1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 6 KYLE HEALY, et al., Case No. 20-cv-01802-JD
7 Plaintiffs, ORDER RE REMAND v. 8 Re: Dkt. No. 10 9 FCA US LLC, et al., Defendants. 10
11 12 Plaintiffs Kyle and Michael Healy originally filed this lawsuit in the California Superior 13 Court for the County of Santa Clara. They allege that they bought a defective car manufactured 14 and sold by defendants FCA US LLC and Seaside Chrysler Dodge Jeep RAM (“Seaside”), and 15 state a single claim for breach of the implied warranty of merchantability under the Song-Beverly 16 Consumer Warranty Act, Cal. Civil Code § 1790 et seq. Dkt. No. 1-4. FCA removed the action to 17 this Court on diversity grounds. Dkt. No. 1. Plaintiffs have asked for the case to be remanded to 18 state court because they and Seaside are citizens of California -- plaintiffs live in San Jose, 19 California, and Seaside sells cars in Monterey, California. Dkt. No. 10. Defendants say that 20 Seaside should be disregarded for diversity purposes on fraudulent joinder grounds, or as a matter 21 of discretion under Federal Rule of Civil Procedure 21. Dkt. No. 12. 22 The Court found the remand motion suitable for decision without oral argument. Dkt. No. 23 20. The complaint was removed improvidently and without jurisdiction. 28 U.S.C. § 1447(c). 24 While the Court has concerns about the propriety and reasonableness of removal here, it declines 25 to award costs and fees. 26 BACKGROUND 27 As alleged in the complaint, plaintiffs purchased a new 2016 Ram truck from Seaside in 1 and fitness, in “which the [defendants] undertook to preserve or maintain the utility or 2 performance of [the] vehicle or provide compensation if there was a failure of such utility or 3 performance.” Id. ¶¶ 9, 17. Plaintiffs say that the vehicle had defects and nonconformities in the 4 engine and coolant system that emerged after they took delivery. Id. ¶ 10. They also allege that 5 they brought the car back to defendants for repairs on several occasions, without success. Id. 6 ¶¶ 19-21. 7 DISCUSSION 8 The parties agree that plaintiffs and FCA are of diverse citizenship, and that the amount in 9 controversy is $75,000 or more. The main issue for remand is whether Seaside was fraudulently 10 joined as a defendant in that plaintiffs have no real “intention” of litigating against it, as FCA 11 contends. See Dkt. No. 12 at 4. 12 FCA’s speculation about plaintiffs’ intentions is no basis for finding fraudulent joinder or 13 diversity jurisdiction. As in all federal cases, the foundational principle here is that the jurisdiction 14 of the federal courts is limited to what is authorized by the Constitution and statute. Kokkonen v. 15 Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Removal is appropriate only when a 16 case presents a federal question, or involves diversity of citizenship and meets the statutory 17 amount in controversy. 28 U.S.C. §§ 1331, 1332. There is a strong presumption against removal, 18 and the removal statute is strictly construed against finding federal jurisdiction. Gaus v. Miles, 19 980 F.2d 564, 566 (9th Cir. 1992). Any doubts about the propriety of removal should be resolved 20 in favor of a remand to state court. Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 21 1090 (9th Cir. 2003). Principles of federalism, comity, and respect for the state courts also 22 counsel strongly in favor of scrupulously confining removal jurisdiction to the precise limits that 23 Congress has defined. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941). The 24 defendant always bears the burden of demonstrating that removal was proper. Gaus, 980 F.2d at 25 566. 26 FCA removed on the basis of diversity of citizenship under Section 1332. This requires 27 complete diversity, which means that each plaintiff must have a different citizenship from each 1 Seaside are not diverse. Dkt. No. 12. Consequently, FCA can remove under Section 1332 only if 2 it establishes that Seaside was fraudulently joined. Grancare, LLC v. Thrower by and Through 3 Mills, 889 F.3d 543, 548 (9th Cir. 2018). If so, the presence of Seaside as a non-diverse party can 4 be disregarded and not counted against diversity jurisdiction. Morris v. Princess Cruises, Inc., 5 236 F.3d 1061, 1067 (9th Cir. 2001). 