1 2 3 4 5 6 7 8 9 10 UNITED STATES DISTRICT COURT 11 SOUTHERN DISTRICT OF CALIFORNIA 12 13 REDWOOD INTERFAITH HOUSING Case No.: 24-cv-00233-AJB-JLB CORPORATION, 14 ORDER SUA SPONTE REMANDING Plaintiff/Counter-Defendant, 15 FOR LACK OF SUBJECT MATTER v. JURISDICTION AND DENYING AS 16 MOOT ALL MOTIONS NATIONWIDE AFFORDABLE 17 HOUSING FUND 33, LLC, et al., (Doc. Nos. 58; 60; 61) 18 Defendants/Counterclaimants. 19 20

21 Before the Court are cross-motions for summary judgment and a motion to exclude. 22 (Doc. Nos. 58; 60; 61.) The motions are fully briefed. (Doc. Nos. 58; 60; 61; 64; 65; 68; 23 70; 74.) Also before the Court are the parties’ supplemental briefs addressing whether this 24 Court has jurisdiction over this action. (Doc. Nos. 91; 92; 93; 94.) Pursuant to Local Civil 25 Rule 7.1.d.1, the Court finds these matters suitable for disposition without oral argument. 26 For the reasons set forth below, the Court sua sponte REMANDS this action to San 27 Diego Superior Court for lack of subject matter jurisdiction. Additionally, the Court 28 DENIES AS MOOT the cross-motions for summary judgment and motion to exclude. 1 I. BACKGROUND 2 A. Factual Background 3 In 2007, Plaintiff Redwood Villa Interfaith Housing Corporation (“Redwood”) and 4 Defendants Nationwide Affordable Housing Fund 33, LLC, and SCDC, LLC (collectively, 5 “Nationwide”), joined together to form Redwood Villa Senior Housing Partners, L.P. (the 6 “Partnership”), to purchase, develop, operate, and sell a low-income senior housing facility 7 located at 3060 Redwood Street, San Diego, CA (the “Property”). (Doc. No. 58-4.) 8 Under the terms of the limited partnership agreement (the “Agreement”), Redwood 9 is the sole general partner, Nationwide Affordable Housing Fund 33 is an investor limited 10 partner, and SCDC is a special limited partner. (Id. at 7.1) 11 The Agreement vested Redwood, as the general partner, with “the exclusive right to 12 manage the business of the Partnership and . . . full power, authority and discretion to cause 13 the Partnership to do any of the acts described in Section 2.4” of the Agreement. (Id. at 22– 14 23.) Redwood also possesses 15 a right of first refusal under [

(i)(7)] to either (a) purchase the Limited Partners interest in the Partnership for a price, payable in cash in full 16 at closing, equal to the cash which would be distributed to the Limited Partners 17 pursuant to Section 5.2.B if the Property were then sold to a third party for Fair Market Value [or] (b) purchase the Property . . . at a purchase price (as 18 determined pursuant to [

(i)(7)]) equal to the sum of the 19 outstanding debt, income taxes, and any Exit Taxes and/or expenses that will be incurred as a result of the sale by the Partnership (assuming the maximum 20 federal, state and local income tax rate applicable to corporations). 21 22 (Id. at 30.) It appears that the sale of the Property or of the Partnership’s interest in the 23 Property will likely cause the Partnership to dissolve. (Id. at 6–7.) 24 As the special limited partner, SCDC may “automatically” remove Redwood as a 25 general partner and admit itself as a replacement general partner if Redwood “has in 26

27 28 1 Page citations refer to the pagination generated by the Case Management/Electronic Case Files system. 1 connection with the Partnership or the Property[] performed an act . . . constituting . . . 2 breach of fiduciary duty.” (Id. at 52–54.) 3 In October 2023, Redwood notified Nationwide that it intended to purchase 4 Nationwide’s interest in the Partnership at a fair market value. (Doc. No. 58-23.) After 5 receiving an appraisal of the Property’s value and, in turn, the value of Nationwide’s 6 interest in the Partnership, Redwood determined that it could not afford to pay the appraised 7 value for Nationwide’s interest in the Partnership. (Doc. No. 58-26 at 3.) Nationwide 8 responded that “if [Redwood] is unwilling or unable to fulfill the terms outlined in the [fair 9 market value] Option for Redwood Villas, [Nationwide] intends to remain in the 10 Partnership for the foreseeable future.” (Id. at 2.) 11 Two months later, Redwood notified Nationwide that it intended “to purchase[] all 12 of the Partnership’s interest in the Property” at the

