Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_18-cv-00613/USCOURTS-casd-3_18-cv-00613-0/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 28:1332fc Diversity - Foreclosure

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

BRACHA MANDELBAUM,

Plaintiff,

v.

WELLS FARGO BANK, N.A., et 

al.,

Defendant.

Case No.: 18cv613-LAB (KSC)

ORDER DENYING MOTION FOR 

ATTORNEY’S FEES

Defendant Wells Fargo Bank, N.A., with the consent of the two other 

Defendants, removed this case from state court on March 26, 2018. The notice of 

removal relied on both federal question and diversity jurisdiction. 

Wells Fargo then filed a motion to dismiss, in which Defendant Barrett, 

Daffin, Frappier, Treder & Weiss, LLP (“Barrett”) joined. Plaintiff Bracha 

Mandelbaum then moved ex parte to remand, and Wells Fargo filed an opposition. 

Mandelbaum’s motion included a request for attorney’s fees and costs for improper 

removal, under 28 U.S.C. '1447(c). The Court, carrying out its own obligation to 

confirm its own jurisdiction, issued an order to show cause holding that federal 

jurisdiction was lacking, and requiring Wells Fargo to establish diversity 

jurisdiction. Wells Fargo then filed a notice of non-opposition to remand, and the 

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Court remanded the case. The order of remand did not specifically address the 

request for fees and costs.

Mandelbaum then filed a renewed motion for costs and attorney’s fees, for 

improper removal. (Docket no. 17.) Wells Fargo filed an opposition, in which 

Barrett joined. 

The other Defendant is Breckenridge Property Fund 2016, LLC, which was 

initially included as a Doe defendant. (See Docket no. 1 at 8:27–28.) The complaint 

was amended on March 14, 2018, while the case was in state court, however, to 

include Breckenridge as a named Defendant. (See Docket no. 1-2 at 70.) This was 

apparently done because on March 9, Breckenridge purchased the property at 

issue here at a foreclosure sale. After remand, Breckenridge was dismissed when 

Mandelbaum on June 20 filed an amended complaint omitting it as a party.

Motion for Fees

Mandelbaum’s motion primarily relies on 28 U.S.C. ' 1447(c) as a basis for 

awarding fees and costs. It cites 28 U.S.C. ' 1927 as an alternate basis for the 

award. It sought an award against Wells Fargo, Barrett, and Breckenridge, but has 

since withdrawn the request as to Breckenridge.

28 U.S.C. ' 1447(c)

In general, the Court may award fees under ' 1447(c) only where the 

removing party “lacked an objectively reasonable basis for seeking removal.” 

Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). Although this statute 

mentions that a fee award may be included in the order of remand, the Court has

jurisdiction to award fees on motion even after remand. Moore v. Permanente 

Medical Group, Inc., 981 F.2d 443, 445 (9th Cir. 1992). Even assuming the 

requirements are met, an award of fees falls within the Court’s broad discretion; 

the non-removing party has no right or entitlement to an award. Martin, 546 U.S. 

at 137; Balacorta v. Twentieth-Century Fox Film Corp., 208 F.3d 1102, 1106 n.6 

(9th Cir. 2000). Fees and costs awarded under ' 1447(c) are limited to expenses 

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incurred “as a result of the removal,” not a party’s later actions. Baddie v. Berkeley 

Farms, 64 F.3d 487, 490 (9th Cir. 1995). Actions following removal can, of course, 

shed light on the reasons for removal, but they cannot themselves warrant a fee 

award. 

Although Mandelbaum seeks an award against Barrett, the motion does not 

cite any authority explaining whether a party is subject to a fee award under 

' 1447(c) merely for consenting to removal. Assuming, arguendo, that it can be, 

nothing in the record suggests Barrett acted unreasonably here merely by 

consenting to removal. Barrett’s role in the removal was fairly minor, and the notice 

of removal identifies it as a sham Defendant. Nothing in the record provides any 

reasonable basis for charging it with Wells Fargo’s errors. 

For reasons set forth in the Court’s order to show cause (Docket no. 12), 

federal question jurisdiction was lacking from the start, and Wells Fargo should 

have realized this. That said, the error is a common one, and even district courts, 

attempting to harmonize Rains with more recent precedent such as Grable & Sons 

Metal Prods. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005), sometimes misapply the 

standard. See, e.g., Nevada v. Bank of Am. Corp., 672 F.3d 661, 675 (9th Cir. 

2012) (reversing district court’s determination that state law cause of action turned 

on interpretation of federal law). Even though Wells Fargo erred, its error was not 

flagrant.

