Dhawan v. Broadway Partners Fund Manager, L.L.C. et al

Filing 54

ORDER by Judge Hamilton granting 26 Motion to Remand; finding as moot 41 Motion to Strike; finding as moot 42 Motion to Strike (pjhlc2, COURT STAFF) (Filed on 4/15/2013)

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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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LOVLEEN DHAWAN,
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Plaintiff,

No. C 13-0336 PJH

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v.
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ORDER GRANTING MOTION TO
REMAND

BROADWAY PARTNERS, et al.,
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For the Northern District of California

United States District Court

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Defendants.
_______________________________/

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Before the court are three motions: (1) plaintiff’s motion to remand; (2) defendant

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Rockefeller Group Development Corporation’s (“Rockefeller”) motion to strike, or in the

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alternative, to dismiss; and (3) defendant Broadway Real Estate Services, LLC’s

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(“Broadway”) motion to strike. The motions came on for hearing before this court on April

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10, 2013. Plaintiff Lovleen Dhawan (“plaintiff”) appeared through her counsel, Frank

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Moore. Defendant Rockefeller appeared through its counsel, Katherine Huibonhoa and

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Peter Cooper. Defendant Broadway appeared through its counsel, Jacqueline deSouza.

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Having read the papers filed in conjunction with the motions and carefully considered the

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arguments and the relevant legal authority, and good cause appearing, the court hereby

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GRANTS plaintiff’s motion to remand as follows.

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Plaintiff originally filed suit in state court on December 4, 2012, against Broadway

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and Rockefeller, asserting five causes of action under state law. On January 24, 2013,

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defendants removed the case to this court, based on diversity jurisdiction. Rockefeller then

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filed a motion to dismiss on January 31, 2013. Rather than file an opposition to the motion,

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plaintiff filed a first amended complaint (“FAC”) on February 15, 2013, adding Chaudel

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Baker as a defendant. Because Baker is a California citizen, plaintiff now argues (in her

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motion to remand) that there is no longer complete diversity between the parties, and that

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the court must now remand the case for lack of subject matter jurisdiction. Plaintiff further

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argues that the FAC was filed as a matter of right under Federal Rule of Civil Procedure

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15(a), because it was filed within 21 days of Rockefeller’s Rule 12(b)(6) motion. Broadway

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and Rockefeller disagree, arguing that Rule 15 does not apply where a party seeks to add

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diversity-destroying defendants through amendment. Instead, they contend that 28 U.S.C.

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§ 1447(e) applies to such amendments, giving the court discretion to either deny joinder of

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the non-diverse party, or permit joinder and remand the case to state court. Defendants

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further argue that, in determining whether to permit or deny joinder, courts look at six
factors:

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For the Northern District of California

United States District Court

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(1) whether the new defendants should be joined under Fed. R. Civ. P. 19(a)
as “needed for just adjudication”; (2) whether the statute of limitations would
preclude an original action against the new defendants in state court; (3)
whether there has been unexplained delay in requesting joinder; (4) whether
joinder is intended solely to defeat federal jurisdiction; (5) whether the claims
against the new defendant appear valid; and (6) whether denial of joinder will
prejudice the plaintiff.

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Palestini v. General Dynamics, 193 F.R.D. 654 (S.D. Cal. 2000); see also Cross v.
Kenwood Retail Group, 2009 WL 250454 (N.D. Cal. Feb. 3, 2009).

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Plaintiff argues that, even if section 1447(e) does modify the permissive amendment

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standard of Rule 15, the court need only conduct an abbreviated version of the Palestini

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analysis, looking only at whether the new claim against the non-diverse defendant is

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facially legitimate, and whether defendants would suffer prejudice as a result of the joinder.

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The court agrees with defendants, and finds that Rule 15(a) is inapplicable to diversity-

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destroying amendments. The court further agrees that the full six-factor test is appropriate

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here.

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As to factor (1), the court agrees with defendants that Ms. Baker is not a necessary

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party to the action, such that her absence from the case would not prevent complete relief

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from Rockefeller or Broadway.

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As to factor (2), there seems to be no dispute that plaintiff’s claims against Ms.
Baker would not be time-barred if joinder were denied.
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As to factor (3), the court notes that joinder was sought early in the case, while

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Rockefeller’s first 12(b)(6) motion was still pending, and before defendants had filed an

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answer (though defendants raise a valid objection to plaintiff’s request for defendants to

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delay filing their answer, which will be discussed further below).

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As to factor (4), defendants are likely correct that Ms. Baker was added to the case

by a desire to have this case remanded. However, defendants are also motivated by their

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preference for one forum over another, in that they had this case removed to federal court

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even though plaintiff originally filed in state court. The mere preference for one forum over

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another does not weigh in the section 1447(e) analysis. Instead, the court looks to whether

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For the Northern District of California

as a means of getting this case back to state court. In that sense, plaintiff was motivated

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United States District Court

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plaintiff acted in bad faith by adding Ms. Baker as a defendant; in other words, the key

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question is whether Ms. Baker is a sham defendant, added solely to defeat diversity

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jurisdiction. Here, a look at the original complaint in this case (filed in state court) shows

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that Ms. Baker’s conduct made up a significant portion of plaintiff’s allegations, even before

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joinder was sought. Specifically, the original complaint alleges that Ms. Baker “falsely

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insisted that plaintiff’s role as assistant property manager was unnecessary when, it fact, it

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was their intent to replace plaintiff as assistant property manager with Stephanie Borjas.”

