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Arvizu v. United Furniture Industries CA Inc.

United States District Court, C.D. California

June 28, 2019

ANGEL ARVIZU, Plaintiff,
v.
UNITED FURNITURE INDUSTRIES CA, INC.; et al., Defendants.

          ORDER GRANTING PLAINTIFF'S MOTION FOR LEAVE TO FILE FIRST AMENDED COMPLAINT AND REMAND ACTION TO STATE COURT

          HON. R. GARY KLAUSNER UNITED STATES DISTRICT JUDGE

         Before the Court is Plaintiff Angel Arvizu's Motion for Leave to File First Amended Complaint and Remand Action to State Court, filed on May 8, 2019. (Dkt. No. 9). Having been thoroughly briefed by the parties, this Court took the matter under submission on June 11, 2019.

         Plaintiff Arvizu (“Plaintiff”) originally filed suit on February 22, 2019 in the Superior Court for the County of San Bernardino. The case was removed on the basis of diversity jurisdiction on March 27, 2019. This is an employment action in which Plaintiff alleges that his former employer, Defendant United Furniture Industries CA, Inc. (“United”), wrongfully terminated his employment on or about October 1, 2018 and retaliated against him.

         Plaintiff now seeks leave to amend the Complaint to add United's Human Resources Director Ivon Gonzalez (“Gonzalez”) as a defendant, to add new allegations, and to add three new causes of action against both defendants based on actions primarily taken by Gonzalez. Specifically, Plaintiff seeks to add claims for (1) tortious interference with prospective economic relations, (2) violation of Cal. Lab. Code § 1050, and (3) defamation. All three new claims are based on Gonzalez and United's alleged actions following Plaintiff's termination, which remain ongoing according to Plaintiff. The addition of Gonzalez as a defendant would destroy this Court's subject matter jurisdiction since Plaintiff and Gonzalez are both citizens of the state of California.

         Courts have recognized that the usually liberal approach to amendment under Federal Rule of Civil Procedure 15(a) does not apply when a plaintiff seeks to amend its complaint after removal to add a diversity-destroying defendant. See, e.g., Greer v. Lockheed Martin, 2010 WL 3168408, at *4 (N.D. Cal. Aug. 10, 2010). To apply Rule 15(a)'s permissive standard in this situation “would allow a plaintiff to improperly manipulate the forum of an action.” Clinco v. Roberts, 41 F.Supp.2d 1080, 1087 (C.D. Cal. 1999). Accordingly, when a plaintiff seeks to amend its complaint after removal to add a diversity-destroying defendant, courts in this district generally scrutinize the proposed amendment under the standard of 28 U.S.C. § 1447(e).

         28 U.S.C. § 1447(e) states that “if after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court.” Whether to permit joinder of a party that will destroy diversity jurisdiction rests in the sound discretion of the Court. Palestini v. General Dynamics Corp, 193 F.R.D. 654, 658 (S.D. Cal. 2000) (citing Newcombe v. Adolf Coors Co., 157 F.3d 686, 691 (9th Cir. 1998)); Clinco, 41 F.Supp.2d at 1082. “Courts generally consider the following factors when deciding whether to allow amendment to add non-diverse defendants: (1) whether the party sought to be joined is needed for just adjudication and would be joined under Federal Rule of Civil Procedure 19(a); (2) whether the statute of limitations would preclude an original action against the new defendants in state court; (3) whether there has been unexplained delay in requesting joinder; (4) whether joinder is intended solely to defeat federal jurisdiction; (5) whether the claims against the new defendant appear valid; and (6) whether denial of joinder will prejudice the plaintiff.” IBC Aviation Servs v. Compania Mexicana De Aviacion, 125 F.Supp.2d 1008, 1011 (N.D. Cal. 2000) (citing Palestini v. Gen. Dynamics Corp., 193 F.R.D. 654, 658 (S.D. Cal. 2000)).

         Here, the joinder of Gonzalez as a Defendant is needed for just adjudication of the case. Although courts consider the standard set forth under Rule 19 in determining whether to permit joinder under § 1447(e), amendment under § 1447(e) involves a less restrictive standard than joinder under Rule 19. Id. at 1011-12. “A necessary party is one having an interest in the controversy, and who ought to be made [a] party, in order that the court may act on that rule which requires it to decide and finally determine the entire controversy, and do complete justice, by adjusting all the rights involved in it.” Id. at 1011 (citing CP Nat'l. Corp. v. Bonneville Power Admin., 928 F.2d 905, 912 (9th Cir. 1991)) (internal quotes omitted). “This standard is met when failure to join will lead to separate and redundant actions, ” but not when the diversity-destroying defendant is only tangentially related to the cause of action or would not prevent complete relief if not added. Id. (citing CP Nat'l Corp., 928 F.2d at 910).

