United States District Court, N.D. California
April 27, 2004.
ROSARIO MAIOLINO, Plaintiff, V. UNUMPROVIDENT CORPORATION, Defendant
The opinion of the court was delivered by: SUSAN ILLSTON, District Judge
ORDER GRANTING PLAINTIFF'S
MOTION TO REMAND
Now before the Court is plaintiff's motion to remand this action to the
state court where it was originally filed. Having carefully considered
the parties' arguments and all papers submitted, the Court hereby GRANTS
plaintiff's motion for the reasons set forth below.
In June 1990, plaintiff Rosario Maiolino, a Certified Registered Nurse
Anesthetist, purchased a professional disability insurance policy from
defendant UnumProvident. Compl. at ¶ 29, Ex. A. At an undetermined time
prior to plaintiff's purchase of his policy, UnumProvident submitted a
form copy of the policy to the California Insurance Commissioner
("Commissioner"), who subsequently approved it for sale in California
pursuant to provisions of the California Insurance Code. Compl. at¶¶
100-102. Plaintiff began experiencing low back pain in 1993. Compl. at
¶ 33. In February, 2000, plaintiff's pain became severely exacerbated
during the performance of his occupational duties. Compl. at ¶ 34.
Plaintiff sought medical treatment, and his physicians concluded that his
condition permanently prevented him from working as a nurse anesthetist
and that he should retrain for another profession. Comp. at¶ 36-39.
Plaintiff filed a claim for total disability under his UnumProvident
policy in March, 2000. Compl. at¶¶ 35. UnumProvident initially approved plaintiffs claim and paid benefits under the policy. Compl. at ¶ 42.
Since its initial approval, UnumProvident has conducted surveillance and
two independent medical examinations ("IME's") of plaintiff medical
records. Compl. at ¶¶ 43-48. The results of the IME's indicated that
plaintiffs condition does not prevent him from performing his occupation
`In the usual and customary way," as required under the policy, and
formed the bases for termination of plaintiff's benefits. Compl. at ¶¶
44-50, Ex. B. Plaintiff appealed the IME's, but was rejected for the
final time in April, 2003. Compl. at ¶¶ 44-51. UnumProvident ceased paying
plaintiffs benefits in May, 2003. Compl. at ¶ 52.
On December 18, 2003, plaintiff filed suit against UnumProvident in
state court, alleging several state law causes of action over its failure
to pay disability benefits under the policy and naming the California
Insurance Commissioner as a defendant for improperly approving the policy
at issue. Plaintiff seeks money damages in the form of general, special
and punitive damages, as well as costs of suit and attorney fees against
UnumProvident. Compl. at 16-17. As to the Commissioner, plaintiff seeks
declaratory relief and a writ of mandamus, declaring that the insurance
policy at issue is ambiguous and misleading and ordering the Commissioner
to revoke approval of plaintiff's policy. Compl. at 17-18. UnumProvident
removed the case to this Court, asserting diversity jurisdiction on the
grounds that the Commissioner is a sham defendant. Def's. Notice of
Removal at ¶ 4. Defendant's motion to remand, filed on February 27,
2004, is now before the Court.
Generally, a state court action is only removable to federal court if
it might have been brought there originally. 28 U.S.C. § 1441(a). The
federal removal statute is strictly construed, and the federal courts
reject federal jurisdiction if there is any doubt as to whether removal
was proper. Duncan v. Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996). The
party seeking removal bears the burden of proving its propriety. Id. If,
at any time before final judgment, a federal court determines that it is
without subject matter jurisdiction, the action must be remanded to state
court. 28 U.S.C. § 1447(c). On the other hand, a plaintiff cannot avoid
federal removal jurisdiction or use the concurrent jurisdiction of state
courts as a shield when a case rightfully belongs in federal court. See
Emrich v. Touche Ross & Co., 846 F.2d 1190, 1196 (9th Cir. 1988). Diversity jurisdiction requires complete diversity of citizenship, with
each plaintiff being a citizen of a different state from each defendant.
