Arvizu v. Wal-Mart Stores, Inc. et al

Filing 26

ORDER by Judge Laurel Beeler denying 5 Motion to Dismiss; granting 9 Motion to Remand.The court grants Ms. Arvizu's motion and remands the case to the Superior Court for the County of Alameda. The court denies Wal-Mart's motion to dismiss as moot. (lblc1S, COURT STAFF) (Filed on 2/27/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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San Francisco Division

United States District Court
Northern District of California

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KARINA ARVIZU,

Case No. 17-cv-00201-LB

Plaintiff,

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ORDER GRANTING THE PLAINTIFF’S
MOTION TO REMAND AND DENYING
THE DEFENDANT’S MOTION TO
DISMISS AS MOOT

v.

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WAL-MART STORES, INC., et al.,
Defendants.

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Re: ECF Nos. 5 & 9
INTRODUCTION & BACKGROUND

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This is an employment dispute between a former employee, Karina Arvizu, and her employer,

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Wal-Mart.1 Ms. Arvizu, “a [forty-three] year old Hispanic married mother,” worked at Wal-Mart

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for over twenty-two years.2 Although she “received positive feedback,” “good performance

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ratings,” and “increasing responsibilities” while there, the company fired her on February 22,

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2016.3
Before her termination, Ms. Arvizu alleges, “Wal-Mart fostered a discriminatory workplace”

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where she “was subject to inappropriate race-based comments by management-level employees

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See generally Compl. – ECF No. 1 at 11–16. Record citations refer to material in the Electronic Case
File (“ECF”); pinpoint citations are to the ECF-generated page numbers at the top of documents.

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Id. ¶ 1.

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Id. ¶¶ 1, 6.

ORDER — No. 17-cv-00201-LB

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and was dissuaded from hiring other minorities, despite their qualifications.”4 She expressed

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concern about “the discriminatory conduct of Wal-Mart’s manager and [she tried] to enforce rules

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relating to employee and customer safety.”5 But, in retaliation for these efforts, Wal-Mart fired

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her.6 Ms. Arvizu alleges that she appealed supervisor Jason Duffy’s retaliatory conduct and “asked

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for an investigation of his behavior and her termination.”7 But that did not happen: “Wal-Mart

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senior management ratified [Mr.] Duffy’s wrongful conduct.”8
Ms. Arvizu therefore sued Wal-Mart and Mr. Duffy in California state court. She brings five

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claims against Wal-Mart: (1) discrimination in violation of Cal. Gov. Code § 12940; (2) wrongful

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termination; (3) defamation; (4) violation of Cal. Gov. Code § 12940(k); and (5) wage and hour

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violations.9 She also accuses Mr. Duffy of defamation, the only claim against him.10
Wal-Mart removed the case to federal court.11 It asserts that this court has diversity jurisdiction

United States District Court
Northern District of California

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because, although Mr. Duffy is a California citizen,12 Ms. Arvizu inadequately pleads her

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defamation claim against him and he is therefore a “sham” defendant that should be disregarded

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for diversity purposes.13 Wal-Mart accordingly also moves to dismiss the defamation claim against

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Mr. Duffy.14 Ms. Arvizu moves to remand the case.15

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The court can decide the matter without oral argument and vacates the hearing on March 2,

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2017. Civil L.R. 7-1(b). The court grants Ms. Arvizu’s motion to remand and denies as moot Wal-

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Mart’s motion to dismiss.

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Id. ¶ 8.

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Id. ¶ 14.

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Id.

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Id.

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Id.

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Id. ¶¶ 7–39.

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Id. ¶¶ 17–20.

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Notice of Removal – ECF No. 1.

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Id. ¶ 20; Compl. ¶ 3.

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Notice of Removal ¶¶ 20–22.

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Motion to Dismiss – ECF No. 5.

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Motion to Remand – ECF No. 9.

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ORDER — No. 17-cv-00201-LB

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GOVERNING LAW

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A defendant in state court may remove an action to federal court if the case could have been

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filed originally in federal court. 28 U.S.C. § 1441(a). Original jurisdiction may be based on

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diversity or federal-question jurisdiction. See Caterpillar Inc. v. Williams, 482 U.S. 386, 392

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(1987); 28 U.S.C. §§ 1331, 1332. To invoke diversity jurisdiction, the complaint must allege that

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“the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs,

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and is between . . . citizens of different States . . . .” 28 U.S.C. § 1332(a)(1).

