Mendoza v. First Santa Fe Ins. Servs., Inc.

GLORIA MENDOZA et al., Plaintiffs, v. FIRST SANTA FE INSURANCE SERVICES,INC. n/k/a HUB INTERNATIONAL INSURANCE SERVICES, INC. et al., Defendants.

No. 19-CV-00991 MV/KK

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

August 18, 2020

MEMORANDUM OPINION AND ORDER

THIS MATTER is before the Court on Gloria Mendoza, Anthony Chavez, and Maria Gallegos' ("Plaintiffs'") Motion to Remand. Doc. 10. Defendants Hudson Insurance and Tribal First filed a response in opposition [Doc. 14] and Plaintiffs filed a reply [Doc. 17]. The Court then ordered the parties to submit supplemental briefing [Doc. 38] and they complied, with Defendant HUB International Insurance Services, Inc. joining the supplemental brief filed by Hudson Insurance and Tribal First.¹ See Docs. 39, 40, and 41. Having considered the briefs, exhibits, relevant law, and being otherwise fully informed, the Court finds that the motion is well-taken and will be GRANTED. The Court will accordingly remand this action back to the Second Judicial District Court pursuant to 28 U.S.C. § 1447.

BACKGROUND

This motion requires the Court to decide whether Article I, Section 8, Clause 17 of the United States Constitution, also known as the "Enclave Clause," gives rise to federal jurisdiction over a civil action alleging that Defendants violated New Mexico state law when they unfairly denied Plaintiffs' workers' compensation claims for injuries Plaintiffs suffered while working at the Isleta Resort & Casino on the Isleta Pueblo. Whether the Isleta Pueblo is in fact a "federal enclave" within the meaning of the Enclave Clause is not as obvious as Defendants suggest. The Court need not resolve that difficult issue here, however, because the claims Plaintiffs raise in their complaint are only incidentally related to their injuries on the Pueblo and arise primarily from Defendants' subsequent actions off of it. The Court therefore finds that the federal enclave doctrine does not apply to this case. Nor do Plaintiffs' claims necessarily raise a substantial question of federal law that must be decided in this Court. Because Defendants have not provided a valid basis for the Court to assert jurisdiction over Plaintiffs' state law claims, the case must be remanded to state court.

I. Plaintiffs' Complaint

As per their First Amended Complaint filed in the Second Judicial District Court in Bernalillo County on September 17, 2019, Plaintiffs are current and former employees of the Isleta Resort & Casino who suffered injuries while at work. See Doc. 1 Ex. 2 at ¶¶ 22-24 ("Amended Complaint"). They are also "third party beneficiaries to workers' compensation insurance policies produced, sold and/or administered by Defendants." Id. at ¶ 12. Defendant First Santa Fe Insurances Services, Inc. is a former New Mexico corporation that acted as an insurance "producer" or broker in securing workers' compensation coverage for the Isleta Resort & Casino. Id. at ¶¶ 4, 25. Defendant Hudson Insurance is a foreign corporation, formed in Delaware andregistered to do business in New Mexico, that sold an insurance policy "which was intended to cover... claims made by Plaintiffs as the third-party beneficiaries of such policy." Id. at ¶¶ 27. Defendant Tribal First is a California corporation serving as the third-party administrator on behalf of Hudson Insurance in each of Plaintiffs' claims. Id. at ¶ 28. On Plaintiffs' information and belief, none of the Defendants are tribal entities nor entities owned or operated by any Native American tribe or pueblo. Id. at ¶¶ 6, 8, and 11. "Plaintiffs have intentionally not named their employer [the Isleta Resort & Casino] as a party herein." Id. at ¶ 18.

The instant action arises from Defendants' allegedly unfair and misleading responses to Plaintiffs' claims for workers' compensation. Ms. Mendoza received a letter from Defendant Tribal First on September 11, 2015 in response to her claim. Doc. 1 Ex. 2 at 36. The letter was addressed to an address in Los Lunas, New Mexico and listed a return address in San Diego, California. Id. In the letter, Tribal First advised Ms. Mendoza that her claim was being denied because she failed to report it within the 24-hour window required by the Isleta Resort & Casino's work injury program. Id. Tribal First then sent a second letter in relation to Ms. Mendoza's claim on November 23, 2015, this time to the State of New Mexico Workers Compensation Administration in Albuquerque, New Mexico. Id. at 37. In the second letter, Tribal First asserted that the state workers' compensation appeals board lacked jurisdiction over Ms. Mendoza's claim because the adjudication of the claim in a state forum would violate the Isleta Resort & Casino's sovereign immunity as a Tribal entity. Id.

