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Zuniga v. Standard Guaranty Insurance Company

United States District Court, W.D. Washington

May 24, 2017

JOSE T ZUNIGA, et al., Plaintiffs,
v.
STANDARD GUARANTY INSURANCE COMPANY, et al., Defendants.

          ORDER GRANTING MOTION TO REMAND [Dkt. #s 14 and 15]

          Ronald B. Leighton United States District Judge

         THIS MATTER is before the Court on Plaintiff Zuniga's Motion to Remand [Dkt. #15] Zuniga[1] purchased a home in Tacoma in 2015. He apparently failed to obtain a homeowner's insurance policy as required by his lender, Select Portfolio Servicing. As a result, SPS purchased a “policy /certificate” from Defendant Standard Guaranty Insurance Company, and paid for it from Zuniga's escrow account. SPS informed Zuniga that it had done so, and why, and explained both that he was obliged to have insurance, and that he had the right to obtain better insurance of his choice; this particular insurance “policy/certificate” was more expensive and had less coverage than “normal” homeowner's insurance policies. [Dkt. #14-1]

         In 2016, the home was damaged by fire. Zuniga made a claim under the Standard Guaranty policy. Standard Guaranty hired and independent adjuster (Defendant Assurant Specialty Property) to handle the claim. Assurant engaged one of its employees, Defendant John Lewton, to actually do the adjusting. Like Zuniga, Lewton lives in Washington. Standard and Assurant reside in other states.

         Lewton offered Zuniga $23, 000 to settle his claim. Zuniga claims that is less than a third of the damage suffered. Zuniga also claims that Lewton and Assurant and Standard failed to do much of anything to secure or repair the home. Zuniga sued in Pierce County superior Court, asserting nine claims including breach of contract, bad faith, negligence, discrimination, Washington Consumer Protection Act claims, and constructive fraud.

         Defendants removed the case, invoking this Court's diversity[2] jurisdiction under 28 U.S.C. §§ 1332 and 1441(b). They claimed that Lewton (the Washington defendant) was fraudulently joined and that his citizenship should be disregarded for diversity purposes. They argue that Lewton was joined for the sole purpose of destroying diversity.

         Zuniga seeks Remand, arguing there is no diversity jurisdiction because Lewton was not fraudulently joined. Meanwhile, Defendants have moved to dismiss Lewton, arguing that Zuniga's claims against him fail as a matter of law. [Dkt. #] The Court will address the jurisdictional issue first.

         The Defendants argue that Zuniga fraudulently joined the Washington resident, Lewton, to destroy diversity, and that his citizenship should be disregarded for purposes of ascertaining diversity jurisdiction.

         A. Remand Standard

         Under Conrad Associates v. Hartford Accident & Indemnity Co., 994 F.Supp. 1196 (N.D. Cal. 1998) and numerous other authorities, the party asserting federal jurisdiction has the burden of proof on a motion to remand to state court. The removal statute is strictly construed against removal jurisdiction. The strong presumption against removal jurisdiction means that the defendant always has the burden of establishing removal is proper. Conrad, 994 F.Supp. at 1198. It is obligated to do so by a preponderance of the evidence. Id. at 1199; see also Gaus v. Miles, 980 F.2d 564, 567 (9th Cir. 1992). Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance. Id. at 566.

         Diversity jurisdiction requires that each defendant be a citizen of a different state than any plaintiff. Allstate Ins. Co. v. Hughes, 358 F.3d 1089 (9th Cir. 2004) (citing Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001)). A non-diverse defendant that has been “fraudulently joined, ” however, may be ignored when the court determines the existence of diversity. United Computer Systems, Inc. v. AT & T Corp., 298 F.3d 756, 761 (9th Cir. 2002) (citing Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001)).

         “Fraudulent joinder” is a term of art. Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001)(citing McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987)). The non-diverse defendant has been fraudulently joined if the plaintiff fails to state a cause of action against that defendant, and that failure is “obvious according to the settled laws of the state.” McCabe, 811 F.2d at 1339. The removing defendant is entitled to present facts outside of the complaint to establish that a party has been fraudulently joined. Id. Doubt concerning whether the complaint states a cause of action is resolved in favor of remanding the case to state court. Albi v. Street & Smith Publications, 140 F.2d 310, 312 (9th Cir. 1944).

         B. Zuniga's claims against Lewton.

         Defendants argue that Lewton was fraudulently joined because Zuniga has no legitimate, plausible claims against him; Lewton cannot be liable to Zuniga on any theory. They argue that he was instead named solely to destroy diversity.

         Defendants' arguments are based primarily on a Washington case they claim holds that independent insurance adjusters owe no duties to insured claimants, at least in the absence of a direct contract between them. As a result, they argue, Zuniga's ...


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