Ace Property and Casualty Insurance Company v. McKesson Corporation

— 1 — — 2 — — 3 — 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA — 6 — 7 ACE PROPERTY AND CASUALTY Case No. 20-cv-09356-JSC INSURANCE COMPANY, — 8 — Plaintiff, ORDER RE: MOTION TO REMAND — 9 — v. Re: Dkt. No. 90 — 10 — MCKESSON CORPORATION, et al., — 11 — Defendants. — 12 — 13 Ace Property and Casualty Insurance Company (“ACE”) filed this action in Orange 14 County Superior Court seeking a declaration that it has no duty to defend or indemnify McKesson 15 Corporation (“McKesson”) for lawsuits alleging that McKesson contributed to and profited from 16 the nation’s opioid epidemic. In addition to McKesson, ACE named as defendants 25 other 17 insurance companies that insured McKesson at some point during the relevant period. McKesson 18 removed the lawsuit to this Court based on diversity jurisdiction. Before the Court is ACE’s 19 motion to remand. (Dkt. No. 90.)1 ACE contends that McKesson’s notice of removal is facially 20 and procedurally defective, and that McKesson cannot use the doctrine of realignment to cure the 21 defects in its removal notice. After carefully considering the parties’ briefing, and having had the 22 benefit of oral argument on February 25, 2021, the Court DENIES Ace’s motion to remand. 23 Realignment of the parties is proper. 24 BACKGROUND 25 I. ACE’s State Court Action 26 ACE filed this action in Orange County Superior Court on October 30, 2020 against — 27 — 1 McKesson and 25 other insurance companies that “issued insurance policies to McKesson 2 covering the relevant period” of the lawsuits McKesson faces regarding its alleged misconduct in 3 distributing opioids. (Dkt. No. 1-3 at 4 at ¶ 4.) ACE seeks declaratory judgments that it owes no 4 duty to defend McKesson or indemnify in these lawsuits. (Id. at 13 ¶¶ 47-52.) ACE also seeks— 5 to the extent that ACE has any obligation to defend or indemnify McKesson—a declaration of the 6 rights and obligations, if any, other named insurers have to defend or indemnify McKesson in 7 these lawsuits under those insurers’ policies. (Id. at 14 ¶¶ 53-55.) While the action was pending 8 in state court, ACE voluntarily dismissed 13 Defendants.2 (Dkt. No. 123-2 at 4.) On December 2, 9 2020, McKesson filed a notice of removal, removing the action on diversity grounds to the United 10 States District Court for the Central District of California, and simultaneously sought to transfer 11 the action to the Northern District of California. (See Dkt. Nos. 1 & 2.) McKesson argued in its 12 removal notice that complete diversity existed between the parties when they were properly 13 aligned as “insurers versus insured.” (Dkt. No. 1 at 8 ¶ 21.) 14 Following ACE’s consent to McKesson’s transfer motion, this action was transferred to the 15 Northern District of California on December 23, 2020. (Dkt. No. 53.) On January 4, 2021, ACE 16 filed the instant motion to remand. (Dkt. No. 90.) Defendant National Fire & Marine Insurance 17 Company (“National Fire”) filed a statement of non-opposition to and support for ACE’s remand 18 motion on January 19, 2021, contending that McKesson failed to obtain its consent to removal. 19 (Dkt. No. 106.) ACE then voluntarily dismissed 7 Defendants, but not National Fire.3 (Dkt. No. — 20 — — 21 — 2 Ace voluntarily dismissed Defendants Arch Reinsurance Limited, Argo Re Limited, Aspen Insurance UK Limited, Canopius Underwriting Bermuda Limited, Endurance Specialty Insurance — 22 — Limited, Great Lakes Insurance Company SE, Ironshore Specialty Insurance Company, Liberty Special Markets Agency, Markel American Insurance Company, Munich Reinsurance America, — 23 — Inc., North American Capacity Insurance Company, Swiss Re International SE, and XL Insurance America, Inc. (Dkt. No. 123-2 at 4.) — 24 — 3 Ace voluntarily dismissed Defendants Certain Underwriters at Lloyd’s London, Subscribing to Policy No. B0509B0WCN1500017, Certain Underwriters at Lloyd’s London, Subscribing to — 25 — Policy No. B0509BOWCN1600451, Certain Underwriters at Lloyd’s London, Subscribing to Policy No. B0509BOWCN1700408, Certain Underwriters at Lloyd’s London, Subscribing to — 26 — Policy No. 509/DL554610, Certain Underwriters at Lloyd’s London, Subscribing to Policy No. B0509BOWCN1600450, Certain Underwriters at Lloyd’s London, Subscribing to Policy No. — 27 — B0509BOWCN1700419, and Lexington Insurance Company. (Dkt. Nos. 82 & 112.) Six parties 1 112.) The remand motion is fully briefed, and the Court heard oral argument on February 25, 2 2021. 