Bunn v. Ford Motor Company

Background

Joseph Albert Bunn alleged state-law claims against Ford Motor Company and Ken Grody Ford Carlsbad concerning defects in a 2008 Ford F-250 Super Duty vehicle. The complaint asserted six causes of action, but only the fifth—breach of the implied warranty of merchantability under the Song-Beverly Consumer Warranty Act—included Grody.

Bunn filed the case in Santa Clara County Superior Court. Ford removed it to federal court under the diversity-jurisdiction statute, 28 U.S.C. § 1332. Bunn moved to remand, arguing that Grody defeated diversity because Bunn and Grody were both California residents. Ford argued that Grody was a sham defendant whose inclusion should be disregarded.

Court’s Analysis

The court held that Bunn’s remand motion was timely because a challenge based on the federal court’s subject-matter jurisdiction is not barred by the usual thirty-day deadline for remand motions.

The court rejected Ford’s sham-defendant argument. A defendant is fraudulently joined, or treated as a sham defendant, only when the plaintiff cannot state a claim against that defendant and that failure is obvious under settled state-law rules. The defendant bears a heavy burden, and the court must resolve ambiguities in state law for the plaintiff.

Ford argued that Bunn’s implied-warranty claim against Grody was barred by the statute of limitations. The court explained that California law may allow an implied-warranty claim to rely on a defect that was not discoverable when the product was sold and may apply a discovery rule that delays the start of the limitations period until the plaintiff discovers, or has reason to discover, the claim. Bunn alleged a latent engine defect and alleged that information about the defect had been concealed. The court therefore could not conclude that Bunn had no possibility of stating a claim against Grody.

The court also found Grody to be an indispensable party. Bunn alleged that the warranty breach involved the same vehicle, defects, and repair attempts as the claims against Ford. Trying the claims separately could produce inconsistent findings. The court was also concerned that Grody could be prejudiced because Ford was seeking full indemnity from Grody and therefore might have less incentive to defend the case vigorously.

Finally, the court treated the parties’ alleged residences as establishing their domiciles for purposes of the jurisdictional analysis. Because Bunn and Grody were both alleged to be California residents, complete diversity did not exist. The court did not address Bunn’s arguments concerning the amount in controversy.

Disposition

The court granted Bunn’s motion to remand. It held that Grody was an indispensable and non-sham defendant, concluded that the federal court lacked subject-matter jurisdiction, directed the Clerk to remand the case to Santa Clara County Superior Court, and ordered the federal file closed. The order did not decide the merits of Bunn’s warranty or other claims.