Valerie A. Day v. U.S. Bank National Association, et al

Filing 12

MINUTES OF IN CHAMBERS - COURT ORDER by Judge Percy Anderson: Defendants have failed to meet their burden to demonstrate the Court's diversity jurisdiction. Accordingly, the Court remands this action to Los Angeles Superior Court, Case No. PC056217, for lack for subject matter jurisdiction. ( Case Terminated. Made JS-6 ) Court Reporter: Not Reported. (gk)

JS-6

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 15-2037 PA (ASx)

Title

Valerie A. Day v. U.S. Bank, National Association, et al.

Present: The
Honorable

Date

March 24, 2015

PERCY ANDERSON, UNITED STATES DISTRICT JUDGE

Stephen Montes Kerr

Not Reported

N/A

Deputy Clerk

Court Reporter

Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

None

None

Proceedings:

IN CHAMBERS - COURT ORDER

Before the Court is a Notice of Removal filed by defendants U.S. Bank, National Association
successor trustee to Wachovia Bank, National Association (“U.S. Bank”) and Nationstar Mortgage, LLC
(“Nationstar”) (collectively, “Defendants”). In their Notice of Removal, Defendants assert that this
Court has jurisdiction over the action brought against it by plaintiff Valerie A. Day (“Plaintiff”) based
on the Court’s diversity jurisdiction. See 28 U.S.C. § 1332.
I.

Legal Standard

Federal courts are courts of limited jurisdiction, having subject matter jurisdiction only over
matters authorized by the Constitution and Congress. See, e.g., Kokkonen v. Guardian Life Ins. Co.,
511 U.S. 375, 377, 114 S. Ct. 1673, 1675, 128 L. Ed. 2d 391 (1994). A suit filed in state court may be
removed to federal court if the federal court would have had original jurisdiction over the suit. 28
U.S.C. § 1441(a). A removed action must be remanded to state court if the federal court lacks subject
matter jurisdiction. 28 U.S.C. § 1447(c). “The burden of establishing federal jurisdiction is on the party
seeking removal, and the removal statute is strictly construed against removal jurisdiction.” Prize Frize,
Inc. v. Matrix (U.S.) Inc., 167 F.3d 1261, 1265 (9th Cir. 1999). “Federal jurisdiction must be rejected if
there is any doubt as to the right of removal in the first instance.” Gaus v. Miles, Inc., 980 F.2d 564,
566 (9th Cir. 1992).
In attempting to invoke this Court’s diversity jurisdiction, Defendants must prove that there is
complete diversity of citizenship between the parties and that the amount in controversy exceeds
$75,000. 28 U.S.C. § 1332. To establish citizenship for diversity purposes, a natural person must be a
citizen of the United States and be domiciled in a particular state. Kantor v. Wellesley Galleries, Ltd.,
704 F.2d 1088, 1090 (9th Cir. 1983). Persons are domiciled in the places they reside with the intent to
remain or to which they intend to return. See Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th
Cir. 2001). “A person residing in a given state is not necessarily domiciled there, and thus is not
necessarily a citizen of that state.” Id. For the purposes of diversity jurisdiction, a national bank is “a
citizen of the State in which its main office, as set forth in its articles of association, is located.”
Wachovia Bank v. Schmidt, 546 U.S. 303, 307, 126 S. Ct. 941, 945, 163 L. Ed. 2d 797 (2006)
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JS-6

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 15-2037 PA (ASx)

Date

Title

March 24, 2015

Valerie A. Day v. U.S. Bank, National Association, et al.

