ORDER GRANTING PLAINTIFF’S MOTION FOR REMAND AND DENYING PLAINTIFF’S REQUEST FOR ATTORNEYS’ FEES
Plаintiff Miguel A. Palma moves to remand this removed action to state court and requests attorneys’ fees and costs. Defendant Prudential Insurance Company opposes the motion. Having considered all of the papers filed by the parties, the Court grants Plaintiffs motion for remand and denies Plaintiffs request for attorneys’ fees and costs.
BACKGROUND
Plaintiff filed this case in state court alleging that Prudential wrongfully denied benefits owing to him under his long term disability insurance policy, when he became disablеd from his occupation as a certified public accountant. Plaintiff also alleges that Prudential violated California Insurance Code § 790.03(h)(1) 1 by knowingly misrepresenting the correct definition of “total disability” to California claimants, including Plaintiff.
Plaintiff asserts claims against Prudential for breach of contract, breach of the covenant of good faith and fair dealing, intentional misrepresentation and intentional infliction of emotional distress. In the same complaint, Plaintiff seeks a writ of mandate against the Commissioner of the California Department of Insurance, under California Insurance Code § 10290, which requires the Commissioner to review and approve all disability insurance policies sold, issued or delivered in Califor
Prudential removed this action to federal court on the basis of diversity jurisdiction, claiming that there is complete diversity between the parties once the citizenship of the Commissioner is disrеgarded because he is a sham defendant. Plaintiff moves to remand, arguing that the Commissioner is not a sham defendant, and seeks to recover his attorneys’ fees and costs incurred as a result of the removal.
LEGAL STANDARD
A defendant may remove a civil action filed in state court to federal district court so long as the district court could have exercised original jurisdiction over the matter. 28 U.S.C. § 1441(a). “The ‘strong presumption’ against removal jurisdiction means that the defendant always has thе burden of establishing that removal is proper.”
Gaus v. Miles, Inc.,
District courts have original jurisdiction over all civil actions “where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between ... citizens of different States.” 28 U.S.C. § 1332(a). When federal subject matter jurisdiction is predicated on diversity of citizenship, complete diversity must exist between the opposing рarties.
Owen Equip. & Erection Co. v. Kroger,
A non-diverse party named in a complaint can be disregarded for purposes of determining whether diversity jurisdiction exists if a district court determines that the party’s inclusion in the action is a “sham” or “fraudulent.”
McCabe v. General Foods Corp.,
DISCUSSION
The parties do not dispute that Plaintiff and Prudential are citizens of different states. Therefore, the issue is whether the Commissioner’s presence as a defendant defeats diversity jurisdiction. Prudential argues that, under California law, Plaintiff cannot petition for a writ of mandate against the Commissioner and, even if he can do so, the Commissioner’s presence does not defeat diversity.
The issuance of a disability policy in California requires approval from the Commissioner.
Van Ness v. Blue Cross of California,
Section 10291.5(b)(1) of the California Insurance Code provides that the Commissioner:
shall not approve any disability policy for insurance ... if he finds that it contains any provision ... which is unintelligible, uncertain, ambiguous, or abstruse, or likely to mislead a person to whom the policy is offered, delivered or issued.
The purpose of § 10291.5(b) is to prevent fraud and unfair trade practices and to insure that the language of all insurance policies can be readily understood and interpreted. Cal. Ins. Code § 10291.5(a). Under § 12921.5(a), the Commissioner has an obligation to fulfill the duties imposed by the Insurance Code.
Peterson v. American Life & Health Ins. Co.,
The Code also provides that “the commissioner shall require from every insurer a full compliance with all the provisions of the code.” Cal. Ins. Code § 12926. The Commissioner’s actions are subject to judicial review. Cal. Ins.Code §§ 12940; 10291.5(h).
Under California law, a writ of mandate may be issued by a court to any inferior tribunal ... to compel the performance of an act which the law specially enjoins, as a duty resulting from an office, trust or station.” Cal.Civ.Proc.Code § 1085(a);
see also
Cal.Civ. Pro.Code § 1094.5 (providing procedures for mandamus actions). Section 1085(a) permits judicial review of ministerial dutiеs as well as quasi-legislative acts of public agencies.
Schwartz v. Poizner,
Plaintiff seeks a mandate that the Commissioner exercise discretion to determine if his policy should be reformed or revoked so as to conform to California law or, if the Court finds the Commissioner abused his discretion in approving his policy, to compel the Commissioner to reform it so that it conforms to California law. Pursuant to the above authority, this relief is properly sought in a mandamus action. Prudential, however, argues that Plaintiff cannot obtain the mandamus relief that he seeks. Citing Schwartz, Prudential arguеs that the Commissioner’s enforcement duties are not ministerial, but are discretionary and, as such, are not subject to mandamus review.
