Judge Won't Remand LA Eatery's COVID-19 Coverage Case

By Daphne Zhang
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Law360 (July 28, 2020, 4:28 PM EDT) -- A California federal judge denied a Los Angeles restaurant owner's bid to remand its COVID-19 coverage case against Travelers Property Casualty Company of America to state court, finding the business "fraudulently joined" L.A Mayor Eric Garcetti to avert federal jurisdiction.

U.S. District Judge Andre Birotte said Monday that Travelers has sufficiently shown Mayor Garcetti should not be included in the case because he is not a party in the insurance contract between Travelers and its policyholder, Mark's Engine Company No.28 Restaurant LLC.

"Because plaintiff's claim against Mayor Garcetti is predicated on a contract to which Mayor Garcetti is not a party, Mayor Garcetti was fraudulently joined," Judge Birotte said.

Mark's Engine operates a restaurant in downtown LA. The restaurant sued Travelers and Mayor Garcetti in April, claiming that Travelers should cover its revenue losses from the mayor's March order to shut down nonessential businesses and alleging that the legality of Mayor Garcetti's executive order is questionable.

Travelers moved the case to California federal court in May. Mark's Engine requested the court remand the case back to state court, arguing that the case raises questions about state law and the district court is not a proper place to hear it. The eatery also said that Mayor Garcetti was not fraudulently joined and there is no diversity of citizenship among the parties.

The restaurant was also seeking a declaration that Traveler's coverage denial would not have happened without Mayor Garcetti's order, which has caused a complete shutdown of its business. The restaurant contended that its staff refused to work out of fear of contracting the novel coronavirus, and it was forced by the order to begin the termination process of dozens of its employees.

"Seeking a declaratory judgment that a government official's action triggers insurance coverage does not amount to a cause of action against that government official," Judge Birotte said on Monday, ruling that the case will not be remanded back to the state court.

The judge stressed that Mark's Engine's claim against Mayor Garcetti for declaratory relief would not be saved even if the restaurant wanted to amend its complaint with additional allegations, because the mayor is not involved in the insurance contract in dispute.

"Concerns of forum shopping do not weigh against exercising jurisdiction, as the court has diversity jurisdiction over this action and this case was properly removed," Judge Birotte said.

Representatives for the parties could not be immediately reached for comment. 

The restaurant is represented by Mark John Geragos, Benjamin Jared Meiselas, and Matthew Michael Hoesly of Geragos and Geragos APC and Nitoj P Singh and Harmeet K Dhillon of Dhillon Law Group Inc.

Travelers is represented by Richard Joseph Doren, Deborah L Stein, and Theodore J Boutrous Jr of Gibson Dunn, and Crutcher LLP, and Stephen E Goldman and Wystan M Ackerman of Robinson and Cole LLP.

The case is Marks Engine Company No. 28 Restaurant, LLC v. Travelers Indemnity Company of Connecticut et al, case number 2:20-cv-04423, in the U.S. District Court for the Central District of California.

--Editing by Amy Rowe.

For a reprint of this article, please contact reprints@law360.com.

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