United States District Court, C.D. California
Present: The Honorable ANDREW J. GUILFORD JUDGE.
ORDER REMANDING CASE
ANDREW J. GUILFORD JUDGE.
Sheila and Richard Warner sued two Defendants in California
state court: Select Portfolio Servicing, Inc.
("SPS") and U.S. Bank National Association, as
trustee, on behalf of the holders of the Asset Backed
Securities Corporation Home Equity Loan Trust, Series AEG
2006-HE1 Asset Backed Pass-Through Certificates, Series AEG
2006-HE1 ("U.S. Bank"). The Warners asserted eight
claims related to a home loan they got. SPS and U.S. Bank
removed the case to federal court.
Court REMANDS this case and VACATES all other pending
getting into an analysis of these facts, it's important
to understand subject matter jurisdiction generally and
diversity jurisdiction specifically, as well as how the sham
defendant doctrine fits into all this.
Subject Matter Jurisdiction Generally
Constitution confines federal courts' power to rule to
certain subject matters. See U.S. Const. art. III,
§ 2. Courts themselves police their exercise of power.
They take this sacred duty seriously and guard their limited
jurisdiction jealously. See Abramson v. Marriott
Ownership Resorts, Inc., No. SACV 15-0135 AG (JCGx),
F.Supp. 3d, 2016 WL 105889, at *1 (C.D. Cal. Jan. 4, 2016).
jealousy gets expressed in a lot of ways. The Court has
discussed these ways before, but repeats them here. See
Onsite Nurse Concierge LLC v. Myonsite Healthcare, LLC,
No. SACV 16-0509 AG (PLAx), 2016 WL 2853504, at *1 (C.D. Cal.
May 16, 2016). First, federal courts start off assuming that
cases are outside of their power to rule. Kokkonen v.
Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).
Courts require parties arguing for jurisdiction to establish
otherwise. Id. Second, federal courts demand that
parties arguing for jurisdiction address jurisdiction as soon
as they get to the federal courthouse doors, in their
complaints or notices of removal. See Fed. R. Civ.
P. 8(a)(1); 28 U.S.C. § 1446(a). Third, federal courts
raise jurisdiction whenever they think it's a question,
at any point in a case, on their own without the parties'
involvement. See Fed. R. Civ. P. 12(h)(3). Fourth,
federal courts are particularly skeptical of cases removed
from state court. Gaus v. Miles, Inc., 980 F.2d 564,
566 (9th Cir. 1992).
with courts' jealousy, ties go to plaintiffs. The strong
presumption against removal jurisdiction means that
defendants always have the burden of establishing that
removal is proper. See Id . Courts "strictly
construe the removal statute against removal jurisdiction,
" so "[f]ederal jurisdiction must be rejected if
there is any doubt" about jurisdiction. Id.
Diversity Jurisdiction Specifically
particular flavor of subject matter jurisdiction, diversity
jurisdiction, is relevant here. Diversity jurisdiction allows
federal courts to rule in civil actions between citizens of
different states where the matter in controversy exceeds $75,
000. See 28 U.S.C. § 1332(a). Further,
diversity jurisdiction requires that each plaintiff in a case
be a citizen of a different state than each defendant-in
other words, that there be complete diversity. See
id.; Abramson, 2016 WL 105889, at *1.
The Sham Defendant Doctrine
sham defendant doctrine-sometimes labeled as fraudulent
joinder-is also implicated here. A defendant trying to get
into federal court will often argue that a party the
plaintiff brought into the lawsuit was only included to
prevent potential or destroy existing diversity in a case
where diversity jurisdiction might otherwise exist. For a
defendant to succeed on this argument, the defendant must
convince the court that after resolving "all disputed
questions of fact and all ambiguities in the controlling
state law . . . in the plaintiff's favor, the plaintiff
could not possibly recover against the party whose joinder is
questioned." Padilla v. AT&T Corp., 697
F.Supp.2d 1156, 1158 (C.D. Cal. 2009). The failure to state a
claim against the non-diverse defendant must be "obvious
according to the well-settled rules of the state."
United Computer Sys. v. AT&T Corp., 298 F.3d 756,
761 (9th Cir. 2002). If a defendant is persuasive, the court