Mahoney v. Unum Group et al

Northern District of California, cand-4:2015-cv-03532

ORDER setting briefing schedule re fraudulent joinder issue, and holding motion to dismiss in abeyance {{26}} MOTION to Dismiss. Signed by Judge Saundra B. Armstrong on 10/27/2015.

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1 2 UNITED STATES DISTRICT COURT 3 FOR THE NORTHERN DISTRICT OF CALIFORNIA 4 OAKLAND DIVISION 5 6 GAYLE MAHONEY, Case No: C 15-3532 SBA 7 Plaintiff, ORDER SETTING BRIEFING SCHEDULE RE FRAUDULENT 8 vs. JOINDER ISSUE, AND HOLDING DEFENDANTS' MOTION TO 9 UNUM GROUP, et al., DISMISS IN ABEYANCE 10 Defendants. 11 12 Plaintiff Gayle Mahoney filed the instant insurance bad faith action in state court 13 against Defendants Unum Group and Unum Life Insurance Company of America 14 (collectively "Unum Defendants"), along with the Commissioner of the California 15 Department of Insurance ("Insurance Commissioner"). The Unum Defendants removed the 16 action on the basis of diversity jurisdiction and have now filed a motion to dismiss. Dkt. 1, 17 26. Before addressing the motion to dismiss, however, the Court must first address whether 18 subject matter jurisdiction is present. See United Investors Life Ins. Co. v. Waddell & 19 Reed Inc., 360 F.3d 960, 967 (9th Cir. 2004) ("the district court had a duty to establish 20 subject matter jurisdiction over the removed action sua sponte, whether the parties raised 21 the issue or not"). 22 The Notice of Removal alleges that Plaintiff is a citizen of California, while the 23 Unum Defendants are citizens of Tennessee and Maine. Not. of Removal ¶¶ 4-5. The 24 Unum Defendants acknowledge that the Insurance Commissioner is a citizen of California, 25 but contend that he is a fraudulently joined party-defendant. Id. ¶¶ 14-26. "Joinder of a 26 non-diverse defendant is deemed fraudulent, and the defendant's presence in the lawsuit is 27 ignored for purposes of determining diversity, if the plaintiff fails to state a cause of action 28 1 against a resident defendant, and the failure is obvious according to the settled rules of the 2 state." Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001). 3 The standard for determining whether a defendant is fraudulently joined is similar to 4 that of a 12(b)(6) motion to dismiss. See Sessions v. Chrysler Corp., 517 F.2d 759, 761 5 (9th Cir. 1975) ("Inasmuch as appellant's case against the individual defendants was 6 sufficient to withstand a dismissal motion under [Rule] 12(b)(6), the joinder of claims 7 against them was not fraudulent. . . ."). At the same time, "some room must exist between 8 the standard for dismissal under Rule 12(b)(6), for example, and a finding of fraudulent 9 joinder." Davis v. Prentiss Properties Ltd., Inc., 66 F. Supp. 2d 1112, 1115 (C.D. Cal. 10 1999). A defendant seeking removal based on an allegedly fraudulent joinder therefore 11 must do more than show that the complaint fails to state a claim against the non-diverse 12 defendant. See Nickelberry v. DaimlerChrysler Corp., No. 06-1002, 2006 WL 728200, *1- 13 2 (N.D. Cal., Apr. 17, 2006). The removing defendant must also show that the plaintiff 14 "would not be afforded leave to amend his complaint to cure [the] purported deficiency." 15 Id.; see also Kruso v. Int'l Tel. & Tel. Corp., 872 F.2d 1416, 1426 (9th Cir. 1989) (holding 16 that defendants are fraudulently joined where the complaint fails to state a cause of action 17 against them, and the plaintiff "cannot prevail on any claims they seek to bring against the 18 defendants"). 19 The Notice of Removal contains an extensive argument in support of the Unum 20 Defendants' contention that the Insurance Commissioner is a fraudulently-joined defendant. 21 Not. of Removal ¶¶ 14-26. Plaintiff has not yet addressed that contention. Because the 22 fraudulent joinder issue bears upon the Court's subject matter jurisdiction, the issue must be 23 resolved before the Court proceeds further with the action, including the adjudication of the 24 Unum Defendants' motion to dismiss.1 Accordingly, 25 IT IS HEREBY ORDERED THAT: 26 1 Plaintiff previously filed a motion to remand based on defects in the removal 27 process. The Court denied the motion to remand as untimely. Dkt. 25. However, because lack of jurisdiction is a non-waivable defect, the issue may be raised at any time. Snell v. 28 Cleveland, Inc., 316 F.3d 822, 826 (9th Cir. 2002). -2- 1 1. Within seven days of the date this order is filed, Plaintiff shall file a 2 memorandum, not to exceed seven pages in length, in response to the Unum Defendants' 3 fraudulent joinder argument as set forth in the Notice of Removal. The Unum Defendants 4 shall file a reply memorandum, not to exceed four pages in length, no later than five days 5 after Plaintiff files his memorandum. 6 2. The Unum Defendants' pending motion to dismiss shall be held in abeyance 7 pending the Court's determination of whether subject matter jurisdiction is present. 8 IT IS SO ORDERED. 9 Dated: 10/27/15 ______________________________ SAUNDRA BROWN ARMSTRONG 10 United States District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -3-