DGP Associates, LP v. American Guarantee & Liability Insurance Company et al

Filing 25

ORDER by Judge Edward M. Chen Granting in Part and Denying in Part 5 Plaintiff's Motion to Remand. (emcsec, COURT STAFF) (Filed on 3/19/2013)

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1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 8 DGP ASSOCIATES, LP, 9 11 For the Northern District of California United States District Court 10 No. C-12-6348 EMC Plaintiff, v. AMERICAN GUARANTEE & LIABILITY INSURANCE COMPANY, et al., ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION TO REMAND (Docket No. 5) 12 13 Defendants. ___________________________________/ 14 15 16 DGP Associates, LP (“DGP”) filed suit against American Guarantee and Liability Insurance 17 Company, American Zurich Insurance Company, Zurich American Insurance Company, and Zurich 18 American Insurance Company of Illinois (collectively “Zurich Defendants”) over a business 19 property insurance policy covering a commercial property owned by the Plaintiff. DGP also named 20 in its suit James C. Jenkins Insurance Services, Inc., and Jenkins/Athens Coverco, Inc. (collectively 21 “Jenkins Defendants”), the insurance brokerage firm that procured the policy. The complaint, filed 22 in the Superior Court for the County of San Francisco, alleges breach of contract and bad faith 23 causes of action against the Zurich Defendants, and a negligence cause of action against the Jenkins 24 Defendants. See Not. of Removal (Docket No. 1), Ex. A (Complaint). The Zurich Defendants 25 allege that the Jenkins Defendants are sham defendants who were sued in order to prevent a federal 26 court from exercising diversity jurisdiction under 28 U.S.C. § 1332(a). The Zurich Defendants 27 removed DGP’s state court action to this Court pursuant to 28 U.S.C. § 1441(b), arguing that the 28 citizenship of the Jenkins Defendants should be disregarded for the purpose of determining 1 jurisdiction. See Not. of Removal (Docket No. 1). Thereafter DGP filed a motion to remand this 2 action back to state court, as well as a motion for fees and costs. See Docket No. 5. Having 3 considered the parties’ briefs and accompanying submissions, as well as the oral argument of 4 counsel, the Court hereby GRANTS IN PART and DENIES IN PART Plaintiff’s motions for the 5 reasons discussed both on the record and herein. 6 As stated more fully on the record, the Court finds that Defendants have not met their burden 7 to show that the Jenkins Defendants were fraudulently joined to DGP’s suit. Under controlling 8 Ninth Circuit precedent, “there is a strong presumption against removal jurisdiction” and the burden 9 is on the removing party to demonstrate jurisdiction. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). Where fraudulent joinder is alleged, “if there is a possibility that a state court would find 11 For the Northern District of California United States District Court 10 that the complaint states a cause of action against any of the resident defendants, the federal court 12 must find that the joinder was proper and remand the case to the state court.” Hunter v. Philip 13 Morris USA, 582 F.3d 1039, 1046 (9th Cir. 2009) (quoting Tillman v. R.J. Reynolds Tobacco, 340 14 F.3d 1277, 1279 (11th Cir. 2003) (per curiam)) (emphasis added). 15 The Court finds, at a minimum, that it is possible for DGP to state a cause of action against 16 the Jenkins Defendants as an intended beneficiary of an insurance policy under the negligence 17 doctrine discussed in Business to Business Markets, Inc. v. Zurich Specialties, 135 Cal. App. 4th 165 18 (2005). See also MV Transp., Inc. v. Omne Staff Leasing, Inc., 378 F. Supp. 2d 1200 (E.D. Cal. 19 2005); Nowlon v. Koram Ins. Ctr., Inc., 1 Cal. App. 4th 1437 (1991); Cayo v. Valor Fighting & 20 Mgmt. LLC, C 08-4763CW, 2008 WL 5170125 (N.D. Cal. Dec. 9, 2008); Fick v. Unum Life Ins. Co. 21 of Am., 2:12-CV-01851-MCE, 2012 WL 5214346 (E.D. Cal. Oct. 22, 2012). Consequently, the 22 Court holds that the Jenkins Defendants were not fraudulently joined to this action. Since both DGP 23 and the Jenkins Defendants are citizens of the State of California, this Court lacks diversity 24 jurisdiction under 28 U.S.C. §1332(a) over this case, and therefore the case must be remanded back 25 to state court. 26 The Court also holds that Plaintiff has not shown that fees and costs ought to be awarded 27 pursuant to 28 U.S.C. §1447(c), which authorizes a court granting a remand motion to “require 28 payment of just costs and any actual expenses, including attorney fees, incurred as a result of the 2 1 removal.” “[A]bsent unusual circumstances, attorney’s fees should not be awarded [under §1447] 2 when the removing party has an objectively reasonable basis for removal.” Martin v. Franklin 3 Capital Corp., 546 U.S. 132, 136 (2005). As stated on the record, the Court finds that the Zurich 4 Defendants had an objectively reasonable basis for removing this action, and there is no indication 5 on the record that removal was undertaken in bad faith. 6 Therefore, the Court GRANTS Plaintiff’s Motion to Remand, and DENIES Plaintiff’s 7 Motion for Fees and Costs. This matter is remanded to state court. The Clerk of the Court is 8 directed to close the file in this case 9 This order disposes of Docket No. 5. 11 For the Northern District of California United States District Court 10 IT IS SO ORDERED. 12 13 Dated: March 19, 2013 14 _________________________ EDWARD M. CHEN United States District Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3

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