         Plaintiff contends that “Gonzalez has made [and continues to make] false and defamatory statements about Plaintiff to potential employers.” United may potentially be held liable for such conduct under the doctrine of respondeat superior, Rivera v. National Railroad Corp., 331 F.3d 1074, 1080 (9th Cir. 2003), and if Plaintiff is not permitted to add Gonzalez as a defendant now, he may have to litigate the same or similar issues in a separate state court action, which would unnecessarily consume judicial resources and create the risk of inconsistent results. Moreover, if United were to successfully defend against vicarious liability for Gonzalez's alleged actions, that might impede Gonzalez's ability to protect her own interests in a separate case against her. Additionally, Plaintiff states that he intends to seek injunctive relief against both United and Gonzalez. Thus, Gonzalez is at the very least a party “having an interest in the controversy, and who ought to be made [a] party, in order that the court may act on that rule which requires it to decide and finally determine the entire controversy, and do complete justice, by adjusting all the rights involved in it.” IBC Aviation, 125 F.Supp.2d at 1011. Her relation to the allegations in the original Complaint is not merely tangential. Thus, the first factor weighs in favor of granting Plaintiff's Motion.

         The second factor-the statute of limitations-arguably weighs against remand since Plaintiff concedes that a separate state court action against Gonzalez would not be time-barred. However, this factor is outweighed in this case by considerations of efficiency and judicial economy. Because Gonzalez is a necessary party under the less restrictive § 1447(e) standard, requiring Plaintiff to file a separate state court action against her would clearly be at odds with those considerations.

         The third factor-whether there has been unexplained delay-weighs in favor of remand. Plaintiff asserts that he discovered the nature and extent of Gonzalez's alleged conduct after this action was removed to federal court. Plaintiff further claims that although he was aware of Gonzalez's involvement to a limited extent, he had no basis at the time of his initial filing to include the three new causes of action he now seeks to add against Gonzalez. Furthermore, little or no formal discovery has occurred thus far, the Court has not issued a scheduling order, and Plaintiff filed this Motion less than two months after removal and four months after filing the original Complaint. Thus, this factor weighs in favor of granting Plaintiff's Motion.

         The fourth factor-whether joinder is intended solely to defeat federal jurisdiction- weighs neither for nor against remand. There is a “general presumption against fraudulent joinder, ” and the burden is on Defendant to defeat that presumption. Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). Here, although the proposed amendments act to destroy federal jurisdiction, that does not appear to be Plaintiff's sole reasoning. As explained above, Gonzalez is needed for just and efficient adjudication of this case. In sum, United cannot defeat the “general presumption against fraudulent joinder.” Id.

         The fifth factor-whether the claims against the new defendant appear valid-is difficult to assess at this point. The allegations against Gonzalez appear to be based purely on circumstantial evidence; however, discovery on the matter may reveal additional supporting facts. The new causes of action against United and Gonzalez are substantially similar and related to those previously raised against United alone. Thus, there appears to be a reasonable basis for Plaintiff's proposed new causes of action.

         The sixth and final factor-whether denial of joinder will prejudice the plaintiff-weighs in favor of remand. As discussed above, Plaintiff may be forced to litigate a separate and redundant action in state court if the Court were to deny his Motion, and all parties would face a risk of inconsistent rulings under those circumstances. Given that this case is still in the early stages, any prejudice to Defendant will be slight. Thus, this factor weighs in favor of remand.

         “Where . . . a facially bona fide claim against a non-diverse defendant is stated, amendment is sought early in the litigation and does not appear to be for a dilatory purpose, and no prejudice to the named defendant exists, the court should exercise its discretion in favor of leave to amend, and permit plaintiffs to join the non-diverse party. This approach is consistent with Congress' concern for the administration of justice by reducing the number of diversity-of-citizenship cases to be handled in federal court and the express purposes of section 1447(e), as well as the liberal policy favoring amendment under Federal Rule of Civil Procedure 15.” Righetti v. Shell Oil Co., 711 ...


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