Watson et al v. Ford Motor Company et al, No. 3:2018cv00928 - Document 28 (N.D. Cal. 2018)

Court Description: ORDER GRANTING PLAINTIFFS' MOTION TO AMEND COMPLAINT; ORDERING FIRST AMENDED COMPLAINT FILED; AND REMANDING ACTION TO MARIN COUNTY SUPERIOR COURT 21 (Illston, Susan) (Filed on 8/15/2018)
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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 EDMUND WATSON, et al., Plaintiffs, 8 9 10 United States District Court Northern District of California 11 12 Case No. 18-cv-00928-SI v. FORD MOTOR COMPANY, et al., Defendants. ORDER GRANTING PLAINTIFFS’ MOTION TO AMEND COMPLAINT; ORDERING FIRST AMENDED COMPLAINT FILED; AND REMANDING ACTION TO MARIN COUNTY SUPERIOR COURT Re: Dkt. No. 21 13 14 Currently before the Court is plaintiffs’ motion to amend the complaint. Dkt. No. 21. 15 Pursuant to Civil Local Rule 7-1(b), the Court finds this matter appropriate for resolution without 16 oral argument and hereby VACATES the hearing set for August 17, 2018. Having considered the 17 papers submitted, and for the reasons discussed below, the Court GRANTS plaintiffs’ motion to 18 amend the complaint; ORDERS that the [proposed] First Amended Complaint be FILED; and 19 REMANDS the action to Marin County Superior Court. 20 21 BACKGROUND 22 On February 23, 2013, plaintiffs Edmund and Loretta Watson purchased a 2013 Ford 23 Escape automobile from Novato Ford, under warranty from Ford Motor Company. Dkt. No. 21 at 24 1. Plaintiffs allege that the car subsequently developed defects during the warranty period. Id. 25 On January 9, 2018, plaintiffs filed a complaint in Marin County Superior Court against 26 defendants Ford Motor Company, Marin County Ford, and Journey Ford. Dkt. No. 1-3 at 1. 27 Plaintiffs allege violations of the California Civil Code, breach of express written warranty, breach 28 of implied warranty of merchantability, and fraud by omission. Id. at 2. Plaintiffs served 1 defendants on January 11, 2018, and defendants removed the case to the Northern District of 2 California on February 13, 2018, asserting diversity jurisdiction. 3 On July 11, 2018, plaintiffs filed a motion to amend the complaint seeking leave to add 4 defendant, Novato Ford, under Federal Rule of Civil Procedure 15(a) and 28 U.S.C. § 1447(e). 5 Dkt. No. 21. Plaintiffs allege they erroneously believed Novato Ford had been named in the initial 6 complaint and now wish to add the dealership under the same facts for breach of implied warranty. 7 Dkt. No. 21 at 13-15. On July 25, 2018, defendants filed an opposition alleging plaintiffs’ motion 8 requests improper joinder for the purpose of destroying diversity jurisdiction. Dkt. No. 24 at 1. 9 On August 1, 2018, plaintiffs filed a reply to the opposition. 10 LEGAL STANDARD United States District Court Northern District of California 11 12 I. Rule 15(a) 13 Federal Rule of Civil Procedure 15 governs amendment of the pleadings. It provides that 14 if a responsive pleading has already been filed, the party seeking amendment “may amend its 15 pleading only with the opposing party’s written consent or the court’s leave. The court should 16 freely give leave when justice so requires.” Fed. R. Civ. P. 15(a)(2). This rule reflects an 17 underlying policy that disputes should be determined on their merits, and not on the technicalities 18 of pleading rules. See Foman v. Davis, 371 U.S. 178, 181-82 (1962). Accordingly, the Court 19 must be generous in granting leave to amend. See Morongo Band of Mission Indians v. Rose, 893 20 F.2d 1074, 1079 (9th Cir. 1990) (finding leave to amend should be granted with “extreme 21 liberality”); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989). 22 23 II. 28 U.S.C. 1447(e) 24 If after removal the plaintiff seeks to join additional defendants whose joinder would 25 destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the 26 action to state court. 28 U.S.C. § 1447(e). Under § 1447, whether to permit joinder of a party that 27 will destroy diversity jurisdiction remains in the sound discretion of the court. See Newcombe v. 28 Adolf Coors Co., 157 F.3d 686, 691 (9th Cir.1998); Palestini v. Gen. Dynamics Corp., 193 F.R.D. 2 1 654, 658 (C.D. Cal. 2000); Clinco v. Roberts, 41 F.Supp.2d 1080, 1082 (C.D. Cal. 1999). 