In Schwartz, the court explained:
A ministerial act is an act that a public officer is required to perform in a prescribed manner in obedience to the mandate of legal authority and without regard to his own judgment or opinionconcerning such act’s propriety or impropriety, when a given state of facts exists.... Thus, where a statute or ordinance clearly defines thе specific duties or course of conduct that a governing body must take, that course of conduct becomes mandatory and eliminates any element of discretion.
In
Common Cause of Cal. v. Bd. of Supervisors,
Furthermore, mandamus lies to correct an abuse of discretion by an official acting in an administrative capacity.
Common Cause,
Prudential argues that these prior opinions cannot be followed because they did not have the benefit of the reasoning in
Based on the weight of authority on this issue, the Court concludes that Plaintiff properly may bring a claim for mandamus relief based on an abuse of the Commissioner’s discretion.
II. Bars to Mandamus Relief
Prudential argues that, even if Plaintiff may seek mandamus relief, it is barred because: (1) the Commissioner cannot regulate in-force insurance; (2) the claim was not properly exhausted; (3) the claim is barred by the statute of limitations; and (4) the Commissioner has been misjoined under Federal Rule of Civil Procedure 20.
A. Regulation of In-Force Insurance Policy
Prudential argues that a writ of mandate may not be used to reform or revoke an in-force insurance policy. However,
Van Ness,
B. Exhaustion of Administrative Remedies
Prudential argues that Plaintiffs claim for mandamus is barred because he has failed to exhaust available administrative remedies. Exhaustion of administrative remedies is a prerequisite for state court jurisdiction and, thus, the failure to exhaust may be considered for purposes of determining fraudulent joinder.
Brazina,
Brazina
held that the defendant had not established that there was any administrative appeаl process available to challenge the Commissioner’s approval of an insurance policy, notwithstanding the public complaint process in § 12921.3 of the Insurance Code.
Id.
at 1171;
see also Blake v. Unumprovident Corp.,
Accordingly, Prudential fails to establish that there is аn administrative process that Plaintiff could have utilized before proceeding with his mandamus action. Plaintiff, therefore, has not failed, under settled California law, to exhaust administrative remedies.
C. Statute of Limitations
The parties agree that, because the Insurance Code provides no specific statute of limitations for judicial review of an action taken by the Commissioner, see Cal. Ins.Code § 10291.5(h), the appropriate statute of limitations is the three-year limitation provided in California Cоde of Civil Procedure § 338(a) for “an action upon a liability created by a statute.” The parties disagree, however, when the three-year period accrues. Prudential argues that it begins to run at the time a claimant first obtains the policy; Plaintiff argues that it begins to run upon the denial of benefits. The outcome of this dispute is significant because Plaintiff filed his complaint more than ten years after the issuance of the policy, but within two years from the denial of benefits.
No California decisions directly address this issue. However, at least five Northern District courts have addressed the statute of limitations for this precise application of the writ of mandamus. Only one district court found that the statute of limitations began to run on the date of the Commissioner’s approval of a policy.
See Borsuk v. Massachusetts Mut. Life Ins. Co.,
No. C-03-630 VRW (N.D.Cal.2003) (Docket No. 26). The remaining four courts were unwilling to hold that the statutory clock began to run on the date of the Commissioner’s approval because the plaintiff may not have sufficient notice of his injury until the insurance company rejects his claim.
See Brazina,
In
Borsuk,
the court found that the statute of limitations had expired, summarily concluding that “Borsuk was on notice ... no later than ... the date he agreed to the terms of the policy” and that the statute began to run either on the date of that agreement or on the date the Commissioner approved the policy.
Borsuk
at 18. Because the
Borsuk
court did not provide the basis for its decision on this matter, the Court finds that decision unpersuasive. Furthermore, subsequent to
Borsuk,
the same judge decided the same issue in
Sukin v. State Farm Mut. Ins. Co.,
No. C-07-2829 VRW (N.D.Cal.2007) (Docket No. 27), holding that the plaintiff did not have standing to sue until his claim for insurance benefits had been denied and, there
In
Brazina,
the court did not address the triggering of the statute of limitations directly, but rejected the defendants’ argument that the writ of mandamus was unavailable at any time after the effective date of the Commissioner’s decision. Despite the fact that the plaintiff filed suit fourteen years after the issuance of the policy, the
Brazina
сourt stated that “it seems likely that a California court would interpret the language [of section 10291.5(h) ] to allow this action to proceed.”
Brazina,
Sullivan, Maiolino,
and
Glick
directly addressed the statute of limitations and, finding the issue of when the statute begins to run to be uncertain, construed the ambiguity in favor of granting remand because a cause of action had been stated. In
Sullivan,
the court concluded, “It seems unfair to hold categorically that Plaintiff had notice of the way defendants would administer the policy before Unum denied him benefits” and decided that remand was appropriate because the complaint had been filed within three years of the denial of benefits.
