O 1 JS-6 2 3 4 5 6 7 United States District Court 8 Central District of California 9 10 11 MICHAEL TIPTON, Case № 2:21-cv-02952-ODW (JPRx) 12 Plaintiff, 13 v. ORDER REMANDING ACTION 14 WALMART INC., et al., 15 Defendants. 16 I. INTRODUCTION AND BACKGROUND 17 Plaintiff Michael Tipton filed this employment discrimination and retaliation 18 action in the Superior Court of California, County of Los Angeles, against Defendants 19 Walmart, Inc. and Brendan Talbott. (Notice of Removal (“NOR”), Ex. A 20 (“Complaint” or “Compl.”), ECF No. 1-1.) Tipton asserts eight causes of action 21 against Walmart related to his termination and a single cause of action for defamation 22 against his former supervisor, Talbott. (Id.) Walmart removed the action based on 23 alleged diversity jurisdiction despite Tipton’s allegation that Talbott is a resident of 24 California. (See Compl. ¶ 3.) On April 12, 2021, the Court ordered Walmart to show 25 cause for why this action should not be remanded for lack of subject matter 26 jurisdiction. (Min. Order, ECF No. 11.) On April 19, 2021, Walmart filed a 27 28 1 Response, which curiously only addresses the amount in controversy requirement. 2 (See Response, ECF No. 13.)1 3 Nevertheless, after reviewing Walmart’s Notice of Removal and Tipton’s 4 Complaint, the Court finds that it lacks subject matter jurisdiction over this action 5 because the parties are not completely diverse.2 Consequently, the Court REMANDS 6 this action to state court. See 28 U.S.C. § 1447(c). 7 II. LEGAL STANDARD 8 Federal courts have subject matter jurisdiction only as authorized by the 9 Constitution and Congress. U.S. Const. art. III, § 2, cl. 1; see also Kokkonen v. 10 Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A suit filed in state court 11 may be removed to federal court only if the federal court would have had original 12 jurisdiction over the suit. 28 U.S.C. § 1441(a). Federal courts have original 13 jurisdiction where an action arises under federal law or where each plaintiff’s 14 citizenship is diverse from each defendant’s citizenship and the amount in controversy 15 exceeds $75,000. Id. §§ 1331, 1332(a). 16 The removal statute is strictly construed against removal, and “[f]ederal 17 jurisdiction must be rejected if there is any doubt as to the right of removal in the first 18 instance.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). The party seeking 19 removal bears the burden of establishing federal jurisdiction. Id. The court must 20 remand the action sua sponte “[i]f at any time before final judgment it appears that the 21 district court lacks subject matter jurisdiction.” 28 U.S.C. § 1447(c); United Inv’rs, 22 360 F.3d at 967. 23 24 25 1 Having carefully considered the papers filed in connection with the Motion, the Court deemed the 26 matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. 2 For jurisdictional allegations, the Court looks to the Complaint and Notice of Removal, because 27 diversity jurisdiction “is determined (and must exist) as of the time the complaint is filed and 28 removal is effected.” Strotek Corp. v. Air Transp. Ass’n. of Am., 300 F.3d 1129, 1131–32 (9th Cir. 2002). 1 III. DISCUSSION 2 Walmart invokes diversity as the basis of the Court’s subject matter 3 jurisdiction. (NOR ¶ 11.) The Supreme Court has “consistently interpreted § 1332 as 4 requiring complete diversity: In a case with multiple plaintiffs and multiple 5 defendants, the presence in the action of a single plaintiff from the same State as a 6 single defendant deprives the district court of original diversity jurisdiction over the 7 entire action.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553 8 (2005). 9 “An exception to the requirement of complete diversity exists where it appears 10 that a plaintiff has fraudulently joined a ‘sham’ non-diverse defendant.” Sanchez v. 11 Lane Bryant, Inc., 123 F. Supp. 3d 1238, 1241 (C.D. Cal. 2015). “If the plaintiff fails 12 to state a cause of action against a resident defendant, and the failure is obvious 13 according to the settled rules of the state, the joinder of the resident defendant is 14 fraudulent.” Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 15 (9th Cir. 2007) (quoting McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 16 1987)). There is a strong presumption against fraudulent joinder, and thus, 17 “[f]raudulent joinder must be proven by clear and convincing evidence.” Hamilton 18 Materials, 494 F.3d at 1206. 