Opinion
No. CIV-05-0530-PCT-MHM.
September 22, 2005
ORDER
Currently before the Court are Plaintiff's Motions to Remand, (Dkt. ##9, 12); and Defendants' Motion for Partial Summary Judgment, (Dkt. #18). Having reviewed the motions the Court enters the following order.
I. Factual Procedural Background
On January 20, 2005, Plaintiff filed an Amended Civil Complaint in the Superior Court of the State of Arizona in and for the County of Mohave, alleging breach of contract, common law fraud, intentional misrepresentation, and specific performance. On February 16, 2005 Defendants removed this action to the United States District Court District of Arizona on the basis of diversity of citizenship jurisdiction pursuant to 28 U.S.C. § 1332.
II. Legal Standard
Civil actions not involving a federal question are removable to a federal district court only if there is diversity of citizenship between the parties. 28 U.S.C. § 1332(a)(1) (2005). Section 1332 requires complete diversity of citizenship, that is, each plaintiff's citizenship must be diverse to each defendant's citizenship. Id. However, a defendant may remove a civil action that alleges claims against a non-diverse defendant when that defendant has been fraudulently joined. McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987).
"[F]raudulent joinder is a term of art. 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." Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998) (citations omitted). On a motion to remand, the removing defendant faces a strong presumption against removal, and bears the burden of establishing that removal was proper by a preponderance of evidence. Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 403-404 (9th Cir. 1996). Therefore, the defendant carries a high burden of establishing that the non-diverse party was fraudulently joined. See Gaus v. Miles, Inc., 980 F.2d 564, 564(9th Cir. 1992). In determining whether a non-diverse defendant has been improperly joined, courts may look beyond the pleadings and examine the factual record. McCabe, 811 F.2d at 1339.
III. Discussion
It is undisputed William Bowers is a citizen of Arizona. At issue, is whether William Bowers was fraudulently joined to this action, and therefore, the Court should disregard his citizenship for diversity jurisdiction purposes. Defendants argue Plaintiffs have failed to state a viable claim against William Bowers because the Amended Complaint fails to plead fraud with particularity as required under Rule 9(b).
Rule 9(b) requires that, "in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." FED. R. CIV. PRO. 9(b) (2004). "Federal Rule of Civil Procedure 9(b) requires a pleader of fraud to detail with particularity the time, place, and manner of each act of fraud, plus the role of each defendant in each scheme." Lancaster Cmty Hosp. v. Antelope Valley Dist., 940 F.2d 397, 405 (9th Cir. 1991).
Plaintiffs allege that in October 2004, Plaintiff Walnut Creek and Rhodes Design entered into a binding agreement to jointly purchase the Yandell Trust property and after purchase divide the property. Am Compl. ¶¶ 12-15. The Amended Complaint goes on to outline the details of the alleged agreement. See Am Compl. ¶¶ 16-24. Plaintiffs maintain "Defendants engaged in a pattern of activity, the intent and effect of which was to purchase the Yandell real property without honoring the terms of the Agreement and the obligation to transfer the Property to Plaintiffs," Id. at ¶ 24. While the Amended Complaint does not allege Defendant Bowers was a party to the agreement, it does delineate the agreement, target of the agreement, and specific acts Defendant Bowers allegedly took in furtherance of the scheme. See, ¶¶ 24, 29.
Furthermore, although Defendant Bower's specific role in the transaction or various entities is not outlined in the Amended Complaint, a pleading defect that may be curable under state law, and that could be cured in state court after remand does not equate to the total inability to establish a cause of action in state court which is required by fraudulent joinder jurisprudence. The Fifth Circuit reached a similar conclusion inHart v. Bayer Corp., 199 F.3d 235 (5th Cir. 2000). In Hart, the defendants contended that the plaintiffs' claim against the non-diverse defendant was insufficient because it lacked Rule 9(b) particularity and that removal was therefore proper. Id. at 247 n. 6. The Fifth Circuit disagreed, stating that "such deficiencies do not normally justify dismissal of the suit on the merits and without leave to amend." Id.
Based on the pleadings before it, it appears any deficiency in allegations against Defendant Bowers could be cured by prefacing each paragraph "Defendants and each of them" or with clarification as to Defendant Bowers' role in the various entities. While the Court is mindful of the impact of the "voluntary-involuntary rule," which bars removal after dismissal of a nondiverse defendant unless the dismissal resulted from a voluntary act of Plaintiff, Defendants have failed to meet their high burden of establishing that the non-diverse party was fraudulently joined.
Accordingly,
IT IS HEREBY ORDERED Plaintiff's Motions to Remand are GRANTED. (Dkt. ##9, 12).
IT IS FURTHER ORDERED remanding this matter to the Superior Court of the State of Arizona in and for the County of Mohave.