Healy v. FCA US LLC

Background

Kyle and Michael Healy originally filed the lawsuit in the Superior Court of California for Santa Clara County. They alleged that they bought a defective new 2016 Ram truck manufactured and sold by FCA US LLC and Seaside Chrysler Dodge Jeep RAM. Their complaint asserted one claim: breach of the implied warranty of merchantability under the Song-Beverly Consumer Warranty Act, California Civil Code section 1790 and following.

The Healys alleged that defects and nonconformities in the truck’s engine and coolant system appeared after delivery. They also alleged that they returned the vehicle to the defendants for repairs several times without success.

FCA removed the case to federal court based on diversity jurisdiction. The parties agreed that the Healys and FCA were citizens of different states for jurisdictional purposes and that the amount in controversy was at least $75,000. The Healys moved to remand, arguing that they and Seaside were California citizens. FCA argued that Seaside should be disregarded because it was fraudulently joined or should be severed under Federal Rule of Civil Procedure 21.

Remand and fraudulent joinder

Federal diversity jurisdiction generally requires complete diversity, meaning that each plaintiff must have different citizenship from each defendant. Because the Healys and Seaside were not diverse, FCA could remove the case only if it proved that Seaside had been fraudulently joined.

Fraudulent joinder is a jurisdictional doctrine that permits a federal court to disregard a nondiverse defendant when the plaintiff has either pleaded jurisdictional facts fraudulently or has no possibility of stating a claim against that defendant. The court emphasized that defendants bear a heavy burden and must prove fraudulent joinder by clear and convincing evidence. The relevant question was whether there was any possibility that a California state court would find that the complaint stated a claim against Seaside, not whether the Healys intended to litigate against Seaside.

The court concluded that the Healys plausibly alleged a Song-Beverly Act claim against Seaside. The court identified the elements of that claim as showing that the vehicle was not fit for ordinary purposes, that the plaintiff was injured, and that the injury was proximately caused by the alleged breach of the implied warranty. The court found that FCA had not shown that a California court would find the claim foreclosed with no possibility of proceeding. Seaside therefore was not fraudulently joined, and its presence defeated complete diversity.

The court also stated that any arbitration clause in the vehicle purchase agreement was a separate issue from the existence of federal diversity jurisdiction. It declined to sever Seaside under Rule 21, explaining that severance was discretionary, FCA had not provided a good reason for it, and the claims against FCA and Seaside were sufficiently intertwined that severance would be inconvenient and inefficient. The court also cited federalism and respect for state courts as reasons for allowing the state-law case to proceed in state court.

Fees and costs

The Healys requested attorney’s fees and costs incurred in seeking remand. The court explained that fees are not awarded automatically whenever a case is remanded. Although the court expressed concern that FCA may have repeatedly removed similar cases using arguments rejected by district courts, it concluded that the record did not establish that the removal was objectively unreasonable. The court therefore denied fees and costs.

Disposition

The court ruled that the complaint had been removed improvidently and without jurisdiction and remanded it to the Superior Court of California for Santa Clara County under 28 U.S.C. section 1447(c). The court denied the request for attorney’s fees and costs. The opinion does not state a separate express disposition using the word “denied” for FCA’s Rule 21 request, but the court declined to sever Seaside.