MEMORANDUM AND ORDER RE: MOTION TO REMAND AND MOTIONS TO DISMISS
Plaintiffs Christopher M. Huber and Marian Huber brought this action against defendants Tower Group, Inc. ("Tower Group"), Tower Insurance Company of New York ("Tower Insurance"), a subsidiary of Tower Group, Inc., doing business in California as Tower Select Insurance Company ("Tower Select"), and Donald K. Sams and Associates, Inc. ("Sams & Associates"), stating claims arising out a homeowners' insurance dispute. Presently before the court is plaintiffs' motion to remand to state court on the basis that removal was improper because Sams & Associates is not a sham defendant. (Docket No. 18.) Also before the court are Sams & Associates' and Tower Group's motions to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). (Docket Nos. 9, 11.)
I. Factual and Procedural Background
Plaintiffs own real property in Grass Valley, California. Plaintiffs' property was insured through a homeowners' insurance policy purchased from Tower Select. (Compl. ¶ 14, Ex. 1.) In early September 2010, plaintiffs' property was damaged during severe weather. (Id. ¶ 18.) Plaintiffs made a claim for damages on October 25, 2010, at the office of their insurance broker. (Id. ¶ 19.)
Plaintiffs allege that after they filed their claim, Tower Select retained Sams & Associates as a "captive private insurance adjuster" to view and assess the damages to the property. (Id. ¶ 20.) On November 23, 2010, Sams & Associates retained Cecil Construction Company ("Cecil") to begin emergency repairs to the property. (Id. ¶ 20.) Plaintiffs allege that the emergency repairs left the property in a state of disrepair and made their house uninhabitable after the property was penetrated by toxic mold, rats, and other vermin. (Id. ¶¶ 20, 22.)
Plaintiffs estimate that repairs on all of the damaged structures on the property will cost approximately $115,690.05 and that the complete eradication of the mold problem will cost approximately $27,321.68. (Id. ¶¶ 22, 24.)
On February 14, 2012, plaintiffs, who are California residents, filed suit in state court against Tower Group, a Delaware corporation having its principal place of business in New York, Tower Insurance, a New York corporation having its principal place of business in New York, and Sams & Associates, a California corporation. (Not. of Removal at 1-2, Ex. A (Docket No. 1).) Defendants removed the action to federal court pursuant to 28 U.S.C. § 1441(b) on the ground that diversity of citizenship exists because Sams & Associates is a sham defendant.*fn1 Plaintiffs contest that Sams & Associates is a sham defendant and now move to remand to state court.
"[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district . . . where such action is pending." 28 U.S.C. § 1441(a). The Ninth Circuit strictly construes the removal statute against removal jurisdiction, and the party seeking removal bears the burden of establishing federal jurisdiction. Geographic Expeditions, Inc. v. Estate of Lhotka, 599 F.3d 1102, 1107 (9th Cir. 2010) (citing Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992)). Any questions regarding the propriety of removal are resolved in favor of the party moving for remand. Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003). If removal was improper, "the district court lack[s] subject matter jurisdiction, and the action should [be] remanded to the state court." Toumajian v. Frailey, 135 F.3d 648, 653 (9th Cir. 1998) (citing 28 U.S.C. § 1447(c)).
Federal courts have original jurisdiction over cases where all parties are citizens of different states and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332. Here, plaintiffs allege that they have been damaged in excess of $200,000, therefore the amount in controversy exceeds $75,000.*fn2
The remaining issue, therefore, is whether diversity exists between all parties.
On the face of the Complaint, it seems clear that complete diversity does not exist between all parties as Sams & Associates and plaintiffs are California citizens and that, therefore, removal was improper. Defendants argue, however, that Sams & Associates is a fraudulently joined defendant and that the court should disregard its citizenship for purposes of determining diversity jurisdiction. (Notice of Removal at 3:6-5:6.)
A non-diverse defendant may be disregarded for purposes of determining complete diversity if that defendant was fraudulently joined. Hamilton Materials Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). A plaintiff has fraudulently joined a defendant when the "plaintiff fails to state a cause of action against a resident defendant, and the failure is obvious according to the settled rules of the state." McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). There is a general presumption against a finding of fraudulent joinder, and the removing party must prove by clear and convincing evidence that joinder was fraudulent. Hamilton Materials Inc., 494 F.3d at 1206. If there is a "non-fanciful possibility ...