Stone-Jusas v. Wal-Mart Stores, Inc.

STACEY STONE-JUSAS, Plaintiff(s), v. WAL-MART STORES, INC., et al., Defendant(s).

Case No. 2:14-cv-00669-JCM-NJK

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA

September 29, 2014

REPORT AND RECOMMENDATION

(Docket Nos. 5, 8)

Pending before the Court is Plaintiff's motion to remand this case to state court. Docket No. 8. Defendant Wal-Mart Stores, Inc. ("Walmart") filed a response in opposition. Docket No. 12. Also pending before the Court is Walmart's motion to sever the claims brought against Defendants Maibel Arbueta and Lynn Schramm (collectively, the "Driving Defendants"). Docket No. 5. Plaintiff filed a response and Walmart filed a reply. Docket Nos. 11, 14. The Court also received supplemental briefing from the parties. Docket Nos. 18-20.¹ The Court finds the motions are properly decided without oral argument. See Local Rule 78-2.

For the reasons discussed more fully below, the undersigned RECOMMENDS that the motion to sever (Docket No. 5) be DENIED, that diversity jurisdiction be found lacking, and that the case be REMANDED.

I. BACKGROUND

Walmart is a citizen of Delaware and Arkansas. See Docket No. 1 at 3. Plaintiff, Arbueta, and Schramm are citizens of Nevada. Compl. ¶¶ 1, 3 (Docket No. 1-2). Plaintiff alleges that, onor about March 16, 2013, she slipped on a discarded hanger left on the floor at a Walmart store. Id. at ¶¶ 6-7. Plaintiff brings claims against Walmart alleging negligence. Plaintiff also alleges that she was a passenger in a vehicle, on or about August 23, 2013, and that she was injured at that time when a car driven by Arbueta ran a red light causing the driver of Plaintiff's car to take evasive action, at which time her car was rear-ended by Schramm's car. Compl. at ¶¶ 12-14. Plaintiff brings claims against Arbueta and Schramm alleging negligence. Plaintiff asserts that the injuries suffered in the above two events are intertwined, arguing that the injuries Plaintiff sustained in the incident at Walmart were aggravated by the negligence of the Driving Defendants. See Docket No. 11 at 3-4, Exh. 1.

Plaintiff brought suit against Walmart and the Driving Defendants in state court. On May 1, 2014, Walmart removed the case to this Court, asserting that diversity jurisdiction exists because the claims against the Driving Defendants were fraudulently misjoined. See Docket No. 1 at 3. In particular, Walmart asserted that the claims against the Driving Defendants are severable from the claims against Walmart such that complete diversity would exist as to the severed claims against Walmart. See id. To that end, on May 1, 2014, Walmart filed a motion to sever the claims. Docket No. 5. On May 16, 2014, Plaintiff filed a motion to remand to state court. Docket No. 8. Those two motions are now before the Court.

II. DIVERSITY JURISDICTION AND REMAND

"Federal courts are courts of limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. Of Am., 511 U.S. 375, 377 (1994). Federal courts have diversity jurisdiction over claims arising out of state law where the claims are between citizens of different states and the amount in controversy exceeds $75,000. See 28 U.S.C. § 1332(a). Generally speaking, diversity jurisdiction exists only where there is "complete diversity" among the parties; each of the plaintiffs must be a citizen of a different state than each of the defendants. Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996).

Under 28 U.S.C. § 1441(a), "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or defendants, to the district court of the United States for the district . . . where such action is pending." If jurisdiction is found lacking in a removed case, the federal court must remand thecase back to state court. See 28 U.S.C. § 1447(c). In determining whether removal is proper, courts must strictly construe the removal statute against removal, and "[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." E.g., Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992).

III. ANALYSIS

The pending motions present several important threshold issues for the Court to consider. First, Walmart's position is predicated on the assumption that the Ninth Circuit would allow for the application of the "fraudulent misjoinder" doctrine. As this Court recently highlighted, application of that doctrine in the Ninth Circuit is uncertain. See Gonzales v. Wal-Mart Stores, Inc., 2014 WL 2591690, *2 (D. Nev. May 22, 2014), adopted, 2014 WL 2591499 (D. Nev. June 10, 2014) (Mahan, J.). As such, the Court must first decide whether that doctrine is viable in this Circuit. Second, assuming the Ninth Circuit would approve the fraudulent misjoinder doctrine, the Court must determine the standard under which the doctrine should be applied.

