4 UNITED STATES DISTRICT COURT 5 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 6
7 YI QIAO, et al., Case No. C20-1821-RSM 8 Plaintiffs, ORDER GRANTING PLAINTIFFS’ 9 MOTION FOR REMAND v. 10
11 RONGFANG “FLORA” CHAN, et al.,
12 Defendants. 13
14 I. INTRODUCTION 15 16 This matter comes before the Court on Plaintiffs Yi Qiao, Ambleside Holdings USA, Inc. 17 (“Ambleside”) and De Xiang Holding, Ltd.’s Motion for Remand. Dkt. #5. Defendants oppose 18 Plaintiffs’ motion. Dkt. #26. The Court finds oral argument unnecessary to rule on the issues. 19 Having considered Plaintiffs’ Motion, Defendants’ Response, the attached exhibits and 20 remainder of the record, the Court GRANTS Plaintiffs’ Motion and ORDERS the case remanded 21 22 to King County Superior Court. 23 II. BACKGROUND 24 The Court need not set forth the full factual background given previous orders in this 25 matter. See Dkt. #15. On November 30, 2020, Plaintiffs filed this action in King County Superior 26 Court against Defendants Chan, Washington Building Supplies Inc, Premium Place L.P., Garden 27 28 Ridge LLC, and Washington Hotel and Restaurant Development LLC, Silver Plaza, LLLP, Washington Regional Center Management LLC, Zhongzhen (USA) Investment Limited, and 1 2 Does 1-10 to recover the sums lost through Defendant Chan’s alleged fraudulent activity. Dkt. 3 #1-1. On December 2, 2020, the state court ordered Defendants to appear and show cause why 4 writs of attachment and garnishment should not issue. Dkt. #6-1. The state court scheduled its 5 show cause hearing for December 16, 2020. Id. 6 Before the show cause hearing, Defendants removed the action to the U.S. District Court 7 8 for the Western District of Washington based on recent ownership changes to the entity 9 defendants. Dkt. #1; see also Dkt. #6-3 at 4-9, 16-21. In response to the removal, Plaintiffs filed 10 a motion titled “emergency motion for remand” claiming that Defendants’ removal attempt was 11 baseless and made solely to create delay. Dkt. #5. This Court determined that Plaintiffs’ filing 12 13 failed to comply with Fed. R. Civ. P. 65 and re-noted Plaintiffs’ motion for January 15, 2021 14 pursuant to the Court’s local rules. Dkt. #10. In the interim, Plaintiffs moved for a temporary 15 restraining order (“TRO”) to enjoin Defendants from disposing of their properties for the 16 pendency of the remand motion, which this Court granted on December 23, 2020. Dkt. #15. 17 Because Plaintiffs filed their reply before the noting date, briefing on their motion for 18 19 remand is complete and the matter is ready for the Court’s consideration. LCR 7(b)(1). 20 III. DISCUSSION 21 A. Legal Standard 22 When a case is filed in state court, removal is typically proper if the complaint raises a 23 federal question or where there is diversity of citizenship between the parties and an amount in 24 25 controversy exceeds $75,000. 28 U.S.C. §§ 1331, 1332(a). Typically, it is presumed “that a 26 cause lies outside [the] limited jurisdiction [of the federal courts] and the burden of establishing 27 the contrary rests upon the party asserting jurisdiction.’” Hunter v. Philip Morris USA, 582 F.3d 28 1039, 1042 (9th Cir. 2009). A motion to remand the case based on any defect other than lack of 1 2 subject matter jurisdiction must be made within 30 days after the filing of the notice of removal. 3 28 U.S.C. § 1447(c). An order remanding the case may require payment of just costs and any 4 actual expenses, including attorney fees, incurred as a result of the removal. Id. 5 B. Diversity Jurisdiction 6 Defendants claim federal jurisdiction based on diversity of citizenship pursuant to 28 7 8 U.S.C. § 1332(a). Dkt. #1. Diversity jurisdiction requires diversity of citizenship between the 9 parties and an amount in controversy exceeding $75,000. 28 U.S.C. § 1332(a). Diversity of 10 citizenship requires “complete diversity,” meaning that “each defendant must be a citizen of a 11 different state from each plaintiff.” In re Digimarc Corp. Derivative Litigation, 549 F.3d 1223, 12 13 1234 (9th Cir. 2008). “[D]iversity jurisdiction does not encompass a foreign plaintiff suing 14 foreign defendants.” Nike, Inc. v. Comercial Iberica de Exclusivas Deportivas, S.A., 20 F.3d 15 987, 991 (9th Cir. 1994) (citing Cheng v. Boeing Co., 708 F.2d 1406, 1412 (9th Cir.), cert. denied, 16 464 U.S. 1017, 104 S. Ct. 549, 78 L.Ed.2d 723 (1983). The presence of a United States citizen 17 in such an action “does not salvage jurisdiction because diversity must be complete.” Id. (citing 18 19 Faysound Ltd. v. United Coconut Chem., Inc., 878 F.2d 290, 294 (9th Cir. 1989)). 