Mikkelson v. Michaels Management Services LLC

Background

Jonathan and Alyssa Mikkelson and their minor children N.M., L.M., M.M., A.M., and E.M. sued Michaels Management Services, LLC; the Michaels Organization, LLC; Monterey Bay Manager, LLC; Monterey Bay Military Housing LLC; and Professional Asbestos Removal Corporation. They claimed personal injuries from toxic mold contamination in a home they leased at The Parks at Monterey, a privatized housing project on the former Fort Ord military installation.

The complaint asserted twelve claims under California law and common law, including negligence, fraud, breach of contract, nuisance, warranty-of-habitability violations, wrongful eviction, intentional infliction of emotional distress, and unfair competition. The Mikkelsons filed the action in Monterey County Superior Court on November 18, 2024. The Michaels and Monterey Bay defendants removed it to federal court on December 30, 2024, before any defendant had been served. The state court issued summons on January 13, 2025.

The Motion to Remand

The Mikkelsons asked the federal court to remand, or return, the case to state court. They argued that the defendants had not shown federal-question or diversity jurisdiction and that the forum-defendant rule barred removal based on diversity jurisdiction.

The court rejected the federal-question basis for removal. Although the complaint referred to the federal Military Housing Privatization Initiative and alleged that defendants had defrauded the federal government, all twelve claims were based on California or common law. The defendants did not show that federal law created any of those claims or that resolving them necessarily required deciding a substantial, disputed federal issue. The court also concluded that the lease’s federal dispute-resolution procedures did not make the claims federal questions.

Diversity Jurisdiction and Pre-Service Removal

The parties agreed that the amount in controversy exceeded $75,000, that the Mikkelsons resided in North Carolina, and that complete diversity of citizenship existed. The court also recognized that Monterey Bay Manager, LLC was organized under California law and that other documents indicated that one or more members of an LLC were California citizens or corporations.

The forum-defendant rule generally prevents removal based solely on diversity jurisdiction when a properly joined and served defendant is a citizen of the state where the action was filed. The defendants argued that the rule did not apply because they removed the case before any defendant was served—a practice the court described as “snap removal.” The Mikkelsons responded that they had no opportunity to serve the defendants because summons had not yet issued, in part because the minor plaintiffs needed guardians ad litem before summons could issue.

The court noted that courts disagree about snap removal and that the United States Court of Appeals for the Ninth Circuit had not resolved the precise issue presented. The court questioned whether this type of removal was consistent with congressional intent and noted that the circumstances suggested a tactical effort to circumvent the Mikkelsons’ choice of a state forum. Nevertheless, the court agreed with most courts in the Northern District of California that the plain language of the forum-defendant rule permits removal before service, even when an in-state defendant is involved. The court concluded that the rule did not require remand.

Ruling

The court held that the action was removable based on diversity jurisdiction and that the forum-defendant rule did not prohibit the defendants’ pre-service removal. It denied the Mikkelsons’ motion to remand. The opinion did not decide the merits of the Mikkelsons’ mold-related claims.