(i)(7) purchase price. 13 (Doc. No. 58-28.) Nationwide rejected Redwood’s offer “because Consent of [SCDC] is 14 required to sell the Property . . . . [SCDC] has not consented to the sale or other disposition 15 of the Property.” (Doc. No. 58-39 at 3). 16 B. Procedural Background 17 On December 29, 2023, Redwood initiated this action in San Diego Superior Court 18 to compel the Partnership to transfer the Property to Redwood. (Doc. No. 1-2.) In its 19 Complaint, Redwood named Nationwide Affordable Housing Fund 33 and SCDC as 20 defendants, and included the Partnership as a “Nominal Defendant.” (Id. at 14–15.) 21 Redwood asserted two causes of action against Nationwide and the Partnership. First, 22 Redwood sought declaratory judgment against Nationwide and the Partnership declaring 23 that: 24 (a) [Redwood] has the exclusive authority under the [Agreement] to decide on behalf of the Partnership whether [the Partnership] desires or intends to sell 25 the Property; 26 (b) SCDC has no right to consent to a sale of the Property to [Redwood] 27 pursuant to the §42 [Right of First Refusal]; 28 1 (c) [Redwood’s] §42 [Right of First Refusal] was validly triggered and exercised, creating a binding contract obligating the Partnership to sell the 2 Property to [Redwood] on the terms and conditions specified under Section 3 6.5.H of the [Agreement]; 4 (d) [Nationwide] caused the Partnership to breach that binding contract; and 5 (e) [Redwood] is entitled to specific performance of that contract.

6 7 (Id. ¶¶ 138–55.) Second, Redwood requested judgment in its favor: 8 (i) finding [Nationwide] breached the [Agreement’s] implied covenant of good faith and fair dealing; 9 (ii) finding [Nationwide] ha[s] caused the Partnership to breach the 10 [Agreement] and [the Partnership’s] obligations under the binding contract 11 formed upon [Redwood’s] valid and enforceable exercise of its §42 [Right of First Refusal]; 12 (iii) awarding [Redwood] specific performance requiring the Partnership to 13 convey the Property to [Redwood] pursuant to the terms and conditions of 14 [Redwood’s] §42 [Right of First Refusal], as incorporated into the [purchase sale agreement]; 15 (iv) awarding [Redwood] damages as against [Nationwide] in an amount to 16 be determined at trial; and 17 (v) granting such further relief as the Court deems just and proper. 18 19 (Id. ¶¶ 156–81.) 20 On January 4, 2024, Redwood served the Complaint on Nationwide. (Id. at 2.) 21 Nationwide timely removed the action to this Court “on diversity jurisdiction grounds.” 22 (Doc. No. 1 at 3; see generally Doc. No. 1.) In particular, Nationwide claimed that this 23 Court may exercise diversity jurisdiction over the action because “the Partnership is a 24 nominal defendant, and as such, its citizenship must be disregarded for diversity 25 jurisdiction purposes.” (Doc. No. 1 at 7.) Nationwide did not assert that the action presents 26 a federal question. (See generally Doc. No. 1.) 27 On December 5, 2024, Nationwide filed its First Amended Counterclaim, raising six 28 causes of action against Redwood. (Doc. No. 52 ¶¶ 47–78.) 1 The parties later filed cross-motions for summary judgment, and Nationwide moved 2 to exclude an expert report submitted by Redwood. (Doc. Nos. 58; 60; 61.) 3 On September 15, 2025, the Court requested that the parties submit supplemental 4 briefing to address (1) “[w]hether the Court has diversity jurisdiction of this matter” and 5 (2) “[w]hether the Court has federal question jurisdiction of this matter.” (Doc. No. 90.) 6 II. LEGAL STANDARD 7 Federal courts are courts of limited jurisdiction, having subject matter jurisdiction 8 only over matters authorized by the Constitution and Congress. See Kokkonen v. Guardian 9 Life Ins. Co.,

