David Fritsch v. Northwestern Mutual Life Insurance Company, et al

Filing 32

MINUTES (IN CHAMBERS) ORDER GRANTING PLAINTIFFS MOTION TO REMAND #23 ; DENYING AS MOOT MOTION TO DISMISS #24 by Judge David O. Carter: Before the Court is Plaintiff David Fritschs (Plaintiff or Fritsch) Motion to Remand Action to the Superior Court of California, County of Orange (Motion) (Dkt. 23) and Defendants Motion to Dismiss (Dkt. 24). The Court finds these matters appropriate for resolution without oral argument. See Fed. R. Civ. P. 78; L.R. 7-15. Having considered the parties arguments, the Court GRANTS Plaintiffs Motion to Remand and DENIES AS MOOT Defendants Motion to Dismiss. (MD JS-6. Case Terminated) (es)

JS-6

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SA CV 17-0808-DOC (JDEx)

Date: June 28, 2017

Title: DAVID FRITSCH V. NORTHWESTERN MUTUAL LIFE INS. CO., ET AL.

PRESENT:
THE HONORABLE DAVID O. CARTER, JUDGE
Deborah Goltz
Courtroom Clerk

Not Present
Court Reporter

ATTORNEYS PRESENT FOR
PLAINTIFF:
None Present

ATTORNEYS PRESENT FOR
DEFENDANT:
None Present

PROCEEDINGS (IN CHAMBERS): ORDER GRANTING PLAINTIFF’S
MOTION TO REMAND [23];
DENYING AS MOOT MOTION TO
DISMISS [24]
Before the Court is Plaintiff David Fritsch’s (“Plaintiff” or “Fritsch”) Motion to
Remand Action to the Superior Court of California, County of Orange (“Motion”) (Dkt.
23) and Defendants Motion to Dismiss (Dkt. 24). The Court finds these matters
appropriate for resolution without oral argument. See Fed. R. Civ. P. 78; L.R. 7-15.
Having considered the parties’ arguments, the Court GRANTS Plaintiff’s Motion to
Remand and DENIES AS MOOT Defendants’ Motion to Dismiss.
I.

Background
A.

Facts

The Court adopts the facts as set out in Plaintiff’s Complaint, Notice of Removal
(Dkt. 1) Ex. 1 (“Compl.”).

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 17-0808-DOC (JDEx)

Date: June 28, 2017
Page 2

In July 2003, Plaintiff took out a disability insurance policy (“Policy”) with
Defendant Northwestern Mutual (“Northwestern Mutual”). Id. ¶¶ 1, 14. On July 11,
2003, Plaintiff provided information to his insurance agent, Curtis R. Estes (“Estes”),
who filled out a disability insurance application with Northwestern Mutual. Id. ¶ 15.
Plaintiff was also required to fill out a questionnaire (“Non-Medical Questionnaire”) that
included a question asking whether, in the last ten years, “‘[Plaintiff] had, been told
[Plaintiff] had or been treated for . . . [d]isorder of eyes (including double vision), ears,
nose mouth, throat or speech?’” Id. Plaintiff alleges that Estes answered “no” on
Plaintiff’s behalf without asking Plaintiff. Id.
Seven days later, Northwestern Mutual conducted a medical exam, which included
a questionnaire (“Medical Questionnaire”). Id. ¶ 16. The medical exam and Medical
Questionnaire were completed by an employee of Defendant ExamOne (“ExamOne”),
who, without asking Plaintiff, also marked “no” when answering an identical question
regarding eye, ear, nose mouth, throat, and speech disorders. Id. The ExamOne agent also
examined Plaintiff’s eyes and found no abnormalities. Id. ¶ 17.
At the time that Estes and the ExamOne agent completed the Non-Medical and
Medical Questionnaires, Plaintiff had corneal swelling, blurred vision, and was taking
over-the-counter eye drops. Id. ¶ 7. However, Plaintiff’s optometrist had not diagnosed
him with any eye disorders, nor was Plaintiff being treated for an eye disorder. Id. ¶ 17.
On July 18, 2003, Northwestern Mutual issued the Policy to Plaintiff. Id. ¶ 19.
Under the Policy, Northwestern Mutual has two years from the date of issuance to
rescind the Policy or deny a claim for a disability except when a “fraudulent
misstatement” is made by the policyholder. Id. ¶ 22. Plaintiff paid premiums on his
Policy for over a decade, totaling over $45,000.00. Id. ¶ 23.
In 2015, Plaintiff was diagnosed with thyroid cancer, leaving him unable to
continue his employment. Id ¶ 23. Plaintiff tried to use his disability insurance, but
Northwestern Mutual rescinded Plaintiff’s Policy after it conducted post-claims
underwriting of the Policy. Id. ¶¶ 23–24. Northwestern Mutual stated that the decision to
rescind was due to Plaintiff’s failure to disclose the eye blurriness, corneal swelling, and
taking of over-the-counter drugs in 2003. Id. However, Plaintiff contends that
Northwestern Mutual has not established that it made its decision to rescind Plaintiff’s
Policy based on a “fraudulent misrepresentation” made by Plaintiff. Id.
Plaintiff contends that he has suffered loss of income and assets as a result of
Northwestern Mutual’s decision to rescind his Policy. Id. ¶ 32.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 17-0808-DOC (JDEx)

