Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-00212/USCOURTS-azd-2_09-cv-00212-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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UNITED STATES DISTRICT COURT

DISTRICT OF ARIZONA

JOHN PETER MARTORI; JOSEPH )

RITCHIE MARTORI; and TORI )

MARTORI, )

)

Plaintiffs, ) 2:09-cv-00212 JWS

)

vs. ) ORDER AND OPINION

)

GOLDEN RULE INSURANCE CO., an ) [Re: Motions at Dockets 7 and 12]

Indiana corporation; RICHARD )

GOLDBERG; )

)

)

Defendants. )

)

I. MOTIONS PRESENTED

At docket 7, plaintiffs John Peter Martori (“John”), Joseph Ritchie Martori

(“Joseph”), and Tori Martori (“Tori”) (collectively, “the Martoris”) move for an order

remanding this matter for further proceedings to the Maricopa Superior Court pursuant

to 28 U.S.C. § 1447(c). Defendant Golden Rule Insurance Company (“GRIC”) opposes

the Martoris’ motion at docket 9. The Martoris reply at docket 10. In response to the

Martoris’ reply brief, GRIC moves at docket 12 for leave to file a motion to strike

portions of the Martoris’ reply brief and a sur-reply on the ground that the Martoris’ reply

brief contains a new legal argument, and relies on improper extrinsic evidence and

Case 2:09-cv-00212-JWS Document 17 Filed 05/14/09 Page 1 of 11
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expert testimony. GRIC lodges its proposed motion and sur-reply at docket 13. The

Martoris respond to GRIC’s motion for leave at docket 14. GRIC replies at docket 15. 

Oral argument was requested, but would not assist the court.

II. BACKGROUND

The Martoris filed suit against GRIC and Richard Goldberg (“Goldberg”), an

insurance broker who sold the GRIC insurance policy at issue in the lawsuit, in the

Superior Court of Arizona for Maricopa County on December 31, 2008. In 2002, Joseph

and Tori Martori purchased a major medical insurance policy, issued by GRIC on

December 1, 2002, policy number 054768190 (the “Policy”), from Goldberg. The Policy

was extended to cover John on January 15, 2003. Because John was scheduled to

have (and has since had) surgery, which the Martoris allege is covered by the Policy,

they sought to have GRIC provide a predetermination of coverage under the Policy,

which GRIC allegedly refused to provide. GRIC subsequently determined that John’s

surgery was subject to a $10,000 lifetime maximum coverage per person.

A copy of the Martoris’ complaint appears as Exhibit C to the Notice of Removal

at docket 1. The complaint is not a model of the pleader’s art, but from the entire

document, the court has distilled the following description of the claims which are

referred to as “counts.” In Count One the Martoris seek a declaration from the court

pursuant to A.R.S. §§ 12-1831-1846 that John’s surgery is covered under the Policy to

the same extent as any other sickness or injury. In Count Two they ask for an injunction

prohibiting GRIC from denying such coverage. In Count Three the Martoris seek

compensatory damages from Golden Rule in the event that Golden Rule does not

Case 2:09-cv-00212-JWS Document 17 Filed 05/14/09 Page 2 of 11
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provide such insurance coverage. Count Four alleges that GRIC engaged in bad faith

claim handling. In Count Five, the Martoris allege that if Golden Rule does not provide

insurance coverage for John’s surgery equivalent to the coverage which would be

provided under the Policy for any other sickness or injury, then Goldberg committed

insurance producer malpractice. The second claim against Goldberg is pled in Count

Six where the Martoris allege that if GRIC is not required to pay for John’s surgery, then

Goldberg breached a contract to obtain the insurance the Martoris sought. Count

Seven alleges that based on the doctrine of reasonable expectations, Golden Rule is

obligated to pay damages. Finally, in Count Eight, the Martoris seek punitive damages

from Golden Rule. In addition to declaratory and injunctive relief, and damages, the

Martoris seek an award of attorneys’ fees.

GRIC filed a notice of removal on February 4, 2009, claiming diversity jurisdiction

pursuant to 28 U.S.C. §§ 1332(a)(1) & (c) and 1441(a). Plaintiffs are citizens of Arizona

and GRIC is organized under the laws of Indiana and has as its principal place of

business in Indianapolis, Indiana. GRIC alleges that Goldberg, a resident of Arizona,

was fraudulently added as a defendant to defeat diversity jurisdiction, arguing that the

Martoris suit does not involve a legitimate insurance procurement or malpractice claim,

but instead revolves around a determination of insurance coverage based on the Policy. 

