MARGARET M. MORROW, District Judge.
On August 16, 2011, plaintiffs filed this action in Los Angeles Superior Court.
The complaint in this action was filed on behalf of 108 named plaintiffs. It is a sprawling document that is 84 pages and 387 numbered paragraphs long; many paragraphs contain multiple subparagraphs. The court summarizes the complaint's allegations below.
The complaint alleges that "[a]s the result of an aggressive and relentlessly pursued growth strategy between 2003 and 2009," Wells Fargo Bank, N.A. ("Wells Fargo") became the fourth largest banking institution in the nation, and was the "master servicer" for loans and mortgages at issue in this action.
Defendants allegedly created risky "mortgage pools," promising investors lucrative benefits, and "managed risk through leverage and derivatives trading."
With the proceeds of TARP funds, defendants allegedly committed numerous fraudulent acts, including issuing notices of default in violation of California law, misrepresenting their intention to arrange loan modifications for plaintiffs, and failing to respond to plaintiffs' communications.
The complaint also contains a number of allegations regarding Wachovia, and its acquisition of Golden West Financing Corporation ("Golden West"). Golden West was an Oakland, California-based mortgage lender run by Herbert and Marion Sandler.
When Wachovia announced its purchase of Golden West, the housing market was already beginning to decline, and investors were concerned about their potential exposure.
The Pick-A-Pay loans were allegedly concentrated in California, and when these loans "reset prematurely due to the contractual breaches by Wells Fargo," many homeowners lost their homes through foreclosure.
Plaintiffs contend that, according to data reported pursuant to the Home Mortgage Disclosure Act, fully one-fifth of all the loans defendants made to low and moderate income borrowers, including plaintiffs, were high-cost refinance loans with an average interest rate of 9.8%; these loans purportedly represented close to $11 billion in lending. Plaintiffs assert that the loans went directly into mortgage pools securitized and sold by defendants, who profited from the loans' "secret excessive markups."
The complaint alleges that had all of this information been properly disclosed to plaintiffs, they would have behaved differently, deferring their purchase of a home and refusing to enter into expensive adjustable rate mortgages.
Essentially, the complaint asserts that defendants engaged in a fraudulent scheme by offering mortgages at unsustainable loan-to-value ratios, often to individuals who they knew were a poor credit risk and at high risk of default.
Plaintiffs charge that defendants fraudulently misrepresented to multiple plaintiffs that they would receive assistance securing a loan modification.
Plaintiffs also allege that defendants sold the notes and deeds of trust relating to plaintiffs' properties in transactions that were unlawful or fraudulent in various ways. The sales allegedly
Plaintiffs assert that, had they been aware of defendants' conduct, they would not have entered into their mortgages or purchased homes.
Plaintiffs allege that Wells Fargo is now under investigation by various governmental agencies, and is being sued in several class actions.
The complaint describes in detail a consent decree into which Wells Fargo entered with the Office of the Comptroller of the Currency ("OCC Order"). The decree purportedly states that various federal agencies, including the Board of Governors of the Federal Reserve System, the FDIC, and the Office of Thrift Supervision, found that Wells Fargo had engaged in "unsafe or unsound practices" in its handling of foreclosure-related activities.
Plaintiffs allege that under the OCC Order, Wells Fargo was required to submit to audits and execute a comprehensive plan to "reimburse homeowners who had been improperly foreclosed upon."
The complaint pleads six state law claims. The first four, asserted by all plaintiffs, allege (1) fraudulent concealment; (2) intentional misrepresentation; (3) negligent misrepresentation; and (4) violation of the Unfair Competition Law ("UCL"), California Business & Professions Code § 17200 et seq.
The complaint contains various allegations regarding the citizenship of the parties and the amount in controversy. Paragraphs 43 through 153 are a non-alphabetized list of the 108 plaintiffs, all of whom are alleged to reside in and own property in California.
The complaint names nine defendants: Wells Fargo Bank, N.A., which is a national banking association that is chartered in Sioux Falls, South Dakota and has its primary headquarters in San Francisco, California;
As respects the amount in controversy, the prayer for relief seeks, inter alia, general and special damages, exemplary damages, statutory relief, restitution, injunctive relief and attorneys' fees.
Defendants Wells Fargo and Cal-Western invoke the court's jurisdiction over "mass actions" as defined in 28 U.S.C. § 1332(d)(11)(B)(i).
Defendants also assert that the minimal diversity requirement is satisfied because at least one plaintiff is a California citizen and Wells Fargo is a South Dakota citizen.
In addition to asserting that this is a mass action over which the court has jurisdiction under CAFA, defendants invoke the court's diversity jurisdiction under 28 U.S.C. § 1332(a). As noted, most of the named defendants have either merged into Wells Fargo or no longer exist.
Defendants cite allegations in the complaint to establish that amount in controversy exceeds $75,000. They note that paragraph 153 alleges that "fewer than 100 plaintiffs are alleging claims in amounts
Finally, defendants submit evidence that each plaintiff has placed more than $75,000 in controversy.
