William D. McCann v. Quality Loan Services Corporation

• Court: District Court, D. Nevada
• Decided: July 8, 2020
• Docket: 3:19-cv-00573
• Status: Unknown

Opinion

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 DISTRICT OF NEVADA 8 9 WILLIAM D. MCCANN,

10 Plaintiff, Case No. 3:19-CV-00573-RCJ-WGC 11 vs. ORDER 12 QUALITY LOAN SERVICE CORP., et al, 13 Defendants. 14

15 Plaintiff filed this suit in state court, and Defendants removed to this Court. Currently, 16 Plaintiff moves to remand, and Defendants move to dismiss and strike. Finding a question of 17 whether removal was properly effected, the Court remands the case to state court and denies the 18 remaining motions without prejudice due to lack of jurisdiction. 19 FACTUAL BACKGROUND 20 The underlying case revolves around a lengthy attempt by various parties to foreclose on 21 Plaintiff’s property. In response to those attempts, Plaintiff filed various tort claims, including 22 federal causes of action, against the thirteen Defendants in the Ninth Judicial District for the State 23 of Nevada, Douglas County. Two separate notices of removal were filed in the state court and the 24 /// 1 removed cases were then consolidated before this Court. (ECF No. 29.)1 Following consolidation, 2 Plaintiff moved to remand to state court (ECF No. 46) and Defendants moved to dismiss the claims 3 (ECF Nos. 33, 42, 71, and 72). 4 LEGAL STANDARD 5 A defendant sued in state court may remove the action to federal court upon filing a notice 6 of removal. 28 U.S.C. §§ 1441(a), 1446(a). A plaintiff objecting to removal may file a motion to 7 remand arguing either that the federal court lacks subject-matter jurisdiction or that there were 8 procedural defects in the removal procedure. 28 U.S.C. § 1447(c). “The party invoking the removal 9 statute bears the burden of establishing federal jurisdiction.” Ethridge v. Harbor House Restaurant, 10 861 F.2d 1389, 1393 (9th Cir. 1988) (citing Williams v. Caterpillar Tractor Co., 786 F.2d 928, 11 940 (9th Cir. 1986)). A removing “defendant also has the burden of showing that it has complied 12 with the procedural requirements for removal.” Riggs v. Plaid Pantries, Inc., 233 F. Supp. 2d 1260,

13 1264 (D. Or. 2001). 14 There is a strong presumption against removal; thus, the removal statutes are to be 15 construed restrictively and any doubt about the right of removal is resolved in favor of remand. 16 Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108–09 (1941). In determining whether 17 removal is proper, the Court looks to the entire record before it and additionally considers the state 18 court record created prior to removal. See ARCO Envtl. Remediation, LLC v. Dep’t of Health & 19 Envtl. Quality of the State of Mont., 213 F.3d 1108, 1117 (9th Cir. 2000) (“[I]n determining 20 whether a removal petition is incurably defective, the court not only examines the specific 21 allegations of the petition itself, but also must scrutinize the record of the state court proceedings.”) 22 1 Defendant Quality Loan Service Corporation filed the petition for removal in Case number 3:19- CV-00584-RCJ-WGC. However, due to this Court’s consolidation order, which transferred over 23 only the notices of consent and not the petition for removal, the Court views it as a “consenting” party rather than a “removing” party. Thus, the Court neither considers its petition for removal nor 24 1 (quoting N. Ill. Gas Co. v. Airco Indus. Gases, A Div. of Airco, Inc., 676 F.2d 270, 273 (7th Cir. 2 1982)). 3 ANALYSIS 4 Plaintiff argues that removal was improper in the instant case for multiple reasons; the 5 Court agrees in part, finding that the unanimity requirement has not been met.2 First, Plaintiff 6 argues that removal was void ab initio because the law firm that filed one of the notices of removal 7 was a foreign entity not registered with the Nevada Secretary of State, and therefore had no 8 authority to practice in Nevada. Plaintiff is half right. Ghidotti Berger LLP is a foreign entity. A 9 foreign LLP that has not registered with the Secretary of State “may not commence or maintain 10 any action, suit or proceeding in a[]” Nevada court until it has registered. NRS 87.5405(2). 11 However, Plaintiff’s argument ignores the very next subsection, which holds that failure to register 12 “does not . . . prevent the foreign [LLP] from defending any action, suit, or proceeding in any”

