United States District Court, D. Arizona
HONORABLE SUSAN M, BRNOVICH UNITED STATES DISTRICT JUDGE.
diversity jurisdiction under 28 U.S.C. § 1332, Defendant
Stillwater Insurance Company (“Stillwater”)
removed this case from the Superior Court of Arizona on
August 6, 2019. (Doc. 1). Plaintiff Anthony Russo
(“Russo” or “Plaintiff”), an Arizona
resident, initiated this case in state court more than a year
ago. (Doc. 1 at 3). Stillwater is a foreign corporation.
Stillwater's impetus for removing the case was the state
court granting summary judgment for Stillwater's
co-defendants, who are Arizona residents, resulting in
complete diversity of the remaining parties. (Doc. 1 at 3).
a case cannot be removed more than one year after a Plaintiff
initiated it, unless “the district court finds that the
plaintiff has acted in bad faith in order to prevent a
defendant from removing the action.” 28 U.S.C. §
1446(c). In the Notice of Removal, Stillwater alleges
Plaintiff acted in bad faith by fraudulently joining Arizona
parties as defendants in order to prevent diversity. (Doc. 1
at 8-9). The Court issued an order sua sponte that the
parties brief whether the state court granting summary
judgment to the Arizona defendants constitutes fraudulent
joinder in this case and whether fraudulent joinder falls
under § 1446(c)'s bad faith exception to the
one-year limit on removal. (Doc. 10). Federal courts have a
duty to examine their subject matter jurisdiction whether or
not the parties raise the issue. Canterbury Lots 68, LLC
v. De La Torre, No. CV 13-00712 MMM RZX, 2013 WL 781974,
at *1 (C.D. Cal. Feb. 28, 2013) (citing United Investors
Life Ins. Co. v. Waddell & Reed, Inc., 360 F.3d 960,
966 (9th Cir.2004); Valdez v. Allstate Ins. Co., 372
F.3d 1115, 1116 (9th Cir. 2004).
preliminary matter, Plaintiff attached 8 exhibits to their
brief. Some of which were attached presumably for some
evidentiary value on the underlying claims. Defendant objects
to Exhibits 2 & 3 and filed a motion seeking permission
to file an objection. Plaintiff's object to
defendant's request arguing that the Court ordered
simultaneous briefs. The Court ordered briefing on two legal
issues, not on a factual argument. Therefore, Defendant's
Motion for Leave to Object to Admission of Exhibits 2 and 3
will be denied but exhibits 2 and 3 will not be considered.
case arises from a fire at the residence of Plaintiff Anthony
Russo on February 6, 2017. Russo was insured by Defendant
Stillwater Insurance Company. Stillwater hired Mark Hellan
and Andre Thoresen to investigate the cause and origin of the
fire. Based on their investigation, Stillwater determined
that the loss was not covered under the policy and denied
Russo's claim. Plaintiff Russo then hired his own fire
investigator Patrick Andler to look at the cause and origin
of the fire. Andler's conclusions differed from those
made by Hellan and Thoresen.
Russo filed his Complaint in Maricopa County Superior Court
on February 2, 2018. In addition to Still water, the
Complaint named Hellan, and Hellan's company as
defendants (the “Hellan defendants”). The only
claim against the Hellan defendants was one for negligence.
The Hellan defendants filed a motion to dismiss but before
that was ruled on, Plaintiff filed his Amended Complaint
adding additional claims for aiding and abetting tortious
interference and intentional interference with contract
against the Hellan defendants. The Hellan Defendants filed
another Motion to Dismiss. After oral argument on the motion
to dismiss, Plaintiff moved to file a second amended
complaint. That leave was granted and defendants Thoresen and
his company were added as defendants. The claims against
Thoresen and his company were the same as those made against
the Hellan defendants. Ultimately, the state court dismissed
the negligence claims but allowed the other claims to
proceed. After discovery was conducted, the Hellan defendants
and Thoresen and his company filed motions for summary
judgment. Russo contested the motion for summary judgment by
filing a response and participating in oral argument. Both
motions were granted, and the non-diverse defendants were
dismissed from the case. Stillwater removed the case to this
Court on the same day as the ruling on the basis of diversity
defendant may remove an action to federal court based on
diversity jurisdiction. 28 U.S.C. § 1441(a). However,
the removal statute is strictly construed against removal
jurisdiction. Gaus v. Miles, Inc., 980 F.2d 564, 566
(9th Cir. 1992). Thus, the defendant has the burden of
establishing that removal is proper, and federal jurisdiction
must be rejected if there is any doubt as to the right of
removal. Id. “In borderline situations, where
it is doubtful whether the complaint states a cause of action
against the resident defendant, the doubt is ordinarily
resolved in favor of the retention of the cause in state
court.” Albi v. Street & Smith
Publications, 140 F.2d 310, 312 (9th Cir. 1944).
case, the motions to dismiss were denied and it was not until
the case was factually developed through discovery that the
non-diverse defendants were dismissed. This lends credibility
to a showing that the defendants were not fraudulently joined
because the failure of the claims was not obvious. The state
court denied the motions to dismiss thereby finding that the
Plaintiff had stated valid claims by the pleading standards.
A defendant's presence will be ignored for purposes of
diversity when 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). Stillwater has not met its burden to show that the
joinder was fraudulent.
Bad Faith Exception (18 U.S.C. § 1446(c)(1))
diversity case where the initial pleading is not removable
“may not be removed more than 1 year after the
commencement of the action, unless the district court finds
that the plaintiff has acted in bad faith in order to prevent
a defendant from removing the action.” 28 U.S.C. §
1446(c)(1). The burden is on Stillwater to show bad faith.
See Marin Gen. Hosp. v. Modesto & Empire Traction
Co., 581 F.3d 941, 944 (9th Cir. 2009) Bad faith
requires looking at the subjective intent of the Plaintiff.
Heller v. American States Ins. Co., No. CV 15-9771
DMG (JPRx), 2016 WL 1170891, at *2 (C.D. Cal. March 25,
2016). “The bad faith exception, as distinct from the
doctrine of fraudulent joinder, applies to ‘plaintiffs
who joined-and then, after one year, dismissed-defendants
[whom] they could keep in the suit, but that they did not
want to keep in the suit, except as removal
spoilers.'” Id. (quoting Aguayo v.
AMCO Ins. Co., 59 F.Supp.3d 1225, 1266 (D. N.M. 2014)).
In Aguayo, the court suggested that the analysis
could consider circumstantial evidence of intent, such as
whether the plaintiff actively litigated against the
non-diverse defendant, and direct evidence of intent, such as
emails or letters from Plaintiff suggesting that he or she is
trying to defeat removal. 59 F.Supp.3d at 1262.
case, Plaintiff actively litigated the case in state court
for over a year and did not voluntarily dismiss the
non-diverse defendants. There is no direct evidence of bad
faith. Therefore, the Court finds that there is no exception