Rita Kahlenberg v. Bamboo IDE8 Insurance Services, LLC

• Court: District Court, C.D. California
• Decided: June 15, 2021
• Docket: 2:20-cv-06805
• Status: Unknown

Opinion

1 2 JS-6 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 RITA KAHLENBERG, Case No. 2:20-cv-06805-FLA (PDx)

12 Plaintiff, ORDER GRANTING PLAINTIFF 13 v. AND CROSS-DEFENDANTS’ 14 MOTION TO JOIN DEFENDANT AND REMAND [DKT. 46] 15 BAMBOO INSURANCE SERVICES,

16 INC., et al.,

17 Defendants.

18 19 20 RULING 21 Before the court is Plaintiff Rita Kahlenberg (“Plaintiff” or “Kahlenberg”) and 22 Cross-Defendant Heidi Smith’s, individually and as trustee of The Sherwood and Rita 23 Kahlenberg Trust, (“Cross-Defendant” or “Smith”) Motion to Join Defendant and 24 Remand (“Motion”). Dkt. 46. For the reasons set forth below, the court GRANTS 25 Plaintiff and Cross-Defendant’s Motion and REMANDS this action to the Los 26 Angeles Superior Court. 27 28 1 BACKGROUND 2 Plaintiff alleges Defendant Catlin Insurance Company, Inc. (“Defendant” or 3 “Catlin”) issued a homeowner’s insurance policy (the “Catlin policy”) to Plaintiff and 4 her late husband, Sherwood Kahlenberg, on July 24, 2019. Dkt. 43 (First Am. 5 Compl., “FAC”) ¶ 2. According to Plaintiff, her residence sustained water damage on 6 September 22, 2019 and Defendant wrongfully denied Plaintiff full benefits due under 7 the policy. Id. ¶¶ 1-2. 8 Plaintiff filed the original Complaint in this action in Los Angeles County 9 Superior Court on June 25, 2020 against Defendants Bamboo Insurance Services, Inc. 10 and Catlin. Dkt. 1 (Compl.).1 Catlin removed the action to federal court on July 29, 11 2020 and simultaneously asserted a counterclaim for declaratory relief based on lack 12 of coverage for the loss against Kahlenberg and Smith (collectively “Cross- 13 Defendants”). Dkt. 1-3. 14 On October 9, 2020, Kahlenberg and Smith filed a Motion to Dismiss Catlin’s 15 Counterclaim, which became moot on October 16, 2020, when Catlin filed the First 16 Amended Counterclaim (“FACC”). Dkts. 22, 26, 28. In the FACC, Catlin asserts two 17 causes of action against Cross-Defendants for: (1) rescission; and (2) declaratory relief 18 based on lack of coverage for the loss under the Catlin policy. Catlin seeks to rescind 19 the policy on the grounds that Kahlenberg submitted a policy application containing 20 false information, through her insurance agent, which Catlin relied upon in issuing the 21 homeowners’ policy to Kahlenberg. Dkt. 26 ¶¶ 5-11. 22 Cross-Defendants filed a Motion to Dismiss the FACC on October 30, 2020, 23 which Judge Virginia A. Phillips granted in part and denied in part. Dkts. 31, 38. In 24 their Motion to Dismiss, Kahlenberg and Smith argued Catlin’s claim for rescission 25 26 1 In their Notice of Removal, Defendants stated Plaintiff had erroneously sued “Bamboo 27 Insurance Services, Inc.,” as opposed to Bamboo IDE8 Insurance Services, LLC (“Bamboo IDE8”). Dkt. 1. The parties stipulated to dismiss Bamboo IDE8 on October 28 1, 2020. Dkts. 20, 21. 1 failed because “the insurance application was signed by the insurance agent,” and not 2 by Kahlenberg or Smith. Dkt. 31-1 at 10. The court rejected Kahlenberg and Smith’s 3 argument, explaining, “[a]s a matter of law, ‘if the application was prepared by an 4 insurance broker (the agent of the insured), the application’s contents are the insured’s 5 responsibility.’” Dkt. 38 at 10 (quoting Century Sur. Co. v. Robin Singh Educ. Servs., 6 Inc., No. CV-06-8066 CAS (Ex), 2008 WL 11333841, at *8 (C.D. Cal. Apr. 14, 2008) 7 (emphasis in original)). Accordingly, the court permitted Catlin to proceed on its 8 counterclaim against Kahlenberg for rescission. Id. The court also permitted Catlin to 9 proceed on its counterclaim against Smith for declaratory relief. Id. at 9. 