United States District Court, N.D. California
ORDER GRANTING MOTION TO REMAND AND DENYING MOTION TO
DISMISS RE: DKT. 34, 36
C. SPERO Chief Magistrate Judge
action was initially filed in state court. Plaintiffs Jason
Tuttle and Mary Kathleen Tuttle assert several claims under
California law pertaining to a pending foreclosure of the
Tuttles' home in San Rafael, California against
Defendants Wells Fargo Bank, N.A. (“Wells
Fargo”), Wells Fargo Home Mortgage,  and Barrett
Daffin Frappier Treder & Weiss LLP (“Barrett
Daffin”). Wells Fargo removed to this Court asserting
diversity jurisdiction under 28 U.S.C. § 1332, and
contending that the Court should disregard Barrett Daffin as
fraudulently joined and as a nominal defendant. The Tuttles
move to remand, and the Court held a hearing on May 25, 2018.
For the reasons discussed below, the Tuttles' motion is
GRANTED, except as to their request for attorneys' fees,
and this action is REMANDED to the California Superior Court
for the County of Marin. Because this Court lacks jurisdiction
over the action, Wells Fargo's pending motion to dismiss
is DENIED without prejudice to raising any arguments in state
Allegations of the First Amended Complaint
Tuttles allege that on October 5, 2006, they refinanced their
home mortgage with World Savings Bank, FSB, which was later
acquired by Wells Fargo. 1st Am. Compl. (“FAC, ”
dkt. 30) ¶¶ 20, 22. On March 17, 2017, Wells Fargo
denied an application for loan modification, citing
“the results of [the Tuttles'] net present value
(NPV) evaluation.” Id. ¶¶ 24-25.
According to the Tuttles, Wells Fargo failed to include
required information in its denial letter and did not respond
to a letter requesting that information. Id.
¶¶ 26-31. The Tuttles appealed the denial on April
13, 2017, but Defendants nevertheless recorded a notice of
trustee's sale on January 5, 2018. Id.
¶¶ 30, 32. The Tuttles contend that they were and
are well qualified for a loan modification. Id.
¶¶ 32-37, 44. A Wells Fargo representative
acknowledged on February 12, 2018 that the Tuttles had a
complete application pending and that Wells Fargo had not
postponed the trustee's sale, then set for February 20,
2018. Id. ¶ 38. After the Tuttles received a
temporary restraining order in state court, Wells Fargo
rescheduled the sale for May 3, 2018, which remained the
scheduled date at the time that the Tuttles filed their
operative amended complaint. Id. ¶ 40. The
Tuttles had not received a decision on the appeal of Wells
Fargo's denial of their application at that time, and
Wells Fargo had nevertheless failed to postpone the
foreclosure sale further. Id. ¶¶ 42-43.
Tuttles bring five claims under state law. First, they assert
that Defendants violated California Civil Code section
2923.6(c) because Wells Fargo has proceeded towards a
foreclosure sale even though the Tuttles have a complete
application for loan modification pending, and because
Barrett Daffin has scheduled and proceeded towards the sale
despite Wells Fargo's violation. Id.
¶¶ 45-55. Second, the Tuttles assert that Wells
Fargo violated Civil Code section 2923.7 by failing to
provide a single point of contact with access to someone with
authority to stop foreclosure proceedings, and again assert
that Barrett Daffin violated the same statute by proceeding
towards foreclosure despite Wells Fargo's violation.
Id. ¶¶ 56-60. Third, the Tuttles assert
that Wells Fargo violated Civil Code section 2924.11 by
proceeding towards a foreclosure sale while a modification
application was pending and by failing to provide sufficient
documentation supporting its denial letter. Id.
¶¶ 69-73. Once again, the Tuttles assert that
Barrett Daffin violated the same statute by proceeding
towards foreclosure despite Wells Fargo's violation.
Id. ¶ 74. The Tuttles' fourth claim asserts
that both Wells Fargo and Barrett Daffin violated
California's Unfair Competition Law by virtue of the
Civil Code violations addressed above, and their fifth claim
is for negligence against Wells Fargo. Id.
Notice of Removal and Arguments Regarding Remand
Fargo removed to this Court on March 12, 2018, asserting
diversity jurisdiction under 28 U.S.C. § 1332. See
generally Notice of Removal (dkt. 1). Wells Fargo states
that the parties are diverse because Jason Tuttle is a
citizen of California and Wells Fargo is a citizen of South
Dakota, and that although Barrett Daffin is also a citizen of
California, its citizenship should be disregarded because it
is a nominal party and “no viable claim exists against
[it].” Id. at 2-7. Wells Fargo contends that
the duties of a trustee under a deed of trust are purely
ministerial, and that Barrett Daffin's duties are
privileged under California law absent a showing of malice.
Id. at 5-7. Wells Fargo also contends that the
amount in controversy exceeds $75, 000 and that removal was
timely. Id. at 7-10.
Tuttles move to remand on the grounds that there is not
complete diversity-because Barrett Daffin is a citizen of
California-and that Wells Fargo has not met its burden to
show fraudulent joinder. See generally Mot. to
Remand (dkt. 32). The Tuttles note that the California
Homeowner Bill of Rights (“HBOR”) provisions on
which they base their claims specifically include a
“trustee” as among the parties bound thereby, and
that if a wrongful foreclosure sale actually occurs, a
trustee can be held liable for actual economic damages.
