United States District Court, W.D. Oklahoma
L. RUSSELL UNITED STATES DISTRICT JUDGE.
matter comes before the Court on the Motion to Remand, filed
by Plaintiffs (Doc. No. 24). Defendants CSAA Insurance
Exchange and CSAA Fire and Casualty Insurance Company, d/b/a
AAA Fire and Casualty Insurance Company responded in
opposition to the motion. The Court previously permitted the
parties to conduct jurisdictional discovery and to file
supplemental briefs in support of their respective positions.
Having considered the parties' submissions, the Court
finds as follows.
allege breach of their homeowners insurance policy by
Defendant CSAA Fire and Casualty Insurance Company d/b/a AAA
Fire and Casualty Insurance Company (“AAAFCIC”),
because AAAFCIC refused a claim for alleged earthquake damage
to the insured property. Plaintiffs contend AAAFCIC breached
the contract and that the breach was in bad faith. Plaintiffs
name two additional Defendants, although neither is alleged
to have issued the Policy. Rather, they assert that Defendant
CSAA Insurance Exchange is the parent company of AAA
Oklahoma, and that CSAA Insurance Exchange, AAAFCIC, and AAA
Oklahoma “operate and are part of a reciprocal
insurance exchange, wherein they pool and partner their
businesses under a regime of control such that all of its
subsidiaries and affiliated companies can be held liable for
bad faith and breach of contract.” Petition, ¶ 5.
Plaintiffs also allege that in order for a homeowner in
Oklahoma to purchase insurance through AAA Oklahoma, the
insured must be a member thereof, and as a result, AAA
Oklahoma may be vicariously liable for action or inaction of
AAAFCIC. Petition, ¶ 4.
to 28 U.S.C. § 1332(a), this case was removed from the
District Court of Logan County by CSAA Insurance Exchange and
AAAFCIC, prior to an appearance by AAA Oklahoma. As implied
by its name, AAA Oklahoma is not a diverse party. The
removing Defendants contend Plaintiff fraudulently joined the
non-diverse Defendant to avoid federal jurisdiction.
Plaintiffs argue Defendants cannot meet the heavy burden of
establishing AAA Oklahoma's fraudulent joinder, and
accordingly, seek remand. Plaintiffs further assert that CSAA
Insurance Exchange is not diverse due to its status as an
unincorporated association and therefore considered domiciled
in every state in which it has members, known in the
reciprocal insurance context as subscribers.
pending in state court may be removed by a defendant to
federal court if the case is one over “which the
district courts of the United States have original
jurisdiction.” 28 U.S.C. § 1441(a). “Only
state-court actions that originally could have been filed in
federal court may be removed to federal court by the
defendant.” Caterpillar, Inc. v. Williams, 482
U.S. 386, 392 (1987). The original jurisdiction of the
federal courts includes jurisdiction over civil actions where
the amount in controversy exceeds $75, 000 and each defendant
is a resident of a different state than each plaintiff. 28
U.S.C. § 1332(a); Caterpillar, Inc. v. Lewis,
519 U.S. 61, 68 (1996). However, “[r]emoval
jurisdiction over diversity cases is more limited than
jurisdiction over diversity cases originally brought in
federal court because removal based on diversity is available
only if none of the defendants is a citizen of the state in
which the action is brought.” Wolf Creek Nuclear
Operating Corp. v. Framatome ANP, Inc., 416 F.Supp.2d
1081, 1085 (D. Kan. 2006); see also 28 U.S.C. §
1441(b)(setting forth the forum defendant rule).
Insurance Exchange and AAAFCIC, as the parties invoking the
Court's jurisdiction bear the burden of establishing
diversity. See McNutt v. Gen. Motors Acceptance
Corp., 298 U.S. 178, 189 (1936). Federal removal
jurisdiction is statutory in nature, and the Court strictly
construes the governing statutes. Shamrock Oil & Gas
v. Sheets, 313 U.S. 100, 108-09 (1941); Merrell Dow
Pharm., Inc. v. Thompson, 478 U.S. 804, 814 (1986). It
is well-settled that the presumption is against removal
jurisdiction. Coca-Cola Bottling of Emporia, Inc. v. S.
