Verduzco v. Ford Motor Company, et al.

Filing 15

FINDINGS and RECOMMENDATIONS to Remand Case to Stanislaus Superior Court [Doc. 10]. Referred to Judge O'Neill; Objections to F&R due within 14 days of service of this recommendation. signed by Magistrate Judge Barbara A. McAuliffe on 10/22/2013. (Herman, H)

1
2
3
4
5
6
7

UNITED STATES DISTRICT COURT

8

FOR THE EASTERN DISTRICT OF CALIFORNIA

9
10

IRVING VERDUZCO,

11

Plaintiff,

12
13
14

Case No. 1: 13-cv-01437-LJO-BAM
FINDINGS & RECOMENDATIONS TO
REMAND CASE TO STANISLAUS
SUPERIOR COURT

v.
FORD MOTOR COMPANY, et al.,
Defendants.

15
16
/

17
18

I.

INTRODUCTION

19

This action arises from a May 19, 2000 motor vehicle accident wherein a 1999 Ford Explorer

20

struck the rear end of a 1993 Ford Taurus. Plaintiff Irving Verduzco was a passenger in the Taurus at

21

the time of the crash and had no relationship with any of the owners, occupants or driver of the

22

Explorer. Plaintiff sued the drivers of both vehicles under negligence theories, and on February 23,

23

2001, the San Joaquin Superior Court approved a settlement between these parties.

24

Plaintiff initiated this action against Defendants Ford Motor Company and Heritage Ford, Inc.

25

(the seller of the Explorer) on May 8, 2007 in the County of Stanislaus Superior Court. Defendant

26

Ford was served with the complaint on July 20, 2007. (Doc. 1.) Plaintiff alleges the Defendants are

27

liable for the May 19, 2000 accident under theories of general negligence and product liability. (Doc.

28

1, Attach. 1.) After several continuances, a trial was set for September 10, 2013. After the case had
1

1

been pending for six years and on the eve of trial, Defendants removed this action to this Court on

2

September 9, 2013. (Doc. 1.)
Defendants claim removal is proper pursuant to 28 U.S.C. § 1441, and that this Court has

3
4

diversity jurisdiction pursuant to 28 U.S.C. § 1332. Plaintiff is a resident of Stanislaus County, in the

5

State of California. Defendant Ford Motor Company is a corporation incorporated under the laws of

6

the State of Delaware, having its principal place of business in the State of Michigan. The parties do

7

not specify Defendant Heritage’s place of incorporation or principle place of business, but the parties’

8

briefing demonstrates their agreement that Heritage is a resident of California for diversity purposes.
Ford contends that diversity jurisdiction exists in this action under the doctrine of fraudulent

9
10

joinder. Specifically, Ford alleges that the joinder of Heritage was fraudulent because Plaintiff lacks a

11

reasonable basis to support his claims against Heritage. Accordingly, Heritage’s citizenship is

12

disregarded in determining whether this Court has subject matter jurisdiction under 28 U.S.C. § 1332.

13

Ford also claims it could not have removed this case earlier, because it was not until September 6,

14

2013, that Ford learned Plaintiff was abandoning his claims against Heritage; thus, confirming Ford’s

15

suspicion that Heritage was fraudulently joined to prevent removal.
On September 13, 2013, Plaintiff filed a motion to remand to Stanislaus Superior Court. (Doc.

16
17

10.) Plaintiff argues that even if Heritage was fraudulently joined (which Plaintiff disputes), removal

18

was improper because it was not filed timely under 28 U.S.C. § 1446. Ford filed its opposition on

19

September 27, 2013. (Doc. 11.) Plaintiff filed his reply brief on October 11, 2013. (Doc. 13.) The

20

Court found the matter suitable for decision without oral argument pursuant to Local Rule 230(g) and

21

vacated the hearing set for October 18, 2013. (Doc. 14.) Having carefully considered the parties’

22

submissions and the entire record in this case, the Court recommends this case be remanded to

23

Stanislaus Superior Court.

24
25
26
27
28

/././
2

II.

1
2
3

A.

DISCUSSION

Legal Standard on Motion to Remand
Federal courts have original jurisdiction of all civil actions where the matter in controversy

4

exceeds $75,000, exclusive of interest and costs, and is between citizens of different states. 28 U.S.C.