Date: June 28, 2017
Page 3

In his Complaint, Plaintiff alleges four causes of action: (1) breach of good faith
and fair dealing against Northwestern Mutual; (2) breach of contract against
Northwestern Mutual; (3) professional negligence against Estes, ExamOne, and
Northwestern Mutual; and (4) breach of fiduciary duty against Estes. Id. ¶¶ 35–72.
II.

Procedural History

On March 22, 2017, Plaintiff filed the instant Complaint in the Superior Court of
Orange County. See Compl. at 1. On May 2, 2017, Northwestern Mutual removed this
case to federal court. Notice of Removal (“Notice”) (Dkt. 1).
On June 2, 2017, Plaintiff filed the instant Motion to Remand. Northwestern
Mutual opposed on June 19, 2017 (“Opp’n”) (Dkt. 29), and Plaintiff replied on June 26,
2017 (“Reply”) (Dkt. 30).
III.

Legal Standard

“If at any time before final judgment it appears that the district court lacks subject
matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). Removal of a case
from state court to federal court is governed by 28 U.S.C. § 1441, which provides in
pertinent part that “any civil action brought in a State court of which the district courts of
the United States have original jurisdiction, may be removed . . . to the district court of
the United States for the district and division embracing the place where such action is
pending.” The removing defendant must file a notice of removal in the appropriate
United States District Court, together with all process, pleadings, and orders served upon
the defendant. 28 U.S.C. § 1446(a). Notice of removal must be filed within thirty days of
receiving a copy of the original complaint, or “within 30 days after the service of
summons upon the defendant, if such initial pleading has then been filed in court and is
not required to be served on the defendant, whichever period is shorter.” 28 U.S.C. §
1446(b). Remand may be ordered for lack of subject matter jurisdiction or any defect in
the removal procedure. 28 U.S.C. § 1447(c).
“[P]ost-removal amendments to the pleadings cannot affect whether a case is
removable, because the propriety of removal is determined solely on the basis of the
pleadings filed in state court.” Williams v. Costco Wholesale Corp., 471 F.3d 975, 976
(9th Cir. 2006); see also Sparta Surgical Corp. v. Nat’l Ass’n of Sec. Dealers, Inc., 159
F.3d 1209, 1213 (9th Cir. 1998) (“[A] plaintiff may not compel remand by amending a
complaint to eliminate the federal question upon which removal was based.”). Therefore,
“a party that has properly removed a case need not amend its removal notice or file a new
notice after an amended complaint changes the ground for federal jurisdiction.” Id. Once

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 17-0808-DOC (JDEx)

Date: June 28, 2017
Page 4

a defendant has properly removed a case, “the district court has jurisdiction over it on all
grounds apparent from the complaint, not just those cited in the removal notice.” Id.
To protect the jurisdiction of state courts, removal jurisdiction should be strictly
construed in favor of remand. Harris v. Bankers Life and Cas. Co., 425 F.3d 689, 698
(9th Cir. 2005) (citing Shamrock Oil & Gas Corp. v. Sheet, 313 U.S. 100, 108–09
(1941)). If there is any doubt as to the right of removal in the first instance, remand must
be ordered. See Ethridge v. Harbor House Rest., 861 F.2d 1389, 1393 (9th Cir. 1988).
IV.

