Wendy Soto v. Tristar Products, Inc. et al

Filing 32

MINUTES (In Chambers): ORDER Re Plaintiff Motion to Remand 12 by Judge Michael W. Fitzgerald: The Motion to Remand is GRANTED. The Court REMANDS the action to the Superior Court of the State of California for the County of Santa Barbara. (MD JS-6. Case Terminated.) (jp)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

JS-6

CIVIL MINUTES—GENERAL
Case No. CV-17-6406-MWF (MRWx)
Date: November 9, 2017
Title:
Wendy M. Soto v. Tristar Products, Inc., et al.
Present:

The Honorable MICHAEL W. FITZGERALD, U.S. District Judge
Deputy Clerk:
Rita Sanchez

Attorneys Present for Plaintiff:
None Present

Court Reporter:
Not Reported
Attorneys Present for Defendant:
None Present

Proceedings (In Chambers): ORDER RE PLAINTIFF’S MOTION TO
REMAND [12]
Before the Court is Plaintiff’s Motion to Remand, filed on September 28,
2017. (Docket No. 12). On October 6, 2107, Defendants Tristar Products, Inc.
(“Tristar”), Costco Wholesale Corporation (“Costco Wholesale”), and Costco
Wholesale Membership, Inc. (“Costco Membership”) (Costco Wholesale and
Costco Membership, together the “Costco Defendants”) filed an Opposition.
(Docket No. 24). On October 16, 2017, Plaintiff filed a Reply. (Docket No. 27).
The Court held a hearing on October 30, 2017.
For the reasons set forth below, Plaintiff’s Motion is GRANTED.
Defendants have not established that Costco Membership was fraudulently joined,
“fraudulent” being used here in its technical jurisdictional sense. Specifically, it is
not clear under settled California law that Costco Membership could not be jointly
and severally liable for Plaintiff’s alleged injuries in connection with Plaintiff’s
strict products liability claim. Absent unambiguous and controlling state law
indicating that it could not, which Defendants have not presented, the Court must
resolve all doubts in favor of remand.
I.

BACKGROUND

On July 21, 2017, Plaintiff filed a Complaint against Defendants in the Santa
Barbara County Superior Court. (Complaint, Docket No. 1-1). The crux of
Plaintiff’s Complaint is that, on January 18, 2017, “Plaintiff was using a Tristar
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-17-6406-MWF (MRWx)
Date: November 9, 2017
Title:
Wendy M. Soto v. Tristar Products, Inc., et al.
Power Pressure Cooker XL [the “Pressure Cooker”], which was purchased from
the Costco [Defendants], when the Pressure Cooker malfunctioned and caused
severe, permanent and disfiguring burns to Plaintiff’s body.” (Id. ¶ 8). Plaintiff
asserted negligence, strict products liability, and breach of implied warranty claims
against all Defendants. (Id. ¶¶ 9-38). Though the Complaint did not specify a
dollar amount, Plaintiff alleged that she “sustained extensive economic and noneconomic damages, physical injuries, past and future medical expenses, past and
future and severe and ongoing emotional distress and pain and suffering, and other
such damages, all in an amount to be proven at trial.” (Id. ¶¶ 18, 32).
Plaintiff is a California resident. (Id. ¶ 1). Tristar is incorporated in
Pennsylvania with its principal place of business in New Jersey. (Id. ¶ 2;
Declaration of Pamela Ferguson (“Ferguson Decl.”) (Docket No. 1-6) ¶ 2). Costco
Wholesale is incorporated in Washington with its principal place of business in
Washington. (Complaint ¶ 3; Ferguson Decl. ¶ 3). Costco Membership is
incorporated in California. (Complaint ¶ 4; Notice of Removal (“NoR”) (Docket
No. 1) ¶ 26).
On August 29, 2017, Defendants removed the action to this Court.
Defendants invoked this Court’s diversity jurisdiction, arguing that “Costco
Membership’s presence in the case does not defeat diversity jurisdiction because it
was fraudulently joined.” (NoR ¶ 27). According to Defendants, Costco
Membership “cannot be a properly joined defendant here, where Plaintiff alleges
negligence, strict products liability, and warranty claims arising from her alleged
purchase and use of the pressure cooker” because it “is in business to collect
membership fees paid by individuals and entities who wish to be members of
Costco Wholesale…” and “has no role in Costco [Wholesale’s] purchases, sales, or
business operations…” (Id. ¶ 31). The instant Motion followed.
In connection with its Opposition, Defendants submitted the Declaration of
Zois Johnston (“Johnston Decl.”), a claims manager employed by Costco
Wholesale, which provides, in pertinent part:
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-17-6406-MWF (MRWx)
Date: November 9, 2017
Title:
Wendy M. Soto v. Tristar Products, Inc., et al.
 Costco Membership “is in business solely to collect membership fees paid
by individuals and entities who wish to be members of Costco
Wholesale…, which is in the business of operating warehouse-retail
membership establishments throughout the United States…”
 “Costco Membership does not engage in purchases, sales, or operations
conducted by Costco Wholesale…”
 “As a Costco Membership member, an individual gains access to Costco
Wholesale locations, as well as optometrists, pharmacists, photography
services, travel services, insurance services, and other services… A Costco
Membership member pays a fee to have access to all of the services Costco
Membership provides. Costco Membership’s only financial benefit comes
from its membership fees.”
 “Costco Membership does not engage in any marketing activities for any
products sold at Costco Wholesale…”
 Costco Membership did not design, manufacture, purchase, or sell the
Pressure Cooker that allegedly injured Plaintiff, and does not have any
contractual relationship with Tristar.
(Johnston Decl. ¶¶ 2, 3, 5-7, 9, 11).
In connection with her Reply, Plaintiff offered evidence showing that: (1) as
of January 2016, when Plaintiff was allegedly injured, the Pressure Cooker was
advertised in The Costco Connection, a “magazine for Costco Members”
apparently published by Costco Membership; and (2) that the Pressure Cooker is
available for sale on costco.com, a website registered to Costco Membership.
(Reply at 9-10; Supplemental Declaration of Darrell Padgette (“Padgette Supp.
Decl.”) (Docket No. 28) ¶¶ 2, 3, Ex. 1, 3).

