O 1 JS-6 2 3 4 5 6 7 United States District Court 8 Central District of California 9 10 11 RYAN KAVANAUGH, Case №: 2:19-cv-02145-ODW (SSx) 12 Plaintiff, 13 v. ORDER GRANTING MOTION TO 14 NATIONAL UNION FIRE INSURANCE REMAND [11] 15 COMPANY OF PITTSBURGH, PA et al., 16 Defendants. 17 I. INTRODUCTION 18 On January 28, 2019, Plaintiff Ryan Kavanaugh filed this insurance bad faith 19 action in the Superior Court of California for the County of Los Angeles. (Notice of 20 Removal Ex. B (“Compl.”), ECF No. 1-2.) Prior to the other defendants appearing, 21 Defendant Arthur J. Gallagher Risk Management Services, Inc. (“Gallagher”) 22 removed this matter based on federal diversity jurisdiction. (See Notice of Removal 23 2, 5–6, ECF No. 1.) Kavanaugh moves to remand. (Mot. to Remand (“Mot.”), ECF 24 No. 11.) For the reasons that follow, the Court GRANTS Kavanaugh’s Motion and 25 REMANDS this action to state court.1 26 27
28 1 After carefully considering the papers filed in connection with the Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. 1 II. FACTUAL AND PROCEDURAL BACKGROUND 2 On January 28, 2019, Kavanaugh brought this action against Defendants 3 National Union Fire Insurance Company of Pittsburgh, PA and Great American 4 Insurance Company for their failure to defend him and/or extend coverage to him in 5 three civil actions. (Compl. ¶ 2.) Additionally, and in the alternative, Kavanaugh 6 brought claims against Gallagher and Chelsea Laing for professional negligence for 7 negligently failing to broker and procure adequate insurance for him. (Compl. ¶¶ 3, 8 53, 55–56.) Laing acted as an “agent and/or broker and procured at least one of the 9 policies at issue.” (Compl. ¶ 3.) 10 On March 21, 2019, Gallagher removed this action based on federal diversity 11 jurisdiction. (Notice of Removal 2.) Gallagher noted that, although Laing is a citizen 12 of California, she was fraudulently joined and is a sham defendant, so her citizenship 13 should be disregarded for purposes of diversity jurisdiction. (Notice of Removal 2, 3.) 14 Kavanaugh now moves to remand on the basis that Laing is a proper defendant and 15 can be held liable. (Mot. 5, 8–12.) 16 III. LEGAL STANDARD 17 Federal courts have subject matter jurisdiction only as authorized by the 18 Constitution and Congress. U.S. Const. art. III, § 2, cl. 1; see also Kokkonen v. 19 Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A suit filed in state court 20 may be removed to federal court only if the federal court would have had original 21 jurisdiction over the suit. 28 U.S.C. § 1441(a). Federal courts have original 22 jurisdiction where an action arises under federal law, id. § 1331, or where each 23 plaintiff’s citizenship is diverse from each defendant’s citizenship and the amount in 24 controversy exceeds $75,000, id. § 1332(a). 25 The removal statute is strictly construed against removal, and “[f]ederal 26 jurisdiction must be rejected if there is any doubt as to the right of removal in the first 27 instance.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). The party seeking 28 removal bears the burden of establishing federal jurisdiction. Id. 1 IV. DISCUSSION 2 Gallagher invokes diversity jurisdiction as grounds for this Court’s subject 3 matter jurisdiction. (Notice of Removal 2.) The Supreme Court “ha[s] consistently 4 interpreted § 1332 as requiring complete diversity: In a case with multiple plaintiffs 5 and multiple defendants, the presence in the action of a single plaintiff from the same 6 State as a single defendant deprives the district court of original diversity jurisdiction 7 over the entire action.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 8 553 (2005). The parties do not dispute the requisite amount in controversy. 9 Accordingly, this Motion turns on whether complete diversity exists. 10 Kavanaugh argues that complete diversity does not exist because he and Laing 11 are citizens of California. (See Mot. 6; Compl. ¶¶ 5, 9.) Gallagher does not dispute 12 that Laing is a citizen of California. (See Opp’n to Mot. (“Opp’n) 2, ECF No. 13.) 