20 C. Lack of Complete Diversity 21 Defendants advance two theories of federal diversity jurisdiction, neither of which is 22 legally supported. First, Defendants’ removal notice argues that Plaintiff Ambleside, a 23 Washington citizen, is a “sham plaintiff,” and the remaining plaintiffs—Qiao and De Xian 24 25 Holding, Ltd.—are a Canadian citizen and Samoan corporation, respectively. Dkt. #1 at 3-4. 26 Defendants also contend that the Washington-based corporate defendants are “nominal parties” 27 and should not be considered, leaving only Defendant Chan—a Canadian citizen. Id. at 4-5. 28 Defendants alternatively argue that even if these corporate defendants are considered, 1 2 forthcoming corporate disclosure statements will reveal that these companies are owned by 3 various combinations of Chinese, Hong Kong, and Canadian citizens. Id. at 5. As the Court 4 pointed out in its previous order, even if it accepts Defendants arguments that the Washington 5 defendant corporations are “nominal defendants” and should not be considered, a lawsuit by 6 foreign plaintiffs against foreign defendants does not meet the “complete diversity” requirement. 7 8 Nike, Inc., 20 F.3d at 991; see also Dkt. #15 at 5. Consequently, Defendants’ basis for removal 9 as stated in their removal notice fails as a matter of law. 10 In their Response, Defendants amend their theory of removal by abandoning their claim 11 that Ambleside is a sham plaintiff. See Dkt. #26 at 6 (“Defendants would concede that if both 12 13 Plaintiff Ambleside and the corporate Defendants were all treated as nominal, then the case 14 would involve solely alien plaintiffs suing an alien defendant, thus vitiating diversity 15 jurisdiction.”). Under their revised theory, Defendants argue that this matter concerns an alien 16 individual (Qiao), an alien corporation (De Xiang) and a domestic corporation (Ambleside) suing 17 an alien individual (Chan). Id. Defendants argue that “the presence of aliens on even both sides 18 19 of a case” does not defeat complete diversity. Id. at 3-4 (emphasis in original). Defendants rely 20 on a case from the Northern District of Georgia, Samincorp, Inc. v. Southwire Co., Inc., which 21 found that “[t]he statute [28 U.S.C. § 1332
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4 UNITED STATES DISTRICT COURT 5 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 6
7 YI QIAO, et al., Case No. C20-1821-RSM 8 Plaintiffs, ORDER GRANTING PLAINTIFFS’ 9 MOTION FOR REMAND v. 10
11 RONGFANG “FLORA” CHAN, et al.,
12 Defendants. 13
14 I. INTRODUCTION 15 16 This matter comes before the Court on Plaintiffs Yi Qiao, Ambleside Holdings USA, Inc. 17 (“Ambleside”) and De Xiang Holding, Ltd.’s Motion for Remand. Dkt. #5. Defendants oppose 18 Plaintiffs’ motion. Dkt. #26. The Court finds oral argument unnecessary to rule on the issues. 19 Having considered Plaintiffs’ Motion, Defendants’ Response, the attached exhibits and 20 remainder of the record, the Court GRANTS Plaintiffs’ Motion and ORDERS the case remanded 21 22 to King County Superior Court. 23 II. BACKGROUND 24 The Court need not set forth the full factual background given previous orders in this 25 matter. See Dkt. #15. On November 30, 2020, Plaintiffs filed this action in King County Superior 26 Court against Defendants Chan, Washington Building Supplies Inc, Premium Place L.P., Garden 27 28 Ridge LLC, and Washington Hotel and Restaurant Development LLC, Silver Plaza, LLLP, Washington Regional Center Management LLC, Zhongzhen (USA) Investment Limited, and 1 2 Does 1-10 to recover the sums lost through Defendant Chan’s alleged fraudulent activity. Dkt. 3 #1-1. On December 2, 2020, the state court ordered Defendants to appear and show cause why 4 writs of attachment and garnishment should not issue. Dkt. #6-1. The state court scheduled its 5 show cause hearing for December 16, 2020. Id. 6 Before the show cause hearing, Defendants removed the action to the U.S. District Court 7 8 for the Western District of Washington based on recent ownership changes to the entity 9 defendants. Dkt. #1; see also Dkt. #6-3 at 4-9, 16-21. In response to the removal, Plaintiffs filed 10 a motion titled “emergency motion for remand” claiming that Defendants’ removal attempt was 11 baseless and made solely to create delay. Dkt. #5. This Court determined that Plaintiffs’ filing 12 13 failed to comply with Fed. R. Civ. P. 65 and re-noted Plaintiffs’ motion for January 15, 2021 14 pursuant to the Court’s local rules. Dkt. #10. In the interim, Plaintiffs moved for a temporary 15 restraining order (“TRO”) to enjoin Defendants from disposing of their properties for the 16 pendency of the remand motion, which this Court granted on December 23, 2020. Dkt. #15. 