Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_14-cv-01856/USCOURTS-casd-3_14-cv-01856-0/pdf.json

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

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

HAMILTON SAN DIEGO

APARTMENTS, LP, a California

Limited Partnership,

Plaintiff,

CASE NO. 14cv01856 WQH

(BLM)

ORDER

vs.

RBC CAPITAL MARKETS, LLC, an

Illinois limited liability company; RBC

CAPITAL MARKETS

CORPORATION, an Illinois

corporation; and DOES 1 through 50,

inclusive,

Defendants.

HAYES, Judge:

The matter before the Court is Plaintiff’s Motion to Remand. (ECF No. 9).

I. Background

On July 30, 2012, Plaintiff filed a complaint against RBC Capital Markets

Corporation, an Illinois Corporation and RBC Dain Rauscher, Inc., an Illinois

Corporation, in the San Diego Superior Court, Case No. 37-2012-00101475-CU-BCCTL. The initial action alleged: (1) breach of contract, (2) breach of the implied

covenant of good faith and fair dealing, (3) intentional interference with contractual

advantage, and (4) intentional interference with economic advantage. (ECF No. 1 at ¶4-

5). On September 17, 2012, the Defendants removed the initial action to the Southern

District Court of California claiming original jurisdiction under 28 U.S.C. §1332(a)(1)

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because the amount in controversy exceeded $75,000 and involved citizens of different

states. Id. at ¶6. On March 27, 2013, Plaintiff dismissed the initial action. Id. at ¶9. 

On April 10, 2013, Plaintiff filed this action against RBC Capital Markets

Corporation, an Illinois Corporation and RBC Dain Rauscher, Inc., an Illinois

Corporation (collectively “RBC”) and WNC & Associates, Inc., WNC Holding, LLC,

and WNC Housing, L.P. (collectively “WNC”) in the San Diego Superior Court, Case

No. 37-2013-00043450-CU-BC-CTL. (ECF No. 1, Ex. 1). Plaintiff alleged the

following causes of action against both RBC and WNC: (1) breach of contract, (2)

breach of the implied covenant of good faith and fair dealing, (3) intentional

interference with contractual advantage, (4) intentional interference with economic

advantage, and (5) fraud in the inducement. Id.

On June 18, 2014, Plaintiff filed a Request for Dismissal with Prejudice as to the

WNC Defendants and WNC was dismissed from the action. (ECF No. 1 ¶ 20). 

On August 6, 2014, Defendant removed this action to this Court, asserting

diversity of citizenship between the parties and that the amount in controversy exceeded

$75,000. Id. at ¶ 25-35; see 28 U.S.C. § 1332.

On September 5, 2014, Plaintiff filed the Motion to Remand on the grounds that

(1) Defendant’s removal notice was untimely, (2) inclusion of WNC and subsequent

dismissal of WNC from the case is not evidence of bad faith, and (3) Defendant

independently waived any right to remove the case.1

 (ECF No. 9). On September 29,

2014, Defendant filed an opposition to the Motion to Remand asserting that removal

was timely because Plaintiff joined WNC in bad faith to prevent removal. (ECF No.

13).

II. Analysis

Title 28 U.S.C. § 1446(b) provides that “a notice of removal may be filed within

thirty days after receipt by the defendant, through service or otherwise, of a copy of an

1

 The Court does not address Plaintiff’s third ground for removal that the Defendant

independently waived any right to remove the case because the Court grants Plaintiff’s Motion

to Remand based on the first two grounds.

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amended pleading, motion, order or other paper from which it may first be ascertained

that the case is one which is or has become removable.” 28 U.S.C. § 1446(b)(3)

(emphasis added). However, “[a] case may not be removed under subsection (b)(3) on

the basis of jurisdiction conferred by section 1332 more than 1 year after

commencement of the action, unless the district court finds that the plaintiff has acted

in bad faith in order to prevent a defendant from removing the action.” 28 U.S.C. §

1446(c)(1). 