GRIC notes in its amended answer that Goldberg is an independent insurance broker

and not an agent or employee of GRIC. GRIC also denies having engaged in any

misconduct or breach of the policy, and takes the position that the coverage provisions

of the policy “contain a $10,000 lifetime maximum in covered expenses for surgery to

Case 2:09-cv-00212-JWS Document 17 Filed 05/14/09 Page 3 of 11
1

Docket 8 at 5.

2

Docket 10-2 at 2.

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treat craniomandibular disorders, mal occlusions or disorders of the temporomandibular

joint [TMJ].”1

The Martoris filed their motion to remand on February 18, 2009, arguing that the

court lacks diversity jurisdiction because Goldberg is a resident of Arizona. The

Martoris argue that GRIC bears the burden of establishing diversity jurisdiction - that is,

GRIC must establish that it was more likely than not that Goldberg was fraudulently

added to defeat diversity jurisdiction. Moreover, the Martoris argue that GRIC cannot

establish that their claim of damage exceeds the jurisdictional floor. GRIC opposes the

Martoris’ motion, arguing that (1) Goldberg is not a proper party to the lawsuit, (2) the

Martoris have failed to state a claim against Goldberg, (3) the Martoris’ claims against

Goldberg are time-barred, and (4) the amount in controversy exceeds the jurisdictional

threshold.

The Martoris reply in part by reiterating the arguments made in their original

motion papers, but in addition, they have submitted various exhibits, including a joint

affidavit from Joseph and Tori. The Martoris’ affidavit attempts to establish Goldberg’s

connection to the lawsuit by asserting that Goldberg assured Joseph that John’s

procedures “would be covered as any other sickness or injury so long as insurance

coverage for John was in place for at least one year before the expected procedures

were performed.”2

 The exhibits include an affidavit from plaintiffs’ lawyer, Frederick C.

Berry (“Berry”). Berry purports to opine in the role of an insurance expert. The reply

also mentions in passing that Goldberg did not consent to removal. Asserting that the

Case 2:09-cv-00212-JWS Document 17 Filed 05/14/09 Page 4 of 11
3

28 U.S.C. 1447(c).

4

Id.

5

Duncan v. Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996). 

6

Abrego v. Dow Chem. Co., 443 F.3d 676, 685 (9th Cir. 2006).

7

Santos v. People of Guam, 436 F.3d 1051, 1053 (9th Cir. 2006).

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Martoris have improperly raised new issues in their reply, GRIC moves for leave to file a

motion to strike portions of the reply brief and to file a sur-reply. In its lodged sur-reply,

GRIC argues that the Martoris improperly raised the consent-to-removal argument for

the first time in the reply. GRIC also argues that the Martoris’ reply brief improperly

relies on facts not contained in their complaint and that the affidavit of Berry is unethical

and constitutes improper expert testimony. The court considers the parties’ various

arguments below. 

III. STANDARD OF REVIEW

Section 1447(c) provides that “if at any time before final judgment it appears that

the district court lacks subject matter jurisdiction, the case shall be remanded.”3 The

subject matter jurisdiction of the district court is not a waivable matter and may be

raised at anytime by one of the parties, by motion, or in the responsive pleadings.4

 A

defendant has the burden of establishing that removal was proper.5 The removal

statute is to be strictly construed against removal.6 Federal jurisdiction must be rejected

if there is any doubt as to the right of removal in the first instance. Jurisdiction is the

power to declare the law, and when it ceases to exist, the only function remaining to the

court is that of announcing the fact and dismissing the case.7

Case 2:09-cv-00212-JWS Document 17 Filed 05/14/09 Page 5 of 11
8

28 U.S.C. § 1441(a).

9

Gould v. Mutual Life Ins. Co. of New York, 790 F.2d 769, 773 (9th Cir. 1986).

10Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996); Morris v. Princess Cruises, Inc. 236

F.3d 1061, 1067 (9th Cir. 2001).

11Gould, 790 F.2d at 773.

12Morris, 236 F.3d at 1067.

13Docket 1 at 2.

