Grieco v. World Fuel Services, Inc.

Filing 30

ORDER by Judge Joseph C. Spero DENYING 6 Motion to Dismiss or Compel Arbitration without prejudice; GRANTING 19 Motion to Remand, DENYING request for fees and costs; VACATING hearing (jcslc3S, COURT STAFF) (Filed on 2/10/2012)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 MARK GRIECO, 7 Plaintiff, 8 9 v. WORLD FUEL SERVICES, INC., and DOES 1 through 50, inclusive, 10 ORDER GRANTING PLAINTIFF’S MOTION TO REMAND, DENYING PLAINTIFF’S REQUEST FOR FEES AND COSTS, AND DENYING DEFENDANT’S MOTION TO COMPEL ARBITRATION Defendants. 11 For the Northern District of California United States District Court Case No. C-11-05672 JCS 12 ___________________________________/ 13 14 15 I. INTRODUCTION Plaintiff initiated this action on November 17, 2011 in the Superior Court of the City and 16 County of San Francisco, seeking declaratory and injunctive relief regarding a disputed employment 17 agreement between the Plaintiff, Mark Grieco, and his former employer, the Defendant, World Fuel 18 Services, Inc. (“WFS”). Defendant removed the case to federal court based on diversity jurisdiction. 19 Plaintiff now brings a Motion to Remand and for Fees and Costs (“Motion to Remand”). Defendant 20 WFS opposes the Remand Motion, and brings a Motion to Compel Arbitration or, in the Alternative, 21 to Transfer Venue (“Motion to Compel Arbitration”), asking the Court to dismiss the complaint or 22 stay the proceedings pending arbitration. Plaintiff opposes Defendant’s motion. The Court finds 23 that the motions are suitable for disposition without oral argument pursuant to Local Rule 7-1(b). 24 Accordingly, the hearing on the motions set for Friday, March 2, 2012 at 9:30 a.m. is VACATED. 25 For the reasons stated below, the Court GRANTS Plaintiff’s Motion to Remand, DENIES Plaintiff’s 26 27 28 1 request for fees and costs, and DENIES Defendant’s Motion to Compel Arbitration without 2 prejudice.1 3 II. BACKGROUND 4 A. 5 In his Complaint, Plaintiff alleges that Defendant WFS is a Florida corporation with its 6 principal place of business in Florida. Complaint, ¶ 4. After twenty years of employment with 7 WFS, Plaintiff resigned from the company on or about August 31, 2011. Id. at ¶¶ 10, 14. At the 8 time of his resignation, Plaintiff “work[ed] out of Florida” as a fuel broker of aviation jet fuel. Id. at 9 ¶ 10. Plaintiff subsequently “accepted employment in California with Chemoil” and “obtained a The Complaint place of residence in California.” Complaint, ¶¶ 3, 15. Plaintiff “will be employed . . . and work out 11 For the Northern District of California United States District Court 10 of . . . San Francisco.” Id. at ¶ 16. 12 WFS is a global leader in the downstream marketing and financing of aviation, marine, and 13 ground transportation fuel products and related services. Id. at ¶ 8. Chemoil is one of the leading 14 physical suppliers of aviation jet fuel. Id. at ¶ 9. Chemoil’s primary office for its North American 15 trading operation for aviation jet fuel is in San Francisco, California. Id. 16 The employment agreement between the parties contains a noncompete clause, which 17 Plaintiff seeks to have declared invalid and its enforcement enjoined. Id. at ¶¶ 29, 35, 42. Plaintiff 18 argues that the noncompete provision in the contract is an unlawful restraint of trade and should be 19 declared void. Id. at ¶ 27 (citing Cal. Bus. & Prof. Code §§ 16600 and 17200 et seq.; Application 20 Group, Inc. v. Hunter Group, Inc., 61 Cal. App. 4th 881 (1998)). Plaintiff also seeks a judgment 21 declaring that, under California law, (1) Plaintiff’s employment by Chemoil does not violate any 22 duty owed to WFS, (2) Chemoil may lawfully employ him in California, and (3) he is free to work in 23 his chosen profession. Id. at ¶¶ 29, 35. Finally, Plaintiff seeks a preliminary and permanent 24 injunction prohibiting the enforcement of the noncompete clause in violation of Section 17200 and 25 26 27 28 1 The parties have consented to the jurisdiction of a United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). 