United States District Court, C.D. California
ARACELY LARA SALDIVAR et al. Plaintiffs,
v.
FCA U.S. LLC et al., Defendants.
ORDER GRANTING MOTION TO REMAND AND DENYING FEES AND
COSTS [21]; AND DENYING MOTION TO DISMISS AS MOOT
[16]
OTIS
D. WRIGHT, II UNITED STATES DISTRICT JUDGE
I.
INTRODUCTION
On June
6, 2019, Plaintiffs Aracely Lara Saldivar and Sandra Alvarado
(“Plaintiffs”) filed this action in the Superior
Court of California, County of Los Angeles. (Notice of
Removal (“Notice”) ¶ 1, Ex. A
(“Compl.”), ECF No. 1.) Defendants FCA U.S. LLC
(“FCA”) and McPeek's Dodge of Anaheim
(“McPeek's”) (collectively,
“Defendants”) removed the matter based on alleged
diversity jurisdiction. (Notice ¶ 8.) Plaintiffs move to
remand and seek attorneys' fees and costs. (Mot. to
Remand (“Mot.”), ECF No. 21.) The Court finds
that it lacks subject matter jurisdiction and consequently
REMANDS this action to state
court.[1]
II.
BACKGROUND
This is
a Song-Beverly Consumer Warranty Act
(“Song-Beverly”) action concerning a 2014 Dodge
Charger (“Vehicle”). (Compl. ¶ 9; Mot. 1.)
Plaintiffs allege the Vehicle was sold to them with
“serious defects and nonconformities” including
“engine, electrical, structural, and exterior
defects.” (Compl. ¶ 10; Mot. 1.) On June 6, 2019,
Plaintiffs filed this action in the Superior Court of
California, County of Los Angeles, Case No. 19STCV21651.
(Notice at 1.) Plaintiffs assert causes of action against
Defendant FCA under Song-Beverly and against Defendant
McPeek's for Negligent Repair. (Mot. 1; see
Compl. ¶¶ 16-61.) After Defendants removed the case
on the basis of diversity jurisdiction, Plaintiffs moved to
remand and for attorneys' fees and costs. (Mot. 1.)
III.
LEGAL STANDARD
Federal
courts have subject matter jurisdiction only as authorized by
the Constitution and Congress. U.S. Const. art. III, §
2, cl. 1; see also Kokkonen v. Guardian Life Ins. Co. of
Am., 511 U.S. 375, 377 (1994). A suit filed in state
court may be removed to federal court only if the federal
court would have had original jurisdiction over the suit. 28
U.S.C. § 1441(a). Federal courts have original
jurisdiction where an action arises under federal law or
where each plaintiff's citizenship is diverse from each
defendant's citizenship and the amount in controversy
exceeds $75, 000. Id. §§ 1331, 1332(a).
The
removal statute is strictly construed against removal, and
“[f]ederal jurisdiction must be rejected if there is
any doubt as to the right of removal in the first
instance.” Gaus v. Miles, Inc., 980 F.2d 564,
566 (9th Cir. 1992). The party seeking removal bears the
burden of establishing federal jurisdiction. Id.
IV.
DISCUSSION
Defendants
invoke diversity as the basis of the Court's subject
matter jurisdiction. (Notice ¶ 8.) The Supreme Court
“ha[s] consistently interpreted § 1332 as
requiring complete diversity: In a case with multiple
plaintiffs and multiple defendants, the presence in the
action of a single plaintiff from the same State as a single
defendant deprives the district court of original diversity
jurisdiction over the entire action.” Exxon Mobil
Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553
(2005). Here, Plaintiffs allege that they are California
residents and that McPeek's is a California corporation.
(Compl. ¶¶ 2, 4.) Defendants do not disagree.
(Notice ¶¶ 12-13.) Thus, complete diversity is
destroyed. However, Defendants argue that the Court should
disregard McPeek's citizenship because Defendants contend
McPeek's was fraudulently joined to the Complaint.
(Notice ¶ 14.)
A.
Fraudulent Joinder
“An
exception to the requirement of complete diversity exists
where it appears that a plaintiff has fraudulently joined a
‘sham' non-diverse defendant.” Sanchez v.
Lane Bryant, Inc., 123 F.Supp.3d 1238, 1241 (C.D. Cal.
2015). “If 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, the
joinder of the resident defendant is fraudulent.”
Hamilton Materials, Inc. v. Dow Chem. Corp., 494
F.3d 1203, 1206 (9th Cir. 2007) (quoting McCabe v. Gen.
Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987));
see also Padilla v. AT&T Corp., 697 F.Supp.2d
1156, 1158 (C.D. Cal. 2009) (“[A] non-diverse defendant
is deemed a sham defendant if . . . the plaintiff could not
possibly recover against the party whose joinder is
questioned.”). There is a general presumption against
fraudulent joinder and thus “[f]raudulent joinder must
be proven by clear and convincing evidence.”
Hamilton Materials, 494 F.3d at 1206.
Merely
showing that an action is likely to be dismissed against the
alleged sham defendant does not demonstrate fraudulent
joinder. See Grancare, LLC v. Thrower by & through
Mills, 889 F.3d 543, 550 (9th Cir. 2018). The standard
for establishing fraudulent joinder is more exacting than for
dismissal for failure to state a claim. Id. at 549.
If there is any “possibility that a state
court would find that the complaint states a cause of action
against any of the resident defendants, the federal court
must find that the joinder was proper and remand the case to
the state court.” Id. at 548 (quoting
Hunter v. Philip Morris USA, 582 F.3d 1039, 1046
(9th Cir. 2009)). Courts should decline to find fraudulent
joinder where “a defendant raises a defense that
requires a searching inquiry into the merits of the
plaintiff's case, even if that defense, if successful,
would prove fatal.” Id. at 549-50.
Plaintiffs
assert one claim against McPeek's for Negligent Repair,
which Defendants contend is barred by the economic loss rule.
(Compl. ¶¶ 57-61; Opp'n to Mot. 3-4
(“Opp'n”), ECF No. 23.) The economic loss
rule provides that “damages for inadequate value, costs
of repair and replacement of [a] defective product or
consequent loss of profits-without any claim of personal
injury or damages to other property”-can give rise only
to contract remedies. Robinson Helicopter Co. v. Dana
Corp., 34 Cal.4th 979, 988 (2004). The rule draws a
distinction “between tort recovery for physical
injuries and warranty recovery for economic loss.”
Id. at 989. However, California courts have
recognized an exception to the economic loss rule in cases
...