Solar et al v. Buchanan Ingersoll & Rooney, P.C. et al

Filing 21

ORDER granting motion to remand and denying as moot Defendants' motions to dismiss, stay or transfer (Doc. Nos. 6 , 7 , 8 ). (cc: Superior Court of CA). Signed by Judge John A. Houston on 12/08/2017. (jpp)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 KEITH R. SOLAR; ROBERT J. PARKS; and ROBERT K. EDMUNDS, 15 16 17 ORDER GRANTING MOTION TO REMAND AND DENYING AS MOOT DEFENDANTS’ MOTIONS TO DISMISS, STAY OR TRANSFER [DOC. NOS. 6, 7, 8] Plaintiffs, 13 14 Case No.: 17cv1846-JAH (AGS) v. BUCHANAN INGERSOLL & ROONEY, P.C.; BUCHANAN INGERSOLL & ROONEY, LLP; and DOES 2 THROUGH 50, Defendants. 18 19 INTRODUCTION 20 21 Pending before the Court is Plaintiffs Keith R. Solar, Robert J. Parks and Robert K. 22 Edmunds’ motion to remand, pursuant to 28 U.S. Code § 1447 (Doc. No. 4) and 23 Defendants’ Buchanan Ingersoll & Rooney P.C. (“BIR PC”) and Buchanan Ingersoll & 24 Rooney, LLP’s (“BIR LLP”) motions to dismiss pursuant to Rule 12(b)(6), stay or 25 transfer. Doc. Nos. 6, 7. The motion to remand and the motions to dismiss have been 26 fully briefed. After a careful review of the pleadings and for the reasons set forth below, 27 Plaintiffs’ motion to remand is GRANTED and Defendants’ motions are DENIED AS 28 MOOT. 1 17cv1846-JAH (AGS) 1 BACKGROUND 2 The instant action arises from Plaintiffs’ allegation that Defendants failed to pay 3 unused vacation time in violation of Labor Code Sections 227.3, 201, 202 and/or 203. On 4 August 23, 2017 BIR PC filed an action [case No. 2:17-cv-01113-DSC] for declaratory 5 judgment in the United States District Court for the Western District of Pennsylvania to 6 determine whether it had an obligation to payout accrued paid time-off under employment 7 agreements between itself and Plaintiffs1. On August 25, 2017, Plaintiffs filed a complaint 8 in the Superior Court of the State of California, County of San Diego, entitled Keith R. 9 Solar, Robert J. Parks, and Robert K. Edmunds v. BIR PC; and Does 1-50, Case Number 10 37-2017-00031717-CU-OE-CTL. Doc 1-2, Exhibit A. Plaintiffs’ two-count Complaint 11 asserts claims solely against Defendant BIR PC. Plaintiffs served BIR PC with the 12 Complaint on August 29, 2017. Doc. No. 1-2, Exhibit B. 13 On September 7, 2017, Plaintiffs filed Form SDSC CIV-012, titled “Amendment to 14 Complaint” (Doc. No. 1-2, Exhibit C), declaring discovery of the true name of “Doe 1” 15 and inserting BIR LLP in place of Doe 1, without amending the contents of the complaint. 16 Plaintiffs served Defendants with the Amendment on September 8, 2017. Doc. No. 1-2, 17 Exhibit D. No other pleadings, process, or orders related to this case have been filed in the 18 San Diego Superior Court or served on any defendant. 19 On September 12, 2017, Defendants filed a notice of removal in accordance with 28 20 U.S.C. § 1446(b). Defendants each filed a Motion to Dismiss. Doc. Nos. 6 and 7. Plaintiffs 21 filed a motion to remand on September 29, 2017. Doc. No. 8. All motions have been fully 22 briefed and are now before the Court. 23 24 25 26 27 28 1 The Western District of Pennsylvania issued a Memorandum Order on November 20, 2017, of which this Court takes judicial notice pursuant to Federal Rule of Evidence 201, finding that the “case is not governed by federal law and there are no federal interests at issue.” Accordingly the District court dismissed the matter “without prejudice to the parties' right to fully litigate these matters in a state forum” and declined jurisdiction. 2 17cv1846-JAH (AGS) 1 2 DISCUSSION I. Legal Standard 3 The federal court is one of limited jurisdiction. Gould v. Mutual Life Ins. Co. v. New 4 York, 790 F.2d 769, 774 (9th Cir. 1986). As such, it cannot reach the merits of any dispute 5 until it confirms its own subject matter jurisdiction. Steel Co. v. Citizens for a Better 6 Environ., 523 U.S. 83, 93-94 (1998). District courts must construe the removal statutes 7 strictly against removal and resolve any uncertainty as to removability in favor of 8 remanding the case to state court. Boggs v. Lewis, 863 F.2d 662, 663 (9th Cir. 1988). The 9 burden is on the removing party to demonstrate federal subject matter jurisdiction over the 10 case. See Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988). 