The right to remove a case to federal court is entirely a creature of statute. See Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir.1979). The removal statute, 28 U.S.C. § 1441, allows defendants to remove when a case originally filed in state court presents a federal question or is between citizens of different states and involves an amount in controversy that exceeds $75,000. See 28 U.S.C. §§ 1441(a), (b); see also 28 U.S.C. §§ 1331, 1332(a). Only state court actions that could originally have been filed in federal court can be removed. 28 U.S.C. § 1441(a); see Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987); Ethridge v. Harbor House Rest., 861 F.2d 1389, 1393 (9th Cir.1988). "[J]urisdiction in a diversity case is determined at the time of removal." American Dental Industries, Inc. v. EAX Worldwide, Inc., 228 F.Supp.2d 1155, 1157 (D.Or.2002) (citing St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 289, 58 S.Ct. 586, 82 L.Ed. 845 (1938) ("The inability of plaintiff to recover an amount adequate to give the court jurisdiction does not show his bad faith or oust the jurisdiction.... Events occurring subsequent to the institution of suit which reduce the amount recoverable below the statutory limit do not oust jurisdiction")).
The Ninth Circuit "strictly construe[s] the removal statute against removal jurisdiction," 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) (citing Boggs v. Lewis, 863 F.2d 662, 663 (9th Cir.1988), Takeda v. Northwestern Nat'l Life Ins. Co., 765 F.2d 815, 818 (9th Cir.1985), and Libhart, 592 F.2d at 1064). "The `strong presumption' against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper." Id. (citing Nishimoto v. Federman-Bachrach & Assocs., 903 F.2d 709, 712 n. 3 (9th Cir.1990), and Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir.1988)).
CAFA supplements the original removal statute, giving district courts, inter
Essentially, "CAFA provides that a qualifying mass action `shall be deemed to be a class action' removable to federal court under the Act, so long as the rest of CAFA's jurisdictional requirements are met. Among these requirements, the aggregate amount in controversy must exceed `$5,000,000, exclusive of interest and costs,' and at least one plaintiff must be a citizen of a state or foreign state different from that of any defendant. In addition, there must be minimal diversity between the parties.'" Tanoh v. Dow Chemical Co., 561 F.3d 945, 952 (9th Cir.2009) (quoting 28 U.S.C. § 1332(d)(11)(A)).
CAFA's mass action provisions contain a number of exceptions, however. As the mass action statutes explicitly incorporate the other requirements necessary to maintain a class action, 28 U.S.C. § 1332(d)(11)(A), any exceptions to the court's jurisdiction under CAFA's class action provisions also apply. See 28 U.S.C. § 1332(d)(3) (setting forth various situations in which the court may decline to exercise jurisdiction over a class action "in the interests of justice and looking at the totality of the circumstances"); id. § 1332(d)(4) (setting forth circumstances in which the district court is required to decline to exercise jurisdiction). In addition, 28 U.S.C. § 1332(d)(11)(B)(i) provides that in a mass action, "jurisdiction shall exist only over those plaintiffs whose claims in a mass action satisfy the jurisdictional amount requirements under subsection (a)."
The mass action-specific exceptions are found in 28 U.S.C. § 1332(d)(11)(B), which states:
The parties do not dispute: (1) that the number of plaintiffs in this action exceeds 100; (2) that "plaintiffs' claims involve common questions of law or fact," 28 U.S.C. § 1332(d)(11)(B); (3) and that the citizenship of the parties is minimally diverse, as all the plaintiffs are citizens of California and Wells Fargo Bank South Central, N.A. (formerly known as Wachovia
Although the burden of proving that removal jurisdiction exists rests with defendants, the burden of proof they must satisfy differs depending on the nature of the damages allegations included in plaintiffs' complaint. "[W]hen the plaintiff[s] fail[] to plead a specific amount of damages,... defendant[s] seeking removal `must prove by a preponderance of the evidence that the amount in controversy requirement has been met.'" Lowdermilk v. United States Bank Nat'l Assoc., 479 F.3d 994, 998 (9th Cir.2007) (quoting Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676, 683 (9th Cir.2006) (per curiam)); see also Guglielmino v. McKee Foods Corp., 506 F.3d 696, 700 (9th Cir.2007) ("In the Jurisdiction and Venue section, it is alleged that `[t]he damages to each Plaintiff are less than $75,000. In addition, the sum of such damages and the value of injunctive relief sought by plaintiff in this action is less than $75,000.' ... [B]ecause the allegation in the Jurisdiction and Venue section is not repeated in the Prayer for Relief and does not take account of attorneys' fees, accounting of moneys, or payment of back taxes and benefits, the complaint fails to allege a sufficiently specific total amount in controversy"). See also Dupre v. General Motors, No. CV-10-00955-RGK (Ex), 2010 WL 3447082, *2 (C.D.Cal. Aug. 27, 2010) ("As in Guglielmino, the complaint is facially unclear as to whether the requisite total amount in controversy has been pled, and GM `bears the burden of establishing, by a preponderance of the evidence, that the amount in controversy exceeds [the jurisdictional amount]'").
"[I]f the complaint alleges damages in excess of the federal amount-in-controversy requirement, [however,] then the amount-in-controversy requirement is presumptively satisfied unless `it appears to a `legal certainty' that the claim is actually for less than the jurisdictional minimum.'" Id. (quoting Abrego Abrego, 443 at 683 n. 8). Similarly, a defendant
Here, plaintiffs do not allege the aggregate amount in controversy on their claims. They also do not allege a specific amount in controversy for each individual plaintiff. Instead, the complaint pleads that "fewer than 100 plaintiffs are alleging claims or amounts in controversy that would, as to them[,] equal or exceed the jurisdictional amount for federal jurisdiction under 28 U.S.C. § 1332(a)."
