Case No. 2:19-cv-07197-ODW (SKx)
ORDER REMANDING ACTION SUA SPONTE
On August 19, 2019, Defendants Ford Motor Company ("Ford") and Galpin Motors, Inc. ("Galpin") (collectively, "Defendants") removed this action to federal court based on alleged diversity jurisdiction. (Notice of Removal ("Notice") 1, ECF No. 1.) After reviewing Plaintiff Juanita Gomez Perez's ("Perez") Complaint and Defendants' Notice of Removal, it is clear that Galpin is not diverse from Perez, and thus the Court lacks subject matter jurisdiction. Consequently, the Court REMANDS this action to state court.
After carefully considering Defendants' Notice of Removal and Perez's Complaint, the Court deems the matter appropriate for sua sponte decision. United Inv'rs Life Ins. Co. v. Waddell & Reed Inc., 360 F.3d 960, 967 (9th Cir. 2004). --------
This is a Song-Beverly Consumer Warranty Act ("Song-Beverly") action relating to a 2010 Ford Flex ("Vehicle"). (Notice Ex. B ("Compl.") ¶ 8, ECF No. 1-2.) Perez alleges the Vehicle was sold to her with numerous defects. (Compl. ¶ 10.) On July 16, 2019, Perez filed this action in the Superior Court of California, County of Los Angeles, Case No. 19STCV24959. (See Compl.) Perez asserts causes of action against Ford under Song-Beverly and for breach of express warranty, and against Ford and Galpin for breach of the implied warranty of merchantability. (See Compl. ¶¶ 8-33.) Perez is a citizen of California. (Compl. ¶ 2; Notice ¶ 21.) Ford is a Delaware corporation with its principal place of business in Michigan. (Compl. ¶ 4; Notice ¶ 22.) Galpin is a California Corporation. (Compl. ¶ 5; see also Notice ¶¶ 24.) On August 19, 2019, Defendants removed the action to this Court based on alleged diversity jurisdiction, contending that Galpin is fraudulently joined. (See Notice ¶¶ 23-37.)
III. LEGAL STANDARD
Federal courts have subject matter jurisdiction only as authorized by the Constitution and Congress. U.S. Const. art. III, § 2, cl. 1; see also Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A suit filed in state court may be removed to federal court only if the federal court would have had original jurisdiction over the suit. 28 U.S.C. § 1441(a). Federal courts have original jurisdiction where an action arises under federal law or where each plaintiff's citizenship is diverse from each defendant's citizenship and the amount in controversy exceeds $75,000. Id. §§ 1331, 1332(a).
The removal statute is strictly construed against removal, and "[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). The party seeking removal bears the burden of establishing federal jurisdiction. Id. The court may remand the action sua sponte "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction." 28 U.S.C. § 1447(c); United Inv'rs Life Ins. Co., 360 F.3d at 967.
Defendants invoke diversity as the basis of the Court's subject matter jurisdiction. (Notice 1.) The Supreme Court "ha[s] consistently interpreted § 1332 as requiring complete diversity: In a case with multiple plaintiffs and multiple defendants, the presence in the action of a single plaintiff from the same State as a single defendant deprives the district court of original diversity jurisdiction over the entire action." Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553 (2005). Here, Perez alleges that she is a California citizen and that Galpin is a California corporation. (Compl. ¶¶ 2, 5.) Defendants do not disagree. (Notice ¶¶ 21, 24.) Thus, complete diversity is destroyed. However, Defendants argue the Court should disregard Galpin's citizenship because Galpin was fraudulently joined to the Complaint. (Notice ¶¶ 23-37)
"An exception to the requirement of complete diversity exists where it appears that a plaintiff has fraudulently joined a 'sham' non-diverse defendant." Sanchez v. Lane Bryant, Inc., 123 F. Supp. 3d 1238, 1241 (C.D. Cal. 2015). "If the plaintiff fails to state a cause of action against a resident defendant, and the failure is obvious according to the settled rules of the state, the joinder of the resident defendant is fraudulent." Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007) (quoting McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987)); see also Padilla v. AT&T Corp., 697 F. Supp. 2d 1156, 1158 (C.D. Cal. 2009) ("[A] non-diverse defendant is deemed a sham defendant if . . . the plaintiff could not possibly recover against the party whose joinder is questioned."). There is a general presumption against fraudulent joinder and thus "[f]raudulent joinder must be proven by clear and convincing evidence." Hamilton Materials, 494 F.3d at 1206.
Merely showing that an action is likely to be dismissed against the alleged sham defendant does not demonstrate fraudulent joinder. See Grancare, LLC v. Thrower by & through Mills, 889 F.3d 543, 550 (9th Cir. 2018). The standard for establishing fraudulent joinder is more exacting than for dismissal for failure to state a claim. Id. at 549. If there is any "possibility that a state court would find that the complaint states a cause of action against any of the resident defendants, the federal court must find that the joinder was proper and remand the case to the state court." Id. at 548 (quoting Hunter v. Philip Morris USA, 582 F.3d 1039, 1046 (9th Cir. 2009)).
Perez asserts only one claim against Galpin, for breach of the implied warranty of merchantability. (Compl. ¶¶ 29-33.) Defendants argue this claim is time-barred and thus Perez cannot state a claim against Galpin. (Notice ¶¶ 31, 33-37.) However, Perez also alleges that any statutes of limitations have been tolled under various tolling doctrines. (Compl. ¶ 7.) Thus, there exists the possibility that the state court would find Perez states a claim against Galpin and, as such, the Court must find that joinder was proper.
Further, whether Perez's claim for breach of the implied warranty of merchantability is time-barred or instead the limitations period is tolled is a question that requires inquiry into the merits of Perez's case. This constitutes additional reason to decline to find fraudulent joinder. Grancare, 889 F.3d at 549-50 (discussing that fraudulent joinder is not supported where "a defendant raises a defense that requires a searching inquiry into the merits of the plaintiff's case, even if that defense, if successful, would prove fatal."). Finally, even assuming that Perez's allegations are insufficiently pleaded, nothing precludes Perez from amending her complaint with additional relevant facts supporting a claim against Galpin or her allegations of tolling. See Grancare, 889 F.3d at 550 ("[T]he district court must consider . . . whether a deficiency in the complaint can possibly be cured by granting the plaintiff leave to amend."); Revay v. Home Depot U.S.A., Inc., No. 2:14-CV-03391-RSWL (ASx), 2015 WL 1285287, at *3 (C.D. Cal. Mar. 19, 2015) ("If there is 'any possibility that the state law might impose liability on a resident defendant under the circumstances alleged in the complaint,' or in a future amended complaint, 'the federal court cannot find that joinder of the resident defendant was fraudulent, and remand is necessary.'") (emphasis added) (quoting Hunter, 582 F.3d at 1044).
Defendants have failed to prove by clear and convincing evidence that no possibility exists that a state court would find Perez can state a claim against Galpin. As such, Galpin is properly joined and the Court cannot disregard its citizenship. Consequently, the Court lacks subject matter jurisdiction and must remand.
For the reasons discussed above, the Court REMANDS the action to the Superior Court of the State of California, County of Los Angeles, 111 North Hill Street, Los Angeles, CA 90012, Case No. 19STCV24959. The Clerk of the Court shall close the case.
IT IS SO ORDERED.
November 27, 2019
OTIS D. WRIGHT, II
UNITED STATES DISTRICT JUDGE