Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-01386/USCOURTS-caed-2_06-cv-01386-0/pdf.json

Parties Involved:
John R. Bogdonov
Defendant
Reassure America Life Insurance Company
Defendant
Gloria Reed
Plaintiff
Larry Reed
Plaintiff
Royal Maccabees Life Insurance Company
Defendant

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UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

LARRY AND GLORIA REED,

NO. CIV. S-06-1386 LKK/GGH

Plaintiff,

v.

JOHN R. BOGDONOV; ROYAL O R D E R

MACCABEES LIFE INSURANCE 

COMPANY; and REASSURE

AMERICA LIFE INSURANCE 

COMPANY,

Defendants.

 /

Defendants removed this action on the grounds that plaintiffs

fraudulently joined defendant John R. Bogdonov in order to deprive

this court of jurisdiction. Currently pending before the court is

plaintiffs’ motion to remand this matter to state court. For the

reasons set forth below, the court grants motion to remand.

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 His wife, Gloria Reed, is also a named plaintiff in the 1

case.

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I.

Background Facts

A. Allegations in the Complaint

In February of 1995, plaintiff, Larry Reed, purchased a 1

disability life insurance policy from defendant, Reassure

America Life Insurance Company (“Reassure America”). Plaintiff

maintains that one of Reassure America’s agents, John R. 

Bogdonov, (“Bogdonov”), informed plaintiff that he would be paid

$ 2,400.00 per month, should he become disabled. In reliance on

this statement, plaintiff purchased the policy.

In April of 2003, when the policy was in full effect,

plaintiff was involved in a motorcycle accident and suffered

substantial bodily injuries. Although plaintiff initially

received payments of $2,400.00 from Reassure America, the

payments were later reduced to $1,400.00. Reassure America also

informed plaintiff that they had been overpaying him and that he

owed Reassure America $9,000.00 in back payments. 

Plaintiff subsequently filed suit in Sacramento Superior

Court against Reassure America, Royal Maccabees Life Insurance

Company and Bogdonov. Bogdonov was named both individually and

in his capacity as an agent for Reassure. Plaintiff alleges

that he purchased a life insurance policy from Reassure America

and that Reassure America failed to abide by the terms of the

policy. Plaintiff also alleges that Bogdonov, both individually

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and in his capacity as an agent, made various misrepresentations

regarding the nature and extent of the coverage. 

The complaint alleges seven causes of action: (1) breach of

contract; (2) misrepresentation/fraud; (3) tortuous breach of

contractual obligation; (4) intentional tortuous breach of

contractual obligation; (5) intentional infliction of emotional

distress; (6) loss of consortium; and (7) intentional infliction

of loss of consortium. 

B. Notice of Removal

On June 20, 2006, defendants filed a notice of removal. 

The removal was predicated on diversity jurisdiction. Although

plaintiffs and defendant Bogdonov were residents of California,

defendants maintained that Bogdonov had been fraudulently joined

and thus, his non-diverse citizenship could be disregarded by

the court. 

Plaintiffs subsequently filed a motion to remand the case

to state court on the grounds that Bogdonov was not fraudulently

joined. 

II.

Standard for Remand 

Civil actions not involving a federal question are

removable to a federal district court only if there is diversity

of citizenship between the parties. 28 U.S.C. § 1332(a)(1).

Section 1332 requires that there be complete diversity, that is,

each plaintiff's citizenship must be diverse as to each

defendant's citizenship. Id. Defendants must bear the burden of

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proving all facts necessary to support jurisdiction. Gaus v.

Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). 

A defendant may remove a civil action that alleges claims

against a non-diverse defendant when the plaintiff has no basis

for suing that defendant, or in other words, when that defendant

has been fraudulently joined. McCabe v. General Foods Corp., 811

F.2d 1336, 1339 (9th Cir. 1987).

“ ‘[F]raudulent joinder is a term of art. If 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, the joinder of the resident defendant is fraudulent.” ’

Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998)

(quoting McCabe, 811 F.2d at 1339)(emphasis added). Where a

non-diverse defendant has been “fraudulently joined” to an

otherwise completely diverse case, that defendant is disregarded

for diversity jurisdiction purposes. See, e.g., Calero v. Unisys

Corp., 271 F Supp 2d 1172, 1176 (N.D. Cal. 2003). 

If there is a non-fanciful possibility, however, that

plaintiff can state a claim under California law against the

non-diverse defendants, the court must remand. Macey v.

Allstate Property and Cas. Ins. Co., 220 F. Supp.2d 1116, 1117

(N.D. Cal. 2002) (“When there are real ambiguities among the

relevant state law authorities, federal courts that are

considering motions to remand should avoid purporting to decide

how state courts would construe those authorities.”)

On a motion to remand, the removing defendant faces a

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strong presumption against removal, and bears the burden of

establishing that removal was proper by a preponderance of

evidence. Sanchez v. Monumental Life Ins. Co., 102 F.3d 398,

403-404 (9th Cir. 1996). Thus, the defendant carries a high

burden of establishing that the non-diverse party was

fraudulently joined. See Gaus, 980 F.2d at 564 . 

Indeed, 28 U.S.C. § 1447(c) provides that a case removed

from state court should be remanded if it appears that the case

was removed improvidently or without jurisdiction. Federal

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

right of removal. Id. at 566. 

III.

Analysis

Defendants premise their assertion of fraudulent joinder on

the contention that under California law, plaintiffs cannot

bring suit against Bogdonov. Defendants maintain that it is

well settled under California law that insurance agents cannot

be held liable for acts within the scope of their employment. 