Ms. Gallegos received a letter from Tribal First on July 31, 2017 in response to her claim. Id. at 40. The letter was addressed to an address in Albuquerque, New Mexico and listed the same return address in San Diego listed on the letters to Ms. Mendoza. Id. In the letter, Tribal First advised Ms. Gallegos that her claim had been denied because she was not "clocked into work"when her injury occurred. Id.

Mr. Chavez received a letter from Tribal First on March 15, 2018 in response to his claim. Id. at 39. The letter was addressed to an address in Tijeras, New Mexico. Id. No return address is visible on the letter but it lists a "CA License No." on the bottom of the page. Id. In the letter, Tribal First advised Mr. Chavez that his claim had been denied because there was "no evidence to support that [his] job duties or anything having to do with [his] employment caused [his] knee to hyper-extend." Id.

In their Amended Complaint, Plaintiffs raise five claims arising from Defendants' denial of their workers' compensation claims and the representations in the above-described letters. First, Plaintiffs allege that Defendants violated the New Mexico Unfair Practices Act ("UPA"), NMSA 1978 § 57-12-1 et seq, by, among other things, "knowingly making false or misleading oral or written statements or other representations in connection with the policy of insurance covering Plaintiffs as third party beneficiaries, which tended to or did deceive or mislead Plaintiffs regarding the rights afforded under the policy." See Amended Complaint at ¶ 37.

Second, Plaintiffs allege that Defendants Hudson Insurance and Tribal First committed the tort of negligent misrepresentation when they "materially misrepresented that Plaintiffs' claims were denied based on false grounds." Id. at ¶ 43. According to Plaintiffs, Defendants' negligent misrepresentations include the statement to Ms. Mendoza that she was required to give notice of her work injury within 24 hours, where that is "not the law in New Mexico," and the statements to all Plaintiffs that "sovereign immunity barred their claims" where "neither [Hudson Insurance nor Tribal First] is [a] tribal entity entitled to claim such a defense." Id. at ¶ 44.

Third, Plaintiffs allege that Defendants committed breach of contract when Defendant First Santa Fe "intentionally and negligently failed to secure an insurance policy that would pay validclaims as required under the terms of the contract of insurance" and when Defendants Hudson Insurance and Tribal First "intentionally and negligently failed to investigate Plaintiffs' claims as required under the terms of the contract." Id. at ¶¶ 52 and 54.

Fourth, Plaintiffs allege that Defendants breached their implied covenant of good faith and fair dealing on a number of occasions, including when Defendant First Santa Fe "misled Plaintiffs into believing that insurance for valid claims existed when, in reality, sovereign immunity was always going to be raised" and when Defendants Hudson Insurance and Tribal First failed to "inform Plaintiffs that neither corporation was a tribal entity to which sovereign immunity applied to bar their claims." Id. at ¶¶ 60 and 61.

Fifth and finally, Plaintiffs allege that Defendants Hudson Insurance and Tribal First participated in a civil conspiracy, the objective of which was to "avoid payment of Plaintiffs' claims as third party beneficiaries of the insurance policy for economic gain." Id. at ¶ 66.

For relief, Plaintiffs request compensatory damages, punitive damages, treble damages as allowed under New Mexico law, pre- and post-judgment interest, attorneys' fees and costs, and all other relief that the Court deems just and proper. See Doc. 1 Ex. 2 at 14.

II. Defendants' Notice of Removal

On October 22, 2019, Defendant Tribal First, with the consent of Defendant Hudson Insurance, filed a Notice of Removal removing the instant case from the Second Judicial District Court to this Court under 28 U.S.C. §§ 1331, 1441(a), (c), and (f), and 1446. Doc. 1. In the Notice, Tribal First asserts that Plaintiffs' claims are removable to federal court because they arise "under the Constitution, laws, or treatises of the United States" and therefore give rise to federal question jurisdiction under § 1331. Id. at 3.

III. Plaintiffs' Motion to Remand

Plaintiffs now move to remand the case back to state court. See generally Doc. 10. They argue that removal was improper because "[t]here are no federal claims" in their complaint and Defendants "do not get to create a federal question" for the purpose of removing the case to federal court.² Id. at 9. Defendants oppose the requested remand and argue that this Court has jurisdiction to decide the case. See generally Doc. 14.

STANDARD

Under 28 U.S.C. § 1441(a), a defendant in a civil action brought in state court may remove the action to the federal district court "embracing the place where such action is pending" if the federal court would have had original jurisdiction over the suit. To affect a proper removal under the statute, a defendant must:

[F]ile in the district court... a notice of removal signed pursuant to Rule 11 of the Federal Rules of Civil Procedure and containing a short and plain statement of the grounds for

...