Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-01276/USCOURTS-cand-3_06-cv-01276-0/pdf.json

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

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United States District Court

For the Northern District of California

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1

 Plaintiffs are citizens of California. Complaint ¶ 2. 

Plaintiffs assert that Defendants are a corporation organized and

existing under the laws of the Connecticut, with their principal

place of business in Connecticut. Id. ¶ 1. 

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

FRANK GHIGLIONE and RODGERS

TRUCKING, citizens of California, 

Plaintiffs,

 v.

DISCOVER PROPERTY AND CASUALTY

COMPANY, DISCOVER MANAGERS, INC.,

citizens of Connecticut, and DOES

1-10, inclusive,

Defendants.

 

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No. C-06-1276 SC

ORDER DENYING MOTION

TO REMAND 

I. INTRODUCTION

Plaintiffs Frank Ghiglione and Rodgers Trucking

("Plaintiffs") filed this action in the Superior Court of Alameda

County against Defendants Discover Property and Casualty Company,

et al. ("Defendants" or "Discover"), alleging breach of contract

and breach of the covenant of good faith and fair dealing. 

Defendants removed the action to Federal Court, claiming federal

jurisdiction based on diversity of the parties.1 

Presently before the Court is Plaintiffs' motion to remand

the action to state court. For the reasons contained herein, the

Court hereby DENIES Plaintiffs' motion.

//

Case 3:06-cv-01276-SC Document 13 Filed 04/25/06 Page 1 of 6
United States District Court

For the Northern District of California

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II. BACKGROUND

This action arose from a prior action in which Rodgers

Trucking was a defendant. In May 2003, a Rodgers Trucking vehicle

"was involved in an accident with Eliseo Laureta Soria ("Soria"),

who was operating a bicycle." Complaint ¶ 3 ("Compl.") When

Soria sued Rodgers Trucking, its insurer, Discover, "assumed

complete and exclusive control and responsibility for the

investigation and negotiations for settlement and defense." Id. 

¶ 5. Plaintiffs found Discover's handling of the case less than

satisfactory and brought suit against Discover in state court,

alleging that "defendant has breached its duty of good faith and

fair dealing" and has caused Plaintiffs "severe emotional

distress." Id. ¶¶ 7-9. 

Defendants timely removed this action to the United States

District Court in the Northern District. 

III. LEGAL STANDARD

Suits filed in state court may be removed to Federal Court

where the Federal Court would have had original jurisdiction over

the action in the first instance. 28 U.S.C. § 1441(a). Federal

Courts have original jurisdiction over controversies between

citizens of different states provided that the amount in

controversy exceeds the sum or value of $75,000.00, exclusive of

interest and costs. 28 U.S.C. § 1332(a)(1). 

However, in a "direct action" brought against the insurer of

a policy, to which action the insured is not joined as a partydefendant, "such insurer shall be deemed a citizen of the State of

which the insured is a citizen." 28 U.S.C. § 1332(c)(1) ("section

Case 3:06-cv-01276-SC Document 13 Filed 04/25/06 Page 2 of 6
United States District Court

For the Northern District of California

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2

 Neither party has addressed the issue of the amount in

controversy. 

-3-

1332(c)"). 

The removal statute is strictly construed against removal. 

See Boggs v. Lewis, 863 F.2d 662, 663 (9th Cir. 1988). "Federal

jurisdiction must be rejected if there is any doubt as to the

right of removal in the first instance." Gaus v. Miles, Inc., 980

F.2d 564, 566 (9th Cir. 1992). The defendant seeking removal of

an action to Federal Court has the burden of establishing grounds

for federal jurisdiction. See id.

