Kiang v. Nationwide Life and Annuity Insurance Company

Background

Jason Kiang sued Nationwide Life and Annuity Insurance Company and Ricardo Lara, Commissioner of the California Department of Insurance, in the Superior Court of California, County of San Francisco. Kiang alleged that Nationwide breached its contract, breached the obligation of good faith and fair dealing, and committed financial abuse. His claim against Lara sought a writ of mandate, meaning a court order requiring a public officer or agency to perform a legally required duty. Kiang asked Lara to review Nationwide’s policies and withdraw or revoke their approval.

Nationwide removed the case to federal court under diversity jurisdiction, which generally requires the parties to be citizens of different states and the required amount in dispute. Nationwide argued that Kiang had fraudulently joined Lara, described in the opinion as a California resident who had not yet been served, to prevent federal jurisdiction. Kiang moved to remand the case to state court.

Court’s Analysis

The court applied Ninth Circuit standards for fraudulent joinder. A defendant asserting fraudulent joinder must meet a heavy burden and prove by clear and convincing evidence either actual fraud in the jurisdictional allegations or that the resident defendant cannot be liable under any possible legal theory. If there is a possibility that a state court would find the complaint states a claim against the resident defendant, joinder is proper and the federal court must remand the case.

The court held that Nationwide did not meet that burden. Under California law, a court may issue a writ of mandate requiring a public agency or officer to perform a mandatory duty, including the Department of Insurance’s duty to review an insurance policy. The court found that Kiang had at least some possibility of stating such a claim against Lara, either in the existing complaint or an amended complaint.

The court rejected Nationwide’s argument that Kiang was asking Lara to exercise discretion in a particular way. Even if the initial complaint requested relief that a writ of mandate could not provide, the court stated that remand was required if an amended complaint could possibly state a claim against Lara. Nationwide did not explain why Kiang would be categorically barred from making a more limited request for mandamus relief, and it did not argue that the claim was time-barred. The court also declined to investigate Nationwide’s argument about Kiang’s counsel’s alleged pattern of suing Department of Insurance commissioners to defeat diversity jurisdiction, because Nationwide had not presented clear and convincing evidence of actual fraud in the jurisdictional allegations.

Disposition

The court GRANTED Kiang’s motion to remand. Because the court lacked subject matter jurisdiction under 28 U.S.C. § 1332, it remanded the case to the Superior Court of California, County of San Francisco. The court vacated the hearing scheduled for July 6, 2023 and stated that the order disposed of Docket No. 16. The ruling addressed federal jurisdiction and remand; it did not decide the merits of Kiang’s claims against Nationwide or Lara.