11 It is a long-standing rule that jurisdiction in a diversity case is determined at the time 12 of removal. St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283 (1938). The 13 removal statute, 28 U.S.C. §1441 allows defendants to remove an action when a case 14 originally filed in state court presents a federal question, or is between citizens of different 15 states and involves an amount in controversy that exceeds $75,000. See 28 U.S.C. §§ 16 1441(a) and (b); 28 U.S.C. §§ 1331, 1332(a). The Ninth Circuit “strictly construe[s] the 17 removal statute against removal jurisdiction,” and “[f]ederal jurisdiction must be rejected 18 if there is any doubt as to the right of removal in the first instance.” Gaus v. Miles, Inc., 19 980 F.2d 564, 566 (9th Cir. 1992). “The ‘strong presumption’ against removal jurisdiction 20 means that the defendant always has the burden of establishing that removal is proper.” Id. 21 Title 28 U.S.C. § 1332, the diversity jurisdiction statute, provides: “[A] corporation 22 shall be deemed to be a citizen of every State and foreign state by which it has been 23 incorporated and of the State or foreign state where it has its principal place of business[.]” 24 28 U.S.C. §1332(c)(1). Thus, for an action to be removed on the basis of diversity 25 jurisdiction in an action where there is a corporate defendant, the principal place of business 26 as well as the state of incorporation must be diverse from the plaintiff. 27 28 3 17cv1846-JAH (AGS) 1 II. Analysis 2 A. 3 Plaintiffs move to remand this action to state court for lack of complete diversity. 4 Complete diversity exists when the parties are residents of different states and involves an 5 amount in controversy that exceeds $75,000. See 28 U.S.C. §1332(a). 2 Here, all Plaintiffs 6 are residents of California. BIR PC is incorporated and has its principle place of business 7 in the Commonwealth of Pennsylvania. However, complete diversity is required between 8 all parties. Therefore the Court focuses its attention on BIR LLP. 9 Motion to Remand for Lack of Subject Matter Jurisdiction (i) BIR LLP’s Citizenship 10 A limited liability partnership is a citizen of any state in which any of its partners are 11 citizens. Johnson v. Columbia Properties Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 12 2006). BIR LLP’s partners include several individuals who are citizens of the State of 13 California. See Plaintiffs’ Declarations (Doc. Nos. 8-2, 8-4) and Defendants’ Declaration 14 (Doc. No. 1-4.) Defendants argue that BIR LLP was fraudulently joined for the purposes 15 of destroying diversity jurisdiction and the fraudulent joinder supports removing the action 16 to federal court. 17 (ii) Fraudulent Joinder 18 Joinder is considered fraudulent “‘[i]f the plaintiff fails to state a cause of action 19 against a resident defendant, and the failure is obvious according to the settled rules of the 20 state.’” McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). A federal 21 court must find a joinder to be proper “[i]f there is a non-fanciful possibility that plaintiff 22 can state a claim under [state] law against the non-diverse defendants ...” Macey v. Allstate 23 Property and Cas. Ins. Co., 220 F. Supp.2d 1116, 1117 (N.D. Cal. 2002). Moreover, when 24 a resident defendant opposes remand based on the allegation of a sham joinder, the court 25 may look beyond the pleadings to determine if the joinder is, in fact, a sham. See McCabe, 26 27 28 2 The amount in controversy is not in dispute thus the Court does not address it. 4 17cv1846-JAH (AGS) 1 811 F.2d at1339 (relying in part on Plaintiff’s declaration to determine if joinder of a non- 2 diverse defendant was a sham). 3 Defendants bear the heavy burden of proving “all facts necessary to support 4 jurisdiction” and demonstrating that a non-diverse defendant's joinder is a sham. Macey, 5 220 F. Supp.2d at 1117 (citing Gaus, supra). See also Plute v. Roadway Package Sys., Inc., 6 141 F. Supp. 2d 1005, 1008 (N.D. Cal. 2001) (citing Nishimoto v. Federman–Bachrach & 7 Assocs., 903 F.2d 709, 712 n. 3 (9th Cir. 1990)); Green v. Amerada Hess Corp., 707 F.2d 8 201, 205 (5th Cir.1983), cert. denied, 464 U.S. 1039, 104 S.Ct. 701, 79 L.Ed.2d 166 (1984). 9 In assessing whether joinder is fraudulent, the court must resolve ambiguities in controlling 10 state law, in favor of the non-removing party. Macey, supra. Defendants allege that because 11 Plaintiffs did not reference BIR LLP in their initial pleadings, the claim that BIR LLP is 12 liable to pay the unused vacation time must fail. See Doc 1-6. However, Plaintiffs state, 13 and the Court considers, their claim against the LLP as pled in the proposed First Amended 14 Complaint and declarations attached to the motion for remand. As the Ninth Circuit 15 highlights, “California has liberal rules on amendment of pleadings and it is very possible 16 that the state court would …grant[ ] plaintiffs leave to amend their complaint, allowing 17 them to address the deficienc[y]” on which Defendants rely. California Dump Truck 18 Owners Ass'n v. Cummins Engine Co., 24 F. App'x 727, 729–30 (9th Cir. 2001). 