13 Thus, the issue is whether Laing is a proper party. 14 Complete diversity of citizenship is required to remove an action to federal 15 court, except for “where a non-diverse defendant has been ‘fraudulently joined.’” 16 Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001). A non-diverse 17 defendant is fraudulently joined “[i]f the plaintiff fails to state a cause of action 18 against a resident defendant, and the failure is obvious according to the settled rules of 19 the state.” McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987); see 20 also Padilla v. AT & T Corp., 697 F. Supp. 2d 1156, 1158 (C.D. Cal. 2009) (citing 21 Kruso v. Int’l Tel. & Tel. Corp., 872 F.2d 1416, 1426 (9th Cir. 1989) (“[A] non- 22 diverse defendant is deemed a sham defendant if, after all disputed questions of fact 23 and all ambiguities in the controlling state law are resolved in the plaintiff’s favor, the 24 plaintiff could not possibly recover against the party whose joinder is questioned.”). 25 Courts recognize a strong presumption against fraudulent joinder, which must 26 be “proven by clear and convincing evidence.” Hamilton Materials, Inc. v. Dow 27 Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). Consequently, the standard for 28 establishing fraudulent joinder is more exacting than for dismissal for failure to state a 1 claim. Grancare, LLC v. Thrower ex rel. Mills, 889 F.3d 543, 549–50 (9th Cir. 2018); 2 see also Revay v. Home Depot U.S.A., Inc., No. 2:14-CV-03391-RSWL-AS, 2015 WL 3 1285287, at *3 (C.D. Cal. Mar. 19, 2015) (“Merely showing that an action is likely to 4 be dismissed against the alleged sham defendant does not demonstrate fraudulent 5 joinder.”). Thus, remand is necessary “[i]f there is any possibility that the state law 6 might impose liability on a resident defendant under the circumstances alleged in the 7 complaint, or in a future amended complaint.” Revay, 2015 WL 1285287, at *3 8 (internal quotation marks omitted); see also Barsell v. Urban Outfitters, Inc., No. CV 9 09-02604 MMM (RZx), 2009 WL 1916495, at *3 (C.D. Cal. July 1, 2009) (alteration 10 in original) (“[I]f there is a non-fanciful possibility that plaintiff can state a claim 11 under [state] law against the non-diverse defendants[,] the court must remand.”). 12 Courts should decline to find fraudulent joinder where “a defendant raises a defense 13 that requires a searching inquiry into the merits of the plaintiff’s case, even if that 14 defense, if successful, would prove fatal.” Grancare, 889 F.3d at 549–50. 15 Here, Kavanaugh asserts a single claim against Laing for professional 16 negligence. (See Compl.
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O 1 JS-6 2 3 4 5 6 7 United States District Court 8 Central District of California 9 10 11 RYAN KAVANAUGH, Case №: 2:19-cv-02145-ODW (SSx) 12 Plaintiff, 13 v. ORDER GRANTING MOTION TO 14 NATIONAL UNION FIRE INSURANCE REMAND [11] 15 COMPANY OF PITTSBURGH, PA et al., 16 Defendants. 17 I. INTRODUCTION 18 On January 28, 2019, Plaintiff Ryan Kavanaugh filed this insurance bad faith 19 action in the Superior Court of California for the County of Los Angeles. (Notice of 20 Removal Ex. B (“Compl.”), ECF No. 1-2.) Prior to the other defendants appearing, 21 Defendant Arthur J. Gallagher Risk Management Services, Inc. (“Gallagher”) 22 removed this matter based on federal diversity jurisdiction. (See Notice of Removal 23 2, 5–6, ECF No. 1.) Kavanaugh moves to remand. (Mot. to Remand (“Mot.”), ECF 24 No. 11.) For the reasons that follow, the Court GRANTS Kavanaugh’s Motion and 25 REMANDS this action to state court.1 26 27
