Bordenave v. Safeco Ins. Co. of Illinois et al

Filing 13

ORDER signed by Chief District Judge Kimberly J. Mueller on 7/16/21 REMANDING CASE to the Superior Court of the State of California, County of Butte. Certified copy of remand order sent to other court. CASE CLOSED(Kastilahn, A)

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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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Neal Bordenave,

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Plaintiff,

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No. 2:20-cv-01939-KJM-DMC
ORDER

v.
Safeco Insurance Company of Illinois, Braden
J. Danyus,
Defendants.

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Plaintiff Neal Bordenave originally brought this action in state court against defendants

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Safeco Insurance Company of Illinois and appraiser Braden Danyus. Safeco removed the action

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to this court based on the parties’ diversity of citizenship. Mr. Bordenave has moved to remand.

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For the reasons below, the court grants the motion to remand.

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I.

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BACKGROUND
Mr. Bordenave had a home insurance policy with Safeco when his home was destroyed in

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the 2018 Camp Fire. Compl. ¶¶ 8–12, Not. Removal Ex. A, ECF No. 1; see generally Policy,

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Not. Removal Ex. A, ECF No. 1. After the fire, Mr. Bordenave filed a claim with Safeco,

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seeking payment of benefits under the policy. Compl. ¶ 13. Mr. Bordenave alleges Safeco

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attempted to minimize the payout under the policy by undervaluing his losses and making lowball

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offers to cover the cost of replacing his home, id. ¶ 15, which he refused to accept, id. ¶ 17.
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Mr. Bordenave elected to purchase a replacement home “in lieu of rebuilding” his home, as

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permitted by his policy coverage. Id. ¶ 22. Mr. Bordenave found a new home. Id. Safeco hired

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Mr. Danyus to appraise it. Id. ¶ 23. Mr. Bordenave alleges Mr. Danyus falsely inflated the value

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of the replacement property to minimize Safeco’s payment. Id. ¶¶ 24–25.

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As noted, Mr. Bordenave originally filed this action in California state court. Not.

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Removal ¶ 1. Against Safeco, Mr. Bordenave asserts breach of contract and breach of the

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covenant of good faith and fair dealing. Compl. ¶¶ 29–41. Against Mr. Danyus, he asserts

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negligent misrepresentation, violation of Business and Professions Code section 17200, and tort

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of another. Id. ¶¶ 42–62. Safeco removed the matter to this court, asserting diversity jurisdiction.

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See generally Not. Removal. Safeco is a corporation organized in Illinois with its principal place

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of business in Massachusetts, while Mr. Bordenave and Mr. Danyus are both citizens of

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California. Id. ¶¶ 8–10. Safeco alleges in the notice of removal that Mr. Bordenave fraudulently

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joined Mr. Danyus in an attempt to prevent removal. Id. ¶¶ 13–14. Mr. Bordenave’s motion to

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remand is fully briefed and the court submitted it without oral argument. Mot. Remand, ECF

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No. 6; Opp’n, ECF No. 7; Reply, ECF No. 9; Min. Order, ECF No. 8.

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II.

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LEGAL STANDARD
When a federal district court would have had original jurisdiction over an action originally

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filed in state court, the action may be removed to federal court. 28 U.S.C. § 1441(a). The

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removal statute is strictly construed, and doubts regarding the court’s jurisdiction are resolved in

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favor of remand. See Luther v. Countrywide Home Loans Servicing, LP, 533 F.3d 1031, 1034

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(9th Cir. 2008). Removal is proper only when (1) the case presents a federal question or (2) there

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is diversity of citizenship between the parties and the amount in controversy exceeds $75,000.

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See 28 U.S.C. §§ 1331, 1332(a).

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Diversity jurisdiction requires complete diversity, meaning each plaintiff has different

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citizenship when compared to each defendant. Grancare, LLC v. Thrower by & through Mills,

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889 F.3d 543, 548 (9th Cir. 2018) (citing Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996)). “In

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determining whether there is complete diversity, district courts may disregard the citizenship of a

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non-diverse defendant who has been fraudulently joined.” Id. (citing Chesapeake & Ohio Ry. Co.
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v. Cockrell, 232 U.S. 146, 152 (1914)). “There are two ways to establish fraudulent joinder:

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(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a

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cause of action against the non-diverse party in state court.” Id. (citation and marks omitted).

