Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_15-cv-02118/USCOURTS-caed-2_15-cv-02118-2/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 28:1332 Diversity-Petition for Removal

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

RYAN REYNOLDS, individually and 

behalf of all others similarly 

situated,

Plaintiff,

v.

DIAMOND PET FOOD PROCESSORS OF 

CALIFORNIA, LLC, a California 

Limited Liability Company; 

DIAMOND PET FOOD PROCESSORS OF 

RIPON, LLC, a California Limited 

Liability Company; SCHELL & 

KAMPETER INC. dba DIAMOND PET 

FOODS, a Missouri Corporation; 

DON COLWELL JR., an individual 

with California citizenship; 

MARK FERGUSON, an individual 

with California citizenship; and 

DOES 1 to 100, inclusive,

Defendants.

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Case No. 2:15-cv-02118-JAM-AC

ORDER GRANTING PLAINTIFFS’ 

MOTION TO REMAND

This case is before the Court on a motion to remand brought by 

Plaintiff Ryan Reynolds (“Reynolds”) after defendants Schell & 

Kampeter, dba Diamond Pet Foods (“Schell”), Diamond Pet Food 

Processors of Ripon, LLC (“Diamond Ripon”), and Diamond Pet Food 

Processors of California, LLC (“Diamond California”) (collectively 

Case 2:15-cv-02118-JAM-AC Document 30 Filed 04/29/16 Page 1 of 15
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“Entity Defendants”) removed the case to federal court. Reynolds 

later added defendants Don Colwell Jr. (“Colwell”) and Mark 

Ferguson (“Ferguson”) (collectively “Individual Defendants”). For 

the reasons stated below, the Court grants the motion to remand.1

I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

Reynolds, on behalf of himself and a class of similarly 

situated California persons (the “Class”), filed his initial 

complaint on August 25, 2015, in San Joaquin County Superior Court

against Entity Defendants (Doc. #1-1). Entity Defendants removed 

the case to federal court on October 9, 2015 on the basis of 

diversity jurisdiction, pursuant to 28 U.S.C. § 1332(a), and 

federal question jurisdiction, pursuant to 28 U.S.C. § 1331(a) 

(Doc. #1). Removal at 2. Entity Defendants answered Reynolds’ 

complaint on October 15, 2015 (Doc. #6). Reynolds filed a first 

amended complaint (“FAC”) on November 2, 2015, which added factual 

and legal allegations against Individual Defendants with respect to 

two causes of action (Doc. #8). Reynolds then filed the pending 

motion to remand the case to state court on November 9, 2015 (Doc. 

#11), which was opposed by Entity Defendants and Individual 

Defendants (collectively “Defendants”) (Doc. #13).

The FAC alleges thirteen causes of action related to a leave 

of absence policy that was allegedly applied to Defendants’ 

employees in a discriminatory matter. The thirteen causes of 

action are: (1) disability discrimination on behalf of Reynolds and 

the Class against Entity Defendants; (2) wrongful termination in 

 1 This motion was determined to be suitable for decision without 

oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled 

for March 22, 2016.

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violation of public policy, disability discrimination on behalf of 

Reynolds and the Class against Entity Defendants; (3) violation of 

California Family Rights Act (“CFRA”) for retaliation in the form 

of termination of employment on behalf of Reynolds against Entity 

Defendants; (4) violation of CFRA for retaliation in the form of 

termination of paid health insurance benefits on behalf of Reynolds 

against Entity Defendants; (5) failure to provide reasonable 

accommodation on behalf of Reynolds and the Class against Entity 

Defendants; (6) failure to engage in FEHA interactive process on 

behalf of Reynolds and the Class against Entity Defendants; (7) 

intentional infliction of emotional distress on behalf of Reynolds 

against Defendants; (8) negligent supervision on behalf of Reynolds 

against Entity Defendants and Ferguson; (9) failure to issue wages 

by instrument payable on demand and without discount on behalf of 

Reynolds and against Entity Defendants; (10) failure to timely pay 

overtime wages on behalf of Reynolds and against Entity Defendants; 

(11) failure to timely pay wages due on behalf of Reynolds and 

against Entity Defendants; (12) failure to provide accurate 

itemized wage statement on behalf of Reynolds against Entity 

Defendants; and, (13) unfair competition on behalf of Reynolds and 

the Class against Entity Defendants. Counts four and seven are 

particularly relevant to the pending motion because they are the 

only causes of action that arguably establish federal question 

jurisdiction. 

