Opinion
No. 2:16-cv-01111-KJM-EFB
08-24-2016
RACHEL PACRAY, an individual, Plaintiff, v. WELLS FARGO HOME MORTGAGE, INC.; NBS DEFAULT SERVICES, LLC; TBM FUNDING LLC; and DOES 1 through 20, inclusive, Defendants.
ORDER
Plaintiff Rachel Pacray prefers to litigate her claims against Wells Fargo Home Mortgage, Inc.; NBS Default Services, LLC ("NBS LLC"); and TBM Funding LLC ("TBM LLC") (collectively, "Defendants") in Solano County Superior Court. She moves to remand the case after Wells Fargo Bank N.A. ("Wells Fargo") removed it on May 23, 2016. The matter was submitted without argument, as provided by Local Rule 230(g). ECF No. 21. The motion to remand is granted, but on grounds different than those on which Pacray moves.
Wells Fargo Home Bank N.A. asserts Pacray has erroneously named it as "Wells Fargo Home Mortgage, Inc." Notice of Removal (NOR) 4:2-15, ECF No. 1. Wells Fargo Home Mortgage, Inc. merged into Wells Fargo Bank N.A. on May 8, 2004, and ceased to be a separate entity. NOR Ex. G.
I. MOTION TO REMAND
Pacray filed her complaint in state court in April 2016. NOR Ex. A ("Compl."), ECF No. 1-1. She alleges six claims for: (1) violation of California Civil Code section 2923.55; (2) violation of California Civil Code section 2923.6; (3) violation of California Civil Code section 2923.7; (4) negligence; (5) unfair business practices under California Business and Professions Code sections 17200 and 17203; and (6) violation of California Civil Code section 2924.19. Id.
Wells Fargo removed the case on May 23, 2016, asserting subject matter jurisdiction on the basis of diversity of citizenship under 28 U.S.C. § 1332(a). See NOR. NBS LLC consented and joined in the notice of removal. Def. NBS LLC's Consent to Removal by Wells Fargo, ECF No. 1-4.
On June 22, 2016, Pacray filed a motion to remand. Pl.'s Notice of Mot., Mot. to Remand; Decl. of Kenley Dygert ("Mot."), ECF No. 7. Wells Fargo filed an opposition. Def.'s Opp'n to Mot. ("Opp'n"), ECF No. 13. Pacray has replied. ECF No. 18.
II. LEGAL STANDARD ON MOTION TO REMAND
The removal statute provides: "[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by" a defendant to a federal district court. 28 U.S.C. § 1441(a). Federal courts have original jurisdiction "where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs" and where there is complete diversity between the parties. Id. § 1332(a).
The Ninth Circuit "strictly construe[s] the removal statute against removal jurisdiction." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). "Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Id. There is a "'strong presumption' against removal jurisdiction[, which] means that the defendant always has the burden of establishing that removal is proper." Id. Furthermore, "removal jurisdiction is strictly construed in favor of remand." Nasrawi v. Buck Consultants, LLC, 776 F. Supp. 2d 1166, 1169 (E.D. Cal. 2011) (citing Harris v. Bankers Life and Cas. Co., 425 F.3d 689, 698 (9th Cir. ///// 2005)). Accordingly, "the court resolves all ambiguity in favor of remand to state court." Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009).
III. DISCUSSION
Pacray seeks to remand this action to state court on the following grounds: (1) Wells Fargo and NBS LLC are California citizens; and (2) Wells Fargo has not shown the amount in controversy exceeds $75,000. Mot. 2:7-16. The parties' citizenship is discussed below.
A. Pacray's Citizenship
The parties do not dispute that Pacray is a citizen of California. A person is a citizen of the state in which she is domiciled. See Gilbert v. David, 235 U.S. 561, 569 (1915). "A person's domicile is her permanent home, where she resides with the intention to remain or to which she intends to return." Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001). Pacray alleges she has resided in California "at all times relevant to the facts," Compl. ¶ 1, and the court finds Pacray is a California citizen.