Diversity, however, was a thornier issue. The parties’ citizenship was the 

main point of controversy. It is undisputed that Wells Fargo and Mandelbaum are 

diverse. Barrett and Mandelbaum are not diverse, but the notice of removal argued 

Barrett was a sham defendant. This issue was never fully developed, and 

Mandelbaum’s motion does not argue Wells Fargo lacked an objectively 

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reasonable basis for believing Barrett was a sham defendant.1 Instead, the motion 

focuses on Breckenridge’s citizenship.

As a limited liability company, Breckenridge takes on the citizenship of all its 

owners/members, for purposes of ordinary federal diversity jurisdiction. Johnson 

v. Columbia Props. Achorage, LP, 437 F.3d 894, 899 (9th Cir. 1990). Wells Fargo 

was aware of this at the time of removal, and even cited this principle. Having done 

so, however, Wells Fargo then ignored it, and claimed that Breckenridge’s sole 

member, Neighborhood Stabilization Holding, I, LLC, was a citizen of Delaware 

because it was organized under Delaware law. This was, at the very least, 

careless. Wells Fargo should have confirmed the citizenship of Neighborhood as 

well, before removing. 

The exhibits do not clearly show whether Wells Fargo knew that 

Neighborhood was not diverse at the time of removal. A declaration by counsel 

Andrew Wheaton shows that he consulted with Breckenridge’s counsel, Elaine 

Yang, and that as a result he concluded Neighborhood—and therefore 

Breckenridge—was not a California citizen. (See Wheaton Decl., && 4–5 (Docket 

no. 18 at 16–17).) Following removal, Mandelbaum’s counsel contacted Wells 

Fargo’s counsel to argue that diversity was lacking, and on April 3, contacted 

Elaine Yang. Some time after removal, Wells Fargo learned that some of 

Neighborhood’s owners were California citizens. (See Docket no. 7 (Notice of 

Errata to Notice of Removal).) Around April 10, Mandelbaum’s counsel also 

confirmed this, notified Wells Fargo’s counsel, and asked Wells Fargo to stipulate 

to remand. (See Docket no. 17-1 at 17 (attorney billing entry for April 10).) 

 

1 Mandelbaum develops this argument in her reply brief. Because it was not 

sufficiently raised in the opening brief, however, the Court deems it waived. See 

Mesa Grande Band of Mission Indians v. Salazar, 657 F. sup. 2d 1169, 1173 

(S.D. Cal., 2009).

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At the time of removal, Wells Fargo may have lacked an objectively 

reasonable basis for believing it was diverse from Breckenridge, but it is hard to 

be sure. Wells Fargo made some effort to investigate Breckenridge’s citizenship, 

but apparently either misunderstood or was given wrong information. Whether that 

effort was reasonable under the circumstances is open to question.

One fact in Wells Fargo’s favor is that the circumstances suggest it was 

acting on the basis of limited information. See Carolina Cas. Ins. Co. v. Team 

Equipment, Inc., 741 F.3d 1082, 1087 (9th Cir. 2014) (recognizing that pleading 

requirements may appropriately be relaxed when the party attempting to invoke 

diversity jurisdiction lacks actual knowledge of parties’ citizenship). Breckenridge 

was substituted in as a named Defendant after the case was filed, which limited 

Wells Fargo’s time to investigate its citizenship. Also, Neighborhood was not a 

party, but rather the owner of the newly-added Breckenridge. Breckenridge was 

Yang’s client, and the record does not make clear how much she knew about 

Neighborhood’s ownership. She may have been quite familiar with it, or she might 

have relied on some other unidentified source.

That being said, Wells Fargo knew its information was limited or perhaps 

unreliable, and ought to have either investigated further or waited. Its notice of 

removal also glossed over Breckenridge’s citizenship, which suggests it hoped the 

possible jurisdictional defect would go unnoticed.

Another fact in Wells Fargo’s favor is that Breckenridge’s role in the case 

was not completely clear. The claims arise from an allegedly unlawful foreclosure 

sale, at which Breckenridge was the buyer. Because the complaint was deemed 

amended rather than actually amended to make specific factual allegations against 

Breckenridge, Breckenridge’s role in the claims was never clearly alleged. It may 

be that Breckenridge was the prospective or actual title holder, and was named so 

that complete relief could be afforded. But it is also possible that Breckenridge 

might have been a nominal party. See Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 

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462 (federal courts must disregard nominal or formal parties when evaluating 

ordinary diversity jurisdiction). The fact that Breckenridge was dropped from the 

complaint shortly after remand lends some credence to this possibility. And on this 

record, it cannot be ruled out. 

Another fact is that the only evidence of the citizenship of Neighborhood’s 

owners, and therefore of Breckenridge, are conclusory statements in the briefing

after removal. No party has identified how many owners there are, who they are, 

or why some of them are believed to be California citizens, and it is possible the 

parties themselves don’t know. Mandelbaum’s briefing points to Wells Fargo’s 

refusal to meet and confer on this issue, but there is no showing that Mandelbaum 

knew any more than Wells Fargo about the ownership of Neighborhood. Ordinarily 

the Court will accept the parties’ allegations about a natural person’s citizenship. 

