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finding it "unfair to hold categorically that Plaintiff had notice of the way Defendants would administer the policy before [Defendant] denied him benefits"
Summary of this case from Contreras v. Metropolitan Life Insurance Co.Opinion
No. C 04-00326 MJJ
April 13, 2004
ORDER GRANTING PLAINTIFF'S MOTION TO REMAND
INTRODUCTION
Before the Court is Plaintiff Thomas Sullivan's Notice of Motion and Motion to Remand. For the following reasons, the Court grants Plaintiff's motion.
FACTUAL BACKGROUND
This case arises out of the denial by UnumProvident Corporation and Unum Life Insurance Company (collectively, "Unum") of Plaintiff Thomas Sullivan's claim for disability benefits under Plaintiff's disability insurance policy which was offered through his employer, Colorgraphics. In denying the claim, Unum asserted that Sullivan's disabling condition was excluded as pre-existing and thus he was not entitled to benefits. Complaint for Breach of Contract; Bad Faith; Writ of Mandamus and Declaratory Relief ("Complaint") at ¶ 31. Plaintiff alleges that Unum made their determination by relying upon a policy form approved by the California Department of Insurance ("DOI"). Complaint at ¶¶ 7-11, 27-31. He brought this action in state superior court against Unum, the California Insurance Commissioner John Garamendi ("Commissioner") and the DOI on or about December 23, 2003. Plaintiff's complaint alleges causes of action for breach of contract and bad faith against Unum and causes of action for writ of mandamus and declaratory relief against the Commissioner and the DOI.
Unum subsequently removed this action to federal court on or about January 23, 2004, alleging both federal question jurisdiction as dictated by the Employee Retirement Income Security Act ("ERISA") and diversity jurisdiction because the Commissioner and DOI are sham defendants. Defendants DOI and Commissioner have not joined in the removal. Plaintiff filed this motion to remand on or about February 24, 2004.
LEGAL STANDARD
A plaintiff may challenge removal by a motion to remand. See 28 U.S.C. § 1447. The party invoking the federal court's removal jurisdiction bears the burden of establishing federal jurisdiction. See Emrich v. Touche Ross Co., 846 F.2d 1190, 1195 (9th Cir. 1988) ("The burden of establishing federal jurisdiction is upon the party seeking removal. . . ."). Courts strictly construe the removal statute against removal jurisdiction. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). Any doubt about the propriety of removal is resolved in favor of remand. Id.
Here, removal is premised upon both federal question and diversity jurisdiction. This Court exercises federal diversity jurisdiction under 28 U.S.C. § 1332: "[t]he district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, . . ., and is between . . . Citizens of different States . . ." The Court exercises federal question jurisdiction under 28 U.S.C. § 1441(b): "Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties."
ANALYSIS
A. Procedural Defect: Defendants Did Not All Join in Removal"[N]otice of removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading. . . ." 28 U.S.C. § 1446(b). When there is more than one defendant in the action, all defendants must unanimously agree to join in the removal. Hewitt v. City of Stanton, 798 F.2d 1230, 1232 (9th Cir. 1986). This is commonly referred to as the unanimity requirement. Failure to comply with the thirty day time limitation or the unanimity requirement renders the removal procedurally defective. See Emrich, 846 F.2d at 1193 n. 1. However, a judicially created doctrine provides an exception for parties who are fraudulently joined. Id.
Plaintiff filed his complaint on December 23, 2003. Unum timely filed their notice of removal on January 23, 2004, but the Commissioner and the DOI did not join in the removal petition before the thirty day period expired. As discussed below, the Court finds that the Commissioner is not a sham defendant. Nevertheless, in supplemental briefing, Unum argue that unanimity is not required in this case because (1) the claims against Unum are "separate and independent" from the claims asserted against the DOI and the Commissioner, and because (2) the DOI and the Commissioner are named only in nonremovable claims.
Unum make no showing that the Commissioner or the DOI would join in the petition even now, more than three months after being served with Plaintiff's complaint.
Unum cite Henry v. Independent American Savings Association, 857 F.2d 995 (5th Cir. 1998), for the proposition that joinder of defendants in nonrenewable claims is not necessary where the claims against the removing defendant are "separate and independent." However, the rule in this jurisdiction is clear: all properly joined and served defendants "must join in a removal petition with the exception of nominal parties. . . . A defendant is a nominal party where his role is limited to that of a stakeholder or depositary." Hewitt, 798 F.2d at 1232-33; see also Emrich, 846 F.2d at 1193 n. 1. Since the DOI and the Commissioner are clearly more than nominal parties, their joinder in removal was required.
