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Shears v. Citimortgage, Inc.

United States District Court, E.D. California

July 15, 2015

LORI SHEARS, Plaintiff,
CITIMORTGAGE, INC.; CLEAR RECON CORP.; and DOES 1 through 50, inclusive, Defendants.


TROY L. NUNLEY, District Judge.

This matter is before the Court pursuant to Plaintiff Lori Shears' ("Plaintiff") Motion to Remand. (ECF No. 9.) Defendant Citimortgage, Inc. ("CMI" or "Defendant") has filed an amended opposition to Plaintiff's motion. (ECF No. 13.) The Court has carefully considered the arguments raised in Plaintiff's motion and reply, as well as Defendant's opposition. For the reasons set forth below, Plaintiff's Motion to Remand is GRANTED.


Plaintiff alleges in her Complaint that on or about March 14, 2006, she and her husband entered into a mortgage agreement with Citibank, F.S.B., for a Home Equity Line of Credit ("HELOC") in the amount of $35, 100. (Compl., ECF No. 1 at 12.) Plaintiff and her husband later divorced in October 2009. (ECF No. 1 at 12.) Subsequently, the HELOC was assigned to CMI on April 16, 2012, and Defendant Clear Recon Corporation ("CRC"), a corporation with California citizenship, became the substituted foreclosure trustee on or around July 8, 2013. (ECF No. 13 at 3.) In or around October 2012, Plaintiff's ex-husband filed for Chapter 7 bankruptcy. (ECF No. 1 at 13.) Erroneously believing that the bankruptcy extinguished the debt, Plaintiff did not make payments on the property. (ECF No. 1 at 13.) On or around July 8, 2013, Plaintiff received a Notice of Default from CRC and CMI informing her of the possibility of foreclosure if she continued failing to make payments. (ECF No. 1 at 13.) Plaintiff alleges that she then contacted CMI, whose representative assured her that she would not lose the home. (ECF No. 1 at 13.) The home was then sold at a non-judicial foreclosure sale in November 2013. (ECF No. 1 at 13.) Plaintiff alleges that CMI purposely misled Plaintiff in order to more easily foreclose upon and sell the home. (ECF No. 1 at 10.)

In the Complaint, Plaintiff brings claims solely against CMI for promissory estoppel, negligence, intentional misrepresentation, and negligent misrepresentation. (ECF No. 1 at 10.) Plaintiff also brings claims against both CMI and CRC for intentional infliction of emotional distress and for a violation of Cal. Bus. & Prof. Code § 17200. (ECF No. 1 at 10.)

Plaintiff initially filed the Complaint in San Joaquin County Superior Court on August 26, 2014. (ECF No. 1 at 9.) On October 20, 2014, CRC filed its Declaration of Non-Monetary Status ("DNMS") pursuant to Cal. Civ. Code § 2421l, to which Plaintiff did not timely object.[1] (ECF No. 9 at 2.) The case was removed to this Court on November 17, 2014, based on diversity of citizenship. (ECF No. 1 at 1.) Plaintiff filed the instant motion to remand on December 15, 2014. (ECF No. 9.) Defendant filed an opposition on January 15, 2015, and an amended opposition on January 16, 2015. (ECF Nos. 12 & 13.) Plaintiff filed a reply on January 22, 2015. (ECF No. 14.)


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." 28 U.S.C. § 1332(a)(1). Complete diversity of citizenship requires each plaintiff to be a citizen of a different state from each defendant. Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996).

A. Nominal Party Exception

Diversity is not required between the plaintiff and a "nominal" defendant. Strotek Corp. v. Air Transp. Ass'n. of Am., 300 F.3d 1129, 1133 (9th Cir. 2002). For the purposes of diversity, a nominal party is defined as one "who has some immaterial interest in the subject matter of a lawsuit and who will not be affected by any judgment." Hartford Fire Ins. Co. v. Harleysville Mut. Ins. Co., 736 F.3d 255, 260 (4th Cir. 2013). "Defendants who are nominal parties with nothing at stake may be disregarded in determining diversity, despite the propriety of their technical joinder". See Strotek Corp., 300 F.3d at 1133. Further, "a federal court must disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy." Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 461 (1980).

"[T]he burden of demonstrating that the defendant is a nominal party rest[s] with the removing party." Latino v. Wells Fargo Bank, N.A., No. 2:11-CV-02037-MCE, 2011 WL 4928880, at *2 (E.D. Cal. Oct. 17, 2011) (quoting Wells Fargo Bank, Nat'l Ass'n v. Charlotte Overlook Apartments, LLC, No. 10-411, 2011 WL 2224470, at *3 (W.D. N.C. Apr. 21, 2011)). See also Tureaud v. Kephart, No. 09-7269, 2010 WL 1254372, at *2 (E.D. La. Mar. 24, 2010); McAlpin v. RLI Ins. Co., 320 F.Supp.2d 42, 43 (W.D. N.Y. 2004).

B. Fraudulent Joinder Exception

Another exception "to the requirement of complete diversity is where a non-diverse defendant has been fraudulently joined.'" Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001). Allegations of fraudulent joinder can succeed on a showing that the "plaintiff fails to state a cause of action against [the] defendant, and the failure is obvious according to the well-settled rules of the state[.]" United Computer Sys., Inc. v. AT & T Corp., 298 F.3d 756, 761 (9th Cir. 2002) (citing Morris, 236 F.3d at 1067). The removing defendant has the burden to show that the non-diverse defendant is a sham or was fraudulently joined by "clear and convincing" evidence. Hamilton Materials, Inc. v. Dow Chemical Corp., 494 F.3d 1203, 1206 (9th Cir. 2007).

For purposes of determining fraudulent joinder, courts have employed the pre- Twombly "no set of facts" standard of Conley v. Gibson, 355 U.S. 41, 45-46 (1957), to assess whether under the facts alleged, the plaintiff can state a claim for relief. See Wong v. Michaels Stores, Inc., 2012 WL 718646, at *5 (E.D. Cal. Mar. 5, 2012) (" Twombly and Iqbal clarify the federal pleading standard set forth by Rule 8(a) but make no comment as to the propriety of pleading under California law. For this reason, courts have refused to apply the Twombly and Iqbal standards to determine whether a defendant was fraudulently joined"). Further, "a defendant seeking removal based on an alleged fraudulent joinder must do more than show that the complaint at the time of removal fails to state a claim against the non-diverse defendant. [ ] Remand must be granted unless the defendant shows that the plaintiff would not be afforded ...

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