17 Because Plaintiffs filed their reply before the noting date, briefing on their motion for 18 19 remand is complete and the matter is ready for the Court’s consideration. LCR 7(b)(1). 20 III. DISCUSSION 21 A. Legal Standard 22 When a case is filed in state court, removal is typically proper if the complaint raises a 23 federal question or where there is diversity of citizenship between the parties and an amount in 24 25 controversy exceeds $75,000. 28 U.S.C. §§ 1331, 1332(a). Typically, it is presumed “that a 26 cause lies outside [the] limited jurisdiction [of the federal courts] and the burden of establishing 27 the contrary rests upon the party asserting jurisdiction.’” Hunter v. Philip Morris USA, 582 F.3d 28 1039, 1042 (9th Cir. 2009). A motion to remand the case based on any defect other than lack of 1 2 subject matter jurisdiction must be made within 30 days after the filing of the notice of removal. 3 28 U.S.C. § 1447(c). An order remanding the case may require payment of just costs and any 4 actual expenses, including attorney fees, incurred as a result of the removal. Id. 5 B. Diversity Jurisdiction 6 Defendants claim federal jurisdiction based on diversity of citizenship pursuant to 28 7 8 U.S.C. § 1332(a). Dkt. #1. Diversity jurisdiction requires diversity of citizenship between the 9 parties and an amount in controversy exceeding $75,000. 28 U.S.C. § 1332(a). Diversity of 10 citizenship requires “complete diversity,” meaning that “each defendant must be a citizen of a 11 different state from each plaintiff.” In re Digimarc Corp. Derivative Litigation, 549 F.3d 1223, 12 13 1234 (9th Cir. 2008). “[D]iversity jurisdiction does not encompass a foreign plaintiff suing 14 foreign defendants.” Nike, Inc. v. Comercial Iberica de Exclusivas Deportivas, S.A., 20 F.3d 15 987, 991 (9th Cir. 1994) (citing Cheng v. Boeing Co., 708 F.2d 1406, 1412 (9th Cir.), cert. denied, 16 464 U.S. 1017, 104 S. Ct. 549, 78 L.Ed.2d 723 (1983). The presence of a United States citizen 17 in such an action “does not salvage jurisdiction because diversity must be complete.” Id. (citing 18 19 Faysound Ltd. v. United Coconut Chem., Inc., 878 F.2d 290, 294 (9th Cir. 1989)). 20 C. Lack of Complete Diversity 21 Defendants advance two theories of federal diversity jurisdiction, neither of which is 22 legally supported. First, Defendants’ removal notice argues that Plaintiff Ambleside, a 23 Washington citizen, is a “sham plaintiff,” and the remaining plaintiffs—Qiao and De Xian 24 25 Holding, Ltd.—are a Canadian citizen and Samoan corporation, respectively. Dkt. #1 at 3-4. 26 Defendants also contend that the Washington-based corporate defendants are “nominal parties” 27 and should not be considered, leaving only Defendant Chan—a Canadian citizen. Id. at 4-5. 28 Defendants alternatively argue that even if these corporate defendants are considered, 1 2 forthcoming corporate disclosure statements will reveal that these companies are owned by 3 various combinations of Chinese, Hong Kong, and Canadian citizens. Id. at 5. As the Court 4 pointed out in its previous order, even if it accepts Defendants arguments that the Washington 5 defendant corporations are “nominal defendants” and should not be considered, a lawsuit by 6 foreign plaintiffs against foreign defendants does not meet the “complete diversity” requirement. 7 8 Nike, Inc., 20 F.3d at 991; see also Dkt. #15 at 5. Consequently, Defendants’ basis for removal 9 as stated in their removal notice fails as a matter of law. 10 In their Response, Defendants amend their theory of removal by abandoning their claim 11 that Ambleside is a sham plaintiff. See Dkt. #26 at 6 (“Defendants would concede that if both 12 13 Plaintiff Ambleside and the corporate Defendants were all treated as nominal, then the case 14 would involve solely alien plaintiffs suing an alien defendant, thus vitiating diversity 15 jurisdiction.”). Under their revised theory, Defendants argue that this matter concerns an alien 16 individual (Qiao), an alien corporation (De Xiang) and a domestic corporation (Ambleside) suing 17 an alien individual (Chan). Id. Defendants argue that “the presence of aliens on even both sides 18 19 of a case” does not defeat complete diversity. Id. at 3-4 (emphasis in original). Defendants rely 20 on a case from the Northern District of Georgia, Samincorp, Inc. v. Southwire Co., Inc., which 21 found that “[t]he statute [28 U.S.C. § 1332(a)] does not provide that diversity is destroyed if 22 citizens of foreign states are both plaintiffs and defendants . . . ‘the language of Section 23 1332(a)(3) is broad enough to allow aliens to be additional parties on both sides of the dispute.’” 