Bank Transactions, Inc. v. Franco

Filing 23

ORDER. IT IS HEREBY ORDERED that 9 Defendant's Motion to Dismiss is GRANTED. Plaintiff's Complaint is dismissed without prejudice. If Plaintiff can correct this pleading defect, it may file a Second Amended Complaint no later than 2/3/17. Signed by Chief Judge Gloria M. Navarro on 1/17/17. (Copies have been distributed pursuant to the NEF - ADR)

UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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BANK TRANSACTIONS, INC.,

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Plaintiff,
vs.

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FRIDA FRANCO,

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Defendant.

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Case No.: 2:16-cv-200-GMN-VCF
ORDER

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Pending before the Court is the Motion to Dismiss or Alternatively to Transfer Venue

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(ECF No. 9) filed by Defendant Frida Franco (“Defendant”). Plaintiff Bank Transactions, Inc.

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(“Plaintiff”) filed a Response (ECF No. 12), Defendant filed a Reply (ECF No. 13), and

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Plaintiff filed a Sur-Reply (ECF No. 22).

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I.

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BACKGROUND
This case arises out of an alleged violation of a non-compete clause in an employment

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agreement entitled “Marketing Agreement” between Plaintiff, the company employer, and

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Defendant, its former sales representative. On February 2, 2016, Plaintiff filed the instant

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lawsuit against Defendant alleging one claim for breach of contract. (See Compl., ECF No. 1).

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On March 7, 2016, Plaintiff filed an Amended Complaint, re-alleging breach of contract, and

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adding claims for breach of covenant of good faith and fair dealing and unjust enrichment. (See

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Am. Compl., ECF No. 4).

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On April 5, 2016, Defendant filed the instant Motion asserting that the Court lacked

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personal jurisdiction over her. (Mot. Dismiss 4:3–6:23, ECF No. 9). Defendant specifically

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argues that the choice of law and forum selection clauses in the Marketing Agreement are

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“invalid.” (Id. 6:23–10:18). Alternatively, if the Court is not inclined to dismiss the case,

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Defendant seeks to transfer it to the United States District Court for the Southern District of

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California under 28 U.S.C. § 1404, “for the convenience of the parties and in the interest of

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justice.” (Id. 13:1–20:22). Plaintiff counters that the Marketing Agreement dictates the

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governing law is that of the State of Nevada, and such an agreement as to choice of law is valid

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and enforceable. (Resp. 2:19–5:24, ECF No. 12).
In her Reply, Defendant first suggests that this Court lacks subject matter jurisdiction

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because the parties are not diverse. (Reply 1:20–7:9, ECF No. 13). District courts may

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disregard arguments first raised in a reply brief because the timing of the argument deprives the

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opposing party of the opportunity to respond. See, e.g., Provenz v. Miller, 102 F.3d 1478, 1483

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(9th Cir. 1996); USF Ins. Co. v. Smith’s Food & Drug Ctr., Inc., 921 F. Supp. 2d 1082, 1090

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n.1 (D. Nev. 2013). However, given the importance of subject matter jurisdiction, the Court

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determined the appropriate remedy was to allow Plaintiff the opportunity to respond in the form

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of a Sur-Reply (see ECF No. 21), which Plaintiff timely filed (ECF No. 22).

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II.

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LEGAL STANDARD
Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. of

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Am., 511 U.S. 375, 377 (1994). District courts have jurisdiction in two instances. First, district

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courts have subject matter jurisdiction over civil actions that arise under federal law. 28 U.S.C.

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§ 1331. Second, district courts have subject matter jurisdiction over civil actions where no

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plaintiff is a citizen of the same state as a defendant and the amount in controversy exceeds

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$75,000. 28 U.S.C. § 1332(a). For the latter, referred to as diversity jurisdiction, a corporation

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is a citizen of both the “state by which it has been incorporated and [the state] where it has its

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principal place of business.” 28 U.S.C. § 1332(c)(1). Diversity of citizenship is determined as

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of the filing of the complaint. Harris v. Bankers Life & Cas. Co., 425 F.3d 689, 696 (9th Cir.

