Unreported / Non-Citable
Background
Jorge Boanegres Espinoza sued NFS Unlimited, LLC, doing business as Skates by the Bay, and co-defendant Leo Guardado in the California Superior Court for Alameda County. NFS removed the action to the U.S. District Court for the Northern District of California, contending that Guardado, an individual and non-diverse defendant, had been fraudulently joined. Espinoza then moved to remand the case to state court, and the motion came before the court as Dkt. No. 13.
The complaint asserted 16 causes of action. The court observed that 15 of the 16 involved only NFS Unlimited, while Guardado was named only in Count 15, which alleged harassment in violation of California's Fair Employment and Housing Act. The defendants argued that the harassment claims against Guardado were somewhat thin, and the court agreed that the existing complaint lacked details about the what, where, and when of the acts by Guardado that Espinoza alleged created a hostile work environment or otherwise amounted to actionable harassment.
The Court’s Holding
The court explained that the standard on a motion to remand is not whether the plaintiff's harassment claim would survive Federal Rule of Civil Procedure 12(b)(6) analysis, but whether the individual defendant can be liable on any theory. If there is any possibility that a state court would find that the complaint states a cause of action, the court must remand, citing Grancare, LLC v. Thrower by & through Mills, 889 F.3d 543, 548 (9th Cir. 2018). The court also noted that fraudulent joinder must be proven by clear and convincing evidence, citing Hamilton Materials, Inc. v. Dow Chemical Corp., 494 F.3d 1203, 1206 (9th Cir. 2007).
Applying that standard, the court considered the allegations of the complaint together with Espinoza's representation that he could allege additional allegations about Guardado's conduct. On that record, the court could not determine that Espinoza could not possibly prevail on his claims against the allegedly fraudulently joined defendant, or that the claims against Guardado were wholly insubstantial and frivolous. For that reason, remand was required.
The court therefore granted the plaintiff's motion to remand. Because the court characterized the case as a close one, it denied Espinoza's request for an award of fees and costs, holding that NFS's removal was not objectively unreasonable. The order was dated November 4, 2026, and signed by United States District Judge William H. Orrick.
Key Takeaways
- A removing party invoking fraudulent joinder must show more than weaknesses in the complaint sufficient to raise a Rule 12(b)(6) issue; it must prove by clear and convincing evidence that there is no possibility the state court could find a cause of action against the nondiverse defendant.
- Remand is required when any possibility remains that a state court would find that the complaint states a cause of action against the allegedly fraudulently joined defendant.
- The court relied on the existing allegations and on the plaintiff's representation that he could allege additional facts about Guardado's conduct in concluding that the harassment claim was not wholly insubstantial and frivolous.
- Although the motion to remand was granted, the court denied the plaintiff's request for fees and costs because the jurisdictional question was close and the defendant's removal was not objectively unreasonable.
Why It Matters
The order applies the Ninth Circuit's demanding fraudulent-joinder standard to a removed FEHA case. Thin factual allegations against an individual defendant did not establish that the claims were impossible to maintain, particularly where the plaintiff represented that additional conduct could be alleged. The ruling illustrates that a sparse complaint, standing alone, will not defeat remand when the removing party bears the clear-and-convincing burden on fraudulent joinder.
The separate fee ruling shows that a successful remand motion does not automatically support an award of costs and fees. The court treated the jurisdictional question as close and found the removal objectively reasonable enough to defeat that request, underscoring that fee awards under the removal statute turn on the reasonableness of removal, not merely on the outcome of the remand motion.