(1994). A defendant may remove a civil action to federal 10 court only if the district court would have original jurisdiction over the action. 28 U.S.C. 11 § 1441(a). “[R]emoval statutes are strictly construed against removal.” Luther v. 12 Countywide Home Loans Servicing LP,

(9th Cir. 2008). There is a 13 “strong presumption” against removal jurisdiction, and the party seeking removal always 14 bears the burden of establishing that removal is proper. Gaus v. Miles, Inc.,

, 15 566 (9th Cir. 1992). A party that fails to invoke a ground for jurisdiction in its notice of 16 removal waives any argument related to that ground. City of Oakland v. BP PLC,

895, 911 n.12 (9th Cir. 2020). If there is any doubt as to the propriety of removal, federal 18 jurisdiction must be rejected. Gaus,

. 19 “The federal courts are under an independent obligation to examine their own 20 jurisdiction.” FW/PBS, Inc. v. City of Dallas,

(1990). “If at any time 21 before final judgment it appears that the district court lacks subject matter jurisdiction, the 22 case shall be remanded.”

(c). 23 III. DISCUSSION 24 A. The Court Lacks Diversity Jurisdiction. 25 “The district courts shall have original jurisdiction of all civil actions where the 26 matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, 27 and is between citizens of different States.”

(a)(1). This provision “applies 28 1 only to cases in which the citizenship of each plaintiff is diverse from the citizenship of 2 each defendant.” Caterpillar Inc. v. Lewis,

(1996). 3 Redwood is not diverse from each Defendant, precluding diversity jurisdiction. A 4 “corporation shall be deemed to be a citizen of every State . . . by which it has been 5 incorporated and of the State . . . where it has its principal place of business.” 28 U.S.C. 6 § 1332(c)(1). Here, Redwood is a citizen of California (Doc. Nos. 1 at 5; 1-2 ¶ 20); 7 Nationwide Affordable Housing Fund 33 is a citizen of Colorado, Ohio, and Texas (Doc. 8 Nos. 1 at 5–6; 1-2 ¶ 21); and SCDC is a citizen of Ohio and Texas (Doc. Nos. 1 at 6–7; 1- 9 2 ¶ 22). Additionally, a partnership is a citizen of all the states of which its partners are 10 citizens. Singh v. Am. Honda Fin. Corp.,

, 1064 n.10 (9th Cir. 2019). 11 Accordingly, the Partnership is a citizen of California, Colorado, Ohio, and Texas. In turn, 12 Redwood is not diverse from the Partnership and the Court lacks diversity jurisdiction. 13 Nevertheless, Nationwide raises two arguments to assert that complete diversity is 14 present. (Doc. Nos. 1 at 7–10; 92 at 2–5; 93 at 2–3.) First, Nationwide contends that the 15 Partnership is merely a nominal defendant because (a) Redwood identified the Partnership 16 as a nominal defendant, (b) the Partnership lacks any adverse interest to Redwood, and 17 (c) the Partnership is not a necessary party because it has no stake in the litigation. (Doc. 18 Nos. 1 at 7–8; 92 at 2–4.) Second, Nationwide avers that Redwood fraudulently joined the 19 Partnership to prevent removal because Redwood cannot state a cause of action against the 20 Partnership. (Doc. Nos. 1 at 9–10; 92 at 4–5.) Nationwide’s arguments are unavailing. 21 1. The Partnership is not a nominal party. 22 Preliminarily, a nominal party is one that has “no interest in the action” and that is 23 joined to perform a “ministerial act.” Prudential Real Estate Affiliates, Inc. v. PPR Realty, 24 Inc.,

