United States District Court, N.D. California
ORDER ON MOTION TO REMAND AND MOTION TO DISMISS Re:
Dkt. Nos. 9, 14
M. Ryu United States District Judge.
Mark Bennett, D.D.S., filed this disability insurance action
in Marin County Superior Court against Defendants Ohio
National Life Assurance Corporation (“Ohio
National”) and Mitchell & Mitchell Insurance
Agency, Inc. (“Mitchell”). Ohio National removed
the action on the basis of diversity jurisdiction, asserting
that there is complete diversity between the parties because
Mitchell was fraudulently joined in the case. [Docket No. 1
(Notice of Removal) 6-10.] Bennett now moves to remand the
action. [Docket No. 9.] Mitchell moves pursuant to Federal
Rule of Civil Procedure 12(b)(6) to dismiss the complaint
against Mitchell. [Docket No. 14.] This matter is suitable
for determination without oral argument. Civil L.R. 7-1(b).
For the following reasons, the motion to remand is granted
and the motion to dismiss is denied as moot.
BACKGROUND AND PROCEDURAL HISTORY
August 13, 2019, Bennett filed suit in the Superior Court of
California, County of Marin, against Ohio National, an
insurance company authorized to do business in California,
and Mitchell, a licensed insurance broker/agent with its
principal place of business in California. Compl.
¶¶ 1, 2. Bennett makes the following allegations in
the complaint: while practicing as an oral surgeon, Bennett
purchased three disability insurance policies issued by Ohio
National from Mitchell. Id. at ¶¶ 5-6.
Bennett alleges that Mitchell represented that the Ohio
National policies “would provide him disability
coverage if he was no longer able to work as an oral surgeon
due to injury or sickness, and that under the Policies Ohio
National would be required to pay him a lifetime monthly
disability benefit if he became disabled due to sickness or
injury while the Policies were in force.” Id.
at ¶ 7. Specifically, “Mitchell represented . . .
that the maximum benefit period under the Policies was
‘lifetime' such that Plaintiff would be entitled to
receive monthly disability benefits for the duration of his
life so long as he became unable to work as an oral surgeon
due to sickness or injury.” Id.
the policies were in effect, Bennett “was thrown from a
horse, suffered serious and debilitating injuries to his
shoulder and upper extremity necessitating surgery . . . and
became totally disabled from the practice of oral
surgery.” He “remains totally disabled as a
result of the injuries [he] suffered from the fall from the
horse.” Id. at ¶ 10. Bennett submitted a
claim for benefits under the policies, and Ohio National
accepted and approved payment of monthly total disability
benefits. Id. at ¶¶ 11, 12. However, Ohio
National claimed that Bennett's total disability was due
to a sickness (degenerative disc disease) rather than due to
the injuries he suffered due to the fall and determined that
his disability benefits would end at age 65 because his
disability commenced after his 55th birthday. Id. at
¶ 12. After Bennett reached age 65, Ohio National
terminated his benefits and “has failed and refused to
pay Plaintiff the ongoing monthly benefits to which he was
entitled.” Id. Bennett alleges that Ohio
National wrongfully withheld benefits “based upon its
wrongful determination” that Bennett's disability
is due to sickness. In the event that his disability is
properly characterized as due to sickness rather than injury,
he alleges that “the cessation of his monthly
disability benefits at Age 65 is in direct
contravention” of Mitchell's representations
“that the Maximum Benefit Period under the Policies was
‘Lifetime' without regard to the cause of”
any disability. Id. at ¶ 13.
alleges claims for breach of contract and breach of the
covenant of good faith and fair dealing against Ohio
National. He alleges claims for breach of fiduciary duty,
negligent misrepresentation, and negligence against Mitchell.
September 13, 2019, Ohio National removed the case to federal
court, asserting that removal is proper based on diversity
jurisdiction. Ohio National states that it is an Ohio citizen
and states upon information and belief that Bennett is a
citizen of California. It contends that Mitchell's
citizenship (California) should be disregarded because it is
a sham defendant. Notice of Removal 6. According to Ohio
National, Bennett's claims against Mitchell are untimely
and barred by the statute of limitation. Id. at 6-9.
now moves to remand the case to state court, disputing Ohio
National's claim that Mitchell is a sham defendant whose
California citizenship may be disregarded. He asserts that
his claims against Mitchell are timely. Mitchell cross-moves
pursuant to Rule 12(b)(6) to dismiss Bennett's claims
against Mitchell on the grounds that they are untimely.
MOTION TO REMAND
28 U.S.C. § 1441(a), a defendant may remove to federal
court any matter that originally could have been filed in
federal court. Caterpillar Inc. v. Williams, 482
U.S. 386, 392 (1987). Federal courts are courts of limited
jurisdiction and possess subject matter jurisdiction in civil
cases based only on federal question or diversity
jurisdiction. Id.; see 28 U.S.C.
§§ 1331, 1332. To invoke diversity jurisdiction in
an action involving United States citizens, the complaint
must allege that “the matter in controversy exceeds the
sum or value of $75, 000, exclusive of interest and costs,
and is between . . . citizens of different States . . . .
” 28 U.S.C. § 1332(a)(1).
an action may be removed to federal court only where there is
complete diversity of citizenship, ‘one exception to
the requirement for complete diversity is where a non-diverse
defendant has been fraudulently joined.'”
Hunter v. Philip Morris USA, 582 F.3d 1039, 1043
(9th Cir. 2009) (internal citations omitted) (quoting
Morris v. Princess Cruises, Inc., 236 F.3d 1061,
1067 (9th Cir. 2001)). Under Ninth Circuit law, the joinder
of a non-diverse defendant is deemed fraudulent when a
plaintiff's failure to state a claim against the resident
defendant is “obvious according to the settled rules of
the state.” Hunter, 582 F.3d at 1043. In such
cases, the court may ignore the presence of the non-diverse
defendant for purposes of determining diversity. Id.
(citing Morris, 236 F.3d at 1067). There is a strong
presumption against removal jurisdiction and a general
presumption against fraudulent joinder, which means that the
removing defendants bear a “heavy burden” to
prove fraudulent joinder, with all ambiguity resolved in
favor of remand to state court. Hunter, 582 F.3d at
Ninth Circuit recently underscored that a fraudulent joinder
analysis is different from a Rule 12(b)(6) analysis, and
requires remand if there is a “possibility” that
a state court could find that the plaintiff has stated a
cause of action against the allegedly fraudulent defendant:
A claim against a defendant may fail under Rule 12(b)(6), but
that defendant has not necessarily been fraudulently joined.
We emphasized in Hunter that a federal court must
find that a defendant was properly joined and remand the case
to state court if there is a “possibility that
a state court would find that the complaint states a cause of
action against any of the [non-diverse] defendants.”
Hunter, 582 F.3d at 1046 (emphasis added) (internal
quotations and citation omitted) ...