28 U.S.C. § 1332(a)(1);: Caterpillar. Inc. v. Lewis. 519 U.S. 61, 68,
117 S.Ct. 467, 472 (1996); Morris, 236 F.3d at 1067. The one exception to
this standard arises when a non-diverse defendant is made a party to an
action as a "sham" to defeat diversity. Morris, 236 F.3d at 1067.
Allegations of the presence of a sham defendant can only succeed on a
showing that there is an obvious failure to assert a cause of action
against that defendant under well-settled rules of state law. United
Computer Systems. Inc. v. AT&T Corp., 298 F.3d 756, 761 (9th Cir.
2002); Morris v. Princess Cruises. Inc., 236 F.3d 1061, 1067 (9th Cir.
1. Threshold issues
As a threshold matter, plaintiff argues that remand is required because
the Commissioner did not participate in the notice of removal. The "rule
of unanimity" requires all defendants in a state court action to join in
a petition for removal. 28 U.S.C. § 1446(a). However, a judicially
created exception exists for parties who are fraudulently joined.
Emrich, 846 F.2d at 1193 n.1. UnumProvident petitioned for removal on the
grounds that the Commissioner is a sham defendant, named only for
purposes of defeating diversity. If this Court finds that the Commissioner
is indeed a sham defendant, the Commissioner need not have joined the
Notice of Removal, and his citizenship will be ignored for purposes of
diversity. Morris, 236 F.3d at 1067. If the Court finds that the
Commissioner is not a sham defendant, this case will lack diversity and
will be remanded.
Plaintiff also contends that the amount in controversy required for
diversity jurisdiction is not met in this case. The amount in controversy
requirement for diversity cases must exceed $75,000. 28 U.S.C. § 1332(a).
If a party wishes to avoid federal jurisdiction for lack of
jurisdictional amount in controversy, "it must appear to a legal
certainty that the claim is really for less than the jurisdictional
amount." St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283,
288-89, 58 S.Ct. 586, 590 (1938); Crum v. Circus Circus Enterprises,
231 F.3d 1129, 1131 (9th Cir. 2000). The burden of establishing such
legal certainty falls on the party alleging lack of jurisdiction to show
that the amount in controversy cannot exceed $75,000. Here, the burden
rests with the plaintiff, who is the party seeking remand. Although plaintiff argues that
the failure to specifically plead the jurisdictional requirement in his
complaint is sufficient to fall below the $75,000 threshold, the
complaint still seeks enforcement of a policy that would pay more than
$4,000 per month, as well as seeking punitive damages. Plaintiff does
nothing to demonstrate that the damages he seeks cannot, with any
certainty, meet the requirement for diversity jurisdiction. Accordingly,
plaintiff has not carried his burden of establishing that the amount in
controversy in this case is $75,000 or less, and based on the argument in
UnumProvident's notice of removal, the Court deems the amount in
controversy requirement satisfied.
Thus, plaintiffs motion for remand ultimately turns on the question of
whether causes of action brought by a longtime individual policy holder
seeking declaratory relief and a writ of mandamus from the Commissioner
are barred by well-settled state law. If so, the Commissioner would be a
sham defendant, his citizenship would be disregarded for diversity
purposes, and the case would remain in federal court. The Court concludes
that such causes of action are not barred by well-settled state law.
2. Judicial review of the Commissioner's actions
A disability policy cannot be issued in California without approval
from the Commissioner. Van Ness v. Blue Cross of California,
87 Cal.App.4th 364, 368 (2001); See also Cal. Ins. Code § 10290 (stating
that "a disability policy shall not be issued or delivered to any person
in this State until" the policy is delivered to the Commissioner and
either "[t]hirty days expires without notice from the commissioner after
such copy is filed" or [t]he commissioner gives his written approval
prior to that time.").
The actions of the Commissioner are subject to judicial review. Cal.
