Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-02556/USCOURTS-caed-2_05-cv-02556-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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28 This motion was determined to be suitable for decision without *

oral argument. L.R. 78-230(h).

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

CITY OF RIO VISTA, a California )

municipality, )

) 2:05-cv-2556-GEB-DAD

Plaintiff, )

) ORDER*

v. )

)

ECO RESOURCES, INC., a Texas )

corporation; STEVEN E. RICHARDSON, )

an individual, )

)

Defendants. )

)

)

ECO RESOURCES, INC., a Texas )

corporation, )

)

Counter-claimant, )

)

v. )

)

CITY OF RIO VISTA, a California )

municipality, )

)

Counter-defendant. )

)

Plaintiff moves to remand its suit against Defendants ECO

Resources Inc.’s (“ECO”) and Steven E. Richardson (“Richardson”) to

state court. Defendants oppose the motion.

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BACKGROUND

Plaintiff contracted with ECO to manage and operate

Plaintiff’s wastewater facilities, from 1989 until 2003. Plaintiff is

a municipality organized under the laws of California. ECO is a

corporation organized under the laws of Texas with its principal place

of business in Sugarland, Texas. Richardson is a resident of

California employed by ECO in a managerial capacity.

On October 30, 2003, Plaintiff and ECO entered into a

contract entitled, “City of Rio Vista Water and Wastewater System

Service Contract” (the “Contract”) wherein ECO agreed to furnish

services necessary for the operation and maintenance of Plaintiff’s

wastewater and water production facilities. Subsequent to the

execution of the Contract, disagreements arose between the parties

concerning the management, operation, and maintenance of certain

wastewater facilities. These disagreements ultimately resulted in

Plaintiff cancelling the Contract and replacing ECO with a third party

on August 1, 2005. 

On November 10, 2005, Plaintiff filed its Complaint against

Defendants in Solano County Superior Court alleging various claims

concerning Defendants’ management, operation, and maintenance of

certain wastewater facilities under the Contract. ECO removed the

Complaint to federal court on December 14, 2005, based on diversity of

citizenship.

DISCUSSION

When subject matter jurisdiction is premised on diversity,

complete diversity between all plaintiffs and all defendants is

required. But a non-diverse party may be disregarded for purposes of

diversity jurisdiction if the court determines that the party was

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fraudulently joined in the action. Ritchey v. Upjohn Drug Co., 139

F.3d 1313, 1318 (9th Cir. 1998). 

It is undisputed that both Plaintiff and Richardson are

citizens of California, and therefore complete diversity does not

exist. However, Defendants argue that Richardson should be

disregarded for the purpose of determining subject matter jurisdiction

because he was fraudulently joined. Plaintiff counters it has viable

claims against Richardson, which make him a proper defendant and

necessitate remand for lack of diversity. 

The removant has the burden of establishing removal

jurisdiction; therefore ECO has the burden of establishing Richardson

was fraudulently joined. See Gaus v. Miles, Inc., 980 F.2d 565,

566-67 (9th Cir. 1992). “Fraudulent joinder is a term of art. If []

[P]laintiff fails to state a cause of action against [Richardson], and

the failure is obvious according to the settled rules of [California],

the joinder of [Richardson] is fraudulent.” McCabe v. Gen. Foods

Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). To establish fraudulent

joinder ECO must show “there is no possibility that [P]laintiff will

be able to establish a cause of action in State court against

[Richardson].” Good v. Prudential Ins. Co. of Am., 5 F. Supp. 2d 804,

807 (N.D. Cal. 1998). All disputed questions of fact, and all doubts

concerning the sufficiency of a cause of action must be resolved in

favor of remand. Kaighn v. Nat’l Life of Vt., No. C 02-04984 CRB,

2003 WL 173863, at *1 (N.D. Cal. Jan. 14, 2003); Gaus, 980 F.2d at

566-67.

Plaintiff’s first claim against Richardson is for

negligence. ECO argues this claim is invalid because Plaintiff has

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not alleged any specific negligent act by Richardson. However,

Plaintiff’s Complaint alleges “[Richardson] negligently inspected,

staffed, maintained, repaired, supervised, managed, directed,

controlled, operated and used [Plaintiff’s water treatment facility].” 

(Compl. ¶ 26.) The Complaint further alleges that Richardson’s

negligence resulted in the “release or threatened release of hazardous

substances” and the “release and/or threatened releases of

environmental contaminants . . . at levels . . . injurious to public

health . . . .” (Id. ¶¶ 60, 70.) Additionally, the Complaint alleges

Richardson’s negligence was the direct and proximate cause of

Plaintiff’s damages. (Id. ¶¶ 27-28, 35.) “Under well established

principles, such general allegations of negligence, proximate

causation and resulting injury and damages suffice to state a cause of

action . . . .” Hoyem v. Manhattan Beach City Sch. Dist., 22 Cal. 3d

508, 513-14 (1978).

ECO counters that Plaintiff cannot establish that Richardson

caused the subject harm since Richardson did not have “the kind of

active and meaningful involvement that is required by law to establish

tort liability against him.” (Defs.’ Opp’n Mot. Remand at 8.) ECO

supports its argument with an affidavit from Richardson that states he

never had any “day to day responsibility” for the operation of

Plaintiff’s water treatment facilities. (Richardson Aff. ¶ 4, Jan.

25, 2006.) ECO argues Richardson only supervised those responsible

for the repair, operation, and maintenance of Plaintiff’s water

treatment facilities. (Id. ¶¶ 4, 7-8.) Crediting ECO’s position that

Richardson had no direct involvement in the repair, operation, and

maintenance of Plaintiff’s water treatment facilities does not

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28 This remand order has no effect on ECO’s Counterclaim, filed 1

in this Court, against the City of Rio Vista.

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establish that no set of facts can be proved which would make

Richardson liable to Plaintiff for negligence in his supervisory role. 

CONCLUSION

Since there is a possibility Plaintiff can establish a

negligence claim in state court against Richardson, Richardson is not

fraudulently joined and complete diversity is lacking. Therefore,

Plaintiff’s motion to remand its suit against ECO and Richardson to

Solano County Superior Court is granted.1

IT IS SO ORDERED. 

Dated: April 11, 2006

/s/ Garland E. Burrell, Jr.

GARLAND E. BURRELL, JR.

United States District Judge

 

 

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