Ferdowsnia v. Standard Insurance Company et al

Filing 25

ORDER by Judge Samuel Conti granting 16 Motion to Remand (sclc2, COURT STAFF) (Filed on 5/10/2011)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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ROYA FERDOWSNIA,
Plaintiff,

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v.

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For the Northern District of California

United States District Court

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STANDARD INSURANCE COMPANY;
STEVE POIZNER as COMMISSIONER OF
INSURANCE; and DOES 1-20,
inclusive,

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Defendants.

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) Case No. 11-0720 SC
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) ORDER GRANTING PLAINTIFF'S
) MOTION TO REMAND
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I.

INTRODUCTION
This matter comes before the Court on the Motion to Remand

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filed by Plaintiff Roya Ferdowsnia ("Plaintiff").

ECF No. 9

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("Mot.").

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"Standard") filed an Opposition, and Plaintiff submitted a Reply.

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ECF Nos. 19, 20.

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GRANTED.

Defendant Standard Insurance Company ("Defendant" or

For the following reasons, Plaintiff's Motion is

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II.

BACKGROUND
This action arises out of an individual long-term disability

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insurance policy Standard issued to Plaintiff (hereinafter, "the

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Policy").

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of Removal") ¶ 15.

Plaintiff is a California resident.

ECF No. 1 ("Notice

Standard is an Oregon corporation with its

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principal place of business in Oregon.

Id. ¶ 23.

Plaintiff alleges the following facts.

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While Plaintiff was

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employed as a dental hygienist, she purchased the Policy, which

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purported to provide monthly benefits if she became unable to

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perform her regular occupation due to a covered disability.

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Coleman Decl. ¶ 2 Ex. A ("FAC") ¶¶ 4-6.1

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as a result of, inter alia, upper extremity pain and carpal tunnel

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syndrome while the Policy was in effect.

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2009, after paying benefits for a period of time, Standard denied

Plaintiff became disabled

Id. ¶ 7.

On March 12,

United States District Court

For the Northern District of California

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Plaintiff's claim for continued disability benefits despite the

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fact that Plaintiff was and remains unable to work as a dental

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hygienist.

Id. ¶ 8.

On March 9, 2010, Plaintiff filed this action in San Francisco

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County Superior Court.

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of contract and bad faith against Standard for the alleged wrongful

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termination of her disability benefits.

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asserted a claim for writ of mandamus against the Commissioner of

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the California Department of Insurance ("Commissioner").

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24-30.

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and that the Commissioner abused his discretion by approving the

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policy in contravention of California Insurance Code Section

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10291.5.2

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Mot. at 2.

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FAC ¶¶ 13-23.

She also

Id. ¶¶

She alleged that the Policy contained misleading provisions

Id. ¶ 28.

Plaintiff thus sought a writ of mandamus

Terrence J. Coleman ("Coleman"), attorney for Plaintiff, filed a
declaration in support of the instant Motion. ECF No. 10.
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She asserted claims for breach

Section 10291.5 of the California Insurance Code gives the
Commissioner the power to disapprove certain disability insurance
policies. Specifically, subparagraph (b)(1) provides that "the
commissioner shall not approve any disability policy for insurance
... if the commissioner finds that it contains any provision ...
[that] is unintelligible, uncertain, ambiguous, or abstruse, or
likely to mislead a person to whom the policy is offered, delivered
or issued." Cal. Ins. Code § 10291.5(b)(1).

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compelling the Commissioner to withdraw approval of the Policy and

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associated forms either entirely or to the extent that their

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provisions violate the California Insurance Code.

Id.

On June 7, 2010, Standard filed a special demurrer arguing

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that joinder of the Commissioner as a defendant was improper

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because: (1) Plaintiff's claims against Standard were unrelated to

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her claim against the Commissioner; and (2) Plaintiff's claim

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against the Commissioner was invalid as a matter of law.

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Decl. ¶ 3 Ex. B ("Standard's Demurrer").

Coleman

The court overruled the

United States District Court

For the Northern District of California

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demurrer on July 12, 2010, finding that the claims were

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sufficiently related.

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Demurrer").

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validity of Plaintiff's claim against the Commissioner, noting, "I

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don't think I can or should resolve the validity of the mandate

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cause of action in the absence of the party against whom that is

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directed and that party, for whatever reason, has chosen to answer

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the complaint."

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Id. Ex. C. ("Order Overruling Standard's

In doing so, the court declined to rule on the

Id. Ex. D ("July 12, 2010 Hearing Tr.") at 2:15-

On January 19, 2011, the Commissioner moved to dismiss

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Plaintiff's mandamus claim, and Standard joined the Commissioner's

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motion.

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("Standard's Joinder in Commissioner's MTD").3

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2011 hearing, the Court issued a tentative ruling granting the

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Commissioner's motion.

