Unreported / Non-Citable
Background
Anthony Hernandez, a California resident, sued his former employers in Alameda County Superior Court alleging retaliation, wrongful discharge, failure to pay wages, and unfair business practices under California law. Defendants Pacific West Builders, Inc. (PWB) and Pacific West Communities, Inc. (PWC) removed the case to federal court based on diversity jurisdiction, conceding that non-diverse defendants Fremont Pacific Associates (FPA) and Fremont Pacific Associates II (FPA II) share citizenship with Hernandez but arguing they were fraudulently joined. FPA and FPA II are limited partnerships that own the Osgood Apartments affordable housing project in Fremont, while PWB and PWC managed and developed the project. Hernandez was hired in May 2022 as a construction superintendent for the Osgood project by The Pacific Companies (TPC), of which PWB and PWC are part. He reported alleged misconduct by TPC's CFO to CEO Caleb Roope and was terminated approximately two weeks later by PWB General Superintendent Daren Lynch without explanation.
Defendants argued that FPA and FPA II were not Hernandez's employers under California law, citing declarations and employment records showing only PWB, PWC, TPC, and payroll administrator Barrett Business Services, Inc. were identified as his employer. They contended FPA and FPA II had no role in hiring, firing, or controlling Hernandez's hours, wages, or working conditions. Hernandez moved to remand, asserting that the complaint alleged joint-employer, agency, and integrated enterprise theories under which FPA and FPA II could be liable, citing Mattei v. Corp. Mgmt. Sols., Inc., 52 Cal. App. 5th 116 (2020). The court considered declarations, employment records, and Hernandez's Labor Commissioner complaint in evaluating the fraudulent joinder issue.
The Court’s Holding
The court granted the motion to remand, finding that defendants failed to meet their heavy burden of establishing fraudulent joinder. Under Ninth Circuit precedent, a defendant must show that the non-diverse party cannot be liable on any theory and that there is no possibility the plaintiff can establish a cause of action in state court. The court emphasized that the relevant inquiry is whether there is any possibility a state court could find a cause of action, not the plausibility standard under Rule 12(b)(6), and that even deficiencies in the complaint must be evaluated in light of the possibility of amendment.
The court found that the absence of FPA and FPA II from formal employment records does not foreclose the possibility of control in practice, citing Gebran v. Wells Fargo Bank, N.A., 2016 WL 7471292 (C.D. Cal. 2016), which recognized that practical acts of control may demonstrate apparent authority. The court also noted that Hernandez's Labor Commissioner complaint naming only PWB was not an adjudication of employer status, and that Lynch's declaration did not rule out a scenario where the termination decision was made by the holding company (FPA and FPA II's general partner) but formally issued in PWB's name. Because there remains a possibility that Hernandez could amend to state a joint-employer claim against FPA and FPA II, the court could not conclude they were fraudulently joined.
With FPA and FPA II properly joined, the court analyzed their citizenship. As limited partnerships, they possess the citizenship of all their members. The Roope Declaration confirmed both partnerships have at least one California-based partner, destroying complete diversity. The court therefore lacked subject matter jurisdiction and remanded the case to Alameda County Superior Court. The court also vacated the scheduled hearing and denied as moot defendants' request for judicial notice and Hernandez's evidentiary objections.
Key Takeaways
- Defendants bear a heavy burden to prove fraudulent joinder and must show no possibility of liability on any theory, not merely that the complaint is currently deficient.
- Formal employment records identifying only certain entities as employer do not foreclose joint-employer liability where practical control or apparent authority may be shown through amendment.
- A plaintiff's administrative complaint naming only one employer is not an adjudication binding the plaintiff in subsequent litigation.
- Declarations from management personnel that do not address the decision-making authority of non-diverse entities fail to eliminate the possibility of liability.
- Limited partnerships are citizens of every state where their partners reside, so a single California partner destroys diversity against a California plaintiff.
Why It Matters
This decision reinforces the strong presumption against fraudulent joinder in the Ninth Circuit and clarifies that courts must consider the possibility of amendment when evaluating whether a non-diverse defendant can be liable. The ruling is significant for employment cases involving complex corporate structures, as it holds that formal payroll designations do not categorically preclude joint-employer theories under California law. By remanding, the court preserves the plaintiff's choice of forum and allows state courts to develop the factual record on control and employment relationships in the first instance.