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-17-6406-MWF (MRWx)
Date: November 9, 2017
Title:
Wendy M. Soto v. Tristar Products, Inc., et al.
II.

DISCUSSION

As all parties acknowledge, the threshold requirement for removal under 28
U.S.C. § 1441 is a “finding that the complaint . . . is within the original jurisdiction
of the district court.” Ansley v. Ameriquest Mortgage Co., 340 F.3d 858, 861 (9th
Cir. 2003). Federal question jurisdiction is not asserted and the jurisdictional
amount is not in doubt. The issue, then, is whether Costco Membership defeats
complete diversity, or whether the Court should disregard its presence on
fraudulent joinder grounds.
“Because plaintiff’s motion to remand challenges the basis of the court’s
subject matter jurisdiction, the court may consider extrinsic evidence.” Prime
Healthcare Services – Shasta, LLC v. Sierra Pacific Industries, No. 2:15-CV2007-CMK, 2016 WL 740529, at *2 (E.D. Cal. Feb. 25, 2016) (citing McCarthy v.
U.S., 850 F.2d 558 (9th Cir. 1988)). While, in the context of a motion to remand
due to lack of diversity jurisdiction, it is “well established that courts may pierce
the pleadings … and examine evidence,” it is “also well established that courts
ought to construe facts in favor of the plaintiff where there is disputed evidence.”
Reynolds v. The Boeing Company, No. 2:15-2846-SVW-AS, 2015 WL 4573009, at
*3 (C.D. Cal. Jul. 28, 2015) (internal quotation marks and citations omitted).
“The strong presumption against removal jurisdiction means that the
defendant always has the burden of establishing that removal is proper, and that the
court resolves all ambiguity in favor of remand to state court.” Hunter v. Philip
Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009) (internal quotation marks and
citation omitted).

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-17-6406-MWF (MRWx)
Date: November 9, 2017
Title:
Wendy M. Soto v. Tristar Products, Inc., et al.
A. Fraudulent Joinder
An exception to the complete-diversity rule recognized by the Ninth Circuit
“‘is where a non-diverse defendant has been ‘fraudulently joined.’” Id. (quoting
Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001)). The
joinder is considered fraudulent “[i]f the 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 . . . .” Id. (quoting Hamilton Materials, Inc. v. Dow Chemical
Co., 494 F.3d 1203, 1206 (9th Cir. 2007)). A removing defendant must “prove
that individuals joined in the action cannot be liable on any theory.” Ritchey v.
Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998); accord Reynolds, 2015
WL 4573009, at *2 (“To prove fraudulent joinder, the removing defendant must
show that settled law obviously precludes the liability against the nondiverse
defendant.”) (emphasis added).
Because defendants face a heavy burden in establishing that removal is
appropriate, a court determining whether joinder is fraudulent “must resolve all
material ambiguities in state law in plaintiff’s favor.” Macey v. Allstate Property
and Cas. Ins. Co., 220 F. Supp. 2d 1116, 1117 (N.D. Cal. 2002) (citing Good v.
Prudential Ins. Co. of America, 5 F. Supp. 2d 804, 807 (N.D. Cal. 1998)). “If there
is a non-fanciful possibility that plaintiff can state a claim under [state] law against
the non-diverse defendant[,] the court must remand.” Id.; see also Good, 5 F.
Supp. 2d at 807 (“[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.”). Given this standard, “[t]here 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).