10 On October 22, 2020, Judge Phillips entered a minute order setting trial and 11 other pretrial dates, including February 22, 2021 as the “Last date for hearing motions 12 to amend pleadings or add parties.” Dkt. 29; see also Dkt. 33. The action was 13 transferred to this court on January 5, 2021. Dkt. 40. On January 26, 2021, the parties 14 filed a stipulation for Plaintiff to file the FAC and continue case deadlines. Dkt. 43. 15 The court granted the stipulation in part and allowed Plaintiff to file the FAC but 16 denied in part the stipulation to continue deadlines, explaining Plaintiff had only 17 offered “general statements regarding diligence” and, accordingly, had not established 18 good cause for the requested continuance. Id. at 3. 19 Plaintiff filed the present Motion on February 19, 2021, with a noticed hearing 20 date of April 9, 2021. Dkt. 46, 46-1 (“Mot. Br.”).2 Plaintiff seeks to join Demian 21 Insurance and Financial Services, Inc. (“Demian”), which was allegedly Plaintiff’s 22 insurance broker for the policy, and to assert causes of action for breach of fiduciary 23 duty and professional negligence against this proposed Defendant. Dkt. 46. 24 According to Plaintiff, Demian and Bamboo IDE8 are necessary parties because 25 Catlin’s counterclaim for rescission against Kahlenberg is premised on the allegation 26

27 2 For ease of reference, the court hereafter refers to the moving parties simply as 28 “Plaintiff.” 1 that Kahlenberg signed the insurance application, but Demian was the entity that 2 drafted and signed the application, while Bamboo IDE8 processed it and adjusted the 3 claim. Mot. Br. 1. According to Plaintiff, joinder of Demian and Bamboo IDE8 4 would destroy complete diversity and deprive the court of subject-matter jurisdiction 5 under 28 U.S.C. § 1332, requiring remand of the action to state court. Id. 6 Catlin opposes Plaintiff’s Motion, arguing the Motion is untimely under the 7 Scheduling Order and that Plaintiff has not established good cause for the court to 8 allow a belated amendment. Dkt. 53 at 1 (citing Fed. R. Civ. P. 16(b)(4)). On reply, 9 Plaintiff argues the court should grant the Motion because she meets the requisite 10 good cause standard and Catlin failed to address Plaintiff’s substantive arguments 11 regarding joinder, in its opposition, and concedes the point. Dkt. 55. 12 Plaintiff’s proposed Second Amended Complaint (“SAC”) does not assert any 13 causes of action against Bamboo IDE8. See generally Dkt. 46-2 (Tucker Decl.) Ex. I 14 (“Proposed SAC”). Accordingly, the court will only consider the parties’ arguments 15 with respect to Demian. 16 The court finds this matter appropriate for resolution without oral argument. 17 See Fed. R. Civ. P. 78(b); Local Rule 7-15. 18 TIMELINESS 19 “A schedule may be modified only for good cause and with the judge’s 20 consent.” Fed. R. Civ. P. 16(b)(4). “Rule 16(b)’s ‘good cause’ standard primarily 21 considers the diligence of the party seeking the amendment.” Johnson v. Mammoth 22 Recreations, 975 F.2d 604, 609 (9th Cir. 1992). “If that party was not diligent, the 23 inquiry should end.” Id. Courts in the Ninth Circuit typically consider three factors 24 when determining whether a party has demonstrated good cause: (1) whether the party 25 was diligent in creating the scheduling order; (2) whether the party’s noncompliance 26 with the scheduling order occurred notwithstanding diligence efforts to comply, 27 because of the development of matters which could not have been reasonably foreseen 28 at the time the scheduling order was entered; and (3) whether the party was diligent in 1 seeking amendment of the order once it became apparent the party could not comply. 2 Jackson v. Laureate, Inc., 186 F.R.D. 605, 608 (E.D. Cal. 1999). 3 Catlin argues Plaintiff’s Motion is untimely and that Plaintiff has failed to 4 demonstrate diligence. Opp. 4-6. Under the Scheduling Order, the deadline for a 5 hearing on a motion to join additional parties was February 22, 2021. Dkt. 33. 