Berkeley Research Group, LLC v. United Potato Growers of America, Inc. et al

Filing 51

ORDER REMANDING ACTION, DENYING PLAINTIFF'S AND DEFENDANTS' REQUESTS FOR FEES AND COSTS, AND DENYING DEFENDANTS' MOTION TO FILE UNDER SEAL by Judge William Alsup [denying 43 Administrative Motion to File Under Seal; denying 46 Motion for Attorney Fees; granting 10 Motion to Remand; finding as moot 12 Motion to Dismiss for Lack of Jurisdiction]. (whasec, COURT STAFF) (Filed on 5/2/2017)

Download PDF
1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE NORTHERN DISTRICT OF CALIFORNIA 7 8 9 BERKELEY RESEARCH GROUP, LLC, a California limited liability company, 11 For the Northern District of California United States District Court 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Plaintiff, No. C 16-07205 WHA v. UNITED POTATO GROWERS OF AMERICA, INC., an Idaho corporation; UNITED POTATO GROWERS OF IDAHO, INC., an Idaho corporation; IDAGRO, INC., an Idaho corporation; ALBERT WADA, an Idaho resident; WADA FARMS, INC., an Idaho corporation; WADA FARMS POTATOES, INC., an Idaho corporation; WADA FARMS MARKETING GROUP, LLC, an Idaho limited liability company; WADA-VAN ORDEN POTATOES, INC., an Idaho corporation; CEDAR FARMS, INC., an Idaho corporation; WADA FAMILY, LLC, an Idaho limited liability company; PROFRESH, LLC, an Idaho limited liability company; JEFF RAYBOULD, an Idaho resident; RAYBOULD BROTHERS FARMS, LLC, an Idaho limited liability company; MICHAEL CRANNEY, an Idaho resident; CORNELISON FARMS, INC., a former Idaho corporation; KEITH CORNELISON, an Idaho resident; SNAKE RIVER PLAINS POTATOES, INC., an Idaho corporation; LANCE FUNK, an Idaho resident; PLEASANT VALLEY POTATO, INC., an Idaho corporation; KCW FARMS, INC., an Idaho corporation; KIM WAHLEN, an Idaho resident; and DOES 1–100, ORDER REMANDING ACTION, DENYING PLAINTIFF’S AND DEFENDANTS’ REQUESTS FOR FEES AND COSTS, AND DENYING DEFENDANTS’ MOTION TO FILE UNDER SEAL Defendants. / 26 INTRODUCTION 27 Following jurisdictional discovery in this contract dispute, remand is unopposed. 28 Both parties request fees and costs pursuant to Section 1447 of Title 28 of the United States 1 Code. For the reasons stated herein, the action is REMANDED and both requests are DENIED. 2 Defendants’ motion to file under seal is also DENIED. 3 STATEMENT 4 This action arises out of an expert litigation consulting contract between plaintiff 5 Berkeley Research Group and defendants — a group of potato farmers, farms, and growing 6 associations. Defendants hired BRG to provide expert services in connection with a 7 multi-district litigation in the United States District Court for the District of Idaho.* 8 9 On November 1, 2016, defendants filed a breach of contract action in the Idaho Fourth Judicial District Court claiming BRG billed defendants inappropriately and provided substandard quality work. On November 18, BRG filed this breach of contract action in the Superior Court 11 For the Northern District of California United States District Court 10 of California, County of Alameda, claiming defendants breached by not paying over eight- 12 hundred thousand dollars in outstanding invoices. BRG served defendants in this action over a 13 month before defendants served BRG in the Idaho action. 14 In late January 2017, BRG moved to dismiss the Idaho action pursuant to Idaho Rule of 15 Civil Procedure 12(b)(8) on the ground that another action was pending between the same parties 16 for the same cause. That motion was heard on March 1 and denied on April 12, finding costs 17 and delay would be minimized for the plaintiffs (our defendants) if the Idaho action proceeded, 18 and BRG would need to travel regardless of whether the action were in California or Idaho (Dkt. 19 No. 48-2 at 11). The Idaho judge, however, stayed the proceedings there pending the resolution 20 of the jurisdictional challenges in California (ibid.). 21 Prior to the Idaho motion practice and prior to serving BRG in the Idaho proceedings, 22 defendants removed this action to federal court on December 16 (Dkt. No. 1). In early 23 February 2017, BRG moved to remand for lack of subject-matter jurisdiction on diversity 24 grounds, alleging BRG did not share a state of citizenship with any of the defendants (Dkt. 25 No. 10). More than two weeks later, defendants filed their opposition to the motion to remand 26 27 28 * Previously, only six of the twenty-one captioned defendants had been served in this action (Dkt. No. 20 at 2). As of March 22, all remaining defendants have been served (Dkt. Nos. 28–42). 