2 1 prohibiting WFS from commencing a second-filed action in another forum encompassing or 2 involving the same subject matter of this lawsuit. Id. at ¶ 42. 3 B. 4 On November 23, 2011, Defendant removed this action to the United States District Court Defendant’s Notice of Removal 5 for the Northern District of California pursuant to 28 U.S.C. §§ 1441 and 1446. Defendant’s Notice 6 to Federal Court of Removal (“Removal Notice”), 1. Defendant asserts the Court has jurisdiction 7 based on diversity of citizenship pursuant to 28 U.S.C. § 1332(a), and that the amount in controversy 8 exceeds $75,000. Id. at ¶ 1. Defendant states that WFS is incorporated in Texas and its principal 9 place of business is in Miami, Florida. Id. at ¶ 19. Defendant further asserts that “Plaintiff’s Complaint establishes that he resides in California, and intends to work and reside in California 11 For the Northern District of California United States District Court 10 indefinitely.” Id. at ¶ 20 (citing Complaint, ¶¶ 3, 15, 16). “As such,” Defendant concludes, 12 “Plaintiff resides in the state of California, and is a citizen of that State for purposes of this 13 jurisdictional analysis.” Id. (citing Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 14 2001)). 15 C. 16 On November 30, 2011, Defendant filed its Motion to Compel Arbitration, arguing, among Defendant’s Motion to Compel Arbitration 17 other things, that the arbitration provision in the employment agreement demands that the parties 18 arbitrate the dispute in Miami, Florida. Motion to Compel Arbitration, 1. Plaintiff filed an 19 opposition to Defendant’s motion in which he contests that the arbitration provision is enforceable. 20 Plaintiff’s Opposition to Defendant’s Motion to Compel Arbitration or, in the Alternative, to 21 Transfer Venue (“Opposition to Motion to Compel Arbitration”), 1-2. Plaintiff did not dispute the 22 Court’s jurisdiction. The hearing for Defendant’s Motion to Compel Arbitration was eventually set 23 for February 3, 2012. See Dkt. No. 16. 24 D. 25 Twenty one days after the close of briefing on Defendant’s motion, Plaintiff filed his Motion 26 to Remand, stating for the first time in this action that at the time of removal Plaintiff was a resident 27 and citizen of Florida. Motion to Remand, 1. Because WFS is a Florida corporation, diversity does Plaintiff’s Motion to Remand 28 3 1 not exist. Id. Plaintiff provides a transcript of testimony he gave in a related action in Florida state 2 court on December 27, 2011 as evidence of his Florida residency. Id. at 3. Plaintiff asserts that he 3 testified to the fact that “he has not yet moved to California,” “has never lived in California,” and 4 “presently still lives in Florida where he has lived for the past twenty years.” Id. Plaintiff states that 5 his testimony merely “confirm[s] that he has procured a residence in California, and will relocate [to 6 California] if he is permitted to work in this state.” Id. (citing Declaration of Stephen Dye in 7 Support of Plaintiff’s Motion to Remand (“Dye Decl.”) Ex. C (Grieco Testimony Excerpts), 30: 9- 8 31, 11, 62: 16, 63: 2). 9 Plaintiff also argues that he is entitled to the fees and costs he has incurred as the result of removal, amounting to $25,536.39, because WFS “lacked an objectively reasonable basis for 11 For the Northern District of California United States District Court 10 removal” and “engaged in bad faith.” Id. at 6 (citing Moore v. Permanente Med. Group, Inc., 981 12 F.2d 443, 446-47 (9th Cir. 1992); Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005)). 