Hamid Khorrami et al v. Wells Fargo Bank, N.A. et al

Filing 19

MINUTES (IN CHAMBERS) Order Remanding Case by Judge Andrew J. Guilford: The Court REMANDS this case to state court and VACATES the pending Motion to dismiss (Dkt. No. 10) and the pending Motion to Remand. (Dkt. No. 14.) See document for further information. MD JS-6. Case Terminated. (lwag)

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

SACV 16-1344 AG (DFMx)

Title

HAMID KHORRAMI ET AL. v. WELLS FARGO BANK ET AL.

Present: The
Honorable

September 7, 2016

ANDREW J. GUILFORD

Lisa Bredahl
Deputy Clerk
Attorneys Present for Plaintiffs:
Proceedings:

Date

Not Present
Court Reporter / Recorder

Tape No.

Attorneys Present for Defendants:

[IN CHAMBERS] ORDER REMANDING CASE

Plaintiffs Hamid and Neda Khorrami sued Defendants Wells Fargo; NBS Default Services,
LLC (“NBS”); and Glenwood Trust #27350, PDQ Investment, LLC (“Glenwood”) in state
court for claims arising out of a home loan.
Wells Fargo removed the case to federal court, asserting that this Court has subject matter
jurisdiction on diversity grounds. In its removal, Wells Fargo named Glenwood Trust
#27350 and PDQ Investment, LLC as two separate parties, but Plaintiffs’ complaint treated
Glenwood as one party. The Court will also treat Glenwood as one party and this treatment
does not change the Court’s analysis because the entity or entities are both California
citizens. Wells Fargo stated that the amount in controversy was met because the loan
amount and value of the property clearly exceed $75,000 and Plaintiffs sought actual
damages exceeding $800,000. Wells Fargo also tried to argue that complete diversity was met
because it is a South Dakota citizen, NBS is a Texas citizen, and Plaintiffs are California
citizens. But Wells Fargo argued that Glenwood Trust #27350 and PDQ Investment, LLC,
both California citizen, are fraudulently joined and should not be considered in a diversity
jurisdiction analysis.
The Court was concerned about subject matter jurisdiction and ordered Wells Fargo to
appear at a hearing on August 29, 2016 to show cause as to why this case should not be
CIVIL MINUTES - GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 16-1344 AG (DFMx)

Date

September 7, 2016

Title

HAMID KHORRAMI ET AL. v. WELLS FARGO BANK ET AL.

remanded. Wells Fargo did appear but the Court is not convinced that it has subject matter
jurisdiction and now REMANDS this case to state court and VACATES the pending
Motion to dismiss (Dkt. No. 10) and the pending Motion to Remand. (Dkt. No. 14.)
1.

LEGAL STANDARD
1.1

Subject Matter Jurisdiction Generally

The Constitution confines federal courts’ power to rule to certain subject matters. See U.S.
Const. art. III, § 2. Courts themselves police their exercise of power. They take this sacred
duty seriously and guard their limited jurisdiction jealously. See Abramson v. Marriott Ownership
Resorts, Inc., 155 F. Supp. 3d 1056, 1060 (C.D. Cal. 2016).
This jealousy gets expressed in a lot of ways. First, federal courts start off assuming that cases
are outside of their power to rule. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377
(1994). Courts require parties arguing for jurisdiction to establish otherwise. Id. Second,
federal courts demand that parties arguing for jurisdiction address jurisdiction as soon as they
get to the federal courthouse doors, in their complaints or notices of removal. See Fed. R.
Civ. P. 8(a)(1); 28 U.S.C. § 1446(a). Third, federal courts raise jurisdiction whenever they
think it’s a question, at any point in a case, on their own without the parties’ involvement. See
Fed. R. Civ. P. 12(h)(3). Fourth, federal courts are particularly skeptical of cases removed
from state court. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992).
The strong presumption against removal jurisdiction means that defendants have the burden
of establishing, by a preponderance of evidence, that removal is proper. See id. Courts
“strictly construe the removal statute against removal jurisdiction,” so “[f]ederal jurisdiction
must be rejected if there is any doubt” about jurisdiction. Id.
1.2