B. Wells Fargo's Citizenship
Pacray contends Wells Fargo "should be deemed [a] California citizen[] through [its] significant activities in California." Mot. 2:10-13. Wells Fargo counters Ninth Circuit precedent confirms it is a South Dakota citizen. Opp'n 1:3-10, 2:17-18.
Unlike corporations, "a national bank is a citizen only of the state in which its main office is located." Rouse v. Wachovia Mortg., FSB, 747 F.3d 707, 709 (9th Cir. 2014) (citing 28 U.S.C. § 1348). A bank's main office, which must be "designated in the bank's articles of association," id., is "the 'place where its operations of discount and deposit are to be carried on,'" Wachovia Bank v. Schmidt, 546 U.S. 303, 307 n.1 (2006) (quoting 12 U.S.C. § 22).
Wells Fargo's articles of association state that its main office is located in Sioux Falls, South Dakota. NOR Ex. F, at 67; see also Rouse, 747 F.3d at 715 (concluding "Wells Fargo is a citizen only of South Dakota, where its main office is located"). Accordingly, Wells Fargo is a South Dakota citizen for diversity purposes. /////
Lastly, Wells Fargo suggests Pacray should be sanctioned, under Federal Rule of Civil Procedure ("Rule") 11(c)(3), for arguing Wells Fargo is a California citizen despite "the controlling Ninth Circuit case in Rouse." Opp'n 2:13-16. A district court has power under Rule 11(c)(3) to impose sanctions sua sponte even if no motion is made, but the Court declines to exercise this power here.
C. NBS LLC's Citizenship
Pacray argues NBS LLC should be deemed a California citizen because it "holds [itself] out to California laws and statu[t]es by do[ing] business in California and placing [its] California address on all recorded documents and documents sent to" Pacray. Mot. 7:1-5. Pacray has not cited evidence or provided further examples. Moreover, she seems to misunderstand how a court determines a limited liability company's citizenship, which is explained below.
"[U]nincorporated associations are not legal entities independent of their members. . . . [A]n LLC is a citizen of every state of which its owners/members are citizens." Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006) (citation omitted). In its notice of removal, Wells Fargo asserts NBS LLC is a limited liability company whose sole member is NBSC Group Holdings, Inc. ("NBSC Holdings"), a corporation. NOR 4:17-5:1 (citing NOR Ex. H, at 84-86). Under 28 U.S.C. § 1332(c)(1), "a corporation shall be deemed to be a citizen of every State . . . by which it has been incorporated and of the State . . . where it has its principal place of business." In Hertz Corp. v. Friend, the Supreme Court considered the Circuits' varying interpretations of this provision and concluded that a corporation's "principal place of business" for diversity purposes
is best read as referring to the place where a corporation's officers direct, control, and coordinate the corporation's activities. It is the place that Courts of Appeals have called the corporation's "nerve center." And in practice it should normally be the place where the corporation maintains its headquarters—provided that the headquarters is the actual center of direction, control, and coordination, i.e., the "nerve center," and not simply an office where the corporation holds its board meetings . . . .559 U.S. 77, 92-93 (2010).
Wells Fargo asserts "NBSC Holdings was incorporated in Delaware and maintains its principal place of business in Addison, Texas." NOR 5:2-3. A printout from the Delaware Secretary of State website confirms NBSC Holdings is in fact incorporated in Delaware. NOR Ex. I, at 87. Wells Fargo also has presented the declarations of the following NBSC Holdings' officers: James B. "Brad" Cloud; Luke Madole; and Lawrence "Larry" Buckley. NOR Ex. H, at 84-86. The officers each declare that NBSC Holdings has its principal place of business in Addison, Texas.
The court concludes NBS LLC is a citizen of Delaware and Texas. Granted, the officers state a conclusion about NBSC Holdings' principal place of business, without supporting facts such as where NBSC Holdings has its headquarters. But Pacray fails to set forth evidence contravening NBS LLC's asserted citizenship. The court notes at least one other district court recently has found NBS LLC is a citizen of Delaware and Texas. Calimpusan v. Wells Fargo Bank, N.A., No. CV1508452ABKLSX, 2015 WL 9581727, at *3 (C.D. Cal. Dec. 28, 2015).
