Greenberg v. RiverSource Life Insurance Company et al

Filing 32

ORDER DENYING PLAINTIFF'S MOTION TO REMAND AND VACATING HEARING by Judge William Alsup [denying 14 Motion to Remand]. (whasec, COURT STAFF) (Filed on 4/5/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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RICK M. GREENBERG,
Plaintiff,

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For the Northern District of California

United States District Court

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No. C 12-00552 WHA

v.
RIVERSOURCE LIFE INSURANCE
COMPANY, and HOWARD BELFER, M.D.,
Defendants.

ORDER DENYING
PLAINTIFF’S MOTION
TO REMAND AND
VACATING HEARING

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INTRODUCTION
In this fraud and breach-of-contract action, plaintiff moves to remand for lack of
complete diversity. For the reasons stated below, the motion is DENIED.

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STATEMENT

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Pro se plaintiff Rick M. Greenberg filed the instant action in Santa Clara County

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Superior Court. Plaintiff, a California resident, is a policy holder of insurance coverage provided

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by defendant RiverSource Life Insurance Company, a Minnesota corporation and citizen.

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Defendant Dr. Howard Belfer is a medical doctor and a resident of California. The complaint

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alleges that in December 2007, defendant RiverSource fraudulently denied plaintiff his health

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insurance benefits, and in doing so, breached its contract to provide disability coverage.

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In regard to plaintiff’s fraud claim, plaintiff asserts that RiverSource informed him that

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an independent medical examination was to be performed before benefit payments would be

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made, and that no such examination was performed. Plaintiff further alleges that RiverSource

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then fraudulently represented that defendant Dr. Belfer performed the medical examination.

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It is unclear whether plaintiff contends that no medical examination took place, or that the

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examination was not in fact “independent” because Dr. Belfer was employed by or engaged in

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some sort of scheme with RiverSource to deny benefits. Plaintiff’s breach-of-contract claim is

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premised on the allegation that RiverSource’s denial of coverage is a breach of a 1996 contract

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to provide long-term disability coverage. Plaintiff is seeking damages in the amount of

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$2,106,200.

of removal, defendant asserted: (1) jurisdiction here was proper as the amount in controversy

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exceeds $75,000; (2) defendant RiverSource is incorporated and is a citizen of Minnesota; and

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For the Northern District of California

Defendant RiverSource removed this action pursuant to 28 U.S.C. 1441(b). In support

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United States District Court

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(3) defendant Dr. Belfer’s California citizenship should be ignored because he is a fraudulently

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joined defendant (Dkt. No. 1 ¶¶ 9–11). There is no dispute that the amount in controversy has

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been met, and therefore, this order need only consider the issue of complete diversity as raised

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by the parties. This order follows full briefing.

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ANALYSIS
“[A]ny civil action brought in a State court of which the district courts of the United

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States have original jurisdiction, may be removed.” 28 U.S.C. 1441. A case may be remanded

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to state court for lack of subject-matter jurisdiction or defects in removal procedure. 28 U.S.C.

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1447(c). Diversity jurisdiction requires complete diversity of citizenship and an amount in

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controversy greater than $75,000. 28 U.S.C. 1332(a). The party who sought removal in the first

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instance bears the burden of proof in regard to the propriety of the removal. Wilson v. Republic

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Iron & Steel Co., 257 U.S. 92, 97 (1921). “Federal jurisdiction must be rejected if there is any

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doubt as to the right of removal in the first instance,” such that courts must resolve all doubts

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as to removability in favor of remand. Gaus v. Miles Inc., 980 F.2d 564, 566 (9th Cir. 1992).

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In support of his motion to remand, plaintiff asserts that his complaint qualifies as a

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“direct action” against an insurer pursuant to 28 U.S.C. 1332(c) and therefore, defendant

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RiverSource is deemed to be a citizen of California. Defendant contends that Section 1332(c)

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is inapplicable to plaintiff’s complaint, and also, that defendant Dr. Belfer is a fraudulently

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joined defendant and should be ignored for diversity purposes.

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1.

PLAINTIFF’S CLAIM DOES NOT QUALIFY AS A DIRECT ACTION
AGAINST AN INSURER UNDER 28 U.S.C. 1332(c).

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In support of his motion, plaintiff relies exclusively on 28 U.S.C. 1332(c)(1), which
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states in relevant part:
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For the purposes of [diversity jurisdiction] . . . [I]n any direct
action against the insurer of a policy or contract of liability
insurance, whether incorporated or unincorporated, to which action
the insured is not joined as a party-defendant, such insurer shall be
deemed a citizen of . . . every State and foreign state of which the
insured is a citizen[.]
Plaintiff contends that this action is a “direct action” against insurer RiverSource and,

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For the Northern District of California

United States District Court

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therefore, defendant is deemed to be a citizen of California, plaintiff’s state of residence.