24 25 531 F. Supp. 1, 2 (N.D. Ga. 1980) (quoting C. Wright, A. Miller, and E. Cooper, Federal Practice 26 and Procedure § 3604 (1975)). Under Defendants’ new reasoning, complete diversity exists 27 because Plaintiff Ambleside is a Washington corporation. 28 Again, Defendants have grossly misconstrued the law on federal diversity jurisdiction. 1 2 As the Samincorp court stated, diversity exists under Section 1332(a) where “the controversy is 3 between ‘citizens of different States and in which citizens or subjects of a foreign state are 4 additional parties.’” Samincorp, 531 F. Supp. at 2 (quoting 28 U.S.C. § 1332(a)) (emphasis 5 added). Jurisdiction would therefore exist if a New Yorker sued a Californian, notwithstanding 6 alien parties on both sides of the dispute “assuming, of course, that there was a legitimate dispute 7 8 between the two Americans.” Id. (emphasis added) (internal quotations omitted). The Ninth 9 Circuit in Nike reached the same conclusion that complete diversity exists in cases with aliens on 10 both sides of the litigation, provided that there are “citizens of [the] United States on both sides 11 who satisfy diversity requirements.” Nike, Inc., 20 F.3d at 991 (emphasis added). Here, 12 13 Defendants identify only one U.S. citizen in this dispute: Plaintiff Ambleside. The remaining 14 parties, under Defendant’s theory of removal, are all alien individuals or entities. Because there 15 is no citizen defendant to create complete diversity with Plaintiff Ambleside, Defendants’ theory 16 of diversity jurisdiction fails as a matter of law. 17 For these reasons, the Court finds no proper basis for federal diversity jurisdiction. 18 19 Accordingly, remand is warranted. 20 D. Costs and Fees 21 Plaintiffs request costs and fees under 28 U.S.C. § 1447(c). Dkt. #5 at 8. Under 28 U.S.C. 22 §1447(c), “an order remanding the case may require payment of just costs and any actual 23 expenses, including attorney fees, incurred as a result of the removal.” The standard for awarding 24 25 fees turns on the reasonableness of the removal. Martin v. Franklin Capital Corp., 546 U.S. 132, 26 141 (2005). Courts may award attorney’s fees under 28 U.S.C. §1447(c) where the removing 27 party lacked an objectively reasonable basis for seeking removal. Id. 28 The Court has reviewed the Complaint, the Notice of Removal, and the briefing of the 1 2 parties, and concludes that Defendants did not have an objectively reasonable basis for removal. 3 The complaint is solely a state law action between non-diverse parties, yet Defendants 4 attempted—unsuccessfully—to create diversity jurisdiction through changes of ownership 5 among the Defendant entities. Defendants also contend that Plaintiffs “were afforded an 6 opportunity to stipulate to remand” on January 8, 2021. Dkt. #27 at ¶ 5. Defendants’ offer to 7 8 stipulate to a remand, which occurred only after the Court identified the deficiencies in 9 Defendants’ removal notice, is irrelevant to the question of whether Defendants lacked an 10 objectively reasonable basis for seeking removal in the first instance. 11 For these reasons, Plaintiffs are entitled to an award of fees and costs associated with 12 13 Defendants’ removal. 14 IV. CONCLUSION 15 The Court, having considered Plaintiffs’ Motion, the declarations and exhibits in support 16 thereof, and the remainder of the record, hereby finds and ORDERS: 17 (1) Plaintiffs’ Motion for Remand, Dkt. #5, is GRANTED. This case is hereby 18 19 REMANDED to the Superior Court of Washington State for King County. 20 (2) Plaintiffs are entitled to an award of fees and costs associated with bringing this 21 Motion. Plaintiffs shall file a supplemental motion in this Court requesting such relief no later 22 than twenty-one (21) days from the date of this Order. 23 DATED this 15th day of January, 2021. 24 25 A 26 RICARDO S. MARTINEZ 27 CHIEF UNITED STATES DISTRICT JUDGE 28