II. OPINION

A. Legal Standard

An improperly removed case may be remanded back to state court 

if the federal court lacks subject matter jurisdiction. 28 U.S.C. 

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§ 1447(c) (“If at any time before final judgment it appears that 

the district court lacks subject matter jurisdiction, the case 

shall be remanded.”). There is a strong presumption against 

removal jurisdiction, so a defendant who is seeking removal has the 

burden of establishing that removal is proper. Gaus v. Miles, 

Inc., 980 F.2d 564, 566 (9th Cir. 1992). Thus, “Federal 

jurisdiction must be rejected if there is any doubt as to the right 

of removal in the first instance.” Id. at 566.

A defendant seeking removal need only present a “short and plain 

statement of the grounds for removal.” 28 U.S.C. § 1446(a). The 

standard for such a statement of the grounds for removal is the 

same standard used for analyzing the sufficiency of a complaint as 

set forth in Federal Rule of Civil Procedure (“Rule”) 8(a). Dart 

Cherokee Basin Operating Co., LLC v. Owens, 135 S.Ct. 547, 553 

(2014). A party may then supplement that petition with additional 

evidence and argument in its opposition to a motion for remand. 

Waller v. Hewlett-Packard Co., No. 11-CV-0454-LAB, 2011 WL 8601207, 

at *2 (S.D. Cal. May 10, 2011).

B. Analysis

1. Federal Question Jurisdiction

Ordinarily, a court determines if there is federal question 

jurisdiction pursuant to the well-pleaded complaint rule, which 

states that subject matter jurisdiction exists when a federal 

question is presented on the face of the complaint. Aetna Health 

Inc. v. Davila, 542 U.S. 200, 207 (2004). However, “when a 

federal statute wholly displaces the state-law cause of action 

through complete preemption, the state claim can be removed.” Id. 

Even if the claim is pleaded as one arising under state law, a 

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court must treat a completely preempted claim as being based on 

federal law. Id. 

Defendants argue that the Court has subject matter 

jurisdiction over this case because two of the causes of action 

are completely preempted by federal statutes. Removal ¶¶ 34-35. 

Specifically, Defendants argue that the fourth and seventh causes 

of action, though fashioned as state law claims, are in fact 

preempted by provisions of the Employee Retirement Income Security 

Act (“ERISA”), 29 U.S.C. § 1001, et seq. and the Comprehensive 

Budget Reconciliation Act (“COBRA”), 29 U.S.C. § 1161, et seq. 

Id. ¶¶ 33-34. The Court will discuss each in turn.

a. ERISA

Defendants allege that the fourth and seventh causes of 

action are preempted by ERISA because these claims are about how 

Reynolds’ termination “affect[ed] his rights under Diamond’s 

health care benefits plan.” Removal ¶ 34. Reynolds argues that 

ERISA only preempts state law causes of action that allege that 

“defendants’ motive was to deprive plaintiff of insurance 

benefits,” not state law claims that simply list lost insurance as 

an item of damages. Reply at 2.

ERISA was “intended to ensure that employee benefit plan 

regulation would be exclusively a federal concern.” Davila, 542 

U.S. at 208. ERISA may therefore completely preempt state law 

causes of action. Fossen v. Blue Cross & Blue Shield of Montana, 

Inc., 660 F.3d 1102, 1107 (9th Cir. 2011) (“Conflict preemption 

under ERISA . . . confers federal subject matter jurisdiction for 

claims that nominally arise under state law.”). However, the Ninth 

Circuit has held that “ERISA preempts only those state law claims 

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that arise out of the administration of a[n ERISA] covered plan.” 

