Anderson Stephan v. Costco Warehouse Corporation et al

Filing 18

MINUTES (IN CHAMBERS) ORDER Granting 11 Motion to Remand by Judge Andrew J. Guilford remanding case to Superior Court of California, County of Orange, Case number 30-02018-00979830-CU-PO-CJC. The Court GRANTS Plaintiff's motion to remand. (Dkt. No. 11.) All other pending mattersare VACATED. (see document for details). Case Terminated. Made JS-6 (dro)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

JS-6

CIVIL MINUTES – GENERAL
Case No. SACV 18-00712 AG (AFMx)
Date
Title

June 18, 2018

ANDERSON STEPHAN v. COSTCO WHOLESALE CORPORATION ET
AL.

Present: The Honorable
ANDREW J. GUILFORD
Lisa Bredahl
Not Present
Deputy Clerk
Court Reporter / Recorder
Tape No.
Attorneys Present for Plaintiffs:
Attorneys Present for Defendants:
Proceedings:

[IN CHAMBERS] ORDER GRANTING MOTION TO
REMAND

In March 2018, Plaintiff Anderson Stephan filed a lawsuit in the Orange County Superior
Court against Costco Wholesale Corporation (referred to here as “Costco”), and certain
unknown defendants referred to as “Does,” for injuries Plaintiff allegedly suffered when a
case of water bottles fell on him while he was shopping. Plaintiff later amended his complaint
to include as defendants Costco Wholesale Membership, Inc. (referred to here as
“Membership”) and Felipe Hernandez. Costco then removed the case to federal court on
diversity jurisdiction grounds. Plaintiff now moves to remand.
The Court GRANTS Plaintiff’s motion to remand. (Dkt. No. 11.) All other pending matters
are VACATED.
1. BRIEF BACKGROUND
Plaintiff is a California citizen. He alleges that while he was shopping at a Costco store in
Fountain Valley, a case of water bottles fell on him, injuring him. So on March 15, 2018,
Plaintiff sued Costco, a Washington citizen, in California state court, purporting to allege
negligence-based claims. (Notice of Removal, Dkt. No. 1 at ¶ 6 & Ex. A.)
On March 29, 2018, Costco sought to obtain a stipulation to cap damages at $75,000 “to
avoid removal to federal court.” (Hosseini Decl., Dkt. No. 12-1 at ¶ 4.) Plaintiff refused.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES – GENERAL
Case No. SACV 18-00712 AG (AFMx)
Date
Title

June 18, 2018

ANDERSON STEPHAN v. COSTCO WHOLESALE CORPORATION ET
AL.

Plaintiff then amended his complaint to add, or “Doe in,” named defendants to replace some
of the Doe defendants. Plaintiff added Membership on April 2, 2018 and Hernandez on April
16, 2018. Plaintiff contends that Hernandez is a manager at the store where Plaintiff was
injured. Membership and Hernandez were served on April 10, 2018 and April 23, 2018,
respectively. They are both California citizens.
On April 25, 2018, Costco filed a notice of removal, purporting to assert diversity jurisdiction.
At the time, Costco and Membership apparently weren’t aware that Hernandez had been
named a defendant. The notice of removal contends that Plaintiff’s amendment to add
Membership as a defendant was a “sham.” (Dkt. No. 1 at ¶ 9.) Plaintiff now moves to remand
this action to state court.
2. LEGAL STANDARD
Federal courts possess “only that power authorized by Constitution and statute.” Kokkonen v.
Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). The Constitution provides, in
Article III, § 2, that “[t]he judicial Power [of the United States] shall extend . . . to all Cases . . .
between Citizens of different States.” And Congress, in 28 U.S.C. § 1332(a), has authorized
district courts to exercise jurisdiction over “all civil actions where the matter in controversy
exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . .
citizens of different States.” Thus, § 1332 allows what’s called diversity jurisdiction.
“Historically, diversity jurisdiction has required that each plaintiff in a case be a citizen of a
different state than each defendant—a concept called ‘complete diversity.’” Abramson Marriott
Ownership Resorts, Inc., 155 F. Supp. 3d 1056, 1060 (C.D. Cal. 2016).
“Nothing is to be more jealously guarded by a court than its jurisdiction.” United States v. CejaPrado, 333 F.3d 1046, 1051 (9th Cir. 2003) (citation omitted). “It is to be presumed that a
cause lies outside of [a federal court’s] limited jurisdiction,” and “the burden of establishing
the contrary rests upon the party asserting jurisdiction.” Kokkonen, 511 U.S. at 377. Thus,
principles of federalism, due respect for the state courts, comity, and judicial economy require
courts to “scrupulously confine their [removal] jurisdiction to the precise limits which
[Congress] has defined.” See Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 109 (1941). Put
differently, removal jurisdiction should be strictly construed in favor of remand. Harris v.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES – GENERAL
Case No. SACV 18-00712 AG (AFMx)
Date
Title

