Opinion
3:22-cv-01610-HZ
02-06-2023
JANAE OLSEN, and TIM ARMSTRONG, individuals, Plaintiff, v. GEICO GENERAL INSURANCE COMPANY, a Maryland Profit Corporation, BERKSHIRE HATHAWAY, a Nebraska Profit Corporation, ENLYTE GROUP LLC, a California Profit Corporation B formerly known as Mitchell Internal LLC; MEDCONNECT PRO LLC, an Oregon Limited Liability Company; and BARGER LAW GROUP PC, an Oregon Professional Corporation, Defendants.
Aaron Deshaw 2350 N.W. York Street Portland, Oregon 97210 Attorney for Plaintiffs Brian C. Hickman Gordon & Polscer, LLC Dan W. Goldfine Joshua Grabel Dickinson Wright PLLC Attorneys for Defendants GEICO General Insurance Company and Berkshire Hathaway Inc. Nancy M. Erfle Thomas Castelli Gordon Rees Scully Mansukhani, LLP Attorneys for Defendant Enlyte Group LLC Christopher J. Drotzmann Jonathan Henderson Davis Rothwell Earle & Xochihua, PC Attorneys for Defendant Barger Law Group PC
Aaron Deshaw 2350 N.W. York Street Portland, Oregon 97210 Attorney for Plaintiffs
Brian C. Hickman Gordon & Polscer, LLC
Dan W. Goldfine Joshua Grabel Dickinson Wright PLLC
Attorneys for Defendants GEICO General Insurance Company and Berkshire Hathaway Inc.
Nancy M. Erfle
Thomas Castelli
Gordon Rees Scully Mansukhani, LLP
Attorneys for Defendant Enlyte Group LLC
Christopher J. Drotzmann
Jonathan Henderson
Davis Rothwell Earle & Xochihua, PC
Attorneys for Defendant Barger Law Group PC
OPINION & ORDER
MARCO A. HERNÁNDEZ UNITED STATES DISTRICT JUDGE
This matter comes before the Court on Plaintiffs' Motion to Remand. ECF 27. For the reasons that follow, the Court GRANTS Plaintiffs' Motion.
BACKGROUND
The following facts are taken from Plaintiffs' First Amended Complaint and the parties' filings related to the Motion to Remand and are taken as true unless otherwise noted.
At all relevant times Plaintiffs had automobile insurance through Defendant GEICO General Insurance Company (“GEICO”).
On August 10, 2016, Plaintiff Janae Olsen sustained significant personal injuries when her car was struck from behind by another vehicle travelling at a high rate of speed. Notice of Removal [ECF1], Ex. 1 at ¶ 90.
On November 7, 2016, Olsen submitted proof of loss to GEICO for personal injury protection (“PIP”) and uninsured motorist (“UIM”) coverage.
On March 14, 2019, Olsen received a settlement, approved by GEICO, for $100,000 from the driver that caused the accident.
On April 12, 2019, Olsen sent a letter to GEICO seeking payment of Plaintiffs' $50,000 UIM policy. Olsen detailed her injuries and symptoms that resulted from the accident. On May 13, 2019, GEICO requested all of Olsen's medical records for the five-year period preceding the accident. On May 14, 2019, Olsen provided the requested records to GEICO claims adjuster Sara Joy.
On June 19, 2019, GEICO referred the matter to its in-house legal team. On July 5, 2019, GEICO's in-house counsel, Mary Carol Parker, requested a deposition of Olsen. On July 17, 2019, Olsen's counsel notified Parker of Olsen's intent to depose Joy. Shortly thereafter GEICO referred defense of the claim to outside counsel, Defendant Barger Law Group P.C. (“Barger”). Throughout 2019 and early 2020 Olsen responded to discovery requests and provided medical bills and tax information to Barger.
At some point in 2020 Barger retained Defendant MedConnect Pro, LLC (“MedConnect”) “to evaluate [Olsen] solely using her medical records.” First Am. Compl. (“FAC”) ¶ 126. Olsen and GEICO arbitrated the matter. During arbitration GEICO relied on a report from MedConnect written by Donna Wicher that indicated Olsen was not injured in the August 2016 accident, she did not need any future medical care, her past medical care was excessive, and she did not suffer any wage loss . FAC ¶ 136.
