Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_05-cv-00530/USCOURTS-azd-3_05-cv-00530-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Walnut Creek Estates Development

Company, L.L.P., an Arizona limited

liability partnership; McAlister

Investments, a California corporation; and

Dunton & Dunton, L.L.P., an Arizona

limited liability partnership, 

Plaintiffs, 

vs.

American Land Management, L.L.C., a

South Dakota limited liability company;

Rhodes Design and Development

Corporation, a Nevada corporation; Desert

Communities, Inc., a Nevada Corporation;

William F. Bowers and Jane Doe Bowers,

husband and wife; and Matt Lawson and

Jane Doe Lawson, husband and wife,

Defendants. 

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No. CIV-05-0530-PCT-MHM

ORDER

Currently before the Court are Plaintiff's Motions to Remand, (Dkt. ##9, 12); and

Defendants' Motion for Partial Summary Judgment, (Dkt. #18). Having reviewed the

motions the Court enters the following order.

I. Factual & Procedural Background

On January 20, 2005, Plaintiff filed an Amended Civil Complaint in the Superior

Court of the State of Arizona in and for the County of Mohave, alleging breach of contract,

common law fraud, intentional misrepresentation, and specific performance. On February

Case 3:05-cv-00530-MHM Document 37 Filed 09/26/05 Page 1 of 4
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16, 2005 Defendants removed this action to the United States District Court District of

Arizona on the basis of diversity of citizenship jurisdiction pursuant to 28 U.S.C. § 1332.

II. Legal Standard

Civil actions not involving a federal question are removable to a federal district court

only if there is diversity of citizenship between the parties. 28 U.S.C. § 1332(a)(1) (2005).

Section 1332 requires complete diversity of citizenship, that is, each plaintiff's citizenship

must be diverse to each defendant's citizenship. Id. However, a defendant may remove a

civil action that alleges claims against a non-diverse defendant when that defendant has been

fraudulently joined. McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir.1987).

“[F]raudulent joinder is a term of art. 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) (citations omitted). On a motion to remand, the removing

defendant faces a strong presumption against removal, and bears the burden of establishing

that removal was proper by a preponderance of evidence. Sanchez v. Monumental Life Ins.

Co., 102 F.3d 398, 403-404 (9th Cir.1996). Therefore, the defendant carries a high burden

of establishing that the non-diverse party was fraudulently joined. See Gaus v. Miles, Inc.,

980 F.2d 564, 564(9th Cir.1992). In determining whether a non-diverse defendant has been

improperly joined, courts may look beyond the pleadings and examine the factual record.

McCabe, 811 F.2d at 1339.

III. Discussion

It is undisputed William Bowers is a citizen of Arizona. At issue, is whether William

Bowers was fraudulently joined to this action, and therefore, the Court should disregard his

citizenship for diversity jurisdiction purposes. Defendants argue Plaintiffs have failed to

state a viable claim against William Bowers because the Amended Complaint fails to plead

fraud with particularity as required under Rule 9(b).

Rule 9(b) requires that, "in all averments of fraud or mistake, the circumstances

constituting fraud or mistake shall be stated with particularity." FED. R. CIV. PRO. 9(b)

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(2004). "Federal Rule of Civil Procedure 9(b) requires a pleader of fraud to detail with

particularity the time, place, and manner of each act of fraud, plus the role of each defendant

in each scheme." Lancaster Cmty Hosp. v. Antelope Valley Dist., 940 F.2d 397, 405 (9th Cir.

1991). 

Plaintiffs allege that in October 2004, Plaintiff Walnut Creek and Rhodes Design

entered into a binding agreement to jointly purchase the Yandell Trust property and after

purchase divide the property. Am Compl. ¶¶12-15. The Amended Complaint goes on to

outline the details of the alleged agreement. See Am Compl. ¶¶16-24. Plaintiffs maintain

“Defendants engaged in a pattern of activity, the intent and effect of which was to purchase

the Yandell real property without honoring the terms of the Agreement and the obligation to

transfer the Property to Plaintiffs,” Id. at ¶24. While the Amended Complaint does not allege

Defendant Bowers was a party to the agreement, it does delineate the agreement, target of

the agreement, and specific acts Defendant Bowers allegedly took in furtherance of the

scheme. See, ¶¶24, 29.

Furthermore, although Defendant Bower's specific role in the transaction or various

entities is not outlined in the Amended Complaint, a pleading defect that may be curable

under state law, and that could be cured in state court after remand does not equate to the

total inability to establish a cause of action in state court which is required by fraudulent

joinder jurisprudence. The Fifth Circuit reached a similar conclusion in Hart v. Bayer Corp.,

199 F.3d 235 (5th Cir.2000). In Hart, the defendants contended that the plaintiffs' claim

against the non-diverse defendant was insufficient because it lacked Rule 9(b) particularity

and that removal was therefore proper. Id. at 247 n. 6. The Fifth Circuit disagreed, stating

that “such deficiencies do not normally justify dismissal of the suit on the merits and without

leave to amend.” Id.

Based on the pleadings before it, it appears any deficiency in allegations against

Defendant Bowers could be cured by prefacing each paragraph “Defendants and each of

them” or with clarification as to Defendant Bowers' role in the various entities. While the

Court is mindful of the impact of the “voluntary-involuntary rule,”which bars removal after

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dismissal of a nondiverse defendant unless the dismissal resulted from a voluntary act of

Plaintiff, Defendants have failed to meet their high burden of establishing that the

non-diverse party was fraudulently joined.

Accordingly, 

IT IS HEREBY ORDERED Plaintiff's Motions to Remand are GRANTED. (Dkt.

##9, 12).

IT IS FURTHER ORDERED remanding this matter to the Superior Court of the

State of Arizona in and for the County of Mohave.

DATED this 22nd day of September, 2005.

Case 3:05-cv-00530-MHM Document 37 Filed 09/26/05 Page 4 of 4