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Kelley v. Caliber Home Loans, Inc.

United States District Court, E.D. California

May 2, 2018

JULIE A. KELLEY, Plaintiff,
CALIBER HOME LOANS, INC., et al., Defendants.



         Plaintiff seeks redress from Caliber Home Loans, Inc. (“Caliber”), U.S. Bank National Association (“US Bank”), JP Morgan Chase Bank (“JP Morgan”), and Quality Loan Service Corporation (“Quality”) for negligence, wrongful disclosure, and violations of California Business and Professions Code § 17200 and California Civil Code § 2923.6-7. JP Morgan removed on diversity grounds. The instant matter before the Court is Plaintiff's Motion to Remand (ECF No. 11). For the reasons provided below, Plaintiff's Motion to Remand is DENIED.[1]


         This case stems from the foreclosure of Plaintiff's real property. Plaintiff bought the subject property in 2004 with her now ex-husband. The original mortgage lender was Chase Bank USA, N.A. After their divorce in 2012, Plaintiff's ex-husband executed a quitclaim deed in favor of Plaintiff pursuant to a family court order. Subsequently in 2012, Plaintiff accepted a loan modification after getting behind on her payments. The loan servicer at the time was Chase Home Finance, LLC (“Chase”). JP Morgan would eventually become the successor-in-interest to the property via merger with Chase. She fell behind on her payments again in early 2014 and attempted to work with Chase and another entity, Keep Your Home California, to explore mortgage assistance options.

         On June 9, 2015, Quality recorded a Notice of Default against Plaintiff's property. Shortly thereafter, Plaintiff allegedly submitted to Chase a complete Request for Mortgage Assistance Form with supporting documentation. Sometime in 2015, Chase assigned its interest in the property to U.S. Bank, and in August of that year, Caliber took over servicing. On September 22, 2015, Caliber and Quality recorded a Notice of Trustee's Sale. Plaintiff alleges neither Caliber nor Quality contacted her regarding the Notice and that if they had she would have informed them of her pending loan modification application.

         Quality apparently recorded another Notice of Trustee's Sale on October 26, 2015, setting the sale date for November 2015. Plaintiff and Caliber then exchanged communications concerning Plaintiff's loan modification through April 8, 2016, disagreeing over whether Plaintiff needed to submit a divorce decree in order to qualify under the Home Affordable Modification Program. Plaintiff claims she never received a detailed written response denying or approving her loan modification application. On May 18, 2018, the property was sold. Caliber recorded a Trustee's Deed Upon Sale on /// May 26, 2016, and Quality, as trustee, granted all right, title and interest in the property to U.S. Bank.

         On July 19, 2017, Plaintiff filed her Complaint in the Superior Court of the State of California for Sacramento County. Defendant then removed the case to this Court on August 28, 2017, citing diversity jurisdiction and arguing that Quality, a California corporation, is a fraudulently joined nominal defendant whose citizenship should be disregarded for diversity purposes. Plaintiff, on the other hand, argues that Quality is a proper defendant and its presence in the action destroys diversity.


         When a case “of which the district courts of the United States have original jurisdiction” is initially brought in state court, the defendant may remove it to federal court “embracing the place where such action is pending.” 28 U.S.C. § 1441(a). There are two bases for federal subject matter jurisdiction: (1) federal question jurisdiction under 28 U.S.C. § 1331, and (2) diversity jurisdiction under 28 U.S.C. § 1332. A district court has federal question jurisdiction in “all civil actions arising under the Constitution, laws, or treaties of the United States.” Id. § 1331. A district court has diversity jurisdiction “where the matter in controversy exceeds the sum or value of $75, 000, . . . and is between citizens of different states, or citizens of a State and citizens or subjects of a foreign state . . . .” Id. § 1332(a)(1)-(2).

         A defendant may remove any civil action from state court to federal district court if the district court has original jurisdiction over the matter. 28 U.S.C. § 1441(a). “The party invoking the removal statute bears the burden of establishing federal jurisdiction.” Ethridge v. Harbor House Rest., 861 F.2d 1389, 1393 (9th Cir. 1988) (citing Williams v. Caterpillar Tractor Co., 786 F.2d 928, 940 (9th Cir. 1986)). Courts “strictly construe the removal statute against removal jurisdiction.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (internal citations omitted). “[I]f there is any doubt as to the right of removal in the first instance, ” the motion for remand must be granted. Id. Therefore, “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded” to state court. 28 U.S.C. § 1447(c).

         If the district court determines that removal was improper, then the court may also award the plaintiff costs and attorney's fees accrued in response to the defendant's removal. 28 U.S.C. § 1447(c). The court has broad discretion to award costs and fees whenever it finds that removal was wrong as a matter of law. Balcorta v. Twentieth-Century Fox Film Corp., 208 F.3d 1102, 1106 n.6 (9th Cir. 2000).


         In the present case, JP Morgan removed this action based on its claim that there is complete diversity of citizenship between the parties. There is no dispute that Plaintiff is a California resident and that Caliber, U.S. Bank, and JP Morgan are diverse from Plaintiff. There is also no dispute that Quality is a California resident. The issue is whether Quality's citizenship destroys diversity. Ordinarily, it would. But here Defendant argues that Quality was fraudulently joined in the action, and as a result, its citizenship should be ignored for purposes of determining diversity. If Quality was fraudulently joined, then there is no question that complete diversity exists between the parties. That is therefore the focus of the Court's inquiry.

         “[F]raudulently joined defendants will not defeat removal on diversity grounds.” Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). In assessing whether the joinder of a party is fraudulent and a “sham” intended only to defeat diversity, courts look to whether the plaintiff has failed to “state a cause of action against a resident defendant, and whether that failure is obvious according to the settled rules of the state.” Hunter v. Philip Morris USA, 582 F.3d 1039, 1043 (9th Cir. 2009) (citing Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). Where a plaintiff has ...

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