United States District Court, D. Arizona
Charles Michael Callahan, Micalann Charlotte Pepe, Christian Dichter & Sluga PC, Phoenix, AZ, for Plaintiff.
Daniel Gregory Sakall, David J. Diamond, Goldberg & Osborne, Tucson, AZ, for Defendants.
ORDER AND OPINION
JOHN W. SEDWICK, District Judge.
I. MOTIONS PRESENTED
Defendant Stacey Harrish (" Harrish" ) filed a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure at docket 5 in Tucson Case No. 4:12-cv-00661 (" Tucson Case" ), which Harrish and Defendant IDS Property Casualty Insurance Company (" IDS" ; collectively " Defendants" ) removed from Pima County Superior Court. In the motion to dismiss, Harrish argues that she was an improperly named party against whom no cause of action can lie.
About two weeks after Harrish filed her motion to dismiss, plaintiffs Frank and Bettina Gambrell (" Gambrells" or " plaintiffs" )  filed a motion at docket 7 to remand the Tucson Case back to Pima County Superior Court pursuant to 28 U.S.C. § 1447(c), arguing that there is not complete diversity because Harrish is a resident of Arizona. Defendants filed an opposition at docket 11 in the Tucson Case. While they acknowledge that Harrish is a resident of Arizona, they assert that she
was " fraudulently joined" to the case while it was in state court, meaning they believe plaintiffs have no valid cause of action against Harrish, and thus, her inclusion was designed to block federal diversity jurisdiction.
The Gambrells asked the court to stay the briefing on Harrish's motion to dismiss until the court resolved the jurisdictional issues in the motion to remand, but the court denied the request, opting to consider the motions together, given the similarity of the issue at stake in both motions— i.e., whether a claim of bad faith against Harrish exists under Arizona law. 
The court consolidated the Tucson Case with Phoenix case 2:12-cv-01227 (" Lead Case" ), which is IDS's related declaratory judgment action against the Gambrells. After consolidation, the Gambrells subsequently filed their opposition to Harrish's motion to dismiss at docket 22 in the Lead Case and filed their reply to the motion to remand at docket 20. Harrish filed her reply to her motion to dismiss at docket 23 in the Lead Case. Both parties requested oral argument, but this court concludes that the briefing for the two motions is extensive and thorough and oral argument is not necessary.
The two cases involving the Gambrells and IDS arise out of an automobile accident that occurred March 4, 2011, in which Frank Gambrell sustained personal injuries after another car crossed the center line and collided with the truck Gambrell was driving. The truck was owned by Frank Gambrell's employer. His medical expenses totaled over $87,000, and his loss of earnings totaled over $6,000. The Gambrells settled with the tort feasor's insurance carrier for the $15,000 liability limit. He then pursued a claim under the insurance policy that Gambrell's employer maintained on the truck involved in the accident. That policy had underinsured motorist coverage in the amount of $100,000, and Gambrell collected the full amount under that policy. But, because the amount Gambrell collected from the tort feasor's policy and his employer's policy was allegedly inadequate to compensate Gambrell, he filed a claim for $100,000 under his personal auto insurance policy that he maintained with IDS. IDS assigned Harrish to adjust the claim. They denied Gambrell's claim. Gambrells asked defendants to reconsider their denial and pointed out reasons why they thought the denial was improper, but defendants maintained their denial.
On June 8, 2012, after the parties were unable to settle the claim, IDS initiated a declaratory relief action in federal court by filing the complaint in the Lead Case. In the complaint, IDS asks the court to judicially determine the parties' dispute over coverage. On July 25, 2012, plaintiffs filed the underlying complaint in the Tucson Case in state court. The complaint originally alleged a breach of contract and bad faith claim against IDS.  On August 3, 2012, shortly after defendants declined plaintiffs' request to stipulate to a remand in the Lead Case, plaintiffs filed an amended complaint in state court, adding Harrish as a defendant and alleging that Harrish was assigned to adjust the ...