(construing 28 U.S.C. § 1348). The citizenship of an LLC is the citizenship of its members. See
Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006) (“[L]ike a partnership,
an LLC is a citizen of every state of which its owners/members are citizens.”); Marseilles Hydro Power,
LLC v. Marseilles Land & Water Co., 299 F.3d 643, 652 (7th Cir. 2002) (“the relevant citizenship [of an
LLC] for diversity purposes is that of the members, not of the company”); Handelsman v. Bedford
Village Assocs., Ltd. P’ship, 213 F.3d 48, 51-52 (2d Cir. 2000) (“a limited liability company has the
citizenship of its membership”); Cosgrove v. Bartolotta, 150 F.3d 729, 731 (7th Cir. 1998); TPS
Utilicom Servs., Inc. v. AT & T Corp., 223 F. Supp. 2d 1089, 1101 (C.D. Cal. 2002) (“A limited
liability company . . . is treated like a partnership for the purpose of establishing citizenship under
diversity jurisdiction”).
The Ninth Circuit, however, has recognized an exception to the complete diversity requirement
where a non-diverse defendant has been “fraudulently joined.” Morris v. Princess Cruises, Inc., 236
F.3d 1061, 1067 (9th Cir. 2001). If a plaintiff “fails to state a cause of action against a resident
defendant, and the failure is obvious according to the settled rules of the state, the joinder of the resident
defendant is fraudulent.” McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). If the
Court finds that the joinder of a non-diverse defendant is fraudulent, that defendant’s presence in the
lawsuit is ignored for the purposes of determining diversity. See, e.g., Morris, 236 F.3d at 1067.
“There is a presumption against finding fraudulent joinder, and defendants who assert that
plaintiff has fraudulently joined a party carry a heavy burden of persuasion.” Plute v. Roadway Package
Sys., Inc., 141 F. Supp. 2d 1005, 1008 (N.D. Cal. 2001). A claim of fraudulent joinder should be denied
if there is any possibility that the plaintiff may prevail on the cause of action against the in-state
defendant. See id. at 1008, 1012. “The standard is not whether plaintiffs will actually or even probably
prevail on the merits, but whether there is a possibility that they may do so.” Lieberman v. Meshkin,
Mazandarani, No. C-96-3344 SI, 1996 WL 732506, at *3 (N.D. Cal. Dec. 11, 1996); see also Good v.
Prudential Ins. Co. of Am., 5 F. Supp. 2d 804, 807 (N.D. Cal. 1998) (“[T]he defendant must demonstrate
that there is no possibility that the plaintiff will be able to establish a cause of action in State court
against the alleged sham defendant.”). “In determining whether a defendant was joined fraudulently, the
court must resolve ‘all disputed questions of fact and all ambiguities in the controlling state law in favor
of the non-removing party.” Plute, 141 F. Supp. 2d at 1008 (quoting Dodson v. Spiliada, 951 F.2d 40,
42-43 (5th Cir. 1992)). A court should remand a case “unless the defendant shows that the plaintiff
‘would not be afforded leave to amend his complaint to cure [the] purported deficiency.’” Padilla v.
AT&T Corp., 697 F. Supp. 2d 1156, 1159 (C.D. Cal. 2009) (quoting Burris v. AT&T Wireless, Inc., No.
C 06-02904 JSW, 2006 WL 2038040, at *2 (N.D. Cal. July 19, 2006)).
II.

Analysis
A.

Diversity Jurisdiction

The Notice of Removal alleges that “[t]he Complaint situates Plaintiff . . . as a resident,
domiciled in California, and the owner of the real property in Los Angeles California . . . . Accordingly,
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JS-6

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 15-2037 PA (ASx)

Date

Title

March 24, 2015

Valerie A. Day v. U.S. Bank, National Association, et al.

