Newman v. Select Portfolio Servicing Inc., 3:13-cv-03685

This is a removed mortgage foreclosure case originally filed in Alameda County Superior Court seeking damages and injunctions related to foreclosure proceedings.
SPS removed the case to federal court based on diversity jurisdiction, asserting Newman plaintiffs are diverse from SPS and Quality is a nominal party.
Quality served a declaration of non-monetary status in state court before removal; timing raised Erie/nominal party questions.
The court ordered briefing on whether the declaration affected Quality’s status for diversity and whether Quality was fraudulently joined.
The court found that removal occurred before the 20-day objection window could fully convert Quality into a nominal party, but ultimately ruled on the merits of nominal and fraudulent-joinder issues.
The court granted the remand motion, concluding there was no complete diversity and removal was improper.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Quality is a nominal or fraudulently joined party for diversity purposes	Newman contends Quality is nominal/subject to fraudulent joinder	SPS contends Quality is not nominal or fraudulently joined	Quality is not nominal nor fraudulently joined; diversity not satisfied.
Effect of 2924l declaration timing on nominal status for removal	Objects that removal occurred before status could transmute	Removal timing valid under their reading of the window	Even if Erie applies, removal occurred before the window expired; but court still remands on lack of diversity.
Whether removal was proper given lack of complete diversity	No complete diversity due to non-disregarded Quality	Diversity existed by ignoring nominal party status	Removal improper; remanded to state court.
Whether Quality’s status affects the measure of diversity under 28 U.S.C. § 1332(a)	Quality’s status destroys diversity	Quality should be disregarded as nominal	Quality not disregarded; diversity lacking.
Whether fraud or nomial-party status changes the outcome of the case	Plaintiffs could state claims against Quality	Quality merely a ministerial custodian	Not sufficiently shown as fraudulent or nominal to defeat diversity.

Caterpillar Inc. v. Williams, 482 U.S. 386 (1987) (removal jurisdiction requires proper basis for federal jurisdiction)
Gaus v. Miles, Inc., 980 F.2d 564 (9th Cir. 1992) (strictly construed removal; burden on removing party)
Prudential Real Estate Affiliates, Inc. v. PPR Realty, Inc., 204 F.3d 867 (9th Cir. 2000) (nominal/formal parties may be ignored for diversity unless they have a stake)
Morris v. Princess Cruises, Inc., 236 F.3d 1061 (9th Cir. 2001) (fraudulent joinder when plaintiff cannot recover against non-diverse party)
McCabe v. Gen. Foods Corp., 811 F.2d 1336 (9th Cir. 1987) (definition of fraudulent joinder and when joinder defeats diversity)
Strotek Corp. v. Air Transport Ass’n. of Am., 300 F.3d 1129 (9th Cir. 2002) (nominal parties may be disregarded if no stake in the action)