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Bankruptcy Estate of Phuc v. Medpro Group Inc.

United States District Court, C.D. California

October 8, 2019

BANKRUPTCY ESTATE OF TUNG NGUYEN PHUC
v.
MEDPRO GROUP, INC.

          Present: Honorable ANDREW J. GUILFORD

          CIVIL MINUTES - GENERAL

         Proceedings: [IN CHAMBERS] ORDER REGARDING PLAINTIFF'S MOTION TO FILE AMENDED COMPLAINT

         This is an insurance bad faith action against Defendant MedPro Group, Inc. (“MedPro”), a medical malpractice insurer. Plaintiff Jeffrey Golden now moves to file an amended complaint. (See generally Mot., Dkt. No. 17.)

         The Court GRANTS IN PART Plaintiff's motion to file an amended complaint. The Court REMANDS this case to Orange County Superior Court. All other pending matters are VACATED.

         1. BRIEF BACKGROUND

         This case stems from an underlying medical malpractice action against Tung Nguyen, a vocational nurse. (Mot. at 2.) In 2015, Nguyen was charged with caring for two-year-old Emma Borges, who depended on a tracheostomy tube in her throat to breathe. (Id.) “It was Nguyen's duty to ensure that the tracheostomy tube remained intact and stable.” (Id.) But unfortunately, while under Nguyen's care, Borges' tracheostomy tube fell out, causing Borges “severe and permanent brain damage.” (Id.)

         Borges then sued Nguyen in January 2016 for medical malpractice. (Id.) Nguyen's medical malpractice insurer at the time, Defendant MedPro, defended Nguyen in the action. (Id.) Nguyen's MedPro insurance had a policy limit of $1 million. (Id.) According to Plaintiff, Borges offered to settle her case against Nguyen by demanding Nguyen's $1 million policy limit on three separate occasions. (Id. at 2-3.) But MedPro rejected all three of Borges' settlement demands. Then, “on the eve of arbitration, ” MedPro allegedly agreed to settle the matter, but only if Borges' parents expressly waived their right to sue MedPro for wrongful death if Borges died. (Id. at 3.) Borges rejected MedPro's offer because Borges “had already incurred substantial costs . . . prepar[ing] for arbitration.” (Id.)

         The case then proceeded to arbitration. (Id.) In March 2018, the arbitrator found Nguyen negligent and awarded Borges $6, 069, 139.73 in damages, plus 10% interest. (Id.) Given Nguyen's $1 million policy limit, this subjected Nguyen to substantial personal liability. (Id.) MedPro appealed the award. (Id.) But the appeal didn't stay enforcement of the arbitration award, so Nguyen was forced to file for bankruptcy. (Id.) Nguyen's bankruptcy case is pending in a separate action before this Court. (Id.)

         Plaintiff Jeffrey Golden was appointed Trustee of Nguyen's bankruptcy estate in her bankruptcy case. (Id. at 4.) As Trustee, Golden took ownership of “any and all legal claims that Nguyen might assert against third parties.” (Id.) So on behalf of Nguyen, Golden filed this case against MedPro alleging MedPro mishandled Borges' medical malpractice action. (Id.) Specifically, Golden claims MedPro acted unreasonably and in bad faith by repeatedly rejecting Borges' $1 million settlement offers. (Id.) As Trustee, Golden elected to file this case in state court. Now, Golden seeks leave to file an amended complaint.

         2. ANALYSIS

         Golden's proposed amendment does two things. First, it adds Margaret Holm-MedPro's attorney in the underlying malpractice action-as a defendant in this case. (Mot. at 1.) Second, it asserts a new claim for negligent infliction of emotional distress against MedPro. (Id. at 1, n.1.)

         The Court first turns to Golden's request to add Holm to this case. Both parties agree that adding Holm as a defendant destroys complete diversity among the parties, thus stripping this Court of its diversity jurisdiction to hear this case. (See Id. at 6; Opp'n, Dkt. No. 20 at 18.) Consequently, to the extent Golden's proposed amendment seeks to join Holm, it's governed by 28 U.S.C. Section 1447(e), which applies to diversity-destroying amendments like this one. Section 1447(e) provides that “[i]f after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court.” See 28 U.S.C. § 1447(e). The “permissive” language of Section 1447(e) “clearly gives” district courts discretion to join a non-diverse defendant. See Newcombe v. Adolf Coors Co., 157 F.3d 686, 691 (9th Cir. 1998). When deciding whether to permit joinder under Section 1447(e), courts consider the following factors: (1) “whether there has been unexplained delay in seeking the joinder”; (2) “whether the statute of limitations would prevent the filing of a new action against the new defendant should the court deny joinder”; (3) “whether the party sought to be joined is needed for just adjudication and would be joined under Federal Rule of Civil Procedure 19(a)”; (4) “whether the claim against the new party seems valid”; and (5) “whether joinder is solely for the purpose of defeating federal jurisdiction.” Clinco v. Roberts, 41 F.Supp.2d 1080, 1081-82 (C.D. Cal. 1999); see also McGrath v. Home Depot USA, Inc., 298 F.R.D. 601, 607 (S.D. Cal. 2014) (listing similar factors).

         Here, given certain concessions in the parties' briefing, the Court need only analyze the first, third, and fifth factors. (See Mot. at 14; Opp'n at 21.)

         Regarding the first factor, the Court finds Golden didn't unreasonably delay in seeking to join Holm as a defendant in this case. Golden didn't have reason to suspect Holm was at fault for MedPro's decision to reject Borges' settlement offers until recently, when MedPro told Golden it planned on asserting an “advice-of-counsel” defense to Golden's bad faith claims. (Mot. at 7.) Then, “[w]ithin days, ” Golden “repeatedly informed MedPro, verbally and in writing, of the need to join Holm to the case and sought a stipulation from MedPro to that end.” (Id.) MedPro refused and Golden promptly filed this motion. Still, MedPro argues the delay here is unreasonable mostly because one of Golden's attorneys-Neil Howard- represented Borges in the underlying medical malpractice action. (See Opp'n at 12-13, 21.) And MedPro claims that, in the malpractice case, Howard and Holm exchanged information revealing that Holm assisted MedPro in MedPro's evaluation of Borges' settlement offers. (Id. at 2, 6.) This argument is unconvincing. The mere fact that Howard (and, by extension, Golden) knew Holm played some role in MedPro's rejection of Borges' settlement proposals doesn't automatically charge Howard with knowing that Holm ...


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