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Buno v. Allstate Northbrook Indemnity Co.

United States District Court, C.D. California

October 10, 2019

Susan Buno
Allstate Northbrook Indemnity Company et al.



         Proceedings: IN CHAMBERS - COURT ORDER

         Before the Court is a Notice of Removal filed by defendants Allstate Northbrook Indemnity Company and Allstate Insurance Company of California (“Defendants”). (Docket No. 1.) For the reasons discussed below, the Court finds that Defendants have not satisfied the requirements of diversity jurisdiction, and therefore remands the case back to the Superior Court of the State of California for the County of Los Angeles, Southwest District, Case No. 19TRCV00741.

         “Federal courts are courts of limited jurisdiction, having subject matter jurisdiction only over matters authorized by the Constitution and Congress.” See, e.g., Kokkonen v. Guardian Life Ins. Co., 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). “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). “Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992).

         To invoke this Court's diversity jurisdiction, Defendants must prove that (1) there is complete diversity of citizenship between the parties, and (2) the amount in controversy exceeds $75, 000. 28 U.S.C. § 1332. A natural person must be a citizen of the United States and be domiciled in a state to establish “state citizenship” for diversity purposes. Kantor v. Wellesley Galleries, Ltd., 704 F.2d 1088, 1090 (9th Cir. 1983). Persons are domiciled in places they reside with the intent to remain or to which they intend to return. See Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001). For purposes of diversity jurisdiction, a corporation is a citizen of any state where it is incorporated and of the state where it has its principal place of business. 28 U.S.C. § 1332(c).

         Here, Defendants “are informed and believe that [Plaintiff Susan] Bruno is and was at the commencement of the state court action, a citizen of the State of California.” (Notice of Removal ¶ 5 (citing Ex. A (“Compl”.).) The Complaint alleges that “Plaintiff is a resident of [the] State of California, County of Los Angeles.” (Id. at Ex. A ¶ 2.) But residence is not necessarily the same as domicile. Kanter, 265 F.3d at 857 (“A person residing in a given state is not necessarily domiciled there, and thus is not necessarily a citizen of that state.”). Plus, “[a] petition [for removal] alleging diversity of citizenship upon information and belief is insufficient.” Bradford v. Mitchell Bros. Truck Lines, 217 F.Supp. 525, 527 (N.D. Cal. 1963). Therefore, the Notice has not properly alleged the Plaintiff's citizenship. Compare Kanter, 265 F.3d at 857 (“Absent unusual circumstances, a party seeking to invoke diversity jurisdiction should be able to allege affirmatively the actual citizenship of the relevant parties.”).

         Even if Defendants had properly alleged Plaintiff's citizenship in California, they still would not have made a sufficient showing that there is fraudulent joinder in this case. The Ninth Circuit recognizes an exception to the complete diversity requirement where a defendant has been “fraudulently joined.” Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001). Fraudulent joinder arises if a plaintiff “fails to state a cause of action against a resident defendant, and the failure is obvious according to the settled rules of the state.” McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). If the Court finds that the joinder of a non-diverse defendant is fraudulent, that defendant's presence in the lawsuit is ignored for the purposes of determining diversity. See, e.g., Morris, 236 F.3d at 1067.

         “There is a presumption against finding fraudulent joinder, and defendants who assert that plaintiff has fraudulently joined a party carry a heavy burden of persuasion.” Plute v. Roadway Package Sys., Inc., 141 F.Supp.2d 1005, 1008 (N.D. Cal. 2001). A claim of fraudulent joinder should be denied if there is any possibility that the plaintiff may prevail on the cause of action against the in-state defendants. See id. at 1008, 1012. “The standard is not whether plaintiffs will actually or even probably prevail on the merits, but whether there is any possibility that they may do so.” Lieberman v. Meshkin, Mazandarani, No. C-96-3344 SI, 1996 WL 732506, at *3 (N.D. Cal. Dec. 11, 1996). “In determining whether a defendant was joined fraudulently, the court must resolve ‘all disputed questions of fact and all ambiguities in the controlling state law in favor of the non-removing party.'” Plute, 141 F.Supp.2d at 1008 (quoting Dodson v. Spiliada, 951 F.2d 40, 42-43 (5th Cir. 1992)). Further, “[a]ll doubts concerning the sufficiency of a cause of action because of inartful, ambiguous or technically defective pleading must be resolved in favor of remand.” Id. (citing Archuleta v. American Airlines, Inc., No. CV 00-1286, 2000 WL 656808, at *4 (C.D. Cal. 2000)).