2 DISCUSSION 3 4 I. Leave to Amend There are several accepted reasons to deny leave to amend, including the presence of bad 6 faith on the part of the plaintiff, undue delay, prejudice to the defendant, futility of amendment, 7 and previous amendments. See Ascon Props., 866 F.2d at 1160; McGlinchy v. Shell Chem. Co., 8 845 F.2d 802, 809-10 (9th Cir. 1988). Courts do not ordinarily consider the validity of a proposed 9 amended pleading in deciding whether to grant leave to amend, but leave may be denied if the 10 proposed amendment is futile or would be subject to dismissal. See Saul v. United States, 928 11 United States District Court Northern District of California 5 F.2d 829, 843 (9th Cir. 1991). 12 These factors do not carry equal weight; rather, “it is the consideration of prejudice to the 13 opposing party that carries the greatest weight.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 14 1048, 1052 (9th Cir. 2003). “Absent prejudice, or a strong showing of any of the remaining 15 factors, there exists a presumption under Rule 15(a) in favor of granting leave to amend.” Id. 16 17 A. Bad Faith 18 The burden is on the party opposing the motion to convince the court that “justice” 19 requires denial because of bad faith. Alzheimer's Inst.of Am. v. Elan Corp. PLC, 274 F.R.D. 272, 20 276 (N.D. Cal. 2011). The opposing party must provide “substantial[ly] competent evidence” of 21 bad faith. Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001). 22 Defendants argue that plaintiffs’ approach “comes close to bad faith.” Dkt. No. 24 at 10. 23 Defendants note the complaint was filed in early January and removed to this Court in February. 24 Accordingly, defendants argue, plaintiffs’ counsel had six months to correct their mistake and now 25 move to add a non-diverse defendant in an attempt to destroy diversity. In their declaration, 26 plaintiffs’ counsel states the delay “was due to confusion as to the correct location of this 27 dealership,” and “that before this discovery, [they] had mistakenly believed that the selling 28 dealership had been named in this case.” Dkt. No. 21, Zhang Decl. ¶ 4. While the Court 3 1 acknowledges the months-long delay in filing this motion, it finds no evidence on the record that 2 plaintiffs have acted in bad faith. 3 B. 5 Most courts hold delay alone is not enough to support denial of a motion for leave to 6 amend. Bowles v. Reade, 198 F.3d 752, 758 (9th Cir. 1999). However, “the longer the delay, the 7 greater the presumption against granting leave to amend.” Johnson v. Cypress Hill, 641 F.3d 867, 8 872 (7th Cir. 2011) (internal quotes omitted). Leave to amend has been denied where the moving 9 party either knew or should have known the facts on which the amendment is based when drafting 10 the original pleading but did not include them in the original pleading. Kaplan v. Rose, 49 F.3d 11 United States District Court Northern District of California 4 Undue Delay 1363, 1370 (9th Cir. 1994) (overruled on other grounds by City of Dearborn Heights Act 345 12 Police & Fire Ret. Sys. v. Align Tech., Inc., 856 F.3d 605, 616 (9th Cir. 2017). Here, counsel has 13 stated under oath that she only recently learned that the selling dealership had not been named in 14 the complaint, the case is in its early stages, and no dispositive motions have been filed. Under 15 these circumstances, the Court does not find that the six month delay from the filing of the 16 complaint to plaintiff’s request for amendment amounts to undue delay. 17 18 C. 19 “Prejudice is the touchstone of the inquiry under rule 15(a).” Eminence Capital, LLC , 316 20 F.3d at 1052 (internal quotes omitted). Courts presume prejudice where a motion to amend is 21 brought late in litigation. Solomon v. North American Life & Cas. Ins. Co., 151 F.3d 1132, 1139 22 (9th Cir. 1998) (denying motion to amend on the eve of discovery deadline because it would 23 require reopening discover and delaying proceedings). In addition, litigation expenses caused by a 24 proposed amendment may be deemed prejudicial. Owens , 244 F.3d at 712 . Most importantly, 25 the prejudice must be substantial. See Morongo Band of Mission Indians, 893 F.2d at 1079 26 (affirming denial of leave to amend complaint in light of the radical shift in direction posed new 27 claims, their tenuous nature, and the inordinate delay). 