Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_07-cv-00973/USCOURTS-caed-2_07-cv-00973-0/pdf.json

Parties Involved:
Hytorc Division of Unex Corporation
Defendant
Hytorc of California, Inc.
Defendant
Hytorc of Michigan, Inc.
Defendant
Michigan Industrial Equipment
Defendant
Mike Perry
Defendant
Power-Draulics, Inc.
Defendant
Wrex Sarah
Plaintiff
Tom Smith
Defendant
Unex Corporation
Defendant

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UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

WREX SARAH, 

NO. CIV. S-07-973 LKK/KJM 

Plaintiff,

v.

O R D E R

UNEX CORORATION; HYTORC

DIVISION OF UNEX CORPORATION;

HYTORC OF CALIFORNIA, INC.;

POWER-DRAULICS, INC.; MICHIGAN

INDUSTRIAL EQUIPMENT; TOM

SMITH; MIKE PERRY; HYTORC OF

MICHIGAN, INC; AND DOES 1 to 50,

Defendants.

 /

This is a negligence and products liability action arising

from an injury that plaintiff suffered while using a hydraulic

torque wrench. The action was originally commenced in Shasta

County Superior Court and named both California and non-California

defendants. Non-resident defendant Unex Corporation removed the

action based on diversity jurisdiction, alleging that the

California defendants were fraudulently joined and therefore should

be disregarded. Pending before the court is plaintiff’s motion to

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remand. The court resolves the motion on the papers and after oral

argument. For the reasons set forth below, the court grants

plaintiff’s motion and remands the action to Shasta County Superior

Court. 

I. Background

Plaintiff Wrex Sarah, a citizen of California, alleges that

he suffered injury when, in 2005, a hydraulic torque wrench

malfunctioned and caused hydraulic fluid to be injected into his

left hand. In his complaint, plaintiff identified the subject

wrench as having the brand name “Hytorc.” 

Plaintiff originally filed suit in Shasta County Superior

Court in 2006 seeking compensatory and punitive damages under

products liability and general negligence theories. In his

original suit, there were two defendants: Hytorc of California

and Power-Draulics, Inc., both California corporations.

During discovery in the state court action, Mr. Sarah’s

employer, Roger Meyer, was deposed. Mr. Meyer testified that

the subject wrench was purchased from a Hytorc representative in

Michigan, not California. In response to this testimony,

plaintiff sought to name additional Doe defendants, including

the Michigan division of Hytorc. Plaintiff’s counsel proposed a

stipulation to add the necessary Doe defendants. The parties,

however, were unable to reach a mutually agreeable stipulation. 

Because the statute of limitations on plaintiff’s personal

injury claims was to expire five days following the deposition,

the parties stipulated to dismissal of the existing action

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without prejudice and the filing of a new complaint naming the

additional defendants. 

The original complaint was therefore dismissed without

prejudice and the new complaint was filed on January 31, 2007. 

The newly added defendants included, among others, Unex

Corporation, Hytorc Division of Unex Corporation, Michigan

Industrial Equipment, and Hytorc of Michigan. The new

defendants are not California citizens. After the new complaint

was filed, defendant Unex removed the action to federal court

pursuant to 28 U.S.C. § 1441(b), alleging that Hytorc of

California and Power-Draulics (the “California defendants”) were

fraudulently joined. Pending before the court is plaintiff’s

motion to remand. Only Hytorc of California and Unex Corporation

filed an opposition.

II. Standard

Civil actions not involving a federal question are

removable to a federal district court if there is diversity of

citizenship between the parties. 28 U.S.C. § 1332(a)(1). 

Section 1332 requires that there be complete diversity; that is,

each plaintiff's citizenship must be diverse as to each

defendant's citizenship. Id. A defendant may remove a civil

action that alleges claims against a non-diverse defendant when

the plaintiff has no basis for suing that defendant, or in other

words, when that defendant has been fraudulently joined. McCabe

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

“‘If the plaintiff fails to state a cause of action against

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 Section 1447(c) provides:

A motion to remand the case on the basis of any defect

other than lack of subject matter jurisdiction must be

made within 30 days after the filing of the notice of

removal under section 1446(a). If at any time before

final judgment it appears that the district court lacks

subject matter jurisdiction, the case shall be remanded.