Ins. Code § 12940. This review, when it occurs, is conducted in
accordance with the California Code of Civil Procedure. Cal. Ins. Code §
10295. l(h). Under the California Code of Civil Procedure, a "writ of
mandamus may be issued by any court to any . . . person, to compel the
performance of an act which the law specifically enjoins, as a duty
resulting form an office, trust or station." Cal. Code Civ. P. §
1085(a). Furthermore, the Commissioner is required to "perform all duties
imposed on him or her by the [Insurance Code] and other laws regulating
the business of insurance in [California], and shall enforce the
execution of those provisions and laws." Cal. Ins. Code § 12921(a).
Furthermore, the Commissioner may, with good cause, revoke approval for
any policy that does not comply with California Insurance Code. Cal. Code Regs. § 2196.4(a).
Here, plaintiff asserts that he has a valid claim against the
Commissioner for a writ of mandamus for the Commissioner's alleged abuse
of discretion by, among other things, failing to enforce "the mandatory
minimum requirements of the insurance code with respect to policy
definitions . . . and related policy provisions" in approving of
plaintiff's policy for sale in California. Compl. at ¶¶ 103-107. Plaintiff
alleges that this failure violates California Insurance Code § 10291.5,
which prohibits the Commissioner from approving disability policies that
are, for example, ambiguous, or that "fail to conform with any laws of
this state." Cal. Ins. Code §§ 10291.5(b)(1), (13).
There are some cases from California's federal and state courts
supporting the general proposition that an insured may petition for a
writ of mandamus requiring the Commissioner to revoke approval of an
insurance policy. See Brazina v. The Paul Revere Life Ins. Co.,
271 F. Supp.2d 1163, 1167 (N.D. Cal. 2003), citing Peterson v. American
Life & Health Ins. Co., 48 F.3d 404, 410 (9th Cir. 1995) and Van Ness.
87 Cal.App.4th at 371-72. At the least, it cannot yet be said that such
claims against the Commissioner are barred by well-settled rules of the
In 1995, the Ninth Circuit decided Peterson, which appears to be the
first published case in the Ninth Circuit stating explicitly that an
insured "may petition for a writ of mandamus requiring the Commissioner
to revoke his approval" of a policy. Peterson, 48 F.3d at 410, citing
generally Bixby v. Pierno, 4 Cal.3d 130 (1971) 1971), and 10 Cal. Code
Regs. 2196.4. The plaintiff in Peterson, however, had not sued the
Commissioner; he only named his insurer as a defendant. Peterson, 48 F.3d
at 406-07. Accordingly, the Ninth Circuit's discussion of an insured's
ability to seek mandamus relief against the Commissioner in that case is
In 2001, the California Court of Appeal decided Van Ness, and relied on
Peterson to support the proposition (also in dicta) that an insured can
petition for mandamus to revoke the Commissioner's approval. Van Ness. 87
Cal.App.4th at 371-72. The Van Ness opinion only considered the
availability of mandamus during the period before the policy becomes
final, or perhaps immediately thereafter. Id. at 371-72.
Finally, in 2003, the Chief Judge of this district decided Brazina.
Brazina is the only case of the three that begins a direct discussion of
the decisive issue here, which is the relationship of timing and statutes
of limitations to a challenge of the Commissioner's approval of a
policy. Brazina, 271 F. Supp.2d at 1169-71. 3. Time constraints and California's statute of limitations
The plaintiff in Brazina, represented by the same counsel as plaintiff
in this case, filed a state court action against the same two defendants
that appear here: Paul Revere/UnumProvident and the Commissioner.*fn1
Id. at 1164. UnumProvident removed the case; plaintiff moved to remand;
and UnumPrivident opposed the remand motion by asserting, among other
things, that the plaintiff had held his disability policy for fourteen
years before bringing suit and was therefore time-barred from seeking
mandamus relief against the Commissioner. Id. at 1169-70. UnumProvident's
argument relied on the California Insurance Code, which states that a
"petition for any such [judicial] review may be filed at any time before
the effective date of the action taken" by the Commissioner, which is at
least twenty days after service of written notice. Id. at 1170, quoting
Cal. Ins. Code § 10291.5(h) (internal quotation marks omitted).