A defendant bears the burden of establishing federal jurisdiction. Abrego Abrego

v. The Dow Chemical Co., 443 F.3d. 676, 682 (9th Cir. 2006). “Removal statutes are

strictly construed against removal.” Luther v. Countrywide Home Loan Servicing LP,

533 F.3d 1031, 1034 (9th Cir. 2008). “Federal 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). 

A. Contentions of Parties

Defendant contends that, “Notice of Removal is timely pursuant to 28 U.S.C. §

1446(c)(1) because Hamilton acted in bad faith to prevent RBC from removing the

action.” (ECF No. 1). Defendant contends that WNC, a non-diverse defendant, was

named in the complaint “solely to prevent RBC from exercising its right to remove this

action to federal court.” (ECF No. 13 at 6). Defendant contends that a finding of bad

faith is supported by the following facts:

a. In its 2012 Complaint, Hamilton alleged the same claims against RBC based on the same theory it asserts in the 2013 Complaint, yet in the 2012 Complaint Hamilton sued only RBC. (Cf. 2013 Compl. and 2012 Compl.)

b. On March 27, 2013, after losing two successive Motions to Dismiss in this Court and on the eve of RBC’s targeted date to file the Rule 11

Motion, Hamilton voluntarily dismissed the Federal Action. (Bareket

Decl. ¶¶ 6-17, Exs. D, H, I.)

c. On April 10, 2013, Hamilton filed the 2013 Complaint, naming WNC and alleging a conspiracy between RBC and WNC to commit the same

alleged wrongful conduct that Hamilton had attributed solely to RBC in the 2012 Complaint. (Cf. 2013 Compl. and 2012 Compl.) These new allegations were made despite the fact that Hamilton obtained no

discovery from RBC or any other person or entity during the Federal

Action.

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d. On November 1, 2013, WNC represented to RBC that Hamilton and

WNC had a confidential agreement that would result in WNC’s imminent

dismissal. (Haeusler Decl. ¶¶ 2-3.) This representation was made

immediately prior to a Case Management Conference attended by

Hamilton’s counsel, Mr. Vivoli. (Id.) WNC’s dismissal, however, conveniently did not come until shortly after the one-year deadline from when the case was re-commenced in State Court.

e. Despite the fact that Hamilton made sweeping allegations of conspiracy between WNC and RBC, even after filing the 2013 Complaint, Hamilton sought no discovery of any kind from either WNC or RBC or from any

third party. (Bareket Decl. ¶ 20.)

f. Having made no investigation into its purported claims against WNC before or after filing the 2013 Complaint, and soon after the one year limitation for removal expired, Hamilton dismissed WNC, with prejudice, for “no monetary or other compensation.” (Bareket Decl. ¶ 22 Ex. K.)

Id. at 11. Defendant contends that “[t]his case was not removable on the face of the

2013 Complaint, even after WNC was dismissed .... Thus, RBC had 30 days from the

receipt of an ‘other paper’ that rendered this case removable to file Notice of Removal.” 

Id. Defendant contends that “other paper” indicating removal was not received until

July 10, 2014, when Plaintiff’s counsel confirmed that “there was no monetary or other

compensation paid .... as part of the settlement” with WNC. Defendant asserts that the

notice of removal, filed August 6, 2014 was within the 30 day filing period. Id.

Plaintiff contends that WNC was joined in good faith based on discovery in a

prior action which revealed WNC’s tortious misconduct in “extricat[ing] itself from the

project in a rapidly failing market....” (ECF No. 9 at 4). Plaintiff explains that WNC

was voluntarily dismissed from this action, “[a]s the result of a settlement of an

unrelated business dispute between Plaintiff and WNC Defendants involving their other

common project, Plaintiff was required to dismiss the WNC defendants from this case

in exchange for no separate monetary or other consideration from WNC.” Id. at 4-5. 

Plaintiff contends that the 30 day clock to timely file for removal began on June 18,

2014 when WNC was dismissed, and that the August 6, 2014 removal was not timely.

Id. at 5. 

B. Ruling of Court

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The parties agree that removal in this case is presumptively untimely because the

action was removed on August 6, 2014, which is more than one year after it commenced

on April 10, 2013. (ECF No. 1; ECF No. 9). “A case may not be removed ... more than

one year after the commencement of the action, unless the district court finds that the

plaintiff has acted in bad faith in order to prevent a defendant from removing the

action.” 28 U.S.C. § 1446(c)(1). “The bad faith requirement sets a high threshold...” 

Primus Automotive Financial Services, Inc. v Batarse, 115 F.3d 644, 649 (9th Cir.