This manner of pleading, however, is apparently explained by plaintiffs' interpretation of certain portions of CAFA's mass action provisions. Plaintiffs cite § 1332(d)(11)(B)(i), which states that where jurisdiction exists to hear a mass action, it "exist[s] only over those plaintiffs whose claims ... satisfy the jurisdictional amount requirements under subsection (a)." Plaintiffs contend this means that the court has mass action jurisdiction only when "100 or more persons" each place an amount in controversy that exceeds $75,000, even if the action otherwise meets CAFA's minimal diversity and aggregate amount in controversy requirements. Defendants, by contrast, urge that the court adopt the Eleventh Circuit's view that "the $75,000 provision was not intended to bar district courts from asserting jurisdiction over the entire case if each individual plaintiff's claims do not exceed $75,000," so long as the numerosity and $5 million aggregate amount in controversy thresholds are met. Lowery v. Alabama Power Co., 483 F.3d 1184, 1205 (11th Cir.2007).
The court similarly concludes that addressing this difficult question of statutory interpretation is not necessary here to address the applicable burden of proof or to answer the ultimate question as to whether the court can exercise jurisdiction over this case. As to burden of proof, to remove a mass action under CAFA, the aggregate amount in controversy for all plaintiffs must exceed $5 million. 28 U.S.C. § 1332(d)(2). The complaint here neither affirmatively alleges an amount in controversy of less than $5 million, nor pleads specific amounts in controversy as to each individual plaintiff. The only allegation plaintiffs offer is that some number of plaintiffs "fewer than 100" alleges an amount in controversy less than $75,000. This is insufficient to quantify the aggregate amount placed at issue by the complaint.
The ambiguity of the pleading places it squarely within the rule articulated in Abrego Abrego and Guglielmino that defendants must show by a preponderance of the evidence that the amount in controversy requirement is satisfied. See, e.g., Guglielmino, 506 F.3d at 701.
The court thus examines whether defendants have met their burden of showing by a preponderance that the amount in controversy exceeds $5 million. As noted, the only proof defendants proffer is the Dolan declaration. Dolan states that as an operations analyst in Wachovia Mortgage, FSB's portfolio retention department, he has "custody over and access to various business records of Wells Fargo, and [is] familiar with Wells Fargo's business practices and business records."
Dolan also states that "each of the Plaintiffs has, or at one time had, a mortgage loan with an outstanding principal balance in excess of $75,000."
Dolan notes that he could find no records for thirteen of the 108 plaintiffs and was unable to "locate any loans in [their] names."
Defendants contend that Dolan's declaration is sufficient to demonstrate an aggregate amount in controversy exceeding $5 million. This contention is largely based on their assertion that whatever the allegations of the complaint, plaintiffs actually seek to enjoin foreclosure of their properties or to unwind foreclosures that have already taken place. As evidence of this, they cite allegations challenging defendants' rights to enforce the mortgages and foreclose on plaintiffs' properties.
While the complaint is hardly a model of clarity, the court believes that defendants have not read it accurately. It is true that the pleading contains various allegations questioning defendants' right to enforce the mortgages in question. A closer examination of each of the claims and causes of action, however, does not support the view that plaintiffs seek injunctive or declaratory relief that places the entire value of their mortgages at issue. See Naiyan v. Sodexo, Inc., No. CV 10-9872 PSG (CWx), 2011 WL 1543371, *2 (C.D.Cal. Apr. 25, 2011) (assessing the amount in controversy by examining each claim). The first through third causes of action allege claims for fraudulent concealment, intentional misrepresentation, and negligent misrepresentation respectively. Plaintiffs do not seek injunctive relief on these claims, but rather damages caused by plaintiffs' reliance on defendants' misconduct. While the complaint contends that defendants do not have a valid right to enforce the mortgages, these allegations are included to show that defendants misrepresented the facts by holding themselves out as the owners of valid loans and mortgages. Plaintiffs describe the damages they seek as the "loss of [their] equity investments,"
The fourth cause of action arises under the UCL, and seeks restitution "for all sums received by Defendants with respect [to the mortgages], including, without limitation, interest payments ..., fees ..., and premiums received upon selling the mortgages at an inflated value."
The fifth cause of action, which is asserted by eleven plaintiffs, alleges wrongful
Unlike the claims that precede them, the fifth and sixth claims — which are asserted by small subsets of individual plaintiffs — implicate the foreclosure or threatened foreclosure of their homes and may fairly be said to place the full value of their properties into controversy. The Dolan declaration contains minimal information about nine of the plaintiffs who allege wrongful foreclosure. It reports only that each of their "loan[s] had an unpaid principal balance in excess of $75,000."
Defendants also contend that the amount in controversy is satisfied by allegations that purport to describe the magnitude of the fraudulent scheme at issue here. Specifically, defendants cite paragraphs 25 and 360 of the complaint. Paragraph 25 states that "Wells Fargo and the other Defendants took from Plaintiffs and other borrowers billions of dollars in interest payments and fees."
Defendants' reliance on other allegations concerning sizable settlements is similarly unavailing.
