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Pendola Family Trust Partnership v. Pan Pacific L.P.

December 8, 2009

PENDOLA FAMILY TRUST PARTNERSHIP, A CALIFORNIA GENERAL PARTNERSHIP, PLAINTIFF,
v.
PAN PACIFIC (PINE CREEK) L.P., A LIMITED PARTNERSHIP UNDER THE LAWS OF THE STATE OF DELAWARE, PK II HOLDCO, LLC, A DELAWARE LIMITED LIABILITY COMPANY, PAN PACIFIC RETAIL PROPERTIES, INC., A MARYLAND CORPORATION, KIMCO REALTY CORPORATION, A CORPORATION, AND DOES 1 THROUGH 50, DEFENDANTS.



MEMORANDUM AND ORDER

This matter comes before the court on plaintiff Pendola Family Trust Partnership's ("Pendola" or "plaintiff") motion for remand to state court. Defendants Pan Pacific (Pine Creek), L.P., ("Pine Creek"), PK II Holdco, LLC ("PK"), and Kimco Realty Corporation ("Kimco") (collectively, "defendants") oppose the motion. For the reasons set for below,*fn1 plaintiff's motion for remand is GRANTED.

BACKGROUND*fn2

Plaintiff Pendola is a General Partnership formed and operating under the laws of the State of California. (Compl., attached to Notice of Removal, filed Sept. 11, 2009, ¶ 1.) On November 17, 1999, defendant Pine Creek was formed as a limited partnership under the laws of the State of Delaware. (Id. ¶ 10.) The general partner was Western Properties Trust, a California Business Trust, and Pendola was the sole limited partner. (Id.) In 2001, Western Properties Trust merged with defendant Pan Pacific Retail Properties, Inc. ("Pan Pacific"). (Id. ¶ 11.) In 2006, KRC Acquisition, Inc., a wholly owned subsidiary of defendant Kimco, merged with defendant Pan Pacific. (Id. ¶ 12.) Pendola notified Kimco that it intended to continue as a limited partner in Pine Creek. (Id. ¶ 14.) Kimco declined, representing that it intended to refinance various properties held by Pine Creek to finance the merger. (Id.)

Subsequently, however, On December 13, 2006, Pendola and defendant Kimco entered into a Third Amended Agreement of Limited Partnership of Pine Creek. (Id. ¶ 15.) The agreement, inter alia, changed the name of the limited partnership, changed the general partner, and modified Pendola's previously held conversion rights. (Id.) The conversion right could only be exercised for the entire limited partnership interest, and the redemption price was set at $70 per unit. (Id.) Further, through the conversion right, Pendola could require Pine Creek to acquire identified property through a conversion LLC formed exclusively to acquire such property in exchange for and redemption of its limited partnership interests. (Id.) In consideration of its modified conversion rights, Pendola agreed to indemnify the limited partnership and the general partner from any liabilities, obligations, claims, damages, or other potential losses arising from the exercise of those rights. (Id.) The Third Amended Agreement also gave the limited partnership the opportunity to redeem Pendola's interest if plaintiff failed to exercise its conversion rights on or before April 30, 2007. (Id.)

In reliance on these modifications, on December 19, 2006, Pendola entered into a purchase agreement to acquire conversion property and notified defendants of the exercise of its conversion rights. (Id. ¶ 16.) On January 11, 2007, defendants disclosed to Pendola for the first time that, prior to entering into the Third Amended Agreement, they had entered into loan agreements with lenders that prevented and precluded defendants from acquiring and placing required debt on conversion property. (Id.) Plaintiff alleges this was contrary to the intent and language of the Third Amended Agreement. (Id.) As a result of these disclosures, defendants could not implement Pendola's conversion rights. (Id.)

On March 3, 2008, Pendola informed defendants that it intended to surrender its limited partnership units at the agreed upon price of $70 per unit. In May 2008, defendants notified plaintiff that it did not intend to comply with the Third Amended Agreement. (Id. ¶ 19.)

Plaintiff initially filed this action on August 3, 2009 in the Superior Court of California, County of Nevada, alleging breach of contract, fraud -- intentional misrepresentation, promissory fraud -- promise without intent to perform, promissory fraud -- hidden intention not to comply with the implied covenant of good faith and fair dealing, and constructive fraud -- breach of fiduciary duty.

STANDARD

"[A]ny civil action brought in 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" in which the action is pending. 28 U.S.C. § 1441(a). Federal district courts "have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000" and is between citizens of different states.

28 U.S.C. § 1332(a) Furthermore, 28 U.S.C. § 1441 is construed strictly against removal jurisdiction. Fardella v. Downey Savings & Loan Ass'n, No. 00-4393, 2001 WL 492442, at *1 (N.D. Cal. May 9, 2001) (citing Prize Frize, Inc. v. Matrix, Inc., 167 F.3d 1261, 1265 (9th Cir. 1999)). "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 and the defendant's presence in the lawsuit is ignored for purposes of determining diversity." United Computer Sys., Inc. v. AT&T Corp., 298 F.3d 756, 761 (9th Cir. 2002) (internal quotations and citations omitted); McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). There is a general presumption against fraudulent joinder. Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007).

The party invoking removal bears the burden of establishing federal jurisdiction. See Harris v. Provident Life and Acc. Ins. Co., 26 F.3d 930, 932 (9th Cir. 1994) (quoting Gould v. Mutual Life Ins. Co., 790 F.2d 769, 771 (9th Cir. 1986)). "Fraudulent joinder must be proven by clear and convincing evidence." Hamilton Materials, Inc., 494 F.3d at 1206.

ANALYSIS

A. Motion to Remand

Defendants removed this action to federal court on September 11, 2009, on the basis of diversity jurisdiction due to the alleged fraudulent joinder of defendant Pine Creek. The parties agree that the amount in controversy exceeds $3,800,000 and that Pendola and Pine Creek are both citizens of California. As such, the sole question is whether Pine Creek is a proper or fraudulently joined defendant. Defendants contend that Pendola seeks to enforce purely individual rights through this action, and thus, Pine Creek is not a proper defendant. Plaintiff maintains that its action is both to ...


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