28 Prejudice As the defendants acknowledge, this case is still in its early stages. Dkt. No. 24 at 9. 4 1 Although the scope of discovery and litigation costs may increase, this is a natural result of 2 litigation. Based on the current stage of the case, the Court finds that additional discovery on a 3 relevant party will not substantially prejudice the defendants. 4 5 D. 6 An amendment is futile if the pleading’s deficiencies cannot be cured by any amendment. 7 United States v. Corinthian Colleges, 655 F.3d 984, 995 (9th Cir. 2011). Federal Rule of Civil 8 Procedure 20 allows joinder where: (a) plaintiff’s claims arise out of the “same transaction, 9 occurrence, or series of transactions or occurrences,” and (b) there is at least one common question 10 Futility of law or fact linking all claims. United States District Court Northern District of California 11 Here, the Court finds plaintiffs’ arguments against Novato Ford are part of the same series 12 of transactions or occurrences and deal with one common question of law or fact. Therefore, 13 plaintiffs’ arguments against Novato Ford are not futile. 14 15 E. Previous Amendment 16 Here, plaintiffs have not previously requested to amend the complaint. Plaintiffs’ failure to 17 name the new defendant was a plausible mistake which they sought to rectify once becoming 18 aware of the mistake. Dkt. No. 21 at 15. The Court finds it proper to grant plaintiffs leave to 19 amend the complaint. 20 21 II. Joinder 22 Courts generally consider the following factors when deciding whether to allow an 23 amendment to add non-diverse defendants: (1) whether the new defendant is needed for just 24 adjudication and would be joined under Federal Rule of Civil Procedure 19(a); (2) whether the 25 statute of limitations would preclude an original action against the new defendants in state court; 26 (3) whether there has been unexplained delay in requesting joinder; (4) whether joinder is intended 27 solely to defeat federal jurisdiction; (5) whether the claims against the new defendant appear valid; 28 and (6) whether denial of joinder will prejudice the plaintiff. 5 IBC Aviation Servs., Inc. v. Compania Mexicana de Aviacion, S.A. de C.V., 125 F. Supp. 2d 1008, 1011 (N.D. Cal. 2000). 2 Here, plaintiffs reside in Marin County, California. Dkt. No. 21-2 at 5. Defendant Ford 3 Motor Company is incorporated in Delaware with its principal place of business in California. Id. 4 Defendants Marin County Ford and Journey Ford are incorporated and have their principal place 5 of business in California. Id. Plaintiffs now wish to add Novato Ford as a defendant. Novato 6 Ford is incorporated and has its principal place of business in California. Dkt. No. 21-4 at 2. 7 Defendants’ civil cover sheet alleges Marin County Ford and Journey Ford are fraudulently 8 joined. Dkt No. 1-9 at 1. Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001) 9 (“Nevertheless, one exception to the requirement of complete diversity is where a non-diverse 10 defendant has been “fraudulently joined.”). Defendants have not contested their joinder in any 11 United States District Court Northern District of California 1 subsequent pleading. Defendants now claim the joinder of Novato Ford would destroy diversity. 12 Dkt. No. 24. 13 14 A. Party Needed for Just Adjudication 15 Federal Rule of Civil Procedure 19(a) requires joinder when the person’s absence would 16 prevent complete relief, impede their ability to protect their interests, or subject any of the parties 17 to inconsistent obligations. “This standard is met when failure to join will lead to separate and 18 redundant actions.” IBC Aviation Servs., Inc., 125 F. Supp. 2d at 1011. Further, the person to be 19 joined cannot destroy subject matter jurisdiction. Fed.R.Civ.P. 19(a). While courts consider Rule 20 19(a), they also consider amendments under § 1447(e) which are less restricted. Id. at 1011–12. 