June 18, 2018

ANDERSON STEPHAN v. COSTCO WHOLESALE CORPORATION ET
AL.

Bankers Life and Cas. Co., 425 F.3d 689, 698 (9th Cir. 2005) (citing Shamrock Oil & Gas, 313
U.S. at 108–09). “Federal jurisdiction must be rejected if there is any doubt as to the right of
removal.” Gaus v. Miles, 980 F.2d 564, 566 (9th Cir. 1992) (citation omitted). “The ‘strong
presumption’ against removal jurisdiction means that the defendant always has the burden of
establishing that removal is proper.” Id. (citation omitted).
3. ANALYSIS
3.1 Motion to Remand
3.1.1 Preliminary Matters
Plaintiff urges the Court not to consider the declaration of Shelley Sefton, claims specialist for
Costco, which was untimely. (Reply, Dkt. No. 14 at 9–10.) Broadly speaking, Sefton’s
declaration discusses the role and authority of Membership.
“The Court may decline to consider any . . . document not filed within the deadline set by
order or local rule.” C.D. Cal. L.R. 7-12. Sefton’s declaration was signed and filed on May 31,
2018, when Costco’s opposition was due on May 25, 2018. See Fed. R. Civ. P. 6; C.D. Cal.
L.R. 7-9. (Sefton Decl., Dkt. No. 13.) The Local Rules explain that “the evidence upon which
the opposing party will rely in opposition to the motion” is due by the same deadline as the
opposition brief itself. See C.D. Cal. L.R. 7-9. So Sefton’s declaration, like any other evidence
supporting Costco’s opposition, was due on May 25, 2018.
Costco didn’t offer any justification for the delay or ask to be excused from the ordinarily
applicable deadlines when filing Sefton’s declaration. Instead, Costco’s counsel generally
mentions the issue in a footnote in his own declaration.
Due to the Memorial Day holiday weekend, Defendants opposition is due Friday,
May 25, 2018 rather than the usual one-week after electronic service of a motion.
Given the short time to prepare this opposition—[four] days and that relevant
parties are unavailable due to the holiday, undersigned counsel states facts on
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES – GENERAL
Case No. SACV 18-00712 AG (AFMx)
Date
Title

June 18, 2018

ANDERSON STEPHAN v. COSTCO WHOLESALE CORPORATION ET
AL.

