115 (C.D. Cal. 2015). The 2 California Supreme Court has stated that a plaintiff may satisfy the “intent requirement” 3 of an intentional interference claim by pleading that the defendant had a specific intent to 4 interfere with a contract or that “the defendant knew that the interference was certain or 5 substantially certain to occur as a result of its action.” Korea Supply Co. v. Lockheed 6 Martin Corp., 29 Cal. 4th 1134, 1154 (2003). 7 8 Plaintiffs sufficiently allege that there is a possibility that they could recover 9 against SPC for intentional interference with a contract. The FAC establishes the first 10 two elements of the claim by alleging that Plaintiffs had a homeowner’s insurance policy 11 issued by AMCO and SPC was aware of this contract. (FAC ¶ 41.) It also alleges that 12 SPC engaged in intentional acts—namely “improperly pressur[ing] and influenc[ing] 13 Bausley & Associates to change its opinions regarding the cause of damages in order to 14 create uniformity” with their own opinion—with the knowledge that such acts would 15 disrupt AMCO’s handling of Plaintiffs’ insurance claim. (FAC ¶¶ 14, 43.) According to 16 the FAC, SPC’s acts caused AMCO to breach the insurance contract by denying 17 Plaintiffs’ claim, which in turn resulted in damages. (Id. ¶ 44.) These allegations 18 sufficiently establish that “there is a possibility that a state court would find that the 19 complaint states a cause of action.” Hunter, 582 F.3d at 1046. Courts in this district 20 have refused to find fraudulent joinder in similar cases involving intentional contractual 21 interference claims asserted against defendants retained by insurance companies to 22 investigate claims. See, e.g., Landry v. Liberty Life Assurance Co. of Boston, 2014 WL 23 12610203, at *3 (C.D. Cal. Aug. 4, 2014) (finding that a defendant doctor, who was hired 24 by the defendant insurance company to conduct a medial examination of the plaintiff, 25 was not fraudulently joined because plaintiff adequately stated an intentional interference 26 of contractual relations claim against him); Chau-Barlow v. Provident Life and Accident 27 Ins. Co., 2016 WL 5921061, at *3 (C.D. Cal. Oct. 11, 2016) (same). 1 AMCO’s primary argument in favor of fraudulent joinder—that Plaintiffs will 2 ultimately be unable to prevail against SPC because it has meritorious affirmative 3 defenses—is unpersuasive. Courts generally decline to find fraudulent joinder “where a 4 defendant raises a defense that requires a searching inquiry into the merits of the 5 plaintiff’s case, even if that defense, if successful, would prove fatal.” Grancare, 889 6 F.3d at 548–49. The affirmative defenses AMCO raises here—the honest advice 7 privilege and First Amendment privilege—would require the Court to conduct such an 8 inquiry. Accordingly, the fact that SPC might in the future be able to successfully assert 9 these defenses is insufficient to establish fraudulent joinder. 10 11 The Court is similarly unconvinced that AMCO can establish fraudulent joinder by 12 citing to Plaintiffs’ delay in asserting their claim against SPC. The fact that Plaintiffs did 13 not include the contractual interference claim in their original complaint does not 14 preclude them from stating a colorable claim against SPC in the FAC. See, e.g., del 15 Puerto v. Thompson H. Grp., LLC, 2018 WL 1870423, at *3 (C.D. Cal. Apr. 18, 2018) 16 (remanding case after considering allegations against a new defendant added for the first 17 time in amended state court pleadings). That said, the Court would be remiss if it did not 18 address the unfortunate gamesmanship that Plaintiffs’ counsel appears to have engaged in 19 prior to the removal of this case. After a phone call with defense counsel on November 20 19, 2019, Plaintiffs’ counsel represented that they would not be contesting removal of the 21 case. (Hampton Decl. ¶ 4.) Less than one day after learning of AMCO’s intent to 22 remove however, Plaintiffs’ counsel filed the FAC, which added the claim against SPC. 23 (Id. ¶ 5.) Despite their conversation with defense counsel a day earlier, Plaintiffs’ 24 counsel chose not to inform them that the FAC had been filed. Instead, they waited to 25 serve it until December 5, the day AMCO removed the case. (Id. ¶¶ 6–7.) The Court is 26 troubled by this lack of candor. Had Plaintiffs simply informed AMCO that they also 27 planned to assert a claim against SPC, the parties likely could have avoided litigating the 1 possibility that they could recover against SPC on their intentional interference of 2 contractual relations claim, the Court cannot find that AMCO has met its burden in 3 establishing fraudulent joinder. 4 5 V. CONCLUSION 6 7 For the following reasons, Plaintiffs’ motion to remand is GRANTED. This 8 action is hereby remanded to Los Angeles County Superior Court. 9 10 DATED: January 27, 2020 11 __________________________________ 12 CORMAC J. CARNEY 13 UNITED STATES DISTRICT JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27