O 1

JS-6

2 3 4 5 6 7 United States District Court 8 Central District of California 9 10 11 ARACELY LARA SALDIVAR et al. Case № 2:19-cv-06393-ODW (JPRx)

12 Plaintiffs,

ORDER GRANTING MOTION TO

13 v. REMAND and DENYING FEES AND 14 FCA US LLC et al., COSTS [21]; and

DENYING MOTION TO DISMISS

15 Defendants.

AS MOOT [16]

16 17 I. INTRODUCTION 18 On June 6, 2019, Plaintiffs Aracely Lara Saldivar and Sandra Alvarado 19 (“Plaintiffs”) filed this action in the Superior Court of California, County of Los 20 Angeles. (Notice of Removal (“Notice”) ¶ 1, Ex. A (“Compl.”), ECF No. 1.) 21 Defendants FCA US LLC (“FCA”) and McPeek’s Dodge of Anaheim (“McPeek’s”) 22 (collectively, “Defendants”) removed the matter based on alleged diversity 23 jurisdiction. (Notice ¶ 8.) Plaintiffs move to remand and seek attorneys’ fees and 24 costs. (Mot. to Remand (“Mot.”), ECF No. 21.) The Court finds that it lacks subject 25 matter jurisdiction and consequently REMANDS this action to state court.1 26 27