Discussion

In his Motion, Plaintiff contends that the instant action is suitable for remand
because complete diversity of citizenship under 28 U.S.C. §1332 does not exist as Estes
is a citizen of California. Mot. at 5. In its Opposition, Northwestern Mutual argues that
Estes’s citizenship should not be considered in assessing diversity because he is a “sham”
defendant. Opp’n at 1.
A federal court has diversity jurisdiction if (1) the controversy is between “citizens
of different States,” and (2) the amount in controversy exceeds the sum or value of
$75,000. 28 U.S.C. § 1332(a). Section 1332(a) requires complete diversity, meaning that
no plaintiff can be from the same state as any defendant. Abrego Abrego v. The Dow
Chem. Co., 443 F.3d 676, 679 (9th Cir. 2006).
Plaintiff contends that Estes is a citizen of California, and that Plaintiff is also a
citizen of California. Mot. at 5. Plaintiff does not argue that the amount in controversy
requirement is not met. See id. If Plaintiff is correct, there is not complete diversity.
Northwestern Mutual, however, argues that Estes was fraudulently joined. Opp’n at 7.
A case ordinarily cannot be removed to the federal court if a plaintiff and a
defendant are citizens of the same state. However,
[r]emoval is proper despite the presence of a non-diverse defendant
where that defendant is a fraudulently joined or sham defendant. See
Caterpillar, Inc. v. Lewis, 519 U.S. 61, 68 (1996). In the Ninth Circuit, 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. Kruso v. Int’l Tel. & Tel.
Corp., 872 F.2d 1416, 1426 (9th Cir. 1989). The failure to state a claim
against the non-diverse defendant must be “obvious according to the

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 17-0808-DOC (JDEx)

Date: June 28, 2017
Page 5

well-settled rules of the state.” United Computer Sys. v. AT&T Corp.,
298 F.3d 756, 761 (9th Cir. 2002).
Padilla v. AT&T Corp., 697 F. Supp. 2d 1156, 1158–59 (C.D. Cal. 2009).
There is a “general presumption” that the inclusion of a defendant residing in the
same state as the plaintiff is not for the sole purpose of defeating diversity jurisdiction.
Hamilton Materials, Inc. v. Dow Chemical Corp., 494 F.3d 1203, 1206 (9th Cir. 2007).
Overcoming this presumption requires defendants to “do more than show that the
complaint at the time of removal fails to state a claim against the non-diverse defendant.”
Padilla, 697 F. Supp. 2d at 1159 (citations omitted). “[A] plaintiff need only have one
potentially valid claim against a non-diverse defendant to survive a fraudulent joinder
challenge.” Rieger v. Wells Fargo Bank, Nat. Ass’n, No. 3:13-0749-JSC, 2013 WL
1748045, at *3 (N.D. Cal. Apr. 23, 2013) (citation omitted). “[R]emand must be granted
unless the defendant shows that the plaintiff would not be afforded leave to amend his
complaint to cure [the] purported deficiency.” Id.
Northwestern Mutual argues that Plaintiff cannot state a claim against Estes
because (1) actions of insurance agents are imputed to their employer, and (2) there is no
causal connection between Estes’s actions and Northwestern Mutual’s decision to rescind
Plaintiff’s Policy. Opp’n at 1. Accordingly, to assess diversity, the Court must determine
whether Plaintiff successfully states a claim against Estes for professional negligence and
breach of fiduciary dutym and evaluate the casual connection between Estes’s actions and
Northwestern Mutual’s decsion.
1.

Imputed Actions

Northwestern Mutual argues that Estes is a sham defendant because Estes’s
actions are imputed to Northwestern Mutual. Opp’n at 4. In his Complaint, Plaintiff
alleges two causes of action against Estes: professional negligence and breach of
fiduciary duty.
a.

Professional Negligence

Northwestern Mutual contends that Plaintiff has failed to state a claim against
Estes for professional negligence because Estes was not personally liable to Plaintiff.
Opp’n at 5. Generally, an insurance agent’s negligence is imputed to the insurance
company. Kurtz, Richards, Wilson & Co., Inc. v. Ins. Communicators Mktg. Corp., 12
Cal. App. 4th 1249, 1257–58 (1993).