13 Nevada Court. NRS 87.5405(3) (emphasis added). 14 Plaintiff next contends that removal was procedurally defective because Defendants failed 15 to provide notice of removal to other parties in compliance with 28 U.S.C. § 1446(d). Plaintiff’s 16 argument is incorrect. Section 1446(d) requires a removing party to provide notice “to all adverse 17 parties.” It does not require a removing party to provide notice to co-defendants who have not 18 assumed an adverse posture (i.e. by filing crossclaims). 19 Plaintiff’s third argument is that removing Defendants failed to obtain consent to removal 20 from all necessary parties. Plaintiff is correct that removal based solely on federal question 21 jurisdiction cannot occur without the consent of all “properly joined and served” defendants. 22 28 U.S.C. § 1446(b)(2)(A); cf. Chicago, Rock Island, & Pacific Ry. Co. v. Martin, 178 U.S. 245,

2 Because the Court finds removal procedurally defective, it does not reach Plaintiff’s abstention 24 1 247–48 (1900) (describing the judicially-created “rule of unanimity”). Nevertheless, there are two 2 relevant categories of defendants for which consent is not required: those not “properly joined and 3 served in the action,” Emrich v. Touche Ross & Co., 846 F.2d 1190, 1193 n.1 (9th Cir. 1988), 4 otherwise known as the “unserved defendant” or “nonservice” exception, and nominal defendants, 5 Hewitt v. City of Stanton, 798 F.2d 1230, 1232–33 (9th Cir. 1986). 6 Here, there are four served defendants who have not yet consented to removal: Deutsche 7 Bank Trust Company Americas (“Deutsche Bank”), Residential Accredit Loans, Inc. (2005QA1) 8 (“Residential”), U.S. Bank Trust N.A. (“U.S. Bank”), and Mr. Inku Nam. Two of those defendants, 9 Deutsche Bank and Residential, were not properly served as service was performed by Ms. Jin Lan 10 McCann, who is Plaintiff’s wife and an interested party. (ECF No. 69 Ex. 1 at 1–2; Ex. 3 at 1–2); 11 see Sawyer v. Sugarless Shops, Inc., 792 P.2d 14, 17 (Nev. 1990) (holding service improper when 12 not performed by a disinterested party). Furthermore, where a defendant has not been properly

13 served under state rules prior to removal, mere completion of the state process does not perfect 14 service. Beecher v. Wallace, 381 F.2d 372, 373 (9th Cir. 1967). Instead, “[t]he state court process 15 becomes null and void on the date the action is removed to federal court.” Id. Therefore, Defendant 16 Nam, although properly served under state law, was not served prior to removal, as service 17 occurred on September 16, 2019 and the notice of removal was filed on September 13, 2019. 18 Consequently, the consent of Defendant Nam is not required.3 It is the final defendant, U.S. Bank, 19 which presents an issue. 20 Defendant U.S. Bank was properly served on September 12, 2019, prior to removal. (ECF 21 No. 69 Ex. 2 at 4.) There does, however, exist some question as to whether Defendant U.S. Bank 22 is a nominal defendant. Nominal defendants are those whose “role is limited to that of a stakeholder

23 3 Nonetheless, Defendant Nam has filed motions to dismiss with this Court. (ECF Nos. 71–72.) This Court interprets Defendant Nam’s acknowledgment of the Court’s authority to dismiss the 24 1 or depository.” Hewitt, 798 F.2d at 1233 (citing Tri-Cities Newspapers, Inc. v. Tri-Cities Printing 2 Pressmen & Assistants’ Local 349, 427 F.2d 325, 327 (5th Cir. 1970)). That is, they are parties 3 which are “neither necessary nor indispensable.” Tri-Cities, 427 F.2d at 327. A test cited with 4 approval by the Ninth Circuit is “whether in the absence of the defendant, the Court can enter a 5 final judgment consistent with equity and good conscience which would not be in any way unfair 6 or inequitable to plaintiff.” Id. (alterations omitted) (quoting Storybrook Tenants Ass’n, Inc. v. 7 Alpert, 194 F. Supp. 552, 559 (D. Conn. 1961)). 8 Here, the Court cannot determine with certainty from the face of the complaint that 9 Defendant U.S. Bank is a nominal party. Indeed, removing Defendants do not address Defendant 10 U.S. Bank at all in their response to the motion to remand. From the face of the complaint, it 11 appears that Defendant U.S. Bank is not a nominal defendant because if, as alleged, it claims to 12 have an interest in the property, (ECF No. 1 Ex. 1 at 12, ¶ 11), granting quiet title against all other

