Opinion
ED CV 23-0936 FMO (PVCx)
07-31-2024
Manuel Herrada v. Costco Wholesale Corporation, et al.
Present The Honorable Fernando M. Olguin, United States District Judge
CIVIL MINUTES - GENERAL
Proceedings: (In Chambers) Order Remanding Action
Having reviewed the docket in this action, including the Notice of Removal (Dkt. 1, “NOR”), the court finds that it lacks subject matter jurisdiction.
Federal courts have a duty to examine jurisdiction sua sponte before proceeding to the merits of a case, see Ruhrgas AG v Marathon Oil Co., 526 U.S. 574, 583, 119 S.Ct. 1563, 1569 (1999), “even in the absence of a challenge from any party.” Arbaugh v. Y&H Corp., 546 U.S. 500, 501, 126 S.Ct. 1235, 1237 (2006). Indeed, “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c); see Kelton Arms Condo. Owners Ass'n, Inc. v. Homestead Ins. Co., 346 F.3d 1190, 1192 (9th Cir. 2003) (“Subject matter jurisdiction may not be waived, and, indeed, we have held that the district court must remand if it lacks jurisdiction.”); Snell v. Cleveland, Inc., 316 F.3d 822, 826 (9th Cir. 2002) (“Federal Rule of Civil Procedure 12(h)(3) provides that a court may raise the question of subject matter jurisdiction, sua sponte, at any time during the pendency of the action, even on appeal.”) (footnote omitted).
In general, “any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court[.]” 28 U.S.C. § 1441(a). A removing defendant bears the burden of establishing that removal is proper. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (per curiam) (“The strong presumption against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper.”) (internal quotation marks omitted); Abrego Abrego v. The Dow Chem. Co., 443 F.3d 676, 684 (9th Cir. 2006) (per curiam) (noting the “longstanding, near-canonical rule that the burden on removal rests with the removing defendant”). If there is any doubt regarding the existence of subject matter jurisdiction, the court must resolve those doubts in favor of remanding the action to state court. See Gaus, 980 F.2d at 566 (“Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.”).
An “antiremoval presumption” does not exist in cases removed pursuant to the Class Action Fairness Act (“CAFA'), 28 U.S.C. § 1332(d). See Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 89, 135 S.Ct. 547, 554 (2014).
When federal subject matter jurisdiction is predicated on diversity of citizenship, see 28 U.S.C. § 1332(a), complete diversity must exist between the opposing parties, see Caterpillar Inc. v. Lewis, 519 U.S. 61, 68, 117 S.Ct. 467, 472 (1996) (stating that the diversity jurisdiction statute “applies only to cases in which the citizenship of each plaintiff is diverse from the citizenship of each defendant”), and the amount in controversy must exceed $75,000. See 28 U.S.C. § 1332(a). “[T]he circuits have unanimously and repeatedly held that whether remand is proper must be ascertained on the basis of the pleadings at the time of removal.” Broadway Grill, Inc. v Visa Inc., 856 F.3d 1274, 1277 (9th Cir. 2017); Cody v P.C. Richard & Son Service Co., Inc., 2023 WL 6939977, *2 (C.D. Cal. 2023) (same); Toutov v Curative Labs Inc., 2023 WL 5165550, *2 (C.D. Cal. 2023) (“[T]he requisite diversity must exist at the time the action is removed to federal court.”).
In relevant part, 28 U.S.C. § 1332(a) provides that a district court has diversity jurisdiction “where the matter in controversy exceeds the sum or value of $75,000, . . . and is between . . . citizens of different States” or “citizens of a State and citizens or subjects of a foreign state[.]” 28 U.S.C. §§ 1332(a)(1)-(2).
Defendant removed the action from state court based on diversity jurisdiction pursuant to 28 U.S.C. § 1332. (See Dkt. 1, NOR at ¶¶ 1-13). However, at the time of removal, complete diversity did not exist between the opposing parties. Plaintiff is a citizen of California, (see id. at ¶ 3), defendant Costco Wholesale Corporation (“Costco”) is a citizen of Washington, (see id. at ¶ 4), and defendant Ian Kaikko (“Kaikko”) appears to be a citizen of California. (See, generally, id. at ¶¶ 5-7) (failing to set forth Kaikko's citizenship and contending that he “appears to have been named to create a fraudulent joinder”).
The Complaint asserts only state-law claims. (See Dkt. 1, NOR, Exh. A (Complaint)).
