Opinion
Case No. 2:22-cv-09325-SPG (KSx)
2023-07-14
Vahe KHACHUNTS, an individual, Plaintiff, v. GENERAL INSURANCE COMPANY OF AMERICA, a New Hampshire corporation; Does 1 through 100, Inclusive, Defendants.
Eileen Keusseyan, Harout Greg Keosian, Zareh Jack Kousian, Keosian Law LLP, Encino, CA, for Plaintiff. Jacob F. Meli, Nicolaides Fink Thorpe Michaelides Sullivan LLP, San Francisco, CA, Patricia Anne Daza-Luu, Nicolaides Fink Thorpe Michaelides Sullivan LLP, Los Angeles, CA, for Defendant General Insurance Company of America.
Eileen Keusseyan, Harout Greg Keosian, Zareh Jack Kousian, Keosian Law LLP, Encino, CA, for Plaintiff. Jacob F. Meli, Nicolaides Fink Thorpe Michaelides Sullivan LLP, San Francisco, CA, Patricia Anne Daza-Luu, Nicolaides Fink Thorpe Michaelides Sullivan LLP, Los Angeles, CA, for Defendant General Insurance Company of America.
ORDER DENYING PLAINTIFF'S MOTIONS FOR LEAVE TO FILE FIRST AMENDED COMPLAINT AND REMAND [ECF NO. 17]
SHERILYN PEACE GARNETT, UNITED STATES DISTRICT JUDGE
Before the Court is Plaintiff Vahe Khachunts's ("Plaintiff") Motion for Leave to File a First Amended Complaint and Remand Case to State Court. (ECF No. 17 ("Mot.")). Defendant General Insurance Company of America opposes the motion. (ECF No. 20 ("Opp.")). The Court heard oral argument on July 12, 2023. Having considered the parties' submissions, the relevant law, the record in this case, and the argument of counsel during the hearing on the Motion, the Court DENIES Plaintiff's Motion. I. BACKGROUND
On November 17, 2022, Plaintiff filed the operative complaint in Los Angeles County Superior Court against Defendants General Insurance Company of America ("Defendant") and Does 1-100. According to Plaintiff's Complaint, on or about August 27, 2021, Plaintiff's real property was subject to burglary and vandalism. (ECF No. 1-3 ("Compl.") ¶¶ 8-9). The incident allegedly resulted in significant property damage to Plaintiff's property, including the tile flooring. (Compl. ¶ 9). Plaintiff submitted a first party insurance claim with Defendant. (Id. ¶¶ 11-12). Plaintiff alleges Defendant handled the claim in bad faith and unreasonably delayed payments on the claim. (Id. ¶ 13). Plaintiff brings two causes of action related to Defendant's handling of the insurance claim: (1) breach of contract; and (2) breach of duty of good faith and fair dealing. (Id. ¶¶ 25-42).
On December 23, 2022, Defendant removed the case to this Court based on diversity jurisdiction. (ECF No. 1). On December 29, 2022, Defendant filed its answer, denying Plaintiff's allegations. (ECF No. 8). On May 15, 2023, Plaintiff filed the present Motion. (Mot.). Plaintiff seeks to add in a proposed First Amended Complaint ("FAC") Blake Services, Inc. ("Blake Services"), Zane Street ("Street"), and Ralph Padilla ("Padilla") as new defendants (collectively "Proposed Defendants"). (Id. at 6). Plaintiff also seeks to add an additional claim for negligence. (Id. at 5). Specifically, Plaintiff alleges the three Proposed Defendants were responsible for the tile flooring inspection and acted negligently during the inspection. (ECF No. 17-2 at 14). The addition of the Proposed Defendants would destroy complete diversity and result in this case being remanded to state court.
II. LEGAL STANDARD
Federal Rule of Civil Procedure 15(a)(2) provides that leave to amend "shall be freely given when justice so requires." The Ninth Circuit mandates that the rule be applied with "extreme liberality." Roth v. Garcia Marquez, 942 F.2d 617, 628 (9th Cir. 1991) (internal citation omitted). However, Rule 15(a) "does not apply when a plaintiff amends her complaint after removal to add a diversity destroying defendant." Krantz v. Bloomberg L.P., No. 2:21-CV-06275-AB (RAOx), 2022 WL 2101913, at *2 (C.D. Cal. Feb. 3, 2022) (internal citation omitted). Instead, a proposed amendment to add a diversity-destroying defendant is governed by 28 U.S.C. § 1447(e), which states: "[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." 18 U.S.C. § 1447(e); Doe v. Rose, No. CV-15-07503-MWF-JC, 2016 WL 81471, at *3 (C.D. Cal. Jan. 7, 2016) ("Although motions to amend a pleading are generally analyzed under [Rule] 15, where, as here, the plaintiff seeks to add a non-diverse defendant after removal, amendment is governed by far stricter standards.").
