Albert Midgette v. Wells Fargo Bank, N.A. et al

Filing 16

MINUTE (In Chambers) Order Remanding Action by Judge Fernando M. Olguin: IT IS ORDERED that: (1) The above-captioned action shall be remanded to the Superior Court of the State of California for the County of Los Angeles, 111 North Hill St., Los Angeles, CA 90012, for lack of subject matter jurisdiction pursuant to 28 USC 1447(c). (2) The Clerk shall send a certified copy of this Order to the state court. (Made JS-6 Case Terminated.) (jp)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

JS-6

CIVIL MINUTES - GENERAL
Case No.

CV 17-1526 FMO (PJWx)

Title

Albert Midgette v. Wells Fargo Bank, N.A., et al.

Present: The Honorable

Date

April 10, 2017

Fernando M. Olguin, United States District Judge

Vanessa Figueroa

None

None

Deputy Clerk

Court Reporter / Recorder

Tape No.

Attorney Present for Plaintiff(s):

Attorney Present for Defendant(s):

None Present

None Present

Proceedings:

(In Chambers) Order Remanding Action

On January 20, 2017, Albert Midgette (“plaintiff”) filed a Complaint in the Los Angeles
County Superior Court against Wells Fargo Bank, N.A. (“Wells Fargo”) and Quality Loan Service
Corporation (“Quality”) (collectively, “defendants”). (See Notice of Removal (“NOR”) at ¶ 1; Dkt.
1-1 (“Complaint”)). On February 24, 2017, Wells Fargo removed that action on diversity
jurisdiction grounds pursuant to 28 U.S.C. §§ 1332 and 1441. (See NOR at p. 1). Having
reviewed the pleadings, the court hereby remands this action to state court for lack of subject
matter jurisdiction. See 28 U.S.C. § 1447(c).
LEGAL STANDARD
“Federal courts are courts of limited jurisdiction. They possess only that power authorized
by Constitution and statute[.]” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114
S.Ct. 1673, 1675 (1994). The courts are presumed to lack jurisdiction unless the contrary appears
affirmatively from the record. See DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 342 n. 3, 126
S.Ct. 1854, 1861 (2006). Federal courts have a duty to examine jurisdiction sua sponte before
proceeding to the merits of a case, see Grupo Dataflux v. Atlas Glob. Grp., L.P., 541 U.S. 567,
593, 124 S. Ct. 1920, 1937 (2004), “even in the absence of a challenge from any party.” Arbaugh
v. Y&H Corp., 546 U.S. 500, 501, 126 S.Ct. 1235, 1237 (2006).
In general, “any civil action brought in a State court of which the district courts of the United
States have original jurisdiction, may be removed by the defendant or the defendants, to the
district court[.]” 28 U.S.C. § 1441(a). A removing defendant bears the burden of establishing that
removal is proper. See Gaus v. Miles, Inc., 980 F.2d 564, 566-67 (9th Cir. 1992) (“The strong
presumption against removal jurisdiction means that the defendant always has the burden of
establishing that removal is proper.”) (internal quotation marks omitted); Abrego Abrego v. The
Dow Chem. Co., 443 F.3d 676, 684 (9th Cir. 2006) (per curiam) (noting the “longstanding, nearcanonical rule that the burden on removal rests with the removing defendant”). Moreover, if there
is any doubt regarding the existence of subject matter jurisdiction, the court must resolve those
doubts in favor of remanding the action to state court. See Gaus, 980 F.2d at 566 (“Federal
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 17-1526 FMO (PJWx)

Date

Title

Albert Midgette v. Wells Fargo Bank, N.A., et al.