2 1 (Dkt. No. 14), and separately moved to dismiss for lack of personal jurisdiction or to transfer 2 venue (Dkt. No. 12). 3 Defendants opposed remand, citing the insufficiency of BRG’s supporting declarations 4 as to their Utah members’ citizenship (Dkt. No. 14). Defendants conceded that United Potato 5 Growers of America was a citizen of Utah and that a Utah member of BRG would destroy 6 diversity jurisdiction, due to BRG’s limited liability company status (Dkt. No. 14 at 4–5). 7 BRG provided new evidence of its members’ citizenship in its reply (Dkt. No. 17), and 8 defendants were given (and took) an opportunity to file a surreply to that evidence (Dkt. No. 19). 9 Following briefing and oral argument, an order held the motion to remand in abeyance and permitted jurisdictional discovery limited to determining the citizenship of the four BRG 11 For the Northern District of California United States District Court 10 members who were purportedly citizens of Utah (Dkt. No. 25). 12 Defendants now file a statement announcing their nonopposition to remand and request 13 fees and costs pursuant to Section 1447(c) of Title 28 of the United States Code (Dkt. No. 44). 14 BRG also requests fees and costs pursuant to Section 1447(c) (Dkt. No. 46). 15 This order follows full briefing on BRG’s motion to remand and defendants’ motion to 16 dismiss; oral argument on the motion to remand; defendants’ statement requesting costs and fees; 17 BRG’s motion for costs and fees; and defendants’ opposition to BRG’s fee motion. 18 19 ANALYSIS Defendants now concede that complete diversity is lacking (Dkt. No. 48 at 3). Because 20 there is no federal subject-matter jurisdiction, this action is REMANDED to the Superior Court of 21 California, County of Alameda. 22 Both parties now request costs and fees pursuant to Section 1447(c). Section 1447(c) 23 provides, in pertinent part: “An order remanding the case may require payment of just costs 24 and any actual expenses, including attorney fees, incurred as a result of the removal.” Fees are 25 appropriate “where the removing party lacked an objectively reasonable basis to seek removal.” 26 Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). Our court of appeals applied this 27 standard in Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1065 (9th Cir. 2008). 28 3 1 “The appropriate test for awarding fees under [Section] 1447(c) should recognize the 2 desire to deter removals sought for the purpose of prolonging litigation and imposing costs on 3 the opposing party, while not undermining Congress’ basic decision to afford defendants a right 4 to remove as a general matter, when the statutory criteria are satisfied.” Martin, 546 U.S. at 140. 5 1. DEFENDANTS’ REQUEST FOR FEES AND COSTS. 6 Defendants argue they are entitled to fees because BRG’s inadequate provision of 7 evidence forced defendants to oppose remand at substantial expense. Defendants rely on the 8 following portion of Martin: 9 In applying [the objectively reasonable basis test], district courts retain discretion to consider whether unusual circumstances warrant a departure from the rule in a given case. For instance, a plaintiff’s delay in seeking remand or failure to disclose facts necessary to determine jurisdiction may affect the decision to award attorney’s fees. When a court exercises its discretion in this manner, however, its reasons for departing from the general rule should be faithful to the purposes of awarding fees under [Section] 1447(c). 11 For the Northern District of California United States District Court 10 12 13 14 Martin, 546 U.S. at 141. There, the defendants lacked an objectively reasonable basis for their 15 removal but the plaintiffs were not awarded fees due to their fifteen-month delay in seeking 16 remand. 17 Defendants claim the exception is applicable here as well because BRG allegedly failed 18 to disclose facts necessary to determine jurisdiction until after jurisdictional discovery. Even if 19 Martin allows an award of fees to a losing party on remand, an award is not warranted here. 20 While a previous order found the evidence submitted by BRG warranted jurisdictional 21 discovery, it did not find BRG acted with the intention of prolonging litigation and imposing 22 costs on defendants. BRG offered to provide defendants with the driver’s licenses of BRG’s 23 Utah members, but defendants did not take BRG up on that offer, allegedly expending nearly 24 forty thousand dollars in costs and fees instead. As such, the equities guiding the discretion 25 discussed in Martin are not present here. 26 Moreover, defendants focus on BRG’s post-removal conduct only, ignoring their own 27 flawed decision to remove in the first place. Section 1447(c) is aimed at dissuading removals 28 carried out for the purpose of prolonging litigation and imposing costs on the opposing party. 