Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_07-cv-02293/USCOURTS-azd-2_07-cv-02293-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

NATHAN HANDY, 

Plaintiff, 

vs.

WELLS FARGO BANK, N.A.; and

LINDA HARLAND, 

Defendants. 

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No. CV07-2293-PHX-GMS

ORDER

On October 25, 2007, Plaintiff Nathan Handy filed a complaint in the Superior Court

of the State of Arizona asserting breach of contract and defamation claims. (Dkt. # 49, ¶ 1.)

Defendants Wells Fargo Bank and Linda Harland were properly served. (Id.) On November

26, 2007, Defendants removed the case to this Court. Defendants’ notice of removal alleged

diversity of citizenship as the jurisdictional basis over Plaintiff’s case. (Id. at ¶ 6.) On

October 20, 2008, the Court determined that some doubt existed on the face of Defendants’

Notice of Removal as to whether the Court had proper diversity jurisdiction over the case.

Accordingly, the Court ordered Defendants to file an amended notice of removal sufficient

to establish the Court’s jurisdiction. (Dkt. # 43.) On October 31, 2008, Defendants filed

their amended notice of removal with a supporting memorandum. (Dkt. # 46.) Because the

Case 2:07-cv-02293-GMS Document 49 Filed 11/12/08 Page 1 of 6
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amended notice of removal fails to provide a sufficient basis for establishing jurisdiction, the

Court remands this case to the Superior Court of the State of Arizona. 

“Inquiring whether the court has jurisdiction is a federal judge’s first duty in every

case.” Belleville Catering Co. v. Champaign Market Place, L.L.C., 350 F.3d 691, 693 (7th

Cir. 2003). The removal statute provides, in pertinent part: “[A]ny civil action brought in a

State court of which the district courts of the United States have original jurisdiction, may

be removed by the defendant . . . to the district court of the United States for the district and

division embracing the place where such action is pending.” 28 U.S.C. § 1441(a); see

Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987) (“Only . . . actions that originally

could have been filed in federal court may be removed to federal court by the defendant.”).

However, “[i]f at any time before final judgment it appears that the district court lacks

subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c).

There is a “strong presumption” 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) (emphasis added). “The

strong presumption against removal jurisdiction means that the defendant always has the

burden of establishing that removal is proper.” Id.

Here, the Amended Notice of Removal states that both Plaintiff and Defendant Linda

Harland are citizens of the State of Arizona. (Dkt. # 46, at ¶¶ 4, 6.) However, Defendants

assert that diversity jurisdiction is not destroyed because Defendant Harland’s citizenship

should be disregarded “on the ground that there is no possibility that plaintiff will be able to

establish liability against said defendant.” (Id. ¶ 6.) Defendants’ position is based on the

fraudulent joinder doctrine. 

Under the fraudulent joinder doctrine, “‘If 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, the joinder of the resident defendant is fraudulent.’” Ritchey v. Upjohn Drug Co., 139

F.3d 1313, 1318 (9th Cir. 1998) (quoting McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339

(9th Cir. 1987)); see In re Med. Lab. Mgmt. Consultants, 931 F. Supp. 1487, 1491 (D. Ariz.

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1996). In evaluating the allegations and evidence, courts employ a presumption against

finding fraudulent joinder. See Plute v. Roadway Package Sys., Inc., 141 F. Supp. 2d 1005,

1008 (N.D. Cal. 2001); Diaz v. Allstate Ins. Group, 185 F.R.D. 581, 586 (C.D. Cal. 1998).

This presumption is often expressed by a series of requirements placed upon the party

asserting fraudulent joinder. Diaz, 185 F.R.D. at 586. First, a defendant asserting fraudulent

joinder “‘must demonstrate that there is no possibility that the plaintiff will be able to

establish a cause of action in state court against the alleged sham defendant.’” Id. (quoting

Good v. Prudential Ins. Co. of Am., 5 F. Supp. 2d 804, 807 (N.D. Cal. 2001)). Second, “it

must appear to ‘a near certainty’ that joinder was fraudulent.” Id. (quoting Lewis v. Time,

Inc., 83 F.R.D. 455, 466 (E.D. Cal. 1979), aff’d, 710 F.2d 549 (9th Cir. 1983)). “This occurs

if the plaintiff has no actual intention to prosecute an action against [the] particular resident

defendant[].” Id. Third, “merely showing that an action is likely to be dismissed against that

defendant does not demonstrate fraudulent joinder.” Id. “‘The standard is not whether

plaintiff[] will actually or even probably prevail on the merits, but whether there is a

possibility that [it] may do so.’” Id. (quoting Lieberman v. Meshkin, Mazandarani, No. C-96-

3344, 1996 WL 732506, at *3 (N.D. Cal. Dec. 11, 1996)).

Because the expressed standard for fraudulent joinder is whether

there is any possibility that a claim can be stated against the

allegedly ‘sham’ defendants, the standard is necessarily similar

to that of motions to dismiss, with two exceptions: (1) this Court

may pierce the pleadings to make factual determinations, and (2)

the Court may not make final determinations with regard to

questions of state law that are not well-settled. 