On August 9, 2020, the arbitration panel issued a binding arbitration determination in Olsen's favor and awarding damages in the amount of $488,638.05. Id. at 143.
On August 9, 2022, Olsen and her husband, Tim Armstrong, filed an action in Multnomah County Circuit Court against GEICO, Berkshire Hathaway, Enlyte Group LLC, MedConnect, and Barger and alleged claims for breach of contract against GEICO and Berkshire Hathaway, fraud against all Defendants, negligence, and negligence per se. Plaintiffs did not serve Defendants with their initial Complaint. On September 28, 2022, Plaintiffs filed a First Amended Complaint to provide further factual allegations. Generally Plaintiffs assert Defendants engaged in a fraudulent scheme to delay, deny, and underpay customers' insurance claims to generate “float money” that Berkshire Hathaway used to invest and “to improperly profit” at the expense of individuals, such as Olsen, who are insured by GEICO. Pls. Mot. to Remand at 2.
GEICO is a subsidiary of Berkshire Hathaway.
Enlyte Group LLC provides “software and services to the insurance industry” including GEICO. FAC ¶ 8.
The FAC does not specify against which Defendants Plaintiffs bring their negligence claims, but in their Motion to Remand Plaintiffs indicate they bring these claims against all Defendants.
On October 21, 2022, GEICO removed the matter to this Court on the basis of diversity jurisdiction. In its Notice of Removal GEICO conceded Plaintiffs, MedConnect, and Barger are all Oregon citizens, but asserted the Court should disregard MedConnect and Barger's citizenship in determining diversity jurisdiction because MedConnect and Barger were fraudulently joined.
On November 21, 2022, Plaintiffs filed a Motion to Remand on the basis that MedConnect and Barger were not fraudulently joined and, therefore, this Court lacks subject-matter jurisdiction. Defendants GEICO, MedConnect, and Enlyte oppose remand. The Court took this matter under advisement on December 19, 2022.
STANDARDS
28 U.S.C. § 1446(a) provides in pertinent part: “A defendant or defendants desiring to remove any civil action . . . from a State court shall file in the district court of the United States for the district and division within which such action is pending a notice of removal."
The removal statute, 28 U.S.C. § 1441(a), is strictly construed against removal jurisdiction. Sharma v. HSI Asset Loan Obligation Tr. 2007-1 by Deutsche Bank Nat'l Tr. Co., 23 F.4th 1167, 1170 (9th Cir. 2022). Courts, therefore, “reject federal jurisdiction ‘[when] there is any doubt as to the right of removal in the first instance.'” Martinez v. Am.'s Wholesale Lender, 764 Fed.Appx. 592 (9th Cir. 2019) (quoting Gaus v. Miles, Inc., 980 F.2d 564, 566-67 (9th Cir. 1992)). See also Geographic Expeditions, Inc. v. Est. of Lhotka ex rel. Lhotka, 599 F.3d 1102, 1106-07 (9th Cir. 2010)(federal jurisdiction must be rejected “if there is any doubt as to the right of removal.”). Due to the strong presumption against removal jurisdiction, “[a] ‘defendant seeking removal has the burden to establish that removal is proper.'” Sharma, 23 F.4th at 1169 (quoting Canela v. Costco Wholesale Corp., 971 F.3d 845, 849 (9th Cir. 2020)).
A motion to remand is the proper procedure for challenging removal. Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009).
DISCUSSION
Plaintiffs assert they are Oregon citizens, MedConnect and Barger are Oregon citizens, and Barger and MedConnect were not fraudulently joined. According to Plaintiffs, therefore, the parties are not diverse and this Court lacks subject-matter jurisdiction.
I. Fraudulent Joinder Standard
“Diversity removal requires complete diversity, meaning that each plaintiff must be of a different citizenship from each defendant.” Grancare, LLC v. Thrower by & through Mills, 889 F.3d 543, 548 (9th Cir. 2018)(citing Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996)). When “determining whether there is complete diversity, district courts may disregard the citizenship of a non-diverse defendant who has been fraudulently joined.” Grancare, 889 F.3d at 548 (citation omitted).
