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Apilado v. Bank of America, N.A.

United States District Court, D. Hawaii

August 27, 2019

FRANCISCO M. APILADO, et al., Plaintiffs,
BANK OF AMERICA, N.A., et al., Defendants.



         Defendant Bank of America, N.A. (“BANA”) removed this action from the Circuit Court of the First Circuit, State of Hawai‘i on the basis of diversity jurisdiction, arguing that the Court may disregard the lack of complete diversity between the parties because Plaintiff Randall K. Jim (“Plaintiff Jim”) was fraudulently joined and/or egregiously misjoined. Plaintiffs seek remand to state court. After careful consideration of the parties' submissions, the applicable law, and the arguments of counsel, the Court GRANTS Plaintiffs' Motion for Order of Remand, ECF No. 13, for the reasons articulated below.


         The instant action arises out of BANA's allegedly wrongful non-judicial foreclosures of Plaintiffs' properties. Plaintiffs commenced this action on March 29, 2019 in state court. Notice of Removal (“Notice”), ECF No. 1, Ex. F. Plaintiffs filed a First Amended Complaint (“FAC”) on April 3, 2019, id., Ex. G, asserting the following causes of action: (1) wrongful deprivation of real property (Count I) and (2) unfair and deceptive trade practices and unfair methods of competition under Hawai‘i Revised Statutes (“HRS”) Chapter 480 (Count II). Id.

         On June 5, 2019, BANA removed this action. Notice, ECF No. 1. BANA invoked diversity jurisdiction notwithstanding the fact that it shares North Carolina citizenship with Plaintiff Jim. Id. at ¶ 14. According to BANA, Plaintiff Jim's citizenship may be ignored for diversity purposes because his claims were fraudulently joined and egregiously misjoined. Id. at ¶¶ 15, 26 The present Motion followed.


         I. Removal Jurisdiction

         Under 28 U.S.C. § 1441, a defendant may remove a civil action brought in a state court to federal district court if the district court has original jurisdiction. Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676, 679-80 (9th Cir. 2006). “Removal . . . statutes are ‘strictly construed,' and a ‘defendant seeking removal has the burden to establish that removal is proper and any doubt is resolved against removability.'” Hawaii ex rel. Louie v. HSBC Bank Nevada, N.A., 761 F.3d 1027, 1034 (9th Cir. 2014) (quoting Luther v. Countrywide Home Loans Serv. LP, 533 F.3d 1031, 1034 (9th Cir. 2008)); Hunter v. Phillip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009) (quoting Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (per curiam)) (“The ‘strong presumption against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper,' and that the court resolves all ambiguity in favor of remand to state court.”); Durham v. Lockheed Martin Corp., 445 F.3d 1247, 1252 (9th Cir. 2006). Courts should presume that a case lies outside the limited jurisdiction of the federal courts. Hunter, 582 F.3d at 1042.

         II. Diversity of Citizenship

         BANA asserted diversity jurisdiction as the basis for removal. Federal district courts have original jurisdiction over cases where the amount in controversy exceeds $75, 000, exclusive of interest and costs, and where the matter in controversy is between citizens of different states. 28 U.S.C. § 1332(a)(1). Complete diversity of citizenship requires that each of the plaintiffs be a citizen of a different state than each of the defendants. Williams v. United Airlines, Inc., 500 F.3d 1019, 1025 (9th Cir. 2007) (citing Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553 (2005)); Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001). Moreover, actions based on diversity jurisdiction may only be removed if none of the properly joined and served defendants is a citizen of the state in which the action is brought. 28 U.S.C. § 1441(b). Thus, “[d]efendants may remove an action on the basis of diversity of citizenship if there is complete diversity between all named plaintiffs and all named defendants, and no defendant is a citizen of the forum State.” Lincoln Prop. Co. v. Roche, 546 U.S. 81, 84 (2005).

         Here, complete diversity is lacking because Plaintiff Jim and BANA share North Carolina citizenship. Notice, ECF No. 1 at ¶¶ 4, 12.

         III. Fraudulent Joinder

         BANA acknowledges that the parties lack complete diversity but contends the Court may disregard Plaintiff Jim's citizenship because he was fraudulently joined. Opp'n, ECF No. 23 at 8.[1] An exception to the requirement for complete diversity exists when a non-diverse defendant was fraudulently joined. Hunter, 582 F.3d at 1043. The Ninth Circuit “has explained that under the fraudulent-joinder doctrine, ‘[j]oinder of a non-diverse defendant is deemed fraudulent, and the defendant's presence in the lawsuit is ignored for purposes of determining diversity, [i]f 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.'” Weeping Hollow Ave. Tr. v. Spencer, 831 F.3d 1110, 1113 (9th Cir. 2016) (quoting Morris, 236 F.3d at 1067; McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987)) (alterations in original) (internal quotations omitted).

         Removing defendants may “present the facts showing the joinder to be fraudulent.” Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998) (quoting McCabe, 811 F.2d at 1339); Morris, 236 F.3d at 1068 (“[F]raudulent joinder claims may be resolved by ‘piercing the pleadings' and considering summary judgment-type evidence such as affidavits and deposition testimony.”) (citations omitted). There is, however, a “general presumption against fraudulent joinder, ” which the party asserting federal jurisdiction must prove by “clear and convincing evidence.” Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). A defendant claiming fraudulent joinder bears the heavy burden of facing both the strong presumption against removal jurisdiction as well as the general presumption against fraudulent joinder. Hunter, 582 F.3d at 1046.

         The Ninth Circuit has clarified that the fraudulent joinder test is not equivalent to the test used to assess the sufficiency of a claim under Rule 12(b)(6). Grancare, LLC v. Thrower by & through Mills, 889 F.3d 543, 549 (9th Cir. 2018). Equating the two “conflates a jurisdictional inquiry with an adjudication on the merits.” Id. “Because the purpose of the fraudulent joinder doctrine is to allow a determination whether the district court has subject matter jurisdiction, the standard is similar to the ‘wholly insubstantial and frivolous' standard for dismissing claims under Rule 12(b)(1) for lack of federal question jurisdiction.” Id. (citations omitted). This standard “accords with the presumption against removal jurisdiction, under which [courts] ...

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