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Thiessen v. Folsom Investors, L.P.

United States District Court, E.D. California

February 20, 2018

GLORIA THIESSEN, by and through her Guardian Ad Litem, PAM THIESSEN, Plaintiff,
FOLSOM INVESTORS, L.P., et al., Defendants.


          Troy L. Nunley United States District Judge

         This matter is before the Court on Plaintiff Gloria Thiessen's (“Plaintiff”) Motion to Remand. (ECF No. 6.) Folsom Investors, L.P., Folsom Group, LCC, Jerry Erwin Associates, Inc., and Josef A. Dunham (“Mr. Dunham”) (collectively “Defendants”) oppose the motion.[1](ECF No. 10.) For the reasons set forth below, the Court hereby GRANTS Plaintiff's Motion to Remand. (ECF No. 6.)

         I. Introduction and Background

         Plaintiff, who suffers from dementia, filed the instant action in the Superior Court of California, County of Sacramento, by and through her guardian ad litem, Pam Thiessen. Her complaint contains the following six causes of action: (1) “Elder Neglect/Abuse” against all Defendants; (2) “Negligence/Negligence Per Se” against all Defendants; (3) violation of “Resident's Bill of Rights” against all Defendants; (4) “Fraud/Misrepresentation” against all Defendants; (5) “Financial Elder Abuse” against all Defendants; and (6) “Unfair Business Practices” against all Defendants. (ECF No. 1 at 15-46.)

         Defendants removed this action pursuant to 28 U.S.C § 1441, solely on the basis of diversity jurisdiction under 28 U.S.C. § 1332(a). (ECF No. 1.) The parties agree that the amount in controversy exceeds $75, 000. (Compare ECF No. 1 at 5 with ECF No. 6-1.) Defendants take the position that Defendants (other than Dunham) are citizens of Washington for purposes of diversity. (See, e.g., ECF No. 1 at 2-3.) Plaintiff does not take issue with this in her submissions. (See ECF Nos. 6-1 & 14.) Finally, it is undisputed that both Plaintiff and Defendant Dunham are citizens of California for diversity purposes. (Compare ECF No. 1 at 5 with ECF No. 6-1 at 2.) Nevertheless, it is Defendants' position that this action is removable on the basis of diversity jurisdiction under 28 U.S.C. § 1332(a) because they contend Defendant Dunham “was fraudulently joined in this lawsuit, and his [citizenship] cannot be considered for purposes of determining diversity.” (ECF No. 1 at 2-3.)

         Whether Defendant Dunham was “fraudulently joined as a party to defeat diversity jurisdiction” is the sole focus of the parties' submissions with respect to the instant motion. (Compare ECF No. 6-1 at 1-2 with ECF No. 10 at 2.) To streamline the Court's analysis of the parties' arguments, the Court will briefly set out the legal standard governing removal and fraudulent joinder.

         II. Standard of Review

         “The right of removal is entirely a creature of statute and ‘a suit commenced in a state court must remain there until cause is shown for its transfer under some act of Congress.'” Syngenta Crop Protection, Inc. v. Henson, 537 U.S. 28, 32 (2002) (quoting Great Northern R. Co. v. Alexander, 246 U.S. 276, 280 (1918)). The general removal statute, 28 U.S.C. § 1441, permits the removal to federal court of any civil action over which “the district courts of the United States have original jurisdiction.” 28 U.S.C. § 1441(a). Removal is proper under § 1441 only if the district court could have exercised jurisdiction over the action had it originally been filed in federal court. Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987). Courts “strictly construe [28 U.S.C. § 1441] against removal jurisdiction, ” and “the defendant always has the burden of establishing that removal is proper.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). Furthermore, “[i]f the district court at any time determines that it lacks jurisdiction over the removed action, it must remedy the improvident grant of removal by remanding the action to state court.” California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 838 (9th Cir. 2004).