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 17-0808-DOC (JDEx)

Date: June 28, 2017
Page 6

However, an insurance agent may be a dual agent if they “represent both the
insurer and the insured in connection with the same transaction.” Arocho v. California
Fair Plan Ins. Co., 134 Cal. App. 4th 461, 466 (2005). “If a dual agency exists, the law
does not foreclose recovery by the insured [against an insurance agent.]” Kurtz, 12 Cal.
App. 4th at 1258. “Dual agencies are not uncommon, and do not negate the agent’s duty
to the client.” Kurtz, 12 Cal. App. 4th at 1257. The “existence of a dual agency [is] a
question to be determined by the trier of fact.” Lippert v. Bailey, 241 Cal. App. 2d 376,
382 (1966). Insurance agents can also be held personally liable when the agent holds
himself out as having expertise in a given field of insurance sought by the insured.
Fitzpatrick v. Hayes, 57 Cal. App. 4th 916, 927 (1997).
In the instant action, Plaintiff alleges that Estes was acting as a dual agent: an
agent of Northwestern Mutual and as Plaintiff’s personal wealth and financial advisor.
Mot. at 7–8. In addition, Plaintiff alleges that Estes held himself out as having expertise
in disability insurance. Compl. ¶ 53; Mot. at 8. The Court finds that Plaintiff has
plausibly alleged dual agency, and therefore has stated a claim for professional
negligence. See Kruso, 872 F.2d at 1426.
Because Plaintiff need only plead one valid claim against Estes, the Court need not
address the parties’ arguments with respect to Plaintiff’s cause of action against Estes for
breach of fiduciary duty.1 See Rieger, 2013 WL 1748045 at *3.
2.

Causation

Northwestern Mutual argues that Estes is also not liable to Plaintiff because
Northwestern Mutual did not rely on the Non-Medical Questionnaire when deciding to
rescind Plaintiff’s Policy. Opp’n at 19. If Northwestern Mutual is correct, Estes is not
responsible for Northwestern Mutual’s decision for revoke the Policy or for the resulting
injury that Plaintiff allegedly suffered.
Plaintiff asserts that he has sufficiently alleged causation between Estes’s actions
and Northwestern Mutual’s decision to rescind Plaintiff’s Policy. Mot. at 12–13. Plaintiff
argues that Northwestern Mutual would not have rescinded his Policy if Estes had
included Plaintiff’s minor eye problems on the Non-Medical Questionnaire. Mot. at 13.
However, Northwestern Mutual’s Declaration states that “Northwestern Mutual relied on
the Medical History Questionnaire completed by ExamOne in underwriting the Policy; it
1

Even if Plaintiff failed to sufficiently state a claim against Estes, a state court in California would grant Plaintiff
leave to amend. See McDonald v. Superior Court, 180 Cal. App. 3d 297, 303–04 (1986). In his Motion, Plaintiff
provides several allegations he would seek to add to his Complaint in the Superior Court of Orange County that
would bolster his claims. Mot. at 14–15.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 17-0808-DOC (JDEx)

Date: June 28, 2017
Page 7

did not rely on the Non[-]Medical Questionnaire completed by Estes.” Declaration of
Cindy Lubbert in Opposition to Plaintiff’s Motion to Remand (“Lubbert Decl.”) (Dkt. 291) at 2.
Northwestern Mutual cites Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318
(1998) for the proposition that a defendant may present facts showing that joinder is
fraudulent. Opp’n at 19. However, “‘a summary inquiry is appropriate only to identify the
presence of discrete and undisputed facts that would preclude plaintiff’s recovery against
the in-state defendant . . . .’” Hunter v. Philip Morris USA, 582 F.3d 1039, 1044 (9th Cir.
2009) (citing Smallwood v. Illinois Cent. R. Co., 385 F.3d 568, 573–74 (5th Cir. 2004)).
On a motion to remand, a court must resolve all disputed questions of fact in favor of the
non-removing party. Onelum v. Best Buy Stores L.P., 948 F. Supp. 2d 1048, 1051–52
(C.D. Cal. 2013). The parties dispute whether Northwestern Mutual relied on the NonMedical Questionnaire when deciding to rescind Plaintiff’s Policy. See Opp’n at 19; Mot.
at 13. For the purposes of this Motion, the Court resolved this factual dispute in Plaintiffs
favor.
The Court finds that Plaintiff’s joinder of Estes is not fraudulent. As a result there
is not complete diversity of citizenship. Accordingly, this action must be remanded to
state court.
V.

Disposition

For the foregoing reasons, the Court GRANTS Plaintiff’s Motion to Remand. This
case is REMANDED to the Superior Court of Orange County.
Defendants’ Motion to Dismiss is DENIED AS MOOT.
The Clerk shall serve this minute order on the parties.
MINUTES FORM 11
CIVIL-GEN

Initials of Deputy Clerk: djg