5

§ 1332. Proper jurisdiction under Section 1332 requires complete diversity, so each plaintiff must be

6

diverse from each defendant. Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553, 125

7

S.Ct. 2611, 162 L.Ed.2d 502 (2005). To protect the jurisdiction of state courts, removal jurisdiction

8

should be strictly construed in favor of remand. Harris v. Bankers Life and Cas. Co., 425 F.3d 689,

9

698 (9th Cir. 2005) (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868,

10

85 L.Ed. 1214 (1941)). “Federal jurisdiction must be rejected if there is any doubt as to the right of

11

removal.” Gaus v. Miles, 980 F.2d 564, 566 (9th Cir. 1992) (internal citation omitted). “Th[is] ‘strong

12

presumption’ against removal jurisdiction means that the defendant always has the burden of

13

establishing that removal is proper.” Id. (internal citations omitted).

14

An exception to the requirement of complete diversity exists where a defendant has been

15

fraudulently joined to defeat diversity. Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir.

16

2001). “If the plaintiff fails to state a cause of action against a resident defendant, and the failure is

17

obvious according to the settled rules of the state, the joinder of the resident defendant is deemed

18

fraudulent.” Hamilton Materials, Inc. v. Dow Chemical Corp., 494 F.3d 1203, 1206 (9th Cir. 2007)

19

(quoting McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987)). Where joinder is

20

deemed fraudulent, the defendant’s presence is ignored for the purposes of determining diversity.

21

Morris, 236 F.3d at 1067. The claim of fraudulent joinder must be supported by “clear and convincing

22

evidence.” Hamilton Materials, Inc., 494 F.3d at 1206. The party seeking removal bears a heavy

23

burden in proving that joinder of the in-state defendant is improper. Hunter v. Philip Morris USA, 582

24

F.3d 1039, 1044 (9th Cir. 2009).

25

As an initial matter, “[f]raudulent joinder is a term of art,” McCabe, 811 F.2d at 1339, and it

26

“does not require a finding of fraudulent intent,” Schwenn v. Sears, Roebuck & Co., 822 F.Supp. 1453,

27

1455 (D. Minn. 1993). Thus, rather than focusing on the “mental state” of the plaintiff, the fraudulent

28
3

1

joinder inquiry focuses on the validity of the legal theory being asserted against the non-diverse

2

defendant. Davis v. Prentiss Properties Ltd., Inc., 66 F. Supp. 2d 1112, 1114 (C.D. Cal. 1999).

3

In addressing the issue of fraudulent joinder, the Ninth Circuit looks to whether the facts in the

4

complaint would preclude the plaintiff’s recovery against the non-diverse defendant. See Morris, 236

5

F.3d. at 1067-68 (“abundantly obvious that [plaintiff] could not possibly prevail on her negligent

6

representation claim”). Courts in the Ninth Circuit must find that it is “indisputably clear” that the

7

plaintiff will be unable to state a cause of action against the non-diverse defendant in state court. See

8

Tahoe Keys Marina & Yacht, LLC v. Merkelback, No. 2:12-cv-02582-GEB-AC, 2013 WL 221510, at

9

*1 (E.D. Cal. Jan. 18, 2013). It is not for the court to determine if the plaintiff will prevail on the

10

merits of the claim, but to evaluate whether there is any possibility that the plaintiff may prevail.

11

Board of St. Mary’s Holy Apostolic Catholic Church of the East v. Addai, No. 1:12-cv-1448-AWI-

12

BAM, 2012 WL 4764411, at *2 (E.D. Cal. Oct. 5, 2012). If there is any possibility that the plaintiff

13

would be able to establish liability against the defendant the joinder is not fraudulent. Bear Valley

14

Family v. Bank Midwest, N.A., 2010 WL 3369600, at *2 (C.D. Cal. Aug. 23, 2010).
The procedure and time limitations for removing a case are provided in Section 1446. The

15
16

applicable version of former Section 1446(b) provides:
The notice of removal of a civil action or proceeding shall be filed within thirty days
after the receipt by the defendant, through service or otherwise, of a copy of the initial
pleading setting forth the claim for relief upon which such action or proceeding is
based, or within thirty days after the service of summons upon the defendant if such
initial pleading has then been filed in court and is not required to be served on the
defendant, whichever period is shorter.