The NOR also states that Costco “is a California corporation[.]” (See Dkt. 1, NOR at ¶ 4). For purposes of this Order, the court will ignore such a representation.
“In determining whether there is complete diversity, district courts may disregard the citizenship of a non-diverse defendant who has been fraudulently joined.” Grancare, LLC v. Thrower ex rel. Mills, 889 F.3d 543, 548 (9th Cir. 2018); see Allen v. Boeing Co., 784 F.3d 625, 634 (9th Cir. 2015) (“[J]oinder is fraudulent when a plaintiff's failure to state a cause of action against the [non-diverse] defendant is obvious according to the applicable state law.”). A defendant must show by “clear and convincing evidence” that the plaintiff does not have a colorable claim against the alleged sham defendant. Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007) (“Fraudulent joinder must be proven by clear and convincing evidence.”); Mireles v. Wells Fargo Bank, N.A., 845 F.Supp.2d 1034, 1063 (C.D. Cal. 2012) (“Demonstrating fraudulent joinder” requires showing that “after all disputed questions of fact and all ambiguities . . . are resolved in the plaintiff's favor, the plaintiff could not possibly recover against the party whose joinder is questioned.”) (emphasis in original). Indeed, “[a] defendant invoking federal court diversity jurisdiction on the basis of fraudulent joinder bears a heavy burden since there is a general presumption against [finding] fraudulent joinder.” Grancare, 889 F.3d at 548 (internal quotation marks omitted).
Here, although Costco claims that Kaikko “appear[ed] to have been named to create a fraudulent joinder[,]” (see Dkt. 1, NOR at ¶ 7), Costco made no attempt to show that “plaintiff could not possibly [have] recovered] against” Kaikko. See Mireles, 845 F.Supp.2d at 1063 (emphasis omitted); (see, generally, Dkt. 1, NOR at ¶ 7). And while plaintiff, after removal of the action to this court, dismissed Kaikko, (see Dkt. 19, Notice of Dismissal), jurisdiction was lacking at the time of removal. See Toutov, 2023 WL 5165550, at *2 (“[T]he requisite diversity must exist at the time the action is removed to federal court.”); Cody, 2023 WL 6939977, at *2. As such, plaintiff's “subsequent voluntary act of dismissing [Kaikko] does not change the Court's lack of subject matter jurisdiction” because “[f]ormal dismissal of a nondiverse party is required before subject matter jurisdiction exists to support removal.” Toutov, 2023 WL 5165550, at *2.
Costco contended that because Kaikko had not been served in the action, he was not required to “join the notice of removal.” (Dkt. 1, NOR at ¶ 5). But the issue here is not whether Kaikko was required to join the NOR, but rather, whether the naming of Kaikko as a party in the complaint that was removed destroyed diversity jurisdiction. See Pinter v. Arthur J. Gallagher Service Co., LLC, 2016 WL 614348, *4 (C.D. Cal. 2016) (Section 1441(b)(2) “does not render the citizenship of non-served defendants irrelevant for purposes of establishing diversity jurisdiction and the right to remove[.]”); Greenway Nutrients, Inc. v. Pierce, 2022 WL 17486359, *2 (C.D. Cal. 2022) ("When evaluating whether diversity exists, a court cannot ignore a defendant's citizenship simply because the defendant has not yet been served.") (internal quotation marks omitted).
Indeed, courts have expressed concern that allowing otherwise would permit a plaintiff to engage in forum shopping. See Cody, 2023 WL 6939977, at *4 n. 6.
Although there are exceptions to the time-of-removal rule, see Cody, 2023 WL 6939977, at *2-*4, as one court noted, “a key factual touchstone of those cases [applying an exception] was that the district courts had already entered judgment for a party such that, on appeal, ‘considerations of finality, efficiency, and economy bec[ame] overwhelming' so as to justify not remanding the case for lack of jurisdiction at the time of removal.” Id. at 2 (quoting Caterpillar, 518 U.S. at 75-76, 117 S.Ct. at 476).
In short, the court finds that it lacks subject matter jurisdiction over this action. See 28 U.S.C. § 1332.
Based on the foregoing, IT IS ORDERED that:
1. The above-captioned action shall be remanded to the Superior Court of the State of California for the County of Riverside for lack of subject matter jurisdiction pursuant to 28 U.S.C. § 1447(c).
2. The Clerk shall send a certified copy of this Order to the state court.
3. Any pending motion is denied as moot.