Opinion
Case No. 20-cv-02133-JST
2020-08-05
Clarence WILLIAMS, Plaintiff, v. KEMPER INDEPENDENCE INSURANCE COMPANY, et al., Defendants.
I. Stephen Samuel Sayad, Attorney at Law, South San Francisco, CA, for Plaintiff. Brian David Harrison, Bruce D. Celebrezze, David M. Rhodes, Clyde & Co. US LLP, San Francisco, CA, for Defendant Kemper Independence Insurance Company. Lisa Danielle Angelo, Nancy Nicholson Potter, Murchison & Cumming, LLP, Los Angeles, CA, for Defendant Concise Insurance Services.
I. Stephen Samuel Sayad, Attorney at Law, South San Francisco, CA, for Plaintiff.
Brian David Harrison, Bruce D. Celebrezze, David M. Rhodes, Clyde & Co. US LLP, San Francisco, CA, for Defendant Kemper Independence Insurance Company.
Lisa Danielle Angelo, Nancy Nicholson Potter, Murchison & Cumming, LLP, Los Angeles, CA, for Defendant Concise Insurance Services.
ORDER GRANTING MOTION TO REMAND
Re: ECF No. 16
JON S. TIGAR, United States District Judge
Before the Court is Plaintiff Clarence Williams's motion to remand this case to the Superior Court of the State of California, San Francisco County. ECF No. 16. The Court will grant the motion.
I. BACKGROUND
On February 26, 2020, Williams filed a complaint against David Kemper Insurance Company ("Kemper") and Does 1 through 50 in San Francisco Superior Court. ECF No. 1-1. Kemper, an insurance agency, issued a "Residence Premium" "Package Plus" property insurance policy to Williams for his home in San Francisco, California, which was in effect when a fire damaged Williams's home on December 16, 2017. ECF No. 1-1 ¶¶ 2, 5, 6. Williams alleges that the fire made his home "uninhabitable." Id. ¶ 8. Yet, he remains unable to move back into his home over two years after the fire occurred "because Kemper refuses to pay the amounts owed ... under the policy of insurance." Id. Williams's complaint asserts four causes of action against Kemper and Does 1 through 50: (1) breach of contract, (2) breach of the covenant of good faith and fair dealing, (3) fraud, and (4) negligent misrepresentation. Id. ¶¶ 9-31.
Williams is a citizen of the State of California. ECF No. 1 ¶ 23; ECF No. 1-1 ¶ 1.
On March 17, 2020, Williams filed an amendment to the complaint which named Concise Insurance Services ("Concise") as Defendant Doe 1 and amended the fraud and negligent misrepresentation causes of action to specifically name Concise. ECF No. 2 at 6-7; ECF No. 16 at 23. From approximately 2014 to 2018, Concise acted as Williams's insurance broker to obtain insurance for his property. ECF No. 16 at 9, 21-22. Concise, a California corporation with its principal place of business in Oakland, California, is a California citizen. ECF No. 1 ¶ 27; ECF No. 2 at 7.
On March 27, 2020, Kemper removed this action on diversity grounds, contending that the amount in controversy exceeds $75,000 and that complete diversity exists between the parties. ECF No. 1 ¶ 1. Williams now moves to remand this case to state court. ECF No. 16. He also requests attorney's fees and costs for the allegedly improper removal action. ECF No. 16 at 20. Kemper opposes the motion to remand, ECF No. 22, and Williams has filed a reply, ECF No. 24. II. LEGAL STANDARD
Kemper filed an objection to the reply evidence pursuant to Civil Local Rule 7-3. ECF No. 28. The Court need not reach the issues raised in the objection because, as Kemper notes, the evidence to which it objects "is irrelevant to th[e] dispute." ECF No. 28 at 2. As such, the Court does not rely on the challenged evidence in reaching its decision.
"A defendant may remove an action to federal court based on federal question jurisdiction or diversity jurisdiction." Hunter v. Philip Morris USA , 582 F.3d 1039, 1042 (9th Cir. 2009) (citing 28 U.S.C. § 1441 ). Diversity jurisdiction "requires complete diversity of citizenship; each of the plaintiffs must be a citizen of a different state than each of the defendants." Morris v. Princess Cruises, Inc. , 236 F.3d 1061, 1067 (9th Cir. 2001). In addition, the amount in controversy must exceed $75,000. 28 U.S.C. § 1332(a).