information and belief where necessary and will supplement such facts with
admissible evidence and testimony as soon as possible.
(Dkt. No. 12-1 at ¶ 8 n.1.) Even assuming that this was an appropriate way to deal with the
timeliness of Costco’s evidentiary submissions, the explanation offered isn’t persuasive. Since
Costco removed this case on the theory that Membership was a sham defendant, it was
Costco’s burden to establish federal court jurisdiction upon removal. See Gaus, 980 F.2d at
566. Further, the parties met and conferred regarding Plaintiff’s motion to remand on May 10,
2018, eleven days before the motion was filed. And it was three days after Memorial Day that
Sefton’s declaration was signed and filed.
So the Court hasn’t considered Sefton’s declaration for the purposes of this motion. See C.D.
Cal. L.R. 7-12. But as shown in the next section, the outcome would have been the same
either way.
3.1.2 Analysis
As mentioned, Costco invokes diversity jurisdiction. To start, it’s unclear that the amount in
controversy involved in this case exceeds $75,000. What is clear is that Plaintiff’s refusal to
stipulate that his damages don’t exceed $75,000 doesn’t sufficiently establish that his damages
do exceed $75,000. See Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 402–04 (9th Cir. 1996);
Soriano v. USAA Ins. Agency, Inc., No. 3:09-CV-00661-RCJ-(RAM), 2010 U.S. Dist. LEXIS
76993, at *7–9 (D. Nev. June 24, 2010). But the Court need not discuss the amount in
controversy in this case any further. Indeed following the parties’ arguments, the Court’s
analysis focuses on the diversity of citizenship requirement.
Considering Plaintiff’s amended complaint, there isn’t complete diversity between the parties,
since two of the defendants are California citizens like Plaintiff. See Exxon Mobil Corp. v.
Allapattah Servs., Inc., 545 U.S. 546, 553 (2005) (citation omitted) (The “presence in the action
of a single plaintiff from the same State as a single defendant deprives the district court of
original diversity jurisdiction over the entire action.”). That is in fact the basis for Plaintiff’s
motion to remand. So in its opposition, Costco asks the Court to “disregard[]” the citizenship
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES – GENERAL
Case No. SACV 18-00712 AG (AFMx)
Date
Title

June 18, 2018

ANDERSON STEPHAN v. COSTCO WHOLESALE CORPORATION ET
AL.

of Membership and Hernandez because they were “fraudulently joined” as “sham
defendants.” (Opp’n, Dkt. No. 12 at 4, 8.)
It’s true that “removal is proper despite the presence of a non-diverse defendant where that
defendant is a fraudulently joined or sham defendant.” Padilla v. AT&T Corp., 697 F. Supp. 2d
1156, 1158 (C.D. Cal. 2009) (citing Caterpillar, Inc. v. Lewis, 519 U.S. 61, 68 (1996)). Fraudulent
joinder and sham defendants are terms of art. See Morris v. Princess Cruises, Inc., 236 F.3d 1061,
1067 (9th Cir. 2001) (citing McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987).
“In the Ninth Circuit, a non-diverse defendant is deemed a sham defendant if, after all
disputed questions of fact and all ambiguities in the controlling state law are resolved in the
plaintiff’s favor, the plaintiff could not possibly recover against the party whose joinder is
questioned.” Padilla, 697 F. Supp. 2d at 1158 (citing Kruso v. Int’l Tel. & Tel. Corp., 872 F.2d
1416, 1426 (9th Cir. 1989)). As always, the burden of establishing that jurisdiction is proper
lies with removing defendants, with the court resolving any doubts against removal. See Gaus v.
Miles, 980 F.2d at 566. That is a heavy burden, since “there is a general presumption against
fraudulent joinder.” Hamilton Materials Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir.
2007).
Here, Costco has failed to meet its burden. Considering that a single non-diverse defendant
defeats diversity jurisdiction, the Court need only address the deficiencies of Costco’s
argument concerning Hernandez. See Exxon, 545 U.S. at 553. To start, Costco’s argument
mainly relies on authority that deals with a plaintiff’s attempt to join a non-diverse defendant
after a case has successfully been removed on diversity jurisdiction grounds. (Dkt. No. 12 at 5–
7.) Once it has been established that a federal court would have had original jurisdiction over a
case, courts have discretion to deny joinders that would destroy federal jurisdiction. See, e.g., 28
U.S.C. § 1447(e); Bonner v. Fuji Photo Film, 461 F. Supp. 2d 1112, 1119–20 (N.D. Cal. 2006);
Boon v. Allstate Ins. Co., 229 F. Supp. 2d 1016, 1019–20 (C.D. Cal. 2002); Clinco v. Roberts, 41 F.
Supp. 2d 1080, 1083 (C.D. Cal. 1999). But since Hernandez was made a defendant in this case
before Costco removed it, this Court’s role isn’t to decide whether to allow joinder, only
whether joinder was fraudulent in the first place.
And Costco hasn’t shown that Plaintiff “could not possibly recover” against Hernandez. Costco
hasn’t made any argument supporting the notion that Hernandez may be an improper
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES – GENERAL
Case No. SACV 18-00712 AG (AFMx)
Date
Title