April 10, 2017

jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.”).
Indeed, “[i]f at any time before final judgment it appears that the district court lacks subject matter
jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c); see Kelton Arms Condo. Owners
Ass’n, Inc. v. Homestead Ins. Co., 346 F.3d 1190, 1192 (9th Cir. 2003) (“Subject matter
jurisdiction may not be waived, and, indeed, we have held that the district court must remand if
it lacks jurisdiction.”); Washington v. United Parcel Serv., Inc., 2009 WL 1519894, *1 (C.D. Cal.
2009) (a district court may remand an action where the court finds that it lacks subject matter
jurisdiction either by motion or sua sponte).
DISCUSSION
Having reviewed the NOR and the state court Complaint, the court is persuaded that it does
not have subject matter jurisdiction over the instant matter.1 In other words, plaintiff could not
have originally brought this action in federal court, as plaintiff does not competently allege facts
supplying diversity jurisdiction. Therefore, removal was improper. See 28 U.S.C. § 1441(a);
Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429 (1987) (“Only state-court
actions that originally could have been filed in federal court may be removed to federal court by
the defendant.”) (footnote omitted).
When federal subject matter jurisdiction is predicated on diversity of citizenship pursuant
to 28 U.S.C. 1332(a), complete diversity must exist between the opposing parties. See Caterpillar
Inc. v. Lewis, 519 U.S. 61, 68, 117 S.Ct. 467, 472 (1996) (stating that the diversity jurisdiction
statute “applies only to cases in which the citizenship of each plaintiff is diverse from the
citizenship of each defendant”). Plaintiff appears to be a citizen of California. (See Dkt. 1, NOR
at ¶ 2A). Wells Fargo is a citizen of South Dakota. (Id. at ¶ 2B). However, as Wells Fargo
concedes, Quality is a citizen of California. (See id. at ¶ 2C). Thus, complete diversity does not
exist.
However, Wells Fargo contends that Quality has been fraudulently joined and is a sham
defendant since it is merely a trustee that has filed a Declaration of Nonmonetary Status
(“DNMS”). (See NOR at ¶ 2C). An initial matter, contrary to Wells Fargo’s contention, (see NOR
at ¶ 2C), the filing of a DNMS pursuant to California Civil Code § 2924l by Quality does not render
it a nominal party. As one court has stated:
A defendant’s declaration of nonmonetary status, which excuses a party from
active participation in the case, is not conclusive. A timely objection, or even
facts which arise during discovery, are allowed to show the defendant was
not entitled to nonmonetary status. . . . [E]ven if a defendant’s nonmonetary
status declaration remains unchallenged for the duration of the action, the

1

Wells Fargo seeks only to invoke the court’s diversity jurisdiction. (See, generally, Dkt.
1, NOR).
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 17-1526 FMO (PJWx)

Title

Date

Albert Midgette v. Wells Fargo Bank, N.A., et al.

April 10, 2017

defendant is bound by the nonmonetary terms of the judgment.
Sublett v. NDEX West, LLC, 2011 WL 663745, *2 (S.D. Cal. 2011) (citation omitted); see also
Hershcu v. Wells Fargo Bank, N.A., 2012 WL 439698, *2 (S.D. Cal. 2012) (“The citizenship of
[defendant] may not be ignored for diversity purposes because it has filed a Declaration of NonMonetary Status.”).2 Thus, the filing of a declaration of nonmonetary status does not render
Quality a nominal party. See Dejilo v. Wells Fargo Bank, N.A., 2015 WL 5187344, *3 (N.D. Cal.
2015) (“Courts have held . . . that status as trustee is not itself sufficient to render an entity a
nominal party.”) (internal quotation marks omitted).
With respect to Wells Fargo’s contention that Quality was fraudulently joined, the court is
not persuaded. “If a plaintiff fails to state a cause of action against a resident defendant, and the
failure is obvious according to the well-settled rules of the state, the joinder is fraudulent and the
defendant’s presence in the lawsuit is ignored for purposes of determining diversity.” United
Computer Sys., Inc. v. AT&T Corp., 298 F.3d 756, 761 (9th Cir. 2002) (internal quotation marks
omitted). “It is only where the plaintiff has not, in fact, a cause of action against the resident
defendant, and has no reasonable ground for supposing he has, and yet joins him in order to
evade the jurisdiction of the federal court, that the joinder can be said to be fraudulent, entitling
the real defendant to a removal.” Albi v. Street & Smith Publ’ns, 140 F.2d 310, 312 (9th Cir.
1944); see Allen v. Boeing Co., 784 F.3d 625, 634 (9th Cir. 2015) (“[J]oinder is fraudulent when
a plaintiff’s failure to state a cause of action against the resident defendant is obvious according
to the applicable state law.”). The defendant must show by “clear and convincing evidence” that
the plaintiff does not have a colorable claim against the alleged sham defendant. See Hamilton
Materials Inc. v. Dow Chemical Corp., 494 F.3d 1203, 1206 (9th Cir. 2007) (“Fraudulent joinder
must be proven by clear and convincing evidence.”); see also Mireles v. Wells Fargo Bank, N.A.,
845 F.Supp.2d 1034, 1063 (C.D. Cal. 2012) (“Demonstrating fraudulent joinder” requires showing
that “after all disputed questions of fact and all ambiguities . . . are resolved in the plaintiff’s favor,
the plaintiff could not possibly recover against the party whose joinder is questioned.”) (emphasis
in original); Vasquez v. Bank of Am., N.A., 2015 WL 794545, *4 (C.D. Cal. 2015) (finding
defendants had not met “heavy burden of persuasion to show to a near certainty that joinder was
fraudulent” because plaintiff could amend complaint to state at least one valid claim) (internal
quotation marks omitted).