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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, 811 F.2d at 1339). 

Where a non-diverse defendant has been "fraudulently joined" to

an otherwise completely diverse case, that defendant is

disregarded for diversity jurisdiction purposes. See, e.g.,

Calero v. Unisys Corp., 271 F. Supp. 2d 1172, 1176 (N.D. Cal.

2003). 

III. Analysis

A. Timeliness of Plaintiff’s Motion to Remand 

As a preliminary matter, defendants argue that plaintiff’s

motion to remand is untimely, because it has not been brought

within 30 days of removal as required by 28 U.S.C. § 1447(c).1 

Defendants misunderstand the nature of plaintiff’s motion

to remand, characterizing it as alleging a violation of the “no

local defendant” rule. Defendants argue that such a motion

alleges a procedural defect in the removal process, which is

subject to the 30 day limitation provided by Section 1447(c),

rather than a defect in subject matter jurisdiction, which is

not subject to the 30 day time limit. 

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2 28 U.S.C. § 1441(b) provides:

Any civil action of which the district courts have

original jurisdiction founded on a claim or right arising

under the Constitution, treaties or laws of the United

States shall be removable without regard to the

citizenship or residence of the parties. Any other such

action shall be removable 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.

3 To take a simple example, if a citizen of New York sued a

citizen of California in California state court, the California

defendant could not properly remove the case to federal court. If

he or she did, the New York plaintiff would have 30 days to remand

the case.

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The “no local defendant” rule, also known as the forum

defendant rule, is provided by 28 U.S.C. § 1441(b).2 The rule

acts as a limit on federal diversity jurisdiction and provides

that removal is improper where “any party in interest properly

joined and served as a defendant is a citizen of the state in

which the action is brought.” Lincoln Prop. Co. v. Roche, 546

U.S. 81, 89-90 (2005). In other words, where there is complete

diversity between the parties, but the defendant already has the

“home field advantage” in state court, removal is

inappropriate.3 In such cases, the plaintiff has 30 days to

file a motion to remand. See Lively v. Wild Oats Mkts., Inc.,

456 F.3d 933 (9th Cir. 2006). 

In the instant case, however, plaintiff’s motion does not

allege violation of the forum defendant rule. Instead,

plaintiff’s motion alleges lack of diversity between himself and

the California defendants. Challenges to a court’s subject

matter jurisdiction are not waivable and may be raised at any

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time. Fed. R. Civ. P 12(h)(3); Am. Fire & Cas. Co. v. Finn, 341

U.S. 6, 17-18 (1951) (defects in subject matter jurisdiction are

not waivable); Emrich v. Touche Ross & Co., 846 F.2d 1190, 1194

(9th Cir. 1988) (jurisdictional challenges may be raised at any

time).

B. Fraudulent Joinder

On a motion to remand, the removing defendant faces a

strong presumption against removal and bears the burden of

establishing that removal was proper. Sanchez v. Monumental

Life Ins. Co., 102 F.3d 398, 403-04 (9th Cir. 1996). 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).

In order to establish that a non-diverse defendant has been

fraudulently joined, the removing party also carries the heavy

burden of establishing the absence of any possibility of

recovery. Ritchey, 139 F.3d at 1318. The claim of fraudulent

joinder must be supported by clear and convincing evidence. 

Hamilton Materials Inc. v. Dow Chem. Corp.,(9th Cir. 2007). 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.

The court must initially resolve all disputed questions of

fact and all ambiguities in favor of the non-removing party. 

Macey v. Allstate Prop. & Cas. Ins. Co., 220 F. Supp. 2d 1116,

1117-18 (N.D. Cal. 2002). If, after doing so, there is any

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possibility that the non-removing party may recover against the

party whose joinder is questioned, the court must deny the

motion to remand. Plute v. Roadway Package Sys., Inc., 141 F.

Supp. 2d 1005, 1012 (N.D. Cal. 2001).