There are two ways to establish fraudulent joinder: “‘(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.'” Grancare, 889 F.3d at 548 (quoting Hunter v. Philip Morris USA, 582 F.3d 1039, 1044 (9th Cir. 2009)). “Fraudulent joinder is established the second way [when] a defendant shows that an “‘individual[ ] joined in the action cannot be liable on any theory.'” Grancare, 889 F.3d at 548 (quoting Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998)). If, however, “there is a possibility that a state court would find that the complaint states a cause of action against any of the resident defendants, the federal court must find that the joinder was proper and remand the case to the state court.” Grancare, 889 F.3d at 548 (quoting Hunter v. Philip Morris USA, 582 F.3d 1039, 1046 (9th Cir. 2009))(emphasis in Grancare). “A defendant invoking federal court diversity jurisdiction on the basis of fraudulent joinder bears a ‘heavy burden' since there is a ‘general presumption against [finding] fraudulent joinder.'” Grancare, 889 F.3d at 548 (quoting Hunter, 582 F.3d at 1046).
The Ninth Circuit has “upheld rulings of fraudulent joinder” when defendants have established plaintiffs' claims are barred by the statue of limitations or when defendants have “present[ed] extraordinarily strong evidence or arguments that a plaintiff could not possibly prevail on her claims against the allegedly fraudulently joined defendant.” Grancare, 889 F.3d at 548 (citations omitted). The court, however, has declined to uphold fraudulent joinder rulings when “a defendant raises a defense that requires a searching inquiry into the merits of the plaintiff's case, even if that defense, if successful, would prove fatal.” Id. at 548-49.
In Grancare the Ninth Circuit made clear that the test for fraudulent joinder is not equivalent to an evaluation for failure to state a claim under rule 12(b)(6). In fact, “[a] claim against a defendant may fail under Rule 12(b)(6), but that defendant has not necessarily been fraudulently joined.” Id. at 549. “[A] federal court must find that a defendant was properly joined and remand the case to state court if there is a possibility that a state court would find that the complaint states a cause of action against any of the [non-diverse] defendants.” Id. (quotation omitted)(emphasis in Grancare). “Because the purpose of the fraudulent joinder doctrine is to allow a determination whether the district court has subject matter jurisdiction, the standard is similar to the ‘wholly insubstantial and frivolous' standard for dismissing claims under Rule 12(b)(1) for lack of federal question jurisdiction.” Id. (quoting Bell v. Hood, 327 U.S. 678, 68283 (1946)). See also Franklin v. Murphy, 745 F.2d 1221, 1227 n.6 (9th Cir. 1984), abrogated on other grounds by Neitzke v. Williams, 490 U.S. 319 (1989)(“A . . . complaint that is ‘obviously frivolous' does not confer federal subject matter jurisdiction.”). “The relative stringency of the standard accords with the presumption against removal jurisdiction, under which we ‘strictly construe the removal statute,' and reject federal jurisdiction ‘if there is any doubt as to the right of removal in the first instance.'” Id. (quoting Gaus, 980 F.2d at 566). “Relatedly, the Ninth Circuit has concluded that ‘doubtful question[s] of state law . . . should be tried in the state court and not determined in removal proceedings.'” Miotke v. Corizon Health, Inc., No. 3:20-CV-00125-SB, 2020 WL 3317932, at *4 (D. Or. May 22, 2020), report and recommendation adopted, No. 3:20-CV-00125-SB, 2020 WL 3316977 (D. Or. June 18, 2020)(quoting Smith v. S. Pac. Co., 187 F.2d 397, 402 (9th Cir. 1951)).
II. Merits
As noted, Plaintiffs assert Defendants engaged in a fraudulent scheme to delay, deny, and underpay customers' insurance claims to generate “float money” that Berkshire Hathaway used to invest and “to improperly profit” at the expense of individuals, including Plaintiffs, who are insured by GEICO. Pls. Mot. to Remand at 2. Plaintiffs assert Barger and MedConnect aided and assisted GEICO and Berkshire Hathaway in carrying out this fraudulent scheme.
Defendants assert Plaintiffs “did not, and cannot, state a set of facts that would make a claim for fraud against either of the non-diverse defendants,” and, therefore, MedConnect and Barger were fraudulently joined and their citizenship should be ignored for diversity-jurisdiction purposes. Specifically, Defendants assert Barger's conduct is absolutely privileged and/or Plaintiffs claims against Barger and MedConnect are untimely.