6 The Court extensively discussed fraudulent joinder in Geisse v. Bayer Healthcare Pharm., 7 Inc., No. 17-cv-07026-JD, 2019 WL 1239854 (N.D. Cal. Mar. 18, 2019), and the same principles 8 fully apply here. In summary, there is a “‘general presumption against [finding] fraudulent 9 joinder,’” which compounds the independent presumption against removal in all cases under 10 Section 1332, and imposes a particularly heavy burden on the defendant to prove. Id. at *2 11 (quoting Grancare, 889 F.3d at 548) (alteration in Grancare) (internal citation omitted). A 12 defendant may establish fraudulent joinder by showing actual fraud in pleading jurisdictional 13 facts, or that the plaintiff failed to state a claim against the non-diverse defendant. Id. Under the 14 claim test, the action must be remanded if there is any possibility that a state court would find that 15 the plaintiff stated a cause of action against any non-diverse defendant. Id. 16 Our circuit has emphasized that a “possibility” means just that -- whether “there is a 17 ‘possibility that a state court would find that the complaint states a cause of action against any of 18 the [non-diverse] defendants.’” Id. (quoting Grancare, 889 F.3d at 549) (alteration and emphasis 19 in Grancare) (internal citation omitted). This is a lower standard than plausibility under Rule 20 12(b)(6) for failure to state a claim, and so the joinder of a non-diverse party will not necessarily 21 be deemed fraudulent even if the claim could be dismissed. Id. In effect, the “possibility” 22 standard is akin to the “‘wholly insubstantial and frivolous standard for dismissing claims under 23 Rule 12(b)(1).’” Id. (quoting Grancare, 889 F.3d at 549-50). If there is any possibility above the 24 trivial or frivolous that the plaintiff can state a claim against the non-diverse defendant, “‘the 25 federal court must find that the joinder was proper and remand the case to state court.’” Id. 26 (quoting Hunter v. Philip Morris, USA, 582 F.3d 1039, 1046 (9th Cir. 2009)). 27 “The defendant has some leeway to present facts outside the complaint, but the complaint 1 defendant must prove fraudulent joinder by clear and convincing evidence.” Id.; see also 2 Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). 3 As these well-established standards make clear, the question of a remand turns on the 4 viability of plaintiffs’ state law claim under the Song-Beverly Act. It does not depend on 5 plaintiffs’ litigation “intentions,” as FCA urges. Defendants do not seriously dispute that plaintiffs 6 can bring a claim against Seaside for a violation of the Song-Beverly Act.
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1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 6 KYLE HEALY, et al., Case No. 20-cv-01802-JD
7 Plaintiffs, ORDER RE REMAND v. 8 Re: Dkt. No. 10 9 FCA US LLC, et al., Defendants. 10
11 12 Plaintiffs Kyle and Michael Healy originally filed this lawsuit in the California Superior 13 Court for the County of Santa Clara. They allege that they bought a defective car manufactured 14 and sold by defendants FCA US LLC and Seaside Chrysler Dodge Jeep RAM (“Seaside”), and 15 state a single claim for breach of the implied warranty of merchantability under the Song-Beverly 16 Consumer Warranty Act, Cal. Civil Code § 1790 et seq. Dkt. No. 1-4. FCA removed the action to 17 this Court on diversity grounds. Dkt. No. 1. Plaintiffs have asked for the case to be remanded to 18 state court because they and Seaside are citizens of California -- plaintiffs live in San Jose, 19 California, and Seaside sells cars in Monterey, California. Dkt. No. 10. Defendants say that 20 Seaside should be disregarded for diversity purposes on fraudulent joinder grounds, or as a matter 21 of discretion under Federal Rule of Civil Procedure 21. Dkt. No. 12. 22 The Court found the remand motion suitable for decision without oral argument. Dkt. No. 23 20. The complaint was removed improvidently and without jurisdiction. 28 U.S.C. § 1447(c). 24 While the Court has concerns about the propriety and reasonableness of removal here, it declines 25 to award costs and fees. 26 BACKGROUND 27 As alleged in the complaint, plaintiffs purchased a new 2016 Ram truck from Seaside in 1 and fitness, in “which the [defendants] undertook to preserve or maintain the utility or 2 performance of [the] vehicle or provide compensation if there was a failure of such utility or 3 performance.” Id. ¶¶ 9, 17. Plaintiffs say that the vehicle had defects and nonconformities in the 4 engine and coolant system that emerged after they took delivery. Id. ¶ 10. They also allege that 5 they brought the car back to defendants for repairs on several occasions, without success. Id. 6 ¶¶ 19-21. 