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13:23-25.

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prepare a proposed order consistent with the court's tentative

Ellinikos Decl. Ex. E ("Commissioner's MTD"), Ex. F
At a February 15,

Id. Ex. H ("Feb. 15, 2011 Hearing Tr.") at

The court instructed counsel for the Commissioner to

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Maria Ellinikos ("Ellinikos"), attorney for Standard, filed a
declaration in support of the Opposition. ECF No. 19-2.

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ruling.

Id. at 13:27-14:1.

A few hours after the hearing, before

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the proposed order had been submitted to the court for entry,

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Standard removed the action to federal court on diversity grounds

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pursuant to 28 U.S.C. §§ 1332(a) and 1441(b).

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see also Notice of Removal.

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back to state court.

Coleman Decl. ¶ 4;

Plaintiff now moves to remand the case

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III. LEGAL STANDARD
Any civil action brought in a state court may be removed to

United States District Court

For the Northern District of California

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federal court if there is complete diversity of citizenship and the

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amount in controversy exceeds $75,000.

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As a general rule, the court must strictly construe the removal

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statute, "and any doubt about the right of removal requires

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resolution in favor of remand."

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Inc., 553 F.3d 1241, 1244 (9th Cir. 2009) (citation omitted).

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presumption against removal means that the defendant always has the

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burden of establishing that removal is proper."

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quotations omitted).

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28 U.S.C. §§ 1332, 1441.

Moore-Thomas v. Alaska Airlines,
"The

Id. (internal

Under the "voluntary-involuntary rule" as articulated by the

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Ninth Circuit, "a suit which, at the time of filing, could not have

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been brought in federal court 'must remain in state court unless a

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voluntary act of the plaintiff brings about a change that renders

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the case removable.'"

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(9th Cir. 1993) (quoting Self v. Gen. Motors Corp., 588 F.2d 655,

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657 (9th Cir. 1978)).

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allow creation of diversity removal jurisdiction by court order

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dismissing the non-diverse defendant."

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of New York, 790 F.2d 769, 773 (9th Cir. 1986) (citing Self, 588

California v. Keating, 986 F.2d 346, 348

The voluntary-involuntary rule "does not

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Gould v. Mut. Life Ins. Co.

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F.2d at 660).
An exception to the voluntary-involuntary rule exists if the

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non-diverse defendant was fraudulently joined in order to defeat

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removal.

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fraudulent purpose to defeat removal, the plaintiff may by the

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allegations of his complaint determine the status with respect to

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removability of a case . . . ."); Cava v. Netversant-National,

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Inc., No. 07-02597, 2007 WL 4326754, at *3 (N.D. Cal. Dec. 7, 2007)

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("Notwithstanding the 'voluntary-involuntary' rule, removal of a

See Self, 588 F.2d at 659 ("[I]n the absence of a

United States District Court

For the Northern District of California

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civil action that alleges claims against a non-diverse defendant is

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proper where it appears that such defendant has been fraudulently

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joined.").

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IV.

DISCUSSION
Plaintiff argues in pertinent part that Standard's removal

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violated the voluntary-involuntary rule.4

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contends that removal was proper because the Commissioner was

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fraudulently joined as a sham defendant to defeat federal diversity

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jurisdiction.

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finds that removal of this action to federal court was improper.

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Joinder of a resident defendant is fraudulent "if the

Opp'n at 9.

Mot. at 5.

Standard

The Court agrees with Plaintiff and

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plaintiff fails to state a cause of action against [the] resident

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defendant, and the failure is obvious according to the settled

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Plaintiff also argues that Standard's removal was premature
because the state court had not yet entered a formal, written order
dismissing Plaintiff's claim against the Commissioner at the time
Standard filed its Notice of Removal. Mot. at 7. Thus, according
to Plaintiff, the Commissioner remains a party to the action. The
Court does not reach this argument because it finds that removal
was improper even if Plaintiff's claim against the Commissioner has
been properly dismissed.

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rules of the state."

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1061, 1067 (9th Cir. 2001).

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burden to establish fraudulent joinder "by clear and convincing

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evidence."

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F.3d 1203, 1206 (9th Cir. 2007).

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disputed questions of fact and all ambiguities in the controlling

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state law in favor of the non-removing party."

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Package Sys., Inc., 141 F. Supp. 2d 1005, 1008 (N.D. Cal. 2001)

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(internal quotations omitted).

United States District Court

For the Northern District of California

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Morris v. Princess Cruises, Inc., 236 F.3d
A removing defendant bears a heavy

Hamilton Materials, Inc. v. Dow Chemical Corp., 494
The court must resolve "all

Plute v. Roadway

Standard argues that this case falls within the fraudulent

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joinder exception to the voluntary-involuntary rule.