A. Viability of the Fraudulent Misjoinder Doctrine

Walmart removed this case based on its assertion that the claims against it and Arbueta and Schramm were fraudulently misjoined in state court. See, e.g., Docket No. 1 at 3.² The fraudulent misjoinder doctrine was adopted by the Eleventh Circuit in Tapscott v. MS Dealer Serv. Corp., 77 F.3d 1353, 1360 (11th Cir. 1996), abrogated on other grounds, Cohen v. Office Depot, Inc., 204 F.3d 1069, 1072-76 (11th Cir. 2000). As Walmart correctly cites, one judge in this District has agreed with the Eleventh Circuit and applied the fraudulent misjoinder doctrine. See Greene v. Wyeth, 344 F. Supp. 2d 674, 684-85 (D. Nev. 2004). That opinion is an outlier, however, as the vast majority of district court decisions within the Ninth Circuit have refused to apply the doctrine. See Hannig v. Juarez, 2013 WL 7095748, *3 & n.2 (D. Nev. Aug. 27, 2013) (collecting cases). Indeed, "district courts throughout this circuit have repeatedly and consistently declined to adopt the doctrine." Jurin v. Transamerica Life Ins. Co., 2014 WL 4364901, *3 (N.D. Cal. Sept. 3, 2014). For the reasons discussed more fully below, the undersigned agrees with the vast majorityof cases from within the Ninth Circuit and likewise declines to adopt the fraudulent misjoinder doctrine.

It is well established in the Ninth Circuit that a plaintiff may not defeat diversity jurisdiction by fraudulently joining a party. See, e.g., Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). A "fraudulent joinder" occurs when the "plaintiff fails to state a cause of action against [a] defendant, and the failure is obvious according to the settled rules of the state." McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). The removing party must demonstrate that the individuals joined in the action cannot be liable on any theory. See Ritchey, 139 F.3d at 1318. This is a heavy burden that must be made through clear and convincing evidence, with all ambiguities resolved in favor of the non-removing party. See, e.g., Lighting Science Group Corp. v. Koninklijke Philips Elecs. N.V., 624 F. Supp. 2d 1174, 1179 (E.D. Cal. 2008).

Walmart does not argue that Plaintiff failed to state a claim against the Driving Defendants such that the fraudulent joinder doctrine applies. Instead, it relies on the more novel concept of fraudulent misjoinder, a doctrine adopted by the Eleventh Circuit. See Tapscott, 77 F.3d at 1360. In that case, the Eleventh Circuit found that the fraudulent misjoinder doctrine applies where a diverse defendant is joined with a nondiverse defendant as to whom there is no joint, several or alternative liability and where the claim against the diverse defendant has no real connection to the claim against the nondiverse defendant. Id. The Eleventh Circuit further found in that case that the claims against the defendants at issue had "no real connection" to one another and that their joinder was "so egregious" that the nondiverse defendant could be ignored to establish diversity jurisdiction. Id.

The Ninth Circuit has neither adopted nor rejected Tapscott.³ Nonetheless, Tapscott has come under intense scrutiny by courts in this and other Circuits, as well as by prominent commentators. The criticism of Tapscott has focused largely on the fact that its fraudulent misjoinder doctrine runs afoul of the well-settled rule that federal jurisdiction is to be narrowlyconstrued, that the fraudulent misjoinder doctrine creates an unpredictable and complex rule, and that questions of joinder under state law do not implicate federal subject matter jurisdiction. See, e.g., In re Prempro Prods. Liability Litig., 591 F.3d 613, 621-22 (8th Cir. 2010) (providing overview of criticism). Numerous courts have found that the better approach is to require the defendant to challenge the claimed misjoinder in state court and, if that court severs the claims and diversity then exists, it could seek removal to federal court. See, e.g., Osborn v. Metropolitan Life Ins. Co., 341 F. Supp. 2d 1123, 1127 (E.D. Cal. 2004). In this District, such policy concerns recently led Judge Foley to reject the fraudulent misjoinder doctrine. See Hannig, 2013 WL 7095748, *6.⁴ The undersigned agrees with Judge Foley and similarly declines to apply Tapscott's fraudulent misjoinder doctrine.

As such, there is not complete diversity among the parties in this case and the undersigned RECOMMENDS that the motion to sever (Docket No. 5) be DENIED, that diversity jurisdiction be found lacking, and that the case be REMANDED.

B. Application of the Fraudulent Misjoinder Doctrine

Even assuming arguendo that applying the fraudulent misjoinder doctrine were permissible in this Circuit, the Court would find that its requirements are not satisfied here. In addition to the uncertainty as to the viability of the fraudulent misjoinder doctrine in this Circuit generally, there is also uncertainty as to the applicable standard in the event the doctrine were approved by the Ninth Circuit. See, e.g., Gonzales, 2014 WL 2591690, at *2 (quoting Greene, 344 F. Supp. 2d at 684-85). Nonetheless,...