Case 8:22-cv-01812-CJC-KES Document 23 Filed 12/22/22 Page 1 of 9 Page ID #:343

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 SOUTHERN DIVISION 11 ) 12 ) JORGE H. ACOSTA; BYRON ) Case No.: SACV 22-01812-CJC (KESx) 13 LAMONT ADAMS; LIBBY ANN )

ADAMS; JILL AYAKO ALLAS; TONI )

14 )

LERAYNE ALSTON; RALPH )

15 LAMARR BALLEW; ANTHONY ) ORDER DENYING PLAINTIFFS’

EMMETT BLEDSOE; LATESHA ) MOTION TO REMAND AND

16 ) REQUEST FOR SANCTIONS [Dkt. 12]

MONIQUE BUTTS; JACK CLINTON )

17 CARPENTER; AMANDA CHERE )

CASCELLA; MARTIN CERVANTES; )

18 )

SASMAC CHIN; RACHAEL LOUISE )

19 CLARK; MONICA JEAN COLE; )

MIRNA J. CORNEJO; DOMINIC )

20 )

SALVAS DAVIS; LESLEY ANN )

21 DOAN; SALVADOR JOSE )

ENRIQUEZ; DANA DENISE EPPS; )

22 )

ANISSA S. EVENES; MARQUES )

23 DREW FERNANDEZ; ALEXIS ANNE ) )

FLEMING; PHELIA MAY GAINES;

24 )

CHARLES CARDENAS GARCIA; )

25 JUANITA G. GARNER; MARIA ) )

MENDOZA GUTIERREZ;

26 )

KIMBERLY ANN HAYES; DARLENE )

27 PATRICE HUGHES; LINDA KAYE ) )

IRVING; TERESA LORETTA ISOM;

28 )

JAQUEITA D. JACKSON; TINA ANN )

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JACKSON; MICHAEL KARL )

1 )

JARDINE; LINDA RENA JOHNSON; )

2 PHENG KUY; CHALRES DAVID )

LADIMIR; ANNALICIA MARIE )

3 )

LARA; ROBERT C. LASLEY; JAMES )

4 THOMAS MANGUAL; SEAN P. )

MARTEL; TAKISHA M. )

5 )

MATTHEWS; KARINA ROCIO )

6 MEZA-VAZQUEZ; MARK EVERETT )

MITRO; DORINE ANTONIA )

7 )

MOONEY; JOSEPH D. NERI; )

8 DANIEL J. NOLEN; MARNEE )

MICHELLE OGRADY; MELISA )

9 )

PADILLA; WILBERT LEE PATRICK; )

10 RAMIRO PEREZ JR.; AMY )

ELIZABETH PIVIN; RAYMOND )

11 )

ELLIOTT PURYEAR; RENEE )

12 REYES; DANIEL LLOYD RINGLER; ) )

HECTOR J. RIVAS; IRIKA CARREN

13 )

ROBERTSON; VICTORIA S. )

14 ROBINSON; ROSALIND DENISE ) )

ROSS; ESMERALDA SANTANA;

15 )

CHRISTINA B. SEALS; MICHAEL J. )

16 SOMOON; LISA MARIE ) ) STANSBURY; and ALI DURUPAN 17 )

VILLA, )

18 ) ) 19 Plaintiffs, ) ) 20 v. ) ) 21 ) )

HISCOX INSURANCE COMPANY

22 ) INC. and DOES 1 through 100, ) 23 inclusive, ) )

24 ) Defendants. ) 25 ) ) 26

27 28

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1 I. INTRODUCTION 2 3 Plaintiffs—sixty-three persons proceeding as individuals—joined in filing this 4 action for breach of contract and breach of the implied covenant of good faith and fair 5 dealing against Defendant Hiscox Insurance Company Inc. on August 11, 2022, in the 6 Superior Court of California, County of Orange. (See Dkt. 2-1 [Complaint, hereinafter 7 “Compl.”].) Hiscox subsequently removed the action to the U.S. District Court for the 8 Central District of California, invoking this Court’s diversity jurisdiction. (See Dkt. 2 9 [Defendant’s Notice of Removal of Action (28 U.S.C. §1441(b)), hereinafter 10 “Notice”] ¶ 2.) Now before the Court is Plaintiffs’ motion to remand the action for 11 failure to meet the amount-in-controversy requirement for jurisdiction. (See Dkt. 12 12 [Plaintiffs’ Motion to Remand and Request for Sanctions, Points and Authorities, 13 Declaration in Support Thereof].) For the following reasons, the motion is DENIED. 14 15 II. BACKGROUND 16 17 As Plaintiffs allege in their complaint, Hiscox provided professional services 18 liability insurance to Midwest Recovery Systems, LLC, a collection agency. (See 19 Compl. ¶¶ 7, 9, 13.) In July 2018, Michell Franklin filed a putative class action against 20 Midwest, claiming that it furnished inaccurate or incomplete information about the 21 payday loan debt of Franklin and other California residents to credit agencies in violation 22 of the California Consumer Credit Reporting Agencies Act (the “CCRAA”), Cal. Civ. 23 Code §§ 1785.1–.36 (the “First Action”). (See id. ¶¶ 11–12, 16.) Midwest tendered 24 notice of the First Action, but Hiscox denied any duty to defend. (See id. ¶ 13.) Hiscox 25 claimed that the “professional services” covered under Midwest’s policy were its 26 “services as a collection agent, of non-owned debt, for others for a fee,” not any 27 “reporting [of] information to credit reporting agencies.” (Id. ¶¶ 13–16.) Hiscox further 28 asserted that, in any event, the claim fell under a coverage exclusion. (See id. ¶ 17.) By