13 defendants would not extinguish its claim. Thus, Plaintiff would not be able to fully resolve his 14 claims. 15 Nonetheless, even if Defendant U.S. Bank is a proper defendant, there is still the matter as 16 to whether removing Defendants were required to obtain its consent to removal. See Prize Frize, 17 Inc. v. Matrix (U.S.) Inc., 167 F.3d 1261, 1266 n.6 (9th Cir. 1999), superseded by statute on other 18 grounds, Class Action Fairness Act of 2005, Pub. L. 109-2, 119 Stat. 12 (2005) (noting, but not 19 holding dispositive in finding remand appropriate, the fact that proof of service existed for at least 20 four non-joining defendants). Courts are divided on how to approach situations, such as the one 21 here, where service of the non-consenting party occurs immediately before removal. Compare 22 Cohen v. Hoard, 696 F. Supp. 564 (D. Kan. 1988) (applying bright-line rule that once a defendant

23 has been served, the nonservice exception no longer applies) with Lopez v. BNSF Ry. Co, 614 F. 24 Supp. 2d 1084 (E.D. Cal. 2007) (analyzing whether removing defendants had exercised “due 1 diligence” in checking for other served defendants prior to removal). Even those courts that apply 2 the due diligence approach vary widely on what constitutes “due diligence.” See Lewis v. HSBC 3 Bank USA, N.A., No. 17-00234 DKW-KSC, 2017 WL 3671279, at *3–4 (D. Haw. Aug. 25, 2017) 4 (collecting cases). Lewis divided the due diligence courts into two categories: those that “require[d] 5 the consent of served co-defendants, regardless of the filing of proofs of service . . . [and] found 6 that diligence is lacking when removing defendants merely check the state court record for proofs 7 of service as to co-defendants,” and those that “allowed removing defendants to rely on the state 8 court docket for filed proofs of service.” Id. 9 Although the Court is inclined to apply the bright-line rule described in Cohen, because 10 the text of § 1446(b)(2)(A) does not recognize any exceptions, it acknowledges that such a standard 11 may not be conducive to the practicalities of litigation. However, the Court rejects removing 12 Defendants’ argument that the second approach to “due diligence” is the appropriate one. As Lewis

13 so aptly stated: 14 Section 1446(b)(2)(A) plainly requires the consent of defendants who have been “properly joined and served.” Contrary to Removing Defendants’ contentions, 15 there is no qualification that § 1446(b)(2)(A)’s requirement is only triggered once a proof of service is posted on the electronic docket. Indeed, docketing of service- 16 related documents, though informative to defendants seeking removal, has no bearing on whether a co-defendant has actually been served. 17

