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Hoy v. Clinnin

United States District Court, S.D. California

June 22, 2017

EDMUND HOY, an individual person, on behalf of himself and all others similarly situated, Plaintiff,
JOHN CLINNIN, et al., Defendant.


          Barry Ted Moskowitz, Chief Judge.

         On April 19, 2017, Defendants removed this action from the Superior Court of California, County of San Diego. (ECF No. 1.) Pending before the Court are Plaintiff's motion to remand and Defendants' motion to transfer venue. (ECF Nos. 5, 7.) For the reasons discussed below, Plaintiff's motion to remand is granted and Defendants' motion to transfer venue is denied as moot.

         I. BACKGROUND

         Plaintiff brought a putative class action for alleged violations of the California Business & Professions Code § 17200 (“UCL”) against Defendant Linebarger Goggan Blair & Sampson, LLP (“Linebarger”) and its employees. Linebarger is a foreign limited law partnership that represents California government agencies in connection with their debt collections. According to the Complaint (“Compl.”), as a foreign LLP, Linebarger may only render its services in California through active members of the California State Bar who are employed by the foreign limited liability law partnership for that purpose. (Compl. ¶ 12.) Plaintiff alleges that Defendants have violated the California Rules of Professional Conduct and California Corporations Code because the designated California attorneys-Defendants John Clinnin and Timothy O'Reily-have failed to supervise Linebarger's employees in sending out demand letters under the Linebarger letterhead to California debtors. (Compl. ¶¶ 14-16.) The Complaint seeks both injunctive and restitutionary relief from all Defendants. (Compl. ¶ 43.)

         Defendants removed this action under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d).


         A. Motion to Remand

         Plaintiff moves to remand, arguing that the Court should decline jurisdiction under the local controversy exception under the CAFA. See 28 U.S.C. § 1332(d)(4).

         CAFA grants federal courts with original diversity jurisdiction over class actions comprised of 100 or more persons if the matter in controversy exceeds the sum or value of $5, 000, 000 and any member of a class of plaintiffs is a citizen of a state different from any defendant. § 1332(d)(2). Under CAFA, only “minimal diversity” is required. Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1020-21 (9th Cir. 2007). Although CAFA grants federal courts with subject matter jurisdiction over qualified class actions, it also provides express exceptions, including the local controversy exception, to the exercise of that jurisdiction. Id. at 1024. The local controversy exception applies if: (1) greater than two-thirds of the members of all proposed plaintiff classes are citizens of the State in which the action was originally filed; (2) at least 1 defendant is a defendant whose alleged conduct forms a “significant basis” for the claims asserted, from whom “significant relief” is sought by members of the proposed class, and who is a citizen of the State in which the action was originally filed; (3) the principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed; and (4) no similar class action has been filed against any of the defendants in the last three years. § 1332(d)(4). The Ninth Circuit has held that although the removing party bears the initial burden of establishing jurisdiction under CAFA, the party seeking remand bears the burden of proof as to the applicability of the local controversy exception. Serrano, 478 F.3d at 1024.

         Defendants argue that the local controversy exception does not apply in this case because Defendant Clinnin, a citizen of California, is not a defendant from whom significant relief is sought or whose alleged conduct forms a significant basis for the claims asserted by the proposed class. In determining whether Plaintiff seeks significant relief from Defendant Clinnin and whether his conduct forms a significant basis for the claims, the Court may look only to the Complaint. See, Coleman v. Estes Exp. Lines, Inc., 631 F.3d, 1010, 1015 (9th Cir. 2011).

         1. Significant Defendant

         Whether the “significant basis” condition is met requires a “substantive analysis comparing the local defendant's alleged conduct to the alleged conduct of all the other, non-local defendants.” Benko v. Quality Loan Serv. Corp., 789 F.3d 1111, 1118 (9th Cir. 2015) (quoting Kaufman v. Allstate New Jersey Ins. Co., 561 F.3d 144, 156 (3d Cir. 2009)).

         Defendants argue that Defendant Clinnin's conduct does not form a significant basis of the proposed class' UCL claims because Defendant Clinnin cannot as a matter of law be liable under the UCL. Defendant contends that the California Rule of Professional Conduct 1-120 cannot serve as the basis for a § 17200 claim because it is not intended to create a private cause of action. However, as Plaintiff notes, in People ex. rel. Herrera v. Stender, 212 Cal.App.4th 614, 632 (2012), a California court held that an unlawful UCL claim could be based on a violation of the California Rules of Professional Conduct. See also Estakhrian v. Obenstine, No. CV 11-3480, 2017 WL 2191622, at * 20 (C.D. Cal. Feb. 4, 2017) (granting class certification and finding commonality of issues where the plaintiffs' allegations of California's professional and ethical rules of conduct would establish liability under the UCL). Defendants argue that Plaintiff is attempting to circumvent the “bar on asserting claims for violation of the Rules of Professional Conduct by recasting the claim as a 17200 violation.” (Opp'n to Mtn to Remand, ECF No. 12, 7.) However, as the Herrera Court stated:

The gravemen of the complaint is not to regulate the practice of law but rather is to prevent a fraud upon the public. There is a distinction for our purposes between trying to regulate professional conduct, which plaintiff is not trying to do, and trying to ...

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