Defendants contend that plaintiffs' allegations concerning these settlements constitute admissions that the amount in controversy in this litigation exceeds $5 million. While settlements and jury verdicts in similar cases can provide evidence of the amount in controversy, the cases must be factually identical or, at a minimum, analogous to the case at issue. See Simmons v. PCR Technology, 209 F.Supp.2d 1029, 1034 (N.D.Cal.2002) (considering damages awarded in a "not perfectly analogous" case as evidence "that emotional distress damages in a successful employment discrimination case may be substantial"); Conrad Associates v. Hartford Accident & Indemnity Co., 994 F.Supp. 1196, 1200 (N.D.Cal.1998) (accepting evidence of jury verdicts on analogous punitive damages claims as sufficient to show that the amount in controversy requirement was met). Defendants here proffer no evidence that the lawsuits and settlements alleged in the complaint are factually or legally similar to plaintiffs' claims. The complaint alleges few details concerning the settlements; there is absolutely no indication that the claims purportedly settled were similar in size or scope to those asserted in this litigation. At oral argument, Wells Fargo's lawyer described this case as a "microcosm" of the cases referenced in the complaint; it appears therefore that even defendants understand that the claims at issue here are a subset, and most probably a small subset, of the claims at issue in the governmental lawsuits referenced in the complaint. Similarly, the fact that Wells Fargo has allegedly paid $85 million to settle all or some of the civil claims filed against it speaks not at all to the value of the claims of the 108 plaintiffs who have sued in this case. The court declines defendants' invitation to extrapolate from vague allegations regarding settlements of litigation initiated by governmental entities — which obviously alleged misconduct larger in scope than plaintiffs allege here — or
"The strong presumption against removal jurisdiction necessarily means that federal jurisdiction `must be rejected if there is any doubt as to the right of removal in the first instance.'" Sauer v. Prudential Ins. Co. of Am., No. 2:11-cv-08699-JHN-RZ, 2011 WL 5117772, *1 (C.D.Cal. Oct. 28, 2011) (quoting Gaus, 980 F.2d at 566); see also Haase v. Aerodynamics Inc., No. 2:09-cv-01751-MCE-GGH, 2009 WL 3368519, *2 (E.D.Cal. Oct. 19, 2009) ("[I]f there is any doubt as to the right of removal in the first instance, remand must be granted"). As defendants have failed to meet their burden of proving that the amount in controversy exceeds $5 million by a preponderance of the evidence, the court lacks jurisdiction over this case as a CAFA mass action.
Defendants also invoke the court's diversity jurisdiction over each of the individual plaintiffs' claims.
The parties dispute a number of issues concerning diversity jurisdiction. First, they disagree as to whether Wells Fargo should be considered a California citizen; if it is, this would defeat complete diversity. Second, defendants contend that plaintiffs have fraudulently joined Cal-Western Reconveyance; if this is not the case, the fact that it is a defendant would also defeat diversity. Finally, the parties dispute whether defendants have adequately proved the amount in controversy. The court addresses each issue in turn.
28 U.S.C. § 1348 states:
In Wachovia Bank v. Schmidt, 546 U.S. 303, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006), the United States Supreme Court considered whether, as used in § 1348, "located... signal[ed] ... that the bank's citizenship is determined by the place designated
The Court further explained that, "[i]n 1887 revisions to prescriptions on federal jurisdiction, Congress replaced the 1882 provision on jurisdiction over national banks and first used the `located' language today contained in § 1348.... Like its 1882 predecessor, the 1887 Act `sought to limit ... the access of national banks to, and their suability in, the federal courts to the same extent to which non-national banks [were] so limited.'" Id. at 310-11, 126 S.Ct. 941. Addressing the precise question before it, the Court noted that "[n]ot until 1994 did Congress provide broad authorization for national banks to establish branches across state lines." Id. at 314, 126 S.Ct. 941. Considering Congress' purpose of achieving jurisdictional parity between state and national banks, and the fact that the relevant language in § 1348 was placed in the statute at a time when national banks could not operate branches outside their home state, the Court held that
In the absence of guidance from either the Supreme Court or the Ninth Circuit, district courts in the circuit have reached conflicting conclusions regarding the citizenship of national banks. Compare Goodman v. Wells Fargo Bank, NA, No. CV 11-2685 JFW (RZx), 2011 WL 2372044, *2 (C.D.Cal. June 1, 2011) (remanding after concluding that Wells Fargo was a citizen of California, where it has its principal place of business, and that its citizenship was not diverse from that of a California plaintiff); Saberi v. Wells Fargo Home Mortg., No. 10CV 1985 DMS (BGS), 2011 WL 197860, *3 (S.D.Cal. Jan. 20, 2011) ("Accordingly, for purposes of diversity jurisdiction, Wells Fargo Bank is both a citizen of South Dakota, where it has designated its main office, and California, where it has its principal place of business"); Mount v. Wells Fargo Bank, N.A., No. CV 08-6298 GAF (MANx), 2008 WL 5046286, *2 (C.D.Cal.2008) (holding that Wells Fargo is a citizen of the state where it has its principal place of business and the state where its main office is located) with Tse v. Wells Fargo Bank, N.A., No. C10-4441 TEH, 2011 WL 175520, *2 (N.D.Cal. Jan. 19, 2011) ("[T]he test for a national bank's citizenship under section 1348 is determined solely by the location of its main office designated in its articles of association"); Cochran v. Wachovia Bank, N.A., et al., Case No. CV 10-018 CAS (AGRx), 2010 U.S. Dist. LEXIS 38379 (C.D.Cal. Mar. 9, 2010) (concluding that a national bank was a citizen only of the state in which its main office is located); DeLeon v. Wells Fargo Bank, N.A., 729 F.Supp.2d 1119, 1124 (N.D.Cal.2010) ("[T]he Court concludes that Wells Fargo is a citizen of the state in which its main office, as specified in its articles of association, is located"); Kasramehr v. Wells Fargo Bank N.A. et al., CV 11-0551 GAF (OPx) at 3 (reconsidering the position taken in Mount and concluding that Wells Fargo is a citizen only of the state in which it has its main office); Nguyen v. Wells Fargo Bank, N.A., 749 F.Supp.2d 1022, 1028 (N.D.Cal.2010) ("Wells Fargo is a citizen of the state in which it has designated its `main office'").