"Federal courts are courts of limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). It is "presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction." Id. (citations omitted). "Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Gaus v. Miles , 980 F.2d 564, 566 (9th Cir. 1992) (per curiam). "The ‘strong presumption’ against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper." Id. (citation omitted). The court "resolves all ambiguity in favor of remand." Hunter , 582 F.3d at 1042.
III. DISCUSSION
A. Fraudulent Joinder
The parties do not dispute that Williams and Concise are both citizens of California and that there is no complete diversity of citizenship if both Defendants are proper parties to this action. See ECF No. 1 ¶¶ 23, 27; ECF No. 1-1 ¶ 1; ECF No. 2 at 7. Rather, the parties dispute whether the joinder of Concise was fraudulent. ECF No. 16 at 10, 14-18; ECF No. 22 at 7.
"[T]here are two ways to establish improper joinder: (1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court." Hunter , 582 F.3d at 1044 (internal quotation marks and citation omitted). In its notice of removal, Kemper argues the latter, claiming that Williams fails to allege sufficiently specific facts to sustain claims of fraud and misrepresentation against Concise. ECF No. 1 ¶¶ 29, 34, 42. The cases Kemper cites to support this proposition involve motions to dismiss claims pursuant to Rule 12(b)(6) and the heightened pleading standards under Rule 9(b). ECF No. 1 ¶¶ 34-43. However, "the test for fraudulent joinder and for failure to state a claim under Rule 12(b)(6) are not equivalent." Grancare v. Thrower by & through Mills , 889 F.3d 543, 549 (9th Cir. 2018). "A claim against a defendant may fail under Rule 12(b)(6), but that defendant has not necessarily been fraudulently joined." Id. Accordingly, Williams's complaint is not required to meet the specificity of pleading required by Rule 9(b). Rather, if there is a possibility that a state court would find that the complaint states a cause of action against Concise, the Court must find that the joinder was proper and remand the case to the state court. See Hunter , 582 F.3d at 1046.
Kemper argues that Williams must (1) allege the "who," "what," "where," and "when" of the sale of the insurance policy, (2) provide details about the persons who made the allegedly fraudulent representations, and (3) provide an explanation as to why the disputed statements were untrue or misleading when made. ECF No. 1 ¶¶ 35-39.
The parties appear to agree that, in California, an agent or broker who intentionally or negligently fails to procure insurance as requested by a client is liable to the client in tort for the resulting damages. See AMCO Ins. Co., v. All Sols. Ins. Agency , 244 Cal. App. 4th 883, 890, 198 Cal.Rptr.3d 687 (2016) ; ECF No. 16 at 15; ECF No. 22 at 11. They part ways, however, on whether California's broker liability caselaw applies on the facts of this case. Kemper argues that Concise had nothing to do with the purportedly insufficient amount of coverage under the policy, whereas Williams claims that Concise misrepresented the scope of coverage and pertinent provisions in the Kemper homeowner's insurance policy. ECF No. 16 at 8-10; ECF No. 22 at 6-12.
For factual disputes, courts may "look behind the pleadings to ensure that parties are not improperly creating or destroying diversity jurisdiction." Mississippi ex rel. Hood v. AU Optronics Corp. , 571 U.S. 161, 174, 134 S.Ct. 736, 187 L.Ed.2d 654 (2014) ; see Pacumio v. Wells Fargo Bank, N.A. , No. 20-cv-00251-JCS, 2020 WL 887929, at *2 (N.D. Cal. Feb. 24, 2020) ("On the issue of fraudulent joinder, ... a defendant is entitled to present the facts showing the joinder to be fraudulent." (internal quotation marks omitted)). In doing so, courts "must resolve ‘all disputed questions of fact ... in plaintiff's favor.’ " Pacumio , 2020 WL 887929, at *2 (quoting Hornby v. Integrated Project Mgmt., Inc. , No. C 14-04331 LB, 2014 WL 7275179, at *5 (N.D. Cal. Dec. 22, 2014) ); but see Grancare , 889 F.3d at 548 (noting that the Ninth Circuit has "upheld rulings of fraudulent joinder" where "a defendant presents extraordinarily strong evidence ... that a plaintiff could not possibly prevail on her claims against the allegedly fraudulently joined defendant").