Defendants assert MedConnect's actions are protected by the litigation privilege, but their argument focuses exclusively on Barger's actions with a brief statement that the litigation privilege also applies to “MedConnect's statements made arising out conduct [sic] during a judicial or quasi-judicial proceeding and bars Plaintiffs' fraud claims brought against . . . MedConnect.” Defs' Opp. at 12.
A. Privilege
Defendants concede “a person who acts ‘in concert with' or ‘gives substantial assistance or encouragement' to a fiduciary who breaches a duty to a third party may be liable for the resulting harm.” Reynolds v. Schrock, 341 Or. 338, 346 (2006). Defendants, however, assert Barger was acting as GEICO's attorney and within the scope of that lawyer-client relationship and, therefore, pursuant to Reynolds Barger's conduct is absolutely privileged and there is no possibility that a state court would find the First Amended Complaint states a cause of action against Barger. Plaintiffs, however, assert Barger's actions fall within the “crime or fraud” exception to that privilege and, therefore, it does not establish that there is no “possibility that a state court would find that the complaint states a cause of action against any of the [non-diverse] defendants” or that Plaintiffs “could not possibly prevail on [their] claims against” Barger. Grancare, 889 F.3d at 549 (emphasis in original).
Oregon courts have held “'[s]tatements that are made as part of judicial and quasi-judicial proceedings are absolutely privileged.'” Wollam v. Brandt, 154 Or.App. 156, 162 (1998)(quoting Wallulis v. Dymowski, 323 Or. 337, 348, 918 P.2d 755 (1996)). “Statements made by an attorney in advance of proposed judicial or quasi-judicial proceedings are also absolutely privileged.” Wollam, 154 Or.App. at 162 (quotation omitted). “The privilege is based upon a public policy of securing to attorneys . . . the utmost freedom in their efforts to secure justice for their clients.” Id. (quotation omitted). The Oregon Supreme Court, however, recognized in Reynolds circumstances under which the privilege does not protect an attorney's actions. In that case, an investor brought an action for breach of fiduciary duty against a joint venturer in a real-estate investment and the attorney who represented the joint venturer. The plaintiff alleged the attorney was jointly liable with the joint venturer because he “aided and abetted” the joint venturer's torts. The attorney moved for summary judgment. The trial court granted the attorney's motion as to the plaintiff's claim for breach of fiduciary duty on the basis that the only evidence presented by the plaintiff was that the attorney had “advised his client of what she could do given the language of the agreements.” Reynolds, 341 Or. at 342. The Oregon Court of Appeals reversed the trial court's decision as to that claim on the grounds that the Oregon Supreme Court's “precedents did not exempt a lawyer from liability for assisting in a client's breach of fiduciary duty and . . . the Court of Appeals' case law suggested that a lawyer for a fiduciary could be liable for knowingly aiding or assisting a fiduciary in a breach of duty.” Id. at 343. The Oregon Supreme Court noted it had not decided “whether, and under what circumstances, a third party may assert a claim against a lawyer, acting in a professional capacity, for assisting a client in breaching the client's fiduciary duty.” Id. at 344 (emphasis in original). The Court noted its earlier decisions held “a person may be jointly liable with another for substantially assisting in the other's breach of a fiduciary duty owed to a third party, if the person knows that the other's conduct constitutes a breach of that fiduciary duty.” Id. at 345 (citing Granewich v. Harding, 329 Or. 47, 57 (1999)). If, however, “a person's conduct as an agent or on behalf of another comes within the scope of a privilege, then the person is not liable to the third party.” Id. The Court then “extend[ed] those . . . principles . . . to hold that a lawyer acting on behalf of a client and within the scope of the lawyer-client relationship is protected by such a privilege and is not liable for assisting the client in conduct that breaches the client's fiduciary duty to a third party.” Id. at 350. Thus, “for a third party to hold a lawyer liable for substantially assisting in a client's breach of fiduciary duty, the third party must prove that the lawyer acted outside the scope of the lawyer-client relationship.” Id. at 350-51. The Court specifically noted it “would consider actions by a lawyer that fall within the ‘crime or fraud' exception to the lawyer-client privilege, OEC 503(4)(a), and Rule of Professional Conduct 1.6(b)(1), to be outside the lawyer-client relationship when evaluating whether a lawyer's conduct is protected.” Id. at 351. Ultimately, the Court concluded the “summary judgment record reveal[ed] no evidence from which a reasonable jury could find that [the attorney] acted outside the scope of the lawyer-client relationship in his representation of [the joint venturer]. [The attorney's] conduct therefore falls within the scope of the privilege.” Id. at 356. Accordingly, the Court reversed the Court of Appeals and affirmed the trial court.
