McClain v. Republic Mortgage, LLC et al

Filing 23

ORDERED that this lawsuit is REMANDED to State Court. The Clerk shall mail a copy of this Order to the Eighth Judicial District Court, Clark County, Nevada. Signed by Judge Gloria M. Navarro on 7/22/11. (Copies have been distributed pursuant to the NEF; cert copy of Order & Docket Sheet to State Court - MMM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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JEREMY MCCLAIN,

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Plaintiff,
vs.
REPUBLIC MORTGAGE, LLC, et al.,
Defendants.

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Case No.: 2:10-cv-01588-GMN-PAL
ORDER

Defendants Bank of New York Mellon and Recontrust Company, N.A. (“Removing

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Defendants”) attempted to remove this case to federal court asserting only diversity

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jurisdiction. (See Pet. for Removal, ECF No. 1.) However, Plaintiff is a citizen of Nevada and

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the Complaint filed in state court lists two citizens of Nevada as Defendants: Republic

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Mortgage, LLC (“Republic”) and Fidelity National Title Agency (“Fidelity”).

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Removing Defendants’ Petition for Removal tried to explain away this apparent

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jurisdictional defect by contending that “Neither Republic’s nor Fidelity’s citizenship impacts

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diversity because they were fraudulently joined in this action.” (See Pet. for Removal ¶¶ 10 &

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11, ECF No. 1.) However, the Petition offered little in the way of substantive argument to

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support this contention. Accordingly, the Court ordered the parties to “file briefs addressing

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Defendants’ contention that Defendants Republic Mortgage, LLC and Fidelity National Title

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Agency of Nevada were fraudulently joined in this lawsuit.” (Minute Order, ECF No. 19.)

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Having reviewed the briefs submitted by the parties (ECF Nos. 20 & 21), the Court

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REMANDS this lawsuit to state court.

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DISCUSSION
A civil action brought in state court may be removed by the defendant(s) to a federal
district court if the district court could have had original jurisdiction over the matter. 28 U.S.C.

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§ 1441(a). But, “[i]f at any time before final judgment it appears that the district court lacks

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subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). District courts

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have subject matter jurisdiction over civil actions arising under federal law, see 28 U.S.C. §

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1331, or where no plaintiff is a citizen of the same state as a defendant and the amount in

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controversy exceeds $75,000.00, see 28 U.S.C. § 1332(a).

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Removal statutes are strictly construed against removal jurisdiction. Gaus v. Miles, 980

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F.2d 564, 566 (9th Cir. 1992). “Federal jurisdiction must be rejected if there is any doubt as to

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the right of removal in the first instance.” Id. The defendant has the burden of establishing that

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removal is proper. Id.
Here, diversity jurisdiction does not exist on the face of Plaintiff’s Complaint, as

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Plaintiff is a citizen of Nevada and two of the named Defendants are citizens of Nevada. Nor is

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the Complaint procedurally removable to this Court, as a lawsuit filed in Nevada state court can

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only be removed to this Court if none of the defendants are citizens of Nevada. See 28 U.S.C. §

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1441(b). However, Removing Defendants claim that this case can be properly removed and

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diversity jurisdiction can be properly invoked because Republic and Fidelity were fraudulently

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joined.

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A defendant has been fraudulently joined “[i]f the plaintiff fails to state a cause of action

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against a resident defendant, and the failure is obvious according to the settled rules of the

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state.” McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). Indeed, in order

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to prove fraudulent joinder, “the defendant must demonstrate that there is no possibility that the

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plaintiff will be able to establish a cause of action in state court against the alleged sham

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defendant.” Good v. Prudential Insurance Co. of America, 5 F. Supp. 2d 804, 807 (N.D. Cal.

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1998). Further, a finding of fraudulent joinder is improper if the defendants’ assertions go to

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“the merits of the action as an entirety, and not to the joinder; that is to say, it indicated that the

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plaintiff’s case was ill founded as to all defendants.” Ritchey v. Upjohn Drug Co., 139 F.3d

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1313, 1318 (9th Cir. 1998) (quoting Chesapeake & O.R. Co. v. Cockrell, 232 U.S. 146, 153

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(1914)).

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Removing Defendants’ arguments concerning the alleged fraudulent joinder of Fidelity

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and Republic are unconvincing. Specifically, Removing Defendants contend that Republic and

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Fidelity were fraudulently joined because the conspiracy cause of action leveled against them

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was defectively pleaded with regard to all Defendants. (See Brief 4:3-5:14, ECF No. 21.)

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However, this is exactly the sort of argument that is not persuasive in the context of fraudulent

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joinder, as Removing Defendants are simply claiming that the claim was “ill founded as to all

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defendants,” not that Fidelity and Republic were actually fraudulently joined. Furthermore,

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Removing Defendants have failed to meet their heavy burden of establishing that “there is no

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possibility that the plaintiff will be able to establish a cause of action in state court against the

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alleged sham defendant.” It is entirely possible that, even if Plaintiff’s conspiracy claim is

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defective as it currently stands, Plaintiff could amend the Complaint to state a valid conspiracy

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claim against Fidelity, Republic, and all of the other relevant Defendants. Accordingly,

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diversity jurisdiction does not exist and this case must be remanded.

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CONCLUSION

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IT IS HEREBY ORDERED that this lawsuit is REMANDED to state court. The

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Clerk’s Office is directed to mail a copy of this Order to the clerk of the court for the

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Eighth Judicial District Court, Clark County, Nevada.

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DATED this 22nd day of July, 2011.

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________________________________
Gloria M. Navarro
United States District Judge

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