19 At the time of trial, Plaintiffs will have the burden of establishing BIR LLP as a dual 20 employer under California law. After propounding discovery, Plaintiffs will have the 21 opportunity to put forth evidence supporting their position that the LLP and the PC have 22 an obligation to pay Plaintiffs for their unused vacation time. However, with regard to 23 removability, Defendants “must … show that the [entity] joined in the action cannot be 24 liable on any theory.” Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). 25 (iii) Dual Employer Doctrine 26 The California Supreme Court recognized the dual employer doctrine (also 27 referenced as the “joint employer doctrine”) in the case of Martinez v. Combs in which the 28 Court ruled that the “definition of ‘employer’ encompasses ‘any person . . . who directly 5 17cv1846-JAH (AGS) 1 or indirectly, or through an agent or any other person, employs or exercises control over 2 the wages, hours, or working conditions of any person . . . .” Martinez v. Combs, 49 Cal.4th 3 35, 71 (2010). The key factor in determining whether the dual employer relationship exists 4 is whether two or more employers exercise control over a single employee. Kowalski v. 5 Shell Oil, 23 Cal.3d 168, 176-177. (1979). Whether BIR PC and BIR LLP are dual 6 employers is a factual issue for the trier of fact to determine. Id. at 175. However, this 7 Court must determine if a cause of action under this theory is at least possible. 8 Plaintiffs contend that both BIR LLP and BIR PC were in control of Plaintiffs’ 9 employment in some respect, and that both BIR entities benefited from their professional 10 work as attorneys. Defendant maintains that BIR LLP had a complete lack of control over 11 Plaintiff’s wages, hours, and working conditions. However, Plaintiffs rely on a number of 12 cases establishing that California courts have considered more factors than “the exercise of 13 control” when determining whether a dual employer exists. See Aleksick v. 7-Eleven, Inc., 14 205 Cal.App.4th 1176, 1187 (2012) (discussing whether the alleged joint employer has the 15 right to control the manner and means of accomplishing the result desired, not necessarily 16 that they have exercised that right to control.); Rivcom Corp. v. Agric. Labor Relations 17 Bd., 34 Cal.3d 743,768-769(1983) (discussing whether the alleged joint employer has a 18 “substantial long-term interest” in the ongoing operations of the business for whom the 19 employee provides services and whether the alleged joint employers operate as a single 20 entity.) Although the employment agreements signed by Plaintiffs were counter-signed by 21 BIR PC, a signed employment agreement is not dispositive under California state law. See 22 Doc No. 1-2:18, 28, 38; Kowalski, 23 Cal.3d at 176. 23 In determining removability, the Court is to consider whether Defendants have put 24 forth clear and convincing evidence the LLP is not a dual employer; whether Defendants 25 established as a matter of law that they (1) did not exercise control of the Plaintiffs, (2) did 26 not have the right to control how goals were reached, (3) did not have “substantial long- 27 term interest in the ongoing operations of the business of the PC and/or (4) do not operate 28 as a single employer. These are all factual questions and Defendants’ mere assertion that 6 17cv1846-JAH (AGS) 1 the LLP did not exercise control of the Plaintiffs, without more, is insufficient to disprove 2 the possibility of liability under the dual employer theory. The Court finds Defendants 3 have not met their burden of establishing by clear and convincing evidence that BIR LLP 4 is a sham defendant. Therefore, Plaintiffs’ motion to remand is GRANTED. 5 B. 6 The Court declines to rule on Defendants’ motions to dismiss, stay or transfer. 7 “Article III generally requires a federal court to satisfy itself of its jurisdiction over the 8 subject matter before it considers the merits of a case.” Ruhrgas AG v. Marathon Oil Co., 9 526 U.S. 574, 583 (1999). Given the notice of removal in this case was based solely on 10 diversity of citizenship jurisdiction and the complaint alleges only state law causes of 11 action, the state court is the appropriate forum to litigate the merits of the motions to 12 dismiss. The Court lacks subject matter jurisdiction and therefore DENIES AS MOOT 13 Defendants’ motions to dismiss, stay or transfer. Defendants’ Motions to Dismiss, Stay or Transfer 14 15 CONCLUSION AND ORDER 16 For the foregoing reasons, IT IS HEREBY ORDERED that Plaintiffs’ motion to 17 remand is GRANTED and Defendants’ motions to dismiss, stay or transfer are DENIED 18 AS MOOT. 19 IT IS SO ORDERED. 20 21 22 23 24 DATED: December 8, 2017 _________________________________ JOHN A. HOUSTON United States District Judge 25 26 27 28 7 17cv1846-JAH (AGS)

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