Grancare v. Ruth Thrower
889 F.3d 543
| 9th Cir. | 2018Background
- Ruth Thrower (an elder) died after a fall at a GranCare-operated nursing facility; her estate sued GranCare and facility administrator Remy Rhodes in California state court for elder abuse, negligence, negligent hiring/supervision, and wrongful death; fraud claimed against GranCare only.
- Defendants removed the case to federal court on diversity grounds, asserting Rhodes (a California citizen) was fraudulently joined to defeat diversity jurisdiction.
- The district court remanded, holding that fraudulent-joinder inquiry requires only that there be any possibility a state court could find a viable claim against the non-diverse defendant (not the stricter Rule 12(b)(6) plausibility test), and awarded attorneys’ fees under 28 U.S.C. § 1447(c) as removal was objectively unreasonable.
- GranCare appealed the fee award, arguing the district court applied the wrong legal standard (should be similar to Rule 12(b)(6)) and that removal was objectively reasonable based on a prior district-court decision (Johnson v. GranCare).
- The Ninth Circuit affirmed: it rejected equating the fraudulent-joinder test to Rule 12(b)(6), applied the “any possibility” standard, found plaintiffs pleaded colorable claims against Rhodes (elder-abuse and negligence-per-se theories), and held the fee award was proper because factual differences made reliance on Johnson unreasonable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper standard for fraudulent joinder | Any possibility a state court could find a viable claim against the non-diverse defendant prevents finding fraudulent joinder | Standard should be similar to Rule 12(b)(6) plausibility; if complaint fails to state a claim, joinder is fraudulent | Use the "any possibility" standard; fraudulent joinder is not equivalent to Rule 12(b)(6) |
| Were plaintiffs’ allegations sufficient against administrator Rhodes | Complaint alleges Rhodes was managing agent, failed screening, inadequate care plan, delayed hospital transfer — creating a possible elder-abuse/neglect and negligence-per-se claim | Allegations merely lump Rhodes with others, lack particularity, and Rhodes as administrator owed no duty | Allegations were colorable; Rhodes could be liable under California Elder Abuse Act and regs; joinder proper |
| Can removing party rely on earlier district-court decision (Johnson) to show removal was reasonable | Plaintiffs: removal was objectively unreasonable given clear differences and merits supporting remand | GranCare: reasonably relied on Johnson which applied a 12(b)(6)-like standard | Reliance on Johnson was not reasonable here because the complaints differed materially; removal objectively unreasonable in this case |
| Appropriateness of awarding fees under 28 U.S.C. § 1447(c) | Fees warranted because removal lacked an objectively reasonable basis | Fees improper if removal was objectively reasonable given legal ambiguity and Johnson | Fees affirmed: district court did not abuse discretion; removal was objectively unreasonable in light of facts |
Key Cases Cited
- Hunter v. Phillip Morris USA, 582 F.3d 1039 (9th Cir. 2009) (defines fraudulent joinder standards and presumption against removal)
- McCabe v. Gen. Foods Corp., 811 F.2d 1336 (9th Cir. 1987) (fraudulent joinder where failure to state cause of action is obvious under state law)
- Ritchey v. Upjohn Drug Co., 139 F.3d 1313 (9th Cir. 1998) (removing party may present additional facts to show fraudulent joinder)
- Weeping Hollow Ave. Trust v. Spencer, 831 F.3d 1110 (9th Cir. 2016) (applies "possibility" standard to defeat fraudulent-joinder claim)
- Martin v. Franklin Capital Corp., 546 U.S. 132 (U.S. 2005) (fees under §1447(c) only if removal lacked an objectively reasonable basis)
- Gaus v. Miles, Inc., 980 F.2d 564 (9th Cir. 1992) (strictly construe removal statute; doubts resolved against federal jurisdiction)
- Sessions v. Chrysler Corp., 517 F.2d 759 (9th Cir. 1975) (holding that if complaint survives Rule 12(b)(6) it is not fraudulent joinder; consistent with "possibility" standard)