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Plaintiff’s argument is misguided. “Courts have uniformly defined the term ‘direct action’ as

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used in [Section 1332(c)] as those cases in which a party suffering injuries or damage for which

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another is legally responsible is entitled to bring suit against the other’s liability insurer without

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joining the insured or first obtaining a judgment against him.” Beckham v. Safeco Ins. Co. of

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Am., 691 F.2d 898, 901–02 (9th Cir. 1982). Plaintiff is not seeking recovery from an insurance

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company for liability incurred by a third-party insured. Instead, plaintiff is seeking recovery

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from his own insurer for wrongs suffered by plaintiff directly. Therefore, plaintiff is not entitled

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to rely on 28 U.S.C. 1332(c)(1). Plaintiff attempts to distinguish his claims from those at issue

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in the direct-action cases cited by defendant. He asserts that those cases all involve liability

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insurance, whereas the issue here is the recovery of disability insurance (Reply Br. 2).

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Unfortunately, plaintiff’s assertion is an admission that his claim is not a “case[] in which a party

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suffering injuries or damage for which another is legally responsible is entitled to bring suit

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against the other’s liability insurer”, and therefore, does not qualify as a “direct action” as

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defined by our court of appeals. Ibid.

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DR. BELFER IS A FRAUDULENTLY JOINED DEFENDANT.

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Defendant RiverSource asserts that Dr. Belfer is a fraudulently joined defendant, and

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should be ignored for the purposes of determining whether complete diversity exists between

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the parties.

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Citizenship of fraudulently joined parties must be ignored in analyzing diversity. If a

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plaintiff fails to state claims against a resident defendant, and the failure is obvious according

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to the settled rules of the state, then joinder of the resident defendant is fraudulent. Morris v.

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Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001).

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Plaintiff’s motion and reply both rest on the theory that RiverSource standing on its own
destroys diversity. Plaintiff has not argued the fraudulent joinder issue as raised by defendant.

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For the Northern District of California

United States District Court

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In light of plaintiff’s pro se status, this order will read plaintiff’s reply brief as if it addressed

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defendant’s fraudulent joinder argument.

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A.

Plaintiff Has Not Asserted a Breach-of-Contract Claim
Against Dr. Belfer.

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Under California law, a breach-of-contract claim requires “the existence of the contract,
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performance by the plaintiff or excuse for nonperformance, breach by the defendant and
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damages.” First Commercial Mortgage Co. v. Reece, 89 Cal. App. 4th 731, 745 (2001).
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Fatal to plaintiff’s complaint is the lack of an assertion that a contract existed between
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plaintiff and Dr. Belfer. The only contract referred to is one for “long term disability coverage”
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which can only exist between RiverSource and plaintiff (Dkt. No. 2, Exh. A, Section 3 at 5)
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B.

Plaintiff Has Not Asserted a Fraud Claim Against Dr. Belfer.

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“It is essential that the facts and circumstances which constitute the fraud should be set
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out clearly, concisely, and with sufficient particularity to apprise the opposite party of what he is
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called on to answer, and to enable the court to determine whether, on the facts pleaded, there is
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any foundation, prima facie at least, for the charge of fraud.” Scafidi v. W. Loan & Bldg. Co.,
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72 Cal. App. 2d 550, 553 (1946) (internal citation omitted).
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The only reference to Dr. Belfer in plaintiff’s complaint is an allegation that RiverSource
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denied disability coverage following an independent medical examination performed by
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Dr. Belfer (Dkt. No. 2, Exh. A, Section 3 at 3–4). The complaint does not allege that Dr. Belfer
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committed fraud, or aided RiverSource in its alleged fraud. It is unclear what role, if any,

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Dr. Belfer is accused of playing in the fraud.

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Read in a light most favorable to plaintiff, this order finds that the complaint is devoid

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of any factual allegations to support a claim against Dr. Belfer. Therefore, Dr. Belfer is a

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fraudulently joined defendant and must be ignored for purposes of determining diversity.

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Thus, this order finds that complete diversity exists between Minnesota defendant RiverSource

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and plaintiff, a California resident.

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For the foregoing reasons, plaintiff’s motion to remand is DENIED. The hearing
scheduled for April 12, 2012, is VACATED.

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For the Northern District of California

United States District Court

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CONCLUSION

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IT IS SO ORDERED.

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Dated: April 5, 2012.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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