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-17-6406-MWF (MRWx)
Date: November 9, 2017
Title:
Wendy M. Soto v. Tristar Products, Inc., et al.
B. Strict Products Liability
As both Plaintiff and Defendants recognize, under California law, the
doctrine of strict products liability extends “to retailers because retailers ‘are an
integral part of the overall producing and marketing enterprise that should bear the
cost of injuries resulting from defective products…’” Ontiveros v. 24 Hour Fitness
Corp., 169 Cal. App. 4th 424, 431, 86 Cal. Rptr. 3d 767 (2008) (quoting
Vandermark v. Ford Motor Co. 61 Cal. 2d 256, 262, 37 Cal. Rptr. 896 (1964)).
“Vandermark explained that holding retailers strictly liable would (1) enhance
product safety since retailers are in a position to exert pressure on manufacturers;
(2) increase the opportunity for an injured consumer to recover since the retailer
may be the only entity ‘reasonably available’ to the consumer; and (3) ensure fair
apportionment of risks since retailers may ‘adjust the costs of such protection
between them in the course of their continuing business relationship.’” Id.
(quoting Vandermark, 61 Cal. 2d at 262-63).
Where these policy goals are served, California courts have applied the strict
products liability doctrine not just to retailers, but “to others similarly involved in
the vertical distribution of consumer goods, including lessors of personal property
…, developers of mass-produced homes …, wholesale and retail distributors …,
and licensors…” Bay Summit Community Assn. v. Shell Oil Co., 51 Cal. App. 4th
762, 773, 59 Cal. Rptr. 2d 322 (1996) (citations omitted) (holding that defendant
“involved in the marketing process, but outside the vertical distribution chain” may
be strictly liable where there is “a sufficient causative relationship between the
defendant and the product”). “Although these defendants were not necessarily
involved in the manufacture or design of the final product, each was responsible
for passing the product down the line to the consumer.” Id.
As Defendants recognize in their briefing (Opp. at 7) and pointed out during
the hearing, strict liability may also extend to a party that is outside of the “vertical
distribution” chain so long as that party “plays an integral role in the producing and
marketing enterprise of a defective product and profits from placing the product
into the stream of commerce.” Arriaga v. CitiCapital Commercial Corp., 167 Cal.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-17-6406-MWF (MRWx)
Date: November 9, 2017
Title:
Wendy M. Soto v. Tristar Products, Inc., et al.
App. 4th 1527, 1535, 85 Cal. Rptr. 3d 143 (2008) (finance lessor not subject to
strict products liability under “marketing enterprise” theory). Under the broader
“marketing enterprise” theory of liability, there must be “a sufficient causative
relationship or connection between the defendant and the product so as to satisfy
the policies underlying the strict liability doctrine.” Id. There is a sufficient
causative relationship where: “(1) the defendant received a direct financial benefit
from its activities and from the sale of the product; (2) the defendant’s role was
integral to the business enterprise such that defendant’s conduct was a necessary
factor in bringing the product to the initial consumer market; and (3) the defendant
had control over, or a substantial ability to influence, the manufacturing or
distribution process.” Id. (quoting Bay Summit, 51 Cal. App. 4th at 778).
Defendants first argue that Costco Membership could not be subject to a
strict products liability claim because that doctrine “is generally limited to those
within the vertical distribution chain, i.e., manufacturers, distributors, and retailers”
and “Costco Membership is not the manufacturer, distributor, nor retailer of the
product.” (Opp. at 5). According to Defendants, Costco Membership is not in the
business of selling the Pressure Cooker or any other products, but strictly in the
business of selling memberships that people utilize to access Costco Wholesale
stores and all of those stores’ attendant products and services. (See Johnston Decl.
¶¶ 2-7). In connection with her Reply, Plaintiff has offered evidence that Costco
Membership operates the costco.com website, through which the Pressure Cooker
and other products are available for purchase. But this factual dispute, which must
be resolved in Plaintiff’s favor at this stage, is largely irrelevant for present
purposes because Defendants have cited no authority that clearly precludes Costco
Membership’s strict liability as a party “responsible for passing the product down
the line to the consumer,” Bay Summit, 51 Cal. App. 4th at 773, even if Costco
Wholesale is the only one of the Costco Defendants that directly sold the Pressure
Cooker to Plaintiff.
In Defendants’ own telling, consumers such as Plaintiff pay fees to Costco
Membership, in exchange for which they receive a membership to Costco
Wholesale, and this membership is the exclusive means for gaining access to
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-17-6406-MWF (MRWx)
Date: November 9, 2017
Title:
Wendy M. Soto v. Tristar Products, Inc., et al.
Costco Wholesale stores and other services such as “optometrists, pharmacists,
photography services, [and] travel assistance.” (Opp. at 9; Johnston Decl. ¶ 3).
While Ms. Johnston declared that “Costco Membership does not engage in any
marketing activities for any products sold at Costco Wholesale Corporation,”
Plaintiff offered evidence suggesting that Costco Membership does advertise
products in its magazine publication and on its website; again, a factual dispute
that must be resolved in Plaintiff’s favor at this juncture, and that will become
more crystallized following discovery in Superior Court.
Defendants argue that Costco Membership could not be strictly liable as a
party involved in bringing the Pressure Cooker to market because “Costco
Membership’s dominant purpose is to provide services, not to bring products to
market…” (Opp. at 9). While California courts have declined to extend the strict
products liability doctrine to companies that provide services through which a
plaintiff is injured by another company’s product, the cases Defendants cite are
distinguishable here. For example, in Ontiveros v. 24 Hour Fitness Corp. and
Grebing v. 24 Hour Fitness Corp., the Court of Appeal held that a defendantfitness club could not be strictly liable for injuries that its members sustained while
using defective exercise equipment because the “dominant purpose” of the
plaintiffs’ membership agreements was for the defendant-club to provide fitness
services, including things like personal training, aerobics and yoga classes, use of
locker rooms, and access to various courts, pools, saunas and the like. See Grebing
v. 24 Hour Fitness Corp., 234 Cal. App. 4th 631, 640, 184 Cal. Rptr. 3d 155
(2015); Ontiveros, 169 Cal. App. 4th at 434-35. In Ferrari v. Grand Canyon
Dories, the Court of Appeal held that the defendant river-rafting trip organizer
could not be strictly liable for injuries the plaintiff sustained as a result of a
defective raft because “[u]se of the raft … was merely an incident to th[e] service,”
which included “provid[ing] all the materials for the trip, instructions on rafting
safety, and guides to perform the labor and conduct the activities.” Ferrari v.
Grand Canyon Dories, 32 Cal. App. 4th 248, 259, 38 Cal. Rptr. 2d 65 (1995).
Unlike a gym membership or a river-rafting trip, purchasing a membership
from Costco Membership is a prerequisite to gaining access to Costco Wholesale
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-17-6406-MWF (MRWx)
Date: November 9, 2017
Title:
Wendy M. Soto v. Tristar Products, Inc., et al.
stores, which contain products that members are able to purchase. While Costco
locations may also offer services like optometry and pharmacies, it is not evident
that such services predominate in the mix of products and services on offer.
Anyone who has ever stepped foot in a Costco parking lot and viewed hordes of
people wielding jumbo-sized shopping carts filled with jumbo-sized consumables
could quite reasonably dispute the notion that the dominant purpose of a Costco
membership is services and not products. In any event, in the context of a strict
products liability claim under California law, the line between services and
products is one better drawn in Superior Court.
Defendants cite no authority under Vandermark and its progeny that would
obviously preclude strict products liability as to an entity, like Costco Membership,
that: (1) is a similarly-named affiliate of the retailer that sold the offending
product; (2) functions as the gatekeeper through which consumers must pass, by
paying a membership fee, to access the retailer-affiliate; and (3) functions as a
customer-communications arm of its retailer-affiliate, including by advertising
products that the retailer-affiliate sells.
And it seems that Plaintiff would have non-frivolous arguments that the
policy concerns identified in Vandermark may be served by applying the doctrine
of strict products liability to Costco Membership as a participant in the vertical
distribution chain: (1) Costco Membership, which has direct channels of
communication with Costco Wholesale members and advertises various products
to those members, would seemingly be in a position to exert some pressure on
Tristar and other manufacturers of goods sold at Costco to make their products
safer, either independently or in coordination with Costco Wholesale; (2) applying
the doctrine to the consumer-facing, membership-fee-collecting affiliate of a
members-only retailer, in addition to the retailer itself, would obviously afford an
injured plaintiff more protection than not doing so; and (3) just as Costco
Wholesale and Tristar would be in a position to apportion the costs of Plaintiff’s
injuries between one another, so too would Costco Wholesale, Costco
Membership, and Tristar.
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9