21 Under § 1447(e), courts do not allow joinder of non-diverse defendants when they are “only 22 tangentially related to the cause of action or would not prevent complete relief.” Id. See, e.g., Red 23 Buttons v. National Broad. Co., 858 F.Supp. 1025, 1027 (C.D. Cal. 1994) (denying amendment to 24 add non-diverse defendants who had no direct ties to the underlying allegations). 25 In Lopez v. General Motors Corp., the Ninth Circuit found that in an action against an 26 automaker for injuries stemming from a car accident, the dealership could not be joined under 27 Rule 19(a) because it was not an indispensable party and joinder would deprive the court of 28 diversity jurisdiction. 697 F.2d 1328, 1332 (9th Cir. 1983). 6 1 However, under circumstances analogous to this case, courts in this District have held that 2 auto dealerships may be necessary for adjudication of state law claims, for purposes of a § 1447(e) 3 analysis. For example, in Sandhu v. Volvo Cars of N. Am., LLC, No. 16-CV-04987-BLF, 2017 4 WL 403495, at *2 (N.D. Cal. Jan. 31, 2017), plaintiff alleged that the breach of the implied 5 warranty arose from the same alleged defects in a vehicle and the same failed attempts to repair 6 that vehicle. The Court reasoned that trying two separate cases could lead to inconsistent findings, 7 and therefore this factor weighed in favor of joinder. Id. 8 Here, plaintiffs allege that the breach of the implied warranty arises from the same vehicle, 9 its alleged defects, and a failed attempt to repair that vehicle. Dkt. No. 21 at 11. Here, as in 10 Sandhu, trying two separate cases could lead to inconsistent findings. United States District Court Northern District of California 11 12 B. Statute of Limitations 13 The Song-Beverly Act imposes a four-year statute of limitations for breach of warranty 14 actions. U.C.C. § 2725. However, where a plaintiff can file a separate action in state court for a 15 new defendant, there is less reason to join the new defendant in the federal court action. Sandhu, 16 2017 WL 403495, at *2; See Clinco, 41 F. Supp. 2d at 1083 (finding statute of limitations factor 17 does not support amendment when plaintiff does not argue action against new defendant in state 18 court would be time-barred). It is unclear from the complaint and motion to amend whether the 19 alleged breach occurred in the past four years. However, neither party argues that a new action 20 against Novato would not be timely. Dkt. No. 21 at 12; Dkt. No. 24 at 5. Thus, this factor weighs 21 against joinder. 22 23 C. Unexplained Delay 24 There is no unexplained delay when an amendment to add a non-diverse party is attempted 25 in a timely manner. See, e.g., Clinco, 41 F.Supp.2d at 1083 (finding no untimely delay when 26 amendment was requested less than six weeks after complaint); Lopez, 697 F.2d at 1332 (finding 27 untimely delay when, just four days before motions for summary judgment were to be heard, 28 plaintiff attempted to add a defendant who was eliminated from first amended complaint); Sandhu, 7 1 2017 WL 403495, at *3 (finding no untimely delay when plaintiff filed his first amended 2 complaint within the time limits afforded by Rule 15 and before any dispositive motions were 3 filed). 4 5 Based on the same reasoning stated for undue delay, the Court finds there is no unexplained delay here. Thus, this factor weighs in favor of joinder. 6 D. 8 Where defendants argue that fraudulent joinder should defeat permission to join a non- 9 diverse defendant, they must demonstrate fraudulent joinder by clear and convincing evidence. 10 Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). In IBC 11 United States District Court Northern District of California 7 Intended Solely to Defeat Federal Jurisdiction Aviation Servs., Inc., the Court refused “to impute improper motive to plaintiff simply because 12 plaintiff seeks to add a non-diverse defendant post-removal.” 125 F. Supp. 2d at 1012. The Court 13 reasoned that “suspicion of diversity destroying amendments is not as important now that 14 § 1447(e) gives courts more flexibility in dealing with the addition of such defendants.” Id. at 15 1012. The Court also considered the new defendant’s role in the cause of action and found 16 plaintiff’s desire to add the defendant to be “reasonable and justifiable.” Id. Likewise, in Sandhu, 17 the Court found that while the circumstances suggested one of plaintiff’s motives was to defeat 18 jurisdiction, it was not clear that it was plaintiff’s sole motivation, particularly because a possible 19 valid claim existed against the new defendant. 