(9th Cir. 2000) (quoting 13B Charles Alan Wright, Arthur R. 25 Miller, Edward H. Cooper, Federal Practice and Procedure § 3606, at 409 & n.2 (2d ed. 26 1984)). This definition is not applicable to the Partnership. 27 Turning to Nationwide’s arguments, Redwood’s prior labeling of the Partnership as 28 a nominal defendant is irrelevant. Redwood does not offer any explanation for why it 1 labeled the Partnership as a nominal defendant. (See generally Doc. Nos. 1-2; 91; 94.) It 2 also appears that Redwood is now abandoning that labeling as Redwood points out that it 3 “pled: (1) a declaratory judgment claim against, and sought relief from, the Partnership; 4 and (2) a claim for specific performance against, and sought relief from, the Partnership.” 5 (Doc. No. 94 at 2 (citing Doc. No. 1-2 ¶¶ 138–81).) Regardless, Redwood cannot consent 6 its way into federal court by mislabeling a party. See Sullivan v. First Affiliated Sec., Inc., 7

(9th Cir. 1987). 8 Next, the Partnership possesses an interest adverse to Redwood’s in this litigation. 9 As the parties recognize, it is the Partnership that owns the Property. (See, e.g., Doc. Nos. 10 58-3 ¶ 5; 60-1 at 6.) If Redwood prevails, the Partnership will be stripped of the Property 11 and likely dissolved. (See Doc. Nos. 1-2 at 42; 58-4 at 6–7.) On the other hand, if 12 Nationwide prevails against Redwood’s claims, the Partnership will retain the Property and 13 remain in existence. Insofar as Redwood seeks to take something away from the 14 Partnership, the two entities’ interests are at odds. 15 Nationwide nevertheless asks the Court to turn a blind eye to this reality since 16 Redwood is the general partner, “acts on behalf of the Partnership,” and “controls its 17 conduct.” (Doc. No. 1 at 9; see also Doc. No. 92 at 4–5.) Although true, these facts do not 18 warrant disregarding the Partnership’s corporate form. Cf. Sonora Diamond Corp. v. Sup. 19 Ct.,

(Cal. Ct. App. 2000) (“when the corporate form is used to 20 perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable 21 purpose, the courts will ignore the corporate entity”). 22 The Partnership’s adverse interest also means that the Partnership possesses a stake 23 in the litigation and is a necessary party. Nationwide cites Muskegon Holdings LLC v. VP 24 LB 13 LLC, 8:23-CV-01302-DOC-JDEx,

(C.D. Cal. Dec. 5, 2023), to 25 argue that even though the Partnership owns the property, the Court may nonetheless 26 “accord complete relief among the parties in the litigation without joining the partnership.” 27 (Doc. No. 92 at 2–3.) Redwood also cites Muskegon Holdings as the basis for its decision 28 “to conserve its resources” and not seek remand. (Doc. No. 91 at 2–3.) 1 The parties’ reliance on Muskegon Holdings is misplaced. There, the plaintiff sought 2 “a declaration that [the Right of First Refusal] has not been triggered and thus cannot be 3 exercised.”

, at *4. Such a declaration would have meant that the 4 partnership there had no obligation to sell the property at issue.

In turn, that 5 partnership’s interests would not be impaired by the litigation.

. 6 Redwood’s claims present the reverse image. Redwood seeks a declaration that it 7 validly exercised its right of first refusal. (Doc. No. 1-2 at 42.) According to Redwood, 8 such a declaration would obligate the Partnership to transfer the Property to Redwood. (Id.) 9 The Partnership’s interests may thus be impaired by the present litigation.2 10 Moreover, excluding the Partnership from this litigation may limit Redwood’s 11 ability to obtain complete relief. Nationwide indicates that if the Partnership is removed 12 from these proceedings and Redwood prevails, Redwood would still be able to obtain 13 complete relief because Redwood can simply require the Partnership to transfer the 14 Property. (See, e.g., Doc. No. 92 at 4 (“Plaintiff controls the Partnership and thus controls 15 that outcome.”).) However, any decision on the merits would not be binding on the 16 Partnership if it is removed from the proceedings. Even if Redwood prevails in that 17 situation, SCDC may still oust Redwood from the managing general partner role, become 18 admitted as the replacement managing general partner, and prevent the Partnership from 19 transferring the Property to Redwood. (See Doc. No. 58-4 at 52–54.)3 20 This conclusion is consistent with other courts’ decisions. For instance, in King 21 Plaza, LLC v. Allian Tax Credit Fund 40, Ltd., the court found that a partnership was not 22 a nominal defendant because the plaintiff there sought an order of specific performance 23 24 2 In contrast, it is Nationwide’s counterclaims that are analogous to Muskegon Holdings’ claims. 25 (Compare, e.g., Doc. No. 52 at 16–17 (seeking declaratory relief “that Redwood failed to exercise its [Right of First Refusal] to purchase [Nationwide’s] interests in the Partnership or to purchase the 26 Property”), with Muskegon Holdings,