The court need not and does not reach the issue of NBS LLC's potential nominal or fraudulently-joined status, raised by Wells Fargo in its notice of removal, because NBS LLC's presence in the lawsuit does not destroy complete diversity.
D. TBM LLC's Citizenship
The complaint alleges TBM LLC "is a California limited liability company registered in the state of California, bound by the laws of the state of California, doing business in the County of Solano, State of California." Compl. ¶ 4. Wells Fargo asserts TBM LLC "is a California limited liability corporation." NOR 6:22. Assuming TBM LLC is a limited liability company, it "is a citizen of every state of which its owners/members are citizens." Johnson, 437 F.3d at 899. Wells Fargo does not identify TBM LLC's citizenship because it does not identify the citizenship of TBM LLC's owners/members. However, Wells Fargo asserts in its notice of removal that the court should disregard TBM LLC's citizenship because it was fraudulently joined. NOR 6:23-24.
Pacray's motion does not discuss TBM LLC's citizenship, and neither does Wells Fargo's opposition. "But federal courts have an independent obligation to ensure that they do not exceed the scope of their jurisdiction, and therefore they must raise and decide jurisdictional questions that the parties either overlook or elect not to press." Henderson ex rel. Henderson v. Shinseki, 562 U.S. 428, 434 (2011).
1. Legal Standard Governing Fraudulent Joinder
A resident defendant has been fraudulently joined "[i]f a plaintiff fails to state a cause of action against [the] resident defendant, and the failure is obvious according to the well-settled rules of the state." United Comput. Sys., Inc. v. AT & T Corp., 298 F.3d 756, 761 (9th Cir. 2002). In the Ninth Circuit, a non-diverse defendant is deemed to be fraudulently joined if, after all disputed questions of fact and all ambiguities in the controlling state law are resolved in the plaintiff's favor, the plaintiff could not possibly recover against the party whose joinder is questioned. Dodson v. Spiliada Mar. Corp., 951 F.2d 40, 42 (9th Cir. 1992). A court may look beyond the pleadings to determine if a defendant is fraudulently joined, but "a plaintiff need only have one potentially valid claim against a non-diverse defendant" to survive a fraudulent joinder challenge. See Knutson v. Allis-Chalmers Corp., 358 F. Supp. 2d 983, 993-95 (D. Nev. 2005) (collecting cases); Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998).
"There is a presumption against finding fraudulent joinder, and defendants who assert that plaintiff has fraudulently joined a party carry a heavy burden of persuasion." Plute v. Roadway Package Sys., Inc., 141 F. Supp. 2d 1005, 1008 (N.D. Cal. 2001). A defendant seeking removal based on an allegedly fraudulent joinder must do more than show that the complaint at the time of removal fails to state a claim against the non-diverse defendant. See Burris v. AT&T Wireless, Inc., No. C 06-02904 JSW, 2006 WL 2038040, at *2 (N.D. Cal. July 19, 2006). "Fraudulent joinder must be proven by clear and convincing evidence." Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). Indeed, "[r]emand must be granted unless the defendant shows that the plaintiff 'would not be afforded leave to amend h[er] complaint to cure [the] purported deficiency.'" Padilla v. AT & T Corp., 697 F. Supp. 2d 1156, 1159 (C.D. Cal. 2009) (third alteration in original) (quoting Burris, 2006 WL 2038040, at *2). ///// /////
2. Whether Wells Fargo Has Shown Fraudulent Joinder
Wells Fargo asserts "the complaint lacks any charging allegations against TBM [LLC] and seeks no relief as to this defendant . . . . Notably, the complaint is dedicated to challenging the foreclosure process . . . [whereas] TBM [LLC] played no role in the foreclosure mechanics." NOR 6:24-27. The sufficiency of Pacray's current allegations against TBM LLC is questionable. The only specific references to TBM LLC concern its citizenship, Compl. ¶ 4, and its purported ownership of Pacray's property, which is evidenced by the Trustee's Deed Upon Sale, id. ¶¶ 25, 34, 47; NOR Ex. A, at 51-53. Pacray, however, brings all of her claims against all "defendants," which necessarily includes TBM LLC.
