Alexandre Nshanyan v. Flagstar Bank FSB et al

Filing 10

MINUTE ORDER IN CHAMBERS by Judge Percy Anderson remanding case to Los Angeles Superior Court, Chatsworth Courthouse, Case number PC057779. Case Terminated. Made JS-6. (mrgo)

JS-6

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

CV 17-5610 PA (ASx)

Title

Alexandre Nshanyan v. Flagstar Bank, FSB, et al.

Present: The Honorable

Date

August 1, 2017

PERCY ANDERSON, UNITED STATES DISTRICT JUDGE

Kamilla Sali-Suleyman

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 M&T Bank (erroneously sued as
M&T Bank Corporation) and Lakeview Loan Servicing, LLC (“Removing Defendants”). According to
the Notice of Removal, the Removing Defendants’ co-defendants, Flagstar Bank, FSB and Quality Loan
Service Corporation, consent to the removal. In their Notice of Removal, Removing Defendants assert
that this Court has jurisdiction over the action brought against it by plaintiff Alexandre Nshanyan
(“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)
(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
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JS-6

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

CV 17-5610 PA (ASx)

Date

Title

August 1, 2017

Alexandre Nshanyan v. Flagstar Bank, FSB, et al.

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 Notice of Removal alleges: “According to the Complain, Plaintiff resides at the Property in
Los Angeles County. Exhibit 1, ¶ 1. Since Plaintiff’s Complaint, which is a part of the state court
record, alleges that Plaintiff’s residence is in California, and Plaintiff has filed suit with respect to a
foreclosure of real propert owned and resided by Plaintiff in Los Angeles County, California, Plaintiff
would be deemed to be domiciled in California, and therefore a citizen of California for diversity
purposes.” (Notice of Removal ¶ 6.) As the Notice of Removal indicates, the Complaint alleges only
Plaintiff’s residence and ownership of a home in Los Angeles. Because the only support for Removing
Defendants’ allegation of Plaintiff’s citizenship is an allegation of residence, and residence is not the
same as citizenship, 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,
Removing Defendants’ allegations are insufficient to invoke this Court’s diversity jurisdiction.
The Court additionally notes that Removing Defendants’ efforts to have this Court ignore the
California citizenship of defendant Quality Loan Service Corporation (“QLS”) are insufficient to allow
removal based on diversity jurisdiction. Although the Notice of Removal does not affirmatively allege
the citizenship of QLS, Removing Defendants contend that the Court should ignore the presence of QLS
because it is fraudulently joined and QLS filed a declaration of non-monetary status (“DNMS”) pursuant
to California Civil Code section 2924l on June 30, 2017. (Id. at 5:3-4.)
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). “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). 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. 11cv185L(WMC), 2011 WL 663745 at *2 (S.D. Cal. Feb. 14, 2011). Here, Plaintiff has filed an Objection to
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JS-6

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

CV 17-5610 PA (ASx)

Date

Title

August 1, 2017

Alexandre Nshanyan v. Flagstar Bank, FSB, et al.

QLS’ DNMS. As a result, QLS is “required to participate in the action or proceeding.” Cal. Civ. Code §
2924l(e). At least at this stage, based on Plaintiff’s filing of an Objection to the DNMS, the Court
cannot ignore the citizenship of QLS as a purported nominal defendant.
Nor have Removing Defendants met their burden to establish that QLS is fraudulently joined.
See Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001) (recognizing an exception to
the complete diversity requirement where a non-diverse defendant has been “fraudulently joined”). 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)).
The allegations in the Complaint do not necessarily establish that QLS is either a nominal party
or fraudulently joined. See Perkins v. JPMorgan Chase Bank, N.A., No. CV 16-445- 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.
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JS-6

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

CV 17-5610 PA (ASx)

Date

Title

August 1, 2017

Alexandre Nshanyan v. Flagstar Bank, FSB, et al.

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 QLS. 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 QLS. See
Padilla, 697 F. Supp. 2d at 1159. As a result, the Court finds that QLS has not been fraudulently joined
and this Court cannot ignore its citizenship for purposes of assessing the propriety of Removing
Defendants’ Notice of Removal.
For all of the foregoing reasons, Removing 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, Chatsworth Courthouse, Case No. PC057779, for lack for subject matter
jurisdiction. See 28 U.S.C. § 1447(c).
IT IS SO ORDERED

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