3 II. AIU’s Related Federal Court Action 4 On October 23, 2020, one week before ACE filed this action in state court, AIU Insurance 5 Company (“AIU”) and National Union Fire Insurance Company (“National Union”) (collectively 6 “AIU Plaintiffs”) filed an action in the Northern District of California seeking declarations that 7 they are not obligated to defend or indemnify McKesson against the opioid lawsuits. (See AIU 8 Insurance Company et al v. McKesson Corporation, Case No. 3:20-cv-07469-JSC, Dkt. No. 1 at 9 10-11 ¶¶ 49-56.) McKesson filed an answer and counterclaim against the AIU Plaintiffs in the 10 AIU Insurance action on November 6, 2020—also naming ACE as a third-party defendant— 11 alleging that the AIU Plaintiffs and ACE breached their insurance policies with McKesson by 12 failing and refusing to defend and indemnify McKesson in the opioid lawsuits. (AIU Insurance, 13 Dkt. No. 9 at 17-18 ¶¶ 39-48.) McKesson also sought declarations that the AIU Plaintiffs and 14 ACE are obligated to defend and indemnify it in the opioid lawsuits. (Id. at 18-19 ¶¶ 49-60.) 15 ACE filed an answer and counterclaims seeking declarations that it has no duty to defend 16 or indemnify against McKesson’s third-party complaint on January 7, 2021; the AIU Plaintiffs 17 filed their answer to McKesson on the same day. (AIU Insurance, Dkt. Nos. 45, 46.) The Court 18 related the actions on January 20, 2021. (AIU Insurance, Dkt. No. 53.) Following ACE’s filing of 19 its remand motion on January 4, 2021, ACE filed a motion to stay in the AIU Insurance action on 20 the grounds that the AIU Insurance action should be “stay[ed] . . . in favor of the state court 21 action[.]” (AIU Insurance, Dkt. No. 54 at 6.) In response, McKesson filed its motion for an 22 extension of time to respond to ACE’s stay motion until this Court ruled on the instant motion 23 remand. (AIU Insurance, Dkt. No. 62.) The Court granted McKesson’s motion for an extension 24 of time, and deferred briefing on ACE’s motion to stay in AIU Insurance until ACE’s remand 25 motion is decided in this case. (AIU Insurance, Dkt. No. 65.) 26 DISCUSSION 27 ACE argues that McKesson’s removal notice is facially improper because complete 1 obtain the consent of other Defendants, such as National Fire, before removing this action. 2 I. Legal Standard 3 “Federal courts are courts of limited jurisdiction. They possess only that power authorized 4 by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 , 377 5 (1994). “The basic statutory grants of federal-court subject-matter jurisdiction are contained in 28 6 U.S.C. §§ 1331 and 1332. Section 1331 provides for ‘federal question’ jurisdiction, § 1332 for 7 ‘diversity of citizenship’ jurisdiction.” Arbaugh v. Y&H Corp., 546 U.S. 500, 513 (2006) (internal 8 brackets omitted). Federal subject matter jurisdiction under 28 U.S.C. § 1332 (a)(1) requires 9 complete diversity of citizenship and an amount in controversy in excess of $75,000. 10 “Only state-court actions that originally could have been filed in federal court may be 11 removed to federal court by the defendant.” Caterpillar Inc. v. Williams, 482 U.S. 386 , 392 12 (1987); see also 28 U.S.C. § 1441 (a). A defendant seeking removal to federal court “bears the 13 burden of establishing that removal is proper,” and the “removal statute is strictly construed 14 against removal jurisdiction.” Provincial Gov’t of Marinduque v. Placer Dome, Inc., 582 F.3d 15 1083, 1087 (9th Cir. 2009). “Federal jurisdiction must be rejected if there is any doubt as to the 16 right of removal in the first instance.” Gaus v. Miles, 980 F.2d 564, 566 (9th Cir. 1992); see also — 17 — 28 U.S.C. § 1447 (c) (“If at any time before final judgment it appears that the district court lacks 18 subject matter jurisdiction, the case shall be remanded.”) 19 II. Remand 20 a. Realignment & Removal 21 McKesson insists that if the insurer defendants are realigned with ACE as plaintiffs there is 22 complete diversity between plaintiffs and McKesson (the lone defendant), and therefore National 23 Fire’s (or any other insurer’s) lack of consent is immaterial. ACE responds that a removing 24 defendant “may not invoke the doctrine of realignment in order to manufacture diversity 25 jurisdiction where the plaintiff’s complaint does not supply it,” or that, put differently, realignment 26 cannot be used to create diversity where it would not otherwise exist. (Dkt. No. 90 at 15, 17-18.) 