13 Plaintiff cites three reasons why Defendant’s behavior warrants an order for fees and costs. First, 14 Plaintiff contends that WFS “knew that Greico resided in Florida when it removed his California 15 state case.” Id. As evidence of this knowledge, Plaintiff points to Defendant’s Florida complaint 16 filed on November 21, 2011—four days after Plaintiff filed his California complaint and two days 17 before Defendant removed the California action—where Defendant stated that Plaintiff’s “last 18 known place of residence is in Broward County, Florida.” Id. (citing Dye Decl. Ex. B (Def.’s 19 Florida Complaint), ¶ 3). Second, Plaintiff argues that his complaint did not provide Defendant with 20 a reasonable basis for removal. Id. at 7. Nowhere in his complaint, Plaintiff maintains, “did he say: 21 he is a citizen of California; that he presently lives in California; or that he has commenced work for 22 Chemoil in California.” Id. Plaintiff asserts that, given Defendant’s representations to Plaintiff’s 23 Florida residency in its Florida complaint, Defendant “plainly had an obligation to verify Grieco’s 24 citizenship before removing this action.” Id. (citing Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 25 1992)). Finally, Plaintiff contends that even if Defendant had an objectively reasonable basis for 26 removal, Defendant was obligated to withdraw its notice of removal after Plaintiff testified to his 27 Florida residency on December 27. Id. at 7-8 (citing Dietrich v. Cooperstein, 1995 WL 59494, at *4 28 4 1 (N.D. Cal. Feb. 8, 1995)). Defendant’s failure to do so constitutes bad faith, Plaintiff asserts. Id. at 2 7. 3 E. 4 In Defendant’s opposition to Plaintiff’s motion, Defendant first objects to Plaintiff’s use of Defendant’s Opposition to the Motion to Remand 5 his testimony in the Florida action to prove his Florida residency, asserting that the testimony is 6 inadmissible hearsay. Defendant’s Opposition to Plaintiff’s Motion to Remand (“Opposition”), 3-4 7 (citing Fed. R. Evid. 801(c)). Defendant argues that Plaintiff’s testimony does not fall under the 8 “former testimony” exception to the hearsay rule because that exception requires the declarant to be 9 unavailable and Plaintiff has made no showing that he is unavailable to testify at this proceeding. Id. at 4 (citing Fed. R. Evid. 804(b)(1)). Therefore, Defendant concludes, Plaintiff’s Florida testimony 11 For the Northern District of California United States District Court 10 is inadmissible for asserting the truth of the jurisdictional facts testified to therein. Id. at 4. 12 Defendant acknowledges that, instead of submitting inadmissible evidence, Plaintiff could submit 13 “declaration testimony . . . establishing his domicile and citizenship in Florida.” Id. 14 Defendant further contends in its Opposition that Plaintiff’s complaint “establishes Plaintiff’s 15 domicile in California as a prima facie matter.” Id. at 5-6 (citing Complaint, ¶¶ 3, 15, 16). 16 Defendant rejects Plaintiff’s suggestion “that his allegation in the Complaint that he obtained a 17 residence in California is not an allegation that he actually resides in California.” Id. at 6. 18 Defendant argues that the only allegations in the Complaint regarding Plaintiff’s residence are that 19 he has a residence in California. Id. Defendant also states that where a prima facie case of 20 citizenship is established, the burden of production on a motion to remand shifts to the plaintiff 21 seeking remand to produce evidence to rebut the jurisdictional bases for removal. Id. at 5 (citing 22 Lew v. Moss, 797 F.2d 747, 751 (9th Cir. 1986); District of Columbia v. Murphy, 314 U.S. 441, 455 23 (1941); State Farm Mut. Auto. Ins. Co. v. Dyer, 19 F.3d 514, 520 (10th Cir. 1994); Stine v. Moore, 24 213 F.2d 446, 448 (5th Cir. 1954); Smith v. Simmons, 2008 U.S. Dist. LEXIS 21162 (E.D. Cal. 25 2008)). Plaintiff here, Defendant contends, “has not submitted any admissible evidence of 26 residence, domicile, or citizenship in Florida, or anywhere else for that matter.” Id. at 6. 