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West v. Sentry Insurance Co.

United States District Court, Ninth Circuit

July 3, 2013

CLARKLIFT WEST dba TEAM POWER FORKLIFT, Plaintiff,
v.
SENTRY INSURANCE COMPANY, CRAIG DIBLASI, and DOES 1-5, inclusive, Defendants.

ORDER RE: MOTION TO DISMISS

WILLIAM B. SHUBB, District Judge.

Plaintiff Clarklift West dba Team Power Forklift brings this action against defendants Sentry Select Insurance Company[1] ("Sentry"), Craig DiBlasi, and Does one through five arising from a dispute over coverage under plaintiff's insurance policy. Defendants now move to dismiss Diblasi pursuant to Federal Rule of Civil Procedure 21 and to dismiss plaintiff's claims for breach of fiduciary duty, fraud, and punitive damages for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6).

I. Factual and Procedural Background

Plaintiff is a California corporation with its principal place of business in Sacramento County, California. (Mot. to Dismiss Ex. 1 ("Compl.") ¶ 1 (Docket No. 6).) Sentry is a Wisconsin corporation with its principal place of business in Stevens Point, Wisconsin. (Notice of Removal ¶ 11 (Docket No. 1); Req. for Judicial Notice Ex. 4 (Docket No. 1-8).) Diblasi is a citizen of California and resides there. (Notice of Removal ¶ 12.)

Plaintiff alleges that Diblasi was a Sentry agent servicing its account. (Compl. ¶ 3.) It also alleges, albeit in conclusory terms, that each defendant was the agent and employee of the other and was acting within the course and scope of such agency at all times mentioned in the Complaint. (Id. ¶ 4.) Plaintiff alleges that in June 2012 it suffered a loss at its property on Vasco Lane (the "Vasco property") in Livermore, California. (Id. ¶ 8.) Plaintiff made a claim for the loss with Diblasi. (Id.) The Vasco Property, as well as other properties owned by plaintiff, had been insured with Sentry for years. (Id.)

Plaintiff alleges that it was initially informed by Diblasi and other Sentry employees "that there would be no problem with the claim." (Id. ¶ 9.) Plaintiff was allegedly then informed that because the Vasco property was vacant at the time of the loss the claim might be denied pursuant to provisions in its insurance policy. (Id.) Plaintiff's president, Joe Hensler, allegedly told Diblasi and others at Sentry that neither he nor anyone else at his company had been informed of such a provision. (Id. ¶ 9.) Diblasi allegedly then told Hensler that he also had not been aware of such a provision and "was sure it would not cause a problem with the claim." (Id.)

It was later discovered that Sentry became aware that the Vasco property was vacant when it made a loss control inspection in May 2012. (Id.) Plaintiff alleges that even though Sentry knew the property was vacant, no one from the insurance company informed plaintiff of potential coverage problems. (Id. ¶ 10.) Sentry ultimately denied plaintiff's claim because of the vacant property exclusion. (Id. ¶ 11.)

Plaintiff brings claims for breach of fiduciary duty, fraud, and negligent misrepresentation against both defendants. Plaintiff brings claims for breach of contract and breach of the implied covenant of good faith and fair dealing against Sentry only. Presently before the court is defendant's motion to dismiss Diblasi pursuant to Rule 21 and to dismiss plaintiff's claims for breach of fiduciary duty, fraud, and punitive damages for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6). In its opposition, plaintiff requests that the court remand this action. (Biegler Decl./Opp'n at 3:2-10 (Docket No. 16).)

II. Legal Standard and Analysis

A. Jurisdiction

Before reaching the merits of defendants' motion to dismiss, the court addresses its jurisdiction over this action.[2] "[B]y whatever route a case arrives in federal court, it is the obligation of both district court and counsel to be alert to jurisdictional requirements." Grupo Dataflux v. Atlas Global Grp., L.P. , 541 U.S. 567, 593 (2004); see also Steel Co. v. Citizens for a Better Evn't , 523 U.S. 83, 94 (1998) ("Without jurisdiction the court cannot proceed at all in any cause. Jurisdiction is power to declare the law, and when it ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the cause.'" (quoting Ex parte McCardle , 74 U.S. 506, 514 (1868))). "[T]he district court ha[s] a duty to establish subject matter jurisdiction over the removed action sua sponte, whether the parties raised the issue or not." United Investors Life Ins. Co. v. Waddell & Reed Inc. , 360 F.3d 960, 967 (9th Cir. 2004); see also Snell v. Cleveland, Inc. , 316 F.3d 822, 826 (9th Cir. 2002) ("Federal Rule of Civil Procedure 12(h)(3) provides that a court may raise the question of subject matter jurisdiction, sua sponte, at any time during the pendency of the action, even on appeal.").

District courts are required "to strictly construe the removal statute against removal jurisdiction" and reject federal jurisdiction "if there is any doubt as to the right of removal in the first instance." Gaus v. Miles, Inc. , 980 F.2d 564, 566 (9th Cir. 1992). "The strong presumption' against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper." Id . "If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded."• 28 U.S.C. § 1447(c); Gibson v. Chrysler Corp. , 261 F.3d 927, 932 (9th Cir. 2001).

Jurisdiction in this case is based on diversity of citizenship. See 28 U.S.C. § 1332(a). Such jurisdiction requires complete diversity. Strawbridge v. Curtiss , 7 U.S. 267, 267 (1806). As noted above, plaintiff is a citizen of California and defendant DiBlasi is domiciled in California. Where a defendant is fraudulently joined, however, the presence of a non-diverse defendant will not defeat diversity jurisdiction. Morris v. Princess Cruises, Inc. , 236 F.3d 1061, 1067 (9th Cir. 2001). In their notice of removal, defendants argued that DiBlasi should be disregarded for purposes of determining whether diversity jurisdiction exists because ...


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