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Diversity jurisdiction requires “complete diversity of citizenship” — that is, each of the
plaintiffs must be a citizen of a different state than each of the defendants. Morris v. Princess
Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001). And an action that otherwise meets the

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United States District Court
Northern District of California

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diversity-jurisdiction criteria may not be removed “if any of the parties in interest properly joined

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and served as defendants is a citizen of the State in which such action is brought.” 28 U.S.C.

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§ 1441(b)(2). But despite the presence of a non-diverse or resident defendant, removal is proper

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when that defendant was fraudulently joined. See McCabe v. Gen. Foods, 811 F.2d 1336, 1339

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(9th Cir. 1987). If a plaintiff “fails to state a cause of action against a resident defendant, and the

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

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fraudulent.” Id.

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There is, however, a presumption against fraudulent joinder, and a defendant who asserts it

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“carr[ies] [a] heavy burden of persuasion.” Lieberman v. Meshkin, Mazandarani, C-96-3344 SI,

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1996 WL 732506, at *2 (N.D. Cal. Dec. 11, 1996) (citing Boyer v. Snap-on Tools Corp., 913 F.2d

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108, 111 (3d Cir. 1990)). “Indeed, [a defendant] must show to ‘a near certainty’ that joinder was

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fraudulent and that ‘plaintiff has no actual intention to prosecute an action against [that] particular

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resident defendant[].” Osorio v. Wells Fargo Bank, No. C 12-02645 RS, 2012 WL 2054997, at *2

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(N.D. Cal. June 5, 2012) (quoting Diaz v. Allstate Ins. Group, 185 F.R.D. 581, 586 (C.D. Cal.

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1998) (emphasis in original) (citing Boyer, 913 F.2d at 111)); see also Lewis v. Time, Inc., 83

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F.R.D. 455, 466 (E.D. Cal. 1979), aff’d, 710 F.2d 549 (9th Cir. 1983).

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A non-diverse defendant will be deemed fraudulently joined if, after all disputed questions of
fact and all ambiguities in the controlling state law are resolved in the plaintiff’s favor, the
ORDER — No. 17-cv-00201-LB

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plaintiff could not possibly recover against the party whose joinder is questioned. See Kruso v.

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Int’l Tel. & Tel. Corp., 872 F.2d 1416, 1426–27 (9th Cir. 1989). A removing defendant must

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therefore do more than show that the complaint at the time of removal fails to state a claim against

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the non-diverse defendant. See Burris v. AT & T Wireless, Inc., No. C 06-02904 JSW, 2006 WL

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2038040, at *2 (N.D. Cal. July 19, 2006) (citing Nickelberry v. DaimlerChrysler Corp., No. C-06-

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1002 MMC, 2006 WL 997391, at *1–*2 (N.D. Cal. Apr. 17, 2006)). “Remand must be granted

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unless the defendant shows that the plaintiff ‘would not be afforded leave to amend his complaint

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to cure [the] purported deficiency.’” Padilla v. AT & T Corp., 697 F. Supp. 2d 1156, 1159 (C.D.

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Cal. 2009) (quoting Burris, 2006 WL 2038040 at *2) (alteration in original).
To meet its burden, “[t]he defendant seeking removal to the federal court is entitled to present

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United States District Court
Northern District of California

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the facts showing the joinder to be fraudulent.” McCabe, 811 F.2d at 1339.

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ANALYSIS

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The parties filed competing motions: Ms. Arvizu’s motion to remand and Wal-Mart’s motion

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to dismiss. The court first considers Ms. Arvizu’s motion because it goes to federal subject-matter

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jurisdiction, a threshold inquiry.
The issue in that motion is whether Wal-Mart has shown that Ms. Arvizu fraudulently joined

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Mr. Duffy, a California resident. To do so, Wal-Mart argues that (1) Ms. Arvizu fails to state a

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defamation claim against Mr. Duffy, and (2) the alleged defamatory statement is privileged. The

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court addresses each argument in turn.

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1. The Viability of Ms. Arvizu’s Defamation Claim
Ms. Arvizu brings a defamation claim based on compelled self-publication.16 To state a claim

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for defamation, a plaintiff must allege facts showing “(a) a publication that is (b) false, (c)

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defamatory, and (d) unprivileged, and that (e) has a natural tendency to injure or that causes

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special damage.” Taus v. Loftus, 40 Cal. 4th 683, 720 (2007). A “publication” is a

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Compl. ¶¶ 17–20.