6 Plaintiff filed the instant motion on February 19, 2021 with a hearing date of April 9, 7 2021. Id.; Dkts. 33, 46. Catlin, thus, argues the Motion is untimely. Opp. 5. Further, 8 Catlin contends Plaintiff has not demonstrated diligence because Plaintiff did not 9 promptly move to join Demian and delayed filing the subject Motion until February 10 19, 2021, despite recognizing the need to join Demian as of December 21, 2020, 11 following the court’s December 14, 2020 order holding that Catlin’s counterclaim for 12 rescission would proceed. Id. 13 Plaintiff responds she satisfies the three factors set forth in Jackson, 186 F.R.D. 14 at 608, and has demonstrated diligence. Dkt. 55 (Reply) at 1-5. First, Plaintiff argues 15 she was diligent in creating the original scheduling order. Reply 1-2; Dkt. 26. 16 Second, Plaintiff argues any noncompliance with the Scheduling Order was due to 17 unforeseen circumstances that arose after she submitted the joint report. Reply 2. 18 According to Plaintiff, she filed timely a motion to dismiss the counterclaim on 19 October 30, 2020, which she reasonably believed would be granted and would obviate 20 the need to join Demian in this litigation. Reply 2 (citing Dkt. 31). 21 Third, Plaintiff argues she was diligent once it became clear she could not 22 comply with the Scheduling Order. Plaintiff notes that even before the court 23 permitted the rescission cause of action to proceed on December 14, 2020, she 24 subpoenaed documents from each of the entities involved in obtaining the insurance 25 policy to determine which entity supplied the information on the application to the 26 broker. Id. at 3. According to Plaintiff, she did not receive responses to the 27 subpoenas by January 13, 2021, which delayed Plaintiff’s ability to move to join a 28 new defendant. Reply 3. 1 Plaintiff further states she began the meet and confer process with Defendant 2 regarding amendment beginning on December 21, 2020 and that the parties agreed to 3 jointly ask the court to extend dates in the litigation to enable the parties to identify the 4 correct parties to join. Id. at 3-4. After meeting and conferring regarding the 5 stipulation, the parties requested the court amend the Scheduling Order through a joint 6 stipulation filed on January 22, 2021. Id. at 4. According to Plaintiff, she did not 7 immediately file the Motion after the court denied the parties’ joint request on January 8 26, 2021, because her counsel contacted Defendant’s counsel to discuss voluntarily 9 dismissing the federal case and refiling in state court. Id. (citing Dkt. 46-2 (“Tucker 10 Decl.”) ¶ 10, Ex. G). While Defendant’s counsel provisionally agreed to her proposal, 11 pending his client’s consent, Defendant ultimately declined to consent to voluntary 12 dismissal on February 12, 2021. Plaintiff filed the instant motion on February 19, 13 2021. Dkt. 46. 14 Plaintiff’s efforts to investigate the need to join additional defendants and to 15 meet and confer with Defendant regarding amending the Scheduling Order and 16 potential alternatives to amendment demonstrate sufficient diligence to establish good 17 cause for the court to consider the Motion on its merits. The court, thus, finds the 18 subject Motion timely and will not deny it on this basis 19 DISCUSSION 20 I. Legal Standard 21 Pursuant to 28 U.S.C. § 1447(e), “If after removal the plaintiff seeks to join 22 additional defendants whose joinder would destroy subject matter jurisdiction, the 23 court may deny joinder, or permit joinder and remand the action to state court.” IBC 24 Aviation Servs. v. Compañia Mexicana De Aviacion, S.A. de C.V., 125 F. Supp. 2d 25 1008, 1011 (N.D. Cal. 2000). “Under § 1447, whether to permit joinder of a party 26 that will destroy diversity jurisdiction remains in the sound discretion of the court.” 