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Jurisdiction in this case is based exclusively on diversity of citizenship. Original

diversity jurisdiction exists under 28 U.S.C. § 1332(a) when the parties are of diverse

citizenship and the amount in controversy exceeds $75,000. A defendant may remove

from state court any action “of which the district courts of the United States have original

jurisdiction.”8

 When an action is removed based on diversity, complete diversity must

exist at the time of removal.9 Complete diversity requires each plaintiff to be a citizen of

a different state than each defendant.10 Federal courts look only to the plaintiff’s

pleadings to determine removability - that is, generally, diversity is determined from the

face of a complaint.11 One exception to the requirement of complete diversity, at issue

here, is where a non-diverse defendant has been “fraudulently joined.”12

IV. DISCUSSION

GRIC’s notice of removal asserts that the Martoris “fraudulently added [Goldberg

as a defendant] to defeat diversity jurisdiction because this case does not involve any

insurance procurement or insurance producer malpractice issues but instead involves a

determination of medical coverage based on a policy issued by Golden Rule Insurance

Company that has been in place since December 1, 2002.”13 “Joinder of a non-diverse

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14Morris, 236 F.3d at 1067.

15Id. (internal quotations omitted).

16Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1320 (9th Cir. 1998).

17A.R.S. § 12-542.

18Logerquist v. Danforth, 188 Ariz. 16, 19 (Ariz. 1996) (citation omitted); see also Kenyon

v. Hammer, 142 Ariz. 69 (Ariz. 1984) (malpractice action).

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defendant is deemed fraudulent, and the defendant's presence in the lawsuit is ignored

for purposes of determining diversity, ‘[i]f 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.’”14 Although the court is usually limited to the plaintiff’s pleadings in assessing

removability, the removing defendant “is entitled to present the facts showing the joinder

to be fraudulent.”15 In support of its fraudulent joinder allegation, GRIC claims that the

Martoris’ claims against Goldberg fail to state a claim upon which relief may be granted. 

To that end, GRIC asserts that Goldberg played no role in its coverage decisions and

was not a party to the insurance contract; rather, Goldberg merely sold the Martoris the

GRIC policy. In addition, GRIC argues that the Martoris’ claims against Goldberg are

time-barred which, if true, would also render Goldberg fraudulently joined.16

The Martoris’ first claim against Goldberg is for breach of duty of reasonable

care, skill, and diligence amounting to professional malpractice. In Arizona, the statute

of limitations for professional negligence is two years from the date of accrual of such

claims.17 In malpractice actions, Arizona applies the discovery rule, which states that a

cause of action accrues only “when the plaintiff knew or by the exercise of reasonable

diligence should have known of the defendants' conduct and therefore the statute of

limitations does not begin to run until that time.”18 GRIC has not persuaded the court

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19Docket 10-5 at 11.

20A federal court sitting in diversity applies state substantive law and federal procedural

law. Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996). 

21Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1997).

22Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1982) (quoting Brian Clewer, Inc. v.

Pan American World Airways, Inc., 674 F. Supp. 782, 785 (C.D. Cal. 1986)). 

23Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). 

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that the Martoris’ claims against Goldberg accrued prior to January 12, 2009, when

GRIC indicated that it would not cover John’s surgery.19 As a result, for purposes of the

present motion, the claims against Goldberg may not be considered time-barred. 

GRIC also urges that the Martoris have failed to plead a claim against Goldberg

upon which relief may be granted. This argument is akin to a motion to dismiss for

failure to state a claim made pursuant to Federal Rule of Civil Procedure 12(b)(6).20

The court finds it appropriate to consider Rule 12(b)(6) jurisprudence in evaluating

GRIC’s argument. When reviewing a Rule 12(b)(6) motion to dismiss, “[a]ll allegations

of material fact in the complaint are taken as true and construed in the light most

favorable to the nonmoving party.”21 The court is not required to accept every

conclusion asserted in the complaint as true; rather, the court “will examine whether

conclusory allegations follow from the description of facts as alleged by the plaintiff.”22

A dismissal for failure to state a claim can be based on either “the lack of a cognizable

legal theory or the absence of sufficient facts alleged under a cognizable legal theory.”23

GRIC relies on the recent decision by the Supreme Court in Bell Atlantic Corporation v.