ORDER — No. 17-cv-00201-LB

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“communication to some third person who understands both the defamatory meaning of the

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statement and its application to the person to whom reference is made.” Ringler Assocs. Inc. v.

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Maryland Cas. Co., 80 Cal. App. 4th 1165, 1179 (2000). The originator of a defamatory statement

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is not normally liable for damage caused by the defamed person’s communication of the statement

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to others. Ellis v. Starbucks Corp., No. 15-cv-3451-PJH, 2015 WL 8293965, at *5 (N.D. Cal. Dec.

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9, 2015) (citing Shoemaker v. Friedberg, 80 Cal. App. 2d 911, 916 (1947)). But under the

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“compelled self-publication” exception, self-publication “may be imputed to the originator of the

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statement if the person [defamed] is ‘operating under a strong compulsion to republish the

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defamatory statement and the circumstances that create the strong compulsion are known to the
originator of the alleged defamatory statement at the time it was made.’” Id. (quoting Davis v.

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United States District Court
Northern District of California

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Consol. Freightways, 29 Cal. App. 4th 354, 373 (1994)); see also McKinney v. Cnty. of Santa

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Clara, 110 Cal. App. 3d 787, 795, 798 (1980). “This exception has been limited to a narrow class

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of cases, usually where a plaintiff is compelled to republish the statements in aid of disproving

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them.” Live Oak Publ’g Co. v. Cohagan, 234 Cal. App. 3d 1277, 1285 (1991).

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In Umamoto v. Insphere Insurance Solutions, Inc., the employee-plaintiff did not fraudulently

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assert a defamation claim against a non-diverse manager-defendant. No. 13-CV-0475-LHK, 2013

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WL 2084475 (N.D. Cal. May 14, 2013). There, the plaintiff previously worked for the defendant-

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company. Id. at *1. Among other things, the plaintiff asserted a defamation claim based on

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compelled self-publication against an individual company manager. Id. at *3. The plaintiff alleged

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that “[the company] stated they were terminating [her] ‘due to performance’” and that the plaintiff

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was “compelled to disclose the content of the defamatory statements . . . during subsequent

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applications and interviews for new employment.” Id. As alleged, the plaintiff’s claim against the

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manager was likely to fail because “[the company] [was] alleged to have been ‘the originator’ of

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the statement,” not the manager. Id. at *4. But “[i]t [was] possible that [the manager] was involved

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in [the plaintiff’s] termination and was responsible for the statement.” Id. at *5. Indeed, the

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defendant “was [the company’s] ‘Zone Manager’ for California, the state in which [the plaintiff]

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operated,” and was involved in a co-plaintiff’s termination. Id. Because the defendants “offered no

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evidence from which it may be determined that [the manager] was not responsible for the
ORDER — No. 17-cv-00201-LB

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[defamatory] statement,” a court was likely to grant leave to amend and the manager was not a

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fraudulent defendant. Id.
Here, like Umamoto, Ms. Arvizu’s defamation claim against Mr. Duffy is likely to fail as pled.

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She alleges that she “was falsely accused of gross misconduct, including retaliation and/or

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discrimination against other employees.”17 She asserts that this statement, made by “Defendants,”

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was false, unprivileged, and “directly impugned [her] character and honesty.”18 And she asserts

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that she was “forced to republish certain of these defamatory statements to third parties outside of

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Wal-Mart.”19
For at least two reasons, these allegations alone are insufficient to state a claim against Mr.

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Duffy. First, Ms. Arvizu does not allege facts plausibly supporting a claim for compelled self-

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United States District Court
Northern District of California

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publication. She does not, for example, allege to whom she was forced to communicate the

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statement. That is an important factor, see Estrada v. Wal-Mart Stores, Inc., No. 16-cv-04091-LB,

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2016 WL 5846977, at *10 (N.D. Cal. Oct. 6, 2016); and her assertion that she was forced to

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republish “certain of these defamatory statements to third parties outside Wal-Mart” is not

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sufficient.20 But this deficiency could be cured on amendment if, for example, Ms. Arvizu was

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forced to republish the defamatory statement to “explain the grounds for [her] termination to

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potential employers.” See Howerton v. Earthgrains Baking Cos., Inc., No. 1:13-CV-1397 AWI

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SMS, 2014 WL 2767399, at *2 (E.D. Cal. June 18, 2014); Live Oak Publ’g, 234 Cal. App. 3d at

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1287.
Second, the complaint’s allegations against Mr. Duffy are few and far between; she does not

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even assert that Mr. Duffy made the allegedly defamatory statement. But the few allegations

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involving him — he is a supervisor and Market Manager;21 she “appealed the retaliatory actions

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undertaken by [Mr.] Duffy and asked for an investigation of his behavior and her termination”;

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Compl. ¶ 18.