28 1 After carefully considering the papers filed in connection with the Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. 1 II. FACTUAL AND PROCEDURAL BACKGROUND 2 On January 28, 2019, Kavanaugh brought this action against Defendants 3 National Union Fire Insurance Company of Pittsburgh, PA and Great American 4 Insurance Company for their failure to defend him and/or extend coverage to him in 5 three civil actions. (Compl. ¶ 2.) Additionally, and in the alternative, Kavanaugh 6 brought claims against Gallagher and Chelsea Laing for professional negligence for 7 negligently failing to broker and procure adequate insurance for him. (Compl. ¶¶ 3, 8 53, 55–56.) Laing acted as an “agent and/or broker and procured at least one of the 9 policies at issue.” (Compl. ¶ 3.) 10 On March 21, 2019, Gallagher removed this action based on federal diversity 11 jurisdiction. (Notice of Removal 2.) Gallagher noted that, although Laing is a citizen 12 of California, she was fraudulently joined and is a sham defendant, so her citizenship 13 should be disregarded for purposes of diversity jurisdiction. (Notice of Removal 2, 3.) 14 Kavanaugh now moves to remand on the basis that Laing is a proper defendant and 15 can be held liable. (Mot. 5, 8–12.) 16 III. LEGAL STANDARD 17 Federal courts have subject matter jurisdiction only as authorized by the 18 Constitution and Congress. U.S. Const. art. III, § 2, cl. 1; see also Kokkonen v. 19 Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A suit filed in state court 20 may be removed to federal court only if the federal court would have had original 21 jurisdiction over the suit. 28 U.S.C. § 1441(a). Federal courts have original 22 jurisdiction where an action arises under federal law, id. § 1331, or where each 23 plaintiff’s citizenship is diverse from each defendant’s citizenship and the amount in 24 controversy exceeds $75,000, id. § 1332(a). 25 The removal statute is strictly construed against removal, and “[f]ederal 26 jurisdiction must be rejected if there is any doubt as to the right of removal in the first 27 instance.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). The party seeking 28 removal bears the burden of establishing federal jurisdiction. Id. 1 IV. DISCUSSION 2 Gallagher invokes diversity jurisdiction as grounds for this Court’s subject 3 matter jurisdiction. (Notice of Removal 2.) The Supreme Court “ha[s] consistently 4 interpreted § 1332 as requiring complete diversity: In a case with multiple plaintiffs 5 and multiple defendants, the presence in the action of a single plaintiff from the same 6 State as a single defendant deprives the district court of original diversity jurisdiction 7 over the entire action.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 8 553 (2005). The parties do not dispute the requisite amount in controversy. 9 Accordingly, this Motion turns on whether complete diversity exists. 10 Kavanaugh argues that complete diversity does not exist because he and Laing 11 are citizens of California. (See Mot. 6; Compl. ¶¶ 5, 9.) Gallagher does not dispute 12 that Laing is a citizen of California. (See Opp’n to Mot. (“Opp’n) 2, ECF No. 13.) 13 Thus, the issue is whether Laing is a proper party. 14 Complete diversity of citizenship is required to remove an action to federal 15 court, except for “where a non-diverse defendant has been ‘fraudulently joined.’” 16 Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001). A non-diverse 17 defendant is fraudulently joined “[i]f the plaintiff fails to state a cause of action 18 against a resident defendant, and the failure is obvious according to the settled rules of 19 the state.” McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987); see 20 also Padilla v. AT & T Corp., 697 F. Supp. 2d 1156, 1158 (C.D. Cal. 2009) (citing 21 Kruso v. Int’l Tel. & Tel. Corp., 872 F.2d 1416, 1426 (9th Cir. 1989) (“[A] non- 22 diverse defendant is deemed a sham defendant if, after all disputed questions of fact 23 and all ambiguities in the controlling state law are resolved in the plaintiff’s favor, the 24 plaintiff could not possibly recover against the party whose joinder is questioned.”). 