Ethridge v. Harbor House Rest., 861 F.2d 1389, 1404 (9th Cir. 

1988). As such, “[n]o ERISA cause of action lies . . . when the 

loss of pension benefits was a mere consequence of, but not a 

motivating factor behind, the termination of benefits.” Id. at 

1405; Fitzgerald v. Celergy Networks Inc., 67 F. App'x 390, 392 

(9th Cir. 2003) (“Where, as here, a plaintiff's state law claims 

are, at most, tangentially related to any benefits plan, the 

underlying cause of action should not be removed from the state 

court.”). Thus, ERISA does not preempt state law wrongful

discharge or discrimination claims simply because a plaintiff seeks 

recovery of benefits allegedly owed pursuant to a valid ERISA plan. 

Karambelas v. Hughes Aircraft Co., 992 F.2d 971, 974 (9th Cir. 

1993) (“[I]f the loss of ERISA benefits was a result of rather than 

a motivation for a wrongful discharge, there was no cause of action 

under ERISA.”).

 Defendants attempt to turn Reynolds’ state law claims into 

federal questions by arguing that the few scattered references to 

“benefits” in the fourth and seventh causes of action render those 

two claims preempted by ERISA. Opp. at 6-7. But the references to 

“benefits” are limited and general, especially when read in the 

context of the entire FAC. See, e.g., Fitzgerald, 67 F. App'x at 

391 (finding that plaintiff referred to “benefits” generally and 

only a limited number of times in the complaint, which was 

“replete” with state law accusations). The gravamen of Reynolds’ 

FAC is that Defendants engaged in disability discrimination and 

retaliation against Reynolds and the Class in violation of 

California state law.

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Importantly, Reynolds does not allege that the elimination of 

ERISA benefits motivated Defendants to terminate his employment –

an allegation that may have been sufficient to preempt his 

nominally state law causes of action. See, e.g., Felton v. 

Unisource Corp., 940 F.2d 503-04, 508 (9th Cir. 1991) (finding that 

ERISA preempted state law causes of action because plaintiff 

alleged that Defendants fired the plaintiff in order to avoid 

paying medical insurance benefits as required by ERISA). Instead, 

Reynolds simply lists the loss of benefits as one part of his 

overall damages that resulted from Defendants’ alleged retaliation. 

FAC ¶ 77 (“As a proximate results of defendants’ retaliatory 

actions against plaintiff, . . . plaintiff has suffered the loss of 

the paid health insurance benefits he otherwise would have 

received.”). Indeed the only reasonable way to read the fourth 

cause of action is that Reynolds is alleging that Defendants 

retaliated against him for taking medical leave protected by the 

CFRA: “in retaliation for having taken protected medical leave, 

DIAMOND unlawfully terminated plaintiff’s paid health insurance 

benefits.” Id. ¶ 76. The seventh cause of action similarly 

identifies lost benefits as one of several damages that resulted 

from Defendants’ allegedly tortious acts. Id. ¶¶ 100, 102-103. 

Reynolds does not allege that Defendants engaged in these tortious 

acts in order to deny him the benefits owed under his ERISA plan. 

Thus, taken in the context of the entire FAC, it is clear that 

the lost benefits are “a consequence of plaintiff's larger claim of 

retaliatory termination, rather than [] a motivating factor for 

termination, as required for an ERISA claim.” Sturman v. Cooper 

Companies, Inc., No. C-93-02227-VRW, 1993 WL 356893, at *1 (N.D. 

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Cal. Sept. 3, 1993). At the very least, Defendants have failed to 

carry their burden of demonstrating clear grounds for why the 

fourth and seventh causes of action are preempted by ERISA. Gaus, 

980 F.2d at 566 (“Federal jurisdiction must be rejected if there is 

any doubt as to the right of removal in the first instance.”). 

ERISA does not preempt Reynolds’s claims and does not thereby 

confer federal question jurisdiction. 

b. COBRA

Defendants also allege in their notice of removal that the 

fourth and seventh causes of action are preempted by COBRA because 

these two causes of action “turn on the question of whether 

Defendants had any obligation to continue health care coverage for 

Plaintiff at the time his employment ended.” Removal ¶ 33. 

