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California Casualty Indemnity Exchange v. Danylova

United States District Court, N.D. California, San Jose Division

March 17, 2014

RAYISA DANYLOVA, et al., Defendants.


PAUL S. GREWAL, Magistrate Judge.

Before the court is Defendants Rayisa Danylova, Mykhaylo Danylova, and the Law Office of Boris E. Efron's motion to dismiss this interpleader action for want of diversity pursuant to Fed.R.Civ.P. 12(b)(1).[1] Defendants want the case dismissed with prejudice and also seek sanctions. Plaintiff California Casualty Indemnity Exchange opposes. The court elected to take this matter under submission on the papers pursuant to Civil L.R. 7-1(b).[2] Having considered the arguments, the court GRANTS Defendants' motion, but only IN PART.


A. Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(1) and 35 U.S.C. ยง 1335

The subject-matter jurisdiction of the federal courts is limited.[3] This court has jurisdiction over interpleader actions where: (1) the amount in controversy exceeds $500 and (2) two or more adverse claimants are diverse.[4]

For the purposes of Defendants' Rule 12 motion, the court accepts all material allegations in the complaint as true and construes them in the light most favorable to California Casualty.[5] The court's review is "limited to the complaint, materials incorporated into the complaint by reference, and matters of which the court may take judicial notice."[6] The court need not accept as true allegations that are conclusory, unwarranted deductions of fact, or unreasonable inferences.[7]

Dismissal with prejudice and without leave to amend is not appropriate unless it is clear "that the complaint could not be saved by amendment."[8]

B. Fed.R.Civ.P. 11

Rule 11 provides the court with authority to assess sanctions. The court's authority extends to pleadings filed for an improper purpose, the making of frivolous arguments, or allegations tendered without record support.[9] Sanctions "shall be assessed if the paper filed in the district court and signed by an attorney or unrepresented party is frivolous, legally unreasonable, or without factual foundation, even though the paper was not filed in subjective bad faith."[10]


A. Because No Defendants Are Diverse, This Court Lacks Jurisdiction

Statutory interpleader requires at least two adverse claimants be diverse. Here, the complaint alleges that the defendants are diverse because Kathleen Sebelius, Secretary of the United States Department of Health and Human Services, is located in Washington, D.C. and all other defendants are residents of California.[11] A claim alleged against a United States officer acting in her official capacity, however, is correctly treated as a claim against the United States itself.[12] "The United States, for the purposes of interpleader statute, is not a citizen of any state."[13] This court thus does not have jurisdiction to hear the case.

B. Defendants' Request for Sanctions

Defendants argue that California Casualty had no objectively reasonable basis to bring this suit.[14] Even if California Casualty misread the law, that alone does not mean it did not make a reasonable and competent inquiry before filing suit.[15] On the record before it, the court cannot say the complaint is frivolous, legally unreasonable, or without factual foundation. Sanctions are not warranted.

Because the court is not yet persuaded that amendment would be futile, California Casualty is granted leave to amend. Any amended pleading must be filed within 14 days.


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