1997). The Court of Appeals for the Ninth Circuit has explained in a different context

that “[a] finding of bad faith is warranted where an attorney ‘knowingly or recklessly

raises a frivolous argument, or argues a meritorious claim for the purpose of harassing

an opponent.” Id. (citing In re Keegan Management Co., Sec. Litig., 78 F.3d 431, 436

(9th Cir. 1996)). The Ninth Circuit has further stated that “[a] party demonstrates bad

faith by ‘delaying or disrupting the litigation or hampering enforcement of a court

order.’” Id. (citing Hutto v. Finney, 437 U.S. 678, 689 n. 14 (1978)).

In this case, Plaintiff’s Counsel submitted a sworn declaration which states in

part:

I represented Plaintiff and another entity in a state court case captioned Hamilton San Diego Apartments, LP, et al. v. Professional Property

Management, LLC, et al., San Diego Superior Court Case No. 37-2009-00103507-CU-BC-CTL (“the PPM Action”). The PPM Action

was filed against the property management company, Professional Property Management, LLC (“PPM’) that managed the real property at issue in this case, and another property located in Oakland, California. Both projects involved WNC & ASSOCIATES, INC. (“WNC”), which served as Plaintiff’s capital partner in the projects pursuant to limited

partnership agreements. Within the course of the PPM Action, PPM issued

deposition subpoenas duces tecum to WNC and the RBC Defendants

herein (collectively “RBC”). As a result of those subpoenas, Defendants herein produced their files prior to the deposition of their designated

witness. In reviewing those files, I concluded that Defendants and WNC

had conspired to elevate their own interests above Plaintiff’s interests, in

violation of written agreements between both entities and Plaintiff. As a

result, Plaintiff ultimately filed the Prior Action[.] As to WNC it appeared WNC tried to get out of the project because of a rapidly falling market

and, as to RBC, it appeared RBC conspired to try and foreclose upon

Plaintiff’s asset and the equity RBC realized it could gain through that foreclosure, in addition to acquiring valuable tax benefits due to the

project’s low income housing status.

...

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Although I believed Plaintiff had valid claims against WNC, I did not name WNC as a party to [Suit One] for reasons having to do with

Plaintiff’s ongoing business relationship with WNC in the other project

which the parties were then involved. 

(ECF No. 9-2 ¶ 2-3). The Court finds that Plaintiff states a plausible explanation for

the joinder of WNC in the instant action, but failing to join WNC in the initial action. 

The Declaration submitted by Plaintiff’s counsel further states that:

Before the mediation, I did not initiate discovery against WNC because the documents obtained in the [prior action against WNC], in my view, sufficiently solidified Plaintiff’s claims against WNC such that I did not perceive the need to initiate formal discovery at that time. There was no other reason for my election not to waste my client’s resources conducting additional discovery when I already had sufficient evidence of WNC’s

motives in getting out of the project at issue in this case, which I believed

WNC manufactured grounds to do.

...

Prior to May 30, 2014, I had not taken discovery of Defendants for largely the same reason I had not initiated discovery against WNC. Indeed, the internal emails within RBC were even more damning, in my view, than those involving WNC.

(ECF No. 9-2 ¶ 5-6). 

The Court finds that Plaintiff did not consistently fail to take steps to prosecute

the claims against the RBC or WNC. Defendant contends only that Plaintiff did not

seek discovery from RBC or WNC or make an investigation into its claims against

WNC. The sworn Declaration states a consistent and plausible explanation for

requesting no discovery from WNC or RBC and making no investigation into its claims

against WNC. See Lawson v. Parker Hannifin Corp., No. 13-cv-923-O, 2014 WL

1158880 (N.D. Tex. Mar. 20, 2014) (finding bad faith where plaintiff “consistently

failed to take steps to prosecute her claims against Hanlon, including failing to serve

him with discovery requests or noticing his deposition, and failing to seek a default

judgment when Hanlon failed to timely answer the petition.”).