19 Merely showing that an action is likely to be dismissed against the alleged sham 20 defendant does not demonstrate fraudulent joinder. See Grancare, LLC v. Thrower by 21 & through Mills, 889 F.3d 543, 550 (9th Cir. 2018). This is because the standard for 22 establishing fraudulent joinder is more exacting than that for dismissal for failure to 23 state a claim. Id. at 549. “[I]f there is a possibility that a state court would find that 24 the complaint states a cause of action against any of the resident defendants, the 25 federal court must find that the joinder was proper and remand the case to the state 26 court.” Id. at 548 (quoting Hunter v. Philip Morris USA, 582 F.3d 1039, 1046 27 (9th Cir. 2009)). 28 1 Here, Walmart attempts to invoke diversity jurisdiction because Tipton is a 2 California citizen, and Walmart is considered a citizen of Delaware and Arkansas. 3 (NOR ¶ 18.) In its Notice of Removal, Walmart does not identify Talbott’s 4 citizenship and instead asserts that the Court should disregard his citizenship because 5 he was fraudulently joined. (NOR ¶¶ 13–16.) However, Walmart fails to show there 6 is no possibility that Tipton can state a claim against Talbott. 7 Walmart argues that Tipton’s allegations are insufficient to state a cause of 8 action for defamation against Talbott; however, this argument is unavailing. Walmart 9 must do more than merely show Tipton’s allegations are insufficient because the 10 standard to establish fraudulent joinder is more exacting than that under Rule 12(b)(6). 11 See Grancare, 889 F.3d at 549–50 (discussing that a defendant must show by clear 12 and convincing evidence that there is no possibility a plaintiff could recover against a 13 non-diverse defendant to establish fraudulent joinder). And even assuming Tipton’s 14 allegations are insufficient, Walmart fails to establish that Tipton could not cure any 15 potential deficiency in a future amendment. See id. at 550 (“[T]he district court must 16 consider . . .
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O 1 JS-6 2 3 4 5 6 7 United States District Court 8 Central District of California 9 10 11 MICHAEL TIPTON, Case № 2:21-cv-02952-ODW (JPRx) 12 Plaintiff, 13 v. ORDER REMANDING ACTION 14 WALMART INC., et al., 15 Defendants. 16 I. INTRODUCTION AND BACKGROUND 17 Plaintiff Michael Tipton filed this employment discrimination and retaliation 18 action in the Superior Court of California, County of Los Angeles, against Defendants 19 Walmart, Inc. and Brendan Talbott. (Notice of Removal (“NOR”), Ex. A 20 (“Complaint” or “Compl.”), ECF No. 1-1.) Tipton asserts eight causes of action 21 against Walmart related to his termination and a single cause of action for defamation 22 against his former supervisor, Talbott. (Id.) Walmart removed the action based on 23 alleged diversity jurisdiction despite Tipton’s allegation that Talbott is a resident of 24 California. (See Compl. ¶ 3.) On April 12, 2021, the Court ordered Walmart to show 25 cause for why this action should not be remanded for lack of subject matter 26 jurisdiction. (Min. Order, ECF No. 11.) On April 19, 2021, Walmart filed a 27 28 1 Response, which curiously only addresses the amount in controversy requirement. 2 (See Response, ECF No. 13.)1 3 Nevertheless, after reviewing Walmart’s Notice of Removal and Tipton’s 4 Complaint, the Court finds that it lacks subject matter jurisdiction over this action 5 because the parties are not completely diverse.2 Consequently, the Court REMANDS 6 this action to state court. See 28 U.S.C. § 1447(c). 7 II. LEGAL STANDARD 8 Federal courts have subject matter jurisdiction only as authorized by the 9 Constitution and Congress. U.S. Const. art. III, § 2, cl. 1; see also Kokkonen v. 10 Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A suit filed in state court 11 may be removed to federal court only if the federal court would have had original 12 jurisdiction over the suit. 28 U.S.C. § 1441(a). Federal courts have original 13 jurisdiction where an action arises under federal law or where each plaintiff’s 14 citizenship is diverse from each defendant’s citizenship and the amount in controversy 15 exceeds $75,000. Id. §§ 1331, 1332(a). 16 The removal statute is strictly construed against removal, and “[f]ederal 17 jurisdiction must be rejected if there is any doubt as to the right of removal in the first 18 instance.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). The party seeking 19 removal bears the burden of establishing federal jurisdiction. Id. The court must 20 remand the action sua sponte “[i]f at any time before final judgment it appears that the 21 district court lacks subject matter jurisdiction.” 28 U.S.C. § 1447(c); United Inv’rs, 22 360 F.3d at 967. 23 24 25 1 Having carefully considered the papers filed in connection with the Motion, the Court deemed the 26 matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. 2 For jurisdictional allegations, the Court looks to the Complaint and Notice of Removal, because 27 diversity jurisdiction “is determined (and must exist) as of the time the complaint is filed and 28 removal is effected.” Strotek Corp. v. Air Transp. Ass’n. of Am., 300 F.3d 1129, 1131–32 (9th Cir. 2002). 