18 Id. at *5. The argument against considering checking the state docket once being sufficient 19 diligence is especially strong in this case because Defendants removed only three days after being 20 served.4 See Lewis, 2017 WL 3671279 at *6 (noting that defendants removed the case only two 21 weeks after being served and that “[h]ad Removing Defendants utilized the remainder of their 22 removal window, further inquiries and diligence would probably have revealed that HSBC was 23 4 Although the exact dates that all Defendants were served on is not clear, removing Defendant Servis One, d/b/a/ BSI Financial Services, states that it was served “on or about September 10, 24 1 served and they could have taken necessary steps to obtain HSBC’s consent to removal”).5 2 Admittedly, Plaintiff does not explicitly point to Defendant U.S. Bank until his reply, but to focus 3 solely on that is to ignore removing Defendants’ burden to “affirmatively explain the absence of 4 any co-defendants.” Riggs, 233 F. Supp. 2d at 1267 (quoting Prize Frize, 167 F.3d at 1265).6 5 Furthermore, even without notice of service provided by the state court docket, removing 6 Defendants still had notice of Defendant U.S. Bank being a named defendant from the complaint. 7 See, e.g., Brady v. Lovelace Health Plan, 504 F. Supp. 2d 1170, 1173 (D.N.M. 2007) (“[T]he 8 [re]moving defendant is not excused from the consent requirement merely because it does not 9 know whether a co-defendant has been served . . . . Here, [plaintiff’s] initial complaint should have 10 put [removing defendant] on notice of [the co-defendant.]”). On top of that, once removing 11 Defendants received notice that Defendant U.S. Bank had been served, they could have amended 12 the removal petition or requested leave to file a supplemental briefing addressing that fact. As the

13 Seventh Circuit noted in a case that has been repeatedly cited with approval by the Ninth Circuit, 14 “[a] removal petition may be amended freely within the thirty day period. Moreover, even after 15

16 5 The record does not indicate when the State Court Clerk received the proofs of service, but the rejection of the filings due to removal was issued to Plaintiff on October 8, 2019. (ECF No. 61 Ex. 17 3.) Defendants ask this Court to strike those filings as improper, but the case they cite to is inapposite. Provenz v. Miller, 102 F.3d 1478, 1483 (9th Cir. 1996), rejects “new 18 evidence . . . presented in a reply to a motion for summary judgment.” (emphasis added). This ruling corresponds with our Local Rules. See LR 7-3(a) (allowing exhibits for motions for 19 summary judgment and responses, but not replies). However, the Local Rules explicitly consider the ability of parties to provide evidence in replies to non-summary judgment motions. See LR 7- 3(b). Plaintiff’s unconventional practice of filing motions “request[ing] judicial notice” instead of 20 simply attaching the exhibits to the documents may violate LR 7-2(g), but that argument has not been raised by Defendants. Nor did Defendants attempt to strike Plaintiff’s first such motion, (ECF 21 No. 47), nor any of the other similar motions, (ECF Nos. 8, 47, and 51), raising the possibility of waiver. 22 6 While this quote applied to the notice of removal, it applies equally to responses to a motion to remand, as the essence of a motion to remand is that the removal notice was defective. 23 Additionally, removing Defendants’ statement that “no other parties have been served or have appeared in this matter,” (ECF No. 1 at ¶ 5), is no longer true once Defendants have been put on 24 1 the thirty days have elapsed, amendments to correct ‘defective allegations of jurisdiction’ are 2 permitted under 28 U.S.C. § 1653.” Illinois Gas, 676 F.2d at 273. 3 Finally, even though federal courts are divided on how to apply § 1446(b), or what 4 constitutes “due diligence,” they are united in applying the well-settled standard that “[t]he burden 5 of establishing federal jurisdiction is upon the party seeking removal, and the removal statute[s] 6 [are] strictly construed against removal jurisdiction.” Emrich, 846 F.2d at 1195 (emphasis added) 7 (citations omitted); see, e.g., Carson v. Dunham, 121 U.S. 421, 425 (1887) (“As [defendant] was 8 the actor in the removal proceeding, it rested on her to make out the jurisdiction of the [federal] 9 court.”). This burden was explicitly placed on removing defendants by Congress. See Shamrock 10 Oil, 313 U.S. at 106–107 (“We cannot assume that Congress, in thus revising the statute, was 11 unaware of the history [of previous removal statutes allowing plaintiffs or defendants to 12 remove] . . . or certainly that it regarded as without significance the omission from the earlier act

