Xu v. Weis
2:22-cv-00118
| W.D. Wash. | Feb 21, 2023Background
- Plaintiff Wei Min Xu sued following a motor-vehicle collision, asserting common-law bad faith and Consumer Protection Act (CPA) claims against Allstate adjuster Matt Weis and Allstate Fire & Casualty.
- Weis is a Washington resident and the Allstate claim handler; Allstate is a foreign insurer doing business in Washington.
- Xu filed in King County Superior Court; Allstate removed to federal court asserting diversity jurisdiction and arguing Weis was fraudulently joined.
- The district court ordered briefing on subject-matter jurisdiction and held oral argument.
- The court concluded Keodalah II did not foreclose a common-law bad faith claim against an individual adjuster, found a reasonable possibility Xu could state such a claim, and remanded the case to state court.
- The court denied Xu’s request for attorney fees under 28 U.S.C. § 1447(c) and vacated pending motions; service-of-process questions were rendered moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Weis was fraudulently joined (diversity exists) | Weis properly joined; claims against him (common-law bad faith, CPA) are viable | Weis fraudulently joined to defeat diversity; his citizenship should be disregarded | Weis not fraudulently joined; presence destroys complete diversity; remand ordered |
| Scope of Keodalah II (does it bar common-law bad faith or non–per se CPA claims vs. individual adjusters) | Keodalah II addressed statutory bad-faith and per se CPA only; left common-law and non–per se CPA claims open | Keodalah II confirms no claims against individual adjusters — forecloses such claims | Court held Keodalah II did not foreclose common-law bad-faith claims; reasonable doubt exists; state court should decide novel question |
| Award of attorney fees for improper removal under §1447(c) | Fees warranted because removal lacked reasonable basis | Removal was objectively reasonable based on plausible reading of Keodalah II | Fees denied; Allstate had an objectively reasonable basis to remove |
| Adequacy of service of process on Weis | Service was effected after multiple attempts | Service was inadequate | Service issue moot after remand |
Key Cases Cited
- Keodalah v. Allstate Ins. Co., 449 P.3d 1040 (Wash. 2019) (Wash. Sup. Ct. holding no statutory bad-faith cause of action against individual adjustors and limiting per se CPA liability)
- Grancare, LLC v. Thrower ex rel. Mills, 889 F.3d 543 (9th Cir. 2018) (fraudulent-joinder test: if state court might find claim viable, joinder is proper)
- Weeping Hollow Ave. Tr. v. Spencer, 831 F.3d 1110 (9th Cir. 2016) (diversity jurisdiction requires no plaintiff and no defendant be citizens of same state)
- Hunter v. Philip Morris USA, 582 F.3d 1039 (9th Cir. 2009) (strong presumption against federal jurisdiction on removal; ambiguities resolved for remand)
- Morris v. Princess Cruises, Inc., 236 F.3d 1061 (9th Cir. 2001) (fraudulent joinder doctrine explained)
- United Investors Life Ins. Co. v. Waddell & Reed, Inc., 360 F.3d 960 (9th Cir. 2004) (district court duty to ensure subject-matter jurisdiction sua sponte)
- Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203 (9th Cir. 2007) (defendant bears burden by clear and convincing evidence to establish fraudulent joinder)
- Tank v. State Farm Fire & Cas. Co., 715 P.2d 1133 (Wash. 1986) (discussing insurer–insured fiduciary duties relevant to bad-faith analysis)