HSBC Bank, USA, N.A. v. Fid. Nat'l Title Grp., Inc.

593 F.Supp.3d 1016

HSBC BANK, USA, N.A., AS TRUSTEE on Behalf OF ACE SECURITIES CORP. HOME EQUITY LOAN TRUST and for the Registered Holder of ACE Securities Corp. Home Equity Loan Trust, Series 2006-ASAP5, Asset Backed Passthrough Certificates, Plaintiff,

v.FIDELITY NATIONAL TITLE GROUP, INC. ; Chicago Title Insurance Company ; Ticor Title of Nevada, Inc.; Doe Individuals I through X; and Roe Corporations XI through XX, inclusive, Defendants.

Case No. 2:21-cv-00153-KJD-NJK

United States District Court, D. Nevada.

Signed March 25, 2022

Darren T. Brenner, Lindsay Dragon, Wright, Finlay & Zak, LLP, Las Vegas, NV, for Plaintiff.

Kevin Samuel Sinclair, Sinclair Braun LLP, Encino, CA, for Defendants Fidelity National Title Group, Inc., Ticor Title of Nevada, Inc.

Kevin Samuel Sinclair, Sinclair Braun LLP, Encino, CA, Scott E. Gizer, Sophia Shunwan Lau, Early Sullivan Wright Gizer & McRae LLP, Las Vegas, NV, Gary L. Compton, Las Vegas, NV, for Defendant Chicago Title Insurance Company.

ORDER GRANTING PLAINTIFF'S MOTION TO REMAND

Kent J. Dawson, United States District Judge Before the Court are Plaintiff's Motion to Remand (ECF #6) and Motion for Attorney Fees (ECF #7). Defendant responded in opposition (ECF #18) to which Plaintiff replied (ECF #22).

I. Background

On May 11, 2021, the parties stipulated to stay this action pending the appeal of a similar case. (ECF #26). The Ninth Circuit issued its ruling on the appeal on November 5, 2021. Wells Fargo Bank, N.A. v. Fidelity Nat'l Title Ins. Co., No. 19-17332, 2021 WL 5150044 (9th Cir. Nov. 5, 2021). The parties have not requested that the stay be lifted, but the purpose of the stay was to await the resolution of that appeal. As such, the Court lifts the stay to rule on the instant motion. Dependable Highway Exp., Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th Cir. 2007) ("[A] district court possesses the inherent power to control its docket and promote efficient use of judicial resources.").

This is a breach of contract and insurance bad faith lawsuit arising from a title insurance claim. (ECF #6 at 2). HSBC Bank, USA, N.A. ("HSBC Bank") is the beneficiary of a deed of trust encumbering real property in Nevada. Id. HSBC Bank alleges that Ticor Title of Nevada, Inc. ("Ticor Nevada") and Chicago Title Insurance Company ("Chicago Title") entered into a contractual relationship insuring the deed of trust in superior position to competing liens. Id. at 3. The Homeowners Association ("HOA") eventually foreclosed on its lien in April 2015. Id. HSBC Bank filed the instant lawsuit in Nevada state court on January 28, 2021. Id. at 4. Chicago Title removed the case to this Court on the same day. Id. HSBC Bank now moves for remand, arguing that Chicago Title's "snap removal" is procedurally improper. Id. Chicago Title contends that under the plain language of the removal statute, snap removal is proper. Id. at 14. Chicago Title also argues that Ticor Nevada is a fraudulently joined defendant who was only added to trigger the forum defendant rule and prevent removal to federal court. Id. at 14. Chicago Title is a Florida corporation with its principal place of business in Florida; Fidelity National Title Group, Inc. is a Delaware corporation with its principal place of business in Florida; HSBC Bank is a national banking association with its main office in Virginia; and Ticor Nevada is a Nevada corporation with its principal place of business in Nevada. (ECF #1, at 2).

There are many similar actions currently being litigated in Nevada and this issue of snap removal has become a common question. To date, six judges in the District of Nevada have ruled on the issue.¹ Five, including this Court, have found that snap removal is improper and remanded the cases to state court, while one judge has denied remand, ruling that the snap removal is an acceptable practice according to the plain language of the statute.² The Court joins the majority of the judges in the District and finds that Defendant's snap removal prior to service was improper and the forum defendant rule requires a remand to state court.