But here, the newer conclusions about Neighborhood’s citizenship are based on 

uncertain information, and could be wrong.

The mere possibility of diversity jurisdiction, of course, does not warrant 

removal. There is a “strong presumption against removal jurisdiction,” Gaus v. 

Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992), and a party should not remove a 

case without objectively reasonable grounds for believing that removal is proper. 

But at the same time, the Court is less inclined to award fees where a removing 

defendant merely failed to prove the presence of jurisdiction, than where it is clear 

jurisdiction was absent.

At the time it filed its notice of removal, Wells Fargo should have realized 

that jurisdiction was doubtful. Its removal was at the very least careless. That 

being said, there is evidence its counsel took some steps to investigate diversity 

jurisdiction, even if the information turned out to be wrong. The Court is reluctant 

to award fees and costs without some evidence that Wells Fargo knew or 

suspected its belief about Breckenridge’s citizenship was wrong before removal. 

Furthermore, diversity jurisdiction might possibly have been proper here, even 

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though Wells Fargo failed to establish it. The Court recognizes that it could award 

fees and costs under ' 1447(c), but in its discretion is not inclined to do so. 

28 U.S.C. ' 1927

An award of fees or costs based on Wells Fargo’s behavior after removal is 

governed by ' 1927 which requires, among other things, a finding of subjective 

bad faith. In re Keegan Mgt. Co., Securities Litig., 78 F.3d 431, 436 (9th Cir. 1996). 

Bad faith, in this context, means either knowingly or recklessly raising a frivolous 

argument, or arguing a claim for purposes of harassment. Id. (citing Estate of Blas 

v. Winkler, 792 F.2d 858, 860 (9th Cir. 1986); further citations omitted).

Wells Fargo’s assertion of federal question jurisdiction was wrong from the 

start. The Court stops short of calling it frivolous here, however. Wells Fargo 

argued that Mandelbaum’s claim to set aside the foreclosure sale was in fact based 

on federal law, because the alternative state law theory was too insubstantial. (See

Docket no. 10 at 5:12–28.) This was a losing position, but at the same time not 

frivolous. Furthermore, it is evident Wells Fargo’s counsel was confusing federal 

theories with federal claims. This is a common error and, depending on the clarity 

of the pleadings, can be excusable. See, e.g., Tanner v. Kaiser, 2015 WL 

6081771, at *4 (N.D. Cal., Oct. 15, 2015) (citing Rains v. Criterion Sys., Inc., 80 

F.3d 339 (9th Cir. 1996)) (pointing out plaintiff’s conflation of theories with claims). 

This was clearly an error but, in this case, not a frivolous one.

Its continued assertion of diversity jurisdiction after learning that 

Breckenridge was probably not diverse, however, was negligent and probably 

reckless. At least as early as April 16, 2018, when it filed its notice of errata 

acknowledging that some of Neighborhood’s owners were California citizens, 

Wells Fargo should have realized its assertion of diversity jurisdiction was on very 

shaky ground. By continuing to assert that Breckenridge was diverse, Wells Fargo 

exposed itself to sanctions. (See Docket no. 10 at 4:17–19 (asserting that 

Breckenridge was diverse because Neighborhood was a Delaware LLC, and 

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ignoring Neighborhood’s citizenship).) Wells Fargo may not have realized the 

gravity of its error, however, because it still erroneously believed federal question 

jurisdiction was present. (Id. at 4:21–6:5.)

Mandelbaum’s briefing makes some cogent arguments in favor of a finding 

that Wells Fargo acted in bad faith, in order to impose needless costs and burdens. 

Wells Fargo’s tactics can certainly be called aggressive, though in the Court’s view 

they do not amount to bad faith or malice. The Court also recognizes that Wells 

Fargo abandoned its position and consented to remand as soon as the Court’s 

order to show cause explained why federal question jurisdiction was lacking. A 

party acting in bad faith might have been expected to press on at that point.

Because the Court finds no bad faith, an award of fees is unavailable under 

' 1927. See Keegan, 78 F.3d at 436.

Conclusion and Order

Mandelbaum withdrew its request for an award against Breckenridge. Even 

if it had not, both Breckenridge’s and Barrett’s involvement in removal and in 

litigation after removal were so minor as not to merit an award of fees and costs 

against them.

The Court in its discretion DENIES Mandelbaum’s request for an award of 

fees and costs under ' 1447(c). And because the standard for an award of fees 

and costs under ' 1927 is not met, that request is DENIED as well. The motion as 

a whole (Docket no. 17) is DENIED.

IT IS SO ORDERED.

Dated: January 11, 2019

Hon. Larry Alan Burns

United States District Judge

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