LLC v. Starr Indemnity and Liability Co.

          PRESENT THE HONORABLE DAVID O. CARTER, JUDGE

          CIVIL MINUTES - GENERAL

         PROCEEDINGS (IN CHAMBERS): ORDER GRANTING PLAINTIFFS' MOTION TO REMAND [22]

         Before the Court is William Parish (“Parrish”), Spring Creek Research, LLC (“SCR”), and Passport 420, LLC (“Passport” and collectively, “Plaintiffs”) Motion to Remand (“Motion”) (Dkt. 22). The Court finds this matter appropriate for resolution without oral argument. See Fed. R. Civ. P. 78; L.R. 7-15. Having reviewed the moving papers and considered the parties' arguments, the Court GRANTS Plaintiffs' Motion.

         I. Background

         A. Facts

         The Court adopts the facts as set out in Plaintiffs' Complaint (“Compl.”) (Dkt. 1-1). This is an action regarding losses resulting from the government seizure of an aircraft owned and operated by the Plaintiffs. Compl. ¶ 1. In June 2016, Parrish contemplated the joint purchase of an aircraft with his attorney Defendant Michael Avenatti (“Avenatti”). Id. ¶ 15. In July 2016, Parrish and Avenatti formed Passport and entered into an agreement to purchase an aircraft. Id. ¶ 16. At the time Passport was formed, Avenatti was the formal “manager” of the LLC. Id. ¶ 18. However, by the Summer of 2018, Parrish assumed the role of manager. Id.

         Defendant Starr Indemnity & Liability Company (“Starr”) sold an insurance policy (the “policy”) to Plaintiff Passport. Id. ¶ 19. Passport is the “named insured” on the policy. However, the policy further defines as an insured “any director, officer, partner, employee or stockholder of the Named Insured while that person is acting within their official capacity as such.” Declaration of Robert W. Clark (“Clark Decl.”) (Dkt. 26-3), Exh. 2 at 37. Thus, Parrish and Plaintiff SCR argue they are insureds under the policy. Compl. ¶ 20.

         On April 10, 2019, the federal government seized the aircraft at issue in this case. Id. ¶ 21. Subsequently, Plaintiffs submitted a claim to Starr. However, Starr has not provided coverage to date. Id. ¶ 22. Instead, Starr “asserts that coverage may be limited by the conduct of Mr. Avenatti in connection to the pending criminal charges against him in the Central District of California.” Id. Plaintiffs bring claims for Breach of Contract against Starr, Breach of the Covenant of Good Faith and Fair Dealing against Starr, and Declaratory Relief against Starr, Avenatti, and Avenatti and Associates (collectively, “Defendants”). Id. ¶¶ 24-35.

         B. Procedural History

         On September 11, 2019, Defendant Starr removed the case to this Court based on diversity jurisdiction. See Not. of Removal. On October 11, 2019, Plaintiff filed the instant Motion. On November 4, 2019, Defendant Starr opposed (“Opp'n”) (Dkt. 26) and on November 27, 2019, Plaintiff replied (“Reply”) (Dkt. 31).

         II. Legal Standard

         A federal court may order remand for lack of subject matter jurisdiction or any defect in the removal procedure. 28 U.S.C. § 1447(c). A federal court has diversity jurisdiction if: (1) the controversy is between “citizens of different States, ” and (2) the amount in controversy exceeds the sum or value of $75, 000. 28 U.S.C. § 1332(a). Diversity jurisdiction requires complete diversity, meaning that no plaintiff can be from the same state as a defendant. Abrego Abrego v. The Dow Chem. Co., 443 F.3d 676, 679 (9th Cir. 2006). Thus, a case ordinarily cannot be removed to the federal court if a plaintiff and a defendant are citizens of the same state. See 28 U.S.C. § 1332(a).

         However, this Court “must align for jurisdictional purposes those parties whose interests coincide respecting the ‘primary matter in dispute, '” and “will ignore the citizenship of ‘nominal or formal parties who have no interest in the action.'” Prudential Real Estate Affiliates, Inc. v. PPR Realty, Inc., 204 F.3d 867, 873 (9th Cir. 2000). Overall, “[i]f the interests of a party named as a defendant coincide with those of the plaintiff in relation to the purpose of the lawsuit, the named defendant must be realigned as a plaintiff for jurisdictional purposes.” Dolch v. United Cal. Bank, 702 F.2d 178, 181 (9th Cir. 1983). The “general presumption” is that the inclusion of a defendant residing in the same state as the plaintiff is not for the sole purpose of defeating diversity jurisdiction. Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007).

         III. ...