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-17-6406-MWF (MRWx)
Date: November 9, 2017
Title:
Wendy M. Soto v. Tristar Products, Inc., et al.
Similarly, based on the present record, which must be construed in
Plaintiff’s favor, Plaintiff could make a non-frivolous argument that Costco
Membership might be subject to strict liability under the broader “marketing
enterprise” theory. First, it could be argued that Costco Membership received a
direct financial benefit from the sale of the Pressure Cooker. While Defendants
argue that Costco Membership makes money only through collecting membership
fees, the reason people pay membership fees is to gain access to Costco Wholesale
and the products (including the Pressure Cooker) that it sells. Second, because
Costco Membership functions as Costco Wholesale’s gatekeeper and
communicates with members on Costco Wholesale’s behalf, it plays an integral
role in bringing together the Pressure Cooker and the Costco members who
purchase it. And third, as discussed above, as the gatekeeper and membercommunications arm of Costco Wholesale, Costco Membership seemingly would
have the ability to exert pressure on Tristar to make its products safer, either on its
own or in conjunction with Costco Wholesale. See Arriaga, 167 Cal. App. 4th at
1535; Bay Summit, 51 Cal. App. 4th at 778.
Defendants argue that “[w]ithout Costco Membership the membership fees
would not be collected but Costco [Wholesale] could still offer all of the same
products, albeit likely at a higher price.” (Opp. at 9). That may be, but it is not
how the Costco Defendants actually conduct their business. Given the Costco
Defendants’ seemingly unique business structure and the lack of on-point
authority, it would be improper for this Court to presume that Plaintiff could not
state a viable strict products liability claim against Costco Membership under
California law, as either a participant in the vertical distribution chain or under the
broader “marketing enterprise” theory. That question is better left to the Superior
Court and, perhaps, the state appellate courts.
In sum, Defendants have failed to demonstrate that there is no possibility
that Plaintiff could state a viable strict products liability claim against Costco
Membership, and the Court thus cannot conclude that Costco Membership was
improperly joined. Having reached this conclusion, the Court need not address the
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10