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1 April 2019, however, Hiscox backtracked; it acknowledged that the policy covered the 2 First Action, agreed to defend Midwest, and directly paid for counsel. (See id. ¶¶ 22–23.) 3 4 On February 5, 2021, the court in the First Action granted the plaintiff’s motion for 5 class certification—but only as to the putative class members who had paid money to 6 Midwest, which did not include Plaintiffs in this action. (See id. ¶ 35.) Plaintiffs then 7 served a notice of intent to sue for similar violations of the CCRAA on Midwest, which, 8 in turn, tendered the notice to Hiscox. (See id. ¶¶ 39, 42.) On November 12, Hiscox 9 responded to the notice by denying coverage, (see id. ¶ 43), and on November 22, 10 Plaintiffs filed an action as individuals (rather than as a class) against Midwest and 11 certain officers for violations of the CCRAA (the “Second Action”). (See id. ¶ 44.) 12 13 Eventually, Plaintiffs, Midwest, and the officers settled the Second Action and 14 stipulated to the entry of a judgment. (See id. ¶ 47.) The stipulation provided that the 15 court would enter a judgment against Midwest and in favor of Plaintiffs for “$8,999 in 16 actual damages for each of the 63 plaintiffs for a total of $566,937” as well as “$500,000 17 in attorney’s fees and court costs.” (Dkt. 13-1 Ex. 2 [Stipulation for Entry of Judgment, 18 Covenant Not to Execute, Assignment, hereinafter “Stip.”] at 4;1 see also Compl. ¶ 47.) 19 20 1 Plaintiffs stated in their complaint that they incorporated the stipulation by reference and had attached 21 it as an exhibit. (See Compl. ¶ 47.) According to Hiscox, however, they did not in fact attach it. (See Dkt. 13 [Defendant Hiscox Insurance Company Inc.’s Opposition to Plaintiffs’ Motion to Remand and 22 Request for Sanctions; Memorandum of Points and Authorities, hereinafter “Opp.”] at 4 n.2.) In any event, Hiscox included the stipulation as an exhibit to its opposition, and the stipulation is hereby 23 deemed incorporated. The doctrine of incorporation by reference permits courts to “consider unattached 24 evidence on which the complaint ‘necessarily relies’ if: (1) the complaint refers to the document[,] (2) the document is central to the plaintiff’s claim[,] and (3) no party questions the authenticity of the 25 document.” United States ex rel. Lee v. Corinthian Colls., 655 F.3d 984, 999 (9th Cir. 2011) (citation omitted). Plaintiffs certainly refer to the stipulation. (See Compl. ¶ 47.) It is also “‘integral’ to the 26 complaint,” Palin v. N.Y. Times Co., 940 F.3d 804, 811 (9th Cir. 2011) (citation omitted), as Plaintiffs 27 “rel[y] heavily upon its terms and effect.” Id. (citation omitted). Indeed, the stipulation is the very type of document that is “[t]ypically” deemed “an integral matter”—a “contract or other legal document 28 containing obligations upon which the plaintiff’s complaint stands or falls.” Id. at 811 & n.18 (citation omitted). Finally, Hiscox presented the stipulation, (see Stip.), and Plaintiffs have not objected.

