FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

CHARLES H. GARDNER, 

Plaintiff-Appellee,

v.

UICI, a Texas corporation;

NATIONAL ASSOCIATION FOR THE

SELF EMPLOYED, a Texas

corporation; PFL LIFE INSURANCE No. 06-55045

COMPANY, an Iowa corporation; D.C. No. TRANSAMERICA LIFE INSURANCE  CV-05-07735-FMC COMPANY, an Iowa corporation;

STEVEN ALAN HEYMAN, OPINION

Defendants,

and

MEGA LIFE AND HEALTH

INSURANCE COMPANY, an Oklahoma

corporation,

Defendant-Appellant. 

Appeal from the United States District Court

for the Central District of California

Florence-Marie Cooper, District Judge, Presiding

Argued and Submitted

June 5, 2007—Pasadena, California

Filed November 19, 2007

Before: Stephen S. Trott, A. Wallace Tashima, and

Johnnie B. Rawlinson, Circuit Judges.

Opinion by Judge Rawlinson

15025
COUNSEL

Andre J. Cronthall (briefed and argued), Fred R. Puglisa

(briefed), Catherine La Tempa (briefed), Sheppard, Mullin,

Richter & Hampton LLP, Los Angeles, California, for the

defendant-appellant. 

A. Douglas Mastroianni, Peter L. Weinberger & Associates,

Los Angeles, California, for the plaintiff-appellee.

OPINION

RAWLINSON, Circuit Judge: 

The district court awarded fees and costs to Appellee

Charles H. Gardner (Gardner) upon remanding this case to the

state court from which it was removed. Because we conclude

that the Mega Life And Health Insurance Company (MEGA)

had an objectively reasonable basis for removal, we reverse

the district court’s award of fees and costs. 

I. FACTS AND PROCEDURAL HISTORY

In 1994, Gardner purchased health insurance from PFL

Life Insurance Company. More than ten years later, in 2005,

Gardner canceled his insurance policy and filed an action in

GARDNER v. MEGA LIFE AND HEALTH INS. 15027
the Superior Court of the State of California against MEGA,

UICI, Transamerica Life Insurance Company (Transamerica),1

the National Association for the Self-Employed (the NASE),

and Steven Alan Heyman (Heyman) (collectively “Defendants”) for violations of the Consumer Legal Remedies Act,

breach of contract, breach of the implied covenant of good

faith and fair dealing, fraud, breach of fiduciary duty, negligence, and unfair competition based on the sale of the health

insurance coverage. MEGA removed the case to district court

on diversity grounds, asserting that Heyman, the only nondiverse defendant, was fraudulently joined to destroy diversity. In support of its notice of removal, MEGA argued that

“[a]ll of the claims [Gardner] attempted to assert against . . .

Heyman [were] barred by the applicable statutes of limitations.” 

Gardner subsequently moved to remand the case to state

court, asserting that because he alleged a conspiracy “to misrepresent the nature of the [insurance] coverage offered to

[him],” the statute of limitations did not begin to run until

2005, when the “last overt act” in furtherance of the conspiracy occurred. Gardner also moved for attorney’s fees under

28 U.S.C. § 1447(c).2

The district court rejected MEGA’s assertion of diversity

jurisdiction and remanded the case to state court, holding that

because a California court “could” conclude that the conspiracy claim alleged against Heyman was not time-barred, Heyman was not fraudulently joined. The district court also

granted Gardner’s motion for an award of fees and costs, finding that “[a]ny objective consideration of the allegations in

1According to the First Amended Complaint (FAC), “PFL Life Insurance Company was merged out of existence and became Transamerica

Life Insurance Company, or . . . merely changed its name to Transamerica

Life Insuance Company[.]” 

2Gardner’s reference in his motion to 28 U.S.C. § 1446(c) was apparently a typographical error. 

15028 GARDNER v. MEGA LIFE AND HEALTH INS.
the Complaint, state law regarding civil conspiracy, and the

legal standard regarding fraudulent joinder should have led

Defendants to the inescapable conclusion that removal was

not proper.” This timely appeal followed.