27 The Court disagrees. 1 diversity is not consistent with Ninth Circuit precedent. See Faysound Ltd. v. United Coconut 2 Chemicals, Inc., 878 F.2d 290 , 295–96 (9th Cir. 1989) (“It has been found not inappropriate to 3 permit realignment with another result—the creation of diversity jurisdiction.”) (citation omitted). 4 In the Ninth Circuit, “[c]ourts may realign parties, according to their ultimate interests, whether 5 the realignment has the effect of conferring or denying subject matter jurisdiction on the court.” 6 Smith v. Salish Kootenai Coll., 434 F.3d 1127, 1133 (9th Cir. 2006) (en banc) (citing Standard Oil 7 Co. of Cal. v. Perkins, 347 F.2d 379, 382 (9th Cir. 1965)) (emphasis added). While ACE cites 8 Jackson v. Home Depot U.S.A., Inc., 880 F.3d 165, 172-73 (4th Cir. 2018), in support of its 9 argument that McKesson may not invoke realignment to create federal diversity jurisdiction, 10 Jackson is a Fourth Circuit decision whose reasoning is inapplicable where the Ninth Circuit has 11 held that courts may realign parties even where “realignment has the effect of conferring . . . 12 subject matter jurisdiction on the court,” Smith, 434 F.3d at 1133 (citation omitted) (emphasis 13 added); see also Zuniga v. United Can Co., 812 F.2d 443, 450 (9th Cir. 1987) (“District courts are, 14 of course, bound by the law of their own circuit[.]”). Accordingly, the Court may properly 15 consider the parties’ realignment where, as here, it would create diversity jurisdiction over 16 McKesson, ACE, and the remaining insurer defendants (“Insurer Defendants”). 17 ACE argues further, however, that realignment upon removal is improper. While the 18 Ninth Circuit has not addressed this specific question, several district courts in the Ninth Circuit 19 have considered and realigned parties to affirm or confer diversity jurisdiction upon removal. See, 20 e.g., Rainier Econ. Dev. Council v. United States Gypsum Co., No. 09-00479-HA, 2009 WL 21 10733447, at *2 (D. Or. July 6, 2009); Brighton/Shaw, Inc. v. Carson, No. 1:06cv1136 AWI DLB, — 22 — 2007 WL 426446 , at *2 (E.D. Cal. Feb. 7, 2007) (“As with original diversity jurisdiction, in 23 determining whether diversity exists in cases removed from state court, the federal court has the 24 power to align the parties according to their real interests.”) (citation omitted); City of Gladstone v. 25 Northland Cas. Co., No. CIV. 00-1438-KI, 2001 WL 34728883 , at *2-3 (D. Or. Feb. 28, 2001) 26 (determining that “[t]he remaining issue [on the City’s motion to remand] is whether [certain 27 defendants] should now be realigned with the City to allow this court to have diversity subject 1 exists”); Telekenex, Inc. v. Axis Reinsurance Co., No. C12-1617-JCC, 2012 WL 13028156 , at *3 2 (W.D. Wash. Nov. 27, 2012) (finding that it was “the proper course” to “realign[] the parties in an 3 insurance coverage case before determining whether the requirements of the removal statute— 4 including the forum defendant rule—were satisfied”) (citing Universal Concrete Prods. Corp. v. 5 Peerless Ins. Co., No. CCB-08-00317, 2008 WL 4104171 , at *14-15 (D. Md. Aug. 21, 2008)); 6 Pattee v. Am. States Ins. Co., No. A03-208CV(JWS), 2003 WL 24085348 , at *2 (D. Alaska Nov. 7 10, 2003) (querying that “[w]hether this case will be remanded depends on whether the court 8 should [realign a defendant]” to confer diversity, and determining that realignment was proper 9 where parties’ interests were “congruent at the time of removal . . . [t]herefore [a defendant] is 10 deemed to have been a plaintiff”). Cf. Richer v. Travelers Commercial Ins. Co., No. 17-cv-0498411 HSG, 2017 WL 5618524 , at *2 (N.D. Cal. Nov. 22, 2017) (finding that the court was “required to 12 remand the case to state court—unless [one defendant] c[ould] show that [another was] properly 13 realigned as a plaintiff, which would preserve diversity of citizenship and . . . subject matter 14 jurisdiction[,] but that the defendant failed to make this showing). The Court finds these cases 15 persuasive. As the court in Telekenex stated, “[a]ny other rule [c]ould permit parties to avoid 16 removal of cases properly within the jurisdiction of the federal courts by creative pleading[.]” 