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BROWN v. ALLSTATE INS. CO.

July 30, 1998

MICHAEL T. BROWN, Plaintiff,
v.
ALLSTATE INSURANCE COMPANY, a corporation; KEN BAKER, an individual; JIM TOMASELLO, an individual; ROBERT GICK, an individual; and DOES 1-50, inclusive, Defendants.



The opinion of the court was delivered by: BREWSTER

ORDER (1) DECLINING REMAND AND VACATING MAY 19, 1998 ORDER TO SHOW CAUSE, (2) DISMISSING DEFENDANTS BAKER, TOMASELLO AND GICK AS FRAUDULENTLY JOINED, (3) GRANTING IN PART AND DENYING IN PART DEFENDANT ALLSTATE'S RULE 12(B)(6) MOTION TO DISMISS, AND (4) GRANTING PLAINTIFF LEAVE TO FILE A SECOND AMENDED COMPLAINT

 I. BACKGROUND

 Michael Brown ("Plaintiff") owns two plumbing companies that performed plumbing contracting and insurance claim work for Allstate Insurance Company ("Allstate"). A business dispute ensued between Plaintiff and Allstate, and Allstate subsequently ceased to use Plaintiff's services. On December 18, 1997, Plaintiff sued Allstate and three alleged Allstate employees, Ken Baker, Jim Tomasello, and Robert Gick, in the Superior Court of California, alleging nine state law causes of action.

 On January 20, 1998, Defendants *fn1" removed the case to the United States District Court for the Southern District of California pursuant to 28 U.S.C. § 1441(b), asserting that this Court possessed diversity jurisdiction under 28 U.S.C. § 1133. *fn2" On March 30, 1998, Allstate filed a motion to dismiss Plaintiff's complaint pursuant to FED. R. CIV. P. 12(b)(6). *fn3" Plaintiff filed a First Amended Complaint ("FAC") on May 1, 1998, and the parties subsequently stipulated that the motion to dismiss would be deemed applicable to the FAC. On May 19, 1998, the Court deferred action on the pending motion to dismiss and ordered Allstate to show cause why the case should not be remanded to state court for want of subject matter jurisdiction.

 II. FEDERAL JURISDICTION AND REMAND

 The Court must determine whether this case was properly removed to federal court in the first instance under 28 U.S.C. § 1441. See Emrich v. Touche Ross and Co., 846 F.2d 1190, 1194-95 (9th Cir. 1988). Section 1441(a) authorizes removal of "any civil action brought in a State Court of which the district courts of the United States have original jurisdiction." Where, as here, subject matter jurisdiction would be based on diversity of citizenship, a suit is removable "only if none of the parties in interest properly joined and served as defendants is a citizen of the state in which the action is brought." 28 U.S.C. § 1441(b). If it appears that the district court lacks subject matter jurisdiction, the case must be remanded. 28 U.S.C. § 1447(c). The burden of establishing federal jurisdiction is on the party seeking removal, and the removal statutes are construed restrictively, so as to limit removal jurisdiction and prevent waste of judicial resources. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992).

 This Court appears to lack jurisdiction because Defendants Baker, Tomasello, and Gick are alleged to be California residents. See 28 U.S.C. § 1441(b). However, Allstate argues that removal was proper because the individual defendants were fraudulently joined in the complaint. A party may be disregarded for jurisdictional purposes if the Court determines that party's joinder is fraudulent or a sham and that no cause of action has been stated against that party. See McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). If the plaintiff fails to state a cause of action against a defendant, and the failure is obvious according to the settled rules of the state, the joinder of the defendant is fraudulent and may be disregarded. See id. Fraudulent joinder is a term of art and is not intended to impugn the integrity of Plaintiff or his counsel.

 Although Plaintiff's complaint and FAC name the three individual defendants in the caption and in the headings of some causes of action, no material allegations against these defendants are made. Because Plaintiff has failed to state a cause of action against them, the individual defendants have been fraudulently joined.

 Plaintiff attempts to explain the absence of the individual defendants' names in the body of the complaint as a typographical error, and requests (although not by noticed motion) leave to amend the FAC to correct this error. However, "whether an action should be remanded must be resolved by reference to the complaint at the time the petition for removal was filed." Kruso v. I.T.T., 872 F.2d 1416, 1426 n. 12 (9th Cir. 1989)(citations omitted). The complaint as it existed at removal does not allege any wrongdoing by the individual defendants. Therefore, these defendants are fraudulently joined and are hereby dismissed, without prejudice. As the requirements for jurisdiction under 28 U.S.C. § 1332 and § 1441 are now satisfied, the Court declines to remand the action against Allstate and vacates its order to show cause.

 III. MOTION TO DISMISS

 A. Standard of Law

 A motion to dismiss for failure to state a claim pursuant to FED. R. CIV. P. 12(b)(6) tests the legal sufficiency of the claims in the complaint. This court must accept as true all material allegations in the complaint, as well as reasonable inferences to be drawn from them, and must construe the complaint in the light most favorable to plaintiff. Parks School of Business, Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). The court need not, however, accept every allegation in the complaint as true; rather, the court "will examine whether conclusory allegations follow from the description of facts as alleged by the plaintiff." Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992)(citation omitted).

 B. Analysis

 Plaintiff's FAC contains nine causes of action: (1) termination in violation of public policy, (2) breach of implied contract of continued employment, (3) breach of implied covenant of good faith and fair dealing, (4) intentional infliction of emotional distress, (5) defamation, (6) intentional interference with ...


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