Shadylane Holdings 1006, LLC et al v. Caliber Home Loans, Inc. et al

Filing 17

MINUTE ORDER (IN CHAMBERS) by Judge Andrew J. Guilford: Remanding Case to Superior Court of California, Orange County, Case number 30-2016-00845362. The Court therefore REMANDS this case to state court for lack of subject matter jurisdiction.(see document for details) (Case Terminated. Made JS-6) (mba)

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

SACV 16-0872 AG (DFMx)

Title

SHADYLANE HOLDINGS 1006 ET AL. v. CALIBER HOME LOANS
ET AL.

Present: The
Honorable

Date

July 8, 2016

ANDREW J. GUILFORD

Lisa Bredahl
Deputy Clerk
Attorneys Present for Plaintiffs:

Not Present
Court Reporter / Recorder

Tape No.

Attorneys Present for Defendants:

Proceedings:

[IN CHAMBERS] ORDER REMANDING ACTION TO
STATE COURT
Plaintiffs David and Nancy Epstein and Shadylane Holdings 1006, LLC sued Defendants
Caliber Home Loans, Inc. and Quality Loan Service Corporation in state court for claims
arising from a pending home foreclosure. (Complaint, Dkt. No. 1, Ex. A.) Caliber is the
lender of the Epsteins’ defaulted home loan and Quality is the trustee under the deed of
trust. (Id. ¶¶ 3, 7.)
On May 11, 2016, Caliber removed this case to this Court, seeking to invoke this Court’s
diversity jurisdiction. (Notice of Removal, Dkt. No. 1.) On June 8, 2016, the Court issued an
Order to Show Cause (“OSC”) as to why this case shouldn’t be remanded for lack of subject
matter jurisdiction. In particular, the Court was concerned about whether there was complete
diversity of citizenship, as both Quality and Plaintiffs are California citizens. (OSC, Dkt. No.
10.) Caliber responded, arguing that Quality should be disregarded for purposes of diversity
jurisdiction because Quality is a “nominal” defendant. (Response to OSC, Dkt. No. 13.) The
Court isn’t persuaded.
The Court finds this matter appropriate for disposition without oral argument. The Court
REMANDS this case to state court for lack of subject matter jurisdiction.
CIVIL MINUTES - GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 16-0872 AG (DFMx)

Date

July 8, 2016

Title

SHADYLANE HOLDINGS 1006 ET AL. v. CALIBER HOME LOANS
ET AL.

LEGAL STANDARD
The Court must jealously guard its jurisdiction. Olmos v. Residential Credit Sols., Inc., 92 F. Supp.
3d 954, 955 (C.D. Cal. 2015). Courts have diversity jurisdiction over cases where the parties
are diverse and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332. Diversity
jurisdiction requires the parties on each side of the “v.” to be citizens of different states — a
concept called “complete diversity.” Hunter v. Philip Morris U.S.A., 582 F.3d 1039, 1043 (9th
Cir. 2009). Removing defendants must show complete diversity existed at the time of
removal. See Strotek Corp. v. Air Transp. Ass’n of Am., 300 F.3d 1129, 1131 (9th Cir. 2002). For
purposes of complete diversity, “‘[a] federal court must disregard nominal or formal parties
and rest jurisdiction only upon the citizenship of real parties to the controversy.’” Kuntz v.
Lamar Corp., 385 F.3d 1177, 1183 (9th Cir. 2004) (quoting Navarro Sav. Ass’n v. Lee, 446 U.S.
458, 461 (1980)). Removing defendants have the burden of proving a defendant is a nominal
party. Sanchez v. Wells Fargo Bank, N.A., No. LACV 15-07720 JAK (PJWx), 2016 WL
1408051, at *3 (C.D. Cal. Apr. 8, 2016).
ANALYSIS
Caliber has not met its burden of showing that Quality is a “nominal” party.
First, Quality did not achieve formal status as a nominal party at the time of removal. Under
California Civil Code Section 2924l, trustees may become a nominal party after they file a
declaration of non-monetary status and plaintiffs make no objection to that status within
fifteen days. Cal. Civ. Code § 2924l(d). Here, Caliber filed its Notice of Removal only
minutes after Quality filed such a declaration of non-monetary status in state court.
(Response to OSC, Dkt. No. 13.) Thus, Caliber deprived Quality of the fifteen-day period
needed to become a nominal party under Section 2924l. See Sun v. Bank of Am. Corp., No.
SACV 10-0004 AG (MLGx), 2010 WL 454720, at *2 (C.D. Cal. Feb. 8, 2010).
Second, Caliber has not persuaded the Court that Quality is a nominal party “with nothing at
stake [to therefore] be disregarded in determining diversity, despite the propriety of [its]
CIVIL MINUTES - GENERAL
Page 2 of 3

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

SACV 16-0872 AG (DFMx)

Date

July 8, 2016

Title

SHADYLANE HOLDINGS 1006 ET AL. v. CALIBER HOME LOANS
ET AL.

technical joinder.” Id. (citing Strotek, 300 F.3d at 1133). The Ninth Circuit has recognized that
trustees who are “joined purely as a means of facilitating collection” are“paradigmatic
nominal defendant[s].” SEC v. Colello, 139 F.3d 674, 676 (9th Cir. 1998). But a defendant
loses nominal status where a plaintiff’s substantive allegations go beyond claims arising from
mere collection of the judgment. Sanchez, 2016 WL 1408051, at *5.
Plaintiffs allege that Quality failed to identify the amount due on the Epsteins’ home loan.
Under California Civil Code Section 2924(b), “trustee[s] shall incur no liability for any good
faith error resulting from reliance on information provided in good faith by the beneficiary
regarding the nature and the amount of the default . . . .” The issue of whether Quality made
a good-faith error not only involves a substantive claim that goes beyond a trustee’s role in
facilitating collection, but also requires the Court to weigh the merits of such a claim. The
Court declines to analyze the merits of that claim at this early stage.
Because parties on either side of the “v.” are California citizens, there is no complete
diversity. Hunter, 582 F.3d at 1043. And without complete diversity, the Court lacks subject
matter jurisdiction over this action.
DISPOSITION
The Court therefore REMANDS this case to state court for lack of subject matter
jurisdiction.

:
Initials of Preparer

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