1 III. DISCUSSION 2 Walmart invokes diversity as the basis of the Court’s subject matter 3 jurisdiction. (NOR ¶ 11.) The Supreme Court has “consistently interpreted § 1332 as 4 requiring complete diversity: In a case with multiple plaintiffs and multiple 5 defendants, the presence in the action of a single plaintiff from the same State as a 6 single defendant deprives the district court of original diversity jurisdiction over the 7 entire action.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553 8 (2005). 9 “An exception to the requirement of complete diversity exists where it appears 10 that a plaintiff has fraudulently joined a ‘sham’ non-diverse defendant.” Sanchez v. 11 Lane Bryant, Inc., 123 F. Supp. 3d 1238, 1241 (C.D. Cal. 2015). “If the plaintiff fails 12 to state a cause of action against a resident defendant, and the failure is obvious 13 according to the settled rules of the state, the joinder of the resident defendant is 14 fraudulent.” Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 15 (9th Cir. 2007) (quoting McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 16 1987)). There is a strong presumption against fraudulent joinder, and thus, 17 “[f]raudulent joinder must be proven by clear and convincing evidence.” Hamilton 18 Materials, 494 F.3d at 1206. 19 Merely showing that an action is likely to be dismissed against the alleged sham 20 defendant does not demonstrate fraudulent joinder. See Grancare, LLC v. Thrower by 21 & through Mills, 889 F.3d 543, 550 (9th Cir. 2018). This is because the standard for 22 establishing fraudulent joinder is more exacting than that for dismissal for failure to 23 state a claim. Id. at 549. “[I]f there is a possibility that a state court would find that 24 the complaint states a cause of action against any of the resident defendants, the 25 federal court must find that the joinder was proper and remand the case to the state 26 court.” Id. at 548 (quoting Hunter v. Philip Morris USA, 582 F.3d 1039, 1046 27 (9th Cir. 2009)). 28 1 Here, Walmart attempts to invoke diversity jurisdiction because Tipton is a 2 California citizen, and Walmart is considered a citizen of Delaware and Arkansas. 3 (NOR ¶ 18.) In its Notice of Removal, Walmart does not identify Talbott’s 4 citizenship and instead asserts that the Court should disregard his citizenship because 5 he was fraudulently joined. (NOR ¶¶ 13–16.) However, Walmart fails to show there 6 is no possibility that Tipton can state a claim against Talbott. 7 Walmart argues that Tipton’s allegations are insufficient to state a cause of 8 action for defamation against Talbott; however, this argument is unavailing. Walmart 9 must do more than merely show Tipton’s allegations are insufficient because the 10 standard to establish fraudulent joinder is more exacting than that under Rule 12(b)(6). 11 See Grancare, 889 F.3d at 549–50 (discussing that a defendant must show by clear 12 and convincing evidence that there is no possibility a plaintiff could recover against a 13 non-diverse defendant to establish fraudulent joinder). And even assuming Tipton’s 14 allegations are insufficient, Walmart fails to establish that Tipton could not cure any 15 potential deficiency in a future amendment. See id. at 550 (“[T]he district court must 16 consider . . . whether a deficiency in the complaint can possibly be cured by granting 17 the plaintiff leave to amend.”); Revay v. Home Depot U.S.A., Inc., No. 2:14-CV- 18 03391-RSWL (ASx), 2015 WL 1285287, at *3 (C.D. Cal. Mar. 19, 2015) (emphasis 19 added) (quoting Hunter, 582 F.3d at 1044) (“If there is ‘any possibility that the state 20 law might impose liability on a resident defendant under the circumstances alleged in 21 the complaint,’ or in a future amended complaint, ‘the federal court cannot find that 22 joinder of the resident defendant was fraudulent, and remand is necessary.’”). 23 In short, Walmart fails to show by clear and convincing evidence that there is 24 no possibility Tipton could state a claim against Talbott. Accordingly, the Court finds 25 that Talbott was properly joined, and the Court cannot disregard his citizenship. As 26 there is not complete diversity, the Court must remand. See Gaus, 980 F.2d at 566. 27 28 1 IV. CONCLUSION 2 For the reasons discussed above, the Court REMANDS this action to the 3 || Superior Court of California, County of Los Angeles, 111 N. Hill Street, Los Angeles, 4] California, 90012, Case No. 21STCV08266. The Clerk of the Court shall close the 5 || case. 6 7 IT IS SO ORDERED. 8 9 April 20, 2021 ss 10 □ Géedliot 2 OTIS D. WRIGHT, II 3 UNITED STATES DISTRICT JUDGE
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