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Id. ¶ 19.

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Id.

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Id.

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Id. ¶ 3.

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ORDER — No. 17-cv-00201-LB

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and “Wal-Mart senior management ratified [his] wrongful conduct”22 — support the conclusion

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that he was involved in her termination and was responsible for the defamatory statement. And the

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defendants have not offered evidence to the contrary.

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The court therefore concludes that, although Ms. Arvizu inadequately pleads a defamation

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claim against Mr. Duffy, leave to amend would be proper. The defendants have no shown that,

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under California law, she could not possibly recover against Mr. Duffy.

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The cases that the defendants cite do not change this outcome.23 See, e.g., Toth v. Guardian

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Indus. Corp., No. 1:12cv0001 LJO DLB, 2012 WL 468244 (E.D. Cal. Feb. 13, 2012); Roland-

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Warren v. Sunrise Senior Living, Inc., No. 09 CV 1199 JM (WMc), 2009 WL 2406356 (S.D. Cal.
Aug. 4, 2009). Both of those cases addressed fraudulent joinder under a standard more akin to a

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United States District Court
Northern District of California

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Rule 12(b)(6) motion to dismiss, denying the plaintiffs’ motions to remand where they merely

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“failed to state a claim” against the non-diverse defendant. Toth, 2012 WL 468244 at *5; Roland-

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Warren, 2009 WL 2406356 at *8. But the question is whether the plaintiff could possibly recover

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against the party whose joinder is questioned. See Schwarzer, Tashima & Wagstaffe, Rutter Group

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Prac. Guide: Federa. Civ. Pro. Before Trial § 2:2467 (The Rutter Group 2016) (“Courts do not

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apply even a Rule 12(b)(6) motion to dismiss standard in which the claim must be ‘plausible’ on

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its face. Rather, the standard is whether there is ‘any possibility’ the complaint stated a cause of

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action.”) (citing Stillwell v. Allstate Ins. Co., 663 F.3d 1329, 1333 (11th Cir. 2011)). Ms. Arvizu

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could possibly recover against Mr. Duffy under California defamation laws. And the defendants’

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cases “rejected the possibility that the plaintiff would be able to correct the deficiencies in the

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defamation allegations by filing an amended complaint.” Morales v. Gruma Corp., No. CV 13-

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7341(CAS) (FFMx), 2013 WL 6018040, at *6 (C.D. Cal. Nov. 12, 2013) (citing Toth, 2012 WL

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468244 at *5; Roland-Warren, 2009 WL 2406356 at *8). But it is the defendants’ burden to

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“show[] that the plaintiff ‘would not be afforded leave to amend [her] complaint to cure [the]

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Id. ¶ 14.

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See Opposition to Motion to Remand – ECF No. 20 at 13–14.

ORDER — No. 17-cv-00201-LB

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purported deficiency.’” Padilla, 697 F. Supp. 2d at 1159 (quoting Burris, 2006 WL 2038040 at

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*2). They have not done so in this case.

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2. The Common Interest Privilege Defense
Wal-Mart asserts that “[e]ven if [Ms. Arvizu] could allege facts sufficient to support

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defamation against [Mr.] Duffy, she would still not be able to escape application of the common

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interest privilege.”24
California Civil Code section 47(c) creates a qualified privilege for any communication made

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“without malice, to a person interested therein . . . by one who is also interested.” “‘Parties in a
business or contractual relationship have the requisite ‘common interest’ for the privilege to

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United States District Court
Northern District of California

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apply.’” Umamoto, 2013 WL 2084475 at *5 (quoting King v. United Parcel Serv., Inc., 152 Cal.

