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Ironshore Specialty Insurance Co. v. Maison Reeves Homeowners Association

United States District Court, C.D. California

April 21, 2017

IRONSHORE SPECIALTY INSURANCE CO., Plaintiff,
v.
MAISON REEVES HOMEOWNERS ASSOCIATION, et al., Defendants.

          ORDER GRANTING PLAINTIFF'S MOTION TO REMAND

          HONORABLE ANDRÉ BIROTTE JR. UNITED STATES DISTRICT JUDGE

         Before the Court is Plaintiff Ironshore Specialty Insurance Company's (“Ironshore”) Motion to Remand, filed March 24, 2017. (Dkt. No. 8.) Defendant Everest Indemnity Insurance Company (“Everest”) filed an opposition on April 3, 2017, and Ironshore filed a reply on April 10, 2017. (Dkt. Nos. 9, 10.) Having carefully considered the arguments and materials submitted, the Court deems this motion appropriate for decision without oral argument. See C.D. L.R. 7-15. For the following reasons, the Court GRANTS Ironshore's motion and remands the case to Los Angeles County Superior Court.

         I. BACKGROUND

         This case arises from alleged construction defects in a condominium development located at 261 Reeves Drive in Beverly Hills, California. (Dkt. No. 1-1, Notice of Removal (“NOR”) Ex. A at 5, 7.) The Maison Reeves Homeowners' Association (“HOA”) originally sued in Los Angeles County Superior Court the developer, Pacific Northstar Reeves (“PNR”), and various contractors and subcontractors, including Avoca USA, Inc. (“Avoca”), for the defects (hereinafter referred to as “the defect cases” or “the construction defect cases”). (See Id. at 208.) Some defendants in the defect cases are citizens of California, including Pacific Northstar Property Group, LLC, a defendant not named in the coverage action. (Id. at 209.) Ironshore intervened in these construction defect cases as the insurer for PNR and Avoca, entities which at some point had their corporate statuses suspended by the state of California.

         On March 22, 2016, Ironshore filed a separate action alleging eighteen causes of action for declaratory relief against Thomas Henry Coleman, [1] PNR, Avoca, the HOA as a third-party claimant to the insurance policies, and Everest. Ironshore sought a judicial determination of the rights and duties of Everest and Ironshore as insurers under various insurance agreements related to the construction of the Reeves property (hereinafter referred to as “the coverage case”). On June 10, 2016, the court consolidated this case with the construction defect cases. (Dkt. No. 1-9, NOR Ex. A at 2062.) The order specifically stated, “The Court finds BC558992, BC610856 and BC614431 related within the meaning of CA Rule of Court 3.300. Cases are ordered transferred forthwith to Department 62, Judge Michael Stern. The Court further orders the cases consolidated this date. Case BC558992 is designated to be the lead case. No further pleadings shall be filed in cases BC610856 and BC614431.” (Id.)

         The parties engaged in extensive motion practice in the coverage portion of the consolidated action. Everest filed a demurrer, which the court overruled. (Dkt. No. 1-9, NOR Ex. A at 2066.) At that time, the court set a trial date for April 24, 2017. (Dkt. No. 1-9, NOR Ex. A at 2085.) Among other motions in the coverage action, Ironshore filed a motion for summary adjudication, and Everest filed a motion for summary judgment. (See Dkt. No. 1-5, NOR Ex. A at 946-98; Dkt. No. 1-8, NOR Ex. A at 1756.) At no point did Everest challenge the consolidation order.

         In addition, the HOA filed a motion to bifurcate the coverage action and trial from the construction defect actions and trial and argued the defect actions should proceed to trial before the coverage action. (Dkt. No. 1-9, NOR Ex. A at 2138-39.) In response, Ironshore filed a motion to bifurcate the actions and order separate trials, but argued instead the coverage action should proceed to trial before the defect actions. (See Dkt. No. 1-9, NOR Ex. A at 2090.) On February 2, 2017, the court granted the HOA's motion and denied Ironshore's. (Dkt. No. 1-10, NOR Ex. A at 2380.) The court did not indicate whether it intended to completely sever the coverage action from the defect actions, or whether it simply ordered separate trials in the still-consolidated case.

