Liberty Mutual First Insurance Company et al v. Ez-Flo International, Inc. et al

Filing 33

MINUTES (In Chambers): ORDER Re Plaintiffs Motion to Remand 11 by Judge Michael W. Fitzgerald: The Court GRANTS the Motion to Remand and ORDERS that this action be REMANDED to San Bernardino County Superior Court. (MD JS-6. Case Terminated.) (jp)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

JS-6
CIVIL MINUTES—GENERAL
Case No. EDCV-17-228-MWF (SPx)
Date: May 3, 2017
Title:
Liberty Mutual Fire Insurance Company, et al. v. EZ-Flo International,
Inc., et al.
Present: The Honorable MICHAEL W. FITZGERALD, U.S. District Judge
Deputy Clerk:
Rita Sanchez

Court Reporter:
Not Reported

Attorneys Present for Plaintiff:
None Present

Attorneys Present for Defendant:
None Present

Proceedings (In Chambers): ORDER RE PLAINTIFFS’ MOTION TO
REMAND [11]
Before the Court is Plaintiffs’ Motion to Remand, filed on March 6, 2017.
(“the Motion,” Docket No. 11). Defendant filed an Opposition to the Motion and
Plaintiffs filed a Reply. (Docket Nos. 26–27).
The Court held a hearing on the Motion on May 1, 2017, and now
GRANTS the motion. The Second Amended Complaint (“SAC”) does not include
more than 100 named plaintiffs, such that jurisdiction is unavailable under CAFA’s
“mass action” provision. (Docket No. 1-1).
I.

BACKGROUND

This case involves claims by Plaintiffs—insurance companies acting as
subrogees of their insureds—against Defendant EZ-Flo International concerning
defects in Defendant’s water supply lines, which are used to transport water from a
water supply pipe to a plumbing fixture. (SAC ¶ 1).
In the first action, two insurance companies filed suit on December 26, 2013,
against Defendant. The two companies were acting as subrogees of one insured
and sought only $412,000. (Declaration of Michael J. Hassen, ¶ 2 (Docket No. 261)). On August 13, 2015, the other insurance-company Plaintiffs filed their
Complaint in a second action against Defendant, acting as subrogees of 111
homeowners for claims totaling $4,233,714.81. (Id.). The two cases were
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CIVIL MINUTES—GENERAL
1

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. EDCV-17-228-MWF (SPx)
Date: May 3, 2017
Title:
Liberty Mutual Fire Insurance Company, et al. v. EZ-Flo International,
Inc., et al.
consolidated by the Superior Court on September 2, 2015, though the Superior
Court did not clarify whether the consolidation was for pretrial purposes only. (Id.
¶ 4).
Plaintiffs in the second action filed their First Amended Complaint on
February 11, 2016, seeking monetary relief as subrogees for 112 homeowners for
claims totaling $4,714,824.82. (Id. ¶ 7). Defendant filed a demurrer, which was
sustained only as to the claims of three homeowners. (Id. ¶ 9). Following this
demurrer, the two suits sought a combined $4,987,351.62. (Id. ¶ 11).
On January 20, 2017, Plaintiffs filed their Second Amended Complaint,
seeking monetary relief as subrogees for 145 homeowners for claims totaling
$6,588,979.71. (Id. ¶ 14). Defendant’s Notice of Removal was then filed on
February 7, 2017. (Docket No. 1).
II.

DISCUSSION
A.

Class Action Fairness Act

Defendants’ Notice of Removal asserts jurisdiction under the Class Action
Fairness Act of 2005 (CAFA), 28 U.S.C. § 1332(d). (Notice of Removal at 1).
Under CAFA, the Court has “original jurisdiction of any civil action in which the
matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest
and costs, and is a class action in which” there is minimal diversity. 28 U.S.C. §
1332(d)(2).
As relevant here, CAFA’s “mass action” provision provides for federal
jurisdiction in non-class action cases that involve “monetary relief claims of 100 or
more persons” that are “proposed to be tried jointly . . . .” 28 U.S.C. §
1332(d)(11)(A), (B).

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CIVIL MINUTES—GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. EDCV-17-228-MWF (SPx)
Date: May 3, 2017
Title:
Liberty Mutual Fire Insurance Company, et al. v. EZ-Flo International,
Inc., et al.
“[N]o antiremoval presumption attends cases invoking CAFA, which
Congress enacted to facilitate adjudication of certain class actions in federal court.”
Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S.Ct. 547, 554 (2014)
(holding that a defendant’s notice of removal under 28 U.S.C. § 1446(a) need
include only a plausible allegation that the amount in controversy exceeds the
jurisdictional threshold).
B.

