Saldivar v. FCA U.S. LLC

          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 ...