         The HOA also filed a motion for judgment on the pleadings, arguing the complaint for declaratory relief in the coverage action failed to state a claim against it. (See Dkt. No. 1-9, NOR Ex. A at 2119.) The court granted this motion as to the entire complaint. (Dkt No. 1-10, NOR Ex. A at 2380.) In Everest's view, the court's dismissal of the HOA, the last remaining California defendant, rendered the coverage action removable to federal court. According to Everest, PNR and Avoca, as suspended California corporations, are nominal defendants whose citizenship is disregarded for purposes of the diversity jurisdiction analysis. On this basis, Everest filed a Notice of Removal as to the coverage action only.

         Upon receipt of the Notice of Removal of the coverage action, the state court judge dismissed all three actions, including the defect actions, without prejudice. (Dkt. No. 9-8, Declaration of Michael A. Miller in support of Defendant Everest Indemnity Insurance Company's Opposition to Plaintiff's Motion to Remand (“Miller Decl.”) ¶ 38.) At that point, the HOA filed an ex parte application to set aside the dismissal of the entire action so that the construction defect actions could proceed in state court while the coverage action presumably pended in federal court. (Miller Decl. ¶ 39, Ex. 21.) As the HOA explained in that application, the court “unilaterally issued the Dismissal Order, thereby dismissing the entire Consolidated Action without prejudice based on Everest's Notice of Removal. In doing so, it appears as though the Court may have mistakenly lumped the Underlying Construction Defect Actions together with the Coverage Action for purposes of the dismissal.” (Id. at 5.) The HOA therefore sought an order “setting aside its order dismissing the entire Consolidated Action in favor of an order dismissing without prejudice only the Coverage Action, thereby maintaining jurisdiction over the two Underlying Construction Defect Actions.” (Id.) The court declined to grant this request. Instead, the court ordered the parties to stipulate to the desired relief and submit a proposed order. (Miller Decl. ¶ 46, Ex. 22.) Ironshore's counsel declined to stipulate, and it appears the construction defect actions have not since been reinstated in state court. (Miller Decl. ¶ 48, Ex. 24.)

         II. LEGAL STANDARD

         Federal courts are courts of limited jurisdiction, having subject matter jurisdiction only over matters authorized by the Constitution and Congress. See 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). Federal district courts have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, ” and is between parties with diverse citizenship. 28 U.S.C. § 1332(a). A removed action must be remanded to state court if the federal court lacks subject matter jurisdiction. 28 U.S.C. § 1447(c).

         Under 28 U.S.C. § 1441(a), “any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.” But such a case is not removable “if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.” 28 U.S.C. § 1441(b)(2).

         A party may file a notice of removal “within thirty days after receipt by the defendant . . . of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.” 28 U.S.C. § 1446(b)(3). However, in no event may a case be removed more than one year after the commencement of an action. 28 U.S.C. § 1446(c)(1).

         “The burden of establishing federal jurisdiction is on the party seeking removal, and the removal statute is strictly construed against removal jurisdiction.” Prize Frize, Inc. v. Matrix (U.S.) Inc., 167 F.3d 1261, 1265 (9th Cir. 1999), superseded by statute on other grounds as stated in Abrego Abrego v. The Dow Chem. Co., 443 F.3d 676, 681 (9th Cir. 2006); Martinez v. Los Angeles World Airports, No. CV 14-9128-PA-PLAx, 2014 WL 6851440, at *2 (C.D. Cal. Dec. 2, 2014). “Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.” Gaus v. Miles, 980 F.2d 564, 566 (9th Cir. 1992). “The ...


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