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Illegal Aliens, LLC v. North American Specialty Insurance Co.

United States District Court, C.D. California

April 10, 2015



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.)


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 defendant, then the court must remand the case. Macey v. Allstate Prop. & Cas. Ins. Co., 220 F.Supp.2d 1116, 1118 (N.D. Cal. 2002).

B. Motion to Dismiss

A 12(b)(6) motion to dismiss requires the court to determine the sufficiency of the plaintiff's complaint and whether or not it contains a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). Under Rule 12(b)(6), a court must (1) construe the complaint in the light most favorable to the plaintiff, and (2) accept all well-pleaded factual allegations as true, as well as all reasonable inferences to be drawn from them. See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001), amended on denial of reh'g, 275 F.3d 1187 (9th Cir. 2001); Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998).

In order to survive a 12(b)(6) motion to dismiss, the complaint must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556U.S. 662, 663 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). However, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678. Dismissal is proper if the complaint "lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008); see also Twombly, 550 U.S. at 561-63 (dismissal for failure to state a claim does not require the appearance, beyond a doubt, that the plaintiff can prove "no set of facts" in support of its claim that would entitle it to relief). A complaint does not suffice "if it tenders naked assertion[s]' devoid of further factual enhancement.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The Court need not accept as true "legal conclusions merely because they are cast in the form of factual allegations." Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003).


A. Motion to Remand

Illegal Aliens moves for the Court to remand this case back to state court, arguing that Abacus is a non-diverse defendant and that Abacus was not fraudulently joined. Illegal Aliens is incorporated in California, and both parties agree that Abacus is the only defendant who is a citizen of California for diversity purposes. The two causes of action asserted against Abacus are for (1) breach of contract, and (2) negligence.

As for the breach of contract claim, Illegal Aliens has not stated a claim against Abacus because Abacus was not a party to the insurance contracts. It is unclear whether Abacus had any direct relationship with Illegal Aliens such that they could have a contract to begin with, and the only contract alleged in the FAC are the insurance contracts. Abacus is not a party to the insurance contracts. Furthermore, "[u]nder California law, an insurance agent cannot be held liable for breach of contract... because he is not a party to the insurance contract." Minnesota Mut. Life Ins. Co. v. Ensley, 174 F.3d 977, 981 (9th Cir. 1999) (citing Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566 (1973)). Based on what the Court can discern from the FAC, under California law, Illegal Aliens cannot state a claim for breach of contract against Abacus.

As for the negligence claim, here Illegal Aliens has stated sufficient facts to support a possible claim. The FAC alleges that Abacus was engaged by Illegal Aliens and was acting "on behalf of" Illegal Aliens. (Compl. ¶ 5.) Abacus, on the other hand, argues that it was in fact an agent of NAS and was not an agent of Illegal Aliens. Under California law, "where the agent contracts in the name of the insurer and does not exceed that authority, the insurer is liable and not the agent." Briano v. Conseco Life Ins. Co., 126 F.Supp.2d 1293, 1298 (C. D. Cal. 2000)(citations omitted). The insurer is responsible for the acts of the agent within the scope of his agency. Lippert v. Bailey, 241 Cal.App.2d 376, 382 (1966). An agent of an insurance company is generally immune from suits brought by claimants for actions taken while the agent was acting within the scope of its agency. Icasiano v. Allstate Ins. Cos., 103 F.Supp.2d 1187, 1189 (N.D. Cal. 2000).

However, it is an "established rule that if a dual agency exists, the law does not foreclose recovery by the insured." Id. (citation and quotation marks omitted). "Under California law, a dual-agent' theory requires that the insurance agent act on behalf of the insured in some way beyond his or her capacity as an agent for the insurer." Good v. The Prudential Insurance Company of America, 5 F.Supp.2d 804, 808 (N.D. Cal.1998). "An insurance agent cannot be a dual agent unless he or she is either an independent broker or has a long-term, special relationship with the insured." Id. (citation and internal quotations omitted). The "special duty" exception arises where an insurance agent "assume[s] a greater duty toward his insured by misrepresenting the policy's terms or extent of coverage." Paper Savers, Inc. v. Nacsa, 51 Cal.App.4th 1090, 1097 (1996). However, a lone allegation that the insurance agent had superior knowledge of his insurance products and that the agent led the plaintiff to believe he was acting in his best interests is insufficient to establish a dual-agent relationship. Good, 5 F.Supp.2d at 808.

Abacus argues that Illegal Aliens has not shown that Abacus had a duty of care towards Illegal Aliens separate from the duty NAS owed to Illegal Aliens. See, e.g. Charlin v. Allstate Ins. Co., 19 F.Supp.2d 1137, 1140-44 (C.D. Cal. 1998) (concluding joinder of agent was fraudulent when plaintiff failed to alleged that the supposed "dual agent" had acted beyond capacity for the insurer, that he was independent broker, or that he had longstanding relationship with the plaintiff). In response, Illegal Aliens cites to a line of California cases stemming from Westrick v. State Farm Insurance, 137 Ca. App.3d 685 (1982). Illegal Aliens argues that an insurance agent, even if it is not a dual agent, may owe a duty to the insured where the insured had a specific request for a particular type or extent of coverage. Abacus also cites to a federal case, Macey v. Allstate Prop. & Cas. Ins. Co., 220 F.Supp.2d 1116 (N.D. Cal. 2002), as lending support to this principle.

This is a close case. The Westrick and Macey cases are not exactly factually analogous, as in those cases the plaintiffs alleged that they had issued very specific inquiries as to whether a particular item was covered, namely specific automobiles, and the defendant agents had assured plaintiffs that their policies extended to those particular automobiles. See Macey, 220 F.Supp.2d at 1120 ("Prior to his car accident, [plaintiff] specifically requested coverage for his 1997 Saab. In response to his specific inquiry and with full knowledge that his July payment was past due, [defendant agents] assured plaintiff that the 1997 Saab was insured."). Here, Illegal Aliens states that it was seeking coverage for all types of claims incurred during the course of making the Film, a much more general request. However, Illegal Aliens further alleges that Abacus held itself out as an expert in procuring this type of production insurance, and further that Abacus asked questions of Illegal Aliens where Illegal Aliens conveyed the scope of its production.

Although the facts alleging a "special duty" are sparse, the Court cannot say definitively that Abacus did not owe a separate duty of care towards Illegal Aliens. Illegal Aliens argues that Abacus had a "special duty" to Illegal Aliens because it held itself out as an expert in insurance for film production. Although this case is not as clear as the Westrick and Macey cases, the burden to show removal jurisdiction is a heavy one. Accordingly, the Court concludes that there is a "non-fanciful" possibility that Abacus may be liable to Illegal Aliens under the negligence claim.

B. Defendants Abacus and Wells Fargo's Motions to Dismiss

Because the Court finds that Abacus is not a sham defendant and thus that it should remand this case back to state court, the motions to dismiss are therefore moot.


For the reasons stated above, the Motion to Remand is GRANTED. Therefore, the Motions to Dismiss are DENIED as MOOT.


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