Courts concluding that Wells Fargo is a
In Excelsior Funds, Inc. v. JP Morgan Chase Bank, N.A., 470 F.Supp.2d 312 (S.D.N.Y.2006), however, one court offered a compelling counter-argument refuting this reasoning. Recognizing Congress's intent to create parity, the Excelsior court noted that at the time § 1348 was enacted, a state bank was only a citizen of a single state: the state in which it was incorporated. Id. at 319. As a result, jurisdictional parity at the time the statute was passed was achieved by limiting a national bank's citizenship to a single location. The concept that a corporation was a citizen of the state where it had its principal place of business did not arise until 1958, when 28 U.S.C. § 1332(c)(1) was first enacted. See An Act of July 25, 1958, Pub.L. No. 85-554, 72 Stat. 415; S.Rep. No. 85-1830 (1958), as reprinted in 1958 U.S.C.C.A.N. 3099, 3101-02; Excelsior, 470 F.Supp.2d at 319. Reasoning that the most relevant time period for determining the meaning of a statute is the time it was enacted, the Excelsior court concluded that the citizenship of national banks did not remain permanently tethered to the citizenship of state banks, and that Congressional expansion of the state banks' citizenship in 1958 did not result in a corresponding expansion of the citizenship of national banks. Id. (adding that "[i]f Congress intended to achieve jurisdictional parity between national and state banks for all time[ ] in § 1348, and thus to include principal place of business as a location for a national bank when it became a basis for citizenship for a state bank, Congress could have provided for that in the statutory language"). The court continued: "In fact, the language that expressly established parity between national banks and state banks was removed in
The court finds this analysis persuasive.
The complaint also pleads claims against Cal-Western, which is allegedly a California citizen.
"It is a commonplace that fraudulently joined defendants will not defeat removal on diversity grounds." Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir.1998) (citing Emrich, 846 F.2d at 1193 & n. 1 and McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987)). A non-diverse defendant is fraudulently joined and its citizenship is disregarded "[i]f the plaintiff fails to state a cause of action against the [non-diverse] defendant, and the failure is obvious according to the settled rules of the state...." Hamilton Materials, Inc. v. Dow Chemical Co., 494 F.3d 1203, 1206 (9th Cir.2007) (quoting McCabe, 811 F.2d at 1339). "Fraudulent joinder must be proven by clear and convincing evidence." Id. (citing Pampillonia v. RJR Nabisco, Inc., 138 F.3d 459, 461 (2d Cir.1998)). Because courts must resolve all doubts against removal, a court determining whether joinder is fraudulent "must resolve all material ambiguities in state law in [the] plaintiff's favor." Macey v. Allstate Property and Cas. Ins. Co., 220 F.Supp.2d 1116, 1117 (N.D.Cal.2002) (citing Good v. Prudential, 5 F.Supp.2d 804, 807 (N.D.Cal.1998)). Thus, "[i]f there is a non-fanciful possibility that plaintiff can state a claim under [state] law against the non-diverse defendants[,] the court must remand." Id.
Defendants argue that plaintiffs refer to Cal-Western only once in their 84-page complaint. That allegation does nothing more than refer to Cal-Western's citizenship.
The sufficiency of plaintiffs' current allegations against Cal-Western is questionable, given that the only specific reference to Cal-Western in the complaint
Although the court does not presently decide the sufficiency of plaintiffs' conspiracy allegations, it does note that under a conspiracy theory, all defendants could be held responsible for the acts of their co-conspirators, so long as those acts were undertaken in furtherance of the conspiracy. As a result, it is untrue that the complaint lacks allegations that could result in Cal-Western being held liable for the wrongful conduct charged.
Defendants contend, however, that as a trustee, Cal-Western is immunized as a matter of law from liability on tort causes of action. "[A] trustee's actions in executing a non-judicial foreclosure are privileged communication s under Cal. Civ. Code section 47, and as such will not support a tort claim other than one for malicious prosecution." Champlaie v. BAC Home Loans Servicing, LP, 706 F.Supp.2d 1029, 1062 (E.D.Cal.2009) (citing CAL. CIV. CODE §§ 47, 2924(d) and Kachlon v. Markowitz, 168 Cal.App.4th 316, 333, 85 Cal.Rptr.3d 532 (2008)); see also Canales v. Federal Home Loan Mortg. Corp., No. CV 11-2819 PSG (VBKx), 2011 WL 3320478, *3 (C.D.Cal. Aug. 1, 2011) ("California law clearly provides that a trustee's actions in
Most of plaintiffs' claims sound in tort, making them subject to California Civil Code 47.
Plaintiffs' wrongful foreclosure claim alleges that "[d]efendants acted outrageously and persistently with actual malice in performing the acts alleged in this cause of action."
