Salkin v. United Services Automobile Ass'n
767 F. Supp. 2d 1062
C.D. Cal.2011Background
- Plaintiffs purchased a 2008 life policy for Mr. Salkin from Defendants, with Mrs. Salkin as beneficiary.
- Mr. Salkin was diagnosed with advanced cancer in 2009 and plaintiffs attempted to redeem an accelerated death benefit.
- Defendants investigated Mr. Salkin’s medical history and subsequently rescinded the policy.
- Plaintiffs filed suit in Riverside Superior Court on July 23, 2010 alleging breach of contract, bad faith, and to set aside rescission under California law.
- Defendants removed the case to federal court on September 1, 2010, contending fraudulent joinder of USAA to defeat diversity.
- Court denied plaintiffs’ motion to remand and denied defendants’ ex parte application to supplement opposition; later dismissed claims against USAA with leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether USAA was fraudulently joined | Plaintiffs claim USAA is liable or at least properly joined. | USAA is a non-diverse, fraudulently joined defendant; liability rests with USAA Life. | USAA fraudulently joined; remand denied |
| Whether USAA Life is alter ego of USAA | USAA Life is alter ego of USAA, liable for actions of USAA Life. | There is no alter ego relationship; separate entities with independent management. | Not alter ego; separate entities; no liability transfer |
| Whether USAA Life is the agent of USAA | USAA Life acted as agent-in-fact for USAA. | USAA Life is not an agent of USAA; control is not pervasive. | Not an agent; actions not attributable |
| Whether the court should allow discovery to establish fraudulently joined status | Plaintiffs should be allowed discovery to show possible liability. | Fraudulent joinder is determined on the removal record; no right to further discovery at this stage. | Discovery denied; fraudulent joinder shown; complete diversity exists |
Key Cases Cited
- Hunter v. Philip Morris USA, 582 F.3d 1039 (9th Cir. 2009) (complete diversity rule and fraudulent joinder standard)
- Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546 (U.S. 2005) (statutory/constitutional basis for jurisdiction and diversity)
- Mercado v. Allstate Ins. Co., 340 F.3d 824 (9th Cir. 2003) (fraudulent joinder defined; burden on removing party)
- McCabe v. Gen. Foods Corp., 811 F.2d 1336 (9th Cir. 1987) (fraudulent joinder standard and removal review)
- Gaus v. Miles, Inc., 980 F.2d 564 (9th Cir. 1992) (strict construction of removal jurisdiction)
- Sonora Diamond Corp. v. Super. Ct., 83 Cal.App.4th 523 (Cal. Ct. App. 2000) (alter ego and agency principles for corporate liability)
- Delos v. Farmers Ins. Grp., 93 Cal.App.3d 642 (Cal. Ct. App. 1979) (unity of interest distinctive context; distinguishable from case at hand)
- Keszenheimer v. United Services Auto. Ass'n, 78 Fed.Appx. 333 (5th Cir. 2003) (USAA and USAA Life treated as separate entities for purposes of fraud joinder)
- Holden v. United Services Auto Ass'n, No. 07-5424-JFW (C.D. Cal. Nov. 20, 2007) (Cal. Dist. Ct. 2007) (same conclusion on separate corporate identities)