Id. at 8-9. The Tuttles contend that these statutes
supersede any need to show actual malice under the common
law. Id. at 9-10. The Tuttles cite a number of
district court decisions holding that trustees were not
fraudulently joined nominal parties in foreclosure cases,
including this Court's decision in Rankankan v. JP
Morgan Chase Bank, N.A., No. 16-cv-01694-JCS, 2016 WL
3411522 (N.D. Cal. June 22, 2016). Mot. to Remand at 10-12.
The Tuttles request their costs and attorneys' fees
because “removal was clearly improper, ” and
submit a declaration from their counsel Nelson Goodell
stating that he anticipates spending 9.4 hours working on the
motion to remand and attending the hearing at a rate of $300
per hour, for a total request of $2, 820. Id. at
12-13; see generally Goodell Decl. (dkt. 32-1).
Fargo opposes remand, arguing that Barrett Daffin is
fraudulently joined because its duties as trustee were narrow
and it only acted as an agent of Wells Fargo, not in its own
interest. Opp'n (dkt. 39) at 2-3. Wells Fargo cites a
number of district court decisions remanding cases on the
basis that trustee defendants were fraudulently joined-most,
but not all, of which were decided before the HBOR became
effective in 2013. Id. at 3-7 (citing, e.g.,
Ogamba v. Wells Fargo Bank, N.A., No.
2:17-cv-01754-KJM-AC, 2017 WL 4251124 (E.D. Cal. Sept. 26,
2017) (appeal pending); Marquez v. Wells Fargo Bank,
N.A., No. C 13-2819 PJH, 2013 WL 5141689 (N.D. Cal.
Sept. 13, 2013)). Wells Fargo does not distinguish or
otherwise discuss the decisions cited by the Tuttles that
reached the opposite conclusion. See generally Id.
Wells Fargo also argues that Barrett Daffin's actions
were privileged communications under the common interest
privilege codified at sections 47(c) and 2924(d) of the
California Civil Code. Id. at 5-6. Wells Fargo
contends that even if the Court grants the motion to remand,
this is not the sort of unusual case where attorneys'
fees should be awarded. Id. at 7. Wells Fargo also
erroneously asserts that the Tuttles failed to submit a
declaration from counsel stating the fees incurred.
Tuttles argue in their reply that the Ogamba court
erred in applying a Rule 12(b)(6) analysis to the question of
fraudulent joinder, and that that case should have been
remanded under the more demanding standard that the Ninth
Circuit has articulated for establishing fraudulent joinder.
Reply (dkt. 45) at 4. According to the Tuttles, “the
overwhelming majority of the recent case law holds that
non-judicial foreclosure trustees that are accused of
violating the California Homeowners Bill of Rights are not
‘fraudulently joined' parties.” Id.
at 5 (citing district court decisions). The Tuttles contend
that the “actual malice” standard is only
necessary for a plaintiff to recover monetary damages from a
trustee and is not necessary to obtain injunctive relief,
which the Tuttles seek here. Id. at 5-6. The Tuttles
also assert that Barrett Daffin has been actively involved in
the foreclosure process, and refused to postpone the
foreclosure sale even after being contacts by the
Tuttles' attorney and apprised of the claims in this
case, stating that it would only postpone the sale if Wells
Fargo instructed it to. Id. at 6-7. In a second
declaration, attorney Nelson Goodell states that despite
Barrett Daffin's representation that it would postpone
the sale at Wells Fargo's request, Wells Fargo sent the
Tuttles an email on the scheduled day of the sale stating
that it would postpone the sale, but Barrett Daffin
nevertheless did not postpone the foreclosure sale until
after the state court issued a temporary restraining order.
See generally Goodell Reply Decl. (dkt. 45-1). The
Tuttles state that they could amend their complaint to more
clearly describe Barrett Daffin's involvement if
necessary. Reply at 7.
Tuttles also respond to a footnote in which Wells Fargo noted
that the Tuttles did not object to Barrett Daffin's
declaration of non-monetary status in state court, citing a
number of district court decisions holding that such
declarations are not relevant to federal courts' analysis
and arguing that even if such declaration could be relevant
in this Court, it has no effect in this case, where Wells
Fargo removed from state court before the time to object to
the declaration of non-monetary status had expired.
Id. at 10-12. The Tuttles also reiterate their
argument that they are entitled to attorneys' fees.
Id. at 12-13.
Daffin has not addressed the motion to remand, but filed a
notice of joinder in Wells Fargo's separate motion to
dismiss the action, which the Court does not reach. See
generally Joinder (dkt. 36). In that filing, Barrett
Daffin asserts that a trustee is not liable for good faith
performance of its duties related to foreclosure, even if its
actions are erroneous. Id. at 4-5. According to
Barrett Daffin, a plaintiff must show malice to prevail
against a trustee, which “means the publication was
motivated by hatred or ill will towards the plaintiff or
[that] the defendant lacked reasonable grounds for belief in
the truth of the publication and therefore acted in reckless
disregard of the plaintiff's rights.” Id.
at 5 (citing Kachlon v. Markowitz, 168 Cal.App.4th