McGrath Kamrass v. Jefferies, LLC et al
Memorandum Opinion and Order denying plaintiff's Motions to Remand to State Court 5 and strike 11 defendants' opposition 10 . Judge Donald C. Nugent 9/25/2017(C,KA) Modified text 9/26/2017 (C,KA).
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
CHRISTINE McGRATH KAMRASS,
JEFFERIES, LLC, et al.,
CASE NO. 1: 17 CV 964
JUDGE DONALD C. NUGENT
This matter comes before the Court on Plaintiff’s Motion to Remand and for an Award of
Costs, Expenses and Attorney Fees. (ECF #5) Defendants Jefferies LLC, Jefferies and Company,
Inc. and John Laub (“Defendants”) have filed a brief in opposition, Plaintiff has filed a reply
brief and Defendants were granted leave to file a sur-reply brief. Plaintiff has filed a Motion to
Strike Defendants’ Opposition brief because it was 4 pages longer than local rule permits. (ECF
#11) Defendants filed an Opposition to the motion to strike and attached a 15 page version of
their brief in opposition to the motion to remand. As no one was prejudiced by Defendants’
violation of the local rule page limit, Plaintiff’s Motion to Strike (ECF #11) is denied. Plaintiff’s
Motion to Remand is now fully briefed and ready for decision.
PROCEDURAL AND FACTUAL HISTORY
Defendants Jefferies LLC, Jefferies & Company, Inc., and John Laub (collectively,
“Defendants”) removed this action from the Court of Common Pleas for Cuyahoga County, Ohio
on May 8, 20171. Defendants assert that this Court has diversity jurisdiction pursuant to 28
Defendant Jefferies Investments, LLC has not filed an answer and no lawyer has entered
U.S.C. § 1332 over this action if the citizenship of improperly joined defendant Jefferies
Investments, LLC is ignored. Defendants claim that Jefferies Investments was improperly joined
as a defendant in order to defeat jurisdiction. Otherwise, there is complete diversity between
Plaintiff and the moving defendants and the amount in controversy exceeds $75,000.
Plaintiff Christine McGrath Kamrass is a citizen of Ohio. She brought suit against her
employer and her supervisor, John Laub, under Ohio R.C.§ 4112 alleging claims of
Sex/Caregiver Discrimination (Count One); Age Discrimination (Count Two) and Sex Plus/Age
Plus Discrimination (Count Three). Specifically, Plaintiff identifies the Defendants as follows:
(1) Jefferies, LLC, a Delaware corporation headquartered in New York, NY; (upon information
and belief, Jefferies LLC is a successor in interest to Jefferies & Company, Inc); (2) Jefferies &
Company, Inc., a Delaware corporation with a principal place of business in New York; and (3)
Jefferies Investments, LLC, an Ohio limited liability company. (Upon information and belief,
Jefferies Investment is a wholly owned subsidiary of Jefferies, LLC and/or Jefferies & Co.,
which was created for the particular purpose of developing and conducting business in Ohio.);
and (4) John Laub, a citizen of the State of New York.2 (Compl. ¶¶ 2-4)
Plaintiff alleges upon information and belief that Jefferies & Company, Jefferies LLC
and Jefferies Investments constitute a single employer/integrated entity because of the
interrelated nature of the entities in areas such as corporate structure, record keeping, bank
accounts, and equipment; the commonality of management amongst the organizations; the
an appearance on its behalf.
The Complaint also includes unnamed defendants John/Jane Des 1-5 and XYZ
Corporations 1-5, who will be disregarded for the purposes of this motion.
centralized nature of their human resources, employee relations and legal functions; and/or the
fact that the entities share common ownership and financial control. (Id. ¶ 6) Thereafter, the
Complaint refers to all the Jefferies entities as “Jefferies”.