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2005) (citing Smith v. Sperling, 354 U.S. 91, 93 n.1 (1957)).

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“The party seeking to invoke the district court’s diversity jurisdiction always bears the

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burden of both pleading and proving diversity jurisdiction.” NewGen, LLC v. Safe Cig, LLC,

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840 F.3d 606, 613–14 (9th Cir. 2016). When a plaintiff originally files in federal court, “[t]he

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essential elements of diversity jurisdiction . . . must be affirmatively alleged in the pleadings.”

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Bautista v. Pan Am. World Airlines, Inc., 828 F.2d 546, 552 (9th Cir. 1987) (citation omitted);

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see also Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001) (“[I]n a diversity

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action, the plaintiff must state all parties’ citizenships such that the existence of complete

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diversity can be confirmed.”). At the pleading stage, the plaintiff is “merely required to allege

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(not to prove) diversity.” Kanter, 265 F.3d at 857.
Federal Rule of Civil Procedure 15 provides that “leave to amend shall be freely given

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when justice so requires.” Fed. R. Civ. P. 15(a); Foman v. Davis, 371 U.S. 178, 182

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(1962); Amerisource Bergen Corp. v. Dialysis West, Inc., 465 F.3d 946, 951 (9th Cir. 2006).

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Specifically, when a court dismisses a complaint for failure to properly allege diversity

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jurisdiction, leave to amend should be granted unless doing so would be futile. See Jacobs v.

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Patent Enf’t Fund, 230 F.3d 565, 567–68 (9th Cir. 2000). When amendment is futile in a case

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dismissed for lack of subject matter jurisdiction, the court should still dismiss the case without

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prejudice so the plaintiff may reassert its claims in a competent court. See Frigard v. United

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States, 862 F.2d 201, 204 (9th Cir. 1988) (per curiam).

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III.

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DISCUSSION
Plaintiff brought this case under the Court’s diversity jurisdiction, pursuant to 28 U.S.C.

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§ 1332. (Am. Compl. ¶ 1). Amount in controversy is not in dispute, nor is Defendant’s

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citizenship as an individual domiciled in the State of California. However, Defendant asserts

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that while Plaintiff is incorporated in Nevada, and therefore a citizen of Nevada, Plaintiff is also

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a citizen of California because its “principal place of business” is California. (Reply 2:24–

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5:21); see also 28 U.S.C. § 1332(c)(1) (a corporation is a citizen of both the state in which it

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was incorporated and the state in which its principal place of business is located). In its Sur-

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Reply, Plaintiff argues that the Court should not rely on the “self-serving conclusions stated in

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[Defendant’s] Affidavit” to determine subject matter jurisdiction. (Sur-Reply 2:10, ECF No.

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22). However, Plaintiff never asserts where its principal place of business is located, despite

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ample opportunity to do so in its Complaint, Amended Complaint, and the Sur-Reply allowed

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by the Court specifically to address subject matter jurisdiction. Given the lack of pleading as to

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Plaintiff’s principal place of business, Plaintiff’s Amended Complaint plainly fails to allege the

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“essential elements of diversity jurisdiction” required under § 1332(a). See Bautista, 828 F.2d

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at 552. Accordingly, the Court lacks subject matter jurisdiction over this case. However, the

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Court will dismiss the case without prejudice and allow Plaintiff leave to file a Second

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Amended Complaint because it is possible that diversity jurisdiction exists in this matter. See

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Jacobs, 230 F.3d at 567–68.

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IV.

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CONCLUSION
IT IS HEREBY ORDERED Defendant’s Motion to Dismiss (ECF No. 9) is

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GRANTED. Plaintiff’s Complaint is dismissed without prejudice. If Plaintiff can correct this

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pleading defect, it may file a Second Amended Complaint no later than February 3, 2017.

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Otherwise, Plaintiff may pursue any further action regarding this matter in state court.

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DATED this _____ day of January, 2017.

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___________________________________
Gloria M. Navarro, Chief Judge
United States District Court

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