Plaintiffs here assert Barger's conduct falls within the crime or fraud exception and, therefore, pursuant to Reynolds, Barger's conduct is not privileged and Barger may be liable for aiding GEICO's fraudulent scheme. “Under the ‘crime or fraud' exception, ‘[t]here is no privilege . . . [i]f the services of the lawyer were sought or obtained to enable or aid anyone to commit or plan to commit what the client knew or reasonably should have known to be a crime or fraud.'” Singh v. McLaughlin, 255 Or.App. 340, 351 (2013)(quoting OEC 503(4)(a); Rule of Professional Conduct 1.6(b)(1) (providing that a lawyer may reveal client confidences when reasonably necessary “to disclose the intention of the lawyer's client to commit a crime and the information necessary to prevent the crime”)). The First Amended Complaint contains several allegations in support of Plaintiffs' assertion that GEICO hired Barger “to enable or aid [GEICO] to commit or plan to commit what [GEICO] knew or reasonably should have known to be . . . fraud.” For example, Plaintiffs allege both GEICO and Barger knew or should have known that because Donna Wicher “reviews doctor chart notes and . . . opines upon whether they are correct or not, and opines on whether past and future medical treatment is appropriate, despite not being educationally qualified or legally allowed to do” so she is acting in violation of Oregon Revised Statutes §§ 677.085 and 684.020. FAC ¶ 133. Plaintiffs allege GEICO and Barger “knew or should have known that . . . Wicher . . . does not conduct her own testing or scoring, and . . . MedConnect Pro consistently fraudulently conceal [sic] this in . . . Wicher's reports so that it appears as if . . . Wicher is performing the evaluation, thereby misleading people reading the report such as other doctors, plaintiff counsel . . . and arbitrators.” Id. ¶ 134. Plaintiffs allege Barger “made material misrepresentations that were false, and concealed material facts of MedConnect Pro's unlawful operation, and plaintiff's injuries in an attempt to allow Defendant GEICO to profit by denying, delaying and defending Plaintiff's claim (as well as other claims) despite their merits.” Id. ¶ 212. Plaintiffs allege MedConnect is operating in violation of Oregon Revised Statute § 58.375, that GEICO and Barger knew or should have known MedConnect was operating in violation of § 58.375, and yet GEICO and Barger “regularly seek medical examinations and diagnostic opinions [from MedConnect] to defend personal injury claims, including Oleson's claim. Id. ¶¶ 128, 130. Plaintiffs also allege Barger violated several provisions of the Oregon Rules of Professional Responsibility and Oregon Code of Professional Responsibility when it “fail[ed] to withdraw from working with Defendant GEICO to further the fraudulent goals of Defendants GEICO and Berkshire Hathaway” including: Rule 1.16(a)(1)-(2), (b)(2)-(3); DR 1-102(A)(3)-(4); DR 2-109(A)(1)-(2); DR 7-102(A)(1)-(3), (5), (7), and (B)(1)- (2). These rules generally set out the circumstances under which attorneys should withdraw from representation of clients including when such representation “will result in violation of the Rules of Professional Conduct or other law,” clients “persist[] in a course of action involving the lawyer's services that the lawyer reasonably believes is . . . fraudulent,” or clients have “used the lawyer's services to perpetrate . . . fraud” and define professional misconduct to include various things such as engaging “in conduct involving dishonesty, fraud, deceit or misrepresentation.”
