Chase v. Kia Motors Am.
| Decision Date | 24 February 2023 |
| Docket Number | 22-cv-09082-JCS |
| Parties | JOHN CHASE, et al., Plaintiffs, v. KIA MOTORS AMERICA, INC., et al., Defendants. |
| Court | U.S. District Court — Northern District of California |
ORDER REMANDING SUA SPONTE FOR LACK OF JURISDICTION
Defendant Hyundai Capital America d/b/a Kia Finance (“Kia Finance”) removed this case from the California Superior Court for the County of Alameda,[1] asserting that a federal claim that Plaintiffs added in arbitration while state court proceedings were stayed rendered the case removable once the stay was vacated. Plaintiffs John Chase and Hillary Chase move to remand on the basis that Kia Finance's removal was untimely, arguing that Kia Finance should have removed when Plaintiffs first raised their federal claim in arbitration. Defendants Kia Motors America Inc. (“Kia Motors”) and Michael C. Stead, Inc. d/b/a Michael Stead's Hilltop Ford Kia (“Hilltop”) join Kia Finance in opposing remand.
The Court held a hearing on February 24, 2023. Contrary to all parties' positions, the federal claim never became part of the case before the Superior Court, and thus is not part of the case before this Court. This Court therefore lacks subject matter jurisdiction and REMANDS the case sua sponte on that basis. Lacking jurisdiction, the Court does not reach the procedural arguments asserted by the parties.[2]
This case began with automotive defect and warranty claims under California law that
Plaintiffs filed in the Alameda County Superior Court. On August 16, 2019, the parties filed a stipulation in the state court action to stay proceedings pending arbitration. After acknowledging that Defendants had demanded that Plaintiffs submit their claims to arbitration, the relevant portion of the stipulation reads as follows:
The Parties hereby stipulate and agree as follows:
Notice of Removal (dkt. 1) Ex. A at 96.
On August 20, 2019, the Superior Court signed and entered the parties' proposed order, which states that the “Court accepts the above stipulation of the parties to submit this matter to binding arbitration,” “[t]he matter is STAYED pending the completion of arbitration,” and a status conference would occur the following year “to monitor the status of arbitration.” Id. at 104. The parties then proceeded with arbitration.
In September of 2020, Plaintiffs requested and obtained leave from the arbitrator to add claims by John Chase under the Fair Credit Reporting Act (“FCRA”)-a federal law-and its California analogue against Kia Finance, and filed an addendum to their arbitration demand asserting those additional claims. Conn Decl. (dkt. 10-1) ¶¶ 2-4 & Exs. A, B; Notice of Removal Ex. B at 58-60. Kia Finance filed a dispositive motion as to the new claims, but the arbitrator denied that motion and allowed those claims to proceed. Conn Decl. ¶¶ 8-9 & Exs. D, E.
The parties continued to submit case management statements to the Superior Court while arbitration was pending. In three such statements filed in January through October of 2022, Kia Finance noted that “Plaintiffs allege . . . FCRA claims,” and also that “[t]his case is currently in arbitration with the Evidentiary [sic] hearing anticipated to occur in 2022.” Conn Decl. Ex. G at 2, Ex. H at 2, Ex. I at 2.
On September 12, 2022, Plaintiffs moved in the Superior Court to vacate the order staying the case pending arbitration and to lift the stay under section 1281.98 of the California Code of Civil Procedure, arguing that Kia Finance had failed to pay an arbitration fee when required. Notice of Removal Ex. A at 320-25. That statute provides in relevant part:
Cal. Civ. Proc. Code § 1281.98.
Plaintiffs' motion “request[ed] that the Court: (a) enter an order vacating the Court's August 20, 2019 Order staying this case pending the completion of arbitration; and (b) permit Plaintiffs to proceed in this action in the Alameda County Superior Court under Plaintiffs' original Complaint,” and indicated in a footnote that “[u]pon the Court vacating the August 20, 2019 Order, Plaintiffs will seek leave to file a First Amended Complaint to allege additional causes of action, consistent with the claims that have been asserted in Arbitration.” Notice of Removal Ex.
A at 321 & n.1. That motion did not specifically reference Plaintiffs' claim under the FCRA.
Defendants argued that section 1281.98 did not apply to the facts at hand and that it was preempted by the Federal Arbitration Act (“FAA”), among other reasons to deny the motion, but in an order dated December 6, 2022, the Superior Court rejected those arguments and granted Plaintiffs' motion. See Notice of Removal Ex. A at 609-15.[3]Since the merits of that decision are not before this Court, this order does not recount the details of Defendants' arguments or the Superior Court's reasoning. The Superior Court's order did not address Plaintiffs' FCRA claim or other claims added in arbitration, but merely stated that Plaintiffs' motion was granted and that the stay was vacated, and set a case management conference for May 9, 2023. Id. at 609. Plaintiffs never filed an amended complaint in the Superior Court. Conn Decl. ¶ 7.
Kia Finance removed to this Court on December 22, 2022, asserting federal question jurisdiction based on Plaintiffs' FCRA claim, and contending that removal was timely because “[w]hen the State Court ordered the matter from arbitration back to State Court on December 6, 2022 and lifted the stay, this was the first time that the operative complaint in State Court included a federal cause of action.” See Notice of Removal ¶¶ 9, 16.
Plaintiffs argue that the state court action became removable when they first added their FCRA claim in arbitration, and that Kia Finance missed the thirty-day deadline to remove after that development. Mot. (dkt. 10) at 6-7. They assert that state courts cannot stay the deadline for removal to federal court. Id. at 7. Plaintiffs contend that Kia Finance improperly waited until after it received an adverse ruling in state court-the decision to vacate the stay-before belatedly removing to what it considered a more favorable forum. Id. at 8. According to Plaintiffs, Kia Finance should at the very least have removed when Plaintiffs first filed their motion to vacate the stay, as opposed to waiting to see how the Superior Court ruled on it. Id. at 8-9. Plaintiffs indicate that they intend to bring a separate motion for attorneys' fees if their present motion to remand is granted. Id. at 9-10.
Plaintiffs' motion does not clearly address the question of whether their FCRA claim ever became part of the case before the Superior Court. The closest it comes to acknowledging any uncertainty as to that issue is in one sentence of the introduction section that begins with a qualifying phrase: “To the extent that the FCRA claim asserted in arbitration can form the basis for federal question jurisdiction (the only basis that [Kia Finance] asserts), [Kia Finance] had 30 days from the date of receipt [of the addendum to Plaintiffs' arbitration demand] to remove the case.” Id. at 2. Other portions of the motion simply assert that the case was removable at that earlier time. Id. at 7 (“At the time that Plaintiffs filed an Addendum to their Arbitration Demand on September 14, 2020, the lawsuit had been pending for over a year and the action was removable.”).
Defendants argue that under Ninth Circuit law, the inclusion of a federal claim in arbitration does not in itself establish federal jurisdiction over an action to review the arbitration award. Opp'n (dkt. 18)[4] at 5 (citing Carter v. Health Net of Cal., Inc., 374 F.3d 830, 836 (9th Cir. 2004)). They contend that there is no authority supporting Plaintiffs' position that a defendant should remove a stayed state court action when a federal claim is raised in...
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