Ferdowsnia v. Standard Insurance Company

Full title: ROYA FERDOWSNIA, Plaintiff, v. STANDARD INSURANCE COMPANY; STEVE POIZNER…

Court: United States District Court, N.D. California

Date published: May 10, 2011

Case No. 11-0720 SC (N.D. Cal. May. 10, 2011)

Opinion

Case No. 11-0720 SC.

May 10, 2011

ORDER GRANTING PLAINTIFF'S MOTION TO REMAND

SAMUEL CONTI, Senior District Judge

I. INTRODUCTION

This matter comes before the Court on the Motion to Remand filed by Plaintiff Roya Ferdowsnia ("Plaintiff"). ECF No. 9 ("Mot."). Defendant Standard Insurance Company ("Defendant" or "Standard") filed an Opposition, and Plaintiff submitted a Reply. ECF Nos. 19, 20. For the following reasons, Plaintiff's Motion is GRANTED.

II. BACKGROUND

This action arises out of an individual long-term disability insurance policy Standard issued to Plaintiff (hereinafter, "the Policy"). Plaintiff is a California resident. ECF No. 1 ("Notice of Removal") ¶ 15. Standard is an Oregon corporation with its principal place of business in Oregon. Id. ¶ 23.

Plaintiff alleges the following facts. While Plaintiff was employed as a dental hygienist, she purchased the Policy, which purported to provide monthly benefits if she became unable to perform her regular occupation due to a covered disability. Coleman Decl. ¶ 2 Ex. A ("FAC") ¶¶ 4-6.¹ Plaintiff became disabled as a result of, inter alia, upper extremity pain and carpal tunnel syndrome while the Policy was in effect. Id. ¶ 7. On March 12, 2009, after paying benefits for a period of time, Standard denied Plaintiff's claim for continued disability benefits despite the fact that Plaintiff was and remains unable to work as a dental hygienist. Id. ¶ 8.

1 Terrence J. Coleman ("Coleman"), attorney for Plaintiff, filed a declaration in support of the instant Motion. ECF No. 10.

On March 9, 2010, Plaintiff filed this action in San Francisco County Superior Court. Mot. at 2. She asserted claims for breach of contract and bad faith against Standard for the alleged wrongful termination of her disability benefits. FAC ¶¶ 13-23. She also asserted a claim for writ of mandamus against the Commissioner of the California Department of Insurance ("Commissioner"). Id. ¶¶ 24-30. She alleged that the Policy contained misleading provisions and that the Commissioner abused his discretion by approving the policy in contravention of California Insurance Code Section 10291.5.² Id. ¶ 28. Plaintiff thus sought a writ of mandamus compelling the Commissioner to withdraw approval of the Policy and associated forms either entirely or to the extent that their provisions violate the California Insurance Code. Id.

2 Section 10291.5 of the California Insurance Code gives the Commissioner the power to disapprove certain disability insurance policies. Specifically, subparagraph (b)(1) provides that "the commissioner shall not approve any disability policy for insurance . . . if the commissioner finds that it contains any provision . . . [that] is unintelligible, uncertain, ambiguous, or abstruse, or likely to mislead a person to whom the policy is offered, delivered or issued." Cal. Ins. Code § 10291.5(b)(1).

On June 7, 2010, Standard filed a special demurrer arguing that joinder of the Commissioner as a defendant was improper because: (1) Plaintiff's claims against Standard were unrelated to her claim against the Commissioner; and (2) Plaintiff's claim against the Commissioner was invalid as a matter of law. Coleman Decl. ¶ 3 Ex. B ("Standard's Demurrer"). The court overruled the demurrer on July 12, 2010, finding that the claims were sufficiently related. Id. Ex. C. ("Order Overruling Standard's Demurrer"). In doing so, the court declined to rule on the validity of Plaintiff's claim against the Commissioner, noting, "I don't think I can or should resolve the validity of the mandate cause of action in the absence of the party against whom that is directed and that party, for whatever reason, has chosen to answer the complaint." Id. Ex. D ("July 12, 2010 Hearing Tr.") at 2:15-18.

