Brian Mudd v. Clear Recon Corp., 2:17-cv-05650

Plaintiffs Brian and Julie Mudd, California citizens, sued Wells Fargo Bank, N.A. and Clear Recon Corp. in Ventura County Superior Court over allegedly wrongful foreclosure-related conduct.
Wells Fargo removed to federal court asserting diversity jurisdiction, alleging it is a South Dakota citizen and that Clear Recon (a California citizen) was fraudulently joined.
Wells Fargo argues Clear Recon is merely the trustee performing ministerial duties (e.g., recording notices) and therefore cannot be liable absent malice.
Plaintiffs allege facts suggesting possible improper recording of a Notice of Default while they were under consideration for a loan modification, among other wrongful-foreclosure allegations.
The removing party bears the burden to prove complete diversity and fraudulent joinder by clear and convincing evidence.
The Court found it was not apparent from the complaint that there is no possibility Plaintiffs could prevail against Clear Recon, and ordered Wells Fargo to show cause why the case should not be remanded.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether federal diversity jurisdiction exists	Mudd: Federal jurisdiction lacking if a non-diverse defendant remains	Wells Fargo: Diversity exists because Clear Recon was fraudulently joined and should be ignored	Court: Not yet satisfied; ordered Wells Fargo to show cause because joinder not clearly fraudulent
Whether Clear Recon was fraudulently joined	Mudd: Complaint plausibly alleges wrongful acts by Clear Recon (e.g., recording NOD while modification pending)	Wells Fargo: Clear Recon only performed ministerial trustee duties and cannot be held liable absent malice	Court: Plaintiffs plausibly could prevail; fraudulent joinder not obvious from complaint
Whether ministerial acts by a trustee are privileged such that no affirmative relief lies against Clear Recon	Mudd: Trustee could have acted with malice or beyond ministerial scope	Wells Fargo: Trustee duties are ministerial and privileged absent malice, precluding relief	Court: Not decided on merits; the complaint does not make it obvious plaintiff cannot show malice
Whether leave to amend would be permitted to cure pleading defects	Mudd: Could amend to allege facts showing malice or non‑ministerial conduct	Wells Fargo: Plaintiffs would not be afforded leave to amend to cure defects (implicit)	Court: Not convinced amendment would be impossible; Wells Fargo must show otherwise to sustain removal

Diaz v. Davis (In re Digimarc Corp. Derivative Litig.), 549 F.3d 1223 (9th Cir.) (complete diversity requirement rule)
Ritchey v. Upjohn Drug Co., 139 F.3d 1313 (9th Cir.) (standards for fraudulent joinder)
Morris v. Princess Cruises, Inc., 236 F.3d 1061 (9th Cir.) (fraudulently joined defendants ignored for diversity)
Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203 (9th Cir.) (burden of proving fraudulent joinder by clear and convincing evidence)
Geographic Expeditions, Inc. v. Estate of Lhotka ex rel. Lhotka, 599 F.3d 1102 (9th Cir.) (removing party bears burden of establishing diversity)
Clarence E. Morris, Inc. v. Vitek, 412 F.2d 1174 (9th Cir.) (citizenship determined by named parties regardless of service)
McCabe Gen. Foods Corp. v. 811 F.2d 1336 (9th Cir.) (fraudulent joinder doctrine articulation)
Soo v. United Parcel Service, Inc., 73 F. Supp. 2d 1126 (N.D. Cal.) (citizenship/joinder principles)
Padilla v. AT&T Corp., 697 F. Supp. 2d 1156 (C.D. Cal.) (leave to amend considerations in fraudulent joinder context)