Daniel McCoy v. Ocwen Loan Servicing, LLC et al

Filing 9

MINUTE ORDER IN CHAMBERS - COURT ORDER by Judge Percy Anderson. For all of the foregoing reasons, Removing Defendants have failed to meet its burden to demonstrate the Court's diversity jurisdiction. Accordingly, the Court remands this action to Los Angeles Superior Court, Case No. LC105148, for lack for subject matter jurisdiction. See 28 U.S.C. section 1447(c). Case Terminated. Made JS-6. (mrgo)

JS-6

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

CV 17-1610 PA (JEMx)

Title

Daniel McCoy v. Ocwen Loan Servicing, LLC, et al.

Present: The Honorable

Date

March 1, 2017

PERCY ANDERSON, UNITED STATES DISTRICT JUDGE

V.R. Vallery

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 Ocwen Loan Servicing, LLC and
Wilmington Savings Fund Society, FSB (doing business as Christiana Trust as Trustee for HLSS
Mortgage Master Trust for the benefit of the holders of the Series 2014-1 Certificates issues by HLSS
Mortgage Master Trust) (“Removing Defendants”). According to the Notice of Removal, the Removing
Defendants’ co-defendant, The Mortgage Law Firm, PLC (“The Mortgage Law Firm”) consents to the
removal. In their Notice of Removal, Removing Defendants assert that this Court has jurisdiction over
the action brought against it by plaintiff Daniel McCoy (“Plaintiff”) based on the Court’s diversity
jurisdiction. See 28 U.S.C. § 1332.
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, Removing 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 17-1610 PA (JEMx)

Date

Title

March 1, 2017

Daniel McCoy v. Ocwen Loan Servicing, LLC, 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.”).
One exception to the complete diversity requirement is “nominal party” status. “Defendants who
are nominal parties 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 America, 300 F.3d 1129,
1133 (9th Cir. 2002) (citing Prudential Real Estate Affiliates, Inc. v. PPR Realty, Inc., 204 F.3d 867, 873
(9th Cir. 2000)). “Removing Defendants bear the burden of proving a defendant is a nominal party.”
Latino v. Wells Fargo Bank, N.A., 2011 WL 4928880, at *2 (E.D. Cal. Oct.17, 2011).
The Ninth Circuit has also 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.

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

CV 17-1610 PA (JEMx)

Date

Title

March 1, 2017

Daniel McCoy v. Ocwen Loan Servicing, LLC, et al.

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)).
According to the Notice of Removal, The Mortgage Law Firm, like Plaintiff, is a California
citizen. Removing Defendants assert, however, that “based on the allegations in the Complaint, The
Mortgage Law Firm states that it has been joined as a nominal defendant and therefore its citizenship is
irrelevant for purposes of removing the State Court Action to this Court.” (Notice of Removal 5:10-12.)
The Notice of Removal also alleges that The Mortgage Law Firm has filed a Declaration of
Nonmonetary Status (“DNMS”). The time for Plaintiff to oppose The Mortgage Law Firm’s DNMS has
not expired. See Cal. Civ. Code § 2924l(c). Moreover, “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).
Nor do the allegations in the Complaint necessarily establish that The Mortgage Law Firm is
either a nominal party or fraudulently joined. See Perkins v. JPMorgan Chase Bank, N.A., No. CV 16445- PSG(SSx), 2016 WL 3844205, at *23 (C.D. Cal. July 15, 2016) (“In sum, the Court finds that MTC
is not a nominal party at this time. As a result, MTC’s citizenship is relevant to the diversity analysis.
Because Plaintiff and MTC are citizens of California, complete diversity does not exist and Chase has
failed to satisfy its ‘burden of establishing that removal is proper.’”) (citing Gaus, 980 F.2d at 566);
Gomez v. Wells Fargo Bank, N.A., No. C 15-2996 SBA, 2015 WL 4592060, at *2 (N.D. Cal. July 28,
2015) (“In sum, the Court concludes that Wells Fargo has failed to carry its burden of demonstrating that
Cal-Western is either fraudulently-joined or a nominal party whose citizenship may be disregarded for
purposes of diversity jurisdiction.”); Nance v. Cal-W. Reconveyance Corp., No. LA CV14-07950 JAK,
2015 WL 452747, at *3 (C.D. Cal. Jan. 29, 2015) (citing Latino v. Wells Fargo Bank, N.A., No.
2:11-CV-02037-MCE, 2011 WL 4928880, at *3 (E.D. Cal. Oct. 17, 2011)); Silva v. Wells Fargo Bank
NA, 2011 WL 2437514, at *5 (C.D. Cal. June 16, 2011) (acknowledging “the trustee on a deed of trust
is often a nominal party” but finding the complaint on its face adequately pleaded claims against CalWestern as trustee).
If there is “a non-fanciful possibility that plaintiff can state a claim under [state] law against the
non-diverse defendants[,] the court must remand.” Mireles v. Wells Fargo Bank, N.A., 845 F. Supp. 2d
1034, 1062 (C.D. Cal. 2012) (quoting Macey v. Allstate Property & Cas. Ins. Co., 220 F. Supp. 2d 1116,
1117 (N.D. Cal. 2002)) (brackets in original). The Court finds the Removing Defendants have not met
the “heavy burden of persuasion” that there is no possibility that Plaintiff may prevail on the claims
against The Mortgage Law Firm. See Plute, 141 F. Supp. 2d at 1008. Nor can the Court conclude, on
this record, that Plaintiff would not be afforded leave to amend his Complaint to state a viable claim
against The Mortgage Law Firm. See Padilla, 697 F. Supp. 2d at 1159. As a result, the Court finds that
The Mortgage Law Firm has not been fraudulently joined and this Court cannot ignore its citizenship for
purposes of assessing the propriety of Removing Defendants’ Notice of Removal.
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JS-6

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

CV 17-1610 PA (JEMx)

Date

Title

March 1, 2017

Daniel McCoy v. Ocwen Loan Servicing, LLC, et al.

For all of the foregoing reasons, Removing Defendants have failed to meet its burden to
demonstrate the Court’s diversity jurisdiction. Accordingly, the Court remands this action to Los
Angeles Superior Court, Case No. LC105148, for lack for subject matter jurisdiction. See 28 U.S.C. §
1447(c).
IT IS SO ORDERED

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