17
18
19
20
21

If the case stated by the initial pleading is not removable, a notice of removal may be
filed within thirty days after receipt by the defendant, through service or otherwise, of a
copy of an amended pleading, motion, order or other paper from which it may first be
ascertained that the case is one which is or has become removable, except that a case
may not be removed on the basis of jurisdiction conferred by section 1332 of this title
more than 1 year after commencement of the action.

22
23
24
25

Ritchey v. Upjohn Drug Co., 139 F.3d 1313 (9th Cir. 1998), quoting 28 U.S.C. § 1446(b).1

26
27
1

28

The Court does not apply the current version of Section 1446. On December 7, 2011, Section 1446
was amended to include a “bad faith” exception to the one-year limitation on removal for claims that
4

1

Plaintiff’s Motion to Remand implicates both procedural and substantive aspects of removal.

2

Plaintiff argues Ford’s removal was not timely under Section 1446(b), and further argues this Court

3

lacks jurisdiction because this case presents claims between non-diverse parties. Ford responds there

4

is complete diversity because Heritage is fraudulently joined in this action, thus, Heritage is not

5

considered in the diversity analysis. Ford further argues that the doctrine of fraudulent joinder

6

abrogates the time limits on removal proscribed in Section 1446(b). Explained in greater detail below,

7

Ford’s removal is foreclosed by the time constraints of Section 1446(b) and, further, Ford has failed to

8

meet its burden of establishing Heritage is a sham defendant.

9

B.

10

Defendant’s Removal Was Not Timely
Defendant argues that, under Ninth Circuit law and Section 1446, “if the only nondiverse

11

defendant was fraudulently joined, removal is proper whenever that becomes known – including on

12

the eve of trial.” Doc. 11, 1: 12-13. In other words, the time limits proscribed by Section 1446 are

13

inapplicable in cases of fraudulent joinder. Plaintiff responds that under Section 1446 and Ninth

14

Circuit authority, fraudulent joinder cases are treated as instances where the case was “initially

15

removable;” thus, Ford would have had thirty days from the date Ford was served with the complaint

16

to remove the case to federal court. Alternatively, Plaintiff argues, even if this case were not treated as

17

initially removable, Ford would have had to remove within one year of the case being filed. Plaintiff

18

additionally argues there are no judicially-created exceptions to the time limits proscribed by Section

19

1446. Both parties rely upon Ritchey v. Upjohn Drug Co., 139 F.3d 1313 (9th Cir. 1998) in support of

20

their respective positions.

21

In Ritchey, the plaintiff sued a drug manufacturer along with a non-diverse doctor and health

22

care entity. The Ritchey plaintiff filed the action on January 3, 1994, however, did not give notice of

23
24
25
26
27
28

were initially not removable. See, 28 U.S.C. § 1446(c) (“A case may not be removed under subsection
(b)(3) on the basis of jurisdiction conferred by section 1332 more than 1 year after commencement of
the action, unless the district court finds that the plaintiff has acted in bad faith in order to prevent a
defendant from removing the action.”); see also, Federal Courts Jurisdiction and Venue Clarification
Act of 2011, PL 112-63, December 7, 2011, 125 Stat 758. This amendment, however, does not apply
to any cases “commenced” in state court prior to January 6, 2012. See, Id. at PL 112-63, December 7,
2011, 125 Stat 758, Sec. 205 (“The amendments made by this title … shall take effect upon the
expiration of the 30-day period beginning on the date of the enactment of this Act [December 7,
2011].”) Ford agrees that the pre-December 7, 2011 version of Section 1446 applies to Ford’s Notice
of Removal. Doc. 11, fn. 2.
5

1

the action to defendants until “sometime in December of 1995.” Id. at 1315. On January 29, 1996,

2

more than a year after the complaint was filed, the defendants removed the action to federal court

3

despite a lack of complete diversity, arguing fraudulent joinder.2 Id. The plaintiff challenged the

4

propriety of removal, arguing that removal was precluded by the time limitations of Section 1446(b).
The starting point for Ritchey’s analysis was that Section 1446(b) contained two paragraphs

