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Cicero v. American Family Mutual Insurance Co.

United States District Court, W.D. Washington, Seattle

December 10, 2019




         This matter comes before the Court on Defendant American Family Mutual Insurance Company's motion to dismiss a party (Dkt. No. 12) and Plaintiffs' motion to remand and for attorney fees (Dkt. No. 13). Having thoroughly considered the parties' briefing and the relevant record, the Court finds oral argument unnecessary and hereby GRANTS Plaintiffs' motion to remand and DENIES Plaintiffs' motion for attorney fees (Dkt. No. 13) and STRIKES as moot American Family's motion to dismiss a party (Dkt. No. 12) for the reasons explained herein.

         I. BACKGROUND

         On September 23, 2017, a Schwartz Brothers commercial truck, driven by an employee of Defendant SBR Holdings, LLC, crashed into Plaintiffs' home. (Dkt. No. 1-3 at 1-2.) After American Family, Plaintiffs' insurer, failed to pay to repair their home, Plaintiffs sued American Family in King County Superior Court. (Id.) Plaintiffs allege that American Family failed to promptly respond to and investigate Plaintiffs' claim for loss and that American Family has constructively denied them coverage. (Id. at 3-5.) Plaintiffs bring claims against American Family for breach of contract, insurance bad faith, negligent claims handling, violation of Washington's Consumer Protection Act, Wash. Rev. Code § 19.86, and violation of the Insurance Fair Conduct Act, Wash. Rev. Code § 48.30.015. (Id. at 5-6.) Plaintiffs also bring a claim for negligence against SBR. (Id. at 6.)

         American Family removed the matter to the Court based on diversity jurisdiction. (Dkt. No. 1 at 3-7.) American Family is a citizen of Wisconsin, and Plaintiffs and SBR are citizens of Washington (Id. at 4, Dkt. No. 13 at 2.) In its removal notice, American Family alleges that SBR should be ignored for the purposes of jurisdiction because SBR is a dispensable party subject to severance by the Court. (Dkt No. 1 at 4-5.) American Family now moves to dismiss SBR based on fraudulent joinder and as a dispensable party pursuant to Rules 19 and 21. (See Dkt. No. 12.) Plaintiffs move to remand on the ground that the Court lacks subject matter jurisdiction. (See Dkt. No. 13.)


         A. Motion to Remand

         The plaintiff is the master of the complaint and can plead a cause of action to avoid federal jurisdiction. Lowdermilk v. U.S. Bank Nat'l Ass'n, 479 F.3d 994, 999 (9th Cir. 2007). For this reason, courts strictly construe a defendant's ability to remove a case from state court to federal court. Romo v. Teva Pharm. USA, Inc., 731 F.3d 918, 921 (9th Cir. 2013). The burden is on the defendant to demonstrate that a claim “arises under” or “necessarily turns upon” federal law. Ultramar America Ltd. v. Dwelle, 900 F.2d 1412, 1414 (9th Cir. 1990).

         A party to a civil action brought in state court may remove that action to federal court if the district court would have had original jurisdiction at the time of both commencement of the action and removal. See 28 U.S.C. § 1441(a); 14B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3723 (4th ed. 2013). Once removed, the case can be remanded to state court for either lack of subject matter jurisdiction or defects in the removal procedure. See 28 U.S.C. § 1447(c). But “fraudulently joined defendants will not defeat removal on diversity grounds.” Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). “Joinder of a non-diverse defendant is deemed fraudulent, and the defendant's presence in the lawsuit is ignored for purposes of determining diversity, ‘[i]f the plaintiff fails to state a cause of action against a resident defendant, and the failure is obvious according to the settled rules of the state.'” Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001) (quoting McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987)).

         According to the notice of removal, Plaintiffs are citizens of Washington. (See Dkt. No. 1 at 4.) It is uncontested that SBR is a citizen of Washington. (See Dkt. Nos. 13 at 2, 16 at 1-2.) Thus, there is no question that if SBR were a party to this case, the parties would not be diverse. See 28 U.S.C. § 1332(a)(1). Therefore, to decide whether remand is proper based on lack of subject matter jurisdiction, the Court considers American Family's arguments for dismissing SBR.

         1. Defective Removal

         “Where fewer than all the defendants have joined in a removal action, the removing party has the burden under section 1446(a) to explain affirmatively the absence of any co-defendants in the notice for removal.” Prize Frize, Inc. v. Matrix (U.S.) Inc., 167 F.3d 1261, 1266 (9th Cir. 1999). Plaintiffs argue that the removal was defective because American Family did not obtain SBR's consent. (Dkt. No. 14 at 3-4.) But in its removal notice, American Family made clear that it would contest whether SBR should be part of the case. (See Dkt. No. 1 at 4-5) (alleging that SBR is a dispensable party subject to severance). And in its motion to dismiss, American Family specifically alleged that SBR was fraudulently joined. (Dkt. No. 12 at 7-9.) Thus, the procedural requirement of consent by all parties to removal does not prevent the Court from evaluating whether SBR should be a party to this case. See Ritchey, 139 F.3d at 1318; see also S. Bayview Apartments, Assocs. v. Cont'l W. Ins. Co., No. C07-5287-RBL, Dkt. No. 24 at 11 (W.D. Wash. 2007) (finding that the consent requirement was eclipsed by the necessity for remand).

         2. Fraudulent Joinder

         American Family moves to dismiss SBR as fraudulently joined. (Dkt. No. 12 at 7-9.) Plaintiffs' claim against SBR is for negligence, based on the conduct of SBR's employee who crashed the commercial truck into Plaintiffs' home. (Dkt. No. 1-3 at 6.) American Family does not argue that Plaintiffs fail to state a claim against SBR. (See Dkt. No. 12 at 7-9.) Instead, American Family cites a district court case for the proposition that joinder could also be fraudulent if Plaintiffs have “no real intention” of prosecuting their claim against SBR. (Dkt. No. 12 at 7) (citing S. Bayview, No. C07-5287-RBL, Dkt. No. 24 at 5 (W.D. Wash. 2007)). But the dictum in S. Bayview did not establish a different type of fraudulent joinder. See Id. The court in that case concluded that the plaintiff obviously failed to state an actionable case against certain defendants. Id. Thus, American Family offers no authority for the proposition that Plaintiffs' subjective intentions regarding joinder of SBR are relevant to a fraudulent joinder analysis.[1]Moreover, American Family offers little more than a conclusory allegation that “the plain language of the ...

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