25 Courts recognize a strong presumption against fraudulent joinder, which must 26 be “proven by clear and convincing evidence.” Hamilton Materials, Inc. v. Dow 27 Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). Consequently, the standard for 28 establishing fraudulent joinder is more exacting than for dismissal for failure to state a 1 claim. Grancare, LLC v. Thrower ex rel. Mills, 889 F.3d 543, 549–50 (9th Cir. 2018); 2 see also Revay v. Home Depot U.S.A., Inc., No. 2:14-CV-03391-RSWL-AS, 2015 WL 3 1285287, at *3 (C.D. Cal. Mar. 19, 2015) (“Merely showing that an action is likely to 4 be dismissed against the alleged sham defendant does not demonstrate fraudulent 5 joinder.”). Thus, remand is necessary “[i]f there is any possibility that the state law 6 might impose liability on a resident defendant under the circumstances alleged in the 7 complaint, or in a future amended complaint.” Revay, 2015 WL 1285287, at *3 8 (internal quotation marks omitted); see also Barsell v. Urban Outfitters, Inc., No. CV 9 09-02604 MMM (RZx), 2009 WL 1916495, at *3 (C.D. Cal. July 1, 2009) (alteration 10 in original) (“[I]f there is a non-fanciful possibility that plaintiff can state a claim 11 under [state] law against the non-diverse defendants[,] the court must remand.”). 12 Courts should decline to find fraudulent joinder where “a defendant raises a defense 13 that requires a searching inquiry into the merits of the plaintiff’s case, even if that 14 defense, if successful, would prove fatal.” Grancare, 889 F.3d at 549–50. 15 Here, Kavanaugh asserts a single claim against Laing for professional 16 negligence. (See Compl. ¶¶ 50–56.) Gallagher takes the position that Laing’s status 17 as an employee of Gallagher precludes any personal claims against her. (Opp’n 4–5.) 18 In California, “[w]here the agent contracts in the name of the insurer and does 19 not exceed that authority, the insurer is liable, and not the agent.” Kurtz, Richards, 20 Wilson & Co. v. Ins. Communicators Mktg. Corp., 12 Cal. App. 4th 1249, 1257–58 21 (1993). However, “[i]f a dual agency exists, the law does not foreclose recovery by 22 the insured.” Id. at 1258; see also Briano v. Conseco Life Ins. Co., 126 F. Supp. 2d 23 1293, 1298 (C.D. Cal. 2000) (recognizing the “dual agency” exception to the general 24 rule for holding agents liable). 25 Gallagher’s Opposition does not actually dispute that an agent can be held 26 liable under the dual agency principle. Instead, Gallagher argues that “Laing is 27 authorized to transact business on behalf of [Gallagher]. Her business address is at the 28 [Gallagher] offices.” (Opp’n 4.) However, this does not address Kavanaugh’s 1 || allegation that Laing was acting as a dual agent for both Kavanaugh and Gallagher. 2 || (Mot. 8.) Moreover, in a section entitled “Something As A Header,” Gallagher points 3 || to Nasrawi v. Buck Consultants, LLC, 713 F. Supp. 2d (E.D. Cal. 2010) for the 4|| proposition that a company employee cannot be held personally liable. (Opp’n 7.) 5 || However, Nasrawi is not a case involving an insurance agent undertaking a dual 6 || agency role; nor does it involve insurance at all. Nasrawi is not on point. 7 Gallagher has not met its burden of demonstrating by clear and convincing 8 | evidence that a jury could not possibly find Laing liable under a dual agency principle. 9] “[I]f there is any possibility that the state law might impose liability on a 10 || resident ...in a future amended complaint, the federal court cannot find that joinder 11 || of the resident defendant was fraudulent, and remand is necessary.” Revay, 2015 WL 12 | 1285287, at *3 (internal quotation marks omitted). Based on the allegations in the 13 | Complaint, Laing faces potential liability, and her status as an employee of Gallagher 14 || does not shield her from such liability. Laing is not a sham defendant, and the Court 15 || cannot discount her citizenship. Accordingly, the Court lacks subject matter 16 || jurisdiction. 17 Vv. CONCLUSION 18 For the reasons discussed above, the Court REMANDS the action to the 19 | Superior Court of California for the County of Los Angeles, Case No. 19STCV02868 20 || located at 111 North Hill Street, Los Angeles, California 90012. The Clerk of the 21 || Court shall close the case. 22 IT IS SO ORDERED. 23 24 August 15, 2019 25
57 OTIS D. WRIGHT, II 08 UNITED STATES DISTRICT JUDGE