Charlin v. Allstate Ins. Co., CV 98-3451 ABC (AJUx).

• Decision Date: 15 July 1998
• Docket Number: No. CV 98-3451 ABC (AJUx).,CV 98-3451 ABC (AJUx).
• Citation: 19 F.Supp.2d 1137
• Court: U.S. District Court — Central District of California
• Parties: Celia CHARLIN, Plaintiff, v. ALLSTATE INSURANCE CO.; Donoyan Insurance Agency; Does 1 to 20, inclusive, Defendants.

19 F.Supp.2d 1137

Celia CHARLIN, Plaintiff, v. ALLSTATE INSURANCE CO.; Donoyan Insurance Agency; Does 1 to 20, inclusive, Defendants.

No. CV 98-3451 ABC (AJUx).

United States District Court, C.D. California.

July 15, 1998.

COPYRIGHT MATERIAL OMITTED

Johnna J. Hansen, Booth & Koskoff, Torrance, CA, for Plaintiff.

Peter H. Klee, Thomas D. Bunton, Luce, Forward, Hamilton & Scripps, San Diego, CA, for Defendants.

ORDER RE: MOTION TO REMAND

COLLINS, District Judge.

Plaintiff's motion for remand was submitted for decision on May 28, 1998. After reviewing the materials submitted by the parties and the case file, it is hereby ORDERED that Plaintiff's motion to remand is DENIED.

I. Factual and Procedural Background

Plaintiff makes the following allegations relevant to the instant Motion to Remand:

Celia Charlin ("Plaintiff") was the named insured under an automobile policy issued by Allstate Insurance Company ("Defendant") through Donoyan Insurance Agency ("Donoyan"). Complaint ¶ 6. Plaintiff never signed a waiver of uninsured motorist ("UM") coverage. Complaint ¶ 6. On May 11, 1997, Plaintiff was involved in an accident with an uninsured motorist. Complaint ¶ 8. Defendant subsequently denied Plaintiff's claims for UM benefits under the Allstate policy. Complaint ¶ 10.

On March 27, 1998, Plaintiff commenced this action against Defendant and Donoyan in Los Angeles County Superior Court. On May 5, 1998, Defendant and Donoyan removed the case to federal court. On May 15, 1998, the Court issued an Order to Show Cause ("OSC"), in part, to determine whether Plaintiff fraudulently joined Donoyan as a defendant. In response to the OSC, Plaintiff filed her Motion to Remand on May 28, 1998. Plaintiff contends that the Court should remand this action because no diversity jurisdiction exists. Defendant and Donoyan filed their Opposition on June 10, 1998. They contend that diversity jurisdiction does exist. Defendants specifically contend that Plaintiff "has not stated a valid cause of action against Donoyan" and that Donoyan is a "sham defendant that has been fraudulently joined." Opp. at 2.

II. Discussion

1. Standard: Fraudulent Joinder¹

A defendant may remove a civil action on the basis of diversity jurisdiction and seek to persuade the district court that a non-diverse defendant was fraudulently joined. See McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir.1987). "[I]n most cases, fraudulent joinder involves a claim against an in-state defendant that simply has no chance of success, whatever the plaintiff's motives." Poulos v. Naas Foods, Inc., 959 F.2d 69, 73 (7th Cir.1992). "If 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, the joinder of the resident defendant is fraudulent." Id. "Under such circumstances, the court may disregard the joinder and retain jurisdiction." Lewis v. Time Inc., 83 F.R.D. 455, 460 (E.D.Cal.1979), aff'd, 710 F.2d 549 (9th Cir.1983).

A joinder is fraudulent if there is no intention to get a joint judgment, and there is no colorable ground for so claiming. Lewis, 83 F.R.D. at 460. A "colorable" claim against a non-diverse defendant bars removal under the fraudulent joinder doctrine; "doubtful questions" of law must be determined in state court. See Smith v. Southern Pacific Co., 187 F.2d 397, 401-02 (9th Cir. 1951); see also McCabe, 811 F.2d at 1339. Thus, "it must appear to `a near certainty' that joinder of [Donoyan] was fraudulent." Bennett v. Allstate Ins. Co., 753 F.Supp. 299, 302 (N.D.Cal.1990) (quoting Lewis, 83 F.R.D. at 466).

"While issues of liability may not ordinarily be determined on a motion to remand, it is well settled that upon allegations of fraudulent joinder designed to prevent removal, federal courts may look beyond the pleadings to determine if the joinder, although fair on its face, is a sham or fraudulent device to prevent removal." Smoot v. Chicago, Rock Island & Pacific Railroad Co., 378 F.2d 879, 881-82 (10th Cir.1967). Thus, the court may "pierce the pleadings, consider the entire record, and determine the basis of joinder by any means available." Dodd v. Fawcett Publications, Inc., 329 F.2d 82, 85 (10th Cir.1964). The defendant seeking removal is entitled to present facts showing that the joinder is fraudulent. McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir.1987). The district court, however, must resolve all disputed questions of fact in favor of the non-removing party. Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 42 (5th Cir.1992). Doubt arising from inartful, ambiguous, or technically defective pleadings should be resolved in favor of remand. Lewis, 83 F.R.D. at 460. "[O]rdinarily a fraudulent joinder claim must be capable of summary determination." Id.