5
6

proscribing different time limits on removal depending on the circumstances. The first paragraph

7

permitted removal within thirty days of the complaint being served on the removing party. The

8

second paragraph permitted removal when the case was not initially removable; however, subsequent

9

developments make the case removable. Under the latter circumstance, removal is permitted within

10

one year of the case being filed. The plaintiff in Ritchey argued the one-year limitation applied to both

11

paragraphs. In other words, the Ritchey plaintiff argued that regardless of when service was affected,

12

the one-year limitation operated against all instances of removal – even if a complaint was not served

13

until after a year had passed since the case was filed.

14

The Ritchey court rejected plaintiff’s argument and found the one-year time limit on removal in

15

the second paragraph of Section 1446(b) did not infringe on a defendant’s right to remove within thirty

16

days of being served with a complaint:
[T]he most sound reading of a sentence will refer its limiting clause back to the
antecedent clause to which it is attached, and not to other paragraphs or sentences in the
statute. See Pacificorp v. Bonneville Power Admin., 856 F.2d 94, 97 (9th Cir.1988).
(“The date limitation ... refers directly back to the antecedent phrase....”); Zogbi v.
Federated Dep't Store, 767 F.Supp. 1037, 1039 (C.D.Cal.1991) (“The general rule is
that a qualifying phrase or clause only modifies that which immediately precedes it.”)

17
18
19
20
21

We see no reason to deviate from that mode of reading here. The first paragraph of §
1446(b) addresses a defendant's right to promptly remove when he is served. The
second paragraph addresses a defendant's right to remove beyond the initial period of
30 days, if the case only becomes removable sometime after the initial commencement
of the action. Only the latter type of removal is barred by the one-year exception.

22
23
24
25

Ritchey, 139 F.3d at 1316.

26
2

27
28

On appeal, the Ritchey plaintiff argued the case was not removed within the required thirty-day
period. Id. at 1315, fn. 3. However, the Ninth Circuit held the plaintiff waived that issue by failing to
timely raise it, and proceeded under the assumption that the defendants removed the case within thirty
days of being served pursuant to Section 1446(b). Id.
6

1

Ritchey also discussed how other courts have determined the one-year limitation applies to

2

both paragraphs. Id. 1317. According to Ritchey, a misconstruction of Section 1446(b) led some

3

court to apply an equitable estoppel doctrine to permit removal after one year had passed because “[i]n

4

that way, [these courts] have attempted to ameliorate the fact that on their construction of § 1446(b), a

5

plaintiff need only file an action in state court and then wait one year before service, if he wishes to

6

deprive the defendant of the ability to remove under any circumstances.” Id. at 1318. However, by

7

concluding the first paragraph of Section 1446(b) was not susceptible to the one-year limitation,

8

Ritchey concluded such equitable exceptions were unnecessary. Id.

9

Once Ritchey concluded the one-year limitation did not apply to service of the initial pleading,

10

the question became “whether the action was removable under the first paragraph of § 1446(b), or to

11

put it another way, whether there was diversity jurisdiction based upon the initial pleading …” Id. at

12

1318. Ritchey noted that while “[t]he existence of diversity jurisdiction certainly does not appear on

13

the face of Ritchey's complaint[,]” defendants argued certain individuals “were fraudulently joined or

14

sham defendants.” Id. The Ritchey court agreed, concluding that the plaintiff had failed to state a

15

cause of action against the non-diverse defendants. Id. at 1319. Accordingly, Ritchey found removal

16

proper because the notice of removal was filed within thirty-days of the defendant being served with

17

the complaint containing fraudulently joined defendants.

18

Ford concludes that “under Ritchey, there is no one-year limit to removals under a fraudulent

19

joinder theory.” Doc. 11, 8: 15-16. While Ford correctly notes that under Ritchey the one-year

20

limitation proscribed in the second paragraph of Section 1446(b) does not apply to instances of

21

fraudulent joinder, Ford mistakenly suggests Ritchey eliminates the time constraints on removal

22

altogether. On the contrary, Ritchey applied the time constraints found in the first paragraph of Section

23

1446(b), which require an initially removable complaint be removed within thirty days of service. Id.

24

at 1318. The logic underlying this conclusion is straight-forward: under the fraudulent joinder

25

doctrine, sham defendants cannot destroy diversity for subject matter jurisdiction or removal purposes.

26

Thus, cases involving fraudulent joinder do not “become removable,” but rather, are “initially

27

removable.” Id. at 1316-19. Pursuant to Section 1446(b) and Ritchey, Ford was required to seek

28

removal within thirty days of being served with Plaintiff’s complaint.
7

1

Ford cites to several other cases that do not support its position. Ford cites United Computer

2

Systems, Inc. v. AT&T Corp., 298 F.3d 756 (9th Cir. 2002) for the proposition that “the thirty-day time

3

limits prescribed in Section 1446(b) will be ignored when removal is sought on the ground that some

4

defendants have been joined fraudulently to prevent removal.” United Computer Systems, however,

5

did not concern a circumstance where the removing defendant was served and failed to remove the

6

case within thirty days of service. Rather, United Computer Systems addressed the “first-served” rule,

7

where the removal period in a case involving multiple defendants commences with service on the first

8

party. Id. at 762. In United Computer Systems, the fraudulently joined defendant was first-served, and

9

the removing defendants had no notice of the action at that time. United Computer Systems held that

10

“[i]f the fraudulence of a defendant's joinder is irrelevant for purposes of determining diversity, and

11

there is no obligation to join such a defendant in a removal petition, there is no good reason why date

12

of service on a fraudulently joined defendant should commence the thirty-day time period for removal

13

under § 1446(b).” A contrary result “would encourage unfair litigation tactics,” because a plaintiff

14

could avoid removal by withholding service on diverse defendants for thirty days. Id. at 763.

15

Contrary to Ford’s reading, United Computer Systems does not eliminate the time limitations for

16

removal in cases of fraudulent joinder. Rather, United Computer Systems holds the time limitation

17

begins with service on a diverse defendant, rather than a fraudulently joined defendant.

18

Ford next cites to Boles v. Land Rover North America, 2012 WL 1997214 (N.D. Cal. 2012)

19

and asserts the Boles court found “fraudulent joinder and den[ied] remand following more than two

20

years into the case after Land Rover pointed out at CMF/ECF No. 5 that under Ritchey no one-year

21

limit applies to fraudulent joinder removals.”

22

Boles made no such finding. Boles did not discuss the one-year limit on removal, nor did

23

Boles conclude that under Ritchey the one-year limit is inapplicable to fraudulent joinder. Rather,

24

Boles found that the plaintiff had waived any defects in the notice of removal by failing to move to

25

remand within thirty-days. Id. at *2, fn. 3. Boles then went on to discuss the issue of fraudulent

26

joinder with respect to the court’s continuing subject matter jurisdiction, but not in the context of

27

whether removal was proper in the first instance. At that point, Boles relied upon Ritchey for the

28

common notion that a fraudulently joined defendant may be disregarded for purposes of determining
8

1

diversity. Id. at *2-3. Boles did not find that fraudulent joinder creates an exception to the time

2

limitations on removal.

3

Lastly, Ford cites to Roth v. CHA Hollywood Medical Center, L.P., 720 F.3d 1121, 1126 (9th

4

Cir. 2013), claiming the Ninth Circuit held that “where the one year limitation on removal under 28

5

U.S.C. § 1446 does not apply, such as in the CAFA context (just like with fraudulent joinder

6

removals), then a defendant can time a removal based on its own investigation whenever it likes,

7

including the ‘eve of trial in state court.’” Id. at 1126.

8

The Court disagrees with Ford’s reading of Roth. On the contrary, Roth recognized that the

9

only instance in which the time limitations of Section 1446(b) do not apply arise specifically in the

10

context of CAFA diversity cases because CAFA explicitly declined to impose such a time limit:

11

We discern one practical objection to our reading of §§ 1441 and 1446(b). It may be
that in some diversity cases, defendants will be able to take advantage of the fact that
neither the “initial pleading” nor any later document received from plaintiff triggers one
of the two thirty-day periods. In such cases, defendants may sometimes be able to delay
filing a notice of removal until it is strategically advantageous to do so. In a non-CAFA
diversity case, the advantage gained through such gamesmanship is limited by the fact
that a notice of removal must be filed, in any event, within one year of the
commencement of the action. See 28 U.S.C. § 1446(c)(1). However, in a CAFA case,
there is no such time limit. A CAFA case may be removed at any time, provided that
neither of the two thirty-day periods under § 1446(b)(1) and (b)(3) has been triggered.
See 28 U.S.C. 1453(b).

12
13
14
15
16
17
18

Roth, 720 F. 3d at 1126 (emphasis added); see also, 28 U.S.C. § 1453(b) (“A class action may

19

be removed to a district court of the United States in accordance with Section 1446 (except that

20

the 1-year limitation under Section 1446(c)(1) shall not apply) . . . .”).

21

Other district courts have interpreted Ninth Circuit precedent as this Court does: there are no

22

equitable exceptions to the time limits imposed under Section 1446(b). See, e.g., Blue v. Equifax Info.

23

Servs., LLC, C 06-06349 JSW, 2007 WL 602295 (N.D. Cal. 2007) (“The Ninth circuit has not

24

recognized an exception, the statute does not contain an exception, and the Ninth circuit narrowly

25

construes removal statutes against removal. As such, this Court will not recognize an exception to the

26

clear statutory language of 1446(b)”); Selman v. Pfizer, Inc., 11-cv-1400-HU, 2011 WL 6655354 (D.

27

Or. 2011) (“Ninth Circuit precedent suggests that their claim of fraudulent joinder should be time-

28

barred by the thirty-day limit set forth in Section 1446(b)’s first paragraph.”); see also, Bay Guardian
9

1

Co., Inc. v. Vill. Voice Media LLC, C 09-03833 JSW, 2010 WL 329962 (N.D. Cal. 2010). Thus, this

2

Court rejects Ford’s argument that there are no time limits for removing complaints containing

3

fraudulent joinder.
Accordingly, this Court finds that Ford’s removal was not timely and the case should be

4
5

remanded.

6

C.

7

Ford Did Not Meet Its Burden To Demonstrate Fraudulent Joinder
The Court has concluded Ford’s notice of removal is not timely and remand is proper. Thus,

8

the Court will not go into great detail discussing whether Heritage is a fraudulently joined defendant,

9

i.e., whether Plaintiff has “clearly” failed to state a claim against Heritage. It is notable, however, that

10

even if Ford’s removal were timely, Ford’s briefing effectively concedes that Heritage was not

11

fraudulently joined.

12

In a nutshell, Ford’s primary argument concerning its six-year delay in seeking removal is that

13

it was unaware Plaintiff lacked sufficient evidence to substantiate its claims against Heritage until

14

Plaintiff submitted pretrial filings revealing that Plaintiff would not be pursuing a claim against

15

Heritage. Doc. 11, 9: 11-14. Ford argues that until that time, it could not have removed this case

16

because Plaintiff pled a “colorable” claim for negligence against Heritage:

17
18
19
20
21
22
23

In short, the only possible claim against Heritage that had not been ruled out was one
for Negligence . . .
Plaintiff misses the fact that he had stated a negligence claim; a potentially valid claim
for a used car sale if there were any modifications made or obvious defects that should
have been discovered upon a reasonable inspection. The question remained whether
Plaintiff had any evidentiary basis for these claims—that is, whether Plaintiff’s experts
could identify any negligence such as a defect in the Explorer that Heritage should have
discovered with a reasonable inspection, and which Plaintiff’s experts could causally
connect to Plaintiff’s injuries. Given the fraudulent joinder standards, even though
Plaintiff did not have a colorable strict liability claim, he still had, at that time, a
potentially colorable negligence claim, (assuming an evidentiary basis).

24
25

Doc. 11, 12: 22-23; 14: 12-17 (emphasis added.) Ford suggests that Plaintiff’s lack of evidence to

26

substantiate its claims against Heritage, coupled with his subsequent decision to abandon claims

27

against Heritage, demonstrate Plaintiff never had any intent to prosecute claims against Heritage.

28

According to Ford, this circumstance reveals that Heritage was fraudulently joined.
10

Putting aside the sufficiency of Plaintiff’s claims against Heritage, Ford has failed to meet its

1
2

burden to demonstrate fraudulent joinder. Hamilton Materials, Inc., 494 F.3d at 1206 (the claim of

3

fraudulent joinder must be supported by “clear and convincing evidence.”) First, as a practical matter,

4

Ford’s concession that Plaintiff pled “colorable” claims for negligence effectively concedes Plaintiff

5

“stated a claim” against Heritage. NetVersant-Nat., Inc., 2007 WL 4326754 (N.D. Cal. 2007) (“The

6

fact that NetVersant concedes that Cava asserted a colorable, though weak, claim against Wainwright

7

up to the moment of adverse summary adjudication is significant”); see also, Rozier v. Corrections

8

Corp. of America, 2013 WL 4407492 (S.D. Cal. 2013) (“Courts generally apply a presumption against

9

fraudulent joinder.”)
Second, Ford’s focus on “Plaintiff’s intent” to abandon his negligence claims against Heritage

10
11

at the last minute, or whether Plaintiff could develop sufficient evidence to support the negligence

12

claim is misplaced. The Ninth Circuit has repeatedly stated that joinder is fraudulent “[i]f the plaintiff

13

fails to state a cause of action against a resident defendant, and the failure is obvious according to the

14

settled rules of the state.” Mercado v. Allstate Ins. Co., 340 F.3d 824, 826 (9th Cir. 2003) (quoting

15

McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987)). In another formulation, courts

16

have stated that “[t]he standard is not whether plaintiffs will actually or even probably prevail on the

17

merits, but whether there is any possibility that they may do so.” Bellecci v. GTE Sprint Commc'ns.

18

Corp., 2003 WL 151538 at *3 (N.D. Cal. 2003) (citation omitted; emphasis added); see also Morris v.

19

Princess Cruises, Inc., 236 F.3d 1061, 1068 (9th Cir. 2001). It does not matter if Plaintiff’s claim is

20

weak, lacks sufficient evidence or if Plaintiff has no intention to actually litigate the claim.3 If there is

21

any possibility that the plaintiff could establish liability against the defendant, the joinder is not

22
23
24
25
26
27
28

3

Defendant cites several out-of-circuit authorities in support of its position that “[a] definitive
indication that the plaintiff intends to abandon his action against a nondiverse defendant is key
evidence allowing a fraudulent joinder removal.” Doc. 11, 6: 22-25, citing Rauch v. Rauch, 446 F.
Supp. 2d 432 (D.S.C. 2006); Ramirez v. Michelin N.A., Inc., No. 07cv228, 2007 WL 2126635, at *3
(S.D. Tex. July 19, 2007); Aydell v. Sterns, 677 F. Supp. 877, 880 (M.D. La. 1988). These authorities,
however, are contrary to the law of this Circuit. In the Ninth Circuit, the core inquiry is whether
Plaintiff could establish liability against the non-diverse defendant under any theory, even if the
plaintiff is not likely to do so. Bear Valley Family v. Bank Midwest, N.A., 2010 WL 3369600, at *2
(C.D. Cal. Aug. 23, 2010)
11

1

fraudulent. Bear Valley Family v. Bank Midwest, N.A., 2010 WL 3369600, at *2 (C.D. Cal. Aug. 23,

2

2010).
Accordingly, Ford has not met its burden to demonstrate Heritage was fraudulently joined.

3
4

D.

Attorney’s Fees

5

Plaintiff requests the costs and fees Plaintiff incurred as a result of Ford’s improper removal. A

6

court that remands a case to state court based on improper removal “may require payment of just costs

7

and any actual expenses, including attorney fees, incurred as a result of the removal.” 28 U.S.C. §

8

1447(c); Gardner v. UICI, 508 F.3d 559, 561 (9th Cir. 2007). “Absent unusual circumstances, courts

9

may award attorney's fees under § 1447(c) only where the removing party lacked an objectively

10

reasonable basis for seeking removal. Conversely, when an objectively reasonable basis exists, fees

11

should be denied.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141, 126 S.Ct. 704, 163 L.Ed.2d

12

547 (2005). However, “bad faith need not be demonstrated” for a court to award fees and costs on

13

remand. Moore v. Permanente Medical Group, Inc., 981 F.2d 443, 448 (9th Cir. 1992).