Plaintiffs, on the other hand, seek to have the case remanded on

the grounds that under California law, there are certain

circumstances in which an agent may be liable, and these

circumstances may be present in the case at bar. 

The court’s task, therefor, is to determine whether it is

‘obvious’ under ‘well settled’ California law that under the

allegations in plaintiffs’ complaint, plaintiffs would be unable

to state a claim against Bogdonov as an individual defendant. 

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See Macey, 220 F. Supp. 2d at 1119. 

1. Insurance Agent Liability 

As a general rule, insurance agents acting in the scope of

their agency are not individually liable, rather, liability will

rest with the insurance company. See Lippert v. Bailey, 241

Cal.App. 2d 376, 382 (1966). Defendants maintain that the

complaint only alleges that Bogdonov acted as an agent and thus,

only Reassure America can be held liable for his actions. 

There are exceptions and ambiguities to the Lippert rule. 

These exceptions are not well settled under California law.

Because of the ambiguity in the law, it is not clear whether the

facts alleged in the complaint, if true, would sustain a claim

for individual liability against Bogdonov. 

Under California law, an insurance agent may be liable for

his negligent failure to accurately apprise an insured of his

policy terms upon request. Westrick v. State Farm Ins., (1982)

137 Cal. App. 3d 685 (Cal. App. 2 Dist. 1982). Indeed, an

“insurance agent may assume a greater duty toward his insured by

misrepresenting the policy's terms or extent of coverage.” Paper

Savers v. Nacsa, 51 Cal. App. 4th 1090, 1097 (Cal. App. 2 Dist.

1996).

In Free v. Republic Ins. Co. 8 Cal. App. 4th 1726 (Cal.

App. 2 Dist. 1992), for example, the court held that an agent

has a duty to use reasonable care in responding to specific

inquiries from the policy holder. There, the agent repeatedly

reassured the policy holder that the coverage policy was

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sufficient. The court found that once an insurer or its agent

elects to respond to a policy holder’s questions about coverage,

a special duty arises which requires them to use reasonable care

to provide accurate information. A breach of this duty subjects

the agent to liability. Id. at 1729. 

One District Court observed the following about California

agent liability law: 

To state a claim for misrepresentation against an insurance

agent, a plaintiff must show that the claim falls within

one of the exceptions to Lippert's prohibition on

liability. Specifically, the plaintiff must either show

that the agent entered into an express agreement to provide

specific coverage, engaged in specific misrepresentations

regarding the scope of coverage, or assumed a dual agency

role.

Thornton v. New York Life Ins. Co., 211 F.R.D. 606, 609

(N.D. Cal. 2002). 

The unsettled state of agent liability under California law

was recently addressed by another District Court faced with a

motion to remand similar to the one in the case at bar. In

Macy, 220 F. Supp. 2d at 1117, a policy holder was assured by an

agent that his policy was in good standing. When the policy

holder sought to recover under the policy, the insurance company

denied payment. The policy holder filed suit against the agent

and the insurance company in state court. Defendants removed

the action to federal court on the grounds that the agent was

fraudulently joined to destroy diversity. Plaintiff contended

that there was authority in California law under which the agent

could be held liable. The court concluded, 

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We doubt, but do not decide, whether the allegations in

plaintiff's complaint could support a claim against the

Korbases based on a “dual agency” theory. We need not

resolve that issue because we hold that it is not obvious

under well settled doctrine that plaintiff's allegations

could not support a claim against the individual defendants

on an alternative legal theory under California law.

Macey, 220 F. Supp. 2d at 1120.

2. Allegations in Complaint 

Plaintiffs’ complaint specifically alleges that Bogdonov

“individually and in his capacity as an agent for Defendants

assured plaintiff payments of $2,400.00 would be made each month

he was disabled.” Compl. at 4. 

Here, plaintiffs’ allegations may establish that Bogdonov

engaged in specific misrepresentations about the scope of the

insurance policy. See Westrick, 137 Cal. App. 3d 685. 

Plaintiffs maintain that they relied upon Bogdonov’s

representations about the extent of the insurance coverage and

that these representations were false. If the allegations are

true, that Bogdonov did engage in specific misrepresentations

about the scope of the coverage, then the Lippert prohibition on

liability would not apply. See Thornton, 211 F.R.D. at 609. 

Like the court in Macey, this court “need not resolve

[this] issue because we hold that it is not obvious under well

settled doctrine that plaintiff's allegations could not support

a claim against the individual defendant[] on an alternative

legal theory under California law.” Macey 220 F. Supp. 2d at

1120. As the Macey court held, “[w]hen there are real

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ambiguities among the relevant state law authorities, federal

courts that are considering motions to remand should avoid

purporting to decide how state courts would construe those

authorities.” Id. at 1118 

In sum, it would not be a fanciful possibility that

plaintiffs could state a claim under California law against

Bogdonov. See Bennet v. Allstate Ins. Co., 753 F. Supp. 299, 302

(N.D. Cal. 1990) (for a court to find fraudulent joinder, “it

must appear to a ‘near certainty’ that joinder of [defendant]

was fraudulent”). 

For these reasons, the court finds that Bagdonov was not

fraudulently joined. Thus, because Bagdonov’s presence as a

defendant in the case destroys diversity, the court must remand

this action to state court.

IV.

Conclusion

Plaintiffs’ motion to remand is GRANTED. The court hereby

ORDERS the above-captioned case REMANDED to the Superior Court

of the State of California in and for the County of Sacramento

County.

IT IS SO ORDERED. 

DATED: September 1, 2006.

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