Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-4_12-cv-00661/USCOURTS-azd-4_12-cv-00661-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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UNITED STATES DISTRICT COURT

DISTRICT OF ARIZONA

FRANK and BETTINA GAMBRELL, )

)

Plaintiffs, ) 4:12-cv-00661 JWS

)

vs. ) ORDER AND OPINION

)

IDS PROPERTY CASUALTY ) [Re: Motion at docket 18]

INSURANCE CO., et al., )

)

Defendants. )

)

I. MOTION PRESENTED

At docket 18, plaintiffs Frank and Bettina Gambrell (“Gambrells”) seek an award

of attorneys’ fees “pursuant to A.R.S. 12-341.01 and /or 28 U.S.C. 1447(c).” Defendant

IDS Property Casualty Insurance Co. (“IDS”) responds at docket 20. Gambrells’ reply is

at docket 21. Oral argument was not requested, and oral argument would not be of

assistance to the court.

II. DISCUSSION

The parties are familiar with the factual and procedural background. Readers

who are unfamiliar with the relevant background should read the order at docket 14,

which remanded the case to state court.

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In support of their motion, Gambrells rely primarily on A.R.S. 12-341.01 which

authorizes a court to award reasonable attorneys’ fees to a prevailing party in a contract

dispute governed by Arizona law. This court has already explained in an order at

docket 30, Case No. 2:12-cv-1227, why it declines to exercise its discretion to award

fees to the Gambrells pursuant to that statute. The reasoning in that order is

incorporated here. Based thereon, to the extent it relies on A.R.S. 12-341.01, the

Gambrells’ request for fees at docket 18 will be denied.

The court now turns to Gambrells’ assertion that fees may be awarded pursuant

to 28 U.S.C. § 1447(c). That statute provides that a district court may award “just costs

and any actual expenses, including attorney fees, incurred as a result of the removal.” 

Like A.R.S. 12-341.01, the federal statute authorizes, but does not require, an award of

fees. In their opening memorandum at docket 19, Gambrells did not cite any authority

for the proposition that an award would be proper under section 1447(c); rather, they

merely asserted it would. In response, IDS asserts that an award may not be made

because they had an objectively reasonable basis for initiating the removal citing

Gardner v. UICI.1

 It is IDS’ position that because they could legitimately contend that in

Walter v. Simmons2

 an Arizona Appellate court had indicated that an employee adjuster

owed no duty to an insured, the decision to remove was objectively reasonable. In their

reply, Gambrells not only argue the removal was unreasonable, but advance a different

legal standard. Gambrells contend that the removal was “wrong as a matter of law” with

1

508 F.3d 559, 561 (9th Cir. 2007).

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818 P.2d 214 (Ariz. Ct. App. 1991).

2

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respect to the fraudulent joinder issue. Gambrells rely on Balcorta v. Twentieth

Century-Fox Film Corp3.

Under the “wrong as a matter of law” standard, Gambrells’ argument is not

persuasive, because as this court explained in an earlier order, it is not settled as a

matter of Arizona law that an employee adjuster owes a duty of good faith and fair

dealing to an insured. It follows that IDS could not have been wrong as a matter of law

to base the removal on the proposition that there is no such duty.

 The matter thus turns on whether there was an objectively reasonable basis to

assert that Harrish was fraudulently joined because she owed no duty to the Gambrells. 

Gambrells contend that it could not have been objectively reasonable to remove on that

basis, because IDS was aware that earlier district court decisions had remanded cases

because Arizona law is not clear on this point. This argument has some merit, but does

not carry the day, as explained below.

In earlier motion practice IDS argued that the decision by the Arizona Court of

Appeals in the Walter case had established that an employee adjuster owed no good

faith duty to the insured. In reviewing the motion papers and the relevant case law, this

court concluded that whether Walter was properly cited as establishing that proposition

was a close question, but ultimately determined that what the Walter court had said was

dicta, which did not establish Arizona law. In answering what is again a close question,

this court now holds that it was objectively reasonable for IDS to rely on Walter, even

3

208 F.3d 1102, 1106 n.6 (9th Cir. 2000).

3

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though in this court’s final analysis that reliance was incorrect. It follows that there is no

basis for an award of fees under section 1447(c).

III. CONCLUSION

For the reasons above, this court declines to exercise its discretion to award fees

to Gambrells. The motion at docket 18 is DENIED.

DATED this 10th day of May 2013.

/s/ JOHN W. SEDWICK

UNITED STATES DISTRICT JUDGE

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