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 California state court. Nationwide removed the case to federal court, arguing that Lara had been fraudulently joined and that, without Lara, the parties were citizens of different states. The court initially granted Kiang’s motion to remand because Kiang had some possibility of stating a viable claim against Lara.

After the case returned to state court, Nationwide moved to sever Kiang’s claims against Nationwide from the writ claim against Lara. The state court granted that request, leaving Nationwide as the only defendant in the case before the federal court. Nationwide removed the case again. The opinion states that Kiang was domiciled in California, Nationwide was domiciled in Ohio, and both parties agreed that more than $75,000 was in controversy.

Issue

Kiang moved to remand the case to state court. He argued that the voluntary-involuntary rule required remand because the state court’s severance was made over his opposition rather than by his voluntary act.

The voluntary-involuntary rule is a judge-made limit on removal. It generally provides that a case initially not removable because of a nondiverse defendant remains in state court unless the plaintiff voluntarily changes the case in a way that creates federal jurisdiction.

Court’s analysis

The court held that the Ninth Circuit continues to recognize the voluntary-involuntary rule despite later amendments to the federal removal statute. But the court concluded that the rule does not apply when a state court severs an improperly joined in-state defendant and the severance creates complete diversity.

The court reasoned that neither of the purposes it identified for the rule—concerns about finality and respect for the plaintiff’s choice of forum—supported remand here. Kiang conceded that the severance order was not appealable, so there was no risk that an appeal would later restore the nondiverse defendant and eliminate federal jurisdiction. The court also concluded that federal courts should not permit devices intended to prevent removal when a defendant has a right to remove. It relied on the state court’s finding that joining the claim against the Commissioner with the insurance claim was improper under state law.

The court distinguished the Ninth Circuit’s decision in Self v. General Motors Corporation, noting that Self did not involve a state-court severance based on improper joinder and was decided before relevant amendments to the removal statute. The court also concluded that accepting Kiang’s proposed rule could allow a plaintiff to defeat diversity jurisdiction by joining an unrelated claim against an in-state defendant and then opposing severance.

Disposition

Judge Jacqueline Scott Corley denied Kiang’s motion to remand. The order did not decide the merits of Kiang’s claims against Nationwide or any separate claims against Lara. It disposed of Docket Number 17.