Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_12-cv-00283/USCOURTS-azd-2_12-cv-00283-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Farmers Insurance Exchange, a reciprocal 

insurance exchange, as assignee of Cast & 

Associates a/k/a Flame Connection Cast & 

Associates d/b/a Flame Connection, 

Plaintiff, 

vs. 

James River Insurance Company, a foreign 

insurer, 

Defendant.

No. CV 12-00283-PHX-NVW

ORDER 

Before the Court is Plaintiff Farmers Insurance Exchange’s “Motion to Remand 

for Lack of Subject Matter Jurisdiction” (Doc. 6). The removing party bears the burden 

of establishing federal subject matter jurisdiction, Emrich v. Touche Ross & Co., 846 

F.2d 1190, 1195 (9th Cir. 1988), and there is a strong presumption against removal 

jurisdiction, see Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). For the reasons 

stated below, Farmers’ motion will be granted. 

Defendant James River Insurance Company, which is domiciled in Ohio and 

Virginia, removed to this Court claiming complete diversity because Farmers is allegedly 

a California corporation with its headquarters in California, and thus treated as a citizen 

of California for diversity purposes. Farmers, however, is organized under California law 

as a “reciprocal insurance exchange,” owned by all of its policyholders. It is not a 

corporation. James River’s only evidence to the contrary is that Farmers “appears in a 

corporation name search, but it does not appear in the alternative limited liability 

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company/limited partnership name search available on the California Secretary of State’s 

website.” (Doc. 11 at 4 (emphasis in original).) This is insufficient — especially now 

that Farmers has challenged jurisdiction and placed the burden on James River to 

establish it. If Farmers was truly incorporated under California law, James River should 

be able to obtain Farmers’ articles of incorporation from public records. As far as the 

record discloses, it has not attempted to do so. By contrast, Farmers has submitted its 

organizational document which plainly shows that it has organized itself as a reciprocal 

insurance exchange. (Doc. 15.) 

Because Farmers is non-corporate business entity, it is classified as an 

unincorporated association. An unincorporated association is deemed a citizen of every 

state where it has members. Carden v. Arkoma Assocs., 494 U.S. 185, 195–96 (1990). 

According to an affidavit from Farmers’ assistant secretary, Farmers has members — by 

which it means policyholders — in Ohio, Virginia, California, and Arizona. If Farmers’ 

policyholders are indeed its members, it would defeat diversity jurisdiction. Courts have 

split over this question. The apparent “majority view” accepts the structure of an 

insurance exchange at face value, concluding that its policyholders are its members. See, 

e.g., Cady v. Am. Family Ins. Co., 771 F. Supp. 2d 1129, 1131 (D. Ariz. 2011); Farmers 

Ins. Exchange v. MTD Prods,. Inc., No. 3:11-CV-2405-L, 2011 WL 5877025, at *4–5 

(N.D. Tex. Nov. 22, 2011); Truck Ins. Exchange v. The Manitowoc Co., No. CV-10-

8191-PCT-PGR, 2010 WL 4961618, at *2 (D. Ariz. Dec. 1, 2010). A minority concludes 

otherwise, based somewhat on incredulousness that a business could be structured as 

such, and somewhat on reasoning that 28 U.S.C. § 1332(c)(1) already prevents a fair deal 

of insurance-related litigation from coming to federal court and Congress likely did not 

intend (or would not wish) to extend this restriction any further. See Erie Ins. Exchange 

v. Davenport, 616 F. Supp. 2d 578 (D. Md. 2009); Garcia v. Farmers Ins. Exchange, 121 

F. Supp. 2d 667 (N.D. Ill. 2000). 

The reasoning of both the majority and the minority is analytically unsatisfying. 

But at a minimum, there exists reason to doubt the propriety of removal. James River 

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had the burden of dispelling that doubt and has not succeeded. The case will therefore be 

remanded. 

IT IS THEREFORE ORDERED that Plaintiff Farmers Insurance Exchange’s 

“Motion to Remand for Lack of Subject Matter Jurisdiction” (Doc. 6) is GRANTED. 

IT IS FURTHER ORDERED that the Clerk shall REMAND this case to Maricopa 

County Superior Court. The Clerk shall terminate this case. 

Dated this 21st day of March, 2012. 

Case 2:12-cv-00283-NVW Document 19 Filed 03/21/12 Page 3 of 3