27 28 5 1 Consequently, Defendant argues that Plaintiff has not met his burden of production on the motion 2 and therefore his motion must be denied. Id. 3 Defendant next argues that even if the Motion to Remand is granted, an award of fees would good-faith basis for removal. Id. at 7 (citing Schmitt v. Ins. Co. of No. Am., 845 F.2d 1546, 1552 6 (9th Cir. 1988); Solorzano v. Am. Nat’l Ins. Co., 609 F. Supp. 144, 146 (C.D. Cal. 1985). Defendant 7 rejects Plaintiff’s assertion that Defendant’s statement in its Florida complaint that its last known 8 address for Plaintiff was in Florida constitutes evidence of bad-faith removal. Id. Rather, Defendant 9 argues, Defendant’s knowledge of Plaintiff’s last known address is irrelevant; the relevant question 10 for removal “is what Defendant knew based on the jurisdictional allegations in the Complaint in this 11 For the Northern District of California be inappropriate and would constitute an abuse of discretion because Defendant had a supportable, 5 United States District Court 4 action . . . .” Id. at 8. Defendant maintains that it knew “Plaintiff had been maneuvering to accept a 12 position with Chemoil” and feared that Plaintiff would “relocate[] to California and [attempt] to 13 bring suit to prevent enforcement of his obligations.” Id. The allegations in Plaintiff’s Complaint 14 “provided [Defendant] with confirmation of its fears.” Id. 15 Defendant also rejects Plaintiff’s argument that Plaintiff’s testimony imposed upon 16 Defendant a duty to remand this action. Id. at 8-9. Defendant contends that it is “entitled to rely on 17 the allegations pled on the face of the Complaint in removing, and now continuing to assert federal 18 diversity jurisdiction.” Id. at 9. Moreover, to the extent Plaintiff’s testimony is relevant and 19 admissible, it shows that Plaintiff presented contradicting allegations as to his residency, Defendant 20 argues. Id. Plaintiff’s testimony—where he stated “that he had no residence in California, was 21 unemployed, and was never asked by Chemoil to relocate to California”—contradicted his 22 Complaint and made it “unclear which set of allegations is true.” Id. (citing Declaration of Lucas V. 23 Munoz in Support of Defendant’s Opposition to Plaintiff’s Motion to Remand, Ex. B (Grieco 24 Testimony Transcript), 29, 31, 47, 49, 69). 25 26 Finally, Defendant argues that even if Plaintiff is awarded fees and costs, the figure Plaintiff requests is “entirely unreasonable.” Id. at 10. 27 28 6 1 F. 2 Plaintiff’s Reply includes a declaration by the Plaintiff wherein he states: 3 1. I live in Cooper City, Florida. I have lived in Florida for approximately 20 years. I have never lived in California. Plaintiff’s Reply to the Opposition 4 2. I have accepted employment with Chemoil Corporation, which is headquartered in California. I have not yet commenced that employment. If I am permitted to work in California, I intend to move to California. For that purpose, I have arranged for a residence in California. 5 6 7 Declaration of Mark Grieco in Support of his Motion to Remand (“Grieco Decl.”), 2. Plaintiff 8 argues that his future plan to live in California is consistent with the statements in his Complaint. 9 Plaintiff’s Reply to Defendant’s Opposition to Plaintiff’s Motion to Remand (“Reply”), 4-5. Plaintiff also reasserts his argument that Defendant’s alleged subjective knowledge of Plaintiff’s 11 For the Northern District of California United States District Court 10 Florida residency makes removal and Defendant’s unwillingness to stipulate to remand improper. 12 Id. at 6-7. 13 IV. ANALYSIS 14 A. 15 “Except as otherwise expressly provided by Act of Congress, any civil action brought in a Legal Standard Governing Removal 16 State court of which the district courts of the United States have original jurisdiction, may be 17 removed by the defendant or the defendants, to the district court of the United States for the district 18 and division embracing the place where such action is pending.” 