at *4 (“Plaintiff seeks a declaration that Canopy’s [Right of First Refusal] has not been triggered and thus cannot be exercised.”).) 27 3 To be clear, the Court does not endorse any such gamesmanship. The Court provides this example only 28 to demonstrate why the resolution of Redwood’s claims must also bind the Partnership. 1 that would require the partnership to sell its property.

, 458 (D.N.J. 2 2024). King Plaza also noted that the partnership would be further impacted because the 3 sale of the property would lead to the partnership’s dissolution.

Additionally, the King 4 Plaza court distinguished Muskegon Holdings because the claims before it could “have the 5 effect of liquidating and terminating the Partnership.”

. Similarly, the district court 6 in Wesley Housing Development Corporation of Northern Virginia v. SunAmerica Housing 7 Fund 1171, concluded that in an action that could require a partnership to sell its property 8 at a below-market price, “the Partnership is not a nominal party and the Partnership’s 9 citizenship must be considered in determining whether complete diversity exists between 10 the parties.”

, 458–59 (E.D. Va. 2021). 11 In contrast, Beneficial Pines at Warrington, LLC v. MG GTC Middle Tier II, LLC, 12 held that a partnership could not be considered a nominal party when its judgment “would 13 neither affect any property owned by the partnership nor compel or forbid any act by the 14 partnership.” No. 8:22-cv-1351-SDM-CPT,

, at *3 (M.D. Fl. Dec. 8, 15 2022). 16 In short, the distinguishing feature that prevents the Partnership from being a 17 nominal defendant here is that the resolution of Redwood’s claims may affect the 18 Partnership’s property interests. See Prudential,

. 19 2. Redwood did not fraudulently join the Partnership as a party. 20 The Ninth Circuit has recognized that: 21 [t]here are two ways to establish fraudulent joinder: “(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a 22 cause of action against the non-diverse party in state court.” Hunter v. Phillip 23 Morris USA,

(9th Cir. 2009) . . . . Fraudulent joinder is established the second way if a defendant shows that an “individual[] joined 24 in the action cannot be liable on any theory.” Ritchey v. Upjohn Drug Co., 139

(9th Cir. 1998). But “if there is a possibility that a state court would find that the complaint states a cause of action against any of the 26 resident defendants, the federal court must find that the joinder was proper 27 and remand the case to the state court.” Hunter,

. . . . A defendant invoking federal court diversity jurisdiction on the basis of 28 1 fraudulent joinder bears a “heavy burden” since there is a “general presumption against [finding] fraudulent joinder.”

(citations omitted). 2

3 Grancare, LLC v. Thrower by and through Mills,

(9th Cir. 2018). 4 Nationwide has failed to carry this heavy burden. In its notice of removal, 5 Nationwide asserted that “because the Partnership has no stake in the outcome of this 6 litigation, it follows that [Redwood] has not stated, and cannot adequately state, a cause of 7 action against it.” (Doc. No. 1 at 9.) Nationwide echoes this assertion in its supplemental 8 briefing, adding that Redwood “only requests specific performance that the Partnership sell 9 the Property to [Redwood] pursuant to the [Right of First Refusal]. This is not a claim 10 against the Partnership, rather a remedy conditioned on a declaration that [Redwood] 11 validly exercised its [Right of First Refusal].” (Doc. No. 92 at 4.) 12 Nationwide is incorrect. As discussed above, the Partnership has a stake in this 13 litigation—its ownership of the Property and, likely, its continued existence. And as 14 Redwood points out, California courts have recognized requests for specific performance 15 as claims. (Doc. No. 94 at 2 n.2 (citing Benach v. Cnty. of Los Angeles,

