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Bennett v. Ohio National Life Assurance Corp.

United States District Court, N.D. California

November 15, 2019

MARK BENNETT, D.D.S., Plaintiff,


          Donna M. Ryu United States District Judge.

         Plaintiff 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.


         On 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.

         While 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.

         Bennett 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.

         On 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.

         Bennett 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.


         A. Legal Standard

         Under 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).

         “Although 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 1046.

         The 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) ...

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