28 U.S.C. § 1441(a). Original 19 jurisdiction may be based on diversity or the existence of a federal question, as set forth in 28 U.S.C. 20 §§ 1331 and 1332. Federal subject matter jurisdiction under 28 U.S.C. § 1332(a)(1), based on 21 diversity, requires complete diversity of citizenship and an amount in controversy in excess of 22 $75,000. When an action is removed based on diversity, complete diversity must exist at the time of 23 removal. Gould v. Mut. Life Ins. Co. of N.Y., 790 F.2d 769, 773 (9th Cir. 1986) (citing Miller v. 24 Grgurich, 763 F.2d 372, 373 (9th Cir. 1985)). “If at any time before final judgment, it appears that 25 the district court lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). 26 27 Citizenship for diversity jurisdiction purposes is based on the party’s “domicile.” Lew v. Moss, 797 F.2d 747, 749-50 (9th Cir. 1986). A person is domiciled in a location “where he or she 28 7 1 has established a fixed habitation or abode in a particular place, and [intends] to remain there 2 permanently or indefinitely.” Id. (quoting Owens v. Huntling, 115 F.3d 814, 819 (9th Cir. 1940)) 3 (internal quotation marks omitted). A change in domicile requires both physical presence at a new 4 location and an intent to remain in that new location indefinitely. Id. at 750. 5 The Ninth Circuit “strictly construe[s] the removal statute against removal jurisdiction.” 6 Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (citations omitted). Thus, “[f]ederal 7 jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.” Id. 8 (citation omitted). “The ‘strong presumption’ against removal jurisdiction means that the defendant 9 always has the burden of establishing that removal is proper.” Id. B. 11 For the Northern District of California United States District Court 10 The parties do not dispute that WFS has its principal place of business in Florida. Because a Whether There is Diversity Jurisdiction 12 corporation is deemed a citizen of the state in which it has its principal place of business, WFS is 13 considered a citizen of Florida for diversity jurisdiction purposes.2 28 U.S.C. § 1332(c)(1). The 14 only issue is whether Plaintiff was a citizen of Florida or California at the time the action was 15 removed. If Plaintiff was a citizen of Florida at that time, there will be no diversity and this action 16 must be remanded. 17 Plaintiff supports his Motion to Remand with two pieces of evidence: his declaration 18 testimony and his in-court testimony in a separate action in Florida. Both items of evidence purport 19 to establish Plaintiff’s Florida citizenship. Defendant does not put forward any evidence of 20 Plaintiff’s California citizenship, and instead points to the Complaint as clearly establishing such 21 citizenship. Even if the Complaint could be read as unambiguously indicating Plaintiff’s California 22 residency, the Court finds that Plaintiff’s declaration, in the absence of any evidence from Defendant 23 to the contrary, requires this Court to remand the action to state court. Plaintiff’s declaration states 24 that he has “never lived in California,” and that he has lived in Florida for twenty years and lives 25 26 27 28 2 A corporation is also deemed to be a citizen of the state of its incorporation. 28 U.S.C. § 1332(c)(1). The parties here present conflicting assertions as to WFS’ state of incorporation. According to Plaintiff, it is Florida; Defendant contends it is incorporated in Texas. The Court need not decide the matter, however, because even if WFS is also a citizen of Texas, that fact will not affect the outcome of the diversity jurisdiction analysis. 8 1 there currently. Grieco Decl. at 2. Plaintiff further states his intention to move to California if he is 2 allowed to work for Chemoil, and that he has “arranged” for a residence in California for that 3 purpose. Id. In light of this uncontested declaration, the Court cannot conclude that Plaintiff had a 4 physical presence in California and an intent to remain in the state indefinitely at the time of the 5 notice of removal. See Lew, 797 F.2d at 750. Rather, the declaration suggests that Plaintiff was a 6 citizen of Florida at that time. Because there is at least a doubt as to the propriety of the removal, 7 federal jurisdiction must be rejected. See Gaus, 980 F.2d at 566.3 8 C. 9 Pursuant to 28 U.S.C. §1447(c), “[a]n order remanding the case may require payment of just Whether Fees and Costs Should be Awarded costs and any actual expenses, including attorney fees, incurred as a result of the removal.” 