In their Notice of Removal, Defendants state that with the exception of Jefferies
Investments, there is complete diversity among the parties. With respect to Jefferies Investments,
LLC, Defendants state that it is “an entity presently unknown to the Defendants, whose members
are presently unknown to Defendants and, therefore, its actual citizenship is likewise presently
unknown....” (ECF #1 at 4) Defendants assert through the declaration of Michael J. Sharp,
General Counsel of Jefferies LLC, that Jefferies Investments, LLC is not an appropriate party to
this action because “at no time have Christine McGrath Kamrass or John Laub been employed
by Jefferies Investments, LLC.” (ECF #1, Ex. 2 at ¶6). Thus Defendants contend, Plaintiff has
no reasonable cause of action against Jefferies Investments, LLC. Plaintiff began her
employment with Jefferies & Company, Inc. in 2006, and following Leucadia National
Corporation’s acquisition of Jefferies Group, LLC in 2013, became an employee of Jefferies
LLC. Further, since the start of his employment in 2014, John Laub has been an employee of
Jefferies, LLC. (Id.)
Defendants state that Jefferies LLC is a limited liability company and therefore has the
citizenship of each of its members. At the end of a long line of LLCs with one member, is
Leucadia National Corporation, which is incorporated in New York with its principal place of
business in New York. Defendants state that Jefferies LLC has the same citizenship as Leucadia
National. (Id. at 3).
Defendants confirm that John Laub is a citizen of New York and that Jefferies &
Company, Inc. was the predecessor to Jefferies LLC and that Jefferies & Company, Inc. was a
for profit corporation formed under the laws of the State of Delaware, with its principal place of
business in New York. (Id.)
Plaintiff has filed a Motion to Remand (ECF #5), buttressing the allegations in her
Complaint regarding the connections of Jefferies Investments to the other Jefferies entities with
her declaration and asserting that under the applicable standards of review, remand is
appropriate. Defendants disagree.
STANDARD OF REVIEW
In order for this Court to have diversity jurisdiction over this action pursuant to 28 U.S.C.
§1332(a)(1), the matter in controversy must exceed the sum or value of $75,000 and be between
citizens of different states. Moreover, the plaintiff’s citizenship must be diverse from that of
each named defendant. Caterpillar, Inc. v. Lewis, 519 U.S. 61, 68 (1996). The amount in
controversy is not in question. The only issue here is whether Jefferies Investments, LLC was
fraudulently joined by Plaintiff in order to defeat diversity jurisdiction.
A defendant seeking to remove an action from state court has the burden of
demonstrating that the federal court has subject matter jurisdiction. See Danca v. Private health
Care Systems, Inc., 185 F.3d 1,4 (1st Cir. 1999). Moreover, courts strictly construe the removal
statutes and all doubts are construed against removal. Shamrock Oil & Gas Corp. v. Sheets, 313
U.S. 100, 108-109, 61 S. Ct. 868, 872, 85 L.Ed. 1214 (1941), Keller v. Honeywell Protective
Services, 742 F. Supp. 425, 426 (N. D. Ohio 1990). Strict construction of the removal statutes is
necessary because removal jurisdiction encroaches on a state court’s jurisdiction. Thus, the
Sixth Circuit has stated:
in the interest of comity and federalism, federal jurisdiction should
be exercised only when it is clearly established, and any ambiguity
regarding the scope of §1446(b) should be resolved in favor of
remand to the state courts.
Brierly, v. Alusuisse Flexible Packaging, Inc., 184 F.3d 527, 534 (6th Cir.1999).
“Fraudulent joinder occurs when the non-removing party joins a party against whom
there is no colorable cause of action.” Walker v. Philip Morris USA, Inc., 443 Fed. Appx.
946(6th Cir. 2011)(citing Jerome-Duncan, Inc. v. Auto-By-Tel, LLC, 176 F.3d 904. 907 (6th Cir.
1999). The burden is on the removing defendant to show fraudulent joinder, and, as with any
dispute over removal, all doubts are to be resolved against removal. Alexander v. Elec. Data Sys.