Moreover, as noted, the mere failure to state a claim is insufficient to invoke fraudulent joinder, and Wells Fargo has not demonstrated that Pacray "would not be afforded leave to amend h[er] complaint to cure [the] purported deficiency." Burris, 2006 WL 2038040, at *2. Specifically, Wells Fargo argues Pacray's claims for violations of California Civil Code sections 2923.55, 2923.6 and 2923.7 fail because "P[acray] has not alleged and cannot allege that this defendant had any duty regarding these statutes." NOR 7:1-4. Wells Fargo cites no authority for this assertion, and it fails to show "'the pleading could not possibly be cured by the allegation of other facts.'" Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995) (quoting Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 247 (9th Cir. 1990)). It has made no showing whatsoever as to Pacray's remaining three claims.
Wells Fargo cites California Civil Code section 2924.7, but this appears to be a typographical error. --------
Furthermore, the allegations taken as a whole imply that TBM LLC colluded, or perhaps conspired, with other defendants to improperly foreclose on Pacray's residence. In a case with similar, albeit more detailed factual allegations, the court found "the potential for [a] foreclosure-based conspiracy to develop as a theory of the case" "raise[d] doubt regarding the propriety of the removal." Alabastro v. Wells Fargo Bank, N.A., No. 5:14-CV-03469 EJD, 2015 WL 138235, at *3 (N.D. Cal. Jan. 9, 2015); see Compl. ¶ 26 ("Defendants have abused their rights as a lender, have engaged in unfair business practices, and have breached several promises as well as fiduciary duties to Plaintiff."), ¶ 62 ("[D]efendants . . . have engaged in unfair competition within the meaning of California Business and Professions Code [section] 17200").
For these reasons, Wells Fargo's conclusory assertions fall short of carrying its heavy burden of proving TBM LLC's fraudulent joinder by clear and convincing evidence. See Hamilton, 494 F.3d at 1206. Consequently, the court cannot disregard TBM LLC's citizenship in determining whether diversity jurisdiction exists. Because Wells Fargo has not properly alleged TBM LLC's citizenship, or because TBM LLC is a California citizen as the parties indicate, Wells Fargo has not shown complete diversity of citizenship, and this case should be remanded to Solano County Superior Court.
The court need not and does not reach the parties' remaining arguments about the amount in controversy, because even if this jurisdictional requirement is met, the case must be remanded on lack of complete diversity grounds.
E. Pacray's Request for Costs and Attorneys' Fees
Pacray seeks costs and attorneys' fees under 28 U.S.C. § 1447(c) "incurred as a result of unnecessary removal." Mot. 9:21. Wells Fargo counters, inter alia, its "removal was objectively reasonable." Opp'n 4:22-23.
Courts have discretion to award attorneys' fees when considering motions to remand. Martin v. Franklin Capital Corp., 546 U.S. 132, 136 (2005). "An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." 28 U.S.C. § 1447(c). A district court may award fees to plaintiffs in § 1447(c) cases even absent a finding of bad faith. Moore v. Permanente Med. Grp., Inc., 981 F.2d 443, 446 (9th Cir. 1992). The purpose of an award is not to punish defendants, but to reimburse plaintiffs for unnecessary litigation costs incurred as a result of the unsuccessful removal attempt. Id. at 447.
While Wells Fargo has failed to meet the high bar for establishing fraudulent joinder, its assertions about TBM LLC's liability were objectively reasonable. Although Wells Fargo did not address all of Pacray's claims, sufficient ambiguity in the pleading exists to warrant a reasonable belief that there were no viable claims against TBM LLC. Accordingly, Pacray's request for costs and attorneys' fees is denied.
IV. CONCLUSION
For the foregoing reasons, Pacray's motion to remand is hereby GRANTED and her request for costs and attorneys' fees is DENIED. Wells Fargo's motion to dismiss, ECF No. 4, is hereby DENIED as moot. This case is REMANDED to Solano County Superior Court. The Clerk of Court is directed to CLOSE this case.
IT IS SO ORDERED. DATED: August 24, 2016.
/s/_________
UNITED STATES DISTRICT JUDGE