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1 Plaintiffs agreed not to execute the judgment against Midwest or the officers, (see Stip. at 2 4; Compl. ¶ 47), and Midwest and the officers “assign[ed] to Plaintiffs all of their rights, 3 remedies, titles and/or interest in and to any and all claims and/or causes of action against 4 Hiscox . . . , arising from the facts and circumstances regarding” the Second Action. 5 (Stip. at 4; see also Compl. ¶ 47.) On July 25, 2022, the court entered the judgment 6 accordingly. (See Compl. ¶ 48; Dkt. 13 Ex. 3 [Judgment]. 2) 7 8 Then on August 11, 2022, Plaintiffs filed this action against Hiscox based on the 9 assignment from Midwest and its officers. (See Compl. ¶ 49.) Plaintiffs allege that 10 Hiscox breached its contractual obligations to defend and indemnify under its policy with 11 Midwest, (see id. ¶ 65), and breached the implied covenant of good faith and fair dealing 12 by not “conduct[ing] a prompt and full investigation of the facts and circumstances 13 giving rise to the claims asserted in the [Second Action] before denying coverage and 14 refusing to defend,” (id. ¶ 73). Hiscox subsequently removed the action from the 15 Superior Court. (See Notice.) 16 17 III. LEGAL STANDARD 18 19 “‘Federal courts are courts of limited jurisdiction,’ possessing ‘only that power 20 authorized by Constitution and statute.’” Gunn v. Minton, 568 U.S. 251, 256 (2013) 21 (citation omitted). A federal district court has jurisdiction over a civil action removed 22 from state court only if the action could have been brought in the federal court originally. 23 See 28 U.S.C. § 1441(a). A court has diversity jurisdiction, moreover, when more than 24

25 2 The judgment in the Second Action is judicially noticeable. “The court may judicially notice a fact that is not subject to reasonable dispute,” so long as it “(1) is generally known within the trial court’s 26 territorial jurisdiction[,] or (2) can be accurately and readily determined from sources whose accuracy 27 cannot reasonably be questioned.” Fed. R. Evid. 201(b). The decisions of state courts are typically subject to notice. See Bryant v. Carleson, 444 F.2d 353, 357 (9th Cir. 1971). Further, the parties have 28 referenced the contents of the judgment throughout their filings, (see, e.g., Compl. ¶ 48; Opp. at 5), to which none has objected.

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1 $75,000 is in controversy and the citizenship of each plaintiff is different from that of 2 each defendant. See 28 U.S.C. § 1332(a). When a case is removed, the burden of 3 establishing the propriety of removal falls on the defendant, and the removal statute is 4 strictly construed against removal jurisdiction. See Gaus v. Miles, Inc., 980 F.2d 564, 5 566 (9th Cir. 1992). “Federal jurisdiction must be rejected if there is any doubt as to the 6 right of removal in the first instance.” Id. 7 8 IV. DISCUSSION 9 10 The parties’ dispute over the motion to remand centers on whether it is possible to 11 aggregate Plaintiffs’ claims against Hiscox to meet the amount-in-controversy 12 requirement for jurisdiction. Typically, aggregation is “permissible only ‘(1) in cases in 13 which a single plaintiff seeks to aggregate two or more . . . claims against a single 14 defendant and (2) in cases in which two or more plaintiffs unite to enforce a single title or 15 right in which they have a common and undivided interest.’” Gibson v. Chrysler Corp., 16 261 F.3d 927, 943 (9th Cir. 2001) (quoting Snyder v. Harris, 394 U.S. 332, 335 (1969)). 17 No single plaintiff’s claims total $75,000, so only if Plaintiffs bring their claims upon a 18 “common and undivided interest” meeting the minimum could jurisdiction exist. At least 19 with respect to the assignment of the $500,000 in attorneys’ fees from the stipulated 20 judgment of the Second Action, a common and undivided interest indeed exists. 21 22 In determining whether an interest is common and undivided, “the proper focus . . . 23 is not influenced by the type of relief requested, but rather . . . depend[s] upon the nature 24 and value of the right asserted.” Snow v. Ford Motor Co., 561 F.2d 787, 790 (9th Cir. 25 1977). Given “the source of plaintiffs’ claims,” if they “are derived from rights that 26 [plaintiffs] hold in group status, then the claims are common and undivided. If not, the 27 claims are separate and distinct.” Urbino v. Orkin Servs. of Cal., Inc., 726 F.3d 1118, 28 1122 (9th Cir. 2013) (citation omitted). “[Q]uestions of fact and law common to the