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App. 4th 426, 440 (2007)). A plaintiff may defeat the privilege by showing that the defendant

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acted with malice. See Noel v. River Hills Wilsons, Inc., 113 Cal. App. 4th 1363, 1368 (2003). The

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plaintiff must demonstrate “actual malice” by showing that either: (1) “the publication was

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motivated by hatred or ill will towards the plaintiff,” or (2) “the defendant lacked reasonable

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grounds for belief in the truth of the publication and therefore acted in reckless disregard of the

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plaintiff’s rights.” Id. at 1370. “Mere allegations that the statements were made ‘with malice’ or

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with ‘no reason to believe the statements were true’ are insufficient to rebut the presumption of

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privilege.” Kacludis v. GTE Sprint Commc’ns Corp., 806 F. Supp. 866, 872 (N.D. Cal. 1992). And

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“malice is not inferred from the communication itself.” Noel, 113 Cal. App. 4th at 1370.
In Umamoto, the common-interest privilege did not render the individual manager a “sham

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defendant.” 2013 WL 2084475 at *5–*6. The employee-plaintiff there alleged that she “was

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terminated due to performance even though [she] was ‘consistently ranked #1 nationally

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throughout the company in sales’ and had ‘earned approximately 129 awards [and] accolades.’”

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Id. at *6. The company also fired the plaintiff “just two months after her husband [and co-plaintiff]

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filed a sexual harassment complaint against [the manager-defendant] and [the manager] sent [her

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Id. at 12.

ORDER — No. 17-cv-00201-LB

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husband] an email terminating him.” Id. Based on these allegations, it was “possible that the

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Superior Court would find that Plaintiffs’ allegations [were] sufficient to show malice” and, even

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if not, the deficiencies were not so obvious as to render the defamation claim fraudulent. Id. The

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court therefore remanded the case. Id.
Here, as in Umamoto, the common-interest privilege does not render fraudulent Ms. Arvizu’s

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defamation claim. As in Umamoto, she alleges that she had a history of success while employed at

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Wal-Mart: she worked there for over twenty-two years and, throughout her time there, she

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“received positive feedback and good performance ratings, along with increasing

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responsibilities.”25 And as in Umamoto, the allegations surrounding the circumstances of her

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termination may indicate malice: she “was subject to inappropriate race-based comments by

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United States District Court
Northern District of California

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management-level employees and was dissuaded from hiring other minorities”; she expressed

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concern “about the discriminatory conduct of Wal-Mart’s manager” and tried to “enforce rules

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relating to employee and customer safety” but was ultimately fired for doing so; and she “appealed

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the retaliatory actions undertaken by [Mr.] Duffy and asked for an investigation of his behavior

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and her termination,” but that never happened.26 These allegations give some support to the

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conclusion that the defamatory statement — that she engaged in “gross misconduct, including

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retaliation and/or discrimination against other employees” — was motivated by malice. And even

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if a court concluded that these allegations were insufficient, the deficiencies would likely be cured

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by amendment and do not indicate fraudulent joinder.

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In sum, Wal-Mart has not satisfied its burden of demonstrating that Ms. Arvizu fraudulently

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joined Mr. Duffy in her defamation claim. Because Mr. Duffy is a California citizen, the court is

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without subject-matter jurisdiction and remands the case to the Superior Court for the County of

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Alameda.

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Compl. ¶¶ 1, 6.

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Id. ¶¶ 8, 14.

ORDER — No. 17-cv-00201-LB

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3. Attorney’s Fees
Ms. Arvizu requests attorney’s fees and costs incurred as a result of Wal-Mart’s removal.27 A

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defendant who removes a case improperly may be sanctioned under Rule 11 and 28 U.S.C.

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§ 1447. In particular, § 1447(c) provides that “[a]n order remanding the case may require payment

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of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.”

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Awarding fees in this situation is discretionary, and they may be awarded only if such an award is

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“just.” See Martin v. Franklin Capital Corp., 546 U.S. 132, 136, 138 (2005). “Absent unusual

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circumstances, courts may award attorney’s fees under § 1447(c) only where the removing party

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lacked an objectively reasonable basis for seeking removal.” Id. at 141. Thus, “when an

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objectively reasonable basis exists, fees should be denied.” Id.
Here, Wal-Mart, although not ultimately successful, had an objectively reasonable basis for

United States District Court
Northern District of California

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removing the case based on Toth and Roland-Warren. See Morales, 2013 WL 6018040 at *6

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(denying attorney’s fees where defendant removed the case based on Toth and Roland-Warren).

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The court therefore denies Ms. Arvizu’s request for attorney’s fees and costs.

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CONCLUSION

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The court grants Ms. Arvizu’s motion and remands the case to the Superior Court for the

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County of Alameda. The court denies Wal-Mart’s motion to dismiss as moot.

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IT IS SO ORDERED.

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Dated: February 27, 2017
______________________________________
LAUREL BEELER
United States Magistrate Judge

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See Motion to Remand at 6–8.

ORDER — No. 17-cv-00201-LB

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