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It contends that the settled law of California precludes a court

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from issuing a writ of mandamus to compel the Commissioner to

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revoke approval of an insurance policy.

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acknowledges that numerous federal courts in this district have

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held otherwise.

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C-07-02597, 2007 U.S. Dist. LEXIS 90295, at *21 (N.D. Cal. Nov. 29,

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2007); Sullivan v. Unum Life Ins. Co. of Am., No. C-04-00326, 2004

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WL 828561, at *3 (N.D. Cal. Apr. 15, 2004); Branzina v. Paul Revere

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Life Ins. Co., 271 F. Supp. 2d 1163, 1172 (N.D. Cal. 2003).

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Standard argues that each of these district court decisions relied

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on the same two inapposite cases -- Peterson v. Am. Life & Health

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Ins. Co., 48 F.3d 404, 410 (9th Cir. 1995) and Van Ness v. Blue

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Cross of Cal., 87 Cal. App. 4th 364, 371-72 (Ct. App. 2001) -- and

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thus reached the same erroneous conclusion.

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Peterson and Van Ness stated in dicta that an insured may petition

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for a writ of mandamus requiring the Commissioner to revoke

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approval of a policy if the insured believes the Commissioner

Id. at 4.

Opp'n at 9.

Standard

See, e.g., Contreras v. Metro. Life Ins. Co., No.

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Opp'n at 5.

Both

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abused his discretion in approving the policy under section

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10291.5.
In support of its position that the settled law of California

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bars Plaintiff's mandamus claim, Standard relies on Schwartz v.

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Poizner, 187 Cal. App. 4th 592 (Ct. App. 2010), and cites four

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state trial court orders sustaining demurrers by the Commissioner

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to similar claims.5
Standard's reliance on Schwartz is misplaced.

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Fraudulent

joinder is determined as of the time the complaint was filed.

Beck

United States District Court

For the Northern District of California

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v. Starbuck's Corp., No. C-08-2930, 2008 WL 4298575, at *2 (N.D.

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Cal. Sept. 19, 2008) (remanding case despite fact that after

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plaintiff filed his complaint the California Supreme Court issued a

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decision precluding liability against the non-diverse defendant).

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Schwartz was decided nearly five months after Plaintiff filed her

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FAC.

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Plaintiff's -- which Plaintiff vigorously disputes -- it has no

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bearing on whether Plaintiff fraudulently joined the Commissioner

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in the instant action.

Thus, even if Schwartz would preclude mandamus claims such as

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The trial court orders provided by Standard in which the

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Commissioner's demurrers to similar mandamus claims were sustained

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also fail to establish that there was a settled rule barring

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Plaintiff's mandamus claim when the FAC was filed.

In her reply

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Standard asks the Court to take judicial notice of court orders
sustaining demurrers by the Commissioner in the following cases:
Harris v. Bank of Am., N.A., No. CGC-07-469393 (San Francisco Sup.
Ct. 2008); Grotz v. Unum Group, No. CGC-09-485552 (San Francisco
Sup. Ct. 2009); Martinez v. Standard Ins. Co., CGC-10-501948 (San
Francisco Sup. Ct. 2010); Graybill-Bundgard v. Standard Ins. Co.,
CGC-10-504747 (San Francisco Sup. Ct. 2011). See ECF No. 19-1.
Pursuant to Federal Rule of Evidence 201, the Court GRANTS
Standard's Request.

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brief, Plaintiff provides three trial court orders denying the

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Commissioner's demurrers to identical claims.6

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appears to the Court that state courts are divided on the issue.

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At a minimum, it is far from "obvious according to the settled

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rules of the state" that Plaintiff's claim was invalid when filed.

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See Morris, 236 F.3d at 1067.

It therefore

In light of the above, and the rule that ambiguities in the

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law must be resolved in favor of the non-removing party, the Court

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concludes that the Commissioner was not fraudulently joined and

United States District Court

For the Northern District of California

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therefore GRANTS Plaintiff's Motion to Remand.

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Plaintiff asks the Court to take judicial notice of court orders
denying demurrers by the Commissioner in the following cases:
Guyton v. Unum Life Ins. Co., No. CGC-02-415586 (San Francisco Sup.
Ct. 2002); Glick v. Unumprovident Life Ins. Co., No. CGC-03-422858
(San Francisco Sup. Ct. 2003); Contreras v. Metro. Life Ins. Co.,
CGC-07-462224 (San Francisco Sup. Ct. 2007). See ECF No. 21. The
Court GRANTS Plaintiff's Request.

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V.

CONCLUSION
For the reasons stated above, Plaintiff Roya Ferdowsnia's

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motion to remand this case to the Superior Court of California,

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County of San Francisco, is GRANTED.

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IT IS SO ORDERED.

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Dated: May 10, 2011
UNITED STATES DISTRICT JUDGE

United States District Court

For the Northern District of California

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