17 Telekenex, Inc., 2012 WL 13028156 , at *3. 18 ACE asserts that, rather than realign the parties, McKesson must instead satisfy the 19 requirements of the “fraudulent joinder” exception to the rule that “only state-court actions that 20 originally could have been filed in federal court may be removed to federal court by the 21 defendant[.]” Caterpillar Inc., 482 U.S. at 392 ; see also Morris v. Princess Cruises, Inc., 236 F.3d 22 1061, 1067 (9th Cir. 2001) (“[O]ne exception to the requirement of complete diversity is where a 23 non-diverse defendant has been ‘fraudulently joined.’”). “There are two ways to establish 24 fraudulent joinder: (1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the 25 plaintiff to establish a cause of action against the non-diverse party in state court.” Grancare, LLC 26 v. Thrower by & through Mills, 889 F.3d 543, 548 (9th Cir. 2018) (internal quotation marks and 27 citation omitted). According to ACE, “[i]t makes eminent sense to require [McKesson] to satisfy 1 and that otherwise permitting McKesson to realign the parties upon removal “would be to 2 countenance a readily available end-run around [the] demanding standard” of the fraudulent 3 joinder exception. (Dkt. No. 90 at 15-16.) Not so. 4 At oral argument, ACE highlighted that when the Ninth Circuit has discussed fraudulent 5 joinder as a possible exception to the complete diversity requirement for removal jurisdiction it 6 has not also mentioned realignment as an exception. See, e.g., Morris, 236 F.3d at 1067 -1070 7 (analyzing removal jurisdiction through the fraudulent joinder exception with no mention of 8 realignment); Grancare, 889 F.3d 543 (reviewing district court’s remand order on the basis of 9 fraudulent joinder). ACE contended that the Court should draw by “negative implication” the 10 notion that had the Ninth Circuit “meant to include” realignment as an exception to the complete 11 diversity requirement it would have done so. (Dkt. No. 135 at 9.) According to ACE, the Ninth 12 Circuit’s silence regarding realignment as a possible exception to this requirement is tantamount to 13 its rejection. This argument is unpersuasive. First, there is nothing in the relevant caselaw that 14 indicates the Ninth Circuit considered and rejected realignment. ACE cites cases from the Third 15 and Eighth Circuits for the proposition that a defendant may avoid remand only by showing a non16 diverse party was fraudulently joined. (Dkt. No. 90 at 15.) See Batoff v. State Farm Ins. Co., 977 17 F.2d 848, 851 (3d Cir. 1992) (“[T]he removing defendant may avoid remand only by 18 demonstrating that the non-diverse party was fraudulently joined.”); see also Filla v. Norfolk S. 19 Ry. Co., 336 F.3d 806 , 809 (8th Cir. 2003). These cases are inapposite, however, as the Ninth 20 Circuit has not limited fraudulent joinder as the only means for a removing defendant to avoid 21 remand if the parties are facially non-diverse. See Morris, 236 F.3d at 1067 (“[O]ne exception to 22 the requirement of complete diversity is [fraudulent joinder].”) (emphasis added); Strotek Corp. v. 23 Air Transp. Ass’n. of Am., 300 F.3d 1129, 1132 (9th Cir. 2002) (“Nor may the presence of a sham 24 or nominal party defeat removal on diversity grounds.”) (citations omitted).4 — 25 — 4 ACE cites one district court case, King v. Warner-Lambert Co., No. CV-S-02-0370, 2002 WL 26 988167, at *1 (D. Nev. May 7, 2002), in support of its argument that fraudulent joinder is the only way in which a removing defendant may avoid remand where one defendant is non-diverse. King, — 27 — a district court in the Ninth Circuit, cited Batoff, 977 F.2d at 851 as the appropriate legal standard 1 In any event, realignment of the parties upon removal is not an “exception” to the complete 2 diversity requirement or an “end-run around” the requirements for fraudulent joinder; rather, it is a 3 consideration of how parties’ interests align for jurisdictional purposes. See Dolch v. United 4 California Bank, 702 F.2d 178, 181 (9th Cir. 1983) (“If the interests of a party named as a 5 defendant coincide with those of the plaintiff in relation to the purpose of the lawsuit, the named 6 defendant must be realigned as a plaintiff for jurisdictional purposes.”) (citing City of Indianapolis 7 v. Chase Nat’l Bank, 314 U.S. 63 , 69 (1941)); Prudential Real Estate Affiliates, Inc. v. PPR 8 Realty, Inc., 204 F.3d 867, 873 (9th Cir. 2000) (“We must align for jurisdictional purposes those 9 parties whose interests coincide respecting the primary matter in dispute.) (internal quotation 10 marks and citation omitted). Other courts have analyzed parties’ realignment in a similar fashion. 