Remand Motion

Plaintiffs’ Motion argues that this Court lacks jurisdiction because (1) the
suit does not involve “100 or more persons” because there are only twenty-six
named insurance-company Plaintiffs; and (2) Defendant’s Notice of Removal was
not timely.
1. 100 or more persons
As stated, a mass action removed pursuant to CAFA must involve the claims
of “100 or more persons” who proposed to have their claims tried jointly in state
court. The Supreme Court recently interpreted this language in Mississippi ex rel.
Hood v. AU Optronics Corp., 134 S. Ct. 736 (2014). The parties dispute the
relevance of the Mississippi case to the Motion.
In Mississippi, the Court resolved a circuit split as to whether in suits
brought by states, unnamed parties in interest should count toward the “100
persons” requirement in CAFA. Id. at 741. For example, in that case the State of
Mississippi sued manufacturers of liquid crystal displays in Mississippi state court
over alleged price fixing. Defendants removed the case to federal court, arguing
that the real parties in interest were the citizens of Mississippi. The district court
concluded that the case did qualify as a mass action, and the Fifth Circuit affirmed
that part of the decision.

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CIVIL MINUTES—GENERAL
3

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. EDCV-17-228-MWF (SPx)
Date: May 3, 2017
Title:
Liberty Mutual Fire Insurance Company, et al. v. EZ-Flo International,
Inc., et al.
The Supreme Court unanimously reversed. It held that that the language
“100 or more persons” does not refer to “100 or more named or unnamed real
parties in interest,” but rather to the actual plaintiffs in the suit. Id. at 742. The
Court noted that elsewhere in CAFA Congress had specifically used the phrase
“named or unnamed” to refer to a group of people:
CAFA provides that in order for a class action to be
removable, “the number of members of all proposed
plaintiff classes” must be 100 or greater, § 1332(d)(5)(B),
and it defines “class members” to mean “the persons
(named or unnamed) who fall within the definition of the
proposed or certified class,” § 1332(d)(1)(D). Congress
chose not to use the phrase “named or unnamed” in
CAFA's mass action provision, a decision we understand
to be intentional.
Id. Therefore, “the term ‘persons’ in § 1332(d)(11)(B)(i) refers to the individuals
who are proposing to join as plaintiffs in a single action.” Id. The Court
specifically rejected the argument that “persons” should be construed to include
“both named and unnamed real parties in interest,” finding that it “stretched the
meaning of ‘plaintiff’ beyond recognition.” Id. at 743.
The Court cited approvingly two definitions of “plaintiff”: a “party who
brings a civil suit in a court of law,” Black's Law Dictionary 1267 (9th ed. 2009),
and “one who commences a personal action or lawsuit,” or “the complaining party
in any litigation,” Webster's Third New International Dictionary 1729 (1961). And
it rejected the definition of plaintiff as “anyone, named or unnamed, whom a suit
may benefit.” Id. The Court later reiterated that the word “plaintiffs” refers to “the
actual named parties who bring an action.” Id. at 744. The Court also specifically
rejected the Fifth Circuit’s application of the “background principle” of analyzing
the unnamed “real parties in interest to a suit” in determining whether a federal
court has diversity jurisdiction. Id. at 745.
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CIVIL MINUTES—GENERAL
4

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. EDCV-17-228-MWF (SPx)
Date: May 3, 2017
Title:
Liberty Mutual Fire Insurance Company, et al. v. EZ-Flo International,
Inc., et al.
The parties dispute whether Mississippi mandates remand here. Plaintiffs
argue that there are less than 100 named Plaintiffs here because there are only
twenty-six insurance companies on the face of the operative Second Amended
Complaint. Defendant argues that, unlike Mississippi, there are more than 100
named persons, the insureds, on whose behalf the claims have been filed by the
insurance companies. Thus, Defendant urges the Court to deny remand and
conclude that the 145 homeowners present here satisfy the “100 or more persons”
requirement in CAFA. Neither party has pointed to a case post-Mississippi that
addresses the decision’s application to subrogees or insurance company plaintiffs.
This Court acknowledges that Mississippi did not address the precise issue
here. There, the defendants had argued that unnamed real parties in interest should
be counted toward the 100-person requirement. Here, Defendant argues that
named real parties in interest should count. The Second Amended Complaint
includes an exhibit listing each of the insureds’ names and which insurance
company is suing on their behalf.
It is true that much of the Mississippi decision was devoted to the particular
issues that district courts might face if unnamed parties were allowed to be
included in the mass action definition. For example, if “plaintiffs” referred to
unnamed real parties in interest, the district court in Mississippi might have been
required to “hold an evidentiary hearing to determine the identity of each of the
hundreds of thousands of unnamed Mississippi citizens who purchased one of
respondents' LCD products between 1996 and 2006.” Id. at 743. The High Court
referred to such possibilities as an “administrative nightmare.” Id. This Court
agrees with Defendant that these particular aspects of the Mississippi decision are
inapposite here.
The bulk of the Mississippi decision, however, applies to this case. The
Court clearly held that the phrase “100 or more persons” refers to actual plaintiffs
in a case. And “plaintiffs” refers to those who bring a civil suit or commence an
action. In this case the only “plaintiffs” are the twenty-six insurance companies
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CIVIL MINUTES—GENERAL
5