Corp., 13 F.3d 940, 949 (6th Cir. 1994). To prove fraudulent joinder, the removing party must
present sufficient evidence that a plaintiff could not have established a cause of action against
non-diverse defendants under state law. The Sixth Circuit has instructed trial courts to analyze
claims of fraudulent joinder as follows:
[T]he removing party must present sufficient evidence that a
plaintiff could not have established a cause of action against nondiverse defendants under state law. However, if there is a
colorable basis for predicting that plaintiff may recover against
non-diverse defendants, this Court must remand the action to state
court. The district court must resolve all disputed questions of fact
in favor of the non-removing party. All doubts as to the propriety
of removal are resolved in favor of remand.
Coyne v. American Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999). Further, when deciding a
motion to remand including fraudulent joinder allegations, the court may “may ‘pierce the
pleading’ and consider summary judgment evidence, such as affidavits presented by the
parties...The court may look to material outside the pleadings for the limited purpose of
determining whether there are “undisputed facts that negate the claim.” Casias v. Wal-Mart
Stores, Inc., 695 F.3d 428, 433 (6th Cir. 2012) citing Walker v. Philip Morris USA, Inc., 443 Fed.
Appx. 946, 955-56 (6th Cir. 2011).
[T]he underlying inquiry into fraudulent joinder is similar to the inquiry
into a motion to dismiss under Fed.R.Civ.P. 12(b)(6), but is even more
deferential to the Plaintiffs. See Little v. Purdue Pharma, L.P., 227
F.Supp.2d 838, 845-46 (S.D.Ohio 2002) (citations omitted). Given the
deference in a fraudulent joinder inquiry, the Little court held that a
colorable claim existed if there was a basis for the claim in the laws of the
state where the claim was brought. Little, 227 F.Supp.2d at 847. The
inquiry into whether facts of the case actually support the claim is not
a jurisdictional issue, but is “more appropriately left for the court
which ultimately takes control of the case.” Id.
Leikin Oldsmobile, Inc. v. Sentry Select Insurance Co., No. 1: 08 CV 1695, 2008 WL 4686170 at
*2 (N.D. Ohio Oct. 22, 2008) (emphasis added.)
The plaintiff's motive in joining a non-diverse defendant “is immaterial to [the]
determination regarding fraudulent joinder.” Auto-By-Tel, L.L.C., 176 F.3d 904 at 907; see also
Harris v. Great Lakes Steel Corp., 752 F.Supp. 244, 246 n. 4 (E.D.Mich.1990) (“[t]he proper
inquiry is whether there is any reasonable basis for asserting a claim against a defendant, not
whether the plaintiff's motive in joining a defendant is to destroy diversity”). Similarly, whether
the plaintiff will ultimately recover against the removing defendant is also immaterial.
The only question before the Court at this point of the proceedings is whether Plaintiff
has asserted sufficient factual allegations to establish a “colorable” claim against the non-diverse
Defendant Jefferies Investments LLC. Plaintiff acknowledges that she was hired by Jefferies &
Company, Inc. and that following the acquisition of Jefferies & Company by Leucadia National
Corporation, became an employee of Jefferies LLC. Thus, for Plaintiff to assert a colorable
employment discrimination claim against Jefferies Investments LLC under Ohio R.C. § 4112,
Plaintiff must allege facts, that, if accepted as true and with all inference taken in favor of
Plaintiff, support the assertion that Jefferies LLC, Jefferies & Company and Jefferies
Investments, LLC are a single employer.
Under the “single employer” or “integrated enterprise” doctrine, two companies may be
considered so interrelated that they constitute a single employer subject to liability under
employment discrimination laws. Swallows v. Barnes & Noble Book Stores, Inc., 128 F.3d 990,
993-94, (6th Cir. 1997). Courts examine the following four factors to determine if two (or more)
entities should be treated as a single employer: (1) interrelation of operations, i.e., common
offices, common record keeping, shared bank accounts and equipment; (2) common
management, common directors and boards; (3) centralized control of labor relations and
personnel; and (4) common ownership and financial control. Id. (citation omitted.) “None of
these factors is conclusive, and all four need not be met in every case.” