Faulks v. Wells Fargo & Company et al

Filing 119

ORDER by Judge Maria-Elena James granting 113 Motion to Dismiss; denying 114 Motion to Remand; finding as moot 115 Motion to Appear by Telephone. (cdnS, COURT STAFF) (Filed on 2/19/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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LAURENCE FAULKS,

Case No. 13-cv-02871-MEJ

Plaintiff,
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ORDER RE: MOTION TO DISMISS &
MOTION TO REMAND

v.
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WELLS FARGO & COMPANY, et al.,

Re: Dkt. Nos. 113, 114

Defendants.

United States District Court
Northern District of California

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INTRODUCTION

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Plaintiff Laurence Faulks originally brought this case against Wells Fargo & Company,

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Bank, N.A. and Wells Fargo Home Mortgage (collectively, “Wells Fargo”) challenging Wells

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Fargo’s actions related to the foreclosure on real property located at 25 Cameo Way, San

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Francisco, California 94131 (the “Property”). After Wells Fargo removed the case to this Court

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based on diversity jurisdiction, the Court granted the parties’ stipulation to add Consumer Credit

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Counseling of San Francisco (“CCCSF”) as a Defendant. Dkt. Nos. 98, 99. CCCSF now moves

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to dismiss all claims against it pursuant to Federal Rule of Civil Procedure 12(b)(1) and (6),

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arguing that (1) allowing Faulks to join CCCSF defeats diversity jurisdiction, and (2) Faulks

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missed the statutory deadline by which he must file suit against it by more than a year and a half.

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Mot. to Dismiss, Dkt. No. 113. In response, Faulks filed a Motion to Remand, arguing that the

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Court should instead remand the case because diversity of citizenship is lacking. Mot. to Remand,

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Dkt. No. 114. The Court finds these matters suitable for disposition without oral argument and

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VACATES the March 10, 2016 hearing. See Fed. R. Civ. P. 78(b); Civ. L.R. 7-1(b). Having

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considered the parties’ positions, relevant legal authority, and the record in this case, the Court

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rules as follows.

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BACKGROUND

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As of 2010, Wells Fargo was the holder of the mortgage to the Property. Third Am.

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Compl. (“TAC”) ¶ 18, Dkt. No. 104. In that year, Faulks was unable to make his loan payments

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and applied for a loan modification under the Home Affordable Modification Program (“HAMP”).

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Id. Wells Fargo repeatedly told Faulks that as long as his application was being evaluated under

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HAMP, it would not sell his home through a foreclosure sale. Id. ¶ 19. Faulks alleges that despite

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sending Wells Fargo all the documentation it requested, he received notices that erroneously stated

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he had failed to submit certain documents. Id. ¶ 20.

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In February 2012, at the behest of a Wells Fargo representative, Faulks sought help from
CCCSF. Id. ¶ 20. According to CCCSF, it “is a non-profit organization that provides

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United States District Court
Northern District of California

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comprehensive financial counseling and education to help consumers achieve financial

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independence through debt reduction, homeownership, and improved money management skills.”

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Mot. to Dismiss at 1. In March, CCCSF sent Wells Fargo all of the requested documentation in a

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“completed modification doc’s package.” Id. ¶¶ 22, 44. Faulks alleges Wells Fargo postponed the

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trustee’s sale date from April 16, 2012 to May 17, 2012 because it was considering his loan

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modification request, and that “[a]t all times up until and including May 17, 2012, Wells Fargo led

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Plaintiff to believe, and its conduct and statements would have led any reasonable person to

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believe, that it was still continuing to consider his application for loan modification.” Id. ¶ 24.

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Faulks alleges that “any reasonable person” would have believed Wells Fargo was considering his

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HAMP loan modification from the time he contacted CCCSF through the foreclosure sale on May

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17, 2012. Id. ¶ 22. In fact, only two days before the foreclosure sale, Wells Fargo told CCCSF

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that it was still considering Faulks’s HAMP loan modification. Id. ¶ 24.

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After Wells Fargo sold his home on May 17, 2012, Faulks filed this lawsuit on May 17,

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2013 in the Superior Court of San Francisco, alleging Wells Fargo negligently and fraudulently

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denied his loan modification. Compl., Dkt. No. 1-1. Wells Fargo later removed the case to this

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Court on June 21, 2013. Id.

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On December 3, 2015, Faulks and Wells Fargo filed a Stipulation to File Third Amended

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Complaint to add CCCSF as a Defendant. Dkt. No. 98. The parties stated that, after Faulks took
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the deposition of Rico Delgadillo, the Vice President of Counseling Programs for CCCSF, the

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testimony elicited supported a cause of action for negligence against CCCSF. Id. at 2. The

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parties’ Stipulation did not provide any information regarding CCCSF’s citizenship. The Court

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granted the parties’ Stipulation (Dkt. No. 99), after which Faulks filed the operative TAC, adding

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a cause of action for negligence against CCCSF. Dkt. No. 104.

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CCCSF now moves to dismiss Faulks’s claim against it. CCCSF notes it is a citizen of
California (see Lonning Decl. ¶ 2, Dkt. No. 113-1), and since Faulks is also a citizen of California

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(see TAC ¶ 6), CCCSF argues joinder is impermissible and it must be dismissed from this action.

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Mot. to Dismiss at 4. In the alternative, CCCSF argues Faulks’s claims against it are time barred

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because the statute of limitations for a negligence claim is two years, yet Faulks did not bring his

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United States District Court
Northern District of California

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claims against it until 2016, more than three years after the foreclosure. Id. Finally, CCCSF

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argues Faulks fails to plead a cognizable negligence theory because he alleges only conclusory

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statements that fail as a matter of law. Id. at 6.

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Four days after CCCSF filed its Motion to Dismiss, Faulks filed his Motion to Remand,

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arguing that there is no diversity jurisdiction, and remand is therefore appropriate. Mot. to

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Remand at 2.

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LEGAL STANDARD

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Under 28 U.S.C. § 1332, there must be complete diversity of citizenship between all

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plaintiffs and all defendants. In the case of an amended complaint that joins new parties, diversity

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must exist at the time the amended complaint is filed. Rockwell Intern. Corp. v. United States,

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549 U.S. 457, 473-74 (2007); Lewis v. Lewis, 358 F.2d 495, 502 (9th Cir. 1966). “If after removal

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the plaintiff seeks to join additional defendants whose joinder would destroy subject matter

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jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State

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court.” 28 U.S.C. § 1447(e). Thus, once a court has permitted the joinder of a non-diverse party,

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“Section 1447(e) allows a district court . . . only to remand the case to state court.” Yniques v.

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Cabral, 985 F.2d 1031, 1036 (9th Cir. 1993), disapproved of on other grounds by McDowell v.

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Calderon, 197 F.3d 1253 (9th Cir. 1999).

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DISCUSSION

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As an initial matter, the Court concludes removal was proper because complete diversity

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existed at the time of removal: Faulks is a California resident while Wells Fargo, the only

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Defendant at the time of removal, is a South Dakota company. Not. of Removal at 3; see 28

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U.S.C. § 1441(a) (recognizing that an action filed in state court may be removed only if the federal

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district court has original jurisdiction); id. § 1332(a) (defining diversity jurisdiction as having an

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amount in controversy exceeding $75,000 and between citizens of different states); Owen Equip.

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& Erection Co. v. Kroger, 437 U.S. 365, 373-74 (1978) (requiring complete diversity of

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citizenship). Thus, the question is the effect of Faulks’s amendment adding a nondiverse party.

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“Post-removal joinder of nondiverse defendants, even those that are not indispensable,

United States District Court
Northern District of California

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destroys diversity jurisdiction and requires remand.” Selby v. Foremost Signature Ins. Co., 2011

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WL 43608, at *3 (E.D. Wash. Jan. 4, 2011) (citing, among others, Cobb v. Delta Exports, Inc.,

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186 F.3d 675, 677–78 (5th Cir. 1999)). “This allows plaintiffs to reinstate their initial choice of

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forum.” Id. (citing 28 U.S.C. § 1447(e)). Thus, the addition of CCCSF, a nondiverse party, after

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Wells Fargo properly removed this action to federal court, “destroyed the complete diversity

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necessary for this Court to maintain jurisdiction,” and remand appears appropriate. Id.

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CCCSF, however, argues its joinder was impermissible, and it must therefore be

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dismissed. Mot. to Dismiss at 4. To the extent the Court has already ordered joinder of CCCSF, it

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argues the Court should revisit that issue, as Faulks and Wells Fargo’s stipulation did not mention

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CCCSF is a non-diverse Defendant, and CCCSF did not have an opportunity to object to the

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joinder. Opp’n to Mot. to Remand at 3, Dkt. No. 117. CCCSF further argues that, even if the

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Court chooses to remand this action to state court, it will be removed once again because CCCSF

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will likely be dismissed. Id. at 2.

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The Court has the authority to reconsider its prior order sua sponte. Fed. R. Civ. P. 54

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(“any order or other decision, however designated, that adjudicates fewer than all the claims or the

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rights and liabilities of fewer than all the parties does not end the action as to any of the claims or

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parties and may be revised at any time before the entry of a judgment adjudicating all the claims

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and all the parties’ rights and liabilities”); City of L.A., Harbor Div. v. Santa Monica Baykeeper,
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254 F.3d 882, 888-89 (9th Cir. 2001) (discussing authority of Court to sua sponte revise a prior

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order). The Court finds reconsideration appropriate in this instance.

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“[C]ourts have held that when a district court is unaware that joinder will destroy diversity,

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it may reconsider its prior decision permitting leave to amend a complaint.” Kapunakea Partners

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v. Equilon Enters. LLC, 2012 WL 2060876, at *3 n.5 (D. Haw. 2012) (listing cases, including City

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of L.A.). In their joint stipulation to allow Faulks to amend his complaint to add CCCSF, Faulks

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and Wells Fargo did not mention that CCCSF was a non-diverse defendant; nor did they mention

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the implications of such a joinder. See Dkt. No. 98. Faulks also did not present the Court with a

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proposed amended complaint, which would have provided the pertinent citizenship information.
Further, CCCSF had no opportunity to object to the joinder. Having now reviewed Faulks’s TAC

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United States District Court
Northern District of California

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and CCCSF’s Motion to Dismiss, the Court finds joinder may not have been proper based on this

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record, and dismissal is warranted under the circumstances.
CONCLUSION

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Based on the analysis above, the Court DENIES Faulks’s Motion to Remand and

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GRANTS CCCSF’s Motion to Dismiss. Although Faulks and CCCSF briefly touch on the

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joinder issue in their motions, the Court finds it inappropriate to decide whether joinder is

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appropriate based on such a limited record. If Faulks still seeks to join CCCSF, he may file a

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properly noticed motion for joinder.

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IT IS SO ORDERED.

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Dated: February 19, 2016
______________________________________
MARIA-ELENA JAMES
United States Magistrate Judge

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