28 11 For the Northern District of California United States District Court 10 U.S.C. § 1447(c). The Supreme Court has held that, “[a]bsent unusual circumstances, courts may 12 award attorney’s fees under § 1447(c) only where the removing party lacked an objectively 13 reasonable basis for seeking removal. Conversely, when an objectively reasonable basis exists, fees 14 should be denied.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). The Martin court 15 explained that “district courts retain discretion to consider whether unusual circumstances warrant a 16 departure from the rule in a given case.” Id. In Lussier v. Dollar Tree Stores, Inc., the Ninth Circuit 17 cautioned that “removal is not objectively unreasonable solely because the removing party's 18 arguments lack merit, or else attorney’s fees would always be awarded whenever remand is 19 granted.” 518 F.3d 1062, 1065 (9th Cir. 2008). Rather, the objective reasonableness of the removal 20 depends on the clarity of the applicable law and whether such law “clearly foreclosed” the 21 defendant’s arguments for removal. Id. at 1066-67. 22 The Court declines to impose costs and fees in this case given Plaintiff’s representations in 23 his Complaint. Plaintiff asserts in his Complaint that he “accepted employment in California with 24 Chemoil” and “obtained a place of residence in California,” and that he “will be employed . . . and 25 26 27 28 3 The Court does not rely on Plaintiff’s Florida testimony in coming to its conclusion. As Defendant points out, the Florida testimony is inadmissible hearsay when offered to prove the truth of the jurisdictional facts in the testimony. Fed. R. Evid. § 801(c). The testimony does not fall under the “former testimony” exception to the hearsay rule because Plaintiff has given no indication that he is unavailable to provide testimony at this proceeding. See Fed. R. Evid. § 804(b)(1). 9 1 work out of . . . San Francisco.” Complaint at ¶¶ 3, 15, 16. He does not make any indication that he 2 still resides in Florida. In light of these statements and omissions, the Court is satisfied that 3 Defendant had an objectively reasonable basis for believing that Plaintiff moved to California and 4 that diversity jurisdiction existed. 5 Plaintiff further claims that Defendant removed in bad faith, pointing to Defendant’s filing in The Court declines to parse Defendant’s subjective beliefs concerning Plaintiff’s residency. Finally, 8 Plaintiff’s insistence that Defendant wrongfully refused to stipulate to remand following Plaintiff’s 9 revelations in his Florida testimony is without merit. Defendant’s desire to have Plaintiff clarify, 10 and produce evidence of, his allegations on the record in this action is both reasonable and prudent 11 For the Northern District of California the Florida action where Defendant stated Plaintiff’s last known place of residence was in Florida. 7 United States District Court 6 given Plaintiff’s earlier representations in his Complaint. 12 Therefore, the Court declines Plaintiff’s request for costs and fees. 13 D. 14 Because the Court finds that it must remand this case, it does not reach the merits of Motion to Compel Arbitration 15 Defendant’s Motion to Compel Arbitration. The Court accordingly denies Defendant’s Motion 16 without prejudice. 17 IV. 18 CONCLUSION For the reasons stated above, the Court GRANTS Plaintiff’s Motion to Remand, DENIES 19 Plaintiff’s request for costs and fees, and DENIES Defendant’s Motion to Compel Arbitration 20 without prejudice. Accordingly, the Court REMANDS the case to state court. 21 IT IS SO ORDERED. 22 23 Dated: February 10, 2012 24 25 _________________________ JOSEPH C. SPERO United States Magistrate Judge 26 27 28 10

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