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Litigation News

Litigation News | 2025

Will the Real Party in Interest Please Stand Up?

Jeffrey Michael Marchese

Summary

  • State is the real party in interest for diversity removal in ghost gun case.
  • Ghost guns are untraceable and harder for law enforcement to track.
  • People of the State of California sued Texas-based companies for making computer numerical control milling machines that allow customers to manufacture their own ghost guns.
Will the Real Party in Interest Please Stand Up?
Marian Vejcik via Getty Images

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Texas-based defendants must face a lawsuit brought by the State of California in state court after a California federal district court rejected its attempt to remove and denied its motion to transfer venue. The court rejected the argument that the real party in interest was a California gun violence prevention organization, instead holding that the State of California was the plaintiff.

California Sues Out-of-State Companies in State Court Over “Ghost Guns”

In California v. Coast Runner Indus., et. al., the People of the State of California sued Texas-based companies for making computer numerical control (CNC) milling machines that allow customers to manufacture their own ghost guns, which are untraceable and harder for law enforcement to track. The state accused the companies of specifically marketing the machines to Californians wanting to bypass the state’s strict gun laws. The plaintiff asserted two causes of action: (1) for violation of California Civil Code Section 3273.62, prohibiting a person who sells, offers to sell, transfers, advertises, or markets a CNC milling machine from knowingly or recklessly causing another person to engage in illegal conduct, and (2) for violation of California’s Unfair Competition Law, Cal. Bus. & Prof. Code Section 17200.

Attempts to Remove and Remand

The defendants timely removed the case to the U.S. District Court for the Southern District of California under diversity jurisdiction and filed a motion to transfer venue, but the plaintiff filed a motion to remand, arguing that the court lacked diversity jurisdiction because the People of the State of California was the real party in interest and there can be no diversity jurisdiction where the state is the party. The defendants contended that the real plaintiff was Giffords Law Center to Prevent Gun Violence, which is a citizen of the State of California, so complete diversity existed. The defendants argued that the Giffords Law Center is the real party in interest because the County of San Diego and the Giffords Law Center partnered on this litigation, and the Giffords Law Center is engaged in a long-term litigation campaign that is expressly targeted against one of the defendants and its founder. The parties did not dispute that the amount in controversy exceeds the $75,000 threshold.

The Real Party in Interest

The parties agreed that the test to determine the real party in interest is to examine the essential nature and effect of the proceeding as it appears from the entire record. To do so, the U.S. Court of Appeals for the Ninth Circuit instructs courts to consider whether the state has a specific and concrete interest in the case, and the extent to which the state has a “substantial interest” in the relief sought. If the relief benefits only the state, then the state may be the real party in interest.

In its analysis, the district court focused on two cases, Department of Fair Emp’t v. Lucent Tech and Nevada v. Bank of Am. Corp. In Lucent, the California Department of Fair Employment and Housing, acting on behalf of the state, brought a wrongful termination action on behalf of an employer’s former employee. There, the Ninth Circuit held that the State of California was not a real party in interest because California’s interest in protecting all persons from employment discrimination was only a general governmental interest with most of the requested relief for damages available by the individual aggrieved. The Ninth Circuit also found that any relief unique to the Department of Fair Employment and Housing was tangential. By contrast, in Nevada, the Ninth Circuit found Nevada was the real party in interest where Nevada’s Attorney General filed a complaint on behalf of Nevada consumers against a bank and other defendants for deceptive trade practices related to the 2008 mortgage crisis. The Ninth Circuit determined Nevada’s Attorney General had statutory authority to pursue its claims, and Nevada had an interest in eliminating deceptive practices against consumers.

Lack of Diversity of Citizenship

In this case, the district court found that the action against gun manufacturers was similar to the Nevada case in that the state had concrete interests in this litigation and would substantially benefit from the remedy sought. The state sought to prevent the dissemination of ghost guns and to mitigate risks posed by them, and California had specific interests in holding entities to account that violate California’s firearm and consumer safety laws for the benefit of all Californians. The plaintiff also had statutory authority to bring both causes of action. Moreover, the court held that the Giffords Law Center was not the real party in interest because the defendants did not assert specific facts to establish that the organization was the real party in interest in their notice of removal, and the defendants did not offer any reasoning as to why the organization’s involvement in prior litigation meant the Giffords Law Center functioned as the plaintiff in this litigation.

Impact for Practitioners

“Where a plaintiff is seeking diversity jurisdiction, one has to carefully examine the citizenship of all parties to the case to ensure there is complete diversity,” states Mark A. Romance, Miami, FL, Co-Chair of the ABA Litigation Section’s Pretrial Practice & Discovery  Committee. “Attorneys therefore need to dig deeper into who is affected by the litigation to fully examine the diversity issue,” adds Romance.

“On selecting a venue, this case tells us that it is always strategic,” states Joseph V. Schaeffer, Pittsburgh, PA, Co-Chair of the Litigation Section’s Pretrial Practice & Discovery Section. “What it all comes back to is the idea that the plaintiff is the master of his or her complaint and has quite a bit of latitude on how to style it and where to file,” adds Schaeffer.

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