2

Courts are split on whether an unopposed declaration of nonmonetary status is sufficient
to deem a trustee a nominal party. Compare Rivera v. Aurora Loan Servs. LLC, 2010 WL
1709376, *2 (S.D. Cal. 2010) (finding notice of nonmonetary status sufficient to render party
nominal party for purposes of jurisdiction); Raissian v. Quality Loan Serv. Corp., 2014 WL
6606802, *3-4 (C.D. Cal. 2014) (recognizing split) with Sublett, 2011 WL 663745, at *2 (finding
notice insufficient to render party a nominal party for jurisdiction purposes) and Hershcu, 2012 WL
439698, at *2 (same). The court believes the reasoning of Sublett and Herschu is more
persuasive.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 17-1526 FMO (PJWx)

Date

Title

Albert Midgette v. Wells Fargo Bank, N.A., et al.

April 10, 2017

Here, Wells Fargo has failed to meet its burden of showing by clear and convincing
evidence that plaintiff does not have a colorable claim against Quality. Among other claims,
plaintiff asserts claims against Quality for violations of the Homeowner Bill of Rights (“HBOR”) by,
among other things, knowingly violating a bankruptcy stay. (See Dkt. 1-1, Complaint at ¶¶ 41, 7173). “These and other allegations of the Complaint clearly demonstrate that [plaintiff’s] claims
against [the trustee] are not merely predicated on its ministerial role as [] trustee.” Gomez v. Wells
Fargo Bank, N.A., 2015 WL 4592060, *2 (N.D. Cal. 2015); see, e.g., Mireles, 845 F.Supp.2d at
1068 (finding trustee was not fraudulently joined partly because alleged violation of Cal. Civ. Code
§ 2923.5 could support UCL claim); Knott v. Caliber Home Loans, 2015 WL 3932668, *5 (C.D. Cal.
2015) (remanding case where plaintiff’s complaint alleged that trustee participated in alleged
wrongdoing); Dejillo, 2015 WL 5187344, at *2 (noting that other courts have found trustees not
fraudulently joined); Daniels v. Wells Fargo Bank, N.A., 2012 WL 10649202, *5 (C.D. Cal. 2012)
(noting that because several claims were directed toward all defendants collectively, trustee “could
potentially be held liable either under a conspiracy theory or for the claims aimed at Defendants
collectively”). Thus, “it is untrue that the complaint lacks allegations that could result in [Quality]
being held liable for the wrongful conduct charged.” Mireles, 845 F.Supp.2d at 1064. Under the
circumstances, the court concludes that Wells Fargo has not met its heavy burden of establishing
that “plaintiff could not possibly recover” against Quality. See id. at 1063; see also Hamilton
Materials Inc., 494 F.3d at 1206 (“Fraudulent joinder must be proven by clear and convincing
evidence.”); Knott, 2015 WL 3932668, at *2 (“The standard is not whether plaintiffs will actually
or even prevail on the merits, but whether there is a possibility that they may do so.”) (internal
quotation marks omitted).
Because Quality is not a nominal party and was not fraudulently joined, its citizenship is
considered in the determination of diversity jurisdiction. Thus, there was no diversity jurisdiction
over this action at the time of removal because both plaintiff and Quality are citizens of California.
This order is not intended for publication. Nor is it intended to be included in or
submitted to any online service such as Westlaw or Lexis.
CONCLUSION
Based on the foregoing, IT IS ORDERED that:
1. The above-captioned action shall be remanded to the Superior Court of the State of
California for the County of Los Angeles, 111 North Hill St., Los Angeles, CA 90012, for lack of
subject matter jurisdiction pursuant to 28 U.S.C. § 1447(c).
2. The Clerk shall send a certified copy of this Order to the state court.
Initials of Preparer
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