1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 CHARITY SCHMIDT, No. 2:23-cv-01669-TLN-AC 12 Plaintiff, 13 v. ORDER 14 TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA; BRIAN 15 GORATH; and DOES 1–100, 16 Defendants. 17 18 19 This matter is before the Court on Plaintiff Charity Schmidt’s (“Plaintiff”) Motion for 20 Remand and Request for Attorneys’ Fees. (ECF No. 4.) Defendants Travelers Property Casualty 21 Company of America and Brian Gorath (collectively, “Defendants”) filed an opposition. (ECF 22 No. 5.) Plaintiff filed a reply. (ECF No. 7.) For the reasons set forth below, the Court GRANTS 23 in part and DENIES in part Plaintiff’s motion. 24 /// 25 /// 26 /// 27 /// 28 /// 1 I. FACTUAL AND PROCEDURAL BACKGROUND 2 This case concerns an insurance claim Plaintiff filed with Defendant Travelers Property 3 Casualty Company of America (“Travelers”) in 2021. (ECF No. 1 at 15–40.) Plaintiff is a citizen 4 of California and alleges Defendant Brian Gorath (“Gorath”) is also a citizen of California. (Id. at 5 15–16.) Travelers is an insurance company and is a citizen of both New York and Connecticut. 6 (Id. at 4.) 7 In April 2015, Plaintiff was driving for work as traveling pharmaceutical salesperson 8 when another car collided with Plaintiff’s car. (Id. at 17–18.) The driver of the other vehicle was 9 held liable for the collision and paid Plaintiff damages. (Id.) Because Plaintiff was injured while 10 at work, Plaintiff alleges she was entitled to benefits through her employer’s workers 11 compensation policy with Travelers for this incident and a previous accident. (Id. at 19.) 12 Per the policy limit, Plaintiff believed she should be awarded $1,849,275.29 and sent 13 several letters to Travelers demanding arbitration. (Id. at 19–20.) Travelers did not acknowledge 14 the claim until December 2017. (Id.) Over the subsequent five years, Travelers, through its 15 agent, Gorath, subpoenaed Plaintiff’s medical records, took Plaintiff’s deposition, and conducted 16 arbitration hearings. (Id. at 21–24, 36.) At the close of arbitration, Plaintiff asserted to the 17 arbitrator that she was entitled to $4,054,051.81, while Defendants maintained Plaintiff was not 18 entitled to any award. (Id. at 24.) In the end, the arbitrator sided with Plaintiff and issued 19 Plaintiff a $3,609,051.80 award. (Id. at 25.) As Defendants failed to pay Plaintiff’s benefits prior 20 to this arbitration, Plaintiff contends Defendants subjected her to unnecessary discovery and 21 “severe emotional distress.” (Id. at 21–38.) 22 On or about June 20, 2023, Plaintiff initiated this action against Defendants in Sacramento 23 County Superior Court. (Id. at 29–40.) Plaintiff alleged three causes of action against 24 Defendants: (1) breach of contract against Travelers; (2) breach of the implied covenant of good 25 faith and fair dealing against Travelers and Gorath; and (3) intentional infliction of emotional 26 distress against Travelers and Gorath. (Id.) On August 10, 2023, Travelers removed this action 27 to this Court pursuant to 28 U.S.C. § 1441 (“§ 1441”). (Id.) In its Notice of Removal, Travelers 28 contends there is complete diversity in this action because Plaintiff is a citizen of California, 1 Travelers is a citizen of both New York and Connecticut, and Gorath — despite being a citizen of 2 California — is a “sham defendant” whose presence cannot defeat diversity. (Id. at 4.) On 3 August 24, 2023, Plaintiff filed the instant motion to remand. (ECF No. 4-1 at 5.) 4 II. STANDARD OF LAW 5 A civil action brought in state court, over which the district court has original jurisdiction, 6 may be removed by the defendant to federal court in the judicial district and division in which the 7 state court action is pending. 28 U.S.C. § 1441(a). The district court has original jurisdiction 8 over civil actions between citizens of different states in which the amount in controversy exceeds 9 $75,000. 