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Escalante v. Burlington National Indemnity, Ltd.

United States District Court, C.D. California

November 24, 2014

LUZ ELENA ESCALANTE; A.E., a minor, Plaintiffs,
v.
BURLINGTON NATIONAL INDEMNITY, LTD.; DOES 1-100, inclusive, Defendants.

ORDER GRANTING MOTION TO REMAND [8]

OTIS D. WRIGHT, II, District Judge.

I. INTRODUCTION

Plaintiffs Luz Escalante and A.E. move to remand this action to Los Angeles County Superior Court for lack of subject-matter jurisdiction. (ECF No. 8.) Plaintiffs argue that Defendant Burlington National Indemnity, Ltd. failed to establish diversity jurisdiction under 28 U.S.C. § 1332. Plaintiffs' main argument is that Burlington's Removal was untimely. For the reasons discussed below, the Court finds that Burlington's Removal did not meet the standards set forth by 28 U.S.C. § 1446. Therefore, this Court GRANTS Plaintiff's Motion to Remand.[1] (ECF No. 8.)

II. FACTUAL BACKGROUND

Plaintiffs' claims arise from a previous judgment. Lawrence Hansen and Ruben Marmet are licensed physicians employed by Family Planning Associates Medical Group, Inc. ("FPAMGI"). (Compl. ¶ 8.) On November 4, 2008, Plaintiffs filed suit against both doctors and FPAMGI for medical malpractice. ( Id. ¶ 10.) On January 20, 2012, Plaintiffs obtained a judgment finding all three jointly and severally liable to Plaintiffs for $6, 155, 562.00. ( Id. ¶ 11.) Hansen, Marmet, and FPAMGI were insured for malpractice by Defendant Burlington. (Mot. 3.) The insurance policy limited coverage to $1, 000, 000 per incident/claimant with a maximum of $3, 000, 000. ( Id. ) After the judgment, Burlington only paid Plaintiffs $1, 000, 000 of the over $6, 000, 000 owed to them.

Following the judgment, Irving Feldkamp IV, FPAMGI's principal and president, notified Plaintiffs that the insurance broker responsible for placing the malpractice policy with Burlington was Richard Beall and his company, Beall Financial and Insurance Services, Inc. (collectively "the Beall Defendants"). ( Id. 4; Mot. Ex. 1, 2.) FPAMGI agreed to assign to Plaintiffs all rights it had against Burlington for bad faith and against the Beall Defendants for negligently obtaining inadequate malpractice insurance in exchange for a covenant not to execute the judgment. ( Id. )

On January 16, 2013, Plaintiffs, now acting as judgment creditors, filed this action in state court, alleging (1) breach of insurance contract; (2) tortious breach of implied covenant of good faith and fair dealing; (3) an action under California Insurance Code §11580(b)(2); and (4) negligence.[2] (Not. of Removal Ex. A.) The original Complaint included as defendants, Burlington, a Cayman Island citizen; Beall and Beall Financial and Insurance Services, both California citizens; and Chandler Insurance Company, Ltd., a Cayman Island citizen.

Plaintiffs spent over a year trying to effectuate service on Burlington, an offshore company. (Mot. 6.) After multiple failed attempts and state-court supervision, Burlington was finally served on June 19, 2014. ( Id. )

Meanwhile, on May 22, 2014, the Beall Defendants, moved for summary judgment arguing that they were not FPAMGI's malpractice insurance broker. ( Id. 5.) Despite having represented to Plaintiffs that the Beall Defendants were responsible for FPAMGI's insurance policy, Irving Feldkamp IV disclosed during his deposition that neither Beall nor his company ever acted as insurance brokers for FPAMGI. ( Id. 11.) Moreover, in the same deposition Feldkamp IV notified the Plaintiffs that Burlington was started and owned by his father, Irving Feldkamp III. ( Id. )

On September 2, 2014, Plaintiffs dropped the Beall Defendants (the only non-diverse parties). (Not. of Removal ¶ 7.) On August 22, 2014 Plaintiffs dismissed Chandler Insurance Co. ( Id. ¶ 8.)

On January 16, 2013, Plaintiffs commenced this action in Los Angeles County Superior Court. (Not. of Removal Ex. A.) Burlington removed the action to this Court on September 16, 2014, on the basis of diversity jurisdiction under 28 U.S.C. § 1332. (ECF 1.) On October 7, 2014, Plaintiffs moved to remand this action. (ECF No. 8.) Defendants timely opposed. (ECF No. 9.) That Motion is now before the Court for decision.

III. LEGAL STANDARD

Federal courts are courts of limited jurisdiction, having subject-matter jurisdiction only over matters authorized by the Constitution and Congress. U.S. Const. art. III, § 2, cl. 1; e.g., Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A suit filed in state court may be removed to federal court if the federal court would have had original jurisdiction over the suit. 28 U.S.C. § 1441(a). But courts strictly construe the removal statute against removal jurisdiction, and "[f]ederal jurisdiction must be rejected 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 party seeking removal bears the burden of establishing federal jurisdiction. Durham v. Lockheed Martin Corp., 445 F.3d 1247, 1252 (9th Cir. 2006) (citing Gaus, 980 F.2d at 566).

Federal courts have original jurisdiction where an action presents a federal question under 28 U.S.C. § 1331, or diversity of citizenship under 28 U.S.C. § 1332. A defendant may remove a case from a state court to a federal court pursuant to the federal removal statute, 28 U.S.C. § 1441, on the basis of federal question or diversity jurisdiction. To exercise diversity jurisdiction, a federal court must find complete diversity of citizenship among the adverse ...


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