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See original complaint (Dkt. 1, Ex. B) at ¶ 13; see also ¶¶ 7-10, 17, 28 (alleging additional

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wrongful conduct by Ms. Baker). The alleged misrepresentation by Ms. Baker forms the

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basis of plaintiff’s claims against her. Thus, while it is true that plaintiff did not seek to add

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Ms. Baker as a defendant until the case was removed, the court finds that Ms. Baker is not

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a sham defendant, and thus finds that plaintiff does not seek joinder solely to defeat federal

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jurisdiction.

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The next, related factor looks to whether the claims against Ms. Baker are viable.

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Plaintiff asserts two causes of action against Ms. Baker: (1) interference with prospective

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business advantage; and (2) violation of Cal. Labor Code § 1050. Plaintiff’s tort claim for

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interference with prospective business advantage requires that five elements be shown:

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(1) an economic relationship between plaintiff and some third party, with the probability of
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intentional acts on the part of defendant designed to disrupt the relationship; (4) actual

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disruption of the relationship; and (5) economic harm to plaintiff proximately caused by

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defendant’s conduct. Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1153

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(2003). The Korea Supply court further clarified that the “intentional acts” must be

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“independently wrongful,” which it defines as “unlawful,” which is in turn defined as

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“proscribed by some constitutional, statutory, regulatory, common law, or other

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determinable legal standard.” Id. at 1158-59. At the hearing, plaintiff identified a number of

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alternative bases for finding that Ms. Baker’s conduct was wrongful, including that Ms.

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Baker’s “intentionally false statements” about “purported performance deficiencies by

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For the Northern District of California

future economic benefit to plaintiff; (2) the defendant’s knowledge of the relationship; (3)

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United States District Court

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plaintiff” constituted defamation. See FAC, ¶ 84.

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In this context, the legal standard for defamation requires a false and unprivileged

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communication (oral communications qualify as slander, written communications as libel),

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tending to cause injury in plaintiff’s occupation. Cal. Civ. Code §§ 45, 46. Even though the

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FAC does not assert a separate claim for defamation, it does allege that Ms. Baker made a

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false statement that caused injury in plaintiff’s occupation. While defendants have

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presented various theories as to why Ms. Baker’s statements were privileged, plaintiff has

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raised factual issues regarding the applicability of each of these privileges. At this early

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stage of the case, the court cannot resolve these factual issues, and instead finds it

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sufficient that plaintiff’s allegations, if true, could state a viable claim for defamation against

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Ms. Baker. As a result, plaintiff has made a sufficient showing that Ms. Baker’s conduct

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was independently wrongful, such that plaintiff’s claim for interference with prospective

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business advantage is a viable one.

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As to factor (6) in the Palestini analysis, the court finds that denial of joinder would

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cause at least some prejudice to plaintiff, in that she would be forced to litigate her claims in

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two separate lawsuits in two separate forums. Though this would not be a great burden, it

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is greater than any burden that defendants would suffer if joinder is granted. This case has

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been pending in federal court for less than three months, and is still in the pleading stages.
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Moreover, defendants do not have a constitutional right to litigate in federal court, and

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instead have only “an expectancy contingent upon a plaintiff’s failure to add non-diverse

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defendants.” Miller v. United Air Lines, 2001 WL 823815 (N.D. Cal. July 10, 2001). Thus,

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joinder would cause no prejudice to defendants, but some prejudice to plaintiff.

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Rockefeller and Broadway also protest that plaintiff’s counsel disingenuously

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requested that defendants delay their filing of answers to the original complaint, without

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informing them that he intended to file an amended complaint, adding Ms. Baker as a

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defendant. In their view, this shows improper motive on the part of plaintiff, which weighs

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against joinder. While the court agrees that plaintiff’s counsel’s actions appear
disingenuous at best, and under different circumstances, could result in the striking of an

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For the Northern District of California

United States District Court

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amended complaint, it also appears that one of plaintiff’s counsel’s goals was to file the

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FAC before any answer was filed, so that he could argue that the FAC was filed as a matter

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of right under Rule 15(a). But because the court finds that Rule 15(a) does not apply (and

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instead applies section 1447(e), and thus does not consider whether the FAC was filed

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before or after defendants’ answer), plaintiff did not actually gain any strategic advantage

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by filing the FAC before defendants’ answer, making this a case of “no harm, no foul.”

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Again, the court cautions plaintiff’s counsel that such conduct would not be tolerated under

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different circumstances, but in this case, plaintiff’s intended gamesmanship did not have its

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intended effect. For that reason, the court’s joinder analysis does not consider plaintiff’s

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counsel’s lack of forthright information.

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Instead, the court places great weight on the fact that plaintiff seeks to add a viable

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claim against a non-sham defendant at a very early stage of the case, in a manner that

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causes no prejudice to defendants. For those reasons, the court exercises its discretion

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under section 1447(e) to allow joinder of Ms. Baker as a defendant (and thus allow the filing

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of the FAC). Because Ms. Baker’s presence in the case destroys complete diversity

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between the parties, the court no longer has subject matter jurisdiction over the case, and

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thus GRANTS plaintiff’s motion to remand. Rockefeller and Broadway’s motions are thus

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denied as moot. The case is REMANDED to the Superior Court for the City and County of
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San Francisco.
IT IS SO ORDERED.
Dated: April 15, 2013
______________________________
PHYLLIS J. HAMILTON
United States District Judge

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For the Northern District of California

United States District Court

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