Reynolds’ motion and Defendants’ opposition do not address this 

issue. But Reynolds argues in his reply that “COBRA does not, in 

any of its language, purport to preempt claims which are not 

alleged to be COBRA claims.” Reply at 3. 

Reynolds is correct that COBRA does not have preemptive force. 

The Ninth Circuit has clearly held, after analyzing the text and 

legislative history of COBRA, that “the COBRA provisions . . . do 

not preempt state law. Radici v. Associated Ins. Companies, 217 

F.3d 737, 745 (9th Cir. 2000). Thus, the claims raised in the 

fourth and seventh causes of action are not preempted by COBRA and 

do not establish federal question jurisdiction. Since the Court 

has already rejected ERISA preemption, there are no grounds for 

subject matter jurisdiction pursuant to 28 U.S.C. § 1331(a).

///

///

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2. Diversity Jurisdiction

Entity Defendants - the three defendants listed in the 

original Complaint - initially removed this case to federal court 

on the basis of diversity jurisdiction pursuant to 28 U.S.C. 

§ 1332(a). Removal at 3-5. After adding Individual Defendants in 

the FAC, Reynolds alleges that diversity jurisdiction is improper 

for two reasons. First, Reynolds argues that Schell is a citizen 

of California and, since Schell is an owner of Diamond California 

and Diamond Ripon (collectively “LLC Defendants”), the LLC 

Defendants are also California citizens. Mot. at 4-6. Second, 

Reynolds argues that Ferguson and Colwell are California citizens 

and therefore defeat diversity jurisdiction. Id. at 6-8. In 

opposition, Defendants argue that Schell is not a California 

citizen and that the Court should deny joinder of Ferguson and 

Colwell because the FAC was improperly filed. Opp. at 8-15.

a. Schell’s Citizenship

A corporation is a citizen of the state in which it is 

incorporated and the state in which it has its principal place of 

business. 28 U.S.C. § 1332(c)(1). Reynolds asks the Court to 

apply a “substantial predominance” test to determine Schell’s 

principal place of business. Mot. at 5. But Defendants are 

correct that Reynolds’ proposed test is outdated law. The 

“substantial predominance” test was replaced with the “nerve 

center” test. Hertz Corp. v. Friend, 559 U.S. 77, 92-93 (2010) 

(“the application of a more general business activities test has 

led some courts . . . to look . . . incorrectly at the State 

itself, measuring the total amount of business activities that the 

corporation conducts there and determining whether they are 

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‘significantly larger’ than in the next-ranking State.”).

We conclude that ‘principal place of business’ is best 

read as referring to the place where a corporation's 

officers direct, control, and coordinate the 

corporation's activities. It is the place that Courts 

of Appeals have called the corporation's ‘nerve 

center.’ And in practice it should normally be the 

place where the corporation maintains its 

headquarters—provided that the headquarters is the 

actual center of direction, control, and coordination, 

i.e., the ‘nerve center,’ and not simply an office 

where the corporation holds its board meetings.

Id. Thus, Schell is a citizen of the state in which it is 

incorporated and the state in which its nerve center is located.

The evidence before the Court demonstrates that Schell is a 

citizen of Missouri. Schell was incorporated and is headquartered 

in Missouri, where “all corporate level functions, including all 

corporate officers,” are located. Schell Decl. ¶¶ 4-6. Thus, 

since Schell is a citizen of Missouri and Reynolds is a citizen of 

California, diversity jurisdiction based on Schell’s citizenship 

would be proper. However, the Court must also consider the 

citizenship of the additional defendants.

b. The FAC

Reynolds’ FAC added several factual and legal accusations 

against Ferguson and Colwell. Reynolds alleged that Individual 

Defendants “terminated plaintiff and stripped him of his paid 

health insurance benefits.” FAC ¶ 36. Reynolds also added both 

Ferguson and Colwell as defendants for the seventh cause of action 

for intentional infliction of emotional distress and Ferguson to 

the eighth cause of action for negligent supervision. FAC at 15-

18. Neither party disputes that Individual Defendants are 

California citizens and that, if they were properly joined in the 

FAC, then diversity jurisdiction would be improper because 

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Individual Defendants would share California citizenship with 

Reynolds. Thus, the only remaining issue is whether Reynolds 

properly filed his FAC.

