United States District Court, W.D. Washington, Seattle
EDWARD STROMAN and ANNETTE STROMAN, wife and husband, and the marital community comprised thereof, Plaintiffs,
STATE FARM FIRE AND CASUALTY COMPANY, et al., Defendants.
HONORABLE RICHARD A. JONES UNITED STATES DISTRICT JUDGE
matter comes before the Court on Plaintiff's Motion to
Remand and For Attorney Fees (“Motion to
Remand”), and Defendant State Farm Fire and Casualty
Company's (“State Farm”) Motion to Compel.
Dkt. ## 13, 15. Both motions are opposed, and both parties
have filed replies. Dkt. ## 20, 22, 24, 26, 32. For the
reasons that follow, the Court RESERVES
RULING on Plaintiffs' Motion to Remand, and
GRANTS IN PART AND DENIES IN PART State
Farm's Motion to Compel. Dkt. ## 13, 15.
February 14, 2017, Plaintiffs, who are Washington residents,
allegedly discovered a water loss at their Mill Creek,
Washington home, and reported the loss to their
homeowners' insurance carrier, State Farm. Dkt # 1-1,
¶¶ 1.3, 3.1-3.3. Plaintiffs contend through State
Farm's referral, a remediation company responded to the
loss to dry the home, JC Services Inc. d/b/a ServiceMaster of
King County (“JC Services”), a Washington
corporation. Id. at ¶¶ 1.3, 3.3-3.6.
Plaintiffs, State Farm, and JC Services disputed the extent
of the water damage, the cost to repair, the extent of the
necessary drying, and whether mold developed as a result of
allegedly insufficient and improper drying. Id. at
3.8, 3.11, 3.18, 3.19, 3.21.
filed an action against State Farm and JC Services in King
County Superior Court on August 14, 2017. Dkt. # 1, ¶ 1.
In the original complaint, Plaintiffs asserted several claims
against State Farm, as well as claims against JC Services,
alleging that JC Services “negligently damaged the
plaintiffs' house and other property” and
“failed to properly dry out the water damage, leading
to mold growth in the Stromans' home.” Dkt. # 8,
Ex. 1, at ¶¶ 14.1, 14.2. Specifically, Plaintiffs
asserted claims against JC Services for breach of contract,
violation of the CPA, aiding and abetting insurance bad
faith, negligence, and negligent misrepresentation.
Id. Plaintiffs later filed an Amended Complaint on
March 30, 2018, and a Second Amended Complaint of May 18,
2018, which added another Defendant (ServiceMaster Company
LLC). Dkt. # 1 at ¶ 1.
later settled with Defendant JC Services. Plaintiffs contend
that part of the settlement concerned an inspection of
Plaintiffs' personal property stored at JC Services'
warehouse, which was initially scheduled for late June 2018
but extended to July 27, 2018. Dkt. # 16, ¶ 4.
Plaintiffs contend that a “dispute also arose over
additional storage charges that had been incurred while the
parties negotiated the damage claims, ” which led to
the alleged withholding of certain settlement funds for
Plaintiffs. Dkt. # 17, ¶ 3. Plaintiffs also claim the
“settlement checks” were exchanged on August 7,
2018 and were given to Plaintiffs' counsel's
accounting department for disbursement on that date.
Id. at ¶¶ 3-5. Plaintiffs further contend
that on August 16, 2018, once the settlement check cleared
and the funds were available for disbursal, Plaintiffs signed
a stipulation and dismissal order for JC Services, served the
order on State Farm's counsel, and filed it, dismissing
its claims against JC Services. Id. at ¶ 5, Ex.
August 31, 2018, State Farm removed this matter to this
Court, claiming that Plaintiffs acted in bad faith to prevent
State Farm from removing within one year of the suit's
commencement. Dkt. # 1. Plaintiffs moved to remand, and State
Farm moved to compel production of Plaintiffs' settlement
agreement and certain communications with JC Services. Dkt.
## 13, 15. Both motions are now before this Court.
courts are courts of limited jurisdiction.” Heacock
v. Rolling Frito-Lay Sales, LP, No. C16-0829-JCC, 2016
WL 4009849, at *1 (W.D. Wash. July 27, 2016); see 28
U.S.C. §§ 1331-1332. District courts have
“original jurisdiction” for causes of action that
exceed an amount in controversy of $75, 000.00 and where
there is complete diversity between the parties. 28 U.S.C.
§ 1332(a)(1). An individual is a citizen of the state in
which he is domiciled, not his state of residence. Kanter
v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir.