13 of the phrase ‘either party,’ and the substitution [of the phrase ‘defendant or defendants’].”). 14 Placing the burden on removing defendants also comports with the long-standing policy that “[d]ue 15 regard for the rightful independence of state governments, which should actuate federal courts, 16 requires that they scrupulously confine their own jurisdiction to the precise limits which the statute 17 has defined.” Healy v. Ratta, 292 U.S. 263, 270 (1934). 18 Consequently, the fact that Plaintiff, in his motion to remand, specifically identified some 19 non-consenting defendants, but not others, does not relieve removing Defendants of their 20 affirmative responsibility to examine the records of the state and federal proceedings to ensure that 21 they have satisfied their statutory duty. See, e.g., WFG Nat’l Title Ins. Co. v. Dayden, No. CV-17- 22 4784, 2017 WL 3835675, at *5 (C.D. Cal. Aug. 31, 2017) (rejecting removing defendants’ cursory

23 statement that “[a]ll other defendants who have been served . . . have joined in this notice of 24 removal,” and remanding for failure of removing defendants to cure the defect). 1 Additionally, removing Defendants do not point to any case stating that a plaintiff properly 2 objecting to removal on procedural grounds within the statutory thirty-day limit may still waive 3 the right to remand by neglecting to include a single defendant in the list of non-consenting 4 defendants. Had Plaintiff simply said, “there are non-consenting defendants,” removing 5 Defendants would have had the burden of explaining each non-consenting defendant. See, e.g., 6 Tenn. Gas Pipeline Co. v. Cont’l Cas. Co., 814 F. Supp. 1302, 1310–11 (M.D. La. 1993) (“The 7 clear language of the statute [supported by evidence of congressional intent] does not require 8 plaintiff to set forth all arguments at the time the motion [to remand] is filed as long as the motion 9 is filed within thirty days of the filing of the notice of removal . . . . As long as a motion to remand 10 is timely filed within the thirty day period, the court should be allowed to determine all procedural 11 defects which are raised while the motion to remand is pending.”) (emphasis in original); Wilds v. 12 United Parcel Serv., Inc., 262 F. Supp. 2d 163, 171 (S.D.N.Y. 2003) (“On a motion for remand,

13 the party seeking to sustain removal, not the party seeking remand, bears the burden of 14 demonstrating that removal was proper.”) (emphasis added) (quoting Hodges v. Demchuk, 866 F. 15 Supp. 730, 732 (S.D.N.Y. 1994)). 16 That does not change simply because the Plaintiff used more specificity than necessary. To 17 hold otherwise would conflict with the policy of interpreting the removal statutes narrowly. Nor 18 may the Court ignore the record. See Louisville & Nashville R.R. Co. v. Motley, 211 U.S. 149, 152 19 (1908) (noting that it is the duty of a federal court to ensure that its jurisdiction granted by statute 20 is not exceeded). Therefore, the Court cannot say with certainty that removal was proper, and thus 21 is bound by the directive that “[f]ederal jurisdiction must be rejected if there is any doubt as to the 22 right of removal in the first instance.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992)

23 (emphasis added) (citing Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979)). 24 /// 1 CONCLUSION 2 IT IS HEREBY ORDERED that Plaintiff’s Amended Motion to Remand (ECF No. 46) is 3 |} GRANTED. 4 IT IS FURTHER ORDERED that Plaintiff’s Motion to Remand (ECF No. 7) is DENIED 5 || AS MOOT. 6 IT IS FURTHER ORDERED that Defendant’s Motion to Dismiss (ECF No. 33) is 7 || DENIED WITHOUT PREJUDICE. 8 IT IS FURTHER ORDERED that Defendants’ Motion to Dismiss (ECF No. 42) is 9 || DENIED WITHOUT PREJUDICE. 10 IT IS FURTHER ORDERED that Defendant’s Motion to Strike (ECF No. 65) is DENIED. ll IT IS FURTHER ORDERED that Defendant’s Motion to Strike (ECF No. 66) is DENIED. 12 IT IS FURTHER ORDERED that Defendant’s Motion to Dismiss (ECF No. 71) is 13 |} DENIED WITHOUT PREJUDICE. 14 IT IS FURTHER ORDERED that Defendant’s Motion to Dismiss (ECF No. 72) is 15 |} DENIED WITHOUT PREJUDICE. 16 IT IS FURTHER ORDERED that the Clerk shall close this case. 17 || ITIS SO ORDERED. 18 || Dated July 8, 2020. 19

ROBERT C. JONES 21 United Stg¢tgs District Judge 22 23 24

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