The Declaration submitted by Plaintiff’s Counsel further states that:

This case was mediated on or about April 23, 2014, a date that was

immediately after I had concluded closing arguments in a three-week jury trial in Yolo County in the case captioned City of Roseville v. AECOM

Technology Corporation, Case No. CV11-1282. And, the City of Roseville

trial was my third this year; such that I was nearly constantly engaged in trial up through that date. Moreover, following that mediation and the City

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of Roseville trial, from May 9, 2014, through June 18, 2014, I was engaged in a jury trial in the case captioned Pacifica Companies, LLC et al. v. Shailesh (“Sunny”) Pate et al., San Diego Superior Court Case No. 37-2012-00092404-CU-NPCTL. ...

At the April 23, 2014 mediation, Plaintiff reached a settlement of WNC’s

involvement in this case.

...

It is my understanding that settlement was more or less dictated by a

recent settlement of another action involving the parties’ other project, in which I did not represent Plaintiff and of which I was not previously

aware.

(ECF No. 9-2 ¶ 4-5). 

Plaintiff has provided consistent plausible reasoning for the timing of the nondiverse Defendant’s dismissal. Moreover, WNC was dismissed on June 18, 2014, more

than two months after the expiration of the one-year limitations period on April 10,

2014. The Court finds that WNC’s dismissal more than two months after the one-year

limitation for removal expired is not indicative of bad faith. Compare Lawson, 2014

WL 1158880 at *1 (finding that “nonsuiting Hanlon shortly after the one-year period

for removal coupled with the belated filing of the notice of nonsuit, and execution of

the Release by Lawson nine days prior to the date she allegedly settled with Hanlon, ...

support the Court’s finding of bad faith forum manipulation.”), and Forth v. Diversey

Corporation, No. 13-cv-808-A, 2013 WL 6096528, *1 (W.D.N.Y. Nov. 20, 2013)

(finding that Plaintiff’s explanations and actions were both “inconsistent and

implausible” leading the court to determine that Defendants had demonstrated by clear

and convincing evidence that Plaintiffs acted in bad faith to prevent Defendants from

removing the action.), with NKD Diversified Enterprises, Inc. v. First Mercury Ins. Co.,

No. 14-cv-00183-AWI-SAB, 2014 WL 1671659, *1 (E.D. Cal. Apr. 28, 2014) (finding

no evidence of bad faith when the non-diverse party was dismissed less than three

months after the expiration of the one-year removal period).

The Court finds that Defendant has not met the high threshold required to

establish bad faith on the part of the Plaintiff. See Primus, 115 F.3d at 649. The facts

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alleged by Defendant do not show that Plaintiff or Plaintiff’s attorney knowingly or

recklessly raised a frivolous argument, or delayed or disrupted the litigation in order to

prevent removal. See Id. at 689. Because Defendant has failed to demonstrate bad

faith, the exception to the one-year removal period does not apply and Defendant’s

removal is untimely.

B. Attorney Fees

Plaintiff contends that, “given the untimely and improper nature of the

Defendants’ efforts to remove this case, Plaintiff should be awarded its attorney’s fees

and costs incurred related to the same” pursuant to 28 U.S.C. § 1447(c). (ECF 14 at

10). The relevant part of 28 U.S.C. § 1447(c) states: “An order remanding the case

may require the payment of just costs and any actual expenses, including attorney fees,

incurred as a result of removal.” 28 U.S.C. § 1447(c). “Whether to award attorney fees

is left to the discretion of the district court.” NKD, 2014 WL 1671659 at *8 (citing

Martin v. Franklin Capital Corp., 546 U.S. 132, 139 (2005)). “Determining whether

attorney fees should be awarded turns on the reasonableness of he removal.” Id. (citing

Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1165 (9th Cir. 2008)). “[A]bsent

unusual circumstances, attorney's fees should not be awarded when the removing party

has an objectively reasonable basis for removal.” Martin v. Franklin Capital Corp.,

546 U.S. at 136.

Although Defendant has not met its burden of establishing bad faith, the Court

finds thatRBC had an objectively reasonable basis for seeking removal. Plaintiff’s

request for attorney fees is denied. 

//

//

//

//

III. Conclusion

IT IS HEREBY ORDERED that the Motion to Remand is GRANTED and

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Plaintiff’s request for attorney fees is DENIED. (ECF No. 9). This action shall be

REMANDED to the Superior Court of California, County of San Diego, where it was

originally filed and assigned Case No. 37-2013-00043450-CU-BC-CTL.

DATED: December 11, 2014

WILLIAM Q. HAYES

United States District Judge

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