Whether to permit joinder of a party that will destroy diversity remains in the sound discretion of the district court. See Newcombe v. Adolf Coors Co., 157 F.3d 686, 691 (9th Cir. 1998); Walker v. Glob. Mail, Inc., No. CV 21-6546-DMG (SHKx), 2021 WL 4594024, at *2 (C.D. Cal. Oct. 6, 2021) ("District courts have broad discretion in considering whether to permit a plaintiff to join a non-diverse party under section 1447(e)."). In exercising this broad discretion, courts typically consider six factors: "(1) whether the new defendants should be joined under Federal Rule of Civil Procedure 19(a) as 'needed for just adjudication'; (2) whether the statute of limitations would preclude an original action against the new defendants in state court; (3) whether there has been unexplained delay in requesting joinder; (4) whether joinder is intended solely to defeat federal jurisdiction; (5) whether the claims against the new defendant appear valid; and (6) whether denial of joinder will prejudice the plaintiff." Calderon v. Lowe's Home Ctrs., LLC, No. 2:15-CV-01140-ODW-AGR, 2015 WL 3889289, *3 (C.D. Cal. June 24, 2015) (citing Palestini v. Gen. Dynamics Corp., 193 F.R.D. 654, 658 (S.D. Cal. 2000)). "A court need not consider all the issues, as any factor can be decisive, and no one of them is a necessary condition for joinder." Leyba v. Walmart, Inc., No. 2:20-cv-07604-ODW (Ex), 2021 WL 8893640, at *2 (C.D. Cal. Feb. 2, 2021). Moreover, the "defendant bears the burden of establishing that removal is proper," and any doubt as to removability is resolved in favor of remand. See Provincial Gov't of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 (9th Cir. 2009); see also Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992).
III. DISCUSSION
Although Plaintiff argues that leave to amend is governed by Rule 15(a) and "should be liberally granted," this Court disagrees. (Mot. at 5). When a plaintiff seeks an amendment to add a diversity-destroying party following removal, "the amendment cannot be presumed appropriate and the logic and policy of Rule 15(a) do not apply." Clinco v. Roberts, 41 F. Supp. 2d 1080, 1088 (C.D. Cal. 1999). Instead, "a district court must scrutinize an attempted diversity-destroying amendment to ensure that it is proper; in other words § 1447(e) applies." Id. Here, the parties do not dispute that Plaintiff and the Proposed Defendants are citizens of the same state, California, and that adding any of the Proposed Defendants would destroy diversity jurisdiction under 28 U.S.C. § 1332. Accordingly, the Court analyzes each of the factors under section 1447(e) in turn.
To exercise diversity jurisdiction, a federal court must find complete diversity of citizenship among the adverse parties, and the amount in controversy must exceed $75,0000, exclusive of interest and costs. See U.S.C. § 1332(a).
A. Necessary Parties Under Rule 19(a)
Under Rule 19(a), a "necessary party" has "an interest in the controversy," and should be made a party so that the court may "finally determine the entire controversy, and do complete justice, by adjusting all the rights involved in it." See CP Nat'l Corp. v. Bonneville Power Admin., 928 F.2d 905, 912 (9th Cir. 1991) (internal citation omitted). While courts consider the standard set under Rule 19 to determine whether to permit joinder under section 1447(e), "amendment under § 1447(e) is a less restrictive standard than for joinder under Rule 19." Krantz, 2022 WL 2101913, at *4 (internal citation omitted). The standard for joinder under section 1447(e) "is met when failure to join will lead to separate and redundant actions." IBC Aviation Servs., Inc. v. Compania Mexicana de Aviacion, S.A. de C.V., 125 F. Supp. 2d 1008, 1011-12 (N D. Cal. 2000) (citing CP Nat'l, 928 F.2d at 910). In contrast, the joinder of non-diverse defendants is not necessary "where those defendants are only tangentially related to the cause of action or would not prevent complete relief." Id. at 1012.
