Unreported / Non-Citable
Background
Plaintiff Alta Zarco filed this action in California state court against California Trusted Contractor, Inc. and Frank Dominguez, alleging claims arising from a contract. Defendant Dominguez removed the case to the U.S. District Court for the Central District of California, asserting diversity jurisdiction. On September 23, 2026, the court issued an Order to Show Cause directing Dominguez to explain why the action should not be immediately remanded to the superior court, with a response deadline of October 9, 2026.
Dominguez did not respond to the OSC by the deadline. On October 14, 2026, Plaintiff Zarco filed a Notice of Defendant's Failure to Respond to Order to Show Cause and Request for Immediate Remand. The court acknowledged that Dominguez had filed a response to a similar OSC in a related action, Frank Dominguez v. Alta Zarco, 2:26-cv-02411-MWF(RAOx), but concluded that even if that response were construed as a response in this case, it would not change the jurisdictional analysis.
The Court’s Holding
The court held that it lacked subject matter jurisdiction because complete diversity did not exist. Dominguez claimed to be domiciled in Arizona, while Zarco is domiciled in California. However, Dominguez acknowledged that California Trusted Contractor, Inc. is a California corporation with its principal place of business in California, which would ordinarily defeat complete diversity if retained as a party. Dominguez requested that the court exercise its discretionary authority under Federal Rule of Civil Procedure 21 to drop California Trusted Contractor from the action to cure the jurisdictional defect.
The court rejected this request, finding that California Trusted Contractor is a party to the contract at issue and therefore an indispensable party under Federal Rule of Civil Procedure 19. Citing McClendon v. U.S., 885 F.2d 627, 633 (9th Cir. 1989), the court explained that as a party to the agreement sought to be enforced, the corporation is indispensable and its citizenship must be considered in determining whether diversity jurisdiction exists. Because both Zarco and California Trusted Contractor are California citizens, complete diversity is lacking.
Under 28 U.S.C. § 1447(c), if at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded. The court therefore remanded the action to the Superior Court of the State of California for the County of Los Angeles.
Key Takeaways
- A defendant cannot cure a lack of complete diversity by asking the court to drop an indispensable party under Rule 21 when that party's citizenship destroys diversity jurisdiction.
- A party to a contract sought to be enforced is considered indispensable under Rule 19, and its citizenship must be counted for diversity purposes.
- If a district court determines at any time before final judgment that it lacks subject matter jurisdiction, it must remand the case to state court under 28 U.S.C. § 1447(c).
- A response filed in a related action may be considered, but it will not save removal if the jurisdictional defect is clear.
- The court's remand rested on the absence of complete diversity, not on any procedural default by the removing defendant.
Why It Matters
This order reinforces the principle that federal courts strictly enforce the complete diversity requirement and will not permit parties to manipulate the alignment of parties to create federal jurisdiction. The decision underscores that when a non-diverse party is indispensable under Rule 19, remand is mandatory, and discretionary severance under Rule 21 is not available to preserve federal jurisdiction.
The ruling also highlights the procedural risks of removal: defendants who remove cases involving non-diverse indispensable parties face remand even when they attempt to cure the defect by dropping a party. The court's willingness to consider a response filed in a related action demonstrates some flexibility, but ultimately the jurisdictional defect could not be overcome.