Xie v. Wal-Mart Associates, Inc.

Background

Zhenxing Xie alleged that he worked for Wal-Mart Associates, Inc. beginning in August 2022. After taking bereavement and medical leave, he requested parental leave. He alleged that Wal-Mart told him his role would be terminated after his parental leave, that he was unsuccessful in applying for other Wal-Mart jobs, and that he was terminated on June 26, 2024.

Xie filed the operative complaint in San Mateo County Superior Court. The opinion identifies the relevant claims as disability harassment under California’s Fair Employment and Housing Act, intentional infliction of emotional distress, and negligent infliction of emotional distress. The defendants removed the case to federal court based on diversity jurisdiction, which generally requires qualifying parties on opposite sides to be citizens of different states.

Motion to Remand

Xie moved to remand, meaning to return the case to state court. He argued that federal diversity jurisdiction was lacking because he and Mariam Tareen were both citizens of California. The defendants argued that Tareen had been fraudulently joined—that is, added only to defeat diversity jurisdiction and that Xie could not possibly state a claim against her.

The court explained that fraudulent joinder requires a strong showing that the plaintiff cannot state a claim against the nondiverse defendant under settled state-law rules. If there is any possibility that a state court could find the complaint states a claim, the federal court must treat the joinder as proper and remand the case. The court also noted that the fraudulent-joinder inquiry is different from deciding whether a claim would survive a motion to dismiss, and that possible amendment of the complaint can defeat a fraudulent-joinder argument.

Court’s Analysis

The court concluded that the defendants had not established fraudulent joinder. Although the court found that Xie had not pleaded his California Fair Employment and Housing Act harassment claim in great detail, it determined that his allegations created at least a possibility that a state court could find a claim against Tareen. The court pointed to allegations concerning Xie’s medical distress, his communications about that distress, and his alleged report to Wal-Mart’s Global Security Department and investigation by a Wal-Mart behavioral-threat assessor.

The court declined to decide whether the alleged conduct was sufficiently severe or pervasive to establish a hostile work environment because that would require a merits inquiry beyond the summary inquiry permitted when deciding fraudulent joinder. The court also stated that the defendants had not shown that any pleading deficiencies could not possibly be cured by amendment. Because one potentially viable claim against Tareen was enough to defeat fraudulent joinder, the court did not address the defendants’ arguments concerning Xie’s intentional- and negligent-infliction-of-emotional-distress claims.

Disposition

The court held that Xie and Tareen were both California citizens, Tareen had not been fraudulently joined at least with respect to the California Fair Employment and Housing Act harassment claim, and complete diversity was absent. The court therefore found that it lacked diversity jurisdiction.

Judge Haywood S. Gilliam, Jr. granted Xie’s motion to remand and remanded the case to the Superior Court of the State of California for the County of San Mateo. The court denied the defendants’ motion to dismiss as moot. The Clerk was directed to remand the case and close the file.