Maria Gast v. Universal North America Insurance Company
5:19-cv-00647
C.D. Cal.Jun 12, 2019Background
- Gast purchased homeowner’s insurance from Universal for her Murrieta residence; a burst pipe in April 2015 caused foundation/soil saturation and prolonged moisture beneath the slab.
- Universal inspected, provided a $17,603.87 estimate limited to tile replacement/drywall/painting, and authorized some remediation; Plaintiff’s engineers found continued wet soil and recommended slab replacement.
- Plaintiff alleges adjuster Jerry Siler made several misrepresentations (e.g., tile could be reinstalled on wet slab; damage was due to original installation; policy did not cover certain repairs) and Universal ultimately denied coverage in July 2017 and again in July 2018.
- Plaintiff sued in Riverside Superior Court asserting breach of contract, breach of the implied covenant of good faith and fair dealing (against Universal only), and negligent misrepresentation (against Universal and Siler).
- Universal removed to federal court claiming fraudulent joinder of non-diverse defendant Siler; Plaintiff moved to remand. The district court considered whether the negligent misrepresentation claim against Siler could possibly succeed and thus whether Siler was fraudulently joined.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Siler was fraudulently joined (destroying diversity) | Gast: Siler was properly joined because negligent misrepresentation claims against him are viable | Universal: Siler is a sham defendant because Plaintiff cannot possibly state a negligent misrepresentation claim against him | Court: Siler was not fraudulently joined; remand required |
| Sufficiency of negligent misrepresentation pleadings against Siler | Gast: Siler made actionable misrepresentations and she relied, incurring additional costs | Universal: Gast did not plausibly plead reliance or resulting damage (she relied on her own experts) | Court: Complaint fails to state negligent misrepresentation as pleaded, except potentially as to coverage denial; some reliance and damage allegations could be plausibly alleged |
| Whether leave to amend would be futile | Gast: Could allege further facts showing reliance on the coverage representation and resulting harm | Universal: Prior retention of experts shows lack of reliance and amendment would be futile | Court: Leave to amend would not be futile as to coverage-related misrepresentation; possibility of curing the pleading defect prevents finding fraudulent joinder |
| Proper forum (remand) | Gast: Case should be remanded because complete diversity is lacking | Universal: Federal court has diversity jurisdiction due to fraudulent joinder and amount in controversy | Held: Case remanded to state court; motions to dismiss/strike denied as moot |
Key Cases Cited
- Conley v. Gibson, 355 U.S. 41 (1957) (standard for notice pleading)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for pleadings)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (application of plausibility standard)
- Starr v. Baca, 652 F.3d 1202 (9th Cir. 2011) (pleading must give fair notice and plausibly suggest entitlement to relief)
- Ritchey v. Upjohn Drug Co., 139 F.3d 1313 (9th Cir. 1998) (fraudulent joinder standard)
- GranCare, LLC v. Thrower, 889 F.3d 543 (9th Cir. 2018) (fraudulent joinder requires showing no possibility state court would find defendant liable)
- Gaus v. Miles, 980 F.2d 564 (9th Cir. 1992) (removal statutes strictly construed)
- Wells Fargo Bank, N.A. v. FSI, Fin. Solutions, Inc., 196 Cal. App. 4th 1559 (2011) (elements of negligent misrepresentation under California law)