June 18, 2018

ANDERSON STEPHAN v. COSTCO WHOLESALE CORPORATION ET
AL.

defendant as a matter of law. Instead Costco relies on a declaration signed by Hernandez
about his duties and the design and packaging of the water bottle pallets. (Dkt. No. 12 at 7–8.)
“Although the basis for a removability determination is generally limited to the plaintiff’s
pleadings, where fraudulent joinder is an issue the Court may look beyond the pleadings.”
Padilla, 697 F. Supp. 2d at 1159 (citing Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir.
1998). Still, defendants’ evidence is only relevant to a fraudulent joinder analysis if it tends to
show that the non-diverse defendant has “no real connection with the controversy.” See
Ritchey, 139 F.3d at 1318 (quoting Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97 (1921)).
Indeed a court may not make a sham defendant determination based on an inquiry into the
merits of the case. See id. (citing Chesapeake & Ohio Ry. Co. v. Cockrell, 232 U.S. 146, 153
(1914)); see also Hunter v. Philip Morris USA, 582 F.3d 1039, 1045 (9th Cir. 2009); Murakami v.
E.I. DuPont de Nemours & Co., No. 98-15994, No. 98-16019, 1999 U.S. App. LEXIS 22722, at
*9 (9th Cir. Sep. 9, 1999); Johnson v. Wells Fargo & Co., No. CV 14-06708 MMM (JCx), 2014
U.S. Dist. LEXIS 162864, at *15–16 (C.D. Cal. Nov. 19, 2014). Yet here, Hernandez’s
statements about his duties and the condition of the pallets concern whether Plaintiff’s
asserted negligence claim against him are meritorious. They don’t show that Hernandez has
no connection to Plaintiff’s claims whatsoever. In fact, they don’t even show that Plaintiff’s
purported claim against Hernandez are meritless. And the lack of “particular” allegations
pleaded against Hernandez doesn’t establish that Hernandez is a sham defendant since Costco
hasn’t shown that Plaintiff wouldn’t be granted leave to amend any purported deficiencies
with his complaint. See Padilla, 697 F. Supp. 2d at 1159. (See Dkt. No. 12 at 7.) So Costco’s
fraudulent joinder argument fails.
This case illustrates the strategic value that plaintiffs and defendants place on litigating in state
or federal forum. Costco tried to use removal as a threat. Plaintiff took actions to neutralize
that perceived threat. These strategies may or may not be good. “But even a bad strategy is
not necessarily a sham.” Padilla, 697 F. Supp. 2d at 1158.
3.2 Request for Attorney Fees and Costs
“An order remanding the case may require payment of just costs and any actual expenses,
including attorney fees, incurred as a result of the removal.” 28 U.S.C. § 1447(c). Relying on
that provision, Plaintiff asks the Court for an award of attorney fees and costs. But “[a]bsent
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES – GENERAL
Case No. SACV 18-00712 AG (AFMx)
Date
Title

June 18, 2018

ANDERSON STEPHAN v. COSTCO WHOLESALE CORPORATION ET
AL.

unusual circumstances, courts may award attorney’s fees under § 1447(c) only where the
removing party lacked an objectively reasonable basis for seeking removal.” Martin v. Franklin
Capital Corp., 546 U.S. 132, 141 (2005). In Martin, the Supreme Court made clear that attorney
fees and costs should not be awarded “presumptively, or automatically” on remand. Lussier v.
Dollar Tree Stores, Inc., 518 F.3d 1062, 1065 (9th Cir. 2008). It follows that “removal is not
objectively unreasonable solely because the removing party’s arguments lack merit.” Id. Here,
removal was improper but not objectively unreasonable. Any future efforts to remove might
be treated differently.
The Court therefore DENIES Plaintiff’s request for attorney fees and costs.
4. DISPOSITION
The Court GRANTS Plaintiff’s motion to remand. (Dkt. No. 11.) All other pending matters
are VACATED.
:
Initials of Preparer

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