Hutchinson v. QBE Insurance Group

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Allen Hutchinson, et al., No. CV-25-00332-TUC-RM 10 Plaintiffs, ORDER TO SHOW CAUSE 11 v. 12 QBE Insurance Group, et al., 13 Defendants. [14] 15 Plaintiffs Allen and Michell Hutchinson initiated this action in Pima County 16 Superior Court (Doc. 1-3 at 5)1 and filed a First Amended Complaint in that court on 17 February 24, 2025 (id. at 26). Defendants Praetorian Insurance Company and QBE 18 Insurance Group2 removed the action to federal court on June 20, 2025. (Doc. 1; Doc. 119 4 at 85-88.) 20 I. Background 21 In both their original Complaint and First Amended Complaint, Plaintiffs sued 22 Praetorian Insurance Company, QBE Insurance Group, Brad Hansen, and Shawntae Hart, 23 among other Defendants, asserting state-law claims for breach of contract and insurance 24 bad faith. (Doc. 1-3 at 5, 12-13, 26, 33-34.) Plaintiffs alleged that they were residents of 25 Arizona, as were Defendants Hansen and Hart. (Id. at 6, 27.) 26 Hansen filed a Motion to Dismiss pursuant to Rule 12(b)(6) of the Arizona Rules 27 1 All record citations refer to the page numbers generated by this Court’s electronic filing system. 28 2 Defendant Praetorian Insurance Company avers that QBE Insurance Group is merely a trade name and not a proper party to this action. (Doc. 1 at 2 n.1.) 1 of Civil Procedure, arguing that Plaintiff’s First Amended Complaint failed to state a 2 claim against him upon which relief could be granted. (Id. at 53-64.) Plaintiffs opposed 3 the Motion. (Id. at 85-91.) The state court took the Motion under advisement on May 4 12, 2025. (Doc. 1-4 at 64-65.) The removing Defendants aver that the state court granted 5 Hansen’s Motion to Dismiss on May 14, 2025. (Doc. 1 at 3.) However, the state-court 6 record submitted by the removing Defendants does not contain an order resolving the 7 Motion to Dismiss. The submitted state-court record contains a filing titled “Notice of 8 Lodging,” which indicates that Hansen lodged a proposed form of judgment on June 4, 9 2025 (Doc. 1-4 at 81-83), but the record does not contain the lodged form of judgment, 10 nor does it contain an entry of judgment by the state court as to Hansen. On July 2, 2025, 11 the state court issued an order finding that it lacked authority to act on the lodged 12 judgment due to the removal of the action to federal court. (Doc. 6.) 13 Hart also filed a Rule 12(b)(6) Motion to Dismiss in state court (Doc. 1-4 at 2114 34), which Plaintiffs opposed (id. at 42-48). Plaintiffs and Hart later provided notice that 15 they had reached a settlement that they were working to finalize (id. at 74-75), and the 16 state court thereafter denied Hart’s Motion to Dismiss as moot (id. at 78-79). The 17 submitted state-court record does not contain an entry of judgment as to Hart. 18 II. Discussion 19 The district courts of the United States have original jurisdiction of all civil actions 20 between citizens of different States where the matter in controversy exceeds the sum or 21 value of $75,000. 28 U.S.C. § 1332 (a)(1). Under 28 U.S.C. § 1441 (a), “any civil action 22 brought in a State court of which the district courts of the United States have original 23 jurisdiction, may be removed by the defendant or the defendants[.]” “Removal 24 jurisdiction” is “strictly construed,” and “[t]he burden of establishing federal jurisdiction 25 falls on the party invoking removal.” Gould v. Mutual Life Ins. Co. of N.Y., 790 F.2d 26 769, 771, 773 (9th Cir. 1986). 27 “[I]f the case stated by the initial pleading is not removable, a notice of removal 28 may be filed within 30 days after receipt by the defendant, through service or otherwise, 1 of a copy of an amended pleading, motion, order or other paper from which it may first 2 be ascertained that the case is one which is or has become removable.” 28 U.S.C. § 3 1446(b)(3). “However, when an event occurring after the filing of a complaint gives rise 4 to federal jurisdiction, the ability of a defendant to remove is not automatic; instead, 5 removability is governed by the ‘voluntary/involuntary rule.’” California v. Keating, 986 6 F.2d 346 , 348 (9th Cir. 1993). Under that rule, a case filed in state court that could not 7 have been brought in federal court at the time of filing “must ‘remain in state court unless 8 a “voluntary” act of the plaintiff brings about a change that renders the case removable.’” 9 Id. (quoting Self v. General Motors, 588 F.2d 655 , 657-60 (9th Cir. 1978)). If a state 10 court dismisses claims against a non-diverse defendant on the merits and over the 11 plaintiff’s opposition, the dismissal is involuntary and does not give rise to removal 12 jurisdiction under the voluntary/involuntary rule. Strasser v. KLM Royal Dutch Airlines, [13] 631 F. Supp. 1254, 1256-59 (C.D. Cal. Mar. 31, 1986). Any removed case that “fails to 14 satisfy the voluntary/involuntary test must be remanded for lack of federal subject matter 15 jurisdiction.” Id. at 1257-58 . When subject matter jurisdiction is lacking, the district 16 court has a duty to remand sua sponte. Id. at 1258 ; see also 28 U.S.C. § 1447 (c). 17 Here, the removing Defendants concede that this action was not removable at the 18 time it was filed because complete diversity did not exist between the parties, but they 19 argue that complete diversity now exists given the state court’s granting of Hansen’s 20 Motion to Dismiss and Plaintiffs’ settlement with Hart. (Doc. 1 at 3.) In support of their 21 argument that complete diversity now exists, Defendants rely on out-of-circuit cases 22 discussing severed actions. (See id. at 3-4 .) Defendants do not address the 23 voluntary/involuntary rule, particularly as it relates to Hansen. Furthermore, as discussed 24 above, the state-court record submitted by Defendants does not appear to contain an order 25 by the state court dismissing Hansen, nor does it contain entries of judgment as to Hansen 26 and Hart. 27 The Court will order the removing Defendants to show cause why this action 28 should not be remanded to the state court for lack of subject-matter jurisdiction. 1 IT IS ORDERED that, within fourteen (14) days of the date this Order is filed, 2|| Defendants shall file a brief showing cause why this case should not be remanded to state || court for lack of subject-matter jurisdiction. Plaintiffs may file a responsive brief within 4|| seven (7) days of service of Defendants’ brief. No additional briefing will be allowed absent further Order of the Court. 6 Dated this 3rd day of July, 2025. [3] 10 —D Wi □□ Honorable Rostehary Mafquez 1] United States District □□□□□ [28] -4-