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The court may find fraudulent joinder only if, “after all disputed questions of fact and all

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ambiguities in the controlling state law are resolved in the plaintiff’s favor, the plaintiff could not

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possibly recover against the party whose joinder is questioned.” Nasrawi v. Buck Consultants,

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LLC, 713 F. Supp. 2d 1080, 1084 (E.D. Cal. 2010) (citing Kruso v. Int’l Tel. & Tel. Corp.,

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872 F.2d 1416, 1426 (9th Cir. 1989)). “But ‘if there is a possibility that a state court would find

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that the complaint states a cause of action against any of the resident defendants, the federal court

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must find that the joinder was proper and remand the case to the state court.’” Grancare,

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889 F.3d at 548 (quoting Hunter v. Philip Morris USA, 582 F.3d 1039, 1046 (9th Cir. 2009)).

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The “plaintiff need only have one potentially valid claim against a non-diverse defendant to

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survive a fraudulent joinder challenge.” Nasrawi, 713 F. Supp. 2d at 1084–85 (citation and marks

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omitted).

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“Fraudulent joinder claims may be resolved by ‘piercing the pleadings’ and considering

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summary judgment-type evidence such as affidavits and deposition testimony.” Morris v.

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Princess Cruises, Inc., 236 F.3d 1061, 1068 (9th Cir. 2001) (citation and marks omitted). The

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removing defendant “bears a heavy burden” in attempting to show removal as here is proper

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given the “general presumption against fraudulent joinder.” Hunter, 582 F.3d at 1044.

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III.

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ANALYSIS
Mr. Bordenave argues the case must be remanded because Mr. Danyus is properly joined

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and not completely diverse. Mot. Remand at 6–8. Safeco argues Mr. Danyus was fraudulently

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joined, in part because, it says, all the claims against Mr. Danyus are barred by the economic loss

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rule. Opp’n at 10–12.

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“[T]he economic loss rule ‘prevent[s] the law of contract and the law of tort from

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dissolving one into the other.’” Robinson Helicopter Co. v. Dana Corp., 34 Cal. 4th 979, 988

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(2004) (citation omitted). Generally, purely economic losses are not recoverable based on a

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negligence claim. S.M. Wilson & Co. v. Smith Int’l, Inc., 587 F.2d 1363, 1376 (9th Cir. 1978);
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Seely v. White Motor Co., 63 Cal. 2d 9, 16–18 (1965). However, a plaintiff can recover tort

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damages in a contract case if there was physical harm, if a defendant breached a legal duty

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independent of the contract, or if a “special relationship” existed between the parties. See

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Robinson, 34 Cal. 4th at 989; J’Aire Corp. v. Gregory, 24 Cal. 3d 799, 804 (1979).

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Mr. Bordenave is able to state a claim against Mr. Danyus despite the economic loss rule.

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Real estate appraisers and insurance company employees can be liable for negligent

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misrepresentation under California law in some circumstances even when they are not parties to a

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contract. See Cecena v. Allstate Ins. Co., 358 F. App’x 798, 799–800 (9th Cir. 2009)

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(unpublished) (citing McNeill v. State Farm Life Ins. Co., 116 Cal. App. 4th 597, 603 (2004)).

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For example, in Soderberg v. McKinney, an appraiser faced potential tort liability for

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misrepresentations in an appraisal even though the appraiser was not hired by the investors who

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claimed they were harmed. See 44 Cal. App. 4th 1760, 1766–67 (1996) (“[A] supplier of

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information is liable for negligence to a third party only if he or she intends to supply the

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information for the benefit of one or more third parties in a specific transaction or type of

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transaction identified to the supplier.” (citing Bily v. Arthur Young & Co., 3 Cal. 4th 370, 392

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(1992))).

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The Court of Appeal’s decision in Bock v. Hansen confirms a tort claim might be viable

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against Mr. Danyus here. 225 Cal. App. 4th 215 (2014). In Bock, the court recognized that an

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insurance adjuster can be liable for negligent misrepresentation. See generally id. Safeco claims

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Bock is distinguishable because the adjuster’s misrepresentations in that case allegedly caused

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physical harm, whereas Mr. Bordenave alleges no physical injury. Opp’n at 17. At least one

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federal district court has read Bock as Safeco does. See Feizbakhsh v. Travelers Com. Ins. Co.,

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No. 16-2165, 2016 WL 8732296, at *6 (C.D. Cal. Sept. 9, 2016) (finding Bock “applied the well-

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settled rule that an agent can be held personally liable for negligent misrepresentation when

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physical injury results”). Many other federal district courts, however, have held that negligent

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misrepresentation claims might be viable even without allegations of physical injury “because

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such claims are not ‘obviously foreclosed according to settled principles.’” Livshetz v. Fed. Ins.

