424 F.Supp.3d 666
N.D. Cal.2019Background
- In July 2013 Plaintiffs bought a 2013 Ford vehicle from Cypress Coast Ford and received an express written warranty. Plaintiffs allege defects that impaired the vehicle during the warranty period.
- Plaintiffs (California residents) sued Ford Motor Company (Delaware/Michigan citizen) and Cypress Coast (California dealership). Only the fifth cause of action (breach of implied warranty under Song‑Beverly) names Cypress Coast; the other claims name only Ford.
- Ford removed the case to federal court under 28 U.S.C. § 1332, asserting complete diversity because Cypress Coast is a sham/dispensable non‑diverse defendant.
- Plaintiffs moved to remand, arguing Cypress Coast destroys diversity and removal is improper. Ford opposed, arguing fraudulent joinder based on statute‑of‑limitations grounds and arguing Cypress Coast is dispensable.
- The district court held Ford failed to show fraudulent joinder: under California law the accrual of an implied warranty claim is governed by the discovery rule (per Mexia), so it was not obvious the claim against Cypress Coast is time‑barred. The court also found Cypress Coast necessary/indispensable and that Plaintiffs’ California domicile was adequately alleged.
- Result: Court granted remand to Santa Clara County Superior Court for lack of subject‑matter jurisdiction (no complete diversity).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal court has diversity jurisdiction / remand timeliness | Remand is proper because Cypress Coast is a California citizen and destroys diversity | Removal proper because Cypress Coast is a sham or dispensable party; remand motion untimely | Motion not untimely; court lacks subject‑matter jurisdiction because Cypress Coast is not a sham and is indispensable — remand granted |
| Fraudulent joinder (statute of limitations on implied warranty) | Implied warranty claim may be timely under the discovery rule; Complaint does not show accrual date | Claim is time‑barred (accrued at purchase) so joinder of Cypress Coast is sham | Defendants failed to show joinder was fraudulent; Mexia and Ninth Circuit precedent support discovery rule; possibility of timely claim remains |
| Whether Cypress Coast is indispensable / may be dropped to perfect diversity (Rule 21/19) | Cypress Coast is necessary to adjudicate the vehicle defect and repair issues; dismissal risks inconsistent results and prejudice | Cypress Coast can be dismissed to preserve federal jurisdiction | Cypress Coast is not dispensable; joinder is necessary and its interests could be prejudiced — cannot be dropped to create diversity |
| Adequacy of allegations on Plaintiffs’ domicile | Plaintiffs’ pleaded residence suffices to establish California domicile for diversity analysis | Defendant argued Plaintiffs’ domicile not adequately proven | Court found Plaintiffs’ allegation of California residence adequate; domicile presumed from residence |
Key Cases Cited
- Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826 (U.S. 1989) (addresses diversity and the fraudulent‑joinder exception)
- Gaus v. Miles, Inc., 980 F.2d 564 (9th Cir. 1992) (placing burden of establishing removability on the removing party)
- McCabe v. Gen. Foods Corp., 811 F.2d 1336 (9th Cir. 1987) (fraudulent joinder standard)
- Mexia v. Rinker Boat Co., 95 Cal. Rptr. 3d 285 (Cal. Ct. App. 2009) (discovery rule applies to implied warranty accrual)
- Daniel v. Ford Motor Co., 806 F.3d 1217 (9th Cir. 2015) (federal court must follow state court rulings like Mexia on state‑law accrual)
- Caterpillar Inc. v. Lewis, 519 U.S. 61 (U.S. 1996) (complete diversity requirement)
- Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83 (U.S. 1998) (subject‑matter jurisdiction cannot be waived)
- Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 (U.S. 1999) (courts must police jurisdictional limits on their own initiative)