II. DISCUSSION

Although 28 U.S.C. § 1447(d) generally bars review of a

district court order remanding a case to state court, see Lively

v. Wild Oats Markets, Inc., 456 F.3d 933, 937 (9th Cir. 2006),

we have jurisdiction to review the district court’s award of

fees and costs incurred as a result of removing the case. See

Patel v. Del Taco, Inc., 446 F.3d 996, 999 (9th Cir. 2006). In

addressing whether the district court abused its discretion in

awarding fees to Gardner under 28 U.S.C. § 1447(c), we consider whether the district court’s decision was “based on

clearly erroneous findings of fact or erroneous determinations

of law.” Patel, 446 F.3d at 999 (citation omitted). 

“A civil case commenced in state court may, as a general

matter, be removed by the defendant to federal district court,

if the case could have been brought there originally.” Martin

v. Franklin Capital Corp., 546 U.S. 132, 134 (2005) (citation

omitted). Where, as is alleged by MEGA, “[a] 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” and

removal is proper. Mercado v. Allstate Ins. Co., 340 F.3d

824, 826 (9th Cir. 2003) (citation omitted).3 However, if

removal is found to be improper, a court that remands a case

to state court may “require payment of just costs and any

actual expenses, including attorney fees, incurred as a result

of the removal.” 28 U.S.C. § 1447(c), see also Patel, 446 F.3d

at 999. 

3

“In deciding whether a cause of action is stated . . . we will look only

to a plaintiff’s pleadings to determine removability.” Ritchey v. Upjohn

Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998) (citation and internal quotation marks omitted). 

GARDNER v. MEGA LIFE AND HEALTH INS. 15029
[1] “Absent unusual circumstances, courts may award attorney’s fees under § 1447(c) only where the removing party

lacked an objectively reasonable basis for seeking removal.

Conversely, when an objectively reasonable basis exists, fees

should be denied.” Martin, 546 U.S. at 141 (citations omitted). In Martin, the Supreme Court noted that § 1447(c) did

not indicate that fees “should either usually be granted or usually be denied.” Martin, 546 U.S. at 139. Recognizing “the

desire to deter removals sought for the purpose of prolonging

litigation and imposing costs on the opposing party, while not

undermining Congress’ basic decision to afford defendants a

right to remove as a general matter, when the statutory criteria

are satisfied[,]” id. at 140, the Supreme Court held that absent

unusual circumstances, fees should not be awarded when the

removing party has an objectively reasonable basis for

removal. See id. at 141. In so holding, the Supreme Court

explained that while courts retain discretion to determine

whether such unusual circumstances exist as to depart from

this rule, “[a court’s] reasons for departing from the general

rule should be faithful to the purposes of awarding fees under

§ 1447.” Id. (citations and internal quotation marks omitted).

MEGA argues that Gardner failed to state a claim against

Heyman and therefore, an objectively reasonable basis for

seeking removal existed because: (1) the First Amended Complaint (FAC) failed to allege that the statute of limitations

applicable to the alleged conspiracy claim was tolled or subject to the last overt act doctrine; (2) the alleged conspiracy

claim fails as a matter of law under the theory that an agent

cannot conspire with his/her principal; and (3) on remand

from federal court, the state court sustained its demurrer. 

[2] Gardner’s FAC alleged that contrary to Heyman’s representations, his insurance premiums increased every year. In

turn, Gardner argues that, at a minimum, the last act in furtherance of Defendants’ conspiracy to collect insurance payments from him occurred in 2004, a year before he filed his

complaint, and well within the limitations period, when Hey15030 GARDNER v. MEGA LIFE AND HEALTH INS.
man made additional misrepresentations regarding Gardner’s

insurance premiums. See Aaroe v. First American Title Ins.

