Unreported / Non-Citable
Background
Felicito Portillo filed this action in Los Angeles County Superior Court on August 17, 2026, naming Walmart Inc., Wal-Mart Associates, Inc., and Eva Doe as defendants. The complaint alleged harassment, discrimination, and retaliation under California's Fair Employment and Housing Act, Cal. Gov't Code §§ 12900 et seq., along with constructive wrongful termination in violation of public policy. On September 18, 2026, Walmart Inc. and Wal-Mart Associates, Inc. removed the action to the U.S. District Court for the Central District of California on diversity jurisdiction grounds pursuant to 28 U.S.C. §§ 1332 and 1441.
The notice of removal identified Portillo as a citizen of California and the Walmart entities as citizens of Delaware and Arkansas for jurisdictional purposes. The complaint, however, alleged that Doe is a citizen of California, which would defeat complete diversity if her citizenship counted. Walmart argued that Doe was a sham defendant whose citizenship should therefore be disregarded.
Judge Fernando M. Olguin reviewed the pleadings in chambers and issued a written order remanding the action, resolving subject matter jurisdiction without a reported oral hearing.
The Court’s Holding
The court held that Walmart did not carry its heavy burden of establishing fraudulent joinder. A removing defendant bears the burden of establishing that removal is proper, and any doubt regarding the existence of subject matter jurisdiction must be resolved in favor of remanding the action to state court. Under 28 U.S.C. § 1447(c), if it appears at any time before final judgment that the district court lacks subject matter jurisdiction, the case shall be remanded. Fraudulent joinder must be proven by clear and convincing evidence, and there is a general presumption against finding it.
The governing inquiry resolves disputed questions of fact and all ambiguities in the plaintiff's favor and asks whether the plaintiff could not possibly recover against the nondiverse defendant. Walmart argued that the allegations against Doe were not sufficiently severe or pervasive and too sparse to support a harassment claim. The court found that argument insufficient: even assuming the claims against Doe were deficiently pleaded, there remained the possibility that Portillo could salvage a claim through amendment, so Walmart failed to show that a state court would sustain a demurrer to all causes of action against Doe without leave to amend.
Because Doe's alleged California citizenship therefore remained relevant, complete diversity did not exist between the opposing parties as required by 28 U.S.C. § 1332(a), and the court lacked subject matter jurisdiction. The court ordered the action remanded to the Los Angeles County Superior Court under 28 U.S.C. § 1447(c) and directed the Clerk to send a certified copy of the order to the state court. The ruling addressed federal jurisdiction only, not the ultimate merits of Portillo's employment claims.
Key Takeaways
- A removing defendant bears the burden of establishing federal subject matter jurisdiction, and doubts about removal jurisdiction are resolved in favor of remand.
- Fraudulent joinder must be proved by clear and convincing evidence, and courts apply a general presumption against finding that a nondiverse defendant was fraudulently joined.
- Arguing that allegations are sparse or fail to state a viable harassment claim is not enough when the plaintiff could potentially amend to state a colorable claim.
- Because Walmart did not eliminate Doe as a proper defendant for diversity purposes, her alleged California citizenship defeated complete diversity.
- The action was remanded to Los Angeles County Superior Court, and the Clerk was ordered to transmit a certified copy of the remand order to the state court.
Why It Matters
The decision illustrates the distinction between an ordinary pleading-deficiency argument and the substantially heavier showing required for fraudulent joinder. The possibility of amendment prevented Walmart from establishing that Portillo could not possibly recover against Doe, so the federal court declined to disregard her citizenship to manufacture diversity jurisdiction.
For employment cases removed from California state court, the order underscores that a nondiverse individual defendant cannot simply be dismissed as a sham based on assertions that the current allegations are weak. The removing party must address whether any colorable claim could survive, including through amendment, before complete diversity can be found and a federal forum retained.