On January 19, 2011, the Commissioner moved to dismiss Plaintiff's mandamus claim, and Standard joined the Commissioner's motion. Ellinikos Decl. Ex. E ("Commissioner's MTD"), Ex. F ("Standard's Joinder in Commissioner's MTD").³ At a February 15, 2011 hearing, the Court issued a tentative ruling granting the Commissioner's motion. Id. Ex. H ("Feb. 15, 2011 Hearing Tr.") at 13:23-25. The court instructed counsel for the Commissioner to prepare a proposed order consistent with the court's tentative ruling. Id. at 13:27-14:1. A few hours after the hearing, before the proposed order had been submitted to the court for entry, Standard removed the action to federal court on diversity grounds pursuant to 28 U.S.C. §§ 1332(a) and 1441(b). Coleman Decl. ¶ 4;see also Notice of Removal. Plaintiff now moves to remand the case back to state court.

3 Maria Ellinikos ("Ellinikos"), attorney for Standard, filed a declaration in support of the Opposition. ECF No. 19-2.

III. LEGAL STANDARD

Any civil action brought in a state court may be removed to federal court if there is complete diversity of citizenship and the amount in controversy exceeds $75,000. 28 U.S.C. §§ 1332, 1441. As a general rule, the court must strictly construe the removal statute, "and any doubt about the right of removal requires resolution in favor of remand." Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009) (citation omitted). "The presumption against removal means that the defendant always has the burden of establishing that removal is proper." Id. (internal quotations omitted).

Under the "voluntary-involuntary rule" as articulated by the Ninth Circuit, "a suit which, at the time of filing, could not have been brought in federal court `must remain in state court unless a voluntary act of the plaintiff brings about a change that renders the case removable.'" California v. Keating, 986 F.2d 346, 348 (9th Cir. 1993) (quoting Self v. Gen. Motors Corp., 588 F.2d 655, 657 (9th Cir. 1978)). The voluntary-involuntary rule "does not allow creation of diversity removal jurisdiction by court order dismissing the non-diverse defendant." Gould v. Mut. Life Ins. Co. of New York, 790 F.2d 769, 773 (9th Cir. 1986) (citing Self, 588 F.2d at 660).

An exception to the voluntary-involuntary rule exists if the non-diverse defendant was fraudulently joined in order to defeat removal. See Self, 588 F.2d at 659 ("[I]n the absence of a fraudulent purpose to defeat removal, the plaintiff may by the allegations of his complaint determine the status with respect to removability of a case. . . ."); Cava v. Netversant-National, Inc., No. 07-02597, 2007 WL 4326754, at *3 (N.D. Cal. Dec. 7, 2007) ("Notwithstanding the `voluntary-involuntary' rule, removal of a civil action that alleges claims against a non-diverse defendant is proper where it appears that such defendant has been fraudulently joined.").

IV. DISCUSSION

Plaintiff argues in pertinent part that Standard's removal violated the voluntary-involuntary rule.⁴ Mot. at 5. Standard contends that removal was proper because the Commissioner was fraudulently joined as a sham defendant to defeat federal diversity jurisdiction. Opp'n at 9. The Court agrees with Plaintiff and finds that removal of this action to federal court was improper.

4 Plaintiff also argues that Standard's removal was premature because the state court had not yet entered a formal, written order dismissing Plaintiff's claim against the Commissioner at the time Standard filed its Notice of Removal. Mot. at 7. Thus, according to Plaintiff, the Commissioner remains a party to the action. The Court does not reach this argument because it finds that removal was improper even if Plaintiff's claim against the Commissioner has been properly dismissed.

Joinder of a resident defendant is fraudulent "if the plaintiff fails to state a cause of action against [the] 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). A removing defendant bears a heavy burden to establish fraudulent joinder "by clear and convincing evidence." Hamilton Materials, Inc. v. Dow Chemical Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). The court must resolve "all disputed questions of fact and all ambiguities in the controlling state law in favor of the non-removing party." Plute v. Roadway Package Sys., Inc., 141 F. Supp. 2d 1005, 1008 (N.D. Cal. 2001) (internal quotations omitted).

