United States District Court, C.D. California
Present: Honorable Fernando M. Olguin, United States District
Judge
PROCEEDINGS: (IN CHAMBERS) ORDER REMANDING
ACTION
HON.
FERNANDO M. OLGUIN, UNITED STATES DISTRICT JUDGE
On
April 5, 2016, Ehsan Yaghoubi (“plaintiff”) filed
a Complaint in the Los Angeles County Superior Court against
Ocwen Loan Servicing, LLC (“Ocwen”), Bank of
America (“BANA”), Wells Fargo Bank (“Wells
Fargo”), Law Offices of Les Zieve (“Les
Zieve”), Phialp Prada (“Prada”), and Does 1
through 100 (collectively, “defendants”).
(See Notice of Removal (“NOR”) at ¶
1 & Exhibit (“Exh.”) 1
(“Complaint”)). On June 13, 2016, Ocwen removed
that action on diversity jurisdiction grounds pursuant to 28
U.S.C. §§ 1332 and 1441. (See NOR at p.
1). Having reviewed the pleadings, the court hereby remands
this action to state court for lack of subject matter
jurisdiction. See 28 U.S.C. § 1447(c).
LEGAL
STANDARD
“Federal
courts are courts of limited jurisdiction. They possess only
that power authorized by Constitution and statute[.]”
Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.
375, 377, 114 S.Ct. 1673, 1675 (1994). The courts are
presumed to lack jurisdiction unless the contrary appears
affirmatively from the record. See DaimlerChrysler Corp.
v. Cuno, 547 U.S. 332, 342 n. 3, 126 S.Ct. 1854, 1861
(2006). Federal courts have a duty to examine jurisdiction
sua sponte before proceeding to the merits of a
case, see Ruhrgas AG v. Marathon Oil Co., 526 U.S.
574, 583, 119 S.Ct. 1563, 1569 (1999), “even in the
absence of a challenge from any party.” Arbaugh v.
Y&H Corp., 546 U.S. 500, 501, 126 S.Ct. 1235, 1237
(2006).
In
general, “any civil action brought in a 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[.]” 28 U.S.C. §
1441(a). A removing defendant bears the burden of
establishing that removal is proper. See Gaus v. Miles,
Inc., 980 F.2d 564, 566-67 (9th Cir. 1992) (“The
strong presumption against removal jurisdiction means that
the defendant always has the burden of establishing that
removal is proper.”) (internal quotation marks
omitted); Abrego Abrego v. The Dow Chem. Co., 443
F.3d 676, 684 (9th Cir. 2006) (per curiam) (noting
the “longstanding, near-canonical rule that the burden
on removal rests with the removing defendant”).
Moreover, if there is any doubt regarding the existence of
subject matter jurisdiction, the court must resolve those
doubts in favor of remanding the action to state court.
See Gaus, 980 F.2d at 566 (“Federal
jurisdiction must be rejected if there is any doubt as to the
right of removal in the first instance.”). Indeed,
“[i]f at any time before final judgment it appears that
the district court lacks subject matter jurisdiction, the
case shall be remanded.” 28 U.S.C. § 1447(c);
see Kelton Arms Condo. Owners Ass’n, Inc. v.
Homestead Ins. Co., 346 F.3d 1190, 1192 (9th Cir. 2003)
(“Subject matter jurisdiction may not be waived, and,
indeed, we have held that the district court must remand if
it lacks jurisdiction.”); Washington v. United
Parcel Serv., Inc., 2009 WL 1519894, *1 (C.D. Cal. 2009)
(a district court may remand an action where the court finds
that it lacks subject matter jurisdiction either by motion or
sua sponte).
DISCUSSION
The
court’s review of the NOR and the attached state court
Complaint makes clear that this court does not have subject
matter jurisdiction over the instant matter.[1] In other words,
plaintiff could not have originally brought this action in
federal court, as plaintiff does not competently allege facts
supplying diversity jurisdiction. Therefore, removal was
improper. See 28 U.S.C. § 1441(a);
Caterpillar, Inc. v. Williams, 482 U.S. 386, 392,
107 S.Ct. 2425, 2429 (1987) (“Only state-court actions
that originally could have been filed in federal court may be
removed to federal court by the defendant.”) (footnote
omitted).
When
federal subject matter jurisdiction is predicated on
diversity of citizenship pursuant to 28 U.S.C. 1332(a),
complete diversity must exist between the opposing parties.
See Caterpillar Inc. v. Lewis, 519 U.S. 61, 68, 117
S.Ct. 467, 472 (1996) (stating that the diversity
jurisdiction statute “applies only to cases in which
the citizenship of each plaintiff is diverse from the
citizenship of each defendant”). Plaintiff appears to
be a citizen of California. (See Complaint at
¶¶ 1-2, 18; NOR at ¶ 9a). Ocwen has shown that
it is a citizen of Florida and Georgia, (see NOR at
¶ 9b), that BANA is a citizen of North Carolina
(id. at ¶ 9c), and that Wells Fargo is a
citizen of South Dakota. (Id. at ¶ 9d).
However, as Ocwen appears to concede, Les Zieve is a citizen
of California. (See id. at ¶ 9e). Thus,
complete diversity does not exist.