11 See, e.g., City of Gladstone, 2001 WL 34728883 , at *2-3 (“The remaining issue [on the City’s 12 motion to remand] is whether [certain defendants] should now be realigned with the City to allow 13 this court to have diversity subject matter jurisdiction[.]”); Telekenex, Inc., 2012 WL 13028156 , at 14 *3. Their analyses support this Court’s conclusion that consideration of the parties’ alignment 15 upon removal is neither violative of the removal statute nor a work-around the requirements for 16 fraudulent joinder. See also Tres Cruzes Land & Cattle, LLC v. Scottsdale Ins. Co., No. 2:15-cv17 00449-MCE-DAD, 2015 WL 6949888 , at *3 (E.D. Cal. Nov. 10, 2015) (“Despite this 18 presumption against the propriety of jurisdiction, courts must nonetheless look beyond the labels 19 in the complaint and realign the parties according to their real interests.”) (citing Scotts Co. LLC v. 20 Seeds, Inc., 688 F.3d 1154, 1157 (9th Cir. 2012)). Moreover, the Court’s conclusion is consistent 21 with its “duty . . . to look beyond the pleadings, and arrange the parties according to their sides in 22 the dispute.” City of Indianapolis, 314 U.S. at 69 (citation omitted). 23 The requirement that a court must “strictly construe[]” the removal statute and the 24 presumption against removal, see Provincial Gov’t, 582 F.3d at 1087 , does not mean that 25 realignment cannot properly be considered even when conferring diversity jurisdiction, see Smith, — 26 — 434 F.3d at 1133 ; see also In re Digimarc Corp. Derivative Litig., 549 F.3d 1223, 1234 (9th Cir. — 27 — 1 2008) (“[A] court must realign the parties in order to protect [its] judgments against artful 2 pleading[.]”) (citation omitted). At bottom, so long as the Court resolves any doubts regarding the 3 propriety of the parties’ realignment upon removal against their realignment, the Court does not 4 offend the presumption against removal, see Gaus, 980 F.2d at 566 , or its obligation to resolve all 5 jurisdictional doubts in favor of remand. 6 b. Primary Purpose 7 ACE argues in the alternative that, even if realignment can be considered upon removal, 8 realignment here—placing ACE and the Insurer Defendants on one side, and McKesson on the 9 other—is improper. The Court disagrees. 10 In the Ninth Circuit, courts use the “primary purpose” test when evaluating parties’ 11 realignment. See, e g., Prudential, 204 F.3d at 872-73 . “The issue of alignment for purposes of 12 diversity jurisdiction requires a court to ‘look beyond the pleadings’ to the actual interests of the 13 parties respecting the subject matter of the lawsuit.” Id. at 872 (citing City of Indianapolis, 314 14 U.S. at 69). In doing so, “[a court] must align for jurisdictional purposes those parties whose 15 interests coincide respecting the primary matter in dispute.” Prudential, 204 F.3d at 873 (internal 16 quotation marks and citations omitted); see also Scotts Co. LLC v. Seeds, Inc., 688 F.3d 1154 , 17 1158 (9th Cir. 2012) (“[Courts] should limit [their] inquiry of what constitutes the primary dispute 18 to the primary purpose of th[e] federal case.”). “If the interests of a party named as a defendant 19 coincide with those of the plaintiff in relation to the purpose of the lawsuit, the named defendant 20 must be realigned as a plaintiff for jurisdictional purposes.” Dolch, 702 F.2d at 181 (citing City of 21 Indianapolis, 314 U.S. at 69-70); Cont’l Airlines, Inc. v. Goodyear Tire & Rubber Co., 819 F.2d 22 1519, 1523 (9th Cir. 1987). “Realignment may be required even if a diversity of interests exists 23 on other issues.” Dolch, 702 F.2d at 181 . 