The Court concludes these allegations are sufficient to establish there is a possibility that a state court would find that the complaint states a cause of action against Barger and MedConnect that is not barred by privilege. To the extent that Defendants contend Plaintiffs have not alleged facts sufficient to state a claim for fraud against Barger and MedConnect Defendants apply the wrong standard. As the Ninth Circuit noted in Grancare, “[a] standard that equates fraudulent joinder with Rule 12(b)(6) conflates a jurisdictional inquiry with an adjudication on the merits . . . [the fraudulent joinder standard] . . . is similar to the ‘wholly insubstantial and frivolous' standard for dismissing claims under Rule 12(b)(1) for lack of federal question jurisdiction.” 889 F.3d at 549. (quoting Bell v. Hood, 327 U.S. 678, 682-83 (1946)). This record does not support a finding that Plaintiffs' assertion of the crime or fraud exception is wholly insubstantial or frivolous or that there is no possibility that a state court would find the crime or fraud exception applies. Accordingly, Defendants have not established Plaintiffs are unable to prevail on any of their claims against Barger and MedConnect due to privilege.
B. Limitations Period
Defendants allege Plaintiffs could not possibly prevail on their fraud claim against Barger and MedConnect because that claim is barred by the relevant statute of limitations.
Oregon Revised Statute § 12.110(1) provides an action for fraud “shall be commenced within two years” and “the limitation shall be deemed to commence only from the discovery of the fraud or deceit.” The “discovery rule” of § 12.110(1) “operates in conjunction with the general claim-accrual principle that applies to all claims - viz., that a claim accrues when all of the facts exist that the plaintiff must prove in order to recover on the claim.” Murphy v. Allstate Ins. Co., 251 Or.App. 316, 321-22 (2012)(citation omitted). Specifically, the discovery rule of § 12.110(1) provides that a fraud claim accrues when a plaintiff “has discovered facts or, in the exercise of reasonable diligence, should have discovered facts that would alert a reasonable person to the existence of the three elements of an actionable injury, which are (1) harm, (2) causation, and (3) tortious conduct - viz., the alleged fraud.” Id. (citing Gaston v. Parsons, 318 Or. 247, 256 (1994). See also Mathies v. Hoeck, 284 Or. 539, 542 (1978) (“[T]he period of limitations for fraud begins to run when the plaintiff knew or should have known of the alleged fraud.”); Widing v. Schwabe, Williamson & Wyatt, 154 Or.App. 276, 283 (1998)(“The discovery rule [under ORS 12.110(1) ], as it applies to the fraud claim, is essentially similar [to the discovery principle laid out in Gaston incorporating the three elements of an actionable injury], except that the actual or [imputed] knowledge that a plaintiff must have in order to start the running of the statute has sometimes been described as including the fact of the fraud itself.”). The resolution of that inquiry
depends on two predicate determinations: (1) when, if ever, plaintiff learned sufficient facts that should have aroused his attention about the possibility of fraud such that he had a duty to undertake further investigation and (2) if plaintiff had a duty to investigate, when a reasonable investigation would have provided him with sufficient facts to disclose the existence of an actionable injury.Murphy, 251 Or.App. at 322 (citations omitted).
The question of when a plaintiff has suffered an “actionable injury resulting from [the defendant's] alleged fraud . . . is a determination that must be made by the factfinder unless the evidence compels a certain answer as a matter of law.” Murphy, 251 Or.App. at 322. See also Widing, 154 Or.App. at 283 n.6 (“Unless the facts can support only one conclusion . . . the question of whether and when a plaintiff has the necessary information to have discovered the claim is one for the trier of fact.”).
Defendants note that Plaintiffs filed this action on August 9, 2022, which is exactly two years from the date of the arbitration award. Defendants assert Plaintiffs' alleged injury does not arise from the arbitration award and, in fact, arose when GEICO denied Olsen's claim and/or at some point during the arbitration process itself. Defendants further contend Plaintiffs must have discovered facts or, in the exercise of reasonable diligence, should have discovered facts that would have alerted a reasonable person to the existence of the alleged harm suffered by Plaintiffs, the cause of that harm, and of the fraudulent conduct by Barger and MedConnect well before August 9, 2022. According to Defendants, therefore, Plaintiffs' claims against Barger and MedConnect are untimely. Defendants conclude that Plaintiffs do not have even a possibility of success on their fraud claim and accordingly, the joinder of Barger and MedConnect is fraudulent and their citizenship should be ignored for jurisdiction.