Diversity Jurisdiction Specifically

Diversity jurisdiction allows federal courts to rule in civil actions between citizens of different
states where the matter in controversy exceeds $75,000. See 28 U.S.C. § 1332(a). Further,
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 16-1344 AG (DFMx)

Date

September 7, 2016

Title

HAMID KHORRAMI ET AL. v. WELLS FARGO BANK ET AL.

diversity jurisdiction requires that each plaintiff in a case be a citizen of a different state than
each defendant—in other words, that there be complete diversity. See id.
1.3

The Sham Defendant Doctrine

The sham defendant doctrine—sometimes labeled as fraudulent joinder—is implicated here.
A defendant trying to get into federal court will often argue that a party the plaintiff brought
into the lawsuit was only included to prevent potential or destroy existing diversity in a case
where diversity jurisdiction might otherwise exist. To succeed on this argument, the
removing party must convince the court that the plaintiff’s failure to state a claim against the
non-diverse defendant is “obvious according to the well-settled rules of the state.” United
Computer Sys. v. AT&T Corp., 298 F.3d 756, 761 (9th Cir. 2002). If the removing party is
persuasive, the court is supposed to ignore the citizenship of the fraudulently joined sham
defendant when deciding whether there’s the requisite diversity of citizenship. See Caterpillar,
Inc. v. Lewis, 519 U.S. 61, 68 (1996); Padilla v. AT&T Corp., 697 F. Supp. 2d 1156, 1158 (C.D.
Cal. 2009).
The argument that a plaintiff fraudulently joined the only non-diverse party is increasingly
being brought in federal courts. See Padilla, 697 F. Supp. 2d at 1157; see also E. Farish Percy,
Making a Federal Case of It: Removing Civil Cases to Federal Court Based on Fraudulent
Joinder, 91 Iowa L. Rev. 189, 191 (2005). As this argument has become more common, so
has its misuse.
2.

ANALYSIS

No one disputes that Glenwood destroys diversity if it is a party to this case and its
citizenship is considered. And if a non-diverse party is joined to a diversity jurisdiction case,
the district court must remand the case because it no longer has jurisdiction. See Morris v.
Princess Cruises, Inc., 236 F.3d 1061, 1068 (9th Cir. 2001).
Wells Fargo must make its showing with the Court resolving “all disputed questions of fact
and all ambiguities in the controlling state law . . . in the [Plaintiffs’] favor.” Id. (emphases
added). The Plaintiffs’ failures on this front must be “obvious.” United Computer Sys., 298 F.3d
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Page 3 of 4

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

SACV 16-1344 AG (DFMx)

Date

September 7, 2016

Title

HAMID KHORRAMI ET AL. v. WELLS FARGO BANK ET AL.

at 761. If there are any doubts, the defendant loses. See Gaus, 980 F.2d at 566.
Wells Fargo states that Glenwood is a fraudulently joined party because the complaint
doesn’t allege any wrongful conduct by and doesn’t seek any relief from Glenwood. (Dkt.
No. 1 at 6:24–27.) But the complaint alleges that all “Defendants were agents, servants,
employees, alter egos, superiors, successors in interest, joint venturers and/or coconspirators of each of their co-defendants.” (Dkt. No. 1 at Ex. A.) And it alleges that
“Defendants, and each of them, knowingly and willfully conspired, engaged in a common
enterprise, and engaged in a common course of conduct to accomplish the wrongs.” (Id.)
Further, Glenwood was the purchaser of Plaintiffs’ foreclosed property at the auction sale,
(Id. at 8) so it is possible that Plaintiffs might recover from Glenwood, and Glenwood seems
far from a sham or fraudulent defendant.
Joining the purchaser of a foreclosed property and alleging that the purchaser was an agent
of the bank that foreclosed on the property is not fraud. Glenwood was not a fraudulently
joined party and its citizenship must be considered in a diversity analysis. Since there is no
complete diversity of citizenship here, this case must be remanded to state court for lack of
subject matter jurisdiction.
3.

DISPOSITION

The Court REMANDS this case to state court and VACATES the pending Motion to
dismiss (Dkt. No. 10) and the pending Motion to Remand. (Dkt. No. 14.)

:
Initials of
Preparer

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