24 While the Ninth Circuit has not applied the “primary purpose test” to circumstances similar 25 to those here, the Fourth Circuit in U.S. Fid. & Guar. Co. v. A & S Mfg. Co., 48 F.3d 131 , 132 (4th 26 Cir. 1995), applied the primary purpose test from the Ninth Circuit’s decision in Continental 27 Airlines, 819 F.2d at 1523 , and determined that insurers and their insured were properly realigned 1 and Guaranty Company (“U.S. Fidelity”) provided A & S Manufacturing Co. (“A&S”) with 2 liability insurance. Id. at 132 . A&S was also insured by Federal Insurance Company as well as 3 Hartford Accident and Indemnity Company. Id. When “environmental contamination” allegedly 4 occurred at A&S sites, the Environmental Protection Agency (the “EPA”) sued A&S to recover 5 costs for responding to the contamination. Id. Because these sites were covered by policies A&S 6 held with these insurers, A&S requested that they indemnify and defend it from the EPA’s suit. — 7 — Id. U.S. Fidelity filed suit against A&S as well as the other insurers, seeking “a declaration of the 8 parties’ rights and duties as they relate[d] to [A&S’s] claims” for coverage; each insurer denied 9 liability to A&S, and contended that “if it were liable, one or both of the other insurers would be 10 liable to it[.]” Id. As aligned in U.S. Fidelity’s complaint, complete diversity existed, and the 11 district court had jurisdiction on diversity grounds. Id. 12 Under the “principal purpose test,” the court determined it must first identify the “primary 13 issue in the controversy,” after which it “should align the parties according to their positions with 14 respect to the primary issue.” Id. at 133 . “If the alignment differ[ed] from that in the complaint,” 15 the court reasoned, then it must “determine whether complete diversity continues to exist.” Id. 16 Applying this framework, the court found that the “pleadings and the nature of the suit clearly 17 manifest[ed]” the dispute’s proper alignment: because the case’s “primary issue” was whether the 18 insurers owed A&S duties to defend or indemnify, any intra-insurer disputes were “ancillary” to 19 the “primary issue of the duty to indemnify.” Id. at 134 . For this reason, the court affirmed the 20 district court’s realignment of the parties around this primary dispute, “placing the insurers as 21 plaintiffs and the insured as the defendant.” Id. A court “trying the merits” of the case would first 22 need to decide whether the insurers had any obligation to defend or indemnify, and if “none, or 23 only one, provided coverage,” then the issue of the insurers’ liability to one another was moot. Id. 24 At bottom, the insurers’ dispute “[was] secondary to whether the insurers [were] liable to A&S 25 and [was] hypothetical until the insurers’ liability [to the insured] [was] determined.” Id. 26 The Court finds U.S. Fidelity’s reasoning persuasive. ACE seeks a declaration of the 27 Insurer Defendants’ obligations, “if any,” to defend or indemnify McKesson “to the extent that the 1 54.) (emphasis added.) The “pleadings and the nature of the suit clearly manifest[]” the dispute 2 and parties’ proper alignment. U.S. Fidelity, 48 F.3d at 134. The “primary dispute” is ACE’s 3 duties to McKesson, and the Insurer Defendants’ obligations, “if any,” are predicated on “the 4 extent [to which] the court determines that ACE has any [coverage] obligations” to McKesson. 5 (Dkt. No. 1-3 at 14 ¶ 54.) (emphasis added). As such, ACE’s dispute with the Insurer Defendants 6 is “secondary to whether [they] are liable to [McKesson] and is hypothetical until [their] liability 7 to [McKesson] is determined.” U.S. Fidelity, 48 F.3d at 134 (emphasis added).5 Accordingly, 8 ACE and the Insurer Defendants share a primary purpose, and are properly realigned as plaintiffs 9 opposite McKesson. 10 The Court’s conclusion that the Insurer Defendants are properly realigned with ACE is 11 also consistent with the Sixth Circuit’s decision in U.S. Fid. & Guar. Co. v. Thomas Solvent Co., — 12 — 955 F.2d 1085, 1090 (6th Cir. 1992). In Thomas Solvent, the Sixth Circuit, also citing the Ninth 13 Circuit’s decision in Continental Airlines, 819 F.2d at 1519 , applied the “primary dispute” test, 14 under which “parties should be aligned according to the primary dispute in an action,” Thomas 15 Solvent, 955 F.2d at 1091 . Applying this test, the court realigned the insurers involved in an action 16 in which one insurer “[sought] a declaratory judgment of the obligations of the various insurers in 17 order to receive contribution from