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Co., No. 20-3374, 2020 WL 4748461, at *3 (C.D. Cal. Aug. 17, 2020) (quoting Zuccolotto v.
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Zurich Am. Ins. Co., No. 16-1277, 2016 WL 10981515, at *3 (C.D. Cal. Sept. 26, 2016)); see

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also, e.g., 818Computer, Inc. v. Sentinel Ins. Co., Ltd., No. 19-9, 2019 WL 698102, at *4 (C.D.

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Cal. Feb. 19, 2019). These courts persuasively reason that any “uncertainty surrounding the

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proper scope of Bock” means a state court must determine whether the negligence claim has

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merit. Zuccolotto, 2016 WL 10981515 at *3. While it remains uncertain whether a state court

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would allow the tort claims against Mr. Danyus to proceed, even a remote possibility of success

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on a single claim means Mr. Danyus was not fraudulently joined. See Livshetz, 2020 WL

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4748461, at *3 (“[A]ny ambiguity in state law must be resolved in favor of the [plaintiff].”);

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Nasrawi, 713 F. Supp. 2d at 1084–85.

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Safeco also urges the court to hold that Mr. Danyus was fraudulently joined because

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Mr. Bordenave does not adequately plead negligent misrepresentation. Opp’n at 13–17. This

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argument misperceives the relevant legal test. “If a plaintiff’s complaint can withstand a Rule

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12(b)(6) motion . . . it necessarily follows that the defendant has not been fraudulently joined.”

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Grancare, 889 F.3d at 550. The inverse, however, is not necessarily true. That is, if the

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complaint could not survive a motion to dismiss, the fraudulent joinder “inquiry does not end.”

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Id. “[T]he district court must consider . . . whether a deficiency in the complaint can possibly be

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cured by granting the plaintiff leave to amend.” Id.

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In any event, Mr. Bordenave’s allegations satisfy the applicable pleading requirements for

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purposes of this motion. A negligent misrepresentation claim has five elements: “(1) the

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misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it

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to be true, (3) with intent to induce another’s reliance on the fact misrepresented, (4) justifiable

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reliance on the misrepresentation, and (5) resulting damage.” Apollo Capital Fund, LLC v. Roth

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Cap. Partners, LLC, 158 Cal. App. 4th 226, 243 (2007) (citation omitted). Mr. Bordenave’s

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allegations map onto these elements. He alleges Mr. Danyus made a misrepresentation of fact by

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inflating the value of the replacement property in his appraisal. See Compl. ¶¶ 23– 24.

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Mr. Danyus’ misrepresentation was allegedly made without the reasonable belief that it was true,

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and to lower Safeco’s payment to Mr. Bordenave. Id. ¶ 44. The misrepresentation was allegedly

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made with the intent to induce Mr. Bordenave’s reliance—to get him to accept Safeco’s offer.
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See Reply at 7. Mr. Bordenave relied on the misrepresentation and chose to purchase a different

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property, and he “would not have done that but for Danyus’ lowball estimate.” Id. at 7–8. Lastly,

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Mr. Bordenave seeks damages because “he had to pay more for a different property to obtain full

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replacement cost benefits.” Id. at 8 (citing Compl. ¶¶ 14–25). To the extent the complaint falls

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short of articulating these claims with more detailed factual allegations, Mr. Bordenave could

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likely add those allegations to an amended complaint; the joinder of Mr. Danyus was not

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fraudulent. See Livshetz, 2020 WL 4748461, at *4 (holding joinder not fraudulent because

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defendants had not shown “[plaintiffs’] purported failure to meet the appropriate pleading

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standard could not be cured by amendment”).

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Because Mr. Bordenave could potentially state at least one negligent misrepresentation

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claim against Mr. Danyus, his joinder was not fraudulent. See Grancare, 889 F.3d at 548. The

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court need not reach Mr. Bordenave’s other claims.

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IV.

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CONCLUSION
The motion to remand is granted. This case is remanded to the Superior Court of the

State of California in and for the County of Butte.

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The Clerk is directed to close the case.

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This order resolves ECF No. 6.

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IT IS SO ORDERED.

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DATED: July 16, 2021.

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