II. Legal Standard

Federal courts are courts of limited jurisdiction. See U.S. CONST. art. III, § 2, cl. 1 ; Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 374, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978). Accordingly, there is a strong presumption against removal. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). A defendant may remove any civil action from state court when the federal district court has original jurisdiction. 28 U.S.C. § 1441(a). A diversity case cannot be removed if "any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." Id. at § 1441(b)(2). Courts strictly construe the removal statute against removal, and "[f]ederal jurisdiction must be rejected if there is any doubt as to right of removal in the first instance." Gaus, 980 F.2d at 566. The removing party bears the burden of establishing federal jurisdiction. California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 838 (9th Cir. 2004).

Removal based on diversity jurisdiction requires complete diversity, meaning "the citizenship of each plaintiff is diverse from the citizenship of each defendant." Caterpillar, Inc. v. Lewis, 519 U.S. 61, 68, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996). However, when "determining whether there is complete diversity, district courts may disregard the citizenship of a non-diverse defendant who has been fraudulently joined." Grancare, LLC v. Thrower by & through Mills, 889 F.3d 543, 548 (9th Cir. 2018) (citing Chesapeake & Ohio Ry. Co. v. Cockrell, 232 U.S. 146, 152, 34 S.Ct. 278, 58 L.Ed. 544 (1914)).

III. Analysis

Chicago Title argues that the plain language of the removal statute permits removal of this action. Chicago Title focuses on the language of the statute, which states that diversity actions may not be removed "if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." 28 U.S.C. § 1441(b)(2) (emphasis added). This is known as the forum defendant rule. Chicago Title argues that because it removed the action prior to any defendant being served, the forum-defendant rule does not apply. Additionally, Chicago Title argues that Ticor Nevada, the forum defendant, was fraudulently joined, and as such, the Court should ignore its citizenship when making a diversity determination. HSBC Bank argues that this removal promotes gamesmanship by defendants and undermines the purpose of the forum defendant rule.

A. Ticor Nevada was not Fraudulently Joined

Fraudulent joinder can be established two ways: "(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court." Grancare, LLC, 889 F.3d at 548 (quoting Hunter v. Philip Morris USA, 582 F.3d 1039, 1044 (9th Cir. 2009) ) (internal quotation marks omitted). Under the second prong, a fraudulent joinder "fails to state a cause of action against the resident defendant" if "the failure is obvious according to the settled rules of the state." McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). Put differently, the defendant need show that a non-diverse party joined in the action cannot be liable on any theory. Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). "A defendant invoking federal court diversity jurisdiction on the basis of fraudulent joinder bears a ‘heavy burden’ since there is a ‘general presumption against [finding] fraudulent joinder.’ " Grancare, LLC, 889 F.3d at 548 (9th Cir. 2018) (quoting Hunter, 582 F.3d at 1046 ). The Ninth Circuit has "declined to uphold fraudulent joinder rulings where a defendant raises a defense that requires a searching inquiry into the merits of the plaintiff's case, even if that defense, if successful, would prove fatal." Id.

Chicago Title argues that removal was proper because the only forum defendant, Ticor Nevada, was fraudulently joined. (ECF #18, at 1). HSBC Bank brings five claims against Ticor Nevada: (1) declaratory judgment on the insurance policy; (2) breach of contract; (3) bad faith and breach of the covenant of good faith and fair dealing; (4) deceptive trade practices under NRS § 41.600 and NRS § 598.0915 ; and (5) unfair practices in settling claims under NRS § 686A.310 (ECF #1, at 21–29).

The Court cannot find that HSBC Bank has failed to state a cause of action against Ticor Nevada. Chicago Title contests the validity of HSBC Bank's contract claims, alleging Ticor Nevada was not a party to the contract. To support its assertion, Defendant argues that Ticor Nevada did not underwrite the policy. In addition, Chicago Title attacks the alter-ego allegations against Ticor Nevada as an alternative form of liability. However, Chicago Title largely overlooks HSBC Bank's claims against Ticor Nevada for deceptive trade practices under NRS 41.600 and 598.0915 and unfair claim-settling practices under NRS 686A.310. Chicago Title's only argument that these claims are fruitless is that the statute of limitations has expired given the "purported misrepresentation occurred 15 years ago." (ECF #18, at 17). However, actions "against a person alleged to have committed a deceptive trade practice ... shall be deemed to accrue when the aggrieved party discovers, or by the exercise of due diligence should have discovered, the facts constituting the deceptive trade practice." NEV. REV. STAT. § 11.190(2)(d). HSBC Bank alleges that it was not aware of deceptive trade practice until it discovered the internal memoranda and guidelines that Defendants allegedly withheld. (ECF #22, at 13). The fact that the purported misrepresentation occurred over 15 years ago, as Chicago Title argues, is irrelevant. The important question is when HSBC Bank discovered or reasonably should have discovered facts giving rise to the action. Based on the...