those insurers who shared an obligation with [it] to the insured 18 parties . . . because the primary dispute involved the insurers’ duties to indemnify[.]” Id. at 108919 90. “Depending on the district court’s determination of this latter issue, the contribution issue may 20 be moot.” Id. at 1089 .6 21 ACE argues that the issue of what defense or indemnification costs are shared with or 22 covered entirely by the Insurer Defendants is “[i]nherent in [the primary] dispute[,]” and that this 23 is “necessary to ascertain the extent of ACE’s liability, if any, to McKesson.” (Dkt. No. 90 at 22.) — 24 — — 25 — 5 While U.S. Fidelity concerned an action that was originally filed in federal court, and the parties’ realignment destroyed diversity, these distinctions are immaterial for the Court’s analysis because, — 26 — as explained above, it may consider realignment upon removal and realignment may be properly considered to confer diversity jurisdiction. — 27 — 6 Thomas Solvent likewise concerned an action originally filed in federal court where the parties’ 1 While ACE contends that certain factual issues—such as when McKesson learned of the “at-issue 2 injuries,” or when certain accidents covered under the policies occurred—support its theory that 3 the determination of the Insurer Defendants’ duties inheres in the action’s “primary dispute,” ACE 4 prefaces this contention with the same condition: “In the event it is determined that there is 5 coverage,” then it can be determined whether and to what extent ACE is ultimately liable. (Dkt. 6 No. 90 at 23.) (emphasis added.) In sum, ACE undermines its own theory that the issue of the 7 Insurer Defendants’ obligations is intertwined with the primary dispute. As in U.S. Fidelity, 48 8 F.3d at 134, ACE’s dispute with the Insurer Defendants is hypothetical until its liability to 9 McKesson is determined and further, until the Insurer Defendants’ liability to McKesson is 10 likewise determined. Furthermore, even if a “diversity of interests” exists between ACE and the 11 Insurer Defendants on other or ancillary issues, this does not itself preclude their realignment. 12 Dolch, 702 F.2d at 181 . 13 ACE’s citation to Cont’l Ins. Co. v. Foss Mar. Co., No. C 02-3936 MJJ, 2002 WL 14 31414315, at *4-5 (N.D. Cal. Oct. 23, 2002), fails to persuade the Court otherwise. In Foss, an 15 insurer named as defendants its insured—Foss Maritime Company—as well as “various insurance 16 company defendants” who had issued policies to Foss during the period relevant to the 17 Environmental Protection Agency’s lawsuit against Foss for environmental damage. Id. at *1 . 18 Foss argued that realignment was proper because “the dispute [was] only between Foss and the 19 insurance carriers over Foss's right to insurance coverage, and not a division of liability between 20 Continental and the other defendants.” Id at *4. The court found that there was no “coincidence 21 or identity of interest” between the insurers that made realignment proper. Id. at *5 . Foss, 22 however, applied a “coincidence [of] interest” test in its realignment analysis that required the 23 parties’ “coinciding interests” to be nearly identical to satisfy the realignment standard. Id. at *5 . 24 The Court disagrees with this interpretation of Continental Airlines, 819 F.2d at 1523 , and the 25 standard for the Ninth Circuit’s “primary purpose” test. 26 ACE additionally argues that realignment would improperly convert the Insurer 27 Defendants into “involuntary plaintiffs.” (Dkt. No. 117 at 19.) However, courts “must align for 1 dispute.” Prudential, 204 F.3d at 873 (internal quotation marks and citation omitted). ACE’s 2 citation to Veranda Beach Club Ltd. P’ship v. W. Sur. Co., 936 F.2d 1364 , 1370 n.2 (1st Cir. 3 1991), does not persuade the Court that realignment on this basis is improper. In Veranda Beach, 4 the court simply noted that, following realignment, one party elected not to file its own complaint 5 but, “in effect, adopted [the plaintiff’s] complaint.” Id. In Flame Control Int’l, Inc. v. Pyrocool 6 Techs., Inc., No. 3:05-CV-0503-H, 2006 WL 8437275 , at *1, *5 (N.D. Tex. Mar. 22, 2006), the 7 court determined in its discretion that amendment of the pleadings was required; however, Flame 8 Control addressed multiple motions, including motions for leave to file a third