Here, defendants simply allege that they were not involved

at all with the allegedly defective product and were therefore

fraudulently joined in the current action. As explained below,

however, defendants fail to support this allegation with clear

and convincing evidence to establish that plaintiff has no

possibility of recovery against them.

1. Power-Draulics

Plaintiffs allege that California defendants Hytorc of

California and Power-Draulics, Inc. participated in the design,

manufacture, distribution, and/or service of the subject wrench,

and are therefore liable for products liability and negligence. 

With regard to Power-Draulics, defendants have not provided

any evidence showing that the company was not involved with the

manufacture, distribution, or service of the product. Instead,

defendants rely on the fact that Power-Draulics was voluntarily

dismissed by plaintiff from the original state action to somehow

show an insufficient nexus between Power-Draulics and

plaintiff’s injury to sustain the present action. At best,

defendants raise a disputed issue of fact regarding whether

Power-Draulics was involved with the manufacture, distribution,

or repair of the wrench. For the purposes of fraudulent joinder

analysis, however, all disputed questions of fact must be

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construed in favor of the non-removing party. Macey, 220 F.

Supp. 2d at 1117-18. Accordingly, the court must assume that

Power-Draulics was, in fact, involved.

2. Hytorc of California

Because defendants have failed to meet its burden of

proving that Power-Draulics was fraudulently joined, the court

need not reach the question of whether Hytorc of California was

fraudulently joined. Where there is at least one non-diverse,

properly joined defendant, the district court lacks subject

matter jurisdiction, and must remand the action to state court. 

Green v. Amerada Hess Corp., 707 F.2d 201, 206 (5th Cir. 1983)

("[I]f there is even a possibility that a state court would find

a cause of action stated against any one of the named in-state

defendants on the facts alleged by the plaintiff, then the

federal court must find that the in-state defendants have been

properly joined, that there is incomplete diversity, and that

the case must be remanded to the state courts").

Nevertheless, assuming, arguendo, that Power-Draulics was

fraudulently joined, Hytorc of California has also failed to

meet its heavy burden of proving fraudulent joinder. Hytorc of

California maintains that it was not involved in placing the

allegedly defective product into the stream of commerce, nor in

completing repairs on the product. At oral argument, counsel

for Hytorc of California and Unex noted that, in a separate

motion to dismiss filed after their opposition to the motion to

remand was filed, Better Bolting (allegedly erroneously sued as

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Hytorc of Michigan) admitted that it sold the wrench in Michigan

to plaintiff’s employer, Mr. Meyer. Decl. of Mike Perry ¶ 4.

This information, however, only establishes where the point

of sale occurred. It, like the deposition testimony of Mr.

Meyer relied upon by defendants, does not address who designed

and manufactured the wrench. Plaintiff alleges that Hytorc of

California may have manufactured or assembled the product,

designed or manufactured component parts, labeled or removed

labels from the product, or breached express and implied

warranties. Mr. Meyer’s testimony does not address any of these

issues, and therefore does not clearly and convincingly show

that there is no hope of recovery against Hytorc of California.

Likewise, the invoices tendered by defendants do not

demonstrate the absence of potential liability. For example,

the invoice dated July 29, 2002 shows the shipment of various

Hytorc products from defendant Unex Corporation in New Jersey to

defendant Michigan Industrial Equipment in Michigan, but the

wrench in question is not among these products.

Finally, defendants point to the lack of evidence that

Hytorc of California was in fact involved. For the purposes of

fraudulent joinder, the court does not examine whether

plaintiffs can prove their case, but merely whether they have

stated a valid claim under state law against the resident

defendants. Perez v. AT&T Co., 139 F.3d 1368, 1380-1381 (11th

Cir. 1998). In short, defendants have failed to show by clear

and convincing evidence that Hytorc of California was not

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involved with the product as alleged by plaintiff.

IV. Conclusion

For the reasons set forth above, plaintiff’s motion to

remand is GRANTED and the action is REMANDED to Shasta County

Superior Court.

IT IS SO ORDERED.

DATED: August 16, 2007.

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