Case 2:09-cv-00212-JWS Document 17 Filed 05/14/09 Page 8 of 11
24127 S. Ct. 1955 (2007). Twombly altered the Rule 12(b)(6) standard in the context of

an antitrust claim, and held that, to survive a motion to dismiss, a complaint must allege

“enough facts to state a claim to relief that is plausible on its face.” Id. at 1974. It is unclear

whether Twombly was intended to apply outside the antitrust context, but the Court appears to

suggest that it may apply in complex cases where discovery can be costly. See id. at 1967 (“It

is no answer to say that a claim just shy of a plausible entitlement to relief can, if groundless, be

weeded out early in the discovery process through ‘careful case management’ . . . .”) (citation

omitted).

25Darner Motor Sales, Inc. v. Universal Underwriters Ins. Co., 140 Ariz. 383, 397 (Ariz.

1984).

26Barmat v. John and Jane Doe Partners A-D, 155 Ariz. 519, 523 (Ariz. 1987)

27Darner, 140 Ariz. at 397. ("[A]n insurance agent performs a personal service for his

client, in advising him about the kinds and extent of desired coverage and in choosing the

appropriate insurance contract for the insured.").

28Id. at 398.

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Twombly 24 to show that the Martoris’ complaint is inadequate to state a claim for either

professional malpractice or breach of contract. 

 In Arizona, “[a]n insurance agent owes a duty to the insured to exercise

reasonable care, skill and diligence in carrying out the agent's duties in procuring

insurance.”25 “The essential nature of actions to recover for the breach of such duties is

not one ‘arising out of contract,’ but rather one arising out of tort - breach of legal duties

imposed by law.”26 Moreover, Arizona courts have recognized that an insurance agent

does have a personal relationship with an insured.27 An agent who “holds himself out to

the public as possessing special knowledge, skill or expertise must perform his activities

according to the standard of his profession. If he does not, he may be held liable under

ordinary tort principles of negligence for the damage he causes by his failure to adhere

to the standard.”28

Based on the face of the pleadings, GRIC contends that the Martoris fail to allege

any materials facts with respect to Goldberg’s engagement. The Martoris’ malpractice

Case 2:09-cv-00212-JWS Document 17 Filed 05/14/09 Page 9 of 11
29Docket 9 at 7.

30See the discussion in note 24.

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claim is set out in Count Five. GRIC argues that the allegations against Goldberg are

mere “formulaic recitations of the elements of breach of contract and professional

malpractice.”29 The court sees more in Count Five than that. A fair reading of the

complaint as a whole (including the allegations in Count Six) gives notice that the

Martoris went to Goldberg to get insurance that would cover risks such as John’s

surgery, and that if the insurance procured does not provide that coverage, then

Goldberg failed to discharge his professional responsibility. The court finds this to be an

adequate description of the malpractice claim against Goldberg under ordinary notice

pleading standards. While the court is well aware of the potential impact of Twombly on

pleading standards under the Federal Rules of Civil Procedure, so far as this court can

discern the Supreme Court has not suggested that a Twombly analysis would apply to a

garden variety malpractice claim.30 GRIC does not cite any Ninth Circuit authority

applying Twombly to such claims, and this court knows of none. This court finds that

the malpractice claim read in the context of the entire complaint, although inartfully pled,

is sufficient under Federal Rule of Civil Procedure 8(a). It follows that the Martoris have

pled a claim against a citizen of Arizona which means that complete diversity is lacking.

Given the court’s conclusion regarding the malpractice claim, it is unnecessary to

consider the dispute as to the contract claim. Similarly, it is not necessary to resolve the

argument over the amount in controversy. Moreover, because the court has reached its

conclusion without considering the materials supplied by plaintiffs with their reply memo

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or the argument that Goldberg did not consent, GRIC’s request to strike a portion of the

reply and to file a sur-reply is moot.

V. CONCLUSION

For the reasons set forth above, the Martoris’ motion to remand at docket 7 is

GRANTED, and GRIC’s motion for leave to strike portions of the Martoris’ reply brief

and to file a sur-reply at docket 12 is DENIED as moot. This case is REMANDED to the

Superior Court of Arizona, Maricopa County.

DATED at this 14th day of May 2009.

/s/ JOHN W. SEDWICK

UNITED STATES DISTRICT JUDGE

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