United States District Court, C.D. California
ORDER GRANTING MOTION TO REMAND AND DENYING MOTIONS TO DISMISS [Dkt. Nos. 26, 28, 32]
DEAN D. PREGERSON, District Judge.
Presently before the Court are Plaintiff Illegal Aliens, LLC ("Illegal Alien")'s Motion to Remand (Dkt. No. 26); Defendant Wells Fargo Insurance Services USA, Inc. ("Wells Fargo")'s Motion to Dismiss (Dkt. No. 28); and Defendant Abacus Insurance Brokers, Inc. ("Abacus")'s Motion to Dismiss (Dkt. No. 32). Having considered the parties' submissions, the Court GRANTS the Motion to Remand.
Plaintiff Illegal Aliens is a California limited liability company that, in October 2010, was producing a feature film (the "Film"). (Notice of Removal, Dkt. No. 1, ¶ 22; First Amended Complaint ("FAC"), Dkt. No 21, ¶ 5.) Defendant North American Specialty Insurance Company ("NAS") is a New Hampshire corporation doing business as an insurance company. (Notice of Removal ¶ 21.) Defendant Wells Fargo is a North Carolina company doing business as an insurance brokerage. (Id. ¶ 23.) Defendant Abacus is a California corporation doing business as an insurance broker. (FAC ¶ 1.)
This suit arises out of injuries sustained by a driver on the set of the Film produced by Illegal Aliens. In October 2010, Illegal Aliens alleges that it approached Wells Fargo to procure insurance for Illegal Aliens and its vendors for the production of the Film. (Id. ¶ 5.) Illegal Aliens alleges that Wells Fargo then engaged Abacus as an insurance broker. (Id.) After obtaining information regarding the production, Abacus then engaged NAS to provide insurance, and delivered two insurance policies to Illegal Aliens. (Id.) The policies allegedly insured Illegal Aliens for all damages due to bodily injury during the course of production of the Film, and further provided that NAS would defend Illegal Aliens in any action alleging bodily injury. (Id.)
During the filming of the movie, Colin McKay claimed to have suffered bodily injuries while performing services for Illegal Aliens on the set of the Film. (Id. ¶ 6.) Argonaut Insurance Company ("Argonaut") provided compensation to McKay for his injuries. (Id. ¶ 7.) In or around December 2012, Argonaut sued Armytrucks, Inc. ("Armytrucks") and Illegal Aliens in Los Angeles Superior Court to claim indemnity for the compensation Argonaut paid to McKay. (Id.) On or about October 23, 2013, McKay filed a separate personal injury lawsuit against Illegal Alien for his bodily injuries. (Id. ¶ 8.)
NAS was given written notice of both actions, but it denied liability under the insurance policies and refused to undertake defense on Illegal Aliens' behalf. (Id. ¶ 10.) As a result, Illegal Aliens alleges, it incurred substantial costs in having to defend itself in both actions. (Id. ¶ 12.)
In its Notice of Removal and in its opposition, NAS points out that Illegal Aliens first filed suit against NAS only (the "First Action"), arguing that NAS should have provided coverage under the insurance policies. In that First Action, Illegal Aliens asserted three causes of action against NAS: breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief. (Notice of Removal ¶¶ 1-2.) Illegal Aliens did not sue either Wells Fargo or Abacus in the First Action. (Id.) On August 1, 2014, a few days after NAS removed the First Action to federal court, Illegal Aliens voluntarily dismissed its complaint. (Id. ¶ 5.) On August 25, 2014, Illegal Aliens filed the present action in state court, asserting the same three causes of action against NAS and adding a fourth cause of action for negligence against additional defendants Wells Fargo and Abacus Insurance Services, Inc. (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 Insurance Services, Inc. was a nonexistent entity and that all other parties were diverse. (See Notice of Removal.)
Illegal Aliens filed a FAC correcting the name of the Abacus defendant, but retaining the original four causes of action. The FAC asserts only two causes of action against Abacus and Wells Fargo: the first cause of action for breach of contract, and the fourth cause of action for negligence. The FAC alleges that Wells Fargo and Abacus hold themselves out as experts in the field of insuring motion picture productions, and that pursuant to both defendants' advice and guidance, Illegal Aliens purchased the two insurance policies in question with the understanding that the insurance would provide protection for any claims "incurred in the normal and ordinary course" of making the Film. (FAC ¶¶ 21-22.) Illegal Aliens alleged that Abacus and Wells Fargo had a "special relationship" with Illegal Aliens and thus owed Illegal Aliens a "special duty" to offer advice about insurance coverage and to ensure that Illegal Aliens was adequately insured. (Id. ¶ 23.) If the insurance policies did not in fact cover the indemnification of Illegal Aliens in the personal injury-related suits, then Illegal Aliens alleges that Wells Fargo and Abacus breached that special duty. (Id. ¶ 24.)
Wells Fargo and Abacus have filed separate motions to dismiss, requesting the Court dismiss with prejudice the sixth cause of action. (Dkt. Nos. 28, 32.) Illegal Aliens has filed a motion to remand this case back to Los Angeles Superior Court. (Dkt. No. 26.)
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 ...