28 1 After considering the papers filed in connection with the Motion to Remand, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78(b); C.D. Cal. L.R. 7-15. 1 II. BACKGROUND 2 This is a Song-Beverly Consumer Warranty Act (“Song-Beverly”) action 3 concerning a 2014 Dodge Charger (“Vehicle”). (Compl. ¶ 9; Mot. 1.) Plaintiffs 4 allege the Vehicle was sold to them with “serious defects and nonconformities” 5 including “engine, electrical, structural, and exterior defects.” (Compl. ¶ 10; Mot. 1.) 6 On June 6, 2019, Plaintiffs filed this action in the Superior Court of California, 7 County of Los Angeles, Case No. 19STCV21651. (Notice at 1.) Plaintiffs assert 8 causes of action against Defendant FCA under Song-Beverly and against Defendant 9 McPeek’s for Negligent Repair. (Mot. 1; see Compl. ¶¶ 16–61.) After Defendants 10 removed the case on the basis of diversity jurisdiction, Plaintiffs moved to remand and 11 for attorneys’ fees and costs. (Mot. 1.) 12 III. LEGAL STANDARD 13 Federal courts have subject matter jurisdiction only as authorized by the 14 Constitution and Congress. U.S. Const. art. III, § 2, cl. 1; see also Kokkonen v. 15 Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A suit filed in state court 16 may be removed to federal court only if the federal court would have had original 17 jurisdiction over the suit. 28 U.S.C. § 1441(a). Federal courts have original 18 jurisdiction where an action arises under federal law or where each plaintiff’s 19 citizenship is diverse from each defendant’s citizenship and the amount in controversy 20 exceeds $75,000. Id. §§ 1331, 1332(a). 21 The removal statute is strictly construed against removal, and “[f]ederal 22 jurisdiction must be rejected if there is any doubt as to the right of removal in the first 23 instance.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). The party seeking 24 removal bears the burden of establishing federal jurisdiction. Id. 25 IV. DISCUSSION 26 Defendants invoke diversity as the basis of the Court’s subject matter 27 jurisdiction. (Notice ¶ 8.) The Supreme Court “ha[s] consistently interpreted § 1332 28 as requiring complete diversity: In a case with multiple plaintiffs and multiple 1 defendants, the presence in the action of a single plaintiff from the same State as a 2 single defendant deprives the district court of original diversity jurisdiction over the 3 entire action.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553 4 (2005). Here, Plaintiffs allege that they are California residents and that McPeek’s is 5 a California corporation. (Compl. ¶¶ 2, 4.) Defendants do not disagree. (Notice 6 ¶¶ 12–13.) Thus, complete diversity is destroyed. However, Defendants argue that 7 the Court should disregard McPeek’s citizenship because Defendants contend 8 McPeek’s was fraudulently joined to the Complaint. (Notice ¶ 14.) 9 A. Fraudulent Joinder 10 “An exception to the requirement of complete diversity exists where it appears 11 that a plaintiff has fraudulently joined a ‘sham’ non-diverse defendant.” Sanchez v. 12 Lane Bryant, Inc., 123 F. Supp. 3d 1238, 1241 (C.D. Cal. 2015). “If the plaintiff fails 13 to state a cause of action against a resident defendant, and the failure is obvious 14 according to the settled rules of the state, the joinder of the resident defendant is 15 fraudulent.” Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th 16 Cir. 2007) (quoting McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 17 1987)); see also Padilla v. AT&T Corp., 697 F. Supp. 2d 1156, 1158 (C.D. Cal. 2009) 18 (“[A] non-diverse defendant is deemed a sham defendant if . . . the plaintiff could not 19 possibly recover against the party whose joinder is questioned.”). There is a general 20 presumption against fraudulent joinder and thus “[f]raudulent joinder must be proven 21 by clear and convincing evidence.” Hamilton Materials, 494 F.3d at 1206. 22 Merely showing that an action is likely to be dismissed against the alleged sham 23 defendant does not demonstrate fraudulent joinder. See Grancare, LLC v. Thrower by 24 & through Mills, 889 F.3d 543, 550 (9th Cir. 2018). The standard for establishing 25 fraudulent joinder is more exacting than for dismissal for failure to state a claim. 26 Id. at 549. If there is any “possibility that a state court would find that the complaint 27 states a cause of action against any of the resident defendants, the federal court must 28 find that the joinder was proper and remand the case to the state court.” Id. at 548 1 (quoting Hunter v. Philip Morris USA, 582 F.3d 1039, 1046 (9th Cir. 2009)). Courts 2 should decline to find fraudulent joinder where “a defendant raises a defense that 3 requires a searching inquiry into the merits of the plaintiff’s case, even if that defense, 4 if successful, would prove fatal.” Id. at 549–50. 