Aqua Connect v. Code Rebel LLC et al

Filing 24

ORDER by Judge Ronald S.W. Lew, DENYING Plaintiff Aqua Connect, Inc.'s Motion to Remand 11 . This Court finds that Defendants Code Rebel and Kryeziu's removal was timely under 28 U.S.C. § 1446(b). Furthermore, the Court DENIES Plaintiff and Defendants Code Rebel and Kryeziu's requests for attorney's fees. (See attached document for details.) (lom)

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 Aqua Connect, Inc., 11 12 13 14 15 16 17 18 ) ) Plaintiff, ) ) ) v. ) ) Code Rebel LLC, Arben ) ) Kryeziu, and Vladimir Bickov, ) ) ) ) Defendants. ) ) ) ) 19 CV 11-5764 RSWL (MANx) ORDER Re: Plaintiff Aqua Connect, Inc.’s Motion to Remand [11] On October 12, 2011, Plaintiff Aqua Connect, Inc.’s 20 Motion for Remand came on for regular calendar before 21 this Court [11]. The Court, having reviewed all papers 22 submitted pertaining to this Motion and having 23 considered all arguments presented to the Court, NOW 24 FINDS AND RULES AS FOLLOWS: 25 The Court hereby DENIES Plaintiff’s Motion to 26 Remand. 27 /// 28 /// 1 1 I. BACKGROUND 2 A. Factual Background 3 Plaintiff brings this current Action against 4 Defendants for claims arising from Defendants’ alleged 5 reverse engineering of Plaintiff’s software and 6 subsequent distribution of an allegedly infringing 7 software product. Plaintiff is a Nevada corporation 8 that sells software and has its principal place of 9 business in California. 10 Defendant Code Rebel LLC (“Code Rebel”) also sells 11 software and is a limited liability corporation 12 organized under the laws of Hawaii, with its principal 13 place of business in Hawaii. Defendant Arben Kryeziu 14 (“Kryeziu”), a citizen of Hawaii, is the managing 15 partner and only member of Defendant Code Rebel. 16 According to the Complaint, Defendant Bickov is a 17 resident of Russia, who worked as an agent of Defendant 18 Code Rebel, at the behest of Defendant Kryeziu. 19 Defendant Bickov has not been served. 20 B. Procedural Background 21 On May 25, 2011, Plaintiff filed this Action 22 against Defendants in the Superior Court of California, 23 County of Los Angeles [1]. Defendants Code Rebel and 24 Kryeziu were served with a Summons and Complaint on 25 June 6, 2011. On July 12, 2011, Defendants Code Rebel 26 and Kryeziu allege they received a letter from unserved 27 Defendant Bickov, in which Defendant Bickov claimed to 28 be a citizen of Ukraine and consented to removal. 2 1 Consequently, on July 13, 2011, Defendants Code Rebel 2 and Kryeziu jointly filed a Notice of Removal on 3 diversity grounds. Thereafter, on August 12, 2011, 4 Plaintiff filed this present Motion to Remand [11]. 5 6 II. LEGAL STANDARD FOR REMAND 7 In deciding whether to remand a case, this Court 8 must determine whether the case was properly removed to 9 this Court. The right to remove a case to federal 10 court is governed by 28 U.S.C. § 1441, which in 11 relevant part states that “any civil action brought in 12 a State court of which the district courts of the 13 United States have original jurisdiction, may be 14 removed by the defendant or the defendants. . . .” 15 U.S.C. § 1441(a). 28 District courts have diversity 16 jurisdiction over all civil actions between citizens of 17 different states where the amount in controversy 18 exceeds $ 75,000, exclusive of interest and costs. 28 19 U.S.C. § 1332. 20 Section 1446(b) governs the timing of removal. If 21 the initial pleading shows that the case is “removable 22 on its face,” then a defendant has thirty days from 23 receipt of the pleading to remove the case. Carvalho 24 v. Equifax Info. Servs., LLC, 629 F.3d 876, 885 25 (quoting Harris v. Bankers Life & Cas. Co., 425 F.3d 26 689, 694 (9th Cir. 2005)). If, however, no basis for 27 removal is apparent in that pleading, the requisite 28 thirty-day removal period does not begin until the 3 1 defendant receives “a copy of an amended pleading, 2 motion, order or other paper” from which removability 3 may first be ascertained. 4 28 U.S.C. § 1446(b). The Court may remand a case to state court for lack 5 of subject matter jurisdiction or defects in removal 6 procedure. 28 U.S.C. § 1447(c). The defendant has the 7 burden of proving that removal is proper and that all 8 of the prerequisites are satisfied. If at any time 9 before final judgment it appears that the district 10 court lacks subject matter jurisdiction over a case 11 that has been removed to federal court, the case must 12 be remanded. 28 U.S.C. § 1447(c). The Ninth Circuit 13 strictly construes the removal statute against removal 14 jurisdiction, and federal jurisdiction must be rejected 15 if there is any doubt as to the right of removal in the 16 first instance. See Shamrock Oil & Gas Corp. v. 17 Sheets, 313 U.S. 100, 108-09 (1941) (stating that 18 removal statutes should be construed narrowly in favor 19 of remand to protect jurisdiction of state courts). 