28 U.S.C. § 1332(a)(1). Removal based on diversity requires that the citizenship of 10 each plaintiff be diverse from the citizenship of each defendant (i.e., complete diversity). 11 Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). Diversity is determined at the time the 12 complaint is filed and removal is effected. Strotek Corp. v. Air Transp. Ass’n of Am., 300 F.3d 13 1129, 1131 (9th Cir. 2002). For diversity purposes, a corporation is a citizen of the state in which 14 it is incorporated and any state in which it maintains its principal place of business. 28 U.S.C. § 15 1332(c)(1). An individual defendant’s citizenship is determined by the state in which they are 16 domiciled. Kantor v. Wellesley Galleries, Ltd., 704 F.2d 1088, 1090 (9th Cir. 1983). 17 “[I]n a case that has been removed from state court to federal court under 28 U.S.C. § 18 1441 on the basis of diversity jurisdiction, the proponent of federal jurisdiction — typically the 19 defendant in the substantive dispute — has the burden to prove, by a preponderance of the 20 evidence, that removal is proper.” Geographic Expeditions, Inc. v. Estate of Lhotka ex rel. 21 Lhotka, 599 F.3d 1102, 1106–07 (9th Cir. 2010). “The preponderance of the evidence standard 22 applies because removal jurisdiction ousts state-court jurisdiction and ‘must be rejected if there is 23 any doubt as to the right of removal in the first instance.’” Id. (quoting Gaus v. Miles, Inc., 980 24 F.2d 564, 566 (9th Cir. 1992)). “This gives rise to a ‘strong presumption against removal 25 jurisdiction [which] means that the defendant always has the burden of establishing that removal 26 is proper.’” Id. (quoting Gaus, 980 F.2d at 566). 27 /// 28 /// 1 III. ANALYSIS 2 In moving to remand, Plaintiff argues this Court does not have original jurisdiction over 3 this action because both Plaintiff and Gorath are citizens of California. (ECF 4-1 at 5–10.) 4 Plaintiff also requests the Court award her attorneys’ fees should the Court find in her favor. (Id. 5 at 10–11.) In opposition, Defendants maintain the Court should disregard Gorath’s citizenship 6 because Plaintiff fraudulently joined Gorath to this action to destroy diversity. (ECF No. 5 at 10– 7 18.) The Court will address Plaintiff’s request for remand and attorneys’ fees in turn. 8 A. Remand 9 “[D]istrict courts may disregard the citizenship of a non-diverse defendant who has been 10 fraudulently joined.” Grancare, LLC v. Thrower by and through Mills, 889 F.3d 543, 548 (9th 11 Cir. 2018). “There are two ways to establish fraudulent joinder: ‘(1) actual fraud in the pleading 12 of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non- 13 diverse party in state court.’” Id. (quoting Hunter v. Phillip Morris USA, 582 F.3d 1039, 1044 14 (9th Cir. 2009)) (additional citations omitted). “Fraudulent joinder is established the second way 15 if a defendant shows that an ‘individual joined in the action cannot be liable on any theory.’” Id. 16 (quoting Ritchey v.
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 CHARITY SCHMIDT, No. 2:23-cv-01669-TLN-AC 12 Plaintiff, 13 v. ORDER 14 TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA; BRIAN 15 GORATH; and DOES 1–100, 16 Defendants. 17 18 19 This matter is before the Court on Plaintiff Charity Schmidt’s (“Plaintiff”) Motion for 20 Remand and Request for Attorneys’ Fees. (ECF No. 4.) Defendants Travelers Property Casualty 21 Company of America and Brian Gorath (collectively, “Defendants”) filed an opposition. (ECF 22 No. 5.) Plaintiff filed a reply. (ECF No. 7.) For the reasons set forth below, the Court GRANTS 23 in part and DENIES in part Plaintiff’s motion. 