Defendants also argue that plaintiffs' UCL claim fails because plaintiffs lack standing to assert such a claim. See Daro v. Superior Court, 151 Cal.App.4th 1079, 1097-98, 61 Cal.Rptr.3d 716 (2007) (explaining that Proposition 64 modified the UCL's standing requirement "to provide that a private person has standing to sue only if he or she `has suffered injury in fact and has lost money or property as a result of such unfair competition,'" quoting CAL. BUS. & PROF. CODE § 17204). "In order to have standing to sue under section 17204, it is not enough for a private person to have suffered an injury in fact.... [A] private person has no standing under the UCL unless that person can establish that the injury suffered and the loss of property or money resulted from conduct that fits within one of the categories of `unfair competition' in section 17200." Id.
Defendants rely heavily on the California Court of Appeal's decision in Bank of America Corp. v. Superior Court, 198 Cal.App.4th 862, 130 Cal.Rptr.3d 504 (2011), where plaintiffs pled a fraudulent misrepresentation
Defendants contend that Bank of America controls, since plaintiffs are proceeding on a similar theory. The court disagrees. First, plaintiffs' UCL claim pleads different forms of injury. Plaintiffs allege that they have experienced "reduced credit scores, unavailability of credit, increased costs of credit, reduced availability of goods and services tied to credit ratings... [and incurred] attorneys' fees and costs,"
The Bank of America court, moreover, "emphasiz[ed] the limited nature of [its] holding," which was only that plaintiffs had failed to state a cause of action for fraudulent concealment because they had not adequately
Defendants also complain that certain of the statutes on which plaintiffs' UCL claim is based do not support the cause of action. Specifically, they contend that plaintiffs' citation of California Civil Code § 2923.5 is insufficient,
Diversity jurisdiction is lacking for another reason as well, i.e., that defendants have failed to demonstrate that the amount in controversy on each plaintiff's claims exceeds $75,000. As noted, when a complaint is silent regarding the amount in controversy, defendants bear the burden of proving, by a preponderance of the evidence, that the jurisdictional threshold is met. See, e.g., Lowdermilk, 479 F.3d at 997 ("[W]hen the plaintiff fails to plead a specific amount of damages, the defendant seeking removal `must prove by a preponderance of the evidence that the amount in controversy requirement has been met,'" quoting Abrego Abrego, 443 F.3d at 683); Matheson, 319 F.3d at 1090 ("Where it is not facially evident from the complaint that more than $75,000 is in controversy, the removing party must prove, by a preponderance of the evidence, that the amount in controversy meets the jurisdictional threshold"). In addition to the notice of removal, the court considers "`summary-judgment-type evidence relevant to the amount in controversy at the time of removal,'" such as affidavits or declarations. Valdez v. Allstate Insurance Co., 372 F.3d 1115, 1117 (9th Cir.2004) (citation omitted).
As noted, plaintiffs' complaint is ambiguous regarding the amount in controversy in this litigation. They plead only that "fewer than 100" plaintiffs allege an amount in controversy equal to or above the jurisdictional threshold of $75,000. This allegation does not specify the amount in controversy on the claims of any individual plaintiff. Nor, because it states that certain claims equal or exceed $75,000, does it affirmatively limit the claim of any plaintiff to an amount below the jurisdictional threshold of $75,000. Additionally, "fewer than 100" could mean that no plaintiff alleges an amount in controversy above the jurisdictional threshold, or that 99 do. Thus, defendants must show that the amount in controversy requirement is met by a preponderance of the evidence.
The court previously addressed the deficiencies in defendants' amount in controversy arguments regarding CAFA mass action jurisdiction in Part II.A.3.a, supra. Similar problems bedevil their amount in controversy arguments regarding diversity jurisdiction. Once again, the only evidence defendants proffer is the Dolan declaration, which does not address the claims of eleven of the 108 plaintiffs. As to those individuals, therefore, defendants have adduced no evidence regarding the amount in controversy on their claims. As respects the remaining plaintiffs, Dolan states only that each "has, or at one time had, a mortgage loan with an outstanding principal balance in excess of $75,000."
The only plaintiffs who have arguably placed the full value of their mortgage at issue are those who plead claims for wrongful foreclosure and breach of contract, i.e., those named in the fifth and sixth causes of action. The Dolan declaration provides information only for nine of
It is true that "[i]n actions seeking declaratory or injunctive relief, ... the amount in controversy is measured by the value of the object of the litigation." Hunt v. Washington State Apple Advertising Com'n, 432 U.S. 333, 346-47, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977). See also Chapman v. Deutsche Bank Nat. Trust Co., 651 F.3d 1039, 1045 n. 2 (9th Cir.2011) ("Here, the object in litigation is the Property, which was assessed at a value of more than $200,000, and therefore satisfies the amount-in-controversy requirement"); Garfinkle v. Wells Fargo Bank, 483 F.2d 1074, 1076 (9th Cir.1973) (treating the value of real property as the amount in controversy in an action to enjoin a foreclosure sale).
The Dolan declaration, however, provides no information regarding the value of any plaintiff's property or, indeed, the size of loan obtained by any plaintiff who has asserted a wrongful foreclosure claim. It states only that "at the time of those foreclosures, each loan had an unpaid principal balance in excess of $75,000."
For all of these reasons, result, defendants have failed to meet their burden of demonstrating by a preponderance of the evidence that the claims of each individual plaintiff meet the jurisdictional threshold for diversity jurisdiction.