7 DISCUSSION 8 The parties agree that plaintiffs and FCA are of diverse citizenship, and that the amount in 9 controversy is $75,000 or more. The main issue for remand is whether Seaside was fraudulently 10 joined as a defendant in that plaintiffs have no real “intention” of litigating against it, as FCA 11 contends. See Dkt. No. 12 at 4. 12 FCA’s speculation about plaintiffs’ intentions is no basis for finding fraudulent joinder or 13 diversity jurisdiction. As in all federal cases, the foundational principle here is that the jurisdiction 14 of the federal courts is limited to what is authorized by the Constitution and statute. Kokkonen v. 15 Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Removal is appropriate only when a 16 case presents a federal question, or involves diversity of citizenship and meets the statutory 17 amount in controversy. 28 U.S.C. §§ 1331, 1332. There is a strong presumption against removal, 18 and the removal statute is strictly construed against finding federal jurisdiction. Gaus v. Miles, 19 980 F.2d 564, 566 (9th Cir. 1992). Any doubts about the propriety of removal should be resolved 20 in favor of a remand to state court. Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 21 1090 (9th Cir. 2003). Principles of federalism, comity, and respect for the state courts also 22 counsel strongly in favor of scrupulously confining removal jurisdiction to the precise limits that 23 Congress has defined. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941). The 24 defendant always bears the burden of demonstrating that removal was proper. Gaus, 980 F.2d at 25 566. 26 FCA removed on the basis of diversity of citizenship under Section 1332. This requires 27 complete diversity, which means that each plaintiff must have a different citizenship from each 1 Seaside are not diverse. Dkt. No. 12. Consequently, FCA can remove under Section 1332 only if 2 it establishes that Seaside was fraudulently joined. Grancare, LLC v. Thrower by and Through 3 Mills, 889 F.3d 543, 548 (9th Cir. 2018). If so, the presence of Seaside as a non-diverse party can 4 be disregarded and not counted against diversity jurisdiction. Morris v. Princess Cruises, Inc., 5 236 F.3d 1061, 1067 (9th Cir. 2001). 6 The Court extensively discussed fraudulent joinder in Geisse v. Bayer Healthcare Pharm., 7 Inc., No. 17-cv-07026-JD, 2019 WL 1239854 (N.D. Cal. Mar. 18, 2019), and the same principles 8 fully apply here. In summary, there is a “‘general presumption against [finding] fraudulent 9 joinder,’” which compounds the independent presumption against removal in all cases under 10 Section 1332, and imposes a particularly heavy burden on the defendant to prove. Id. at *2 11 (quoting Grancare, 889 F.3d at 548) (alteration in Grancare) (internal citation omitted). A 12 defendant may establish fraudulent joinder by showing actual fraud in pleading jurisdictional 13 facts, or that the plaintiff failed to state a claim against the non-diverse defendant. Id. Under the 14 claim test, the action must be remanded if there is any possibility that a state court would find that 15 the plaintiff stated a cause of action against any non-diverse defendant. Id. 16 Our circuit has emphasized that a “possibility” means just that -- whether “there is a 17 ‘possibility that a state court would find that the complaint states a cause of action against any of 18 the [non-diverse] defendants.’” Id. (quoting Grancare, 889 F.3d at 549) (alteration and emphasis 19 in Grancare) (internal citation omitted). This is a lower standard than plausibility under Rule 20 12(b)(6) for failure to state a claim, and so the joinder of a non-diverse party will not necessarily 21 be deemed fraudulent even if the claim could be dismissed. Id. In effect, the “possibility” 22 standard is akin to the “‘wholly insubstantial and frivolous standard for dismissing claims under 23 Rule 12(b)(1).’” Id. (quoting Grancare, 889 F.3d at 549-50). If there is any possibility above the 24 trivial or frivolous that the plaintiff can state a claim against the non-diverse defendant, “‘the 25 federal court must find that the joinder was proper and remand the case to state court.’” Id. 26 (quoting Hunter v. Philip Morris, USA, 582 F.3d 1039, 1046 (9th Cir. 2009)). 