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United States District Court, N.D. California

April 27, 2004.


The opinion of the court was delivered by: SUSAN ILLSTON, District Judge

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. 2001).


 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 state.

  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 dictum.

  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 has closed.

  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 the question.

  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]


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