27 Id. Courts generally consider six factors to determine whether to permit joinder of a 28 non-diverse defendant after removal: (1) whether the party sought to be joined is 1 needed for just adjudication and would be joined under Fed. R. Civ. P. 19(a); (2) 2 whether the statute of limitations would preclude an original action against the new 3 defendants in state court; (3) whether there has been unexplained delay in requesting 4 joinder; (4) whether joinder is intended solely to defeat federal jurisdiction; (5) 5 whether the claims against the new defendant appear valid; and (6) whether denial of 6 joinder will prejudice the plaintiff. Id. The court considers each factor in turn. 7 A. Whether Demian Is a Required Party Under Fed. R. Civ. P. 19(a) 8 Fed. R. Civ. P. 19(a) governs the joinder of persons required to be joined “if 9 feasible.” A putative party is a “required” party if (1) the court cannot accord 10 complete relief among existing parties in the putative party’s absence, or (2) the 11 putative party claims an interest relating to the action and is so situated that 12 proceeding in its absence may impair or impede its ability to protect the interest, or 13 leave an existing party subject to substantial risk of duplicative or inconsistent 14 obligations. Fed. R. Civ. P. 19(a); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. 15 ENC Corp., 464 F.3d 885, 891 (9th Cir. 2006), rev’d on other grounds sub nom. 16 Republic of Philippines v. Pimentel, 553 U.S. 851 (2008). The court is permitted to 17 apply “a less restrictive standard” under Rule 19(a) in deciding whether to remand 18 after removal under 28 U.S.C. § 1447(e). See IBC Aviation Servs., 125 F. Supp. 2d at 19 1011-12 (“Although courts consider whether a party would meet Fed. R. Civ. Proc. 20 19’s standard for a necessary party, amendment under § 1447(e) is a less restrictive 21 standard than for joinder under Fed. R. Civ. Proc. 19.”). 22 In light of Catlin’s counterclaim for rescission against Plaintiff for 23 misrepresentations on the insurance application, Plaintiff argues Demian is a required 24 party under Rule 19(a) because a Demian employee prepared and signed the insurance 25 application. Mot. Br. 8. As Plaintiff explains: “The entire crux of the rescission cause 26 of action is the insurance application. Without it, there is no cause of action. And the 27 application was the responsibility of Demian.” Id. at 9-10. According to Plaintiff, 28 “[i]n the event that Plaintiff is unable to join Demian in this action, Plaintiff will be 1 forced to sue Demian separately in state court to protect her interests,” and Demian 2 would likely seek to join Catlin. Id. Plaintiff further argues the parties would litigate 3 “the same facts and legal issues in two courts,” which may result in inconsistent 4 rulings. Id. at 9. The court agrees and finds that this factor weighs in favor of joinder. 5 B. Whether a Statute of Limitations Would Bar an Independent Action 6 Against Demian 7 Plaintiff states there are no statutes of limitations that would prevent her from 8 bringing an original action against Demian. Mot. Br. 10. Accordingly, this factor 9 weighs against joining Demian. 10 C. Timeliness of Amendment 11 Plaintiff argues her amendment joining Demian is timely because she acted 12 diligently since she first learned of Catlin’s rescission claim in October 2020, when 13 Catlin filed the FACC. Mot. Br. 4, 10-11; Dkt. 26. For similar reasons as stated 14 above regarding timeliness and good cause under Fed. R. Civ. P. 16(b)(4), the court 15 finds Plaintiff’s amendment is timely. This factor weighs in favor of joining Demian. 16 D. Plaintiff’s Motive for Joinder 17 Plaintiff argues she does not seek to add Demian as a sham defendant, solely for 18 the purpose of defeating complete diversity. Mot. Br. 11. According to Plaintiff, the 19 only reason she seeks to join Demian is because Catlin’s rescission counterclaim 20 requires the involvement of Demian as a necessary party. Id. at 1-2, 4. 