Vernon E. Murray v. Bankers Standard Insurance Company, 2:23-cv-02573

Plaintiffs Vernon and Sandra Murray sued multiple insurers, brokers, and individuals in Los Angeles Superior Court alleging bad faith, breach of contract, negligence, and negligent misrepresentation related to insurance claim handling.
Defendants Bankers Standard Insurance Company and ESIS removed the action to federal court based on diversity jurisdiction; removal acknowledged potential non-diversity because several individual defendants (California Defendants) are California citizens.
Defendants argued the California Defendants were fraudulently joined and their citizenship should be disregarded, pointing to an earlier-filed state action (Case No. 22STCV07416) by Vernon Murray and The Walnut Plaza, Ltd. against some of the same brokers for professional negligence and fraud.
Plaintiffs moved to remand, contending the California Defendants are not fraudulently joined and complete diversity therefore does not exist.
The court analyzed fraudulent joinder principles and California claim‑splitting/res judicata and concluded defendants failed to meet their heavy burden to show fraudulent joinder as to Marilyn Cartrett and Clyde Nelson (and could not establish privity binding them to the earlier action).
The court granted the motion to remand for lack of subject matter jurisdiction and denied plaintiffs’ request for attorney’s fees under 28 U.S.C. § 1447(c), finding removal was not objectively unreasonable.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether federal diversity jurisdiction exists	Murray: California Defendants are properly joined; no complete diversity	Defendants: Certain California defendants are fraudulently joined; diversity exists if ignored	Court: Fraudulent joinder not established for Cartrett and Nelson; complete diversity lacking; remand ordered
Whether res judicata/claim-splitting bars claims against the California Defendants	Murray: Prior state suit did not assert claims against Cartrett/Nelson; no preclusion	Defendants: Prior related lawsuit and privity bar relitigation of same primary right	Court: On this record, privity/identity of interest not shown as to Cartrett/Nelson; res judicata does not apply
Whether Cartrett and Nelson are in privity with parties to the earlier suit	Murray: No privity; they could be individually liable on different theories	Defendants: Privity exists such that earlier judgment binds them	Court: Privity requires identity/community of interest and adequate representation; defendants did not meet burden to show it
Whether attorneys’ fees should be awarded under § 1447(c)	Murray: Award fees because removal was improper	Defendants: Removal had an objectively reasonable basis	Court: Denied fees because removal was not objectively unreasonable

Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375 (federal courts are courts of limited jurisdiction)
Gaus v. Miles, Inc., 980 F.2d 564 (9th Cir. 1992) (removal statute strictly construed; doubts resolved against removal)
Prize Frize, Inc. v. Matrix (U.S.) Inc., 167 F.3d 1261 (9th Cir. 1999) (burden on party seeking removal)
Hunter v. Philip Morris USA, 582 F.3d 1039 (9th Cir. 2009) (fraudulent‑joinder doctrine and limits on merits‑based defenses)
Ritchey v. Upjohn Drug Co., 139 F.3d 1313 (9th Cir. 1998) (fraudulent joinder where plaintiff cannot establish any cause of action)
McCabe v. Gen. Foods Corp., 811 F.2d 1336 (9th Cir. 1987) (fraudulent joinder standard)
Crowley v. Katleman, 8 Cal.4th 666 (Cal. 1994) (primary right theory for claim preclusion)
DKN Holdings LLC v. Faerber, 61 Cal.4th 813 (Cal. 2015) (privity requires identity/community of interest and adequate representation)
Grande v. Eisenhower Med. Ctr., 13 Cal.5th 313 (Cal. 2022) (discussion of privity and nonparty preclusion)