Plaintiff is domiciled in California, and therefore a citizen of California for diversity purposes.” (Notice
of Removal ¶ 12.) As the Notice of Removal indicates, the Complaint alleges only Plaintiff’s residence
and ownership of a home in Los Angeles. The only support for Defendants’ allegation of Plaintiff’s
citizenship is an allegation of residence. However, residence is not the same as citizenship. Therefore,
the Notice of Removal’s allegations are insufficient to establish Plaintiff’s citizenship. “Absent unusual
circumstances, a party seeking to invoke diversity jurisdiction should be able to allege affirmatively the
actual citizenship of the relevant parties.” Kanter, 265 F.3d at 857; Bradford v. Mitchell Bros. Truck
Lines, 217 F. Supp. 525, 527 (N.D. Cal. 1963) (“A petition [for removal] alleging diversity of
citizenship upon information and belief is insufficient.”). As a result, Defendants’ allegations are
insufficient to invoke this Court’s diversity jurisdiction.
The Court additionally notes Defendants’ efforts to have this Court ignore the California
citizenship of defendant Barrett Daffin Frappier Treder & Weiss, LLP (“BDFTW”) are insufficient to
allow removal based on diversity jurisdiction. According to the Notice of Removal, BDFTW “is a
California citizen. . . .” (Notice of Removal ¶ 15.) Defendants contend that the Court should ignore the
presence of BDFTW because “it is a nominal and/or sham defendant” that filed a declaration of
nonmonetary status. (Id. ¶¶ 15,16.)
A nominal defendant “with nothing at stake may be disregarded in determining diversity, despite
the propriety of their technical joinder.” Strotek Corp. v. Air Transport Ass’n of Am., 300 F.3d 1129,
1133 (9th Cir. 2002). By filing an unopposed declaration of nonmonetary status, a trustee is excused
from participation in the proceeding. See Cal. Civ. Code § 2924l(d). However, as one district court has
noted, “the State statute allowing for declarations of nonmonetary status does not render a defendant a
sham defendant or a purely nominal party. A defendant’s declaration of nonmonetary status, which
excuses a party from active participation in the case, is not conclusive.” Sublett v. NDEX West, LLC,
No. 11cv185-L(WMC), 2011 WL 663745 at *2 (S.D. Cal. Feb. 14, 2011). Absent any further facts or
explanation, Defendants fail to demonstrate that BDFTW is a nominal defendant, and the Court will not
ignore its citizenship for purposes of evaluating whether diversity jurisdiction exists. Further, Plaintiff
has already objected to BDFTW’s declaration of nonmonetary status. Because the Court cannot ignore
BDFTW’s citizenship as a purported nominal defendant, the Court concludes that Defendants have not
established that the citizenship of BDFTW is diverse from Plaintiff.
B.

Fraudulent Joinder

In the Notice of Removal, Defendants also allege BDFTW has “been fraudulently joined, is a
sham defendant, and its citizenship should also be disregarded for this separate ground.” (Notice of
Removal ¶ 17.) Defendants assert Plaintiff’s Complaint is “bereft of any facts or allegations
demonstrating any liability or wrongdoing on the party of BDFTW.” (Notice of Removal ¶ 19.)
According to Defendants, Plaintiff does not make any allegations against BDFTW but “merely alleges
that [Nationstar] did not have the capacity to substitute in BDFTW as Trustee.” (Id.) Defendants finally
argue “Plaintiff’s contention that BDFTW lacked authority to act as the trustee is directly contradicted

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JS-6

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 15-2037 PA (ASx)

Date

Title

March 24, 2015

Valerie A. Day v. U.S. Bank, National Association, et al.

by the recorded Substitution of Trustee” which constitutes “conclusive evidence” of the authority of the
substituted trustee or his or her agents. (Id.)
Defendants fail to meet their burden of proving fraudulent joinder. Plaintiff’s Complaint makes
specific allegations regarding BDFTW and incorporates them into the second claim for unfair business
practices, Cal. Bus. & Prof. Code § 17200. Plaintiff alleges BDFTW “are attorneys . . . in the business
of acting as a Trustee in California and of foreclosing on properties such as Plaintiff’s.” (Compl. ¶ 26.)
Specifically, Plaintiff claims BDFTW “is an improper trustee and any Trustee sale conducted by
[BDFTW] or its agents . . . would be void.” (Compl. ¶ 33.)
The standard for fraudulent joinder is whether there is a possibility that plaintiffs may prevail,
not whether they actually will prevail. Lieberman, 1996 WL 732506, at *3. Plaintiff has alleged that
because Nationstar did not have the capacity or legal authority to sign the Substitution of Trustee, the
Substitution of Trustee was void and BDFTW never became the Trustee. The Court finds that
Defendant has not met the “heavy burden of persuasion” that there is no possibility that Plaintiff may
prevail on the claim against BDFTW. See Plute, 141 F. Supp. 2d at 1008.
Conclusion
For all of the foregoing reasons, Defendants have failed to meet their burden to demonstrate the
Court’s diversity jurisdiction. Accordingly, the Court remands this action to Los Angeles Superior
Court, Case No. PC056217 for lack for subject matter jurisdiction. See 28 U.S.C. § 1447(c).
IT IS SO ORDERED.

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