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Doe v. Medalist Holdings, L.L.C.

United States District Court, C.D. California

September 1, 2017

Jane Doe
Medalist Holdings, L.L.C. ET AL.

          Present The Honorable MICHAEL W. FITZGERALD, U.S. District Judge Deputy Clerk: Court Reporter:


         Proceedings (In Chambers): ORDER RE PLAINTIFF'S MOTION TO REMAND [26]

         Before the Court is Plaintiff's Motion to Remand, filed on July 10, 2017. (Docket No. 26). On August 8, 2017, Defendants Medalist Holdings, Inc., Leeward Holdings, LLC, Camarillo Holdings, LLC, Dartmoor Holdings, LLC, IC Holdings, LLC,, LLC, New Times Media, LLC, UGC Tech Group C.V., Atlantische Bedrijven C.V., Carl Ferrer, James Larkin, and Michael Lacey (collectively, the “Backpage Defendants”) filed an Opposition (Docket No. 32-1), and on August 14, 2017, Plaintiff filed a Reply (Docket No. 36). On August 28, 2017, the Court held a hearing on Plaintiff's Motion.

         For the reasons set forth below, Plaintiff's Motion is GRANTED. In short, Plaintiff did not “fraudulently join” or “procedurally misjoin” non-diverse Defendant Reson Tredon Richard, and the Court thus lacks diversity jurisdiction over this action.

         I. BACKGROUND

         On January 25, 2017, Plaintiff filed a Complaint against the Backpage Defendants (minus Atlantische Bedrijven C.V.) and John Doe defendants in the Riverside County Superior Court. (Complaint, Docket No. 1-1 at 2-28). The crux of Plaintiff's Complaint was that Plaintiff was “a minor girl who was sold for sex on the website, ” and that the Backpage Defendants “knowingly created an online marketplace for sex trafficking on, and then helped sex traffickers create and develop their sex ads so the defendants could profit from the ads.” (Id. ¶ 1.1). Plaintiff asserted the following state law claims against the Backpage Defendants: negligence; intentional infliction of emotional distress; assault and battery; unjust enrichment; invasion of privacy; and civil conspiracy. (Id. ¶¶ 5.1 - 5.32).

         On February 10, 2017, Plaintiff filed a First Amended Complaint (“FAC”) in the Superior Court. (FAC, Docket No. 1-1 at 98-127). Among other changes, Plaintiff added Atlantische Bedrijven C.V. as a defendant. (FAC ¶ 2.13). Plaintiff alleged that each of the Backpage Defendants (now including Atlantische Bedrijven C.V.) “owned, operated, designed and controlled the [] website, including its content, ” and “profited from the website …, including sex ads posted of [Plaintiff] and other women and children, even though [they] knew those profits were derived from illegal conduct.” (Id. ¶¶ 2.5 - 2.16). Plaintiff also added Richard as a defendant, alleging that he knew that Plaintiff was a minor yet “engaged in communications with [Plaintiff] for immoral purposes, took illicit photographs of [Plaintiff], posted illicit photographs of [Plaintiff] on, and actively solicited adults to have sex with Plaintiff … by posting sex ads for [Plaintiff] on” (Id. ¶ 2.21). Plaintiff alleged that Richard paid the Backpage Defendants “a fee in order to advertise [Plaintiff] for sex on, ” in exchange for which the Backpage Defendants “ ‘moderated' each ad of [Plaintiff] to make it less obvious that the ads were for sex” and “then posted a sanitized version of each add on” (Id. ¶¶ 4.6, 4.7).

         Plaintiff and Richard are California residents. (Declaration of Devin M. Storey (Docket No. 26-2) ¶ 10; AC ¶ 2.21). The Backpage Defendants are variously domiciled in Delaware, Arizona, Texas, the Netherlands, and Curacao. (AC ¶¶ 2.5-2.16; Notice of Removal (“NoR”) (Docket No. 1) ¶¶ 9, 26-62). The Backpage Defendants removed the action to this Court on June 23, 2017, within 30 days of service upon Atlantische Bedrijven C.V. (NoR ¶¶ 6, 7, 17-19). In removing this action, the Backpage Defendants invoke this Court's diversity jurisdiction, arguing that Richard was “procedurally” and/or “fraudulently” misjoined and that his presence in the action should thus be disregarded for purposes of diversity jurisdiction analysis. (Id. ¶¶ 63-77).


         As all parties acknowledge, the threshold requirement for removal under 28 U.S.C. § 1441 is a “finding that the complaint . . . is within the original jurisdiction of the district court.” Ansley v. Ameriquest Mortgage Co., 340 F.3d 858, 861 (9th Cir. 2003). Federal question jurisdiction is not asserted and the jurisdictional amount is not in doubt. The issue, then, is whether Richard defeats complete diversity, specifically whether he is misjoined in some fashion.

         “The strong presumption against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper, and that the court resolves all ambiguity in favor of remand to state court.” Hunter, 582 F.3d at 1042 (internal quotation marks and citation omitted).

         A. Fraudulent Joinder

         An exception to the complete-diversity rule recognized by the Ninth Circuit “‘is where a non-diverse defendant has been ‘fraudulently joined.'” Id. (quoting Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001)). The joinder is considered fraudulent “[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 . . . .” Id. (quoting Hamilton Materials, Inc. v. Dow Chemical Co., 494 F.3d 1203, 1206 (9th Cir. 2007)). A removing defendant must “prove that individuals joined in the action cannot be liable on any theory.” Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998).

         Because defendants face a heavy burden in establishing that removal is appropriate, a court determining whether joinder is fraudulent “must resolve all material ambiguities in state law in plaintiff's favor.” Macey v. Allstate Property and Cas. Ins. Co., 220 F.Supp.2d 1116, 1117 (N.D. Cal. 2002) (citing Good v. Prudential Ins. Co. of America, 5 F.Supp.2d 804, 807 (N.D. Cal. 1998)). “If there is a non-fanciful possibility that plaintiff can state a claim under [state] law against the non-diverse defendant[, ] the court must remand.” Id.; see also Good, 5 F.Supp.2d at 807 (“[T]he defendant must demonstrate that there is no possibility that the plaintiff will be able to establish a cause of action in State court against the alleged sham defendant.”). Given this standard, “[t]here is a presumption ...

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