United States District Court, N.D. California
ORDER REMANDING CASE
WILLIAM ALSUP UNITED STATES DISTRICT JUDGE.
an automobile “Lemon Law” case. Defendants
removed; plaintiffs seek remand. The crux is whether an
in-state defendant was fraudulently joined. Finding possible
recovery against the in-state defendant, the motion to remand
purchased a Ford Fusion in June of 2013. Ford warranted
against defect and committed to repair should a defect occur.
During the warranty period, a defect developed. Plaintiffs
took the vehicle to Penske Ford for repair, but the attempts
were unsuccessful. Ford declined to promptly replace the
vehicle or pay restitution (Dkt. No. 16-2 at 3-4), and
plaintiffs sued Ford under, among others, California's
“Lemon Law” and Penske Ford for negligent repair
(Dkt. No. 1-2 at ¶¶ 12-55).
defendant may remove a case to federal court under diversity
jurisdiction if the parties are diverse and the amount in
controversy exceeds $75, 000. 28 U.S.C. §§ 1332,
1441. But, the defendant bears the burden to prove the
circumstances supporting jurisdiction. There is a
“strong presumption against removal jurisdiction”
and “the court resolves all ambiguity in favor of
remand to state court.” Hunter v. Philip Morris
USA, 582 F.3d 1039, 1042 (9th Cir. 2009). Additionally,
“[d]iversity removal requires complete
diversity, meaning that each plaintiff must be of a different
citizenship from each defendant.” GranCare, LLC v.
Thrower By & Through Mills, 889 F.3d 543, 548 (9th
is an exception. A “fraudulently joined” in-state
defendant does not preclude diversity jurisdiction. See
ibid. There are two ways to prove fraudulent joinder:
“(1) actual fraud in the pleading of jurisdictional
fact;” or, relevant here, “(2) [the] inability of
the plaintiff to establish a cause of action against the
non-diverse party in state court.” Ibid. The
bar is high; a plaintiff's inability to recover must be
“obvious according to the
settled rules of the state.” Ritchey v. Upjohn Drug
Co., 139 F.3d 1313, 1318 (9th Cir. 1998) (emphasis
added). “If there is a
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
state court.” Hunter, 582 F.3d at 1046
(emphasis added). And, a “district court must consider
. . . whether a deficiency in the complaint can possibly be
cured by granting the plaintiff leave to amend.”
GranCare, 889 F.3d at 550.
contend plaintiffs' sole claim against in-state Penske
Ford, for negligent repair, is barred by the economic loss
rule. The subject of the suit is a car, not its components,
and plaintiffs do not allege the vehicle caused personal
injury or damage to other property. Thus, the
economic loss rule prohibits tort recovery on what is
essentially a breach of contract claim (Dkt. No. 22 at 4-6).
is not obvious under California law
that plaintiffs have no hope of recovery against Penske Ford.
True, the economic loss rule generally bars tort recovery
unless “a product defect causes damage to ‘other
property,' that is, property other than the product
itself.” Jimenez v. Sup. Ct, 58 P.3d 450,
456 (Cal. 2002). Yet “California decisional law has
long recognized that the economic loss rule does not
necessarily bar recovery in tort for damage that a defective
product (e.g. a window) causes to other portions of a larger
product (e.g., a house) into which the former is
incorporated.” Id. at 457. Indeed, the
California Supreme Court has recognized “that the
concept of recoverable physical injury or property damage
ha[s] over time expanded to include damage to one part of a
product cause by another, defective part.”
Ibid. (quotation marks omitted).
plaintiffs allege Penske Ford failed to “store,
prepare, and repair the Subject Vehicle in accordance with
industry standards” (Dkt. No. 1-2 ¶ 54). And they
allege a litany of defective components, particularly an
engine defect (id. ¶¶ 10, 42).
Plaintiffs' claim for negligent repair against Penske
Ford may be threadbare, but the question is not whether
plaintiffs will prevail on the merits, or even withstand a
Rule 12(b)(6) motion - the question is whether California law
plaintiffs' claim. See GranCare, 889 F.3d at
550; Morris, 236 F.3d at 1067. So long as the
“duty of a product manufacturer to prevent property
damage does not necessarily end when the product is
incorporated into a larger product, ” California's
economic loss rule does not bar recovery if the alleged
defect damages other components of the vehicle.
See Jimenez, 58 P.3d at 457. Plaintiffs could so
amend their complaint and this leaves a
“possibility” of recovery from Penske Ford.
See GranCare, 889 F.3d at 548, 550. Thus, joinder
was proper, and diversity is incomplete.
of in-state defendant Penske Ford being proper, and complete
diversity under 28 U.S.C. § 1332 unsatisfied,
plaintiffs' motion to remand is Granted.