20 21 III. ANALYSIS 22 A. Evidentiary Objection 23 Plaintiff moves to strike a letter from unserved 24 Defendant Bickov as inadmissible hearsay. 25 ¶ 9, Ex. B. See Removal, Hearsay does not encompass all 26 extrajudicial statements but only those offered for the 27 purpose of proving the truth of matter asserted in the 28 statement. Fed. R. Evid. 801(c). 4 Here, Defendants 1 Code Rebel and Kryeziu offer the letter for two 2 purposes: (1) to prove Defendant Bickov’s citizenship 3 and his consent to removal; and (2) to prove that they 4 received notice of removability on July 12, 2011. 5 As for the first purpose, the Court finds that 6 Defendants Code Rebel and Kryeziu may not use the 7 contents of the letter to prove Defendant Bickov’s 8 citizenship and his consent to removal. Such use is 9 hearsay, and thus, Plaintiff’s evidentiary objection as 10 to Bickov’s letter is SUSTAINED in part. 11 As for the second purpose, the Court finds that 12 Defendants Code Rebel and Kryeziu may offer the letter 13 to prove that they received notice of removability on 14 July 12, 2011. Such use is a non-hearsay use of the 15 letter, as it is only being offered for the effect on 16 the listener. United States v. Dorsey, 418 F.3d 1038, 17 1044 (9th Cir. 2005)(“If the significance of an offered 18 statement lies solely in the fact that it was made, no 19 issue is raised as to the truth of anything asserted, 20 and the statement is not hearsay.” (quoting Fed. R. 21 Evid. 801(c) advisory committee's note)). Thus, 22 Plaintiff’s evidentiary objection as to Bickov’s letter 23 is OVERRULED in Part. 24 B. Motion to Remand 25 In its Motion, Plaintiff argues that this Action 26 should be remanded to state court for the following 27 reasons: (1) Defendants Code Rebel and Kryeziu’s 28 removal was untimely; (2) Defendants Code Rebel and 5 1 Kryeziu have failed to make the required showing for 2 diversity jurisdiction; and (3) Defendants Code Rebel 3 and Kryeziu failed to join Defendant Bickov in their 4 Notice of Removal. This Court DENIES Plaintiff’s 5 Motion to Remand because Defendants Code Rebel and 6 Kryeziu’s removal was proper. 7 1. Timing of removal 8 This Court finds that Defendants Code Rebel and 9 Kryeziu’s removal was timely under 28 U.S.C. § 1446(b). 10 Specifically, the Court finds that service of the 11 Complaint did not trigger the thirty-day removal period 12 because Defendants Code Rebel and Kryeziu could not 13 have ascertained the removability of the Action without 14 knowing the citizenship of unserved Defendant Bickov. 15 The Complaint, served upon Defendants Code Rebel and 16 Kryeziu, only alleged Defendant Bickov’s residence; 17 however, for the purpose of giving notice of 18 removability, the Ninth Circuit has held that a person 19 “residing in a given state is not necessarily domiciled 20 there, and thus is not necessarily a citizen of that 21 state.” Kantor v. Wellesley Galleries. Ltd., 704 F.2d 22 1088, 1090 (9th Cir. 1983). As such, the Court finds 23 that the face of the Complaint did not give notice of 24 removability to Defendants Code Rebel and Kryeziu, and 25 thus, the thirty-day removal period could not have 26 started when they were served with the Complaint. See 27 Harris v. Bankers Life and Cas. Co., 425 F.3d 689, 695 28 (9th Cir. 2005)(holding service of the complaint did 6 1 not trigger the thirty-day removal period because the 2 complaint only alleged an unserved defendant’s 3 residence). 4 Rather, the Court finds that the Notice of Removal 5 was timely because the thirty-day removal period did 6 not start until Defendants Code Rebel and Kryeziu 7 received unserved Defendant Bickov’s letter on July 12, 8 2011. See § 1446(b) (If no basis for removal is 9 apparent in the initial pleading, the thirty-day 10 removal period does not begin until a defendant 11 receives “a copy of an amended pleading, motion, order 12 or other paper” from which removability may first be 13 ascertained.); see, e.g., Harris v. Bankers Life and 14 Cas. Co., 425 F.3d 689, 691-92 (9th Cir. 2005)(the 15 defendant timely removed the case within thirty days of 16 discovering additional information about an unserved 17 defendant). The Court finds that Defendant Bickov’s 18 letter alerted Defendants Code Rebel and Kryeziu that 19 complete diversity existed and that this case was 20 removable. Therefore, Defendants Code Rebel and 21 Kryeziu timely filed their Notice of Removal on July 22 13, 2011. 23 2. 