Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-03325/USCOURTS-cand-3_05-cv-03325-2/pdf.json

Parties Involved:
Circuit City Stores West Coast, Inc
Defendant
Richard Lindstrom
Plaintiff
Christine Steel
Plaintiff
Whirlpool Corporation
Defendant

Document Text:

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

RICHARD LINDSTROM and CHRISTINE

STEEL, individually and as Personal

Representatives of THE ESTATE OF MARY

FRANCES LEE, deceased,

Plaintiffs,

 v.

WHIRLPOOL CORPORATION, CIRCUIT

CITY STORES WEST COAST, INC., and

DOES 1 through 30, inclusive,

Defendants. /

No. C-05-3325 MMC

ORDER GRANTING PLAINTIFFS’

MOTION TO REMAND

(Docket No. 9)

Before the Court is the motion to remand filed September 13, 2005 by plaintiffs

Richard Lindstrom (“Lindstrom”) and Christine Steel (“Steel”). Defendants Whirlpool

Corporation (“Whirlpool”) and Circuit City Stores West Coast, Inc. (“CCWC”) have filed

opposition to the motion, to which plaintiffs have filed a reply. In an order filed October 31,

2005, the Court vacated the November 4, 2005 hearing on the motion and permitted

defendants to file a supplemental memorandum addressing plaintiffs’ new argument, set

forth in their reply, that CCWC is not fraudulently joined because it is liable on an

“independent duty to warn” theory. Defendants have filed a supplemental memorandum. 

Having considered the papers filed in support of and in opposition to the motion, and for the
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reasons set forth below, the motion to remand is GRANTED.

BACKGROUND

On July 6, 2005, in the Superior Court of California for the County of Contra Costa,

plaintiffs filed the instant wrongful death/products liability action against defendants

Whirlpool and CCWC. Plaintiffs allege that on March 6, 1993, Mary Frances Lee (“Lee”)

bought a defective Whirlpool dishwasher from Circuit City Store 235 in Concord, California. 

(See Compl. ¶ 10; see also Lindstrom Decl. Ex. 1.) Plaintiffs further allege that on July 12,

2004, while Lee was using the dishwasher in accordance with its intended use, the

dishwasher caught fire, causing injuries that resulted in Lee’s death. (See Compl. ¶¶ 15-

20.) Plaintiffs thereafter brought suit against Whirlpool, as the manufacturer of the

dishwasher, and CCWC, as the distributor of the dishwasher. (See Compl. ¶¶ 1-2.) On

August 15, 2005, defendants removed the complaint to federal court on the basis of

diversity jurisdiction. (See Notice of Removal ¶¶ 1-2.) 

The complaint alleges that, at all relevant times, plaintiff Lindstrom and decedent

Lee were citizens of California and that plaintiff Steel was a citizen of Oregon. (See Compl.

¶ 3; Notice of Removal ¶ 4.) Whirlpool is a Delaware corporation having its principal place

of business in Michigan. (See Notice of Removal ¶ 2.) CCWC is a California corporation

having its principal place of business in California. (See id. ¶ 3.) Although for purposes of

the instant motion, defendants concede that Lindstrom, Lee, and CCWC are California

citizens, defendants contend CCWC is fraudulently joined and, therefore, its citizenship

should be disregarded for purposes of establishing diversity jurisdiction. (See id. ¶¶ 3-4.) 

LEGAL STANDARD

Where, as here, removal is based on diversity jurisdiction, the action may be

removed “only if none of the parties in interest properly joined and served as defendants is

a citizen of the State in which such action is brought.” See 28 U.S.C. § 1441(b).

Generally, diversity jurisdiction exists only where there is “complete diversity” among

plaintiffs and defendants, i.e., where the “citizenship of each plaintiff is diverse from the

citizenship of each defendant.” See Caterpillar, Inc. v. Lewis, 519 U.S. 61, 68 n.3.
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One exception to the requirement of complete diversity, however, “is where a nondiverse defendant has been ‘fraudulently joined.’” See Morris v. Princess Cruises, Inc., 236

F.3d 1061, 1067 (9th Cir. 2001). “Joinder of a non-diverse defendant is deemed

fraudulent, and the defendant’s presence in the lawsuit is ignored for purposes of

determining diversity, ‘[i]f 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.’” Id.

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

Once an action has been removed, “[i]f at any time before final judgment it appears

that the district court lacks subject matter jurisdiction, the case shall be remanded.” See

28 U.S.C. § 1447(c). In considering the propriety of removal, a district court must “strictly

construe the removal statute against removal jurisdiction,” and jurisdiction “must be

rejected if there is any doubt as to the right of removal in the first instance.” See Gaus v.

Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). This “‘strong presumption’ against removal

jurisdiction means that the defendant always has the burden of proving that removal is

proper.” See id.

DISCUSSION

The parties’ disagreement with respect to jurisdiction centers around CCWC’s status

as a successor corporation.

It is undisputed that CCWC did not exist until February 1, 1994, (see Bennett Decl.

Exs. 3, 5; see also Dunn Decl. ¶ 11), almost a year after Lee purchased the allegedly

defective dishwasher on March 6, 1993, (see Lindstrom Decl. Ex. 1), and that, at the time

of the subject purchase, Store 235 was owned and operated by Circuit City Stores, Inc.