Plaintiff did not fully address this issue in its papers, but does allege the addition of the proposed parties is necessary "to ensure a comprehensive and just resolution of the case." (Mot. at 8). Plaintiff also argues joinder of the Proposed Defendants "[is] needed for a just adjudication of Plaintiff's claims, and Plaintiff should not be forced to litigate actions arising from the same incident in different forums." (Id. at 9). In response, Defendant argues that Plaintiff has not demonstrated an actionable negligence claim against the Proposed Defendants and may be afforded complete relief from the Defendant. (Opp. at 8-9). The Court agrees with Defendant.
Plaintiff's proposed FAC only asserts a negligence cause of action against the Proposed Defendants "while performing their duties" in the investigation of the insurance claim. (ECF No. 17-2 at 14). However, under California law adjusters are "not liable in tort to the insured for alleged negligent claims handling which causes only economic loss." Sanchez v. Lindsey Morden Claims Servs., Inc., 72 Cal. App. 4th 249, 250-51, 84 Cal.Rptr.2d 799 (1999). Generally, third-party agents acting on behalf of the insurer cannot be held separately liable in tort for claims "as plaintiffs can recover damages from the principal for the alleged wrongdoing of the agent." Keshish v. Allstate Ins. Co., No. CV 12-03818-MMM (JCx), 2012 WL 12887075, at *5 (C.D. Cal. Oct. 19, 2012) (holding that a third-party investigator that assessed the value of loss on behalf of an insurance company was not an indispensable party to the action). Plaintiff does not claim that he had a contractual relationship with the Proposed Defendants. Additionally, Plaintiff's proposed FAC does not allege any damages outside of Plaintiff's pursuit of benefits under the Policy and Defendant's handling of the claim. (ECF No. 17-2 at 14-15). Indeed, during oral argument on the Motion, Plaintiff's counsel confirmed that Plaintiff's negligence claim against the Proposed Defendants would be based on their inspection of Plaintiff's property for the Defendant and not based on any allegations that the Proposed Defendants' negligence caused damage to Plaintiff's property. Thus, because Plaintiff's proposed FAC seeks to recover improperly under California law, Plaintiff may be afforded full relief from the Defendant without risk of multiple lawsuits. This factor therefore weighs against granting leave.
B. Statute of Limitations
Under this factor, the Court considers "whether the statute of limitations would prevent the filing of a new action against the new defendants should the Court deny joinder." Sagrerò v. Bergen Shippers Corp., No. 2:22-CV-04535-SPG-RAO, 2022 WL 4397527, at *3 (C.D. Cal. Sept. 23, 2022). Here, both parties agree that the statute of limitation for Plaintiff's claims is not at issue. Plaintiff asserts "the statute of limitations for any of the causes of action is not at issue." (Mot. at 9). Defendant agrees that "[t]here is no dispute concerning the statute of limitations, so that factor is not evaluated." (Opp. at 8). Therefore, this factor weighs against joinder. See Sandhu v. Volvo Cars of N. Am., LLC, No. 16-cv-04987-BLF, 2017 WL 403495, at *3 (N.D. Cal. Jan. 31, 2017) ("If a plaintiff could file an action against the joined defendant in state court, then there is less reason to join them in this action.").
C. Timeliness of Seeking Leave
When determining whether to allow amendment to add a nondiverse party, "courts consider whether the amendment was attempted in a timely fashion." Clinco, 41 F. Supp. 2d at 1083. While there is no bright line rule as to what qualifies as timely, courts consider the amount of time that has lapsed since removal, the progress of the case, and how much time has passed since opposing counsel refused to stipulate to any proposed amendment. See, e.g., IBC Aviation Servs., 125 F. Supp. 2d at 1012 (plaintiff acted in "timely fashion and did not unreasonably delay in seeking amendment" by filing motion for leave to amend two weeks after defense counsel refused to stipulate to amendment); Lopez v. General Motors Corp., 697 F.2d 1328, 1332 (9th Cir. 1983) (delay of six months after removal and just four days prior to the hearing on motion for summary judgement "too late" for plaintiffs to join new parties). Finally, under section 1447(e), courts have discretion "to deny joinder of a diversity-destroying party whose identity was ascertainable and thus could have been named in the first complaint." Boon v. Allstate Ins. Co., 229 F. Supp. 2d 1016, 1023 (C.D. Cal. 2002).
