Jane Doe v. Medalist Holdings, Inc. et al

Filing 40

MINUTES (In Chambers): ORDER Re Plaintiff's Motion to Remand 26 by Judge Michael W. Fitzgerald: 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 Riverside. (MD JS-6. Case Terminated.) (jp)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

JS-6

CIVIL MINUTES—GENERAL
Case No. EDCV-17-1264-MWF (FFMx)
Date: September 1, 2017
Title:
Jane Doe v. Medalist Holdings, L.L.C. 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 [26]
Before the Court is Plaintiff’s Motion to Remand, filed on July 10, 2017.
(Docket No. 26). On August 8, 2017, Defendants Medalist Holdings, Inc.,
Leeward Holdings, LLC, Camarillo Holdings, LLC, Dartmoor Holdings, LLC, IC
Holdings, LLC, Backpage.com, LLC, New Times Media, LLC, UGC Tech Group
C.V., Atlantische Bedrijven C.V., Carl Ferrer, James Larkin, and Michael Lacey
(collectively, the “Backpage Defendants”) filed an Opposition (Docket No. 32-1),
and on August 14, 2017, Plaintiff filed a Reply (Docket No. 36). On August 28,
2017, the Court held a hearing on Plaintiff’s Motion.
For the reasons set forth below, Plaintiff’s Motion is GRANTED. In short,
Plaintiff did not “fraudulently join” or “procedurally misjoin” non-diverse
Defendant Reson Tredon Richard, and the Court thus lacks diversity jurisdiction
over this action.
I.