21 While Plaintiff originally filed the action in state court and may have preferred 22 to litigate in that forum, the court cannot conclude Plaintiff seeks to join Demian 23 solely for the tactical purpose of returning to state court. Moreover, as Plaintiff 24 explains, her conduct in moving to dismiss the counterclaim for rescission rather than 25 filing the subject Motion at an earlier date suggests she did not file the Motion solely 26 to return to state court. Thus, the court cannot conclude Plaintiff’s motives are 27 “anything other than avoidance of the inefficiency and expense of multiple actions.” 28 1 Palestini v. Gen. Dynamics Corp., 193 F.R.D. 654, 658 (S.D. Cal. 2000). This factor 2 weighs in favor of joining Demian. 3 E. Strength of Plaintiff’s Claims Against Demian 4 “To state a facially viable claim for purposes of joinder under section 1447(e), a 5 plaintiff need not allege a claim with particularity or even plausibility. Instead, ‘under 6 section 1447(e), the Court need only determine whether the claim ‘seems’ valid.’” 7 Dordoni v. FCA US LLC, Case No. 5:20-cv-20-1475-JGB (SHKx), 2020 U.S. Dist. 8 LEXIS 191483, at *12 (C.D. Cal. Oct. 15, 2020) (citation omitted); see also Sabag v. 9 FCA US, LLC, Case No. 2:16-cv-06639-CAS (RAOx), 2016 U.S. Dist. LEXIS 10 154346, at *16 (C.D. Cal. Nov. 7, 2016) (“In considering the validity of plaintiff’s 11 claims, the court need only determine whether the claim seems valid which is not the 12 same as the standard in either a motion to dismiss or a motion for summary 13 judgment.”) (internal quotation marks, brackets, and citation omitted). 14 Plaintiff states she intends to bring a claim against Demian for negligence and 15 breach of fiduciary duty. Mot. Br. 12. Ordinarily, an insurance agent assumes only 16 those duties normally found in any agency relationship, including the obligation to use 17 reasonable care, diligence, and judgment in procuring the insurance requested by an 18 insured. Jones v. Grewe, 189 Cal. App. 3d 950, 954-55 (1987). California courts 19 have noted, however, that an agent or broker assumes a fiduciary duty when it 20 “assumes an additional duty.” Fitzpatrick v. Hayes, 57 Cal. App. 4th 916, 918 (1997); 21 Jones, 189 Cal. App. 3d at 954-55. An agent may assume additional duties by an 22 express agreement or a holding out by the agent to assume a greater duty to the 23 insured. Jones, 189 Cal. App. 3d at 954-55; Paper Savers, Inc. v. Nacsa, 51 Cal. App. 24 4th 1090, 1096 (1996). Accordingly, the agent may be liable to the insured for losses 25 which resulted as a breach of the additional, special duty. Jones, 189 Cal. App. 3d at 26 954-55. 27 According to Plaintiff, “Demian assumed an additional duty when it chose to 28 complete the insurance application on Plaintiff’s behalf without seeking her or her 1 husband’s input on the contents of the application, and submitting it with the agent’s 2 signature rather than the insured’s. By doing so, it created a fiduciary duty which it 3 breached by failing to confirm that the information it submitted was accurate.” Mot. 4 Br. 13. Without assessing the ultimate merits of her claims, the court finds Plaintiff 5 may have valid claims against Demian for negligence and breach of fiduciary duty. 6 This factor weighs in favor of amendment. See Dordoni, 2020 U.S. Dist. LEXIS 7 191483, at *12 (explaining plaintiff’s allegations stated a claim against putative 8 defendant that “seems valid” and concluding factor weighed in favor of joining new 9 defendant). 10 F. Prejudice to Plaintiff if the Court Denies Plaintiff’s Request 11 The court must finally assess whether Plaintiff will suffer undue prejudice if the 12 court grants or denies her request. IBC Aviation Servs., 125 F. Supp. 2d at 1013. 13 Plaintiff argues the age of the action and possible inconvenience to the parties weigh 14 in favor of amendment. Mot. Br. 13. First, Plaintiff argues no party will suffer 15 prejudice if her motion is granted because the action has not progressed far from the 16 pleading stage and discovery has only just begun. Id. According to Plaintiff, Catlin 17 would not suffer prejudice because remand would alleviate Catlin from the burden of 18 litigating in two forums. Id. In addition, Defendant does not respond to this argument 19 or argue that it would suffer prejudice from the amendment. Accordingly, this factor 20 weighs in favor of joinder. 