Plaintiff filed this motion five months after removal and six weeks after Defendant's Initial Disclosures. (Opp. at 8). Plaintiff argues that he "did not unduly delay in filing this motion." (Mot. at 9). In support of this argument, Plaintiff claims that his decision to add the new Defendants "stems from new information that has come to light in the discovery and investigative process, which revealed the involvement of the parties to be added contributing to Plaintiff's damages." (Id. at 8). However, Plaintiff fails to specify the new information they obtained during the discovery and investigative process in its motion. Defendant, in contrast, provided a sworn declaration that "General Insurance has not disclosed any new information to Plaintiff that is relevant to his Motion." (ECF No. 20-1 at 3). The declaration also made clear that Plaintiff has not sought any discovery in the action thus far. (Id.). Plaintiff did not contradict this assertion. To the contrary, during the hearing on the Motion, Plaintiff's counsel confirmed that, from the start of the case, Plaintiff was aware the three Proposed Defendants had been involved in inspecting Plaintiff's property and that there was no new information during discovery. In fact, Plaintiff's initial Complaint demonstrated that Plaintiff understood, at the time of filing, that Blake Services and Padilla were responsible for the inspection of the tile flooring and the recommendation to replace the damaged time with portions from under the refrigerator and cabinets. (Compl. ¶ 14). Although Plaintiff appears not to have delayed since meeting and conferring with opposing counsel on the proposed amendment, Plaintiff has delayed without explanation since Defendant initially removed this action over five months ago. Thus, this factor weighs against granting leave.
D. Intent to Seek Joinder
Under this factor, courts examine "the motive of a plaintiff in seeking the joinder of an additional defendant." Desert Empire Bank v. Ins. Co. of N. America, 623 F.2d 1371, 1376 (9th Cir. 1980). Generally, "[t]he issue is often framed in terms of whether the sole purpose of seeking to join the non-diverse defendant is to defeat diversity jurisdiction." Murphy v. Am. Gen. Life Ins. Co., 74 F. Supp. 3d 1267, 1285 (C.D. Cal. 2015). However, courts examine the following additional factors to help examine Plaintiff's motive: "1) whether the plaintiff was aware of removal when the plaintiff amended her complaint; 2) whether the proposed amended complaint contains only minor or insignificant changes to the original complaint; 3) whether a plaintiff has provided an explanation for why the plaintiff waited to assert claims against the non-diverse defendant; and 4) whether the plaintiff has asserted a facially valid claim against a proposed defendant." Quesada v. Atrium Hosp. LP, No. 2:22-CV-06143-SVW-MAA, 2023 WL 1861213, at *7 (C.D. Cal. Feb. 9, 2023).
While Plaintiff did not fully address this issue in his papers, as described above, he claims that he seeks to amend the complaint based on "newly discovered information" and that he "demonstrate[d] a genuine pursuit of justice and a desire to present a complete and accurate portrayal of the facts." (Mot. at 8). Plaintiff further asserts that the new allegations are not futile and "are supported by the current evidence." (Id. at 10). In response, Defendant argues that Plaintiff's sole motive is the destruction of this Court's diversity jurisdiction. (Opp. at 12-13). Defendant claims that Plaintiff's proposed FAC is "substantially similar" to Plaintiff's initial complaint. (Id. at 13). Moreover, Defendant argues that while Plaintiff's proposed FAC alleges Proposed Defendants are liable for "repair and remedial damages," it does not assert additional reasons in support of this claim beyond the dispute of coverage for the insurance claim. (Id.). Defendant relies on Clinco v. Roberts, where the Court suspected the plaintiff's motives were improper because the first amended complaint merely added a "one-sentence allegation to the first cause of action and slightly alter[ed] the sixth cause of action." Clinco v. Roberts, 41 F. Supp. 2d at 1083. While this Court acknowledges that Plaintiff's proposed FAC includes more substantial amendments than those at issue in Clinco, it finds Clinco's reasoning applies with equal force here, where Plaintiff's proposed claim is entirely conclusory. Additionally, Plaintiff filed this motion following removal and, thus, was aware of removal. Furthermore, and as noted above, Plaintiff was aware of the identities of the Proposed Defendants, yet failed to seek to amend the complaint. Lastly, and more fully discussed below, Plaintiff does not assert a facially valid negligence claim against the Proposed Defendants based on the proposed FAC. See Sanchez, 72 Cal. App. 4th at 250-51, 84 Cal.Rptr.2d 799 (holding that California law does not recognize a cause of action for general negligence against claim adjusters based on economic loss); see also Keshish v. Allstate Ins. Co., 2012 WL 12887075, at *5 (holding that a third-party investigator that assessed the value of loss on behalf of an insurance company was not an indispensable party to the action). Thus, without further explanation of Plaintiff's basis for joinder, this factor weighs against granting leave.