BACKGROUND

On January 25, 2017, Plaintiff filed a Complaint against the Backpage
Defendants (minus Atlantische Bedrijven C.V.) and John Doe defendants in the
Riverside County Superior Court. (Complaint, Docket No. 1-1 at 2-28). The crux
of Plaintiff’s Complaint was that Plaintiff was “a minor girl who was sold for sex
on the website www.backpage.com,” and that the Backpage Defendants
“knowingly created an online marketplace for sex trafficking on
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CIVIL MINUTES—GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. EDCV-17-1264-MWF (FFMx)
Date: September 1, 2017
Title:
Jane Doe v. Medalist Holdings, L.L.C. et al.
www.backpage.com, and then helped sex traffickers create and develop their sex
ads so the Backpage.com defendants could profit from the ads.” (Id. ¶ 1.1).
Plaintiff asserted the following state law claims against the Backpage Defendants:
negligence; intentional infliction of emotional distress; assault and battery; unjust
enrichment; invasion of privacy; and civil conspiracy. (Id. ¶¶ 5.1 – 5.32).
On February 10, 2017, Plaintiff filed a First Amended Complaint (“FAC”) in
the Superior Court. (FAC, Docket No. 1-1 at 98-127). Among other changes,
Plaintiff added Atlantische Bedrijven C.V. as a defendant. (FAC ¶ 2.13). Plaintiff
alleged that each of the Backpage Defendants (now including Atlantische
Bedrijven C.V.) “owned, operated, designed and controlled the
[www.backpage.com] website, including its content,” and “profited from the
website …, including sex ads posted of [Plaintiff] and other women and children,
even though [they] knew those profits were derived from illegal conduct.” (Id. ¶¶
2.5 – 2.16). Plaintiff also added Richard as a defendant, alleging that he knew that
Plaintiff was a minor yet “engaged in communications with [Plaintiff] for immoral
purposes, took illicit photographs of [Plaintiff], posted illicit photographs of
[Plaintiff] on www.backpage.com, and actively solicited adults to have sex with
Plaintiff … by posting sex ads for [Plaintiff] on www.backpage.com.” (Id. ¶ 2.21).
Plaintiff alleged that Richard paid the Backpage Defendants “a fee in order to
advertise [Plaintiff] for sex on www.backpage.com,” in exchange for which the
Backpage Defendants “ ‘moderated’ each ad of [Plaintiff] to make it less obvious
that the ads were for sex” and “then posted a sanitized version of each add on
www.backpage.com.” (Id. ¶¶ 4.6, 4.7).
Plaintiff and Richard are California residents. (Declaration of Devin M.
Storey (Docket No. 26-2) ¶ 10; AC ¶ 2.21). The Backpage Defendants are
variously domiciled in Delaware, Arizona, Texas, the Netherlands, and Curacao.
(AC ¶¶ 2.5-2.16; Notice of Removal (“NoR”) (Docket No. 1) ¶¶ 9, 26-62). The
Backpage Defendants removed the action to this Court on June 23, 2017, within 30
days of service upon Atlantische Bedrijven C.V. (NoR ¶¶ 6, 7, 17-19). In
removing this action, the Backpage Defendants invoke this Court’s diversity
jurisdiction, arguing that Richard was “procedurally” and/or “fraudulently”
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CIVIL MINUTES—GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. EDCV-17-1264-MWF (FFMx)
Date: September 1, 2017
Title:
Jane Doe v. Medalist Holdings, L.L.C. et al.
misjoined and that his presence in the action should thus be disregarded for
purposes of diversity jurisdiction analysis. (Id. ¶¶ 63-77).
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 Richard defeats complete
diversity, specifically whether he is misjoined in some fashion.
“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, 582 F.3d at
1042 (internal quotation marks and citation omitted).
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).
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.
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CIVIL MINUTES—GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. EDCV-17-1264-MWF (FFMx)
Date: September 1, 2017
Title:
Jane Doe v. Medalist Holdings, L.L.C. et al.
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).
The Backpage Defendants first assert that they “did not remove on the basis
of fraudulent joinder” (Opp. at 6), and later argue that “Richard was fraudulently
misjoined to destroy diversity.” (Id. at 18). Regardless, the Backpage Defendants
do not have a viable fraudulent joinder argument. Rather than attack the
sufficiency of the state law claims against Richard contained in the AC, the
Backpage Defendants attack Plaintiff’s motives in naming Richard as a defendant.
(See Opp. at 18-19).
The Backpage Defendants do not cite a single case from within this Circuit
supporting the proposition that a plaintiff’s motivation has any bearing in this
context. Their arguments that Richard is “an afterthought” and that Plaintiff “has
no real intention of seeking relief from Richard” are irrelevant for purposes of the
fraudulent joinder analysis. Indeed, Plaintiff’s counsel could boast that they named
Richard solely as a stratagem to defeat diversity, and there is nothing the Backpage
Defendants could do about it.
The Backpage Defendants also attack the FAC’s conspiracy allegations as
“conclusory” and argue that they should not be denied their “right to a federal
forum” as a result of those allegations. But the fraudulent joinder analysis centers
on whether the plaintiff could plausibly assert a state law claim against the nondiverse defendant, see, e.g., Macey, 220 F. Supp. 2d at 1117, not whether the
plaintiff has plausibly alleged that the non-diverse defendant(s) and the diverse
defendant(s) conspired with one another. Moreover, even if a viable conspiracy
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CIVIL MINUTES—GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. EDCV-17-1264-MWF (FFMx)
Date: September 1, 2017
Title:
Jane Doe v. Medalist Holdings, L.L.C. et al.
claim were necessary and the AC’s conspiracy allegations were deficient, this
Court would not exercise removal jurisdiction absent a credible argument that the
Superior Court would sustain a demurrer without leave to amend. See, e.g.,
Johnson v. Wells Fargo & Co., No. CV 14-06708 MMM JCX, 2014 WL 6475128,
at *8 (C.D. Cal. Nov. 19, 2014) (collecting cases). The Backpage Defendants have
not made that argument.
Finally, in attacking the conspiracy allegations, the Backpage Defendants
cite Section 230 of the Communications Decency Act of, 47 U.S.C. § 230, and
Kimzey v. Yelp! Inc., 836 F.3d 1263 (9th Cir. 2016), a case concerning a website’s
immunity against claims relating to content created and posted by a third party
pursuant to Section 230. Section 230 “‘only protects from liability (1) a provider
or user of an interactive computer service (2) whom the plaintiff seeks to treat,
under a state law cause of action, as a publisher or speaker (3) of information
provided by another content provider.’” Kimzey, 836 F.3d at 1268 (quoting Barnes
v. Yahoo!, Inc., 570 F.3d 1096, 1100-01 (9th Cir. 2009)). “[A] website may lose
immunity under the CDA by making a material contribution to the creation or
development of the content.” Id. at 1269.
The merits of the Backpage Defendants’ Section 230 arguments are
irrelevant at this juncture, as it is the Plaintiff’s claims that matter in the removal
analysis, not the Backpage Defendants’ projected federal immunity argument. See
Hunter, 582 F.3d at 1042-43 (“It is ‘settled that a case may not be removed to
federal court on the basis of a federal defense, including the defense of preemption,
even if the defense is anticipated in the plaintiff’s complaint, and even if both
parties admit that the defense is the only question truly at issue in the case.’”)
(quoting Franchise Tax Bd. v. Contr. Laborers Vacation Trust, 463 U.S. 1, 14
(1983)). As counsel for the Backpage Defendants acknowledged during the
hearing, there is no case law suggesting that a Section 230 defense carries with it a
right to remove a case from state court. The Court understands counsel’s concern
that federal courts might “rarely” hear cases that implicate Section 230 due to the
presence of non-diverse defendants. That is a concern that Congress could
address; to date, it has not. Just as a defamation defendant may raise the First
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CIVIL MINUTES—GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. EDCV-17-1264-MWF (FFMx)
Date: September 1, 2017
Title:
Jane Doe v. Medalist Holdings, L.L.C. et al.
Amendment standard in state court, the Backpage Defendants may present their
Section 230 arguments in the Superior Court.
B.