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. EDCV-17-228-MWF (SPx)
Date: May 3, 2017
Title:
Liberty Mutual Fire Insurance Company, et al. v. EZ-Flo International,
Inc., et al.
whose names appear on the face of the Second Amended Complaint above the
word “Plaintiffs.” To conclude otherwise would flout the Supreme Court’s
holding and all but ignore its thorough textual analysis. While the insureds here
are named, that does not make them named plaintiffs that should be included in the
CAFA calculus. The Fifth Circuit’s real-party-in-interest analysis was specifically
rejected in favor of the “straightforward, easy to administer rule” that only the
“actual named parties who bring an action” count toward the 100 person
requirement. Mississippi, 134 S. Ct. at 744.
Defendant devotes much of its Opposition to subrogation law. The Court
does not find these arguments persuasive. Nothing in the Opposition alters the
Court’s legal conclusion that the insureds here are not plaintiffs, in the traditional
sense, in this action. Even if the Court were to consider the arguments concerning
subrogation law generally, other courts have held that “if a subrogee has paid an
entire loss suffered by an insured, it is the only real party in interest and the only
party that may sue in its own name.” Nat'l Fire Ins. Co. of Hartford v. Universal
Janitorial Supply Corp., 2006 WL 892291, at *2 (D.N.J. Apr. 6, 2006) (citing
United States v. Aetna Cas. & Sur. Co., 338 U.S. 366, 380 (1949)). In addition,
although in the case of partial subrogation both the subrogor and subrogee are real
parties in interest, “a subrogor that is a real party in interest in cases of partial
subrogation is not necessarily a party to the complaint.” Id. (emphasis added).
Here, the Second Amended Complaint seems to allege that only the
insurance companies paid any losses. (SAC ¶ 96 (“As a result of the water losses
and associated damages, each Plaintiff made payments to its Insureds . . . .”)).
Even if the insureds had made payments of their own, they were not included as
actual plaintiffs on the face of the Second Amended Complaint. Therefore, they
should not be included in the “100 or more persons” requirement and the case must
be remanded.
At the hearing, Defendant’s counsel made reference to an order issued by
this Court concerning assignments. Almont Ambulatory Surgery Ctr., LLC v.
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6

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. EDCV-17-228-MWF (SPx)
Date: May 3, 2017
Title:
Liberty Mutual Fire Insurance Company, et al. v. EZ-Flo International,
Inc., et al.
UnitedHealth Grp., Inc., 2015 WL 12733443, at *1 (C.D. Cal. Apr. 10, 2015). In
that order the Court dealt with the issue whether, as a matter of law, certain
assignments gave the plaintiffs standing to raise certain claims in light of the antiassignment clause in the relevant contracts. That order construing ERISA is of
little relevance here. The Court’s decision to remand this case is based, in part, on
the bright-line rule established by the Supreme Court: “persons” in the mass action
provision means “plaintiffs.” There are not 100 plaintiffs and the action therefore
must be remanded.
Accordingly, the Court concludes that the Motion must be GRANTED.
2. Timeliness of the Notice of Removal
Although the Court has already concluded that remand is required here, it
will nonetheless address the timeliness issue raised by Plaintiffs. Plaintiffs argue
that removability of the case became clear on February 11, 2016, when the First
Amended Complaint was filed after the consolidation of the claims by the Superior
Court. As Defendant points out, however, it was not clear at the time that the
consolidation was for more than only pre-trial purposes. Therefore, Defendant
states, it could not remove the case at that time. Defendant’s argument is
supported by a recent decision of the Ninth Circuit, which held that “if 100 or more
plaintiffs in separate actions propose consolidating their cases solely for pretrial
purposes, that . . . is insufficient to trigger removal jurisdiction.” Dunson v. Cordis
Corp., ___ F.3d ___, 2017 WL 1364987, at *2 (9th Cir. Apr. 14, 2017).
The Court agrees with Defendant that the Notice of Removal was timely
filed.
III.

CONCLUSION

The Court GRANTS the Motion to Remand and ORDERS that this action
be REMANDED to San Bernardino County Superior Court.
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CIVIL MINUTES—GENERAL
7

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. EDCV-17-228-MWF (SPx)
Date: May 3, 2017
Title:
Liberty Mutual Fire Insurance Company, et al. v. EZ-Flo International,
Inc., et al.
IT IS SO ORDERED.

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