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-17-6406-MWF (MRWx)
Date: November 9, 2017
Title:
Wendy M. Soto v. Tristar Products, Inc., et al.
viability of Plaintiff’s negligence and implied warranty claims against Costco
Membership. Plaintiff's Motion is thus GRANTED, and the case will be
remanded to Superior Court.
C. Attorneys’ Fees
Plaintiff also requests an award of attorneys’ fees and costs incurred in
connection with Defendants’ removal and this Motion. (Mot. at 12). 28 U.S.C.
section 1447(c) provides that “[a]n order remanding the case may require payment
of just costs and any actual expenses, including attorney fees, incurred as a result
of the removal.” The Court may award attorneys’ fees where “the removing party
lacked an objectively reasonable basis for seeking removal.” Martin v. Franklin
Capital Corp., 546 U.S. 132, 141 (2005).
Whether or not to award fees and costs under section 1447(c) is within the
Court’s discretion. See 28 U.S.C. § 1447(c) (“order remanding the case may
require payment of just costs and any actual expenses, including attorney fees,
incurred as a result of the removal”) (emphasis added); Dall v. Albertson’s Inc.,
349 F. App’x 158, 159 (9th Cir. 2009) (“Following remand of a case upon
unsuccessful removal, the district court may, in its discretion, award attorney’s fees
. . . .”). Given that removal in this action was at least colorable, if not more,
Plaintiff’s request for costs and attorneys’ fees is DENIED.
III.

CONCLUSION
For the foregoing reasons, the Motion to Remand is GRANTED.

The Court REMANDS the action to the Superior Court of the State of
California for the County of Santa Barbara.
IT IS SO ORDERED.

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