24 The parties do not dispute whether diversity Diversity Jurisdiction 25 jurisdiction exists; rather, Plaintiff argues that 26 Defendants Code Rebel and Kryeziu failed to prove 27 28 7 1 diversity jurisdiction by a preponderance of evidence.1 2 Generally, on a motion to remand, the defendant has 3 the burden of proving by a preponderance of evidence 4 that diversity jurisdiction exists. Gaus, 980 F.2d at 5 565 (holding that the defendant must prove by a 6 preponderance of evidence that the amount in 7 controversy exceeded $50,000); Guryev v. Life Investors 8 Ins. Co. of Am., No. 00-2679, 2000 U.S. Dist. LEXIS 9 18079, at *2 (N.D. Cal. Dec. 4, 2000). However, on a 10 motion to remand, alleging a party’s residence in the 11 complaint creates a presumption that the party 12 continues to reside in that state and puts “the burden 13 of coming forward with contrary evidence on the party 14 seeking to prove otherwise,” which is Plaintiff in this 15 case. Baumann v. American Family Mut. Ins. Co., 2011 16 WL 2709121, *2 (D. Colo. July 12, 2011) (quoting State 17 Farm Mut. Auto. Ins. Co. v. Dyer, 19 F.3d 514, 519 18 (10th Cir. 1994)); Harrell v. Kepreos, 2005 WL 730639, 19 *2 (D. Or. March 30, 2005)(holding that a person's 20 residence is presumed to be the person’s domicile or 21 place of citizenship).2 22 1 As discussed previously, Defendant Bickov’s letter is hearsay; thus, Defendants Code Rebel and Kryeziu may 24 not use its contents to prove Defendant Bickov’s 25 citizenship. 23 2 If a complaint states that a person is a resident of a state, there is a presumption that the person is 27 also a citizen of that state. State Farm Mut. Auto. 28 Ins. Co. v. Dyer, 19 F.3d 514, 520 (10th Cir. 1994); 26 8 1 Here, Plaintiff alleges in the Complaint that 2 Defendant Bickov is a resident of Russia. As such, 3 Plaintiff’s allegation created a presumption that 4 Russia is Defendant Bickov’s domicile and consequently 5 created a presumption of complete diversity. 6 Therefore, Plaintiff, as the party challenging 7 diversity jurisdiction here, has the burden of 8 disproving this presumption of complete diversity. See 9 Lew v. Moss, 797 F.2d 747, 751 (9th Cir. 1986) (holding 10 that the proponent of jurisdiction bears the burden of 11 proof, but the presumption of continued residence 12 shifts the burden of production onto the party seeking 13 to prove otherwise). 14 The Court finds that Plaintiff has failed to 15 produce any evidence to challenge the presumption of 16 complete diversity, and thus, Plaintiff failed to meet 17 its burden. 18 3. 19 The Court finds removal was proper because Joining in Notice of Removal 20 Defendants Code Rebel and Kryeziu did not need consent 21 of unserved Defendant Bickov to remove. Case law 22 generally requires all defendants to join or consent to 23 the notice of removal, but an exception exists when a 24 25 Gonzalez v. First NLC Financial Servs., 2009 WL 26 2513670, *2 (C.D. Cal. June 12, 2009). However, as discussed in the previous section, residence in a 27 complaint is not enough to give a defendant sufficient 28 notice of removability. 9 1 non-joining defendant has not been served in state 2 court. See Community Bldg. Co. v. Maryland Casualty 3 Co., 8 F.2d 678 (9th Cir. 1925); Lopez v. BNSF Ry. Co., 4 614 F. Supp. 2d 1084, 1087 (E.D. Cal. 2007). Because 5 Defendant Bickov has not been served, the Court finds 6 that this exception to joining or consenting to removal 7 applies here. Thus, the Court finds removal was 8 proper. 9 10 4. Attorney’s Fees Plaintiff requests attorney’s fees in connection 11 with bringing this Motion. Defendants Code Rebel and 12 Kryeziu argue that the Court should instead award them 13 attorney’s fees to punish Plaintiff for making 14 misleading arguments and misstatements of fact and law. 15 The Court finds that neither party should be 16 awarded attorney’s fees. Fee awards are left to the 17 district court’s discretion, but section 1447(c) 18 provides for attorney’s fees “only where the removing 19 party lacked an objectively reasonable basis for 20 seeking removal.” Martin v. Franklin Capital Corp., 21 546 U.S. 132, 141 (2005). Defendants Code Rebel and 22 Kryeziu had an objectively reasonable basis for seeking 23 removal, and there is no evidence that Plaintiff filed 24 this Motion to Remand in bad faith. 25 Accordingly, the Court DENIES Plaintiff and 26 Defendants Code Rebel and Kryeziu’s requests for 27 attorney’s fees. 28 10 1 IV. CONCLUSION 2 For the reasons stated above, the Court DENIES 3 Plaintiff’s Motion to Remand. Furthermore, the Court 4 DENIES Plaintiff and Defendants Code Rebel and 5 Kryeziu’s requests for attorney’s fees. 6 7 8 DATED: October 25, 2011 9 IT IS SO ORDERED. 10 11 12 13 HONORABLE RONALD S.W. LEW Senior, U.S. District Court Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11