Gambrell et al v. IDS Property Casualty Insurance Company et al

Filing 22

ORDER denying 18 Motion for Attorneys' Fees. Signed by Judge John W Sedwick on 5/10/13.(JWS)

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UNITED STATES DISTRICT COURT

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DISTRICT OF ARIZONA

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FRANK and BETTINA GAMBRELL,

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Plaintiffs,

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vs.

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IDS PROPERTY CASUALTY
INSURANCE CO., et al.,

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Defendants.

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4:12-cv-00661 JWS
ORDER AND OPINION
[Re: Motion at docket 18]

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I. MOTION PRESENTED

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At docket 18, plaintiffs Frank and Bettina Gambrell (“Gambrells”) seek an award

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of attorneys’ fees “pursuant to A.R.S. 12-341.01 and /or 28 U.S.C. 1447(c).” Defendant

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IDS Property Casualty Insurance Co. (“IDS”) responds at docket 20. Gambrells’ reply is

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at docket 21. Oral argument was not requested, and oral argument would not be of

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assistance to the court.

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II. DISCUSSION

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The parties are familiar with the factual and procedural background. Readers

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who are unfamiliar with the relevant background should read the order at docket 14,

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which remanded the case to state court.

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In support of their motion, Gambrells rely primarily on A.R.S. 12-341.01 which
authorizes a court to award reasonable attorneys’ fees to a prevailing party in a contract
dispute governed by Arizona law. This court has already explained in an order at

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docket 30, Case No. 2:12-cv-1227, why it declines to exercise its discretion to award

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fees to the Gambrells pursuant to that statute. The reasoning in that order is

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incorporated here. Based thereon, to the extent it relies on A.R.S. 12-341.01, the

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Gambrells’ request for fees at docket 18 will be denied.

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The court now turns to Gambrells’ assertion that fees may be awarded pursuant

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to 28 U.S.C. § 1447(c). That statute provides that a district court may award “just costs
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and any actual expenses, including attorney fees, incurred as a result of the removal.”

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Like A.R.S. 12-341.01, the federal statute authorizes, but does not require, an award of

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fees. In their opening memorandum at docket 19, Gambrells did not cite any authority

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for the proposition that an award would be proper under section 1447(c); rather, they

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merely asserted it would. In response, IDS asserts that an award may not be made

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because they had an objectively reasonable basis for initiating the removal citing
Gardner v. UICI.1 It is IDS’ position that because they could legitimately contend that in

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Walter v. Simmons2 an Arizona Appellate court had indicated that an employee adjuster

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owed no duty to an insured, the decision to remove was objectively reasonable. In their

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reply, Gambrells not only argue the removal was unreasonable, but advance a different

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legal standard. Gambrells contend that the removal was “wrong as a matter of law” with

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508 F.3d 559, 561 (9th Cir. 2007).
818 P.2d 214 (Ariz. Ct. App. 1991).

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respect to the fraudulent joinder issue. Gambrells rely on Balcorta v. Twentieth

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Century-Fox Film Corp3.

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Under the “wrong as a matter of law” standard, Gambrells’ argument is not

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persuasive, because as this court explained in an earlier order, it is not settled as a

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matter of Arizona law that an employee adjuster owes a duty of good faith and fair

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dealing to an insured. It follows that IDS could not have been wrong as a matter of law

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to base the removal on the proposition that there is no such duty.

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The matter thus turns on whether there was an objectively reasonable basis to

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assert that Harrish was fraudulently joined because she owed no duty to the Gambrells.
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Gambrells contend that it could not have been objectively reasonable to remove on that

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basis, because IDS was aware that earlier district court decisions had remanded cases

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because Arizona law is not clear on this point. This argument has some merit, but does

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not carry the day, as explained below.

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In earlier motion practice IDS argued that the decision by the Arizona Court of

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Appeals in the Walter case had established that an employee adjuster owed no good
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faith duty to the insured. In reviewing the motion papers and the relevant case law, this

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court concluded that whether Walter was properly cited as establishing that proposition

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was a close question, but ultimately determined that what the Walter court had said was

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dicta, which did not establish Arizona law. In answering what is again a close question,

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this court now holds that it was objectively reasonable for IDS to rely on Walter, even

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208 F.3d 1102, 1106 n.6 (9th Cir. 2000).

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though in this court’s final analysis that reliance was incorrect. It follows that there is no

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basis for an award of fees under section 1447(c).

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III. CONCLUSION

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For the reasons above, this court declines to exercise its discretion to award fees
to Gambrells. The motion at docket 18 is DENIED.
DATED this 10th day of May 2013.

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/s/ JOHN W. SEDWICK
UNITED STATES DISTRICT JUDGE

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