For the reasons stated, the court grants plaintiffs' motion, and directs the clerk to remand the action to Los Angeles Superior Court forthwith. The court denies defendants' motion to dismiss as moot.
The subsets of plaintiffs bringing the fifth and sixth causes of action do not overlap with one another, with the exception of plaintiff Cristina Magana. (Id. at 77, 81.)
The legislative history of the section confirms that this exception applies only in cases involving a single "event or occurrence," and that it explicitly excludes product liability cases, since "[t]he sale of a product to different people does not qualify as an event." S.Rep. No. 109-14, at 47, reprinted in 2005 U.S.C.C.A.N. 3, 44. While plaintiffs' factual allegations concern an allegedly fraudulent scheme, that scheme involved a multitude of individual transactions involving many different parties. The claims, therefore, can hardly be said to be based on a single, unitary "event." Because the parties did not brief this issue, no authority has been cited suggesting that 28 U.S.C. § 1332(d)(11)(B)(ii)(I) should be extended to cover circumstances such as this. Consequently, the court declines to remand on this basis.
Here, all of the plaintiffs are California citizens. In Part II.A.4.a.iii, infra, the court concludes that Cal-Western has not been fraudulently joined. Consequently, at least one defendant is also a California citizen. The complaint pleads a number of claims against each of the defendants, including Cal-Western, and seeks a variety of forms of relief from them in the aggregate. The complaint thus seeks "significant relief" from Cal-Western. In addition, Cal-Western's conduct "forms a significant basis for the claims asserted" by plaintiffs, given that it purportedly played a key role in effecting a number of the allegedly wrongful foreclosures, and also purportedly conspired with other defendants to commit assorted violations of California's Unfair Competition Law. See Kaufman v. Allstate New Jersey Ins. Co., 561 F.3d 144, 155 (3d Cir.2009) ("The provision does not require that the local defendant's alleged conduct form a basis of each claim asserted; it requires the alleged conduct to form a significant basis of all the claims asserted"). Moreover, the requirement that "principal injuries resulting from the alleged conduct ... were incurred in the State" in which the action was filed is satisfied, 28 U.S.C. § 1332(d)(4)(A)(i)(III), as all plaintiffs are California citizens who allege injuries resulting from mortgage transactions consummated within the state.
For this exception to apply, it must be the case that "no other class action ... asserting the same or similar factual allegations" have been filed in the last three years. Defendants contend that Nelson v. Wells Fargo Bank, N.A., CV No. 11-05573 DMG (Ssx), alleges "almost identical" facts against Wells Fargo. (Remand Opp. at 20.) Despite the purported identity of facts, neither defendants nor plaintiffs sought to relate this case to Nelson, or to consolidate the actions before the same judge. The Nelson case involved different defendants represented by different counsel. Judge Gee evaluated whether the two cases were related, and concluded that while they "share[d] some common defendants and legal theories, there is no overlap of plaintiffs and no overlap with respect to certain major defendants." (Order re: Transfer, Docket No 34 (Dec. 21, 2011) (emphasis added).) Given the many apparent dissimilarities between the two cases, it is not at all clear that the Nelson mass action precludes this court's exercise of jurisdiction under CAFA.
Plaintiffs raised this issue in its motion, but did not respond to defendants' arguments against it in their reply brief, instead focusing on the issue of Wells Fargo's citizenship. It is plaintiffs' burden to demonstrate that this exception applies. Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1024 (9th Cir.2007). The court notes the possible applicability of the exception, however, as it may provide yet another reason why CAFA's mass action provisions do not provide a jurisdictional basis for hearing this case in federal court.
Plaintiffs appear, moreover, to be invoking the doctrine of judicial estoppel, rather than judicial admission. Under the doctrine of judicial estoppel, "`absent any good explanation, a party should not be allowed to gain an advantage by litigation on one theory, and then seek an inconsistent advantage by pursuing an incompatible theory.'" New Hampshire v. Maine, 532 U.S. 742, 749, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001). "[F]ederal law governs the application of judicial estoppel in federal court." Rissetto v. Plumbers and Steamfitters Local 343, 94 F.3d 597, 603 (9th Cir. 1996). The doctrine applies to positions taken in the same or different actions. See id. at 605 ("We now make it explicit that the doctrine of judicial estoppel is not confined to inconsistent positions taken in the same litigation"). It also "applies to a party's stated position whether it is an expression of intention, a statement of fact, or a legal assertion." Wagner v. Professional Engineers in California Government, 354 F.3d 1036, 1044 (9th Cir.2004) (citing Helfand v. Gerson, 105 F.3d 530, 535 (9th Cir. 1997)). Judicial estoppel leads to a determination on the merits that a party cannot assert a position inconsistent with one taken in prior litigation. See, e.g., Elston v. Westport Ins. Co., 253 Fed. Appx. 697, 699 (9th Cir.2007) (Unpub. Disp.) (affirming the district court's entry of summary judgment against the plaintiff on the basis that her claims were barred by judicial estoppel).