IV. DISCUSSION

The Court's ruling on this motion turns on whether this

action is a "direct action" under section 1332(c). If it is a

direct action, as Plaintiffs assert, Plaintiffs and Defendants are

citizens of the same state and therefore diversity jurisdiction is

lacking and the motion will be granted. If it is not a direct

action, as Defendants contend, diversity jurisdiction exists and

the motion to remand will be denied.2

Plaintiffs support their contention that this is a direct

action by quoting from Witkin's California Procedure a passage

that merely repeats the essence of section 1332(c). Plaintiffs'

Memorandum in Support of Motion to Remand at 1-2. Plaintiffs also

state that "two items of special damages [the $200,000.00

Plaintiffs had to pay out of pocket and the amount paid for

attorneys' fees in the prior action with Soria] could not have

been imposed against the insurer because they are in the nature of

indemnity and attorneys [sic] fees. Therefore, this is a direct

Case 3:06-cv-01276-SC Document 13 Filed 04/25/06 Page 3 of 6
United States District Court

For the Northern District of California

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action within the meaning of the removal statute." Plaintiffs'

Response Declaration of George W. Korte in Support of Motion to

Remand at 1-2. 

Defendants contend that this is not a direct action because

Plaintiffs are suing Discover for bad faith, a cause of action not

within section 1332(c)'s ambit. Defendants' Memorandum in

Opposition to Plaintiffs' Motion to Remand at 3. 

Roughly speaking, a direct action under section 1332(c)

occurs when a plaintiff sues a tortfeasor's insurance company for

the tortfeasor for his tortious acts without joining the

tortfeasor as a defendant. "Courts have uniformly defined the

term 'direct action' as used in...[Section 1332(c)] as those cases

in which a party suffering injuries or damage for which another is

legally responsible is entitled to bring suit against the other's

liability insurer without joining the insured or first obtaining a

judgment against him." Beckham v. Safeco Insurance Company of

America, 691 F.2d 898, 901-902 (9th Cir. 1982). "[U]nless the

cause of action urged against the insurance company is of such a

nature that the liability sought to be imposed could be imposed

against the insured, the action is not a direct action." Id. at

902, quoting Walker v. Firemans Fund, 260 F. Supp. 95, 96 (D.

Mont. 1966). "Many other courts have reached the same conclusion

that a 'first party' insurance action, or a suit by an insured

against an insurer is not a 'direct action.'" Searles v.

Case 3:06-cv-01276-SC Document 13 Filed 04/25/06 Page 4 of 6
United States District Court

For the Northern District of California

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3

 This Ninth Circuit case also makes clear that the Supreme

Court's "narrow holding in Northbrook [National Insurance Company

v. Brewer, 493 U.S. 6 (1989)] is not contrary to our interpretation

of 'direct action' in Beckham." 

-5-

Cincinnati Insurance Company, 998 F.2d 728, 729 (9th Cir. 1993).3

The Ninth Circuit held that:

a bad faith action brought by an insured against the insurer

is not a 'direct action' within the meaning of 28 U.S.C. 

§ 1332(c)(1). Rather, a direct action is one in which a

plaintiff is entitled to bring suit against the tortfeasor's

liability insurer without joining the insured.

The Court finds that the instant action is not a "direct

action" within the meaning of 28 U.S.C. § 1332(c)(1). Here,

rather, Plaintiffs are suing their insurer for its alleged bad

faith, a cause of action specifically excluded, per Searles, from

the definition of a direct action. Only by confecting an entirely

different factual situation could this action be labelled a direct

action. 

Plaintiffs' contentions are meritless. It matters not at all

that the "two items of special damages could not have been imposed

against the insurer because they are in the nature of indemnity

and attorneys [sic] fees." Neither this, nor Plaintiffs'

assertion that they acted as an "excess insurer," change the facts

that (a) bad faith actions against an insurer, such as this one,

are not "direct actions," nor that (b) the parties are not

arranged in the way required by section 1332(c). 

//

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// 

Case 3:06-cv-01276-SC Document 13 Filed 04/25/06 Page 5 of 6
United States District Court

For the Northern District of California

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V. CONCLUSION

 For the foregoing reasons, the Court DENIES Plaintiffs'

motion to remand. 

IT IS SO ORDERED.

Dated: April 25, 2006

 ____________________________

UNITED STATES DISTRICT JUDGE 

 

Case 3:06-cv-01276-SC Document 13 Filed 04/25/06 Page 6 of 6