Furthermore, Unum have failed even to establish their underlying premise that, as defined by 28 U.S.C. § 1441(c), the claims against Unum are "separate and independent" from the claims against the DOI and the Commissioner. Where a plaintiff's complaint is based on an interlocked series of transactions and results in only one wrong to plaintiff, there is no "separate and independent claim." Emrich, 846 F.2d at 1197. Plaintiff argues that all of his claims involve interpretation of Plaintiff's policy forms and contain overlapping issues of proof. Indeed, the outcome of the insurance contract dispute could very well depend on whether the Commissioner withdraws approval of the underlying policy. See Brazina v. The Paul Revere Life Insurance Company, 271 F. Supp.2d 1163, 1172 (N.D. Cal. 2003). Given this nexus between the claims as well as the singular wrong affecting Plaintiff, Unum have failed to establish that the claims are transactionally unrelated as required under section 1441(c).
Relying solely on a trial court opinion from the District of Connecticut, Unum also contend that consent of defendants named only in nonremovable claims is not required. See Moscovitch v. Danbury Hospital, 25 F. Supp.2d 74, 78 (D. Conn. 1998). Again, Unum cannot cite any binding precedent that questions or limits the unanimity rule expressed in Hewitt and its progeny. Therefore, to the extent that Moscovitch holds that removing parties need not obtain the consent of properly served defendants who are more than nominal parties and who were not fraudulently joined, the Court finds the opinion at odds with the law of this jurisdiction. Accordingly, Unum's notice of removal was procedurally defective and remand is required without the Court's reaching the merits of Unum's removal claim predicated on federal question jurisdiction.
Regardless, Moscovitch is readily distinguishable. The Moscovitch court noted that joinder of all defendants "is not required where a case involving a federal claim under 28 U.S.C. § 1331 is removed [by one defendant] and a separate claim . . . is involved." 25 F. Supp.2d at 78 (emphasis added). The court specifically cited to section 1441(c) in this analysis. Id. As stated above, the claims against Unum vis a vis the Commissioner and the DOI are not "separate and independent" as described in section 1441(c). Moreover, the cases upon which Moscovitch relies and which Unum highlight either involve claims that are "separate or independent" or include a moving defendant whose charter provides for "a separate and independent jurisdictional grant." See Constantini v. Guardian Life Insurance Co., 859 F. Supp. 89, 90 (S.D.N.Y. 1994); Parisi v. Rochester Cardiothoracic Associates, 1992 U.S. Dist. LEXIS 21228, *2 (W.D.N.Y. 1992).
B. Diversity Jurisdiction
1. Fraudulent Joinder: Sham Defendants
Alternatively, Unum contend that this Court may exercise federal diversity jurisdiction, because the Commissioner and the DOI were fraudulently joined as "sham" defendants. Removal to federal court is proper when no cause of action lies against the defendants) whose presence defeats diversity jurisdiction, McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). The removing party bears the burden of establishing such a fraudulent joinder. Id.
Under the California Insurance Code, the Commissioner has a duty to refuse approval of any policy with language that is "unintelligible, uncertain, ambiguous, or abstruse, or likely to mislead" the insured party. Cal. Ins. Code § 10291.5(b)(1). "[I]f an insured party believes the commissioner has abused his or her discretion in approving a policy in violation of [section] 10291.5, the insured may petition for a writ of mandamus requiring the commission to revoke the approval." Van Ness v. Blue Cross of California, 87 Cal.App.4th 364, 371-72 (2001) (citing Peterson v. American Life Health Insurance Co., 48 F.3d 404, 410-11 (9th Cir. 1995)). See also Cal. Ins. Code § 10291.5(h).
A writ of mandate may lie against the Commissioner under the scenario described by Plaintiff, because it is possible that no plain, speedy, and adequate alternative remedy exists; the Commissioner has a duty to perform; and the Plaintiff has a clear and beneficial right to performance. See Brazina, 271 F. Supp.2d at 1171; see also Payne v. Superior Court, 17 Cal.3d 908, 925 (1976). Unum make no attempt to distinguish nor even address Brazina and thus fail to show that no cause of action conceivably lies against the Commissioner. Accordingly, the Commissioner is not a sham defendant.