“Procedural Misjoinder”

The Backpage Defendants urge the Court to disregard Richard’s presence
and the lack of complete diversity pursuant to the doctrine of “procedural
misjoinder,” a theory advanced by the Eleventh Circuit in Tapscott v. MS Dealer
Service Corp., 77 F.3d 1353 (11th Cir. 1996), and not adopted by the Ninth
Circuit. (See Opp. at 5-13). Under the Eleventh Circuit’s procedural misjoinder
doctrine, lack of complete diversity may be disregarded and a case may be
removed where the plaintiff has asserted claims against “resident defendants [that]
have no real connection with the controversy” between the plaintiff and the nonresident defendants. Tapscott, 77 F.3d at 1360 (emphasis added).
Though the Backpage Defendants cite Cal. Dump Truck Owners Ass’n v.
Cummins Engine Co., 24 Fed. Appx. 727, 729 (9th Cir. 2001), in which the Court,
“[f]or purposes of discussion … assume[d], without deciding, that this circuit
would accept the doctrines of fraudulent and egregious joinder,” the Ninth Circuit
has never endorsed the theory of “procedural misjoinder.” See J.T. Associates,
LLC v. Fairfield Development, L.P., No. 15-cv-04913-BLF, 2016 WL 1252612, at
*2 (N.D. Cal. Mar. 31, 2016) (noting that “the Ninth Circuit has not adopted the
procedural misjoinder doctrine” and rejecting it as likely to cause confusion and
inconsistent with the strong presumption against removal jurisdiction). This Court
agrees with the Court in J.T. Associates that the procedural misjoinder doctrine
does not comport with the requirement to resolve all doubts in favor of remand and
that it unnecessarily creates confusion. Determining whether a plaintiff has stated
a viable state law claim against a non-diverse defendant in connection with the
fraudulent joinder analysis is relatively straightforward. Determining whether or
not a plaintiff’s claims against a non-diverse defendant have a “real connection”
with her claims against a diverse defendant is far more discretionary. The Court
thus declines to adopt the procedural misjoinder doctrine.
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CIVIL MINUTES—GENERAL
6

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. EDCV-17-1264-MWF (FFMx)
Date: September 1, 2017
Title:
Jane Doe v. Medalist Holdings, L.L.C. et al.
In any event, even if it were inclined to apply Tapscott, the Court would
nonetheless find that Plaintiff’s claims against Richard are sufficiently related to
her claims against the Backpage Defendants to fall outside of the procedural
misjoinder exception. Compare Sutton v. Davol, Inc., 251 F.R.D. 500 (E.D. Cal.
2004) (severing and remanding medical malpractice claims against non-diverse
doctor and hospital, and retaining jurisdiction over products liability claims against
diverse medical device manufacturers) and Greene v. Wyeth, 344 F. Supp. 2d 674
(D. Nev. 2004) (severing and remanding claims against non-diverse doctor and
pharmaceutical sales representative, and retaining jurisdiction over products
liability claims against diverse pharmaceutical manufacturer and its affiliates) with
K.R. v. Backpage.com, No. 17-CV-299-WKW (M.D. Ala. Aug. 18, 2017) (Docket
No. 37) (applying Tapscott and finding that underage sex trafficking victim’s
claims against non-diverse former pimp who posted her on Backpage.com website
were sufficiently related to claims against website operators to avoid application of
procedural misjoinder doctrine).
Accordingly, neither the fraudulent joinder nor the procedural misjoinder
exceptions apply to Plaintiff’s state law claims against Richard and the Court thus
lacks diversity jurisdiction over this action.
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 Riverside.
IT IS SO ORDERED.

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