Co., 222 Cal.App.3d 124, 128 (1990) (providing for a threeyear limitations period for a civil conspiracy); see also People

v. Beaumont Inv., Ltd., 111 Cal.App.4th 102, 137 (2003)

(“[T]he statute of limitations does not begin to run until the

final act in furtherance of the conspiracy has been committed.”) (citation omitted). Because Gardner’s allegations

against Heyman pertain to actions taken in Heyman’s capacity

as an agent of the NASE and MEGA, they would generally

be barred as a matter of law under California’s “agent’s

immunity rule.” See Berg & Berg Enters, LLC v. Sherwood

Partners, Inc., 131 Cal.App.4th 802, 817 (2005).4 However,

California courts recognize that in some cases, “[a] cause of

action for conspiracy will lie against agents and employees of

insurers even though the former are not parties to the agreement of insurance when they join the insurer in a conspiracy

to defraud the insured” as Gardner alleges. Younan v. Equifax

Inc., 111 Cal. App.3d 498, 511 (1980). Accordingly, a California court could conclude that Gardner’s action against

Heyman was neither time-barred, see Aaroe, 222 Cal.App.3d

at 128, nor precluded under the “agent’s immunity rule,”see

Younan, 111 Cal.App.3d at 511, rendering diversity jurisdiction and removal to federal court unavailable. Cf. Mercado,

340 F.3d at 826. 

[3] Under Martin, however, whether a removal is improper

is not dispositive in determining whether fees should be

awarded under 28 U.S.C. § 1447(c). See Martin, 546 U.S. at

137. Rather, “the standard for awarding fees . . . turn[s] on the

reasonableness of the removal.” Id. at 141. Consequently, the

relevant inquiry is whether MEGA “lacked an objectively reasonable basis for seeking removal.” Id. We agree with the dis4Under the “agent’s immunity rule . . . an agent is not liable for conspiring with the principal when the agent is acting in an official capacity on

behalf of the principal.” Berg & Berg Enters, LLC, 131 Cal.App.4th at 817

(citations and internal quotation marks omitted). 

GARDNER v. MEGA LIFE AND HEALTH INS. 15031
trict court that a California court could find that the FAC

alleged a claim against Heyman. However, we also recognize

the existence of California cases that could potentially preclude Gardner’s claim against Heyman in his capacity as an

agent of the NASE and MEGA. See, e.g., Berg & Berg

Enters, LLC, 131 Cal.App.4th at 817. The result is a close

question regarding whether Gardner’s failure to state a conspiracy claim against Heyman was “obvious according to the

settled rules of [California.]” Mercado, 340 F.3d at 826 (citation omitted). Under these circumstances, we hold that a reasonable litigant in MEGA’s position could have concluded

that federal court was the proper forum in which to litigate

Gardner’s claims because the FAC failed to state a claim

against Heyman, the only resident defendant. Cf. Mercado,

340 F.3d at 826; see also Martin, 546 U.S. at 140 (“[T]here

is no reason to suppose Congress meant to confer a right to

remove, while at the same time discouraging its exercise in all

but obvious cases.”). Indeed, the record reflects that, on

remand, the state court judge concluded that MEGA’s arguments in support of its demurrer were “well-taken,” further

buttressing our determination that MEGA’s basis for removal

was not “objectively unreasonable” under Martin.

5

III. CONCLUSION

MEGA had an objectively reasonable basis for removal to

federal court. See Martin, 546 U.S. at 141. Additionally, there

is nothing in the record to suggest that there are “unusual circumstances” that justify departing from Martin’s general rule

that “when an objectively reasonable basis [for removal]

exists, fees should be denied.” Id. (citations omitted). Accordingly, the district court abused its discretion in awarding fees

5Under California practice, a general demurrer to a complaint is the

equivalent of a motion to dismiss under Fed. R. Civ. P. 12(b) in federal

practice. See Cal. Civ. Proc. Code §§ 430.10, 430.30; see generally 5 Witkin, Cal. Procedure, Pleading § 905 (4th ed. 1997). 

15032 GARDNER v. MEGA LIFE AND HEALTH INS.
and costs to Gardner under 28 U.S.C. § 1447(c). 

REVERSED AND REMANDED.

GARDNER v. MEGA LIFE AND HEALTH INS. 15033