Standard argues that this case falls within the fraudulent joinder exception to the voluntary-involuntary rule. Opp'n at 9. It contends that the settled law of California precludes a court from issuing a writ of mandamus to compel the Commissioner to revoke approval of an insurance policy. Id. at 4. Standard acknowledges that numerous federal courts in this district have held otherwise. See, e.g., Contreras v. Metro. Life Ins. Co., No. C-07-02597, 2007 U.S. Dist. LEXIS 90295, at *21 (N.D. Cal. Nov. 29, 2007); Sullivan v. Unum Life Ins. Co. of Am., No. C-04-00326, 2004 WL 828561, at *3 (N.D. Cal. Apr. 15, 2004); Branzina v. Paul Revere Life Ins. Co., 271 F. Supp. 2d 1163, 1172 (N.D. Cal. 2003). Standard argues that each of these district court decisions relied on the same two inapposite cases — Peterson v. Am. Life Health Ins. Co., 48 F.3d 404, 410 (9th Cir. 1995) andVan Ness v. Blue Cross of Cal., 87 Cal. App. 4th 364, 371-72 (Ct. App. 2001) — and thus reached the same erroneous conclusion. Opp'n at 5. Both Peterson and Van Ness stated in dicta that an insured may petition for a writ of mandamus requiring the Commissioner to revoke approval of a policy if the insured believes the Commissioner abused his discretion in approving the policy under section 10291.5.

In support of its position that the settled law of California bars Plaintiff's mandamus claim, Standard relies on Schwartz v. Poizner, 187 Cal. App. 4th 592 (Ct. App. 2010), and cites four state trial court orders sustaining demurrers by the Commissioner to similar claims.⁵

5 Standard asks the Court to take judicial notice of court orders sustaining demurrers by the Commissioner in the following cases:Harris v. Bank of Am., N.A., No. CGC-07-469393 (San Francisco Sup. Ct. 2008); Grotz v. Unum Group, No. CGC-09-485552 (San Francisco Sup. Ct. 2009); Martinez v. Standard Ins. Co., CGC-10-501948 (San Francisco Sup. Ct. 2010); Graybill-Bundgard v. Standard Ins. Co., CGC-10-504747 (San Francisco Sup. Ct. 2011).See ECF No. 19-1. Pursuant to Federal Rule of Evidence 201, the Court GRANTS Standard's Request.

Standard's reliance on Schwartz is misplaced. Fraudulent joinder is determined as of the time the complaint was filed.Beck v. Starbuck's Corp., No. C-08-2930, 2008 WL 4298575, at *2 (N.D. Cal. Sept. 19, 2008) (remanding case despite fact that after plaintiff filed his complaint the California Supreme Court issued a decision precluding liability against the non-diverse defendant). Schwartz was decided nearly five months after Plaintiff filed her FAC. Thus, even if Schwartz would preclude mandamus claims such as Plaintiff's — which Plaintiff vigorously disputes — it has no bearing on whether Plaintiff fraudulently joined the Commissioner in the instant action.

The trial court orders provided by Standard in which the Commissioner's demurrers to similar mandamus claims were sustained also fail to establish that there was a settled rule barring Plaintiff's mandamus claim when the FAC was filed. In her reply brief, Plaintiff provides three trial court orders denying the Commissioner's demurrers to identical claims.⁶ It therefore appears to the Court that state courts are divided on the issue. At a minimum, it is far from "obvious according to the settled rules of the state" that Plaintiff's claim was invalid when filed. See Morris, 236 F.3d at 1067.

6 Plaintiff asks the Court to take judicial notice of court orders denying demurrers by the Commissioner in the following cases: Guyton v. Unum Life Ins. Co., No. CGC-02-415586 (San Francisco Sup. Ct. 2002); Glick v. Unumprovident Life Ins. Co., No. CGC-03-422858 (San Francisco Sup. Ct. 2003); Contreras v. Metro. Life Ins. Co., CGC-07-462224 (San Francisco Sup. Ct. 2007). See ECF No. 21. The Court GRANTS Plaintiff's Request.

In light of the above, and the rule that ambiguities in the law must be resolved in favor of the non-removing party, the Court concludes that the Commissioner was not fraudulently joined and therefore GRANTS Plaintiff's Motion to Remand.

V. CONCLUSION

For the reasons stated above, Plaintiff Roya Ferdowsnia's motion to remand this case to the Superior Court of California, County of San Francisco, is GRANTED.

IT IS SO ORDERED.