The parties’ primary factual dispute centers on Concise's role in obtaining the Kemper insurance policy. Williams claims that, for each of the homeowner's policies that Concise obtained from Kemper, Concise "advised [Williams] of the amount of coverage necessary to fully insure [his] property" and Williams relied on that advice to ensure his home was "fully covered for its complete worth in the event it is damaged or destroyed by an event such as a fire." ECF No. 16 at 21 (Williams Declaration). According to Williams, Concise represented that "Kemper would pay for fire damage to the Insured Home and the contents in the Insured Home, and for additional living expenses when the Insured Home became uninhabitable because of insured peril." ECF No. 1-1 ¶ 25. Williams alleges that such representations were false. Id. ¶ 25, 26.
In contrast, a declaration from Concise's CEO states that Concise "[d]id not advise Mr. Williams regarding the amounts of coverage necessary to fully insure his Resident Premises," "[d]id not represent to Mr. Williams that any coverages and amounts of coverage would be adequate to insure his Resident Premises," and "[w]as not asked by Mr. Williams to obtain specific amounts of coverage." ECF No. 22-2 ¶¶ 1, 16. In addition, a declaration from a Regional Underwriting Manager for Kemper Personal Insurance states that Williams's 2017-2018 homeowner's policy was handled through Kemper's automatic renewal and direct-bill process, in which "the broker is not involved in preparing, evaluating, approving, or sending [the Kemper] renewal papers to the insured or in setting the terms of the proposed renewal." ECF No. 22-3 ¶ 11.
Kemper Personal Insurance is "part of Kemper Independence Insurance Company." ECF No. 22-3 ¶ 1.
Faced with the parties’ conflicting accounts about Concise's role in obtaining the insurance, the Court must resolve any factual disputes in the plaintiff's favor. See Pacumio , 2020 WL 887929, at *2 ; Leedy v. Bristol-Myers Squibb Co. , No. 16-cv-07269-JST, 2017 WL 1435885, at *2 (N.D. Cal. Apr. 24, 2017) ("[A] non-diverse defendant is deemed a sham defendant if, after all disputed questions of fact and all ambiguities in the controlling state law are resolved in the plaintiff's favor, the plaintiff could not possibly recover against the party whose joinder is questioned." (citation omitted)). Accordingly, the Court accepts that Concise advised Williams about the amount of coverage necessary to fully insure his home in the event of a fire and that the coverage Concise obtained for Williams was insufficient. Because California courts have found insurance agents to be liable for failing to procure insurance as requested by clients, the Court finds that it is possible that Williams can establish a cause of action against Concise. See, e.g., Desai v. Farmers Ins. Exchange , 47 Cal. App. 4th 1110, 1119, 55 Cal.Rptr.2d 276 (1996) (finding that an insurer may be liable where the plaintiff "demanded a particular level of coverage at the outset" and "[i]t was then represented to him that he was receiving the demanded level of coverage"); Free v. Republic Ins. Co. , 8 Cal. App. 4th 1726, 1730, 11 Cal.Rptr.2d 296 (1992) (finding that insurance agencies could be liable where the "plaintiff sought to be protected against a very specific eventuality-the destruction of his home" and the insurance agent "assured plaintiff his coverage was sufficient"); Troost v. Estate of DeBoer , 155 Cal. App. 3d 289, 292-93, 202 Cal.Rptr. 47 (1984) (finding liability where the insured "told [his insurance agent] he wanted $1 million of coverage for his company" and the agent misrepresented that two policies together would provide $1 million of coverage).
Notably, the broker-liability cases primarily involve an insured requesting or inquiring about a specific level of coverage. Williams's declaration does not explicitly state that he requested full coverage in the event of a fire, only that Concise advised him that his home would be "fully covered for its complete worth in the event it is damaged or destroyed by an event such as a fire" and that Williams relied on such advice. ECF No. 16 at 21. However, a lack of clear precedent does not render the joinder fraudulent. Krivanek v. Huntsworth Grp. , No. 15-cv-02466-HSG, 2015 WL 5258788, at *2 (N.D. Cal. Sept. 9, 2015). Furthermore, when analyzing the issue of fraudulent joinder, remand must be granted "unless the defendant shows that the plaintiff would not be afforded leave to amend his complaint to cure [the] purported deficiency." Rieger v. Well Fargo Bank, Nat. Ass'n , No. 3:13-0749-JSC, 2013 WL 1748045, at *3 (N.D. Cal. Apr. 23, 2013) (citation omitted); see also Krivanek , 2015 WL 5258788, at *2 ("[A]ll doubts concerning the sufficiency of a cause of action because of inartful, ambiguous or technically defective pleading must be resolved in favor of remand." (citation omitted)).
