The opinion of the court was delivered by: Stephen V. Wilson United States District Judge
ORDER GRANTING PLAINTIFF'S EX PARTE APPLICATION FOR REMAND  [JS-6]
On September 30, 2010, Plaintiff Francisco Hernandez filed a complaint in Los Angeles Superior Court against First Student, Inc. ("First Student"), HireRight Solutions, Inc. ("HireRight") (erroneously sued as Usis, Inc.), and Clay Fauth (collectively "Defendants"). Hernandez alleged various causes of action under California state law. On November 1, 2010, Defendants filed a Notice of Removal alleging diversity jurisdiction. On November 22, 2010, Plaintiff filed the Ex Parte Application for Remand at issue. Plaintiff also moved for an award of attorney's fees.
II. Relevant Allegations*fn1
Plaintiff is a California resident. (Compl. ¶ 1). Defendant First Student is incorporated in Delaware and conducts the majority of its business in Ohio. (Not. of Rem. ¶¶ 14-15). Defendant HireRight is incorporated in Oklahoma and conducts the majority of its business in Oklahoma. (Not. of Rem. ¶¶ 16-17). Defendant Fauth is a California resident.
Plaintiff worked for First Student as a school bus driver from approximately 2005 until January 28, 2010. (Compl. ¶¶ 8-11). On December 1, 2009, Plaintiff received a letter suspending him from employment. (Compl. ¶¶ 9, 12). The letter stated that First Student had "received information about [Plaintiff] in a recent background check which . . . included convictions for 'DWI' and 'possession of marijuana.'" (Compl. ¶¶ 9, 12). On January 28, 2010, Plaintiff received a second letter from First Student terminating his employment and reciting as grounds for the termination its discovery of his "misdemeanor conviction for DWI with a sentence of imprisonment" and "a conviction for Disturb [sic] by Loud Unreasonable Noise . . . where the circumstances of the arrest involve possession of marijuana." (Compl. ¶ 11).
Plaintiff alleges that he has never been convicted of the aforementioned crimes and that these "discoveries" of past criminal activity are false. (Compl. ¶ 10). According to Plaintiff, First Student obtained the false criminal background from HireRight, a business that performs criminal backgrounds checks at the request of employers. (Compl. ¶¶ 11, 13).
Plaintiff alleges that Fauth wrote the December 1, 2009 suspension letter and the January 28, 2010 termination letter containing the allegedly false aforementioned statements. Plaintiff further contends that Fauth "made statements to others that [Plaintiff] had committed multiple crimes" and that such statements "are false and unprivileged." (Compl. ¶ 33). Finally, Plaintiff contends that Fauth has "subsequently republished and will continue to [publish]" the false statements which "will be foreseeably republished by their recipients." (Compl. ¶ 34).
Plaintiff alleges violations of California Civil Code §§ 1786 et seq., violations of California Civil Code §§ 432.7 et seq., defamation, false light, negligence, and wrongful termination in violation of public policy against Defendants First Student and HireRight. He also brings claims for defamation and false light against Fauth. (Compl. ¶¶ 32-46). Defendant claims that as a result of all Defendants' false statements, Plaintiff has suffered damage to his business and personal reputation, including injury to his person, humiliation, emotional distress, and mental and physical pain and anguish. (Compl. ¶¶ 35-36).
III. Legal Standard Governing Removal and Remand
Here, Defendants removed the action pursuant to 28 U.S.C. § 1441(b), which permits removal under this Court's diversity jurisdiction, 28 U.S.C. § 1332. Generally, "[t]he presence of the nondiverse party automatically destroys original [subject matter] jurisdiction." Wis. Dept. of Corrections v. Schacht, 524 U.S. 381, 389 (1998). However, "[i]f 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." McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987); see also Zogbi v. Federated Dept. Store, 767 F. Supp. 1037, 1041 (C.D. Cal. 1991). Such fraudulently joined "sham defendants" are disregarded for purposes of determining subject matter jurisdiction, and the Court's exercise of diversity jurisdiction is proper. See McCabe, 811 F.2d at 1339. But if the defendant is not fraudulently joined, the case should be remanded to state court pursuant to 28 U.S.C. § 1447(c). See Hunter v. Philip Morris USA, 582 F.3d 1039, 1048 (9th Cir. 2009).
In applying the fraudulent joinder rule, it must be emphasized that the state law must be "settled" and the complaint's deficiency must be "obvious." See McCabe, 811 F.3d at 1339. These standards reflect the "general presumption against fraudulent joinder" that complements the "strong presumption against removal jurisdiction." Hunter, 582 F.3d at 1046. Federal courts "strictly construe the removal statute against removal jurisdiction," such that "[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) (citations omitted); see also Cal. ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 838 (9th Cir. 2004).
In quoting from the Fifth Circuit's decision in Smallwood v. Illinois Central Railroad Co., 385 F.3d 568, 576 (5th Cir. 2004) (en banc), cert. denied, 544 U.S. 992 (2005), the Ninth Circuit has endorsed the view that "[t]he party seeking removal bears a heavy burden of proving that the joinder of the in-state party was improper," and "an inability to make the requisite decision in a summary manner itself points to an inability of the removing party to carry its burden." Hunter, 582 F.3d at 1044 (quoting Smallwood, 385 F.3d at 573-74).
Under these principles, federal courts in this circuit have applied the fraudulent joinder rule only in cases where it is undisputably clear (or "obvious," in the language in McCabe) that the plaintiff states no cause of action against the non-diverse defendant. See, e.g., Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067-68 (9th Cir. 2001) (affirming finding of fraudulent joinder in negligent misrepresentation action where the nondiverse defendant's alleged misrepresentation was "devoid of any meaningful specificity," the plaintiffs' past actions established that they "could not have reasonably relied upon such statement in any event," and a plaintiff's own affidavit "specifically denied that she ever discussed" the alleged matters with the defendant); Kruso v. Int. Tel. & Teleg. Co., 872 F.2d 1416, 1427 (9th Cir. 1989) (affirming finding of fraudulent joinder where "none of the plaintiffs were personally involved in any of the transactions in question," which "deprives plaintiffs of standing to sue defendants"); McCabe, 811 F.2d at 1339 (affirming finding of fraudulent joinder in tortious interference with contract action where nondiverse defendants had acted in managerial capacity and California law privileges agents' conduct done on principal's behalf in interference with contract actions) (citing Los Angeles Airways, Inc. v. Davis, 687 F.2d 321, 328 (9th Cir. 1982)); Maffei v. Allstate Cal. Ins. Co., 412 F. Supp. 2d 1049, 1053 (E.D. Cal. 2006) (dismissing claims against nondiverse corporate defendant where evidence showed that defendant "has never conducted any business of any kind anywhere, has never been capitalized, has never had any assets, . . . has never had any employees, offices, or operations of any kind, . . . [and] in short, . . . is nothing more than an empty corporate shell created in anticipation of a business plan that was never carried out") (internal quotations omitted); Brown v. Allstate Ins. Co., 17 F. Supp. 2d 1134, 1136-37 (S.D. Cal. 1998) (dismissing claims against nondiverse individual defendants where defendants were named in complaint caption and headings but "no material allegations against these defendants are made" and defendants' names were entirely absent from "the body of the complaint [due to] a typographical error"); Gasnik v. State Farm Ins. Co., 825 F. Supp. 245, 249 (E.D. Cal. 1992) (dismissing claims against nondiverse individual insurance agent ...