         “The threshold requirement for removal under 28 U.S.C. § 1441 is a finding that the complaint contains a cause of action that is within the original jurisdiction of the district court.” Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009). Under 28 U.S.C. § 1332(a), “federal district courts have [diversity] jurisdiction over suits for more than $75, 000 where the citizenship of each plaintiff is different from that of each defendant.” Id. at 1043. “Although an action may be removed to federal court only where there is complete diversity of citizenship, 28 U.S.C. §§ 1332(a), 1441(b), one exception to the requirement for complete diversity is where a non-diverse defendant has been fraudulently joined.” Id. (internal quotation marks omitted).

         “Fraudulent joinder is a term of art.” McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). “Joinder of a non-diverse defendant is deemed fraudulent, and the defendant's presence in the lawsuit is ignored for purposes of determining diversity, ‘[i]f the plaintiff fails to state a cause of action against [that non-diverse] defendant, and the failure is obvious according to the settled rules of the state.'” Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001) (quoting McCabe , 811 F.2d at 1339). In addition to the “strong presumption against removal jurisdiction, ” there is a “general presumption” against finding there has been a fraudulent joinder. Hunter, 582 F.3d at 1042, 1046. Thus, the Ninth Circuit has explained that a party relying on a fraudulent joinder theory to demonstrate removal is appropriate has a “heavy burden.” Id. The party seeking removal “is entitled to present the facts showing the joinder to be fraudulent.” Morris, 236 F.3d at 1067. However, “[f]raudulent joinder must be proven by clear and convincing evidence.” Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007).

         III. Analysis

         The Court finds that this action must be remanded for two separate reasons. The first of these the Court raises sua sponte. See Valdez v. Allstate Ins. Co., 372 F.3d 1115, 1116 (9th Cir. 2004) (noting that federal courts are “obligated to consider sua sponte whether [they] have subject matter jurisdiction”). Defendants seem to assume - and Plaintiff has not challenged - that Defendant Folsom Investors, L.P. takes its citizenship for diversity purposes from one (if not all) of the following: the principal place of business of the limited partnership, which Defendants indicate is Washington; and the citizenship of its general partner, which Defendants suggest is a Washington by noting the general partner is a “limited liability company formed in the State of Washington[, ] under the laws of the State of Washington[, and whose] members are all citizens of Washington.” (ECF No. 1 at 4.)

         The Supreme Court has long made it clear that “a limited partnership is deemed to be a citizen [for diversity purposes] of every state of which any of its general or limited partners is a citizen.” Evans v. California, No. 17-cv-00531-BAS-BGS, 2017 WL 3605378, at *2 (S.D. Cal. Aug. 21, 2017) (citing Carden v. Arkoma Assocs., 494 U.S. 185 (1990)). Defendants make no effort to identify the citizenship of their limited partners. For this reason alone, Defendants do not meet their burden to show that removal is proper. Moreover, given Defendants' apparent ignorance of the rule for limited partnerships and its similarities to the rule for limited liability companies, the Court is not inclined to accept Defendants' assertion about the citizenship of Folsom Investors, L.P.'s general partner. See id. (“[A]n LLC is a citizen of every state of which its owners/members are citizens.”) (quoting Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006)). This presents its own problem as the general partner, Folsom Group, LCC, is also a Defendant. Consequently, even if Defendants met their burden with respect to fraudulent joinder, the Court would nevertheless remand the instant action.

         With this in mind, the Court turns to the parties arguments. Plaintiff begins with the premise that Defendant Dunham is not fraudulently joined if Plaintiff has stated a cause of action against him that does not obviously fail according to the settled rules of the state of California. (See ECF No. 6-1 at 5-6.) Defendants do not take issue with this premise. (See generally ECF No. 10.) In any event, it is plainly correct. See Morris, 236 F.3d at 1067. From this premise, Plaintiff argues she “easily states a valid cause of action against [Defendant] Dunham for elder abuse/neglect.”[2] (ECF No. 6-1 at 6.) Her argument consists of the following three points: First, citing a published opinion from the California Supreme Court, Plaintiff argues “nursing home administrators can be held individually liable for elder abuse.” (ECF No. 6-1 at 6 (citing Delaney v. Baker, 20 Cal.4th 23 (1999).) Second, Plaintiff contends she has adequately alleged that Defendant Dunham is such an administrator under ...

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