In addition to the central dispute regarding Concise's role in obtaining the insurance policy, the parties also disagree about the content of the representations that Concise made about specific provisions of the Kemper homeowner's insurance policy. For instance, Williams asserts that Concise incorrectly claimed that the Kemper insurance policy did not provide coverage for insured losses requiring building code upgrades. ECF No. 1-1 ¶ 10. Kemper, on the other hand, provides a declaration from Concise's CEO stating that Concise and Williams never discussed coverage for insured losses requiring building code upgrades. ECF No. 22-2 ¶¶ 19-20. The parties also disagree about the policy limit. Williams says that he asked Concise to obtain the recommended amount of coverage for his dwelling – $844,000 – but that he subsequently received a letter from a Kemper adjustor stating the policy limit was $422,000. ECF No. 16 at 21-22. Kemper responds that the blanket policy limit is, in fact, at least $844,000, and that $422,000 is "just a benchmark used to establish the Blanket Limit of Liability." ECF No. 22 at 12; ECF No. 22-1 ¶¶ 5, 6. The Court declines to resolve these factual disputes about the policy provisions, having already determined that Williams's complaint contains sufficient facts to establish a claim against Concise for the purposes of defeating Kemper's fraudulent joinder argument.
In sum, the Court finds that Kemper has not met its heavy burden of demonstrating fraudulent joinder by "clear and convincing evidence." Hamilton Materials, Inc. v. Dow Chem. Corp. , 494 F.3d 1203, 1206 (9th Cir. 2007). The Court therefore declines to find that Concise was fraudulently joined.
Defendants in this district have met this heavy burden when they provide an "uncontradicted declaration" in support of their argument or when plaintiffs provide "no evidence" to contradict defendants’ assertions. See Infanzon v. Allstate Insurance Company , No. LA CV19-06483-JAK (SKx), 2019 WL 5847833, at *5 (C.D. Cal. Nov. 6, 2019) ; Rand v. Midland Nat'l Life Ins. , No. CV 19-3104-RSWL-JEM, 2019 WL 3573518, at *6 (C.D. Cal. Aug. 6, 2019).
Because the Court has determined that the parties are not completely diverse, it need not determine whether the amount-in-controversy requirement is satisfied.
B. Attorney's Fees and Costs
Pursuant to 28 U.S.C. § 1447(c), Williams requests "his attorney's fees and costs incurred as a result of the improper removal of this action by Kemper." ECF No. 16 at 20. Upon issuing an order remanding the case, a court may award "just costs and any actual expenses, including attorney fees, incurred as a result of the removal." 28 U.S.C. § 1447(c). The standard for awarding fees turns on "the reasonableness of the removal." Martin v. Franklin Capital Corp. , 546 U.S. 132, 141, 126 S.Ct. 704, 163 L.Ed.2d 547 (2005). An award of attorney's fees may be appropriate where removal has been "sought for the purpose of prolonging litigation and imposing costs on the opposing party." Id. at 140, 126 S.Ct. 704. However, "when an objectively reasonable basis exists, fees should be denied." Id. at 141, 126 S.Ct. 704. The "award of fees under § 1447(c) is left to the district court's discretion." Id. at 139, 126 S.Ct. 704.
In this case, the Court finds that Kemper had an objectively reasonable basis for removal. As explained above, it is not certain that Williams will be able to establish a claim against Concise on these facts. Williams's declaration states that Concise advised him about the amount of insurance necessary, whereas California cases have found broker liability where the insured requested or inquired about a specific level of coverage. See, e.g., Desai , 47 Cal. App. 4th at 1114, 55 Cal.Rptr.2d 276 (the insured "informed an insurance vendor ... that he wanted 100 percent coverage for the cost of repairing or replacing improvements to the property"); Free , 8 Cal. App. 4th at 1729, 11 Cal.Rptr.2d 296 (the insured "inquire[d] whether the coverage limits of his policy were adequate to rebuild his home"); Troost , 155 Cal. App. 3d at 292, 202 Cal.Rptr. 47 (the insured "told [his insurance agent] he wanted $1 million of coverage for his company"). The Court cannot say that the case law on this question is so well-established that it was objectively unreasonable for Kemper to remove the case to federal court. See Ngo v. United Airlines, Inc. , No. 19-cv-04277-JCS, 2019 WL 7282481, at *2 (N.D. Cal. Dec. 27, 2019). Accordingly, the Court declines to exercise its discretion under 28 U.S.C. § 1447(c) to award attorneys’ fees.
CONCLUSION
Williams's motion to remand is granted. The Court remands this action to the Superior Court of California for the County of San Francisco.