27 “The defendant has some leeway to present facts outside the complaint, but the complaint 1 defendant must prove fraudulent joinder by clear and convincing evidence.” Id.; see also 2 Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). 3 As these well-established standards make clear, the question of a remand turns on the 4 viability of plaintiffs’ state law claim under the Song-Beverly Act. It does not depend on 5 plaintiffs’ litigation “intentions,” as FCA urges. Defendants do not seriously dispute that plaintiffs 6 can bring a claim against Seaside for a violation of the Song-Beverly Act. The elements for the 7 claim are: “(1) the [vehicle] was not fit for ordinary purposes, (2) [plaintiff] was injured, and 8 (3) the injury was proximately caused by the alleged breach of the implied warranty.” Gutierrez v. 9 Carmax Auto Superstores California, 19 Cal. App. 5th 1234, 1247 (2018). Plaintiffs plausibly 10 allege just that against Seaside, and defendants have not shown that a California state court would 11 find the claim foreclosed without any possibility of going forward. 12 That is enough to conclude that Seaside was not fraudulently joined and that the removal 13 was improvident. Defendants’ mention of an arbitration clause in the car purchase agreement does 14 not point to a different conclusion. Whether plaintiffs’ case is subject to arbitration is a wholly 15 distinct inquiry from the existence vel non of federal diversity jurisdiction for removal purposes. 16 Defendants’ request that the Court sever and dismiss Seaside under Rule 21 is also 17 misdirected. The decision to sever a defendant for jurisdictional purposes is entrusted to the 18 Court’s sound discretion, and is by no means required or mandatory. See Mendoza v. Nordstrom, 19 865 F.3d 1261, 1266 (9th Cir. 2017); Sams v. Beech Aircraft Corp., 625 F.2d 273, 277 (9th Cir. 20 1980). Defendants have not provided a good reason for the Court to interfere with plaintiffs’ case 21 by substituting its own judgment of who the defendants should be. In addition, the claim against 22 FCA and Seaside is sufficiently intertwined, factually and legally, that severance would be 23 inconvenient and inefficient. There are also the important considerations of federalism and 24 comity, which counsel that a state law claim as alleged here ought to be heard in a state court. 25 The remaining issue is whether plaintiffs should be awarded their attorney’s fees and costs 26 they incurred for the remand proceedings, as they request. Dkt. No. 10 at 7. “An order remanding 27 the case may require payment of just costs and any actual expenses, including attorney fees, 1 the “reasonableness of the attempted removal.” Lussier v. Dollar Tree Stores, Inc., 518 F.3d 2 1062, 1065 (9th Cir. 2008). “Absent unusual circumstances,” the Court may award attorney’s fees 3 under Section 1447(c) “where the removing party lacked an objectively reasonable basis for 4 seeking removal.” Martin vy. Franklin Capital Corp., 546 U.S. 132, 141 (2005). But “removal is 5 || not objectively unreasonable solely because the removing party’s arguments lack merit, or else 6 || attorney’s fees would always be awarded whenever remand is granted.” Lussier, 518 F.3d at 7 1065. 8 Put plainly, fees and costs will not be awarded just because a remand is granted. To be 9 sure, there is some evidence, as plaintiffs suggest, that defendant automobile manufacturers like 10 || FCA frequently remove cases brought by dissatisfied customers on the same handful of arguments 11 that have been rejected by the district courts. The Court has some concern that FCA has been 12 || playing this game, which could make the removal here objectively unreasonable. But the Court 13 cannot say on the record currently before it that this is necessarily true, and so fees and costs are 14 || denied. FCA is advised that a different result on fees and costs may be reached in the next similar 3 15 case. a 16 CONCLUSION 3 17 The complaint was removed improvidently and without jurisdiction, and is remanded to 18 || the Superior Court of California for the County of Santa Clara. 28 U.S.C. § 1447(c). 19 IT IS SO ORDERED. 20 Dated: July 9, 2020 21 22 JAMESS$PPONATO 23 United States District Judge 24 25 26 27 28