21 Plaintiff further argues she will suffer prejudice if the court denies her request 22 because she will be forced to litigate in two forums or forgo her potential claims 23 against Demian, which should militate in favor of permitting amendment. Mot. Br. 13 24 (citing IBC Aviation Servs., 125 F. Supp. 2d at 1013). The court finds Plaintiff’s 25 argument persuasive. Were the court to deny Plaintiff’s request, Plaintiff would face 26 the choice of pursuing additional litigation in state court or forgoing her claims against 27 Demian. The underlying facts in this action would likely substantially overlap with a 28 1 second action in state court, which may prejudice Plaintiff and waste judicial 2 resources. See IBC Aviation Servs., 125 F. Supp. 2d at 1013. 3 In sum, Plaintiff establishes no party will suffer prejudice if the court allows 4 joinder and that Plaintiff will suffer prejudice if the court denies Plaintiff’s request. 5 This factor weighs in favor of joinder. 6 G. Weighing All Factors 7 Weighing all the foregoing factors, the court finds Plaintiff may amend the 8 complaint and join Demian. Demian is a required party because litigating in two 9 forums risks inconsistent rulings, and amendment and remand would conserve judicial 10 resources insofar as one court, rather than two, would provide a forum for the parties 11 to litigate their claims involving substantially overlapping facts. Plaintiff has 12 demonstrated she does not seek to join Demian as merely a sham defendant for 13 tactical purposes, and that she has at least a facially valid claim against Demian. No 14 party would likely suffer prejudice if Plaintiff were allowed to join Demian and 15 litigate in state court, while Plaintiff may suffer prejudice were the court to deny the 16 Motion. Indeed, as Catlin failed to address any of Plaintiff’s arguments regarding 17 joinder, Catlin appears to concede it would not suffer any prejudice were the court to 18 remand this action. After considering all factors, the court finds Plaintiff has 19 demonstrated good cause exists for the court to allow the joinder of Demian and to 20 remand the action to state court. 21 The court, therefore, GRANTS Plaintiff’s Motion with respect to Plaintiff’s 22 request to join Demian as an additional Defendant. 23 II. Amendment Regarding Plaintiff’s “Bad Faith” Allegations 24 Defendant contends Plaintiff’s proposed SAC seeks to add a new “bad faith” 25 claim against Catlin based on its filing of the counterclaim for rescission in the FACC. 26 Dkt. 53 at 6-7 (citing Dkt. 46-2 (Tucker Decl. Ex. I (Proposed SAC) ¶¶ 4, 43)). Catlin 27 argues the court should deny Plaintiff leave to include this allegation in the proposed 28 SAC because Plaintiff failed to meet and confer with Catlin regarding the potential 1 || amendment and because the amendment is futile. Opp. 6-8. Plaintiff argues she is not 2 || asserting any new claims, the allegation was already mentioned in paragraph 37 of the 3 || FAC, and that she attempted to meet and confer on this issue with “daily emails” to 4 || which Defendant “refus[ed] to respond.” Dkt. 43 (FAC) 9 37; Reply 10. 5 Plaintiff did not request to amend the FAC to add these allegations in her 6 | motion. The court declines to grant relief not requested or supported by citation to 7 | authority. Thus, the court DENIES Plaintiff's motion to amend the FAC to add the 8 | allegations in paragraphs 4 and 43 of the proposed SAC. 9 CONCLUSION 10 For the foregoing reasons, the court GRANTS Plaintiff's Motion to join 11 | Demian and REMANDS the action to the Los Angeles Superior Court. In light of the 12 | court’s order, the court DENIES AS MOOT all pending motions and 13 | applications. Dkts. 71, 80, 83. 14 15 IT IS SO ORDERED. 16 17 | Dated: June 15, 2021

19 FERNANDO L. AENLLE-ROCHA United States District Judge 20 21 22 23 24 25 26 27 28 PAGE 12 OF 12