amended complaint 9 and a first amended counterclaim, and distinguishably concerned the “fallout of a failed business 10 relationship for the marketing and sale of firefighting products and technologies.” Fundamentally, 11 ACE cannot claim that realignment’s jurisdictional analysis is invalid on the basis that any 12 realigned party becomes an “involuntary plaintiff.” Doing so would preclude a court from 13 realigning parties in the first place—itself an “end run” around the doctrine. Moreover, 2 Insurer 14 Defendants in this action, AIU Insurance Company and National Union, are plaintiffs in the AIU 15 Insurance action, Case No. 3:20-cv-07469-JSC, where they seek declarations that they have no 16 duty to defend or indemnify McKesson in the same underlying opioid litigation. Realigning these 17 defendants in this action would hardly make them “involuntary plaintiffs.” 18 Finally, ACE’s citation to Chicago Ins. Co. v. Kilbuck, 857 F.2d 1477 (9th Cir. 1988), an 19 unpublished opinion, in support of its argument that realignment of ACE, the Insurer Defendants, 20 and McKesson, is improper. Pursuant to N.D. Cal. Civ. L.R. 3-4(e), Kilbuck cannot be cited and 21 thus carries no weight. Local Rule 3-4(e) prohibits litigants’ citation to any order or opinion 22 designated as “uncitable” by its issuing court, with certain exceptions. Ninth Circuit Local Rule 23 36-3(c) provides that unpublished orders issued before January 1, 2007 “may not be cited to the 24 courts of this circuit,” except in circumstances related to claim or issue preclusion, for certain 25 factual purposes, or requests for publication and petitions for panel rehearings or rehearings en 26 banc. Kilbuck was decided in 1988. Because none of these exceptions are relevant, N.D. Cal. Civ. 27 L.R. 3-4(e) applies; therefore, the Court does not consider Kilbuck. 1 * * * 2 For the reasons set forth above, ACE and the Insurer Defendants share a primary purpose, 3 and are properly realigned as plaintiffs opposite McKesson. While “[f]ederal jurisdiction must be 4 rejected if there is any doubt” regarding removal, Gaus, 980 F.2d at 566 , here there is no doubt 5 that ACE and the Insurer Defendants are properly realigned for jurisdictional purposes. The 6 Court, therefore, has subject matter jurisdiction over this action and remand is inappropriate. 7 “As such, diversity subject matter jurisdiction exists and it was unnecessary for [any 8 Insurer Defendant] to consent to removal.” City of Gladstone, 2001 WL 34728883 , at *3; see also 9 Club at Hokuli'a, Inc. v. Am. Motorists Ins. Co., No. CIV. 10-00241 JMS, 2010 WL 4386741 , at 10 *3 (D. Haw. Oct. 26, 2010) (“Consent of all defendants is not needed, however . . . where the non11 consenting defendant’s interests ‘coincide respecting the primary matter in dispute’ with the 12 plaintiff.”) (citing Prudential, 204 F.3d at 873 ). While “[c]hallenges to removal jurisdiction 13 require an inquiry into the circumstances at the time the notice of removal is filed,” Spencer v. 14 U.S. Dist. Court for N. Dist. of Ca., 393 F.3d 867 , 871 (9th Cir. 2004) (citation omitted), “a 15 complaint’s alignment of the parties is not binding on the courts,” Scotts, 688 F.3d at 1157 16 (internal quotation marks and citation omitted). Because the Court “must align for jurisdictional 17 purposes those parties whose interests coincide respecting the primary matter in dispute,” id. 18 (citation omitted) (emphasis added), once properly realigned it was unnecessary for any Insurer 19 Defendant, including National Fire, to consent to removal. Therefore, the Court need not address 20 ACE’s arguments regarding the facial and procedural deficiencies in McKesson’s removal notice. 21 CONCLUSION 22 For the reasons set forth above, realignment of the parties—and removal of this action to 23 federal court—is proper. As such, ACE’s motion to remand is DENIED. The case management 24 conference will be held on April 1, 2021 at 1:30 p.m. A joint case management conference 25 statement is due one week in advance. 26 This Order disposes of Dkt. No. 90. 27 // 1 IT IS SO ORDERED. 2 Dated: March 10, 2021 — 3 — 4 re ACQUELINE SCOTT CORLE 5 United States Magistrate Judge — 6 — — 7 — — 8 — — 9 — — 10 — — 11 — — 12 — — 13 — — 15 — — 16 — — 17 — Z 18 — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — — 26 — — 27 — — 28 —