As Plaintiff notes, several other courts in this district have echoed Brazina in unpublished opinions relating to nearly identical facts and including these same defendants as parties. See, e.g., Guyton v. Unum Life Insurance Co., N.D. Cal., Case No. C 03-0291 PJH; Glick v. UnumProvident Corp., N.D. Cal., Case No. C 03-4025 WHA; Lamela v. UnumProvident Corp., N.D. Cal., Case No. C 04-0045 PJH. Unum does not attempt to distinguish the facts or analysis in any of these cases either.
The Court need not determine whether the DOI is a sham defendant because a cause of action against the Commissioner, a resident defendant, alone is sufficient to destroy diversity jurisdiction.
Unum make a series of other related arguments generally questioning the legitimacy of a writ of mandamus cause of action in this case. However, as described above, Brazina clearly establishes that a cause of action for writ of mandamus may lie against the Commissioner. Brazina, 271 F. Supp.2d at 1171. Therefore, Unum cannot defeat remand on this basis.
Unum's argument regarding the applicability of California Insurance Code section 10291.5(h) to group policies is not properly before the Court and therefore not considered, because it was not raised in the notice of removal. See Arco Environmental Remediation, L.L.C. v. Department of Health and Environmental Quality, 213 F.3d 1108, 1117 (9th Cir. 2000) ("The Notice of Removal cannot be amended to add a separate basis for removal jurisdiction after the thirty day period.").
2. Time-barred
Additionally, Unum assert that Plaintiff's third cause of action is time-barred, because the statute of limitations began to run against the Commissioner and the DOI at the time the policy was approved. Since the policy was approved more than three years before Sullivan filed his complaint, Unum contend this claim fails on its face. See Cal. Code Civ. P. § 338. As Unum emphasize in their opposition brief, section 10291.5 provides that a petition may be filed before the effective date. Like the Brazina court, this Court is not persuaded "that the statutory language clearly bars later challenges to a Commissioner's actions. . . ." See Brazina, 271 F. Supp.2d at 1171. It seems unfair to hold categorically that Plaintiff had notice of the way defendants would administer the policy before Unum denied him benefits. This denial occurred on or about August 2002. Complaint at ¶ 31. Therefore, Unum have not shown that Plaintiff's claims against the Commissioner and the DOI are clearly time-barred for the purposes of establishing removal jurisdiction.
3. Lack of Certainty
Unum further argue that Plaintiff's third cause of action fails for lack of certainty. In paragraph 30 of his complaint,
Plaintiff alleges that the COMMISSIONER and the DOI have failed to enforce the mandatory minimum requirements of the Insurance Code with respect to the POLICY issued by Defendants in several respects, including, but not limited to the POLICY'S definition of "total disability" and "pre-existing condition", including the defining terms "caused by, contributed to by, or resulting from" and the terms "medical treatment, consultation, care or services including diagnostic measures" contained in Defendants' POLICY, in particular [Plaintiff's policy], as these definitions, or lack thereof, are uncertain, ambiguous, likely to mislead policyholders. . . .
Unum seem to argue that Plaintiff's claim is without merit because the policy terms at issue in the complaint are not ambiguous. The Court fails to see how Unum's argument renders the complaint itself uncertain.
4. Misjoinder Under Rule 20
Unum also argue that Plaintiff's claims against the DOI and the Commissioner are completely unrelated to his claims against Unum, and thus Sullivan does not meet the requirements of permissive joinder under Rule 20 of the Federal Rules of Civil Procedure. They allege that Unum, the DOI, and the Commissioner are not jointly, severally, or alternatively liable to Sullivan, that liability does not arise from the same transaction or occurrence, and that there is no "common question of law or fact" between the claims. At least one court has stated that misjoinder accomplished through Rule 20 may be relevant on a motion to remand when it is "so egregious as to constitute fraudulent joinder." Tapscott v. MS Dealer Service Corp., 11 F.3d 1353, 1360 (11th Cir. 1996). As discussed in Brazina, however, there is enough of a connection to militate against application of Tapscott here, because "the outcome of the insurance contract dispute between defendants and [the Plainitff] may very well depend on whether the Commissioner will withdraw approval of the policy in question." Brazina, 271 F. Supp.2d at 1172. Therefore, the Commissioner was not fraudulently joined in this suit.
Moreover, Plaintiff brought this action against all of the separate defendants together in his original complaint without resort to Rule 20.
CONCLUSION
For the foregoing reasons, the Court GRANTS Plaintiff's motion to remand.
IT IS SO ORDERED.