5 Plaintiffs assert one claim against McPeek’s for Negligent Repair, which 6 Defendants contend is barred by the economic loss rule. (Compl. ¶¶ 57–61; Opp’n to 7 Mot. 3–4 (“Opp’n”), ECF No. 23.) The economic loss rule provides that “damages 8 for inadequate value, costs of repair and replacement of [a] defective product or 9 consequent loss of profits—without any claim of personal injury or damages to other 10 property”—can give rise only to contract remedies. Robinson Helicopter Co. v. Dana 11 Corp., 34 Cal. 4th 979, 988 (2004). The rule draws a distinction “between tort 12 recovery for physical injuries and warranty recovery for economic loss.” Id. at 989. 13 However, California courts have recognized an exception to the economic loss rule in 14 cases involving negligent performance of services or where the harm rises “above and 15 beyond a broken contractual promise.” Id. at 988; N. Am. Chem. Co. v. Superior 16 Court, 59 Cal. App. 4th 764, 777–85 (1997). 17 Defendants have not met their burden to prove fraudulent joinder by clear and 18 convincing evidence. As this Court has recognized, whether Plaintiffs’ claim for 19 negligent repair is barred by the economic loss rule or comes within an exception is a 20 question that “requires a searching inquiry into the merits” of Plaintiffs’ case. 21 Grancare, 889 F.3d at 549. Further, courts in this district have found California law 22 concerning exceptions to the economic loss rule not “well-settled.” See Gayou v. 23 Ford Motor Co., No. CV-18-10407-DMG (JEMx), 2019 WL 1325846, at *3 (C.D. 24 Cal. Mar. 25, 2019) (“[T]he lack of clarity in California law regarding the tort duties 25 arising from service contracts makes this issue ‘not well-settled.’”); Lytle v. Ford 26 Motor Co., No. 2:18-CV-1628 WBS (EFBx), 2018 WL 4793800, at *2 (E.D. Cal. Oct. 27 2, 2018) (“California law is not so settled that a plaintiff could not possibly recover 28 1 against a dealership for negligent repair of a vehicle.”). Thus, a possibility exists that 2 a state court would find that Plaintiffs state a viable cause of action against McPeek’s. 3 Finally, Defendants argue that Plaintiffs assert only conclusory allegations 4 which fail to allege sufficient facts to state a claim for negligent repair. (Opp’n 8.) 5 They argue Plaintiffs could not possibly cure this deficiency with amendment. 6 (Opp’n 8.) The Court disagrees. Although Plaintiffs’ allegations are conclusory, 7 nothing precludes Plaintiffs from amending their complaint with additional relevant 8 facts to bolster their claim. See Revay v. Home Depot U.S.A., Inc., No. 2:14-CV- 9 03391-RSWL (ASx), 2015 WL 1285287, at *3 (C.D. Cal. Mar. 19, 2015) (“If there is 10 ‘any possibility that the state law might impose liability on a resident defendant under 11 the circumstances alleged in the complaint,’ or in a future amended complaint, ‘the 12 federal court cannot find that joinder of the resident defendant was fraudulent, and 13 remand is necessary.’”) (emphasis added) (quoting Hunter, 582 F.3d at 1044); see 14 also Ontiveros v. Michaels Stores, Inc., No. CV 12–09437 MMM (FMOx), 2013 WL 15 815975, at *4–5 (C.D. Cal. Mar.5, 2013), (“[T]he defendant must establish that 16 plaintiff could not amend his complaint to add additional allegations correcting any 17 deficiencies.”). 18 Defendants fail to show by clear and convincing evidence that no possibility 19 exists that a state court could find the complaint or a future amended complaint states 20 a claim against McPeek’s. As such, the Court cannot find that joinder of McPeek’s 21 was fraudulent. Accordingly, remand is necessary. 22 B. Attorneys’ Fees and Costs 23 Plaintiffs seek $1,100 in attorneys’ fees and costs pursuant to 28 U.S.C. 24 § 1447(c). (Mot. 9–10.) “An order remanding the case may require payment of just 25 costs and any actual expenses including attorney fees, incurred as a result of the 26 removal.” 28 U.S.C. § 1447(c). However, “when an objectively reasonable basis [for 27 removal] exists, fees should be denied.” Martin v. Franklin Capital Corp., 546 U.S. 28 132, 141 (2005). “[R]emoval is not objectively unreasonable solely because the 1 || removing party’s arguments lack merit, or else attorney’s fees would always be 2 || awarded whenever remand is granted.” Lussier v. Dollar Tree Stores, Inc., 518 F.3d 3 || 1062, 1065 (9th Cir. 2008). The Court finds removal improper but that Defendants’ 4|| attempt at removal was not objectively unreasonable. As such, the Court DENIES 5 || Plaintiffs’ request for fees and costs. 6 Vv. CONCLUSION 7 For the reasons discussed above, the Court GRANTS Plaintiffs’ Motion to 8 | Remand and DENIES Plaintiffs’ request for fees and costs. (ECF No. 21.) The Court 9 || REMANDS the action to the Superior Court of the State of California, County of Los 10 || Angeles, 111 North Hill Street, Los Angeles, CA 90012, Case No. 19STCV21651. 11 The Court DENIES AS MOOT Defendant McPeek’s Motion to Dismiss. 12 | (ECF No. 16.) The Clerk of the Court shall close the case. 13 14 IT ISSO ORDERED. 15 16 October 21, 2019 es 17

19 OTIS D. WRIGHT, Il

UNITED STATES DISTRICT JUDGE

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