Ocwen,
however, contends that Les Zieve has been fraudulently joined
and is a sham defendant since it is merely a foreclosure
trustee. (See NOR at ¶ 9e). “If a
plaintiff fails to state a cause of action against a resident
defendant, and the failure is obvious according to the
well-settled rules of the state, the joinder 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 omitted). “It is
only where the plaintiff has not, in fact, a cause of action
against the resident defendant, and has no reasonable ground
for supposing he has, and yet joins him in order to evade the
jurisdiction of the federal court, that the joinder can be
said to be fraudulent, entitling the real defendant to a
removal.” Albi v. Street & Smith
Publ’ns, 140 F.2d 310, 312 (9th Cir. 1944);
see Allen v. Boeing Co., 784 F.3d 625, 634 (9th Cir.
2015) (“[J]oinder is fraudulent when a
plaintiff’s failure to state a cause of action against
the resident defendant is obvious according to the applicable
state law.”). The defendant must show by “clear
and convincing evidence” that the plaintiff does not
have a colorable claim against the alleged sham defendant.
See Hamilton Materials Inc. v. Dow Chemical Corp.,
494 F.3d 1203, 1206 (9th Cir. 2007) (“Fraudulent
joinder must be proven by clear and convincing
evidence.”); see also Mireles v. Wells Fargo Bank,
N.A., 845 F.Supp.2d 1034, 1063 (C.D. Cal. 2012)
(“Demonstrating fraudulent joinder” requires
showing that “after all disputed questions of fact and
all ambiguities . . . are resolved in the plaintiff’s
favor, the plaintiff could not possibly recover
against the party whose joinder is questioned.”)
(emphasis in original); Vasquez v. Bank of Am.,
N.A., 2015 WL 794545, *4 (C.D. Cal. 2015) (finding
defendants had not met “heavy burden of persuasion to
show to a near certainty that joinder was fraudulent”
because plaintiff could amend complaint to state at least one
valid claim) (internal quotation marks omitted).
Here,
Ocwen has failed to meet its heavy burden of showing by clear
and convincing evidence that plaintiff does not have a
colorable claim against Les Zieve. Among other claims,
plaintiff alleges that Les Zieve violated California Civil
Code § 2923.5, (see Complaint at ¶¶
71-86, 136-138), and that such a violation also constitutes a
violation of California Business & Professions Code
§§ 17200, et seq. (See id. at
¶¶ 139-156); Mireles, 845 F.Supp.2d at
1068 (finding trustee was not fraudulently joined partly
because alleged violation of Cal. Civ. Code § 2923.5
could support UCL claim); Knott v. Caliber Home
Loans, 2015 WL 3932668, *5 (C.D. Cal. 2015) (remanding
case where plaintiff’s complaint alleged that trustee
participated in alleged wrongdoing and failed to comply with
Cal. Civ. Code § 2923.5). Additionally, plaintiff
alleges that Les Zieve acted “in concert with[] all of
the other Defendants[.]” (Complaint at ¶ 8). While
not a model of clarity, the Complaint “at least implies
that [defendants] and [Les Zieve] acted in conspiracy to
improperly initiate foreclosure[.]” Dejillo v.
Wells Fargo Bank, N.A., 2015 WL 5187344, *2 (N.D. Cal.
2015) (noting that other courts have found trustees not
fraudulently joined by analogous allegations); Daniels v.
Wells Fargo Bank, N.A., 2012 WL 10649202, *5 (C.D. Cal.
2012) (noting that because several claims were directed
toward all defendants collectively, trustee “could
potentially be held liable either under a conspiracy theory
or for the claims aimed at Defendants collectively”).
Thus, “it is untrue that the complaint lacks
allegations that could result in [Les Zieve] being held
liable for the wrongful conduct charged.”
Mireles, 845 F.Supp.2d at 1064. Construing all
ambiguities in favor of plaintiff, the court concludes that
Ocwen has not met its heavy burden of establishing that
“plaintiff could not possibly recover” against
Les Zieve See id. at 1063; see also Hamilton
Materials Inc., 494 F.3d at 1206 (“Fraudulent
joinder must be proven by clear and convincing
evidence.”); Knott, 2015 WL 3932668, at *2
(“The standard is not whether plaintiffs will actually
or even prevail on the merits, but whether there is a
possibility that they may do so.”) (internal quotation
marks omitted).
Finally,
contrary to Ocwen’s contention, (see NOR at
¶ 9e), the statutory immunities set forth in California
Civil Code § 2924(d) do not render Les Zieve a sham
defendant. “[D]istrict courts have rejected this
position . . . where, as here, the plaintiff alleges that the
foreclosing trustee was not actually the trustee authorized
to initiate non-judicial foreclosure proceedings.”
Knott, 2015 WL 3932668, at *4 (emphasis omitted)
(citation and internal quotation marks omitted). The same
reasoning applies in this case, where plaintiff alleges that
no defendant was authorized to engage in foreclosure
procedures against plaintiff’s property. (See
Complaint at ¶¶ 67-68).
Because
Les Zieve is not a nominal party and was not fraudulently
joined, its citizenship is considered in the determination of
diversity jurisdiction. Thus, there was no diversity
jurisdiction over this action at the time of removal because
both plaintiff and Les Zieve are citizens of
California.[2]
This
order is not intended . Nor is it intended to be included in
or submitted to any ...