24 /// 25 /// 26 /// 27 /// 28 /// 1 I. FACTUAL AND PROCEDURAL BACKGROUND 2 This case concerns an insurance claim Plaintiff filed with Defendant Travelers Property 3 Casualty Company of America (“Travelers”) in 2021. (ECF No. 1 at 15–40.) Plaintiff is a citizen 4 of California and alleges Defendant Brian Gorath (“Gorath”) is also a citizen of California. (Id. at 5 15–16.) Travelers is an insurance company and is a citizen of both New York and Connecticut. 6 (Id. at 4.) 7 In April 2015, Plaintiff was driving for work as traveling pharmaceutical salesperson 8 when another car collided with Plaintiff’s car. (Id. at 17–18.) The driver of the other vehicle was 9 held liable for the collision and paid Plaintiff damages. (Id.) Because Plaintiff was injured while 10 at work, Plaintiff alleges she was entitled to benefits through her employer’s workers 11 compensation policy with Travelers for this incident and a previous accident. (Id. at 19.) 12 Per the policy limit, Plaintiff believed she should be awarded $1,849,275.29 and sent 13 several letters to Travelers demanding arbitration. (Id. at 19–20.) Travelers did not acknowledge 14 the claim until December 2017. (Id.) Over the subsequent five years, Travelers, through its 15 agent, Gorath, subpoenaed Plaintiff’s medical records, took Plaintiff’s deposition, and conducted 16 arbitration hearings. (Id. at 21–24, 36.) At the close of arbitration, Plaintiff asserted to the 17 arbitrator that she was entitled to $4,054,051.81, while Defendants maintained Plaintiff was not 18 entitled to any award. (Id. at 24.) In the end, the arbitrator sided with Plaintiff and issued 19 Plaintiff a $3,609,051.80 award. (Id. at 25.) As Defendants failed to pay Plaintiff’s benefits prior 20 to this arbitration, Plaintiff contends Defendants subjected her to unnecessary discovery and 21 “severe emotional distress.” (Id. at 21–38.) 22 On or about June 20, 2023, Plaintiff initiated this action against Defendants in Sacramento 23 County Superior Court. (Id. at 29–40.) Plaintiff alleged three causes of action against 24 Defendants: (1) breach of contract against Travelers; (2) breach of the implied covenant of good 25 faith and fair dealing against Travelers and Gorath; and (3) intentional infliction of emotional 26 distress against Travelers and Gorath. (Id.) On August 10, 2023, Travelers removed this action 27 to this Court pursuant to 28 U.S.C. § 1441 (“§ 1441”). (Id.) In its Notice of Removal, Travelers 28 contends there is complete diversity in this action because Plaintiff is a citizen of California, 1 Travelers is a citizen of both New York and Connecticut, and Gorath — despite being a citizen of 2 California — is a “sham defendant” whose presence cannot defeat diversity. (Id. at 4.) On 3 August 24, 2023, Plaintiff filed the instant motion to remand. (ECF No. 4-1 at 5.) 4 II. STANDARD OF LAW 5 A civil action brought in state court, over which the district court has original jurisdiction, 6 may be removed by the defendant to federal court in the judicial district and division in which the 7 state court action is pending. 28 U.S.C. § 1441(a). The district court has original jurisdiction 8 over civil actions between citizens of different states in which the amount in controversy exceeds 9 $75,000. 28 U.S.C. § 1332(a)(1). Removal based on diversity requires that the citizenship of 10 each plaintiff be diverse from the citizenship of each defendant (i.e., complete diversity). 11 Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). Diversity is determined at the time the 12 complaint is filed and removal is effected. Strotek Corp. v. Air Transp. Ass’n of Am., 300 F.3d 13 1129, 1131 (9th Cir. 2002). For diversity purposes, a corporation is a citizen of the state in which 14 it is incorporated and any state in which it maintains its principal place of business. 28 U.S.C. § 15 1332(c)(1). An individual defendant’s citizenship is determined by the state in which they are 16 domiciled. Kantor v. Wellesley Galleries, Ltd., 704 F.2d 1088, 1090 (9th Cir. 1983). 