4 1 Martin, 546 U.S. at 140. Defendants removed this action to federal court on December 16 2 without attempting to work with BRG to ascertain the citizenship of BRG’s members (Dkt. 3 No. 17-1 ¶ 2). On December 22, BRG notified defendants that the citizenship of some of its 4 limited liability members may ruin complete diversity, to which defendants responded, “[w]e are 5 aware of the LLC issue” (Dkt. No. 17-2). This conduct is contrary to the care Section 1447(c) 6 was meant to encourage. Defendants assert that “[a]ll of this could have been avoided if BRG 7 had more promptly and cooperatively disclosed facts necessary to determine jurisdiction” (Dkt. 8 No. 44). So too if defendants sought this information prior to removal. 9 In their reply, defendants cite a host of non-binding decisions to support their position that a defendant may be awarded fees under Section 1447(c). While the decisions all awarded 11 For the Northern District of California United States District Court 10 fees to defendants on remand, each is inapplicable to the instant action. 12 Vaughan v. McArthur Bros., 227 F. 364, 368–69 (8th Cir. 1915), awarded costs to the 13 defendant after finding one of the plaintiffs knew all along that he was a citizen of the same state 14 as the defendant and only sought remand eight years after removal. Duarte v. Donnelley, 15 266 F. Supp. 380, 384 (D. Haw. Apr. 5, 1967) (Judge Martin Pence), ordered plaintiffs to pay 16 an award of costs once it was revealed that the potential damages were far less than the 17 jurisdictional minimum and plaintiffs had had ample time and responsibility to amend the 18 complaint to the proper amount. Barraclough v. ADP Automotive Claims Services, Inc., 19 818 F. Supp. 1310, 1313 (N.D. Cal. Apr. 19, 1993) (Judge Vaughn Walker), awarded the 20 defendant costs and fees on remand based on the plaintiff’s own admission that the only federal 21 claim pled was frivolous. Brooks v. PrePaid Legal Services, Inc., 153 F. Supp. 2d 1299, 22 1302–03 (M.D. Ala. Aug. 8, 2001) (Judge Ira DeMent), awarded costs to the defendant when 23 the plaintiffs sought to limit their damages to below the jurisdictional amount after removal. 24 Shrader v. Legg Mason Wood Walker, Inc., 880 F. Supp. 366, 369–71 (E.D. Pa. Mar. 9, 1995) 25 (Judge Stewart Dalzell), awarded costs and fees to the defendant when, after removal, the 26 plaintiff changed her story, claiming a defendant she originally asserted was nominal was not 27 actually nominal, thus destroying complete diversity and requiring remand. 28 5 1 Defendants also rely on Micrometl Corp. v. Tranzact Technologies, Inc., 656 F.3d 467, 2 470 (7th Cir. 2011). Although Micrometl did not award the defendant costs and fees, it stated in 3 dicta that Section 1447(c) did not contain a party-based limitation. There, the damages were 4 below the jurisdictional minimum. Ultimately, Micrometl found an award for the defendants 5 was inappropriate because nothing in the record suggested that plaintiff’s counsel inflated its 6 damages in the state court complaint to dupe defendant into removing, or otherwise exhibited 7 bad faith throughout the proceedings. Finally, defendants rely on Davis v. Simmons, 2014 8 WL 3698002, at *10 (N.D. Iowa Jul. 24, 2014) (Judge Linda Reade), which found a defendant 9 may recover fees under Section 1447(c) “if a plaintiff’s conduct that caused the defendant to improperly remove the case was objectively unreasonable . . . .” There, the plaintiff’s complaint 11 For the Northern District of California United States District Court 10 mispled her own name and address. The defendant learned of the plaintiff’s misrepresentations 12 nine months after the defendant removed the action and immediately moved to remand the 13 action. Davis found the plaintiff’s misrepresentations unreasonable and awarded the defendant 14 costs and fees incurred as a result of the removal. 15 Here, BRG did not make misrepresentations, plead frivolous claims, engage in forum 16 manipulation, or otherwise provoke an award of fees for defendants. The only “unreasonable 17 conduct” defendants point to is BRG’s allegedly defective declarations and alleged obstructive 18 behavior. The record does not persuasively show BRG was obstructive. It does, however, show 19 that defendants hastily removed this action to federal court and took no action on at least one 20 offer by BRG to provide domicile evidence informally. Defendants shall bear their own costs 21 and fees. 22 3. 