14

The Court finds an award of fees and costs proper because Ford lacked an objectively

15

reasonable basis for removal. Ford cites, yet ignores, Ninth Circuit authority holding the core inquiry

16

under the fraudulent joinder doctrine is whether a plaintiff can conceivably state a claim against a non-

17

diverse defendant. Moreover, Ford concedes Plaintiff asserted colorable claims against Heritage.

18

Further, Ford stitched together an untenable argument concerning the timing of removal that is

19

unsupported by Ninth Circuit authorities. Thus, Ford lacked an objectively reasonable basis for

20

removal.

21

Further, Ford’s timing of removal – on the eve of trial, following six years of litigation –

22

strongly indicates Ford improperly sought removal to prolong this litigation. Thus, this Court also

23

finds that “unusual circumstances” justify an award of fees and costs. See Community First Credit

24

Union Inc. v. Chandler, 2010 WL 5088230 (N.D. Cal. 2010) (awarding fees and costs on remand

25

where “[t]he timing of the removal on the day of trial, as well as the complete baselessness of the

26

removal, demonstrate that defendant has acted in bad faith and to delay the state court action”);

27

Ciolino v. Ryan, 2003 WL 21556959 (N.D. Cal. 2003) (“the improper removal undoubtedly has had

28

the effect of postponing the trial of this action in state court, a fact on which at least one court has
12

1

based an award of fees and costs under section 1447(c),” citing Elsis v. Hertz Corp., 581 F. Supp. 604,

2

608 (E.D. N.Y. 1984) (finding that the “eve of trial removal served to delay timely litigation of this

3

matter”)); see also, Peabody v. Maud Van Cortland Hill Schrol Trust, 892 F.2d 772, 777 (9th

4

Cir.1989) (holding that a removal made for the transparent purpose of delaying an impending trial

5

“demonstrates a flagrant misuse of the judicial process”).

6

Plaintiff will be ordered to file an affidavit supporting its application for attorneys' fees and

7

costs relating only to the issue of fees and costs in opposing removal and seeking remand. See 28

8

U.S.C. 1447(c) (“An order remanding the case may require payment of just costs and any actual

9

expenses, including attorney fees, incurred as a result of the removal.”) The Court will retain

10

jurisdiction following remand to resolve the award of attorneys' fees and costs. Moore v. Permanente

11

Medical Group, Inc., 981 F.2d 443, 445 (9th Cir.1992) (district court may retain jurisdiction over

12

attorneys' fees issue after remand).
RECOMMENDATIONS AND ORDER

13
14

For the reasons discussed above, this Court RECOMMENDS the following:

15

1.

Superior Court of California, County of Stanislaus;

16
17

Plaintiff’s Motion to remand be GRANTED and this case be REMANDED to the

2.

Plaintiff’s requests for fees and costs be GRANTED. No later than November 15,

18

2013, Plaintiff shall file an affidavit supporting his application for attorneys’ fees and

19

costs. Ford shall file an opposition no later than December 2, 2013, 2013. Plaintiff

20

shall file his reply no later than December 9, 2013. The Court will rule on the matter

21

without oral argument unless oral argument is deemed necessary after reviewing the

22

parties’ briefs.

23

These findings and recommendations are submitted to the district judge assigned to this action,

24

pursuant to Title 28 of the United States Code section 636(b)(1)(B) and this Court’s Local Rule 304.

25

Within fourteen (14) days of service of this recommendation, any party may file written objections to

26

these findings and recommendations with the Court and serve a copy on all parties. Such a document

27

should be captioned “Objections to Magistrate Judge’s Findings and Recommendations.” The district

28

judge will review the magistrate judge’s findings and recommendations pursuant to Title 28 of the
13

1

United States Code section 636(b)(1)(C). The parties are advised that failure to file objections within

2

the specified time may waive the right to appeal the district judge’s order. Martinez v. Ylst, 951 F.2d

3

1153 (9th Cir. 1991).

4
5
6
7

IT IS SO ORDERED.
Dated:

/s/ Barbara

October 22, 2013

A. McAuliffe

_

UNITED STATES MAGISTRATE JUDGE

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
14