17 “[I]n a case that has been removed from state court to federal court under 28 U.S.C. § 18 1441 on the basis of diversity jurisdiction, the proponent of federal jurisdiction — typically the 19 defendant in the substantive dispute — has the burden to prove, by a preponderance of the 20 evidence, that removal is proper.” Geographic Expeditions, Inc. v. Estate of Lhotka ex rel. 21 Lhotka, 599 F.3d 1102, 1106–07 (9th Cir. 2010). “The preponderance of the evidence standard 22 applies because removal jurisdiction ousts state-court jurisdiction and ‘must be rejected if there is 23 any doubt as to the right of removal in the first instance.’” Id. (quoting Gaus v. Miles, Inc., 980 24 F.2d 564, 566 (9th Cir. 1992)). “This gives rise to a ‘strong presumption against removal 25 jurisdiction [which] means that the defendant always has the burden of establishing that removal 26 is proper.’” Id. (quoting Gaus, 980 F.2d at 566). 27 /// 28 /// 1 III. ANALYSIS 2 In moving to remand, Plaintiff argues this Court does not have original jurisdiction over 3 this action because both Plaintiff and Gorath are citizens of California. (ECF 4-1 at 5–10.) 4 Plaintiff also requests the Court award her attorneys’ fees should the Court find in her favor. (Id. 5 at 10–11.) In opposition, Defendants maintain the Court should disregard Gorath’s citizenship 6 because Plaintiff fraudulently joined Gorath to this action to destroy diversity. (ECF No. 5 at 10– 7 18.) The Court will address Plaintiff’s request for remand and attorneys’ fees in turn. 8 A. Remand 9 “[D]istrict courts may disregard the citizenship of a non-diverse defendant who has been 10 fraudulently joined.” Grancare, LLC v. Thrower by and through Mills, 889 F.3d 543, 548 (9th 11 Cir. 2018). “There are two ways to establish fraudulent joinder: ‘(1) actual fraud in the pleading 12 of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non- 13 diverse party in state court.’” Id. (quoting Hunter v. Phillip Morris USA, 582 F.3d 1039, 1044 14 (9th Cir. 2009)) (additional citations omitted). “Fraudulent joinder is established the second way 15 if a defendant shows that an ‘individual joined in the action cannot be liable on any theory.’” Id. 16 (quoting Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998)). “But ‘if there is a 17 possibility that a state court would find that the complaint states a cause of action against any of 18 the resident defendants, the federal court must find that the joinder was proper and remand the 19 case to the state court.’” Id. (quoting Hunter, 582 F.3d at 1044). In this instant case, Defendants 20 argue under the second theory Gorath “is a ‘sham defendant’ because there is no possibility that 21 plaintiff can prove a cause of action against him.” (ECF No. 5 at 6.) 22 As discussed above, Plaintiff brings a cause of action against Gorath for intentional 23 infliction of emotion distress (“IIED”). (ECF No. 1 at 37–38.) Defendants argue Plaintiff cannot 24 bring an IIED claim against Gorath because “all his actions were performed within the scope of 25 his employment as a claims adjuster” and “[u]nder California law, if someone acts as the agent of 26 an insurance company, and that agency is disclosed, only the insurer—not the agent—is liable for 27 the agent’s acts.” (ECF No. 5 at 10–11.) In support, Defendants cite Mercado v. Allstate Ins. 28 Co., 340 F.3d 824, 826 (9th Cir. 2003) for its proposition that “unless an agent or employee acts 1 as a dual agent . . . she can not be held individually liable as a defendant unless she acts for her 2 own personal advantage.” (ECF No. 5 at 12.) 3 However, in Gardner v. UIUC, the Ninth Circuit recognized that some California courts 4 have since found that the “agent’s immunity rule” is not absolute. 508 F.3d 559, 562 (9th Cir. 5 2007) (“California courts recognize that in some cases, ‘[a] cause of action for conspiracy will lie 6 against agents and employees of insurers . . .’ Accordingly, a California court could conclude that 7 [plaintiff’s] action . . . [was not] precluded under the ‘agent’s immunity rule’. . . .”) (internal 8 citations omitted). Indeed, California courts have found that an agent of an insurance company 9 can be held liable for IIED. Bock v. Hansen, 225 Cal. App. 4th 215, 232 (2014) (“[IIED] can lie 10 against an insurance adjuster.”). Thus, the Court finds there is no obvious failure in Plaintiff’s 11 ability to bring an IIED claim against Gorath. See Lieberman v. Meshkin, Mazandarani, No. C- 12 96-3344 SI, 1996 WL 732506, at *3 (N.D. Cal. Dec. 11, 1996) (“The standard is not whether 13 Plaintiffs will actually or even probably prevail on the merits, but whether there is a possibility 14 that they may do so.”). Given the Court finds there is a possibility that Plaintiff can bring an IIED 15 claim against Gorath, the Court need not and does not address whether Plaintiff can bring a claim 16 against Gorath for breach of the implied covenant of good faith and fair dealing. 17 Accordingly, the Court finds Defendants have not met their burden in establishing 18 fraudulent joinder. Therefore, complete diversity does not exist in this action, and the Court 19 hereby GRANTS Plaintiff’s motion to remand.1 20 /// 21 /// 22 /// 23 /// 24 /// 25 /// 26
27 1 Given the Court is remanding this action to the Sacramento Court Superior Court, the Court need not and does not address Plaintiff’s pending Motion for Judgment on the Pleadings 28 (ECF No. 9) and Motion to Stay Discovery (ECF No. 15). 1 B. Attorneys’ Fees 2 Plaintiff also argues she is entitled to $3,000 in attorneys’ fees for bringing the instant 3 motion to remand. (ECF No. 4-1 at 10–11.) “An order remanding the case may require payment 4 of just costs and any actual expenses, including attorney fees, incurred as a result of removal.” 28 5 U.S.C. § 1447(c). “Absent unusual circumstances, courts may award attorney’s fees under § 6 1447(c) only where the removing party lacked an objectively reasonable basis for seeking 7 removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). The decision to award 8 attorney’s fees rests within the trial court’s discretion and does not require a showing that removal 9 was in bad faith. Moore v. Permanente Medical Group, Inc., 981 F.2d 443, 446 (9th Cir. 1992). 10 The defendant lacks an objectively reasonable basis for removal when the law compelling remand 11 is well established. Pineda v. Sun Valley Packing, L.P., No. 1:21-cv-01265-DAD-EPG, 2021 WL 12 5755586, at *5 (E.D. Cal. Dec. 3, 2021). 13 In the instant case, the Court cannot say Defendants “lacked an objectively reasonable 14 basis for seeking removal.” Martin, 546 U.S. at 141. Although Defendants failed to persuade 15 this Court that Gorath has been fraudulently joined, it is also true that the law surrounding the 16 “agent’s immunity rule” is not well established. Compare Feizbakhsh v. Travelers Com. Ins. Co., 17 No. LACV16-02165JAK(EX), 2016 WL 8732296, at *4–6 (C.D. Cal. Sept. 9, 2016) (finding 18 insurance agents, who are acting within the scope of their employment, cannot be held liable for 19 damages resulting from a negligent failure to insure claim), with Gardner, 508 F.3d at 562 20 (finding the “agent’s immunity rule” is not absolute). 21 Accordingly, the Court DENIES Plaintiff’s request for attorneys’ fees. 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 1 IV. CONCLUSION 2 For the foregoing reasons, the Court GRANTS Plaintiff's Motion to Remand and 3 | DENIES Plaintiff's Request for Attorneys’ Fees. (ECF No. 4.) This case is hereby 4 | REMANDED to the Sacramento County Superior Court, and the Clerk of Court is directed to 5 | close this case. 6 IT IS SO ORDERED. 7 | Date: March 6, 2024 () jf 8 □□ J Vt 9 Troy L. Nuhlep ] 10 United States District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28