23 BRG audaciously makes its own request for fees and costs. The need for jurisdictional BRG’S MOTION FOR FEES AND COSTS. 24 discovery alone suggests defendants’ removal was objectively reasonable and that BRG’s 25 motion should be denied. 26 BRG’s argument is two-part. First, BRG argues defendants lacked an objectively 27 reasonable basis to remove, primarily because defendants should have inquired further into 28 the citizenship of BRG’s limited liability members. Our court of appeals in Lussier, 518 F.3d 6 arguments lack merit, or else attorney’s fees would always be awarded whenever remand is 3 granted.” Here, BRG’s complaint only listed BRG as a Nevada limited liability company with 4 its principal place of business in Emeryville, California (Compl. ¶ 1). Given the thirty-day limit 5 on removal, it was not objectively unreasonable for defendants to remove based on this 6 information in the complaint. BRG could have headed off any potential conflict by providing 7 defendants with proof of its members’ Utah citizenship, rather than simply stating there may be a 8 problem, offering to provide members’ driver’s licenses, and waiting for defendants to respond. 9 Instead, BRG allegedly incurred over sixty thousand dollars drafting and arguing the motion to 10 remand, complying with written discovery, responding to supplemental discovery requests, and 11 For the Northern District of California at 1065, held that “[r]emoval is not objectively unreasonable solely because the removing party’s 2 United States District Court 1 now opposing defendants’ request for fees. BRG, like defendants, is responsible for the expense 12 it could have prevented before engaging in this four-month long remand dispute. 13 Second, BRG relies on the same “unusual circumstances” exception in Martin to argue 14 that even if defendants had an objectively reasonable basis to remove, defendants’ conduct 15 following removal would justify an award of costs and fees. That is, defendants’ insistence on 16 establishing satisfactory proof of the Utah BRG members’ domicile should, according to BRG, 17 stand as the basis for BRG’s award under Section 1447(c). The order permitting jurisdictional 18 discovery sufficiently explained how BRG’s lawyer-prepared and artfully-worded declarations 19 fell short of proving their Utah members were domiciled in Utah (Dkt. No. 25). BRG, like 20 defendants, will bear its own fees and costs associated with defendants’ removal. DEFENDANTS’ MOTION TO DISMISS. 21 4. 22 Defendants also ask that their motion to dismiss be revisited. Both parties now agree 23 that there is no federal subject-matter jurisdiction, so this Court cannot entertain the motion to 24 dismiss. 25 5. DEFENDANTS’ MOTION TO FILE CERTAIN DOCUMENTS UNDER SEAL. 26 Defendants’ move to file under seal (1) the Buy Sell Agreement between BRG and one 27 of its Utah members, Vernon Calder, (2) the Director Agreement between BRG and Calder, and 28 (3) the Amended & Restated Limited Liability Company Operating Agreement of Berkeley 7 1 Research Group, LLC. The parties conferred and designated these documents as confidential. 2 BRG filed a declaration pursuant to Local Rule 79-5(e), which requires the designating party to 3 show the documents are sealable. Under Rule 79-5(b), a document is sealable if it is privileged, 4 protectable as a trade secret, or otherwise entitled to protection under the law. BRG’s 5 declaration states the documents “contain confidential and proprietary information regarding the 6 ownership structure, management, and business practices of BRG, as well as the terms of 7 membership and employment of an individual member” (Dkt. No. 45 ¶ 5). BRG’s declaration 8 hints, but does not allege, that the documents are protectable as trade secrets, or that they are 9 otherwise entitled to protection under the law, as required by Rule 79-5(b). Defendants’ motion to file these documents under seal, therefore, is DENIED. 11 For the Northern District of California United States District Court 10 CONCLUSION 12 For the foregoing reasons, BRG’s motion to remand is GRANTED, both defendants’ 13 and BRG’s requests for costs and fees are DENIED, and defendants’ motion to file under seal is 14 DENIED. 15 16 IT IS SO ORDERED. 17 18 Dated: May 2, 2017. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 19 20 21 22 23 24 25 26 27 28 8

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?