Plaintiffs assert they could not have discovered the fraud before August 9, 2020, because it was the excess arbitration award that “evidenced GEICO's improper claim practices and fraudulent conduct as legally actionable,” and that, in turn, suggested Barger and MedConnect's liability as joint tort-feasors for those improper claim practices. Plaintiffs also assert that whether Plaintiffs should have discovered an actionable injury from Defendants' fraud is a question that must be answered by the fact finder under these circumstances.
Based on the allegations of the First Amended Complaint it is unclear that a reasonable person could or should have discovered facts that would have alerted a reasonable person to the existence of the alleged harm suffered by Plaintiffs, the cause of that harm, and of the fraudulent conduct by Barger and MedConnect before August 9, 2020. It is clear that GEICO denied Olsen's claim and that at some point prior to August 9, 2020, Barger hired MedConnect to provide a report regarding the extent and cause of Olsen's injuries. It is unclear, however, whether a reasonable person would have been alerted to the alleged fraudulent conduct of Barger and MedConnect before August 9, 2020. Specifically it is unclear whether a reasonable person would have understood GEICO's alleged plan to deny, delay and underpay insurance claims by hiring MedConnect to provide reports written by individuals who, according to Plaintiffs, were unqualified to provide those reports; that Barger allegedly concealed material facts about MedConnect's status a medical facility operating in violation of Oregon Revised Statute § 58.357; or that GEICO, Barger, and MedConnect were allegedly engaged in a systematic pattern and practice of making material misrepresentations about the medical decisions rendered by MedConnect staff. Accordingly, the Court cannot find on this record that the facts support only one conclusion as to whether Plaintiffs could or should have discovered facts that would have alerted a reasonable person to the existence of the alleged harm suffered by Plaintiffs, the cause of that harm, and of the fraudulent conduct by Barger and MedConnect before August 9, 2020. Accordingly, the questions whether and when Plaintiffs had the necessary information to have discovered the claim are for the trier of fact at this point. The Court, therefore, concludes on this record that Defendants have not met their “heavy burden” to establish there is no possibility that a state court would find that the First Amended Complaint states a cause of action against Barger and MedConnect. Accordingly, the Court finds the joinder of MedConnect and Barger was not fraudulent and, therefore, the Court must remand the case to the state court.
III. Attorney Fees
Plaintiffs request attorney fees and costs incurred as a result of the removal of this action pursuant to 28 U.S.C. § 1447(c), which provides “[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” “Absent unusual circumstances, courts may award attorney's fees under § 1447(c) only whe[n] the removing party lacked an objectively reasonable basis for seeking removal. Conversely, when an objectively reasonable basis exists, fees should be denied.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). “Removal is not objectively reasonable when relevant case law at the time clearly forecloses the removing party's asserted basis for removal.” Powell v. Healy, No. 21-55477, 2022 WL 4181717, at *1 (9th Cir. Sept. 13, 2022)(citing Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1066 (9th Cir. 2008)). “[R]emoval[, however,] is not objectively unreasonable solely because the removing party's arguments lack merit,” Christensen L. Offs., LLC v. Christensen, No. 21-15887, 2022 WL 777217, at *1 (9th Cir. Mar. 14, 2022), or “else attorney's fees would always be awarded whenever remand is granted.” Lussier, 518 F.3d at 1065.
The Court concludes on this record that although Defendants' arguments were unsuccessful, relevant case law did not clearly foreclose Defendants' asserted basis for removal or establish that “the basis for removal was clearly foreclosed.” Christensen L. Offs., 2022 WL 777217, at *1 (citing Lussier, 518 F.3d at 1066). Unlike in other cases in which courts have awarded attorney fees incurred on removal, Defendants' arguments here were not “baseless and premised on misrepresentation” or “frivolous.” Owen v. Stokes, 849 Fed.Appx. 662, 664 (9th Cir. 2021); U.S. Bank, N.A. as Tr. for J.P. Morgan Mortg. Acquisition Tr. 2006-WMC2, Asset Backed Pass-Through Certificates, Series 2006-WMC2 v. Amina, 830 Fed.Appx. 940, 941 (9th Cir. 2020). Accordingly, the Court declines to award Plaintiffs attorney fees and costs incurred as a result of removal.
CONCLUSION
For these reasons, the Court GRANTS Plaintiffs' Motion to Remand [27], DENIES pending motions as moot, and REMANDS this matter to Multnomah County Circuit Court.
IT IS SO ORDERED.