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Armytrucks, Inc. v. North American Specialty Insurance Co.

United States District Court, C.D. California

April 10, 2015

ARMYTRUCKS, INC., Plaintiff,
v.
NORTH AMERICAN SPECIALTY INSURANCE COMPANY, et al., Defendants.

ORDER GRANTING MOTION TO REMAND AND DENYING MOTIONS TO DISMISS [Dkt. Nos. 24, 30, 33]

DEAN D. PREGERSON, District Judge.

Presently before the Court are three motions: Defendant Wells Fargo Insurance Services USA, Inc. ("Wells Fargo")'s Motion to Dismiss (Dkt. No. 24); Defendant Abacus Insurance Brokers, Inc. ("Abacus")'s Motion to Dismiss (Dkt. No. 30); and Plaintiff Armytrucks, Inc. ("Armytrucks")'s Motion to Remand (Dkt. No. 33). Having considered the parties' submissions, the Court GRANTS the Motion to Remand and DENIES the Motions to Dismiss.

I. BACKGROUND

Plaintiff Armytrucks is a California corporation in the business of leasing and renting motor vehicles to entities engaged in the production of visual media such as films. (Complaint ("Compl."), Dkt. No. 1-12, ¶ 1.) Defendant North American Specialty Insurance Company ("NAS") is a New Hampshire corporation doing business as an insurance company. (Id. ¶ 4.) Defendant Wells Fargo is a North Carolina company doing business as an insurance brokerage. (Id. ¶ 5; Declaration of Mark J. Shrake ("Shrake Decl."), Dkt. No. 1-1, ¶ 18.) Defendant Abacus is a California corporation doing business as an insurance brokerage. (Compl. ¶ 6.)

This suit arises out of injuries sustained by a driver on the set of a movie produced by Illegal Aliens, LLC ("Illegal Aliens"). On or about October 13, 2010, Armytrucks and Illegal Aliens entered into a rental agreement wherein Armytrucks would provide Illegal Aliens a former military truck for use in the movie Battle of Los Angeles. (Id. ¶ 15.) As part of the agreement, Illegal Aliens agreed to procure insurance coverage for Armytrucks as to liability associated with the rental. (Id. ¶ 16.)

Armytrucks alleges that Illegal Aliens contacted Wells Fargo in order to secure insurance to protect Armytrucks from general liability and automobile-related risks associated with the production of the movie. (Id. ¶¶ 11, 17.) Armytrucks further alleges that Wells Fargo submitted the Illegal Aliens insurance request to Abacus, which was acting as an agent for NAS. (Id. ¶¶ 7-8, 12.) Armytrucks alleges that as part of this request, Wells Fargo and Abacus either were in possession of or had access to a copy of the script for the movie, and were aware of the types of scenes in which the rented military truck would be involved. (Id. ¶ 12.) After receiving the insurance request, NAS issued two insurance policies to Illegal Aliens to cover the production of the movie. (Id. ¶ 14.) Armytrucks alleges that Abacus and Wells Fargo had actual or constructive knowledge of the involvement of the military truck in the movie production and thus implicitly represented to Armytrucks that the policies would protect Armytrucks for any losses arising from the rental to Illegal Aliens. (Id. ¶ 18.)

During the filming of the movie, Colin McKay was operating the rental truck. (Id. ¶ 19.) McKay claimed to have been exposed to noxious fumes emanating from the truck during his participation in the movie, and was thereafter provided worker's compensation benefits by Argonaut Insurance Company ("Argonaut"), McKay's employer's worker's compensation carrier. (Id.) On or about October 12, 2012, Argonaut filed an indemnification suit against Armytrucks in Los Angeles Superior Court for reimbursement of the insurance benefits Argonaut paid to McKay. (Id. ¶ 20.) On or about October 22, 2012, McKay filed a personal injury lawsuit against Armytrucks and others for injuries sustained as a result of his exposure to toxic fumes. (Id. ¶ 23.)

Armytrucks gave notice of both actions to NAS and requested that it undertake defense and indemnification of Armytrucks pursuant to the insurance policies. (Id. ¶¶ 21, 24.) NAS denied coverage under the insurance policies. (Id.) As a result, Armytrucks alleges, it incurred substantial costs in having to defend itself in both actions. (Id. ¶¶ 22, 25.)

In its Notice of Removal and in its opposition, NAS points out that Armytrucks first filed suit against NAS as the sole defendant (the "First Action"), arguing NAS should have provided coverage under the insurance policies and asserting the first five causes of action against NAS: breach of contract as to both insurance policies, declaratory relief as to both policies, breach of the implied covenant of good faith and fair dealing. (See Exh. A to Shrake Decl., Dkt. No. 1-2.) Armytrucks did not sue either Wells Fargo or Abacus in the First Action. (Id.) Five days after NAS removed the First Action to federal court, on August 4, 2014, Armytrucks voluntarily dismissed its complaint. (See Shrake Decl. ¶¶ 7, 10.) On August 20, 2014, Armytrucks filed the present action in state court, asserting the same five causes of action against NAS and adding the sixth cause of action for negligent misrepresentation against additional defendants Wells Fargo and Abacus. (Dkt. No. 1-12.) NAS filed a Notice of Removal, removing this case to federal court based on diversity jurisdiction on the basis that Abacus was added as a sham non-diverse defendant. (See Dkt. No. 1.)

In its Complaint in this action, Armytrucks asserts its first five causes of action against NAS only, but asserts the sixth cause of action, for negligent misrepresentation, against Abacus and Wells Fargo only. Wells Fargo and Abacus have filed separate motions to dismiss, requesting the Court dismiss with prejudice the sixth cause of action. (Dkt. Nos. 24, 30.) Armytrucks has filed a motion to remand this case back to Los Angeles Superior Court. (Dkt. No. 33.)

II. LEGAL STANDARD

A. Motion to Remand

Diversity jurisdiction under 28 U.S.C. § 1332 requires complete diversity of the parties; however, removal is proper despite the presence of a non-diverse defendant when that defendant was fraudulently joined. Fraudulent joinder is a "term of art" courts use to describe a non-diverse defendant who has been joined to an action for the sole purpose of defeating diversity. McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). A court will disregard such a "sham" defendant for the purposes of determining diversity if it is "obvious according to the settled rules of the state" that the plaintiff has failed to state any cause of action against the defendant in question. Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir.2001).

The "strong presumption against removal jurisdiction" means that the party asserting the fraudulent joinder bears the burden of proof. Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988). The court should remand the case unless the moving party can show fraudulent joinder by clear and convincing evidence. Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). If there is a "non-fanciful possibility" that the plaintiff can state a claim against the non-diverse ...


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