A party is allowed to amend their pleadings once as a matter 

of course within 21 days after service of a responsive pleading. 

Fed. R. Civ. P. 15(a)(1)(B). However, “[i]f after removal the 

plaintiff seeks to join additional defendants whose joinder would 

destroy subject matter jurisdiction, the court may deny joinder, 

or permit joinder and remand the action to the State court.” 28 

U.S.C. § 1447(e) (“Section 1447”). Section 1447 provides district 

courts with broad discretion. Gunn v. Wild, No. C-01-4320 VRW, 

2002 WL 356642, at *3 (N.D. Cal. Feb. 26, 2002); Righetti v. Shell 

Oil Co., 711 F.Supp.531, 533 (N.D. Cal. 1989) (“[S]ection 1447(e) 

is permissive, and grants the court broad discretion to allow 

amendment even where remand may result.”). Courts consider 

multiple factors in ruling on an amendment made pursuant to 

Section 1447, including:

(1) whether the party sought to be joined is 

needed for just adjudication and would be 

joined under Federal Rule of Civil 

Procedure 19(a); (2) whether the statute 

of limitations would preclude an original 

action against the new defendants in 

state court; (3) whether there has been 

unexplained delay in requesting joinder; 

(4) whether joinder is intended solely to 

defeat federal jurisdiction; (5) whether 

the claims against the new defendant 

appear valid; and (6) whether denial of 

joinder will prejudice the plaintiff.

IBC Aviation Servs., Inc. v. Compania Mexicana de Aviacion, S.A. de 

C.V., 125 F.Supp.2d 1008, 1011 (N.D. Cal. 2000); see also Palestini 

v. Gen. Dynamics Corp., 193 F.R.D. 654, 658 (S.D. Cal. 2000). 

These factors, considered as a whole, weigh in favor of permitting 

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Reynolds to file his FAC.

With respect to the first factor, Defendants argue that 

Individual Defendants are not necessary parties under Rule 19 

because resolution of Reynolds’ claims against Individual 

Defendants is not necessary to resolve the remaining claims against 

Entity Defendants. Opp. at 12. However, “when evaluated as part 

of the 28 U.S.C. § 1447(e) determination, a court also must examine 

whether the non-diverse defendant sought to be joined is 

‘tangentially related to the cause of action.’” McCarty v. Johnson 

& Johnson, No. 1:10-CV-00350, 2010 WL 2629913, at *8 (E.D. Cal. 

June 29, 2010) (citing IBC Aviation Servs., 125 F.Supp.2d at 1012 

(“Courts disallow joinder of non-diverse defendants where those 

defendants are only tangentially related to the cause of action or 

would not prevent complete relief.”). Here, Individual Defendants 

are not tangentially related to the causes of action in the FAC. 

Individual Defendants are alleged to have terminated Reynolds’ 

employment and health insurance in accordance with Entity 

Defendants’ express policies. FAC ¶ 36. Though the addition of 

the Individual Defendants is not necessary to render judgment in 

all of the causes of action in this case, Individual Defendants are 

not tangentially related to the alleged wrongdoing. Thus, this 

factor weighs, though slightly, in favor of Reynolds.

As for the second factor, both parties agree that the 

applicable statute of limitations in this case is two years. Opp. 

at 12; Reply at 6. Several events alleged in the FAC occurred more 

than two years prior to the filing of the Motion and to the issuing 

of this Order. Imai Decl. ¶¶ 5-6. Thus, the Court finds that this 

factor weighs in favor of Reynolds. 

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As for the third factor, Defendants concede that Reynolds “did 

not unduly delay seeking amendment.” Opp. at 12. In fact, 

Reynolds filed within the twenty-one day time period established by 

Rule 15(a). Thus, this factor weighs in favor of Reynolds.