Factors relevant in deciding whether to apply the doctrine include: (1) whether a party's later position is "clearly inconsistent" with its earlier position; (2) whether the party has successfully advanced the earlier position, such that judicial acceptance of an inconsistent position in the later proceeding would create a perception that either the first or the second court had been misled; and (3) "whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped." New Hampshire, 532 U.S. at 751, 121 S.Ct. 1808 (citations omitted). In addition to these factors, the Ninth Circuit examines "whether the party to be estopped acted inadvertently or with any degree of intent." EaglePicher Inc. v. Federal Ins. Co., CV 04-870 PHX MHM, 2007 WL 2265659, *3 (D.Ariz. Aug. 6, 2007) (citing Johnson v. Oregon Dep't of Human Resources Rehab. Div., 141 F.3d 1361, 1369 (9th Cir. 1998)).
To invoke judicial estoppel, plaintiffs would have to demonstrate that Wells Fargo has argued that it is a citizen both of the state in which it has its principal place of business and the state in which its main office is located. They would also have to show that those courts relied on Wells Fargo's arguments in determining that they either had or lacked jurisdiction. Plaintiffs have adduced no evidence that either factor is true, as the cited cases and pleadings state only that Wells Fargo alleged that its principal place of business was in California. In Siegel, for example, the district court stated that Wells Fargo's complaint alleged that its principal place of business was in California and that its operational center was South Dakota. 2005 WL 3482236 at *2. The court interpreted the allegations as asserting that Wells Fargo was "a citizen of both California and South Dakota." Id. Putting aside whether Wells Fargo intended to represent that it was a citizen of both states for jurisdictional purposes, the crucial issue in Siegel was the same one the Supreme Court addressed in Wachovia, i.e., whether a national banking association was a citizen of any state where it had a branch. Id. The Siegel court thus had no occasion to determine whether Wells Fargo was a citizen of the state where it had its principal place of business. Plaintiffs have adduced no evidence either that Wells Fargo has argued that it is a citizen of the state in which it has its principal place of business nor that a court relied on such an argument in reaching a result favorable to Wells Fargo. It has adduced evidence only that Wells Fargo has alleged that its principal place of business is in California. Wells Fargo has not denied this fact in this litigation, and as noted, it is not relevant in determining its citizenship for jurisdictional purposes.
Plaintiffs counter that their wrongful foreclosure claim is not based on the fact that defendants failed physically to produce the note, but on the fact that defendants are not the lawful holders of the note. (Complaint, ¶¶ 369, 373.) In their opposition, plaintiffs cite Kelley v. Upshaw, 39 Cal.2d 179, 246 P.2d 23 (1952), for the proposition that "assignment of the mortgage without an assignment of the debt which is secured [is] a legal nullity." Id. at 192, 246 P.2d 23. This citation suggests that plaintiffs contend the deeds of trust were improperly assigned.
This assertion appears inconsistent with factual allegations that defendants fraudulently induced plaintiffs to enter into mortgage agreements with them. The mass of allegations in the complaint, however, makes it difficult to ascertain the theory underlying the wrongful foreclosure claim, and amendment may cure any deficiencies that exist.
When a federal claim is joined with state claims in the same action, the federal court has "supplemental jurisdiction over all other claims that are so related to [the federal] claim[ ] ... that they form part of the same case or controversy under Article III of the United States Constitution." 28 U.S.C. § 1367(a). If "a plaintiff's claims are such that he would ordinarily be expected to try them all in one judicial proceeding, then, assuming substantiality of the federal issues, there is power in federal courts to hear the whole." United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966).
Having the court exercise supplemental jurisdiction is not a matter of right, however. See Gibbs, 383 U.S. at 725, 86 S.Ct. 1130. 18 U.S.C. § 1367(c) identifies four reasons why a district court may choose to decline supplemental jurisdiction:
Gibbs noted that "if it appears that the state issues substantially predominate, whether in terms of proof, of the scope of the issues raised, or of the comprehensiveness of the remedy sought, the state claims may be dismissed without prejudice and left for resolution to state tribunals." Gibbs, 383 U.S. at 726-27, 86 S.Ct. 1130 (emphasis supplied). See also Matek v. Murat, 862 F.2d 720, 732 (9th Cir.1988) ("Judicial economy and fairness to the litigants is better served by dismissal of the [predominating] pendent state claims"). "Finally, there may be reasons independent of jurisdictional considerations, such as the likelihood of jury confusion in treating divergent legal theories of relief, that would justify separating state and federal claims for trial.... If so, jurisdiction should ordinarily be refused." Gibbs, 383 U.S. at 727, 86 S.Ct. 1130 (citing FED.R.CIV.PROC. 42(b) ("For convenience, to avoid prejudice, or to expedite and economize, the court may order a separate trial of one or more separate issues, claims, crossclaims, counterclaims, or third-party claims")).
Defendants cannot argue persuasively that the wrongful foreclosure claims of nine individuals predominate over the myriad claims of the remaining plaintiffs, who number almost 100. While it is true that the complaint alleges a "common plan and scheme designed to conceal ... material facts" from plaintiffs (Complaint, ¶ 163), the nine individuals who assert wrongful foreclosure and breach of contract claims seek a form of relief that is unavailable to the remaining plaintiffs. The proof that will be required to prevail on their claims will be distinct and in large measure separate from the evidence that will be necessary to prove the remaining claims.
Defendants have not demonstrated that judicial economy and fairness would be served by requiring almost 100 plaintiffs who allege claims outside federal jurisdiction to litigate those claims in federal court. This is especially true since their claims can just as easily be adjudicated in state court with no prejudice to any party. Consequently, if the court were to reach the issue, it would decline to exercise supplemental jurisdiction over the claims of plaintiffs who do not assert a wrongful foreclosure or breach of contract claim.