2017 WL 403495 at *3. 20 Here, plaintiffs seek to add the dealership to the existing breach of implied warranty claim 21 under the same set of facts. Dkt. No. 21 at 13. As in IBC Aviation Servs., Inc. and Sandhu, a 22 seemly valid claim exists against the dealership. Thus, plaintiffs’ desire to add the new defendant 23 is reasonable and justifiable. It is not clear that plaintiffs’ sole motive is to defeat diversity 24 jurisdiction and defendants have not provided any clear or convincing evidence to that point. 25 Therefore, this factor weighs in favor of joinder. 26 27 E. Valid Claims 28 A claim is valid if it seems to have merit. See Goodman v. Travelers Ins. Co., 561 F.Supp. 8 1 1111, 1113–14 (N.D.Cal.1983). In other words, “the defendant and the court must be given some 2 basis for believing the Doe pleading is not a mere sham.” Hartwell Corp. v. Boeing Co., 678 F.2d 3 842, 842 (9th Cir. 1982), overruled by Bryant v. Ford Motor Co., 844 F.2d 602 (9th Cir. 1987), 4 vacated, Bryant v. Ford Motor Co., 886 F.2d 1526 (9th Cir. 1989). “[N]umerous courts have 5 found implied warranty claims against dealerships to be valid, and the dealerships to be necessary 6 parties, in connection with claims under the Song-Beverly Act.” Chipley v. Ford Motor Co., No. 7 18-CV-01161-YGR, 2018 WL 1965029, at *2 (N.D. Cal. Apr. 26, 2018). 8 defendant “does not cite any authority that joinder of an indemnitee is unnecessary, or somehow 9 renders an otherwise valid claim invalid, simply because its indemnitor is already a party,” it is not 10 Further, when a sufficient to determine validity of a claim. See Sandhu, 2017 WL 403495, at *4. United States District Court Northern District of California 11 Here, plaintiffs seek to join the dealership for breach of implied warranty after purchasing 12 an allegedly defective car from the dealership, which while under warranty, the dealership refused 13 to fix. Dkt. No. 21 at 1-4. Based on the facts and case law cited by Chipley, the claim appears to 14 have merit at this stage in litigation. Accordingly, this claim should be considered valid. Thus, 15 this factor weighs in favor of joinder. 16 17 F. Prejudice 18 Prejudice to the plaintiff occurs when plaintiff must “choose between redundant litigation 19 arising out of the same facts and involving the same legal issues or foregoing its potential claims.” 20 IBC Aviation Servs., Inc.,125 F. Supp. 2d at 1013. Further, amendment will not prejudice a 21 defendant when discovery has not begun. Id. “Where the claims against the sought parties arise 22 out of the same factual circumstances, it is to the economic benefit of all parties, and the judicial 23 system, to have the entire controversy adjudicated only once.” Sandhu, 2017 WL 403495, at *4 24 (internal quotations omitted). 25 Here, plaintiffs argue if the Court denies plaintiffs’ request to amend the complaint, 26 plaintiffs would have to sue the dealership in state court regarding the same legal issues and facts 27 or forego claims against the dealership. Dkt No. 21 at 15. Such re-litigation would be highly 28 prejudicial to the plaintiff. Further, granting joinder would be the most economic option. 9 1 Therefore, this factor weighs in favor of joinder. 2 CONCLUSION 3 For the foregoing reasons and for good cause shown, the Court hereby GRANTS the 4 Motion to Amend the Complaint. The Court orders that plaintiffs’ [Proposed] First Amended 5 Complaint, Dkt. 21-3, be FILED. Since the First Amended Complaint names a non-diverse 6 defendant, the Court finds that it lacks jurisdiction over this matter and REMANDS the action to 7 the Superior Court for the County of Marin, where it was initially filed.. 8 9 IT IS SO ORDERED. 10 Dated: August 15, 2018 United States District Court Northern District of California 11 12 13 ______________________________________ SUSAN ILLSTON United States District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10