2. Analysis

Plaintiffs complaint alleges three causes of action: (1) breach of contract; (2) fraud; and (3) bad faith. In all three causes of action, Plaintiff alleges that "defendant Donoyan failed to advise plaintiff properly with regard to her uninsured motorist benefits and failed to obtain the required waiver pursuant to the Insurance Code and thereby assisted defendant Allstate in perpetrating the herein alleged fraud, breach of contract, and acts of bad faith." Complaint ¶¶ 11, 17, 25. In addition, Plaintiff argues that "Donoyan functioned as Charlin's agent," and that the failure of "Donoyan to advise plaintiff that she had no uninsured motorist coverage or to secure a waiver of said coverage during renewal forms the basis of a colorable claim against Donoyan." Mot. at 7-8 (emphasis added). Plaintiff's contentions are without merit. Plaintiff cannot state a colorable against Donoyan for three reasons:

a. Donoyan Was Not Plaintiff's Agent

Plaintiff cannot state a colorable claim against Donoyan because Donoyan was not Plaintiff's agent. In such circumstances, Donoyan owed Plaintiff no duty.

First, Plaintiffs complaint does not allege that Donoyan functioned as her agent. Instead, Plaintiff's complaint specifically alleges that "defendants and each of them, were the agents and employees of each of the remaining defendants, and were at all times acting within the course and scope of said agency and employment...." Complaint ¶ 3 (emphasis added). In addition, Plaintiff's complaint does not allege that Donoyan was a dual agent acting beyond his capacity for Allstate.² Specifically, Plaintiff does not allege that Donoyan is an independent broker or that she had a long-term relationship with Donoyan. Thus, Plaintiff's contention in the Motion that Donoyan was acting as her agent is without merit.

Plaintiff cites Eddy v. Sharp, 199 Cal. App.3d 858, 865-66, 245 Cal.Rptr. 211 (1988), for the proposition that "`where the agency relationship exists, there is not only a fiduciary duty but an obligation to use due care' ... including the duty `to accurately inform the (insured) of the policy provisions.'" Plaintiff's reliance on Eddy is misplaced. In Eddy, the Eddys sued their insurance agent, Sharp, and his agency for not providing the coverage Sharp represented they would have in his proposal and cover letter. Sharp was a licensed independent insurance agent who represented numerous insurance companies. Sharp submitted an insurance proposal and cover letter to the Eddys recommending a particular policy from the Great American Insurance Company. The court stated that "if an insurance agent is the agent for several companies and selects the companies with which to place the insurance or insures with one of them according to directions, the insurance agent is the agent of the insured." Id. at 865, 245 Cal.Rptr. 211. Moreover, the court held that "Sharp's duty to the Eddys arose because Sharp undertook to prepare an insurance proposal for the Eddys to review prior to purchasing a policy of insurance. Sharp thus came under a duty of care to accurately inform the Eddys of the policy's provisions." Id. at 866, 245 Cal.Rptr. 211.

In Eddy, Sharp was the insureds' agent because he was an independent broker who selected the insurance company for the Eddys and because he submitted the proposal outlining the coverage he was recommending. In the instant case, however, Donoyan did not select Allstate as the one company among many for Plaintiff to insure with, nor did he undertake to prepare any proposals for Plaintiff. Thus, Eddy is distinguishable from the instant action. The Court concludes that Donoyan was not Plaintiff's agent. Accordingly, Plaintiff cannot state a colorable claim against Donoyan.

b. No Duty As Allstate's Agent or Plaintiff's Agent

Even if Donoyan were Plaintiff's agent, Plaintiff could not state a colorable claim against him because Donoyan owed no duty to advise Plaintiff that she had no uninsured motorist coverage or to secure a waiver of said coverage during renewal.

California Insurance Code § 11580.2(a)(1) provides:

No policy of bodily injury liability insurance covering liability arising out of the ownership, maintenance, or use of any motor vehicle ... shall be issued or delivered in this state to the owner or operator of a motor vehicle ... unless the policy contains, or has added to it by endorsement, a provision with coverage limits at least equal to the limits specified in subdivision (m) and in no case less than the financial responsibility requirements specified ... insuring the insured .... The insurer and any named insured, prior to or subsequent to the issuance or renewal of a policy, may, by agreement in writing ... delete the provision covering damage caused by an insured motor vehicle completely.... Any of these agreements by any named insured or agreement for the amount of coverage shall be binding upon every insured to whom the policy or endorsement provisions apply while the policy is in force, and shall continue to be so binding with respect to any continuation or renewal of the policy or with respect to any other policy which extends,...