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1 group” of plaintiffs are not enough. Id. (citation omitted). “Only where the claims can 2 strictly ‘be asserted by pluralistic entities as such’ or, stated differently, the defendant 3 ‘owes an obligation to the group of plaintiffs as a group and not to the individuals 4 severally,’ will a common and undivided interest exist.” Id. (citations omitted). Thus, if 5 the plaintiffs’ claims “are each cognizable, calculable, and correctable individually,” they 6 do not share a common and undivided interest. Gibson, 261 F.3d at 945. But if they 7 “cannot normally bring suit individually,” id. at 944, or “[r]ecovery by one plaintiff . . . 8 would . . . , as a legal matter, either preclude or reduce recovery by another,” id. at 945, 9 their interest is common and undivided. See Troy Bank v. G.A. Whitehead & Co., 222 10 U.S. 39, 41 (1911) (concluding that the claim “was single and undivided” because 11 “neither [party] can enforce [it] in the absence of the other”). 12 13 “[T]he ‘paradigm cases’ allowing aggregation of claims ‘are those which involve a 14 single indivisible res, such as an estate, a piece of property (the classic example), or an 15 insurance policy. These are matters that cannot be adjudicated without implicating the 16 rights of everyone involved with the res.’” In re Ford Motor Co./Citibank (S.D.), N.A., 17 264 F.3d 952, 959 (9th Cir. 2001) (citation omitted). Similarly, shareholder claims for 18 breach of fiduciary duty are typically aggregable. See Eagle v. Am. Tel. & Tel. Co., 769 19 F.2d 541, 546 (9th Cir. 1985). The breach “is a direct injury to the corporation and only 20 an incidental injury to its shareholders,” and shareholders can bring suit in a “derivative” 21 but not an “individual capacity.” Id. at 545–46. 22 23 In this light, the $500,000 in attorneys’ fees that Plaintiffs seek to recover satisfy 24 the amount-in-controversy requirement. To start, those fees, if common and undivided, 25 would be sufficient for jurisdictional purposes. “The amount in controversy includes” 26 not only “the amount of damages in dispute” but also any “attorney’s fees, if authorized 27 by statute or contract.” Kroske v. U.S. Bank Corp., 432 F.3d 976, 980 (9th Cir. 2005). 28 The fees here are contractual in nature. While each of Plaintiffs may have had a statutory

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1 right under the CCRAA to fees as part of actual damages in the Second Action, see Cal. 2 Civ. Code § 1785.31(a)(1), they bring their claims in this action under the assignment of 3 Midwest’s claims under its policy against Hiscox. And the fees plainly exceed the 4 $75,000 minimum. See 28 U.S.C. § 1332(a). 5 6 Further, Plaintiffs’ claims for the fees are not “cognizable, calculable, and 7 correctable individually,” so they are suing on a common and undivided interest. Gibson, 8 261 F.3d at 945. Again, “the nature . . . of the right[s] asserted” in this action derives 9 from the assigned contractual claims against Hiscox, Snow, 561 F.2d at 790, which 10 allegedly included indemnification for the fees in the Second Action. And the fees 11 appear to have been awarded as a lump sum to Plaintiffs as a group. The judgment and 12 the associated stipulation provided Plaintiffs “$500,000 in attorney’s fees and court 13 costs”—neither allocated that sum in any way. (Stip. at 4; see also Judgment ¶ 6.) 14 Tellingly, this phrasing stands in stark contrast to the stipulation on damages, which 15 provided that Plaintiffs were individually entitled to $8,999 each. (See Stip. at 4.) 16 Because the fees are a lump sum for the unified effort of representing Plaintiffs in the 17 Second Action, were a single plaintiff to sue separately, that claim could not “be 18 adjudicated without implicating the rights of everyone involved.’” Ford Motor 19 Co./Citibank (S.D.), 264 F.3d at 959; see also Phx. Ins. Co. v. Woosley, 287 F.2d 531, 20 532–33 (10th Cir. 1961) (concluding that insurance claims by the insured and partial 21 assignees who had cross-assigned their interests could be aggregated); Mfrs. Cas. Ins. v. 22 Coker, 219 F.2d 631, 633 (4th Cir. 1955) (concluding that claims arising under a single 23 insurance policy could be aggregated because they together exceeded the coverage 24 amount and “no part of this coverage [wa]s allotted to any individual claim”). The 25 interest in the fees is thus common and undivided. 26 27 Accordingly, Plaintiffs’ claims for the attorneys’ fees may be aggregated to meet 28 the jurisdictional minimum, the fees exceed that minimum, and remand is unwarranted.

-8- ase 8:22-cv-01812-CJC-KES Document 23 Filed 12/22/22 Page9of9 Page ID #:351 21}V. CONCLUSION 4 For the foregoing reasons, Plaintiffs’ motion is DENIED. 6 DATED: December 22, 2022 Ko ye 7 {- TZ 8 CORMAC J. CARNEY 9 UNITED STATES DISTRICT JUDGE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

9.