The fourth factor also cuts against Defendants. Defendants 

argue that Reynolds had an improper motive when amending the 

complaint; namely, “to defeat federal subject matter jurisdiction.” 

Opp. at 13. Though Reynolds’ motive is relevant, “[s]uspicion of 

diversity destroying amendments is not as important now that 

§ 1447(e) gives courts more flexibility in dealing with the 

addition of such defendants.” IBC Aviation Servs., 125 F.Supp.2d 

at 1012. The Court agrees with the IBC Aviation court that it 

should “decline[] to impute an improper motive to Plaintiff simply 

because Plaintiff seeks to add a non-diverse defendant postremoval.” Id. Additionally, there is no evidence that Reynolds 

filed this motion for the improper purpose of delaying the 

proceedings. As such, this factor weighs in favor of Reynolds.

 The fifth factor asks whether the claims against the new 

defendants appear valid. Defendants argue that the new claims for 

intentional infliction of emotional distress against both 

Individual Defendants and the claim for negligent supervision 

against Ferguson “are without merit and unlikely to survive a 

motion for summary judgment.” Opp. at 13. Specifically, 

Defendants argue that “emotional injuries arising from such 

personnel activity fall within the normal risk of employment and, 

therefore, are subject to the exclusive remedies under the 

[California Worker’s Compensation Act (“CWCA”)].” Id. at 14. 

Defendants further argue that Reynolds’ allegations fail to meet 

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the elements of either tort. Id. n.7. The Court disagrees. 

Similar arguments were rejected in Khoshnood v. Bank of Am., No. CV 

11-04551 AHM FFMX, 2012 WL 751919 (C.D. Cal. Mar. 6, 2012). 

 First, California law “does not prohibit all emotional 

distress causes of action against an employer, but only those based 

on conduct that is a normal risk of the employment relationship.” 

Fretland v. Cty. of Humboldt, 69 Cal.App.4th 1478, 1492 (1999). 

Thus, an intentional infliction of emotional distress claim based 

on discrimination is not preempted by the CWCA. Khoshnood, 12 WL 

751919 at *6. Additionally, Reynolds has properly alleged the 

elements of a cause of action for intentional infliction of 

emotional distress. “Under California law, to state a claim for 

intentional infliction of emotional distress, the defendant's 

conduct must be outrageous, i.e., beyond all bounds of decency.” 

Clinco v. Roberts, 41 F.Supp.2d 1080, 1084 (C.D. Cal. 1999). Here, 

the conduct alleged in this case is more extreme than in the cases 

cited by Defendants. In Clinco, for example, the alleged 

outrageous behavior was comprised of sending faxes to the plaintiff 

advising him to contact his insurance company. Clinco, 41 

F.Supp.2d at 1084 (“To the extent this conduct is inappropriate, as 

a matter of law, it is no more than a petty oppression or 

annoyance”). The behavior alleged in this case is more similar to 

the conduct alleged in Khoshnood. Khoshnood, 2012 WL 751919, at *7 

(including Plaintiff’s allegation that defendants refused to let 

him have time away from work to meet with the police after his home 

had been burglarized). As such, this factor does not weigh against 

Reynolds.

Finally, the last factor regarding prejudice to the plaintiff 

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in not allowing joinder weighs in favor of amendment. As discussed 

above, not permitting amendment at this point may impact Reynolds’ 

ability to file timely claims and therefore receive relief against 

Individual Defendants.

Thus, on balance, the six factors weigh in favor of granting 

Reynolds leave to file his FAC. Given that the FAC properly joined 

two diversity-destroying defendants, removal based on diversity 

jurisdiction is inappropriate. Since the Court has already found

that there is no federal question jurisdiction, the Court lacks 

subject matter jurisdiction in this case and grants Reynolds’ 

motion for remand.

III. ORDER

For the reasons set forth above, the Court GRANTS Reynolds’ 

motion to remand this case back to the San Joaquin County Superior 

Court.

IT IS SO ORDERED.

Dated: April 28, 2016

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