         While a court can look at evidence including declarations, a court should remand a case “where a defendant raises a defense that requires a searching inquiry into the merits of the plaintiff's case, even if that defense, if successful, would prove fatal.” Morris, 236 F.3d at 1066. “Accordingly, a defendant seeking removal based on an alleged fraudulent joinder must do more than show that the complaint at the time of removal fails to state a claim against the non-diverse defendant.” Nation v. Bayer Healthcare Pharmaceuticals, Inc., No. 13CV4689, 2013 WL 12144106, at *1 (C.D. Cal. Aug. 19, 2013). “Remand must be granted unless the defendant shows that the plaintiff would not be afforded leave to amend his complaint to cure [the] purported deficiency.” Id. (quotations omitted).

         Defendants do not dispute that Defendant Allstate Insurance Company of California (“Allstate California”) is a citizen of California. (Notice of Removal ¶7.) Defendants instead argue “Allstate California is a fraudulently joined ‘sham' defendant and should be ignored for purposes of diversity jurisdiction” because “Allstate California . . . has never issued an insurance policy, and therefore by its very nature could not breach the policy . . . and Allstate California has never conducted any business and does not have any employees.” (Id. ¶¶7-10.) Defendants submitted a declaration from an employee of Allstate Insurance Company to support these allegations. (Docket No.1-1 ¶¶2-5.)

         Defendants' argument is unpersuasive. First, the evidence presented by Defendants does not directly contradict all of Plaintiff's allegations against Defendant Allstate California. Plaintiff alleges that “defendants were obligated to provide Uninsured Motorists' and Underinsured Motorists' coverage (“UIM”) to compensate plaintiff for sustained losses caused by uninsured and/or inadequately insured drivers.” (Compl. ¶10.) Plaintiff also alleges that “defendants persisted in their refusal to compensate plaintiff under the terms of the Policy . . . The only two settlement offers made by defendants to plaintiff were $5, 193.22 new money and $10, 569.72 new money, respectively.” (Id. at ¶17.) While Defendants argue that Allstate California has never issued insurance policies, this allegation does not directly rebut Plaintiff's other allegations that Defendants made prior settlement offers to Plaintiff. In addition, while the Complaint “may indeed be deficient as accused, . . . leave to amend those deficiencies would be appropriate, ” and “[r]emand must be granted unless the [removing Defendants] show[] that [Plaintiff] would not be afforded leave to amend his complaint to cure the purported deficiency.” Nation, 2013 WL 12144106, at *2. Defendants have made no such showing here.

         The Court finds that Defendants have not met their “heavy burden of persuasion” that there is no possibility that Plaintiff may prevail on any of her claims against Defendant Allstate California. Neither the Complaint itself nor any evidence submitted in support of the Notice of Removal forecloses the possibility of Plaintiff succeeding on at least some of her claims against Defendant Allstate California. Nor have Defendants satisfied their burden of establishing that Plaintiff would not be granted leave to amend to cure any purported deficiency. Defendants' fraudulent misjoinder argument therefore fails.

         For the reasons stated above, Defendants have failed to establish that complete diversity exists. See 28 U.S.C. ยง 1447(c). The Court does not have jurisdiction over this action. Accordingly, the Court remands this action back to the Superior Court of the State of California for the County of Los ...

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