UnumProvident argued that the plaintiff could not challenge the validity
of his policy because he did not petition for review prior to the
effective date of the Commissioner's approval, and that this obvious time
bar made the plaintiffs joinder of the Commissioner fraudulent. Brazina,
271 F. Supp.2d at 1169-70.
The court disagreed, holding that the time limitation on seeking
judicial review of the Commissioner's approval was not obvious, as the
California Insurance code used "permissive language" to "create an
opportunity for review." Brazina, 271 F. Supp.2d at 1171, quoting Economic
Empowerment Fund v. Quackenbush, 65 Cal.App.4th 1397, 1402 (1998). The
court held that UnumProvident's failure to demonstrate that the
California Insurance Code "clearly bars" a policyholder from seeking
judicial review after the effective date of the Commissioner's approval
meant that the plaintiff did not fraudulently join the Commissioner in
that case. Brazina, 271 F. Supp.2d at 1171.
This Court agrees with Judge Patel's decision regarding the timing
required for seeking mandamus relief against the Commissioner, and agrees
that the permissive language of the California Insurance Code does not
include a specific deadline. To hold otherwise would undermine the
provision of the California Insurance Code which permits the Commissioner
to revoke approval when a policy "fails to conform" with state law. Cal.
Ins. Code §§ 10291.5(b)(13). Requests for revocation, to be implemented by
mandamus, might well be brought long after the twenty-day approval window
The question left unanswered in Brazina, perhaps because it was not
argued, is what, if any, statute of limitations would ultimately apply to
an attempt to seek a writ of mandamus against the Commissioner, and when
that statute would begin to run. UnumProvident suggests that the
California Code of Civil Procedure provides the solution. See Def's.
Opp'n at 8-11. This is consistent with the provision of the California
Insurance Code that explicitly places judicial review of the
Commissioner's actions within the Code of Civil Procedure. See Cal. Ins.
Code. § 10291.5(h). The California Code of Civil Procedure provides a
three year limitation period for "an action upon liability created by
statute." Cal. Code Civ. P. § 338(a). Another decision in this district
has applied this time limit to a very similar claim. See Borsuk v.
Massachusetts Mutual Life Insurance Company, et al, No. C 03-0630-VRW
(N.D. Cal. 9/4/03). This time limit has been applied to actions seeking
writs of mandamus against public officials and agencies in other
contexts. See Pearson v. County of L.A., 49 Cal.2d 523, 540-41 (1957)
(sheriffs deputy seeking mandamus relief to compel a disciplinary hearing
before county civil service commission subject to three-year statute of
limitations from date right accrues); Dillon v. Bd. of Pension Comm'rs of
L.A., 18 Cal.2d 427, 430-31(1941) (three-year statute of limitations for
mandamus relief against Board of Pension Commissioners begins when
plaintiff first has power to make demand). This three-year statute of
limitations would also appear to apply to causes of action seeking
mandamus relief against the Commissioner.
None of the authority cited by the parties, nor any authority that the
Court has been able to locate, establishes the event which would trigger
the statute of limitations with respect to seeking mandamus relief
against the Commissioner. Plaintiff contends that the date of the denial
of benefits should trigger the statute, while UnumProvident would have
the Court use the date of the Commissioner's approval of the policy or
the date when plaintiff purchased the policy. Arguments can be made for
either approach, and the California courts do not appear to have decided
Plaintiffs claim against the Commissioner appears tenuous,*fn2 but the
dearth of California authority on the topic, combined with the general presumption against removal
jurisdiction, bars this Court from presiding over plaintiff's case.
Consequently, the Court finds that plaintiff's lawsuit is not barred by
well-settled rules of existing state law and hereby GRANTS plaintiffs
motion to remand.
For the foregoing reasons and for good cause shown, the Court hereby
GRANTS plaintiffs motion to remand, and REMANDS this action to the San
Francisco. Superior Court. [docket #7]
IT IS SO ORDERED.