Unreported / Non-Citable
Background
Raquel Garcia filed a complaint in the Superior Court of California for the County of San Bernardino on August 12, 2026, against Costco Wholesale Corporation and Neccole Neal (erroneously sued as Nicole Neal). The complaint alleged harassment and hostile work environment in violation of California Government Code § 12940(j). Garcia claimed that after she disclosed her physical disability and requested an accommodation around March 2025, defendants subjected her to a hostile work environment by directing her to use an upper extremity she could not use without limitation, which worsened her condition, and then removing her from active work and failing to communicate with her about her disability, work restrictions, or return to work for more than one year.
Costco was served with the complaint on August 19, 2026, and filed a notice of removal on September 18, 2026, the last day to timely remove under 28 U.S.C. § 1446(b)(2)(B). Costco removed the case based on diversity jurisdiction, even though the named parties were not completely diverse. Costco contended that non-diverse defendant Neal was a sham defendant whose citizenship should be disregarded under the fraudulent joinder doctrine. Neal, who was represented by the same counsel as Costco, did not oppose removal, and Costco's averment of Neal's non-opposition was sufficient to show unanimous consent to removal.
The Court’s Holding
The court found that removal was timely and that all defendants consented to removal. However, the court held that complete diversity did not exist between the parties because Costco failed to establish fraudulent joinder. The court explained that under the fraudulent joinder doctrine, joinder of a non-diverse defendant is deemed fraudulent and the defendant's presence is ignored for diversity purposes only if the plaintiff fails to state a cause of action against the resident defendant and the failure is obvious according to settled state law rules. A party invoking federal diversity jurisdiction bears a heavy burden to prove fraudulent joinder by clear and convincing evidence.
The court acknowledged that Garcia's allegations did not meet the standard to establish harassment under California Government Code § 12940(j) because the identified conduct of directing her work assignments appeared more closely tied to necessary personnel management decisions. However, the court emphasized that for purposes of fraudulent joinder, Costco must demonstrate there is no possibility that Garcia could prevail on any claim against defendants. Costco had not met this burden by only establishing that Garcia failed to plead sufficient facts to adequately state her claim. Costco must establish that Garcia could not amend her complaint to add additional allegations correcting any deficiencies. The court found that Costco failed to meet its heavy burden to prove fraudulent joinder by clear and convincing evidence.
The court ordered that the case be remanded to the Superior Court of California for the County of San Bernardino.
Key Takeaways
- A defendant seeking removal based on diversity jurisdiction bears a heavy burden to prove fraudulent joinder by clear and convincing evidence when a non-diverse defendant is named in the complaint.
- To establish fraudulent joinder, the removing defendant must show there is no possibility that the plaintiff could prevail on any claim against the non-diverse defendant, not merely that the plaintiff has failed to plead sufficient facts to state a claim.
- The removing defendant must establish that the plaintiff could not amend the complaint to add additional allegations correcting any deficiencies in order to prove fraudulent joinder.
- The test for fraudulent joinder is more demanding than the test for failure to state a claim under Rule 12(b)(6) and is more akin to the wholly insubstantial and frivolous standard for dismissing claims under Rule 12(b)(1).
- Federal courts resolve all ambiguity in favor of remand to state court given the strong presumption against removal jurisdiction.
Why It Matters
This decision reinforces the stringent standard for establishing fraudulent joinder in the Ninth Circuit. Even when a plaintiff's allegations against a non-diverse defendant appear insufficient to state a claim, removal based on diversity jurisdiction will not be sustained unless the removing defendant can prove by clear and convincing evidence that there is no possibility the plaintiff could prevail, including after any amendment to correct pleading deficiencies. The ruling emphasizes that the fraudulent joinder inquiry is jurisdictional, not a merits adjudication, and that doubts must be resolved in favor of remand.