Evanston Insurance Company v. Richman

Background

Evanston Insurance Company brought a declaratory-relief action against Jessica Richman and Zachary Apte. Evanston sought a determination that it owed them no duty to defend or indemnify them in matters arising from their alleged conduct related to uBiome, a now-bankrupt company. The opinion describes Richman and Apte as uBiome co-founders, officers, directors, and co-chief executive officers.

The complaint alleged that uBiome obtained an excess management liability insurance policy from Evanston effective January 31, 2019, through August 21, 2019. Between 2019 and 2022, Richman and Apte and uBiome received notices concerning approximately 11 matters, including proceedings involving the Securities and Exchange Commission, the Department of Justice, forfeiture, arbitration, extradition, and a former uBiome trustee. Evanston denied coverage, asserting among other things that the conduct leading to those matters predated the policy and that wrongful acts were already occurring when uBiome applied for coverage.

Motion and jurisdictional issue

The defendants moved under Federal Rule of Civil Procedure 12(b)(1), which permits a challenge to federal subject-matter jurisdiction. Evanston relied on diversity jurisdiction under 28 U.S.C. § 1332. The court explained that diversity jurisdiction requires complete diversity and that an individual’s citizenship depends on domicile—the person’s permanent home and intent to remain there or return there. For U.S. citizens, the person must be both a U.S. citizen and domiciled in a U.S. state.

The court found no dispute that Richman and Apte currently lived in Germany and had resided there since 2020. Evanston argued that statements made in an earlier related proceeding showed that the defendants were residing in Germany because of Richman’s health but remained domiciled somewhere in the United States. The court found that Evanston had not provided evidence, allegations, or argument showing that Richman or Apte was domiciled in California—or anywhere else in the United States—when Evanston filed this lawsuit in 2024.

The court therefore concluded that the defendants appeared to be stateless for purposes of diversity jurisdiction. Because Evanston had not established the required jurisdiction, the case could not proceed in that court. The opinion notes that the defendants also raised an alternative challenge involving personal jurisdiction, but the ruling granted dismissal based on lack of subject-matter jurisdiction.

Ruling

Judge William H. Orrick granted the motion to dismiss with leave to amend. Evanston must file any amended complaint within 30 days of the order. The order did not decide whether Evanston ultimately owes coverage under the insurance policy; it resolved the jurisdictional issue and gave Evanston an opportunity to allege additional jurisdictional facts.