2001). A “corporation is a citizen of any state where
it is incorporated and of the state where it has its
principal place of business.” Heacock, 2016 WL
4009849, at *1 (quoting Indus. Tectonics, Inc. v. Aero
Alloy, 912 F.2d 1090, 1092 (9th Cir. 1990)).
originally filed in state court, over which a federal court
would have jurisdiction, may be removed to federal court. 28
U.S.C. § 1441(a). A case that lacks complete diversity
when it was filed in state court, but which subsequently
becomes diverse, may be removed within one year of the case
being filed in state court, unless the Court finds that
“the plaintiff has acted in bad faith in order to
prevent [removal].” 28 U.S.C. § 1446(c).
well-settled that “settlement with a non-diverse party
does not establish diversity jurisdiction unless and until
that party is dismissed from the action.” Bishop v.
Ride the Ducks Int'l, LLC, C18-1319-JCC, 2018 WL
5046050, at *2 (W.D. Wash. Oct. 17, 2018) (citing Dunkin
v. A.W. Chesterton Co., No. C10-458-SBA, 2010 WL
1038200, slip op. at *2 (N.D. Cal. March 19, 2010). There is
no dispute that JC Services was not dismissed until after one
year from the date of filing. State Farm also admits that it
removed the case more than one year after it commenced in
state court. Dkt. # 1. Thus, even if the settlement agreement
was negotiated prior to the one-year cutoff date, diversity
jurisdiction would not be established until JC Services was
Court must therefore remand this matter unless State Farm can
prove that Plaintiffs acted in bad faith to prevent removal.
28 U.S.C. § 1446(c). The Ninth Circuit has yet to
establish a standard for evaluating bad-faith attempts to
prevent removal, but other courts in this District have
previously held that it is “a high burden.”
Heacock, 2016 WL 4009849, at *3. For example, bad
faith is shown when a plaintiff names non-diverse defendants,
but then “fail[s] to actively litigate a claim against
[those defendants] in any capacity, ” and then
dismisses them after the one-year deadline. Id.
(emphasis in original).
Court finds that the current record does not indicate the
level of “bad faith” necessary to justify
removal. First, the record shows that Plaintiffs did not act
in bad faith in naming JC Services as a Defendant or fail to
litigate their case against them - a concession State Farm
readily makes. Dkt. # 26 at 7 (“State Farm does not
claim JC Services was added to the suit for the sole purpose
to avoid removal.”). Indeed, Plaintiffs brought several
cognizable claims against JC Services for its role in the
damage and repair efforts of Plaintiffs' home. Plaintiffs
served written discovery on JC Services, responses to which
JC Services provided on October 13, 2017, and produced
documents. Dkt. # 16, Ex. A. JC Services has also
participated in at least two site visits to plaintiffs'
home since this litigation commenced. Dkt. # 16, ¶ 3.
Plaintiffs have taken one deposition, a state-court Rule
30(b)(6) deposition of State Farm. Id. at ¶ 7,
Ex. B. Plaintiffs also demonstrate that they sought
additional information about JC Services through indirect
discovery, such as in a Rule 30(b)(6) deposition of State
Farm. Dkt. # 16, Exs. B-E. Although the Ninth Circuit has not
yet explicitly adopted an “active litigation”
test, here Plaintiffs' active litigation against JC
Services indicates that they did not act in bad faith in
naming JC Services as a Defendant. See Weber v.
Ritz-Carlton Hotel Co., L.L.C., 4:18-CV-03351-KAW, 2018
WL 4491210, at *4 (N.D. Cal. Sept. 19, 2018)
(“Accordingly, because the Court finds that Plaintiff
actively litigated against [defendant], good faith is
presumed.”). This weighs against an overall finding of
Farm instead argues that even if Plaintiffs initially
litigated in good faith against JC Services, Plaintiffs acted
in bad faith when they settled with JC Services prior to the
one-year cutoff, but intentionally delayed executing and
filing the joint stipulation of dismissal with JC Services to
prevent removal. Dkt. # 26 at 7-10. State Farm notes the
suspicious one year and two days' timing of the filing of
the stipulation and dismissal of JC Services. Id.
Generally, in the timing for naming a non-diverse defendant,
the timing of dismissal and the explanation given for that
dismissal are relevant issues to the bad faith inquiry.
Heacock, 2016 WL 4009849, at *3. Suspicious timing
by itself, however, is not sufficient to demonstrate bad
faith. Courts in this District have previously found that a
dismissal of a non-diverse defendant approximately one and
one-half months after a state court action's filing did
not indicate bad faith. Bishop v. Ride the Ducks
Int'l, LLC, C18-1319-JCC, 2018 WL 5046050, at *2
(W.D. Wash. Oct. 17, 2018). Other courts have also found that
the dismissal of a non-diverse defendant thirteen days after
the commencement of the action insufficient to signify that
the plaintiff acted in bad faith. See Weber ...