E. Apparent Validity of Claims Against New Defendants
The existence of a facially valid claim against the putative defendant weighs in favor of permitting joinder under section 1447(e). A claim is facially valid if it "seems valid, which is a lower standard than what is required to survive a motion to dismiss or motion for summary judgment." Prudenciano Flores v. Nissan N. Am., Inc., No. CV 21-09411-RSWL-PDx, 2022 WL 1469424, at *4 (C.D. Cal. May 9, 2022) (citation omitted); see also Freeman v. Cardinal Health Pharm. Servs., LLC, No. 2:14-cv-01994-JAM-KJN, 2015 WL 2006183, *3 (E.D. Cal. 2015) (rejecting defendant's assertion that "the Court should consider whether the amended complaint could be defeated by a motion to dismiss") (internal citation omitted). Indeed, "the claim need not be plausible nor stated with particularity" for joinder under section 1447. See Found. Bldg. Materials, LLC v. Action Gypsum Supply, No. SACV 21-01804-CJC(KESx), 2022 WL 705337, at *4 (C.D. Cal. Mar. 8, 2022) (internal quotation omitted). However, a plaintiff must establish the elements of the alleged cause of action. See also Hayes v. FCA US LLC, No. CV 20-3183-DMG (JCX), 2020 WL 2857490, at *2 (C.D. Cal. June 2, 2020) ("To succeed in a claim for negligent repair, a plaintiff must establish the well-known elements of a negligence claim: duty, breach, causation, and damages.").
Plaintiff argues that the negligence claim asserted against the Proposed Defendants is not futile. Defendant responds that the new negligence claim against the Proposed Defendants is necessarily futile because the Proposed Defendants were acting as Defendant's agents, Proposed Defendants owed no duty to Plaintiff for purely economic damages, and Plaintiff's proposed FAC does not plead any material facts alleging that Proposed Defendants physically damaged Plaintiff's property. (Opp. at 9-12). Defendant cites Sanchez v. Lindsey Morden Claims Services, Inc., for the proposition that adjusters are not liable to the insured party for negligence claims based on economic loss unless there is physical damage to person or property. See Sanchez, 72 Cal. App 4th at 255, 84 Cal.Rptr.2d 799. Plaintiff's proposed FAC does not appear to dispute that the Proposed Defendants were acting as agents for the Plaintiff. Instead, in terms which largely parrot the elements of a negligence cause of action, the FAC alleges damage to Plaintiff and his property. (ECF No. 17-2 ¶¶ 52-53). The FAC does not allege any facts regarding how such damage took place. Further, as stated previously, Plaintiff's counsel confirmed during the hearing on the Motion that Plaintiff's negligence allegation against the Proposed Defendants' is based on performance of the inspection, not on physical damage to the property. Therefore, Plaintiff seeks to recover for purely economic loss. See Clinco v. Roberts, 41 F. Supp. 2d at 1084 (finding the claim against the new party was invalid because the alleged conduct was insufficient to support the alleged claim). Thus, this factor weighs against granting leave.
F. Prejudice to Plaintiff
Where claims against parties sought to be joined in an action "arise out of the same factual circumstances," it is in the economic benefit of all parties and the judicial system to "have the entire controversy adjudicated only once." Avellanet v. FCA US LLC, No. CV 19-7621-JFW(KSX), 2019 WL 5448199, at *4 (C.D. Cal. Oct. 24, 2019) (internal quotation omitted). Further, to force the plaintiff to "proceed with expensive litigation in state court against [the putative defendant] would create avoidable prejudice." Id. However, "[a] plaintiff will not be prejudiced if the court can accord complete relief without the proposed defendant." Eguilos v. Volkswagen Grp. of Am., Inc., No. 2:22-CV-00614-KJM-KJN, 2022 WL 2713273, at *5 (E.D. Cal. July 13, 2022).
Plaintiff argues that they would be "severely prejudiced" if this Court denies joinder of the Proposed Defendants. (Mot. at 10). Plaintiff alleges the Proposed Defendants conducted the investigation negligently which caused damage to Plaintiff. However, the Court has already found that complete relief may be afforded to Plaintiff without the addition of the Proposed Defendants, and there is a low risk of multiple litigations. Thus, denying leave would not prejudice Plaintiff, and this factor weighs against granting leave.
IV. CONCLUSION
For the reasons set forth above, the Court DENIES Plaintiff's Motion for Leave to File its First Amended Complaint and Remand Case to State Court.