Beach Beverage Co., 198 F.Supp.2d 1280, 1285 (D. Kan.
2002). The Court resolves doubtful cases in favor of remand.
Fajen v. Found. Reserve Ins. Co., 683 F.2d 331, 333
(10th Cir. 1982). As noted, the parties agree diversity is
lacking, the questions are whether diversity exists if AAA
Oklahoma is disregarded, and whether AAA Oklahoma can be
disregarded as fraudulently joined. The Court finds that
Defendants have failed to establish the existence of
diversity without regard to whether Plaintiffs' claims
against AAA Oklahoma are viable under Oklahoma law.
on the allegations in the Petition, the Notice of Removal
filed by CSAA Insurance Exchange and AAAFCIC asserted that
CSAA Insurance Exchange is “a foreign company, formed
under the laws of the State of California, with its
“nerve center” or “principal place of
business” in California. Doc. No. 1, ¶ 7. CSAA
Insurance Exchange and Plaintiffs agree, however, that CSAA
Insurance Exchange is not incorporated, but rather is a
reciprocal insurance exchange, an unincorporated association
under California law. As such, the location of its formation
and its principal place of business are irrelevant to the
Court's diversity analysis. Rather, an unincorporated
association is deemed a citizen of any state in which its
“members” are citizens. Siloam Springs Hotel,
L.L.C. v. Century Sur. Co., 781 F.3d 1233, 1234 (10th
Cir.2015)(when determining the citizenship of an
unincorporated association, federal courts must include all
the entities members); see also True v. Robles, 571
F.3d 412, 422 n. 2 (5th Cir.2009) (“As an
unincorporated association, a reciprocal insurance exchange
is considered to have the citizenship of its members for
diversity purposes in federal court”).
United States District Court for the District of Oregon
recently considered whether, under California law,
subscribers were members or customers of an exchange for
diversity purposes. Staggs v. Farmers Insurance
Exchange, 2016 WL 1725302 (D.Or. April 27, 2016). CSAA
Insurance Exchange does not take issue with the notion that
its subscribers are its members. It argues, however, that
because it is not a licensed reciprocal insurer in Oklahoma
that it therefore does not have any subscribers in Oklahoma,
and therefore cannot be considered a citizen of Oklahoma. The
pertinent question from the Court's perspective, however,
is not whether CSAA Insurance Exchange can write policies in
Oklahoma but rather whether any subscriber is a citizen of
Oklahoma. The fact that a policy may be written in California
does not foreclose that one or more subscribers is a citizen
of Oklahoma for purpose of diversity jurisdiction. This is
especially true given that there may be partnerships or
limited liability corporations with partners or members who
are Oklahoma residents but who have a basis for obtaining
insurance in California and have obtained such via
subscription to the CSAA Insurance Exchange.
Insurance Exchange further argues that Plaintiffs did not
obtain insurance through the exchange, citing to a statement
in Plaintiffs' motion to remand. Doc. No. 16 at p. 9
(citing Doc. No. 9 at p. 6). This argument by Plaintiffs,
however, was directed at the issue of whether AAA Oklahoma
was fraudulently joined. CSAA Insurance Exchange does not
assert it was fraudulently joined as a party, and thus
whether Plaintiffs may pursue a claim against the Exchange is
not pertinent to the issue of the Court's jurisdiction.
Court concludes the removing Defendants have failed to
establish the existence of complete diversity between the
parties so as to permit this Court to exercise jurisdiction.
As such, for the reasons set forth above, Plaintiffs'
Motion to Remand (Doc. No. 9) is hereby GRANTED. The Clerk
shall remand this matter to the District Court of Logan
 CSAA Insurance Exchange does not argue
that its subscribers are not members. Rather, its argument
hinges on the fact that it is not licensed to write ...