(“CCS”), (see Dunn Decl. ¶ 9.) It also is undisputed that on February 1, 1994, CCS formed

CCWC as a wholly owned subsidiary for the purpose of managing and operating CCS’s

West Coast Retail Operations, and that on May 1, 1994, CCS purchased all shares of

CCWC and transferred all assets associated with CCS’s West Coast Retail Operations,

including Store 235, to CCWC as consideration for the transaction. (See id. at ¶¶ 11-14.) 

Relying on Gee v. Tenneco, Inc., 615 F.2d 857 (9th Cir. 1980), plaintiffs argue that
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 Although plaintiffs and defendants devote considerable time to discussing whether,

pursuant to Ray v. Alad Corp., 19 Cal.3d 22 (1977), CCWC can be held directly liable as a

corporate successor to CCS, the Court need not reach that issue because, as discussed

infra, plaintiff’s contention that CCWC may be liable on an independent duty to warn theory

requires that the action be remanded.

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Recognizing that “succession alone does not impose a duty to warn,” the Ninth

Circuit went on to conclude that Gee had failed to present evidence sufficient to withstand

summary judgment. See id.

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CCWC acquired an independent duty to warn customers, including Lee, because it had

actual or constructive knowledge of defects in products sold by its predecessor, CCS.1

 In

Gee, the Ninth Circuit, after remarking on the absence of California law on the issue of “a

successor corporation’s duty to warn of defects in products manufactured by a

predecessor,” found it appropriate to “examine precedents elsewhere in order to determine

whether the district judge accurately approximated California law.” See id. at 866. Citing

case law from other jurisdictions, the Ninth Circuit noted that “a successor corporation may

acquire an independent duty to warn where defects in a predecessor’s products come to its

attention,” particularly where there has been a “continuation of the relationship between the

successor and the customers of the successor.” See id.

2

 

Defendants, for their part, rely on Burroughs v. Precision Airmotive Corp., 78 Cal.

App. 4th 681 (2000), wherein the California Court of Appeal, in affirming summary

judgment in favor of a successor corporation, observed that “California has not expressly

adopted this independent duty to warn theory of liability.” See id. at 695. The court

acknowledged that “other jurisdictions, as well as the Restatement of Law have recognized

it,” see id., but went on to state that “even if [the court] were inclined to do so,” adoption of

such a theory was “not warranted in the circumstances of [that] case,” see id. at 698. In

particular, given the industry at issue therein, aircraft parts manufacture, the duties and

obligations of the defendant “were imposed on it by federal law.” See id. Consequently,

the Court of Appeal reasoned, “[i]mposing a separate and independent duty based on

general principles of tort law would not only be superfluous in light of the federal statutory

scheme regulating and overseeing the duties of manufacturers in the general aviation
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 Defendants argue that even if an independent duty to warn theory were adopted,

plaintiffs are unable to make the requisite factual showing. Because such theory has been

neither adopted nor rejected by the California courts, however, the parameters of liability

thereunder have yet to be established in this state.

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industry, but would also directly conflict with that statutory scheme.” See id. As the instant

case does not arise in the context of the aviation industry, Burroughs is distinguishable on

its facts. Further, because the Court of Appeal in Burroughs was not called upon to reach

what is, for California, a matter of first impression, Burroughs does not foreclose plaintiffs’

reliance on an independent duty to warn theory herein. 

In sum, because, to date, no California case has adopted an independent duty to

warn theory as a basis for liability, and no California case has rejected it, whether California

recognizes a claim based on an independent duty to warn under the circumstances

presented in the instant case is unclear.3 As a consequence, the Court cannot say it is

“obvious according to the settled rules of the state” that plaintiffs have failed to plead a

claim against CCWC. See Morris, 236 F.3d at 1067. Further, because a district court must

“strictly construe the removal statute against removal jurisdiction,” and jurisdiction “must be

rejected if there is any doubt as to the right of removal in the first instance,” see Gaus, 980

F.2d at 566, the Court finds defendants have failed to meet their burden of demonstrating

that CCWC is fraudulently joined. Consequently, the Court finds that complete diversity

was lacking at the time of removal and, accordingly, the matter must be remanded.

Finally, plaintiffs move for an award of attorneys’ fees and costs pursuant to 28

U.S.C. § 1447(c). While recognizing a plaintiff need not demonstrate bad faith on the part

of a removing defendant, the Court finds an award of fees and costs is not warranted here. 

See Moore v. Permanente Medical Group, Inc., 981 F.2d 443, 446 (9th Cir. 1992) (“The

[award of attorneys’ fees under § 1447(c)] is left to the court’s discretion, to be exercised

based on the nature of the removal and the nature of the remand.”).

//

CONCLUSION
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For the reasons set forth above, plaintiffs’ motion to remand is hereby GRANTED,

plaintiffs’ motion for attorneys’ fees and costs is hereby DENIED, and the instant action is

hereby REMANDED to the California Superior Court for the County of Contra Costa.

The Clerk shall close the file.

IT IS SO ORDERED.

Dated: November 15, 2005 

MAXINE M. CHESNEY

United States District Judge