(Cal. Ct. App. 2007)).) Consequently, “there is a possibility that a state court 17 would find that the complaint states a cause of action against” the Partnership. Hunter, 582 18 F.3d at 1046 (citation omitted). The Court accordingly finds that Redwood did not 19 fraudulently join the Partnership in this action to defeat diversity jurisdiction. See 20 Grancare,

. 21 3. The Court cannot maintain jurisdiction it never possessed. 22 Given that the Partnership has been a necessary, non-nominal party since the start of 23 these proceedings, the Court never possessed diversity jurisdiction over this action. 24 Redwood nevertheless suggests that “the Court should take appropriate action within its 25 discretion to maintain diversity jurisdiction” to protect Redwood from any prejudice from 26 restarting this litigation in state court. (Doc. No. 91 at 3.) It would be illogical for the Court 27 to “maintain” something it never possessed. Furthermore, given that the Partnership is a 28 necessary party to Redwood’s claims, the Court cannot simply remove the Partnership to 1 establish complete diversity. See Fed. R. Civ. P. 19(a)(1). To the extent that remand 2 prejudices Redwood, any such prejudice is the consequence of Redwood’s decision not to 3 seek remand because of Muskegon Holdings. (See Doc. No. 91 at 2–3.) 4 B. The Court Declines to Assert and Exercise Federal Question Jurisdiction. 5 In the absence of diversity jurisdiction, the parties dispute whether the Court may 6 exercise federal question jurisdiction over the action. Redwood asserts that Nationwide 7 bore the burden of raising federal question jurisdiction in its removal notice, Nationwide 8 waived its ability to raise federal question jurisdiction, and the Court lacks federal question 9 jurisdiction. (Doc. Nos. 91 at 4; 94 at 3–4.) In contrast, Nationwide now asserts that federal 10 question exists because “interpreting the parties’ rights and obligations under the 11 [Agreement] requires interpretation of Congress’ intent in drafting [

].” (Doc. 12 No. 92 at 5–6.) Nationwide adds that the Court may exercise federal question jurisdiction 13 based on its sua sponte request for supplemental briefing on the issue. (Doc. No. 93 at 3.) 14 The Court finds that Nationwide cannot retroactively assert federal question 15 jurisdiction. Again, the party seeking removal bears the burden of establishing that removal 16 is proper. Gaus,

. Any doubt regarding the propriety of removal requires 17 remand.

Here, Nationwide’s notice of removal identified diversity jurisdiction as the 18 sole basis for removal. (See generally Doc. No. 1.) Because more than thirty days have 19 passed since service of the Complaint on January 4, 2024, Nationwide is time-barred from 20 amending its notice of removal to assert federal question jurisdiction. See ARCO Envtl. 21 Remediation, LLC v. Dep’t of Health and Envtl. Qual. of Mont.,

(9th 22 Cir. 2000). Nationwide additionally waived its ability to assert federal question jurisdiction 23 by not raising it in the notice of removal. Oakland, 969 F.3d at 911 n.12. Although 24 Nationwide now asserts that it may retroactively assert federal question jurisdiction based 25 on the Court’s request for supplemental briefing, Nationwide does not provide any citation 26 showing that the Court’s action creates such a back door. (See generally Doc. No. 93.) The 27 Court is not aware of any caselaw that supports this proposition. 28 1 Under these circumstances, Nationwide’s removal of this action was not proper, and 2 is not clear that the defect is cured simply because the Court asked whether it has federal 3 || question jurisdiction. Accordingly, remand is required. Gaus,

. 4 CONCLUSION 5 The Court lacks diversity jurisdiction because the Partnership is a necessary, non- 6 ||nominal defendant that is not diverse from Redwood. And because it is not clear that 7 || Nationwide may assert federal question jurisdiction at this late juncture, Nationwide has 8 || failed to establish that removal is proper. 9 Based on the foregoing, the Court sua sponte REMANDS the action to San Diego 10 ||Superior Court. Further, the Court DENIES AS MOOT the parties’ cross-motions for 11 |}summary judgment (Doc. Nos. 58; 60) and Nationwide’s motion to exclude (Doc. No. 61). 12 IT IS SO ORDERED. 13 ||Dated: October 9, 2025

15 United States District Judge 16 17 18 19 20 21 22 23 24 25 26 27 28