Knutson v. Allis-Chalmers Corp., 358 F. Supp. 2d 983, 995 (D. Nev. 2005) (internal citations

omitted). If the facts alleged by the plaintiff, together with any proven by the defendant, and

considered in the light most favorable to the plaintiff, “would have survived a motion for

dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6), then removal based on

fraudulent joinder is not appropriate.” Id. at 994 (citing Sessions v. Chrysler Corp., 517 F.2d

759, 761 (9th Cir. 1975) (stating that “[i]nasmuch as appellant’s case against the individual

defendants was sufficient to withstand a dismissal motion under Fed. R. Civ. P. 12(b)(6), the

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Ritchey, 139 F.3d at 1319 also cites Sessions for this proposition.

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joinder of the claims against them was not fraudulent so as to warrant dismissal on that

score.”1

)). 

Despite asserting a reliance on the fraudulent joinder doctrine, Defendants fail to

present facts or arguments sufficient to support its application. Initially, it is of no

consequence that Plaintiff has abandoned his breach of contract claim against Defendant

Harland. In order to establish the absence of fraudulent joinder, “a plaintiff need only have

one potentially valid claim against a non-diverse defendant.” Knutson, 358 F. Supp. 2d at

993. Here, Plaintiff’s Complaint also asserts a defamation claim against Defendant Harland.

Defendants argue that “[t]he Complaint contends that ‘Wells Fargo had reported in writing

that Plaintiff had been terminated for fraud/monetary losses’” (Dkt. # 46, at 10.) However,

Defendants fail to also inform the Court that the Complaint similarly alleges that, “Harland

disseminated and published false statements concerning the Plaintiff which were intended

to cast Plaintiff in a false and unfavorable light, and were made with actual and constructive

knowledge of their untruthfulness.” (Dkt. # 1, Ex. 1, at ¶ 24.) Although Defendants appear

to imply that the Complaint fails to state a claim for defamation against Defendant Harland

because it states that Wells Fargo was responsible for the defamatory writing, it is clear that

Plaintiff also alleges that Defendant Harland was responsible for publishing the allegedly

defamatory statement. Therefore, the Complaint appears to state a valid defamation claim

against Defendant Harland, and Defendants do not argue this point. 

Defendants instead argue that “Plaintiff cannot carry his burden of proving that

Defendant Harland published any defamatory statement about him.” (Dkt. # 46, at 12.)

Defendants rely on Plaintiff’s inability to respond to discovery requests with evidence of a

defamatory statement published by Defendant Harland, concluding that Plaintiff cannot meet

his burden of proof. (Id. at 10.) However, in the case of fraudulent joinder, the burden rests

squarely on the shoulders of the removing party to prove that joinder was fraudulent. Gaus,

980 F.2d at 566. 

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Here, the Court considers both the facts alleged by Plaintiff and those proven by

Defendants in the light most favorable to Plaintiff. Knutson, 358 F. Supp. 2d at 994. The

Court finds that Defendants’ attempt to prove Defendant Harland’s lack of involvement in

the allegations of defamation is not sufficient to meet their burden. Merely presenting an

affidavit from Defendant Harland stating that she did not publish a defamatory statement is

not sufficient to prove that her joinder was fraudulent. While her testimony is certainly

probative of whether she was the responsible party, it is not sufficient for this Court to

conclude the she in fact was not responsible, as the Court cannot determine credibility based

on an affidavit. In his Motion for Summary Judgment, Plaintiff similarly provides an

affidavit in which he states that he listed Defendant Harland as the contact person on his

Bank of America application. (Dkt. # 40, Ex. A.) Plaintiff also provides what appears to be

a copy of that application, which does list Defendant Harland as the appropriate contact

person at Wells Fargo. (Id. Ex. D.) The Court must therefore construe Defendant Harland’s

testimony and Plaintiff’s evidence and allegations of fact in the light most favorable to

Plaintiff. Doing so yields the conclusion that it would not be impossible for Plaintiff to

establish a defamation claim against Defendant Harland in state court. Defendant Harland’s

testimony, combined with Plaintiff’s current lack of direct proof on the matter, are not

sufficient to prove the allegations in the Complaint untrue. While Defendants’ evidence does

bear on the likelihood of Plaintiff prevailing on the merits, “‘[t]he standard is not whether

plaintiff[] will actually or even probably prevail on the merits, but whether there is a

possibility that [he] may do so.’” Diaz, 185 F.R.D. at 586 (quoting Lieberman, 1996 WL

732506, at *3 )). Because Plaintiff has stated a valid cause of action against Defendant

Harland, and because Defendants have failed to prove that there is no possibility that Plaintiff

will be able to establish a cause of action in state court, the case must be remanded.

Therefore, 

IT IS HEREBY ORDERED that this case is REMANDED WITHOUT

PREJUDICE to the Superior Court of the State of Arizona. 

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IT IS FURTHER ORDERED that Defendants’ Motion for Partial Summary

Judgment (Dkt. # 20) and Motion to Strike (Dkt. # 42) are DENIED as moot.

DATED this 12th day of November, 2008.

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