This reasоning is bolstered by California cases holding that, where it would be manifestly unjust to deprive a plaintiff of a cause of action before it is aware it has been injured, accrual begins when the plaintiff actually discovers its injury and the cause or could have discovered its injury and the cause through reasonable diligence.
Mangini v. Aerojet-General Corp.,
These observations are not to suggest that Plaintiff will necessarily succeed in persuading a state court to follow his suggested application of the statute of limitations, but support the conclusion that, on the face of the pleading, Plaintiffs claim for a writ of mandate is not barred by settled California law on the statute of limitations.
D. Misjoinder
Federal Rule of Civil Procedure 20(a)(2) permits the joinder of defendants in one action if: (1) the plaintiffs assert any right to relief arising out of the same transaction, occurrence, or series of transactions or occurrences; and (2) there are common questions of law or fact.
Coughlin v. Rogers,
Under California law, defendants may be joined if there is asserted against them:
(a) (1) Any right to relief jointly, severally, or in the alternative, in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all these persons will arise in the action; or
(2) A claim, right or interest adverse to them in the property or controversy which is the subject of the action.
(b) It is not necessary that each defendant be interested as to every cause of action or as to all relief prayed for....
Cal.Code Civ. Proc. § 379. 3
Prudential argues that Plaintiff cannot meet the first element of Rule 20(a) because, against Prudential, he seeks money dаmages based upon breach of contract and torts arising from the alleged improper handling of his disability claim and, against the Commissioner, he seeks a writ of mandate ordering the Commissioner to exercise discretion and to rescind approval of his policy. Prudential also argues that the second element of Rule 20(a) is not met because there are no questions of law or fact common to the contract and tort claims against it, and the administrative claims against the Commissioner.
In Brazina, the court rejected a similar misjoinder claim, reasoning as follows:
Since a policy approved by the Commissioner is presumed valid in compliance with section 10291.5, Peterson,48 F.3d at 410 , the outcome of the insurance contract dispute between defendants and Brazina may very well depend on whether the Commissioner will withdraw approval of the policy in question.
Likewise, the Court finds that there is sufficient overlap between the claims against Prudential and the Commissioner for joinder to be proper under Rule 20(a). Under California law, the result would be the same because its joinder rule is broader than the federal rule.
See Osborn,
Therefore, all of Prudential’s arguments for barring Plaintiffs mandamus action against the Commissioner fail.
III. Commissioner’s Effect on Diversity Jurisdiction
Prudential argues that, even if the Commissioner is a Defendant, this does not affect diversity because the Commissioner has no citizenship for diversity purposes. This argument is based on two premises. First, Prudential correctly points out thаt the Commissioner, in his or her official capacity, is not a “citizen of California.”
See Morongo Band of Mission Indians v. California State Bd. of Equalization,
Prudential’s argument has no basis in the text of the removal statute or any precedent in this or any other circuit. Although infrequently raised, this argument has bеen rejected by other courts.
Jakoubek v. Fortis Benefits Ins. Co.,
In
Batton,
the court rejected an argument identical to that raised by Prudential after examining the diversity statute and concluding, “Nowhere is there any provision allowing diversity jurisdiction where a non-citizen state is a party. Clearly, Congress contemplated the situation of non-citizens and specifically allowed for suits by those non-citizens it thought appropriate.”
28 U.S.C. § 1332(a)(1) grants federal diversity jurisdiction only when plaintiffs and defendants are citizens of different states. Since the State defendants are not citizens, they and the plaintiff cannot be citizens of different states. If a party is not a citizen of a state at all, then it is not a citizen of a different state and it would be inappropriate to allow that party ... to be subject to federal jurisdiction based only on diversity of citizenship.
IV. Attorneys’ Fees and Costs
On granting a motion to remand, the court may order the defendant to pay the plaintiff its “just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” 28 U.S.C. § 1447(c). “Absent unusual circumstances, attorney’s fees should not be awarded when the removing party has an objectively reasonable basis for removal.”
Martin v. Franklin Capital Corp.,
Although the Court was not persuaded by Prudential’s arguments, it had an objectively reasonable basis for removal. Therefore, the Court declines to award Plaintiffs attorneys’ fees and costs under § 1447(c).
CONCLUSION
For the foregoing reasons, the Court grants Plaintiffs motion for remand and denies his request for attorneys’ fees and costs. The Clerk of the Court shall remand the case to the Superior Court for the County of San Francisco and close the file in this Court.
IT IS SO ORDERED.
Notes
. California Insurance Code § 790.03(h)(1) prohibits insurers from misrepresenting to claimants pertinent facts of insurance policy provisions.
. Section 12921 provides, “The commissioner shall perform all duties imposed upon him or her by the provisions of this code ... and shall enforce the execution of those provisions
. The parties both assume Federal Rule of Civil Procedure 20(a) applies. However, in a diversity action, state law may apply.
See HVAC Sales, Inc. v. Zurich American Ins. Gp.,