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Genton v. Vestin Realty Mortgage II

March 9, 2007

RICHARD G. GENTON, TRUSTEE OF THE RICHARD G. GENTON LIVING TRUST DATED 06/05/01, ET AL., PLAINTIFF,
v.
VESTIN REALTY MORTGAGE II, INC., (F/K/A) VESTIN FUND II, LLC, ET AL., DEFENDANT.



The opinion of the court was delivered by: Hon. Roger T. Benitez United States District Judge

ORDER REMANDING CASE TO STATE COURT AND MOOTING OTHER PENDING MOTIONS

I. INTRODUCTION

This case was removed from the California Superior Court for the County of San Diego. Plaintiffs move for remand. For the reasons discussed below, removal was improper. The case is remanded.

II. FACTS

Plaintiffs are a class of investors who owned Vestin Fund II, LLC ("Vestin") securities and voted against Vestin's merger with Vestin Realty Mortgage, Inc. ("Vestin Realty").First Amended Complaint ("FAC") ¶ 1. Plaintiffs claim Vestin's Operating Agreement required, in the event of a merger, that the successor entity pay each member who voted against the merger a prorata share of the company's appraised net value. Id. ¶¶ 2, 36. Defendant Vestin Realty, the successor entity to Vestin upon the merger, allegedly failed to make any payments to Plaintiffs.

Id. ¶ 36. Plaintiffs assert causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and elder abuse. Id. ¶¶ 41-52.

Vestin Realty is incorporated in Maryland. Id. ¶ 28. Vestin Realty's manager, Defendant Vestin Mortgage, Inc., is incorporated in Nevada. Id. ¶29.

III. THE COURT'S CONTINUING OBLIGATION TO INQUIRE AS TO ITS JURISDICTION

Federal courts have limited jurisdictional power and have a continuing duty to confirm their subject matter jurisdiction. See Steel Co. v. Citizens for a Better Environ., 523 U.S. 83, 94 (1998); Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 278 (1977).

In a removal action, a district court must remand a case to state court if, at any time before final judgment, the court determines that it lacks subject matter jurisdiction. See 28 U.S.C. § 1447. Under the Class Action Fairness Act ("CAFA"), the removing party bears the initial burden of proving federal jurisdiction under § 1332(d)(2). See Serrano v. 180 Connect, Inc., No. 06-17366, at *15-16 (9th Cir. Feb. 22, 2007). However, the burden shifts to the party seeking remand to prove a CAFA exception applies. Id.

Federal courts should ordinarily reject jurisdiction "if there is any doubt as to the right of removal in the first instance." See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). However, CAFA's legislative history instructs that CAFA's jurisdictional provisions "should be read broadly, with a strong preference that interstate class actions should be heard in a Federal court if removed by any defendant." See 151 Cong. Rec. H723-01, H-727 (2005) (statement of Congressman Sensenbrenner).

A. Legal Standard

CAFA generally grants the district courts original jurisdiction over any class action in which: (1) the aggregate amount in controversy exceeds $5,000,000; (2) any member of a class of plaintiffs is a citizen of a state different from any defendant; (3) the primary defendants are not states, state officials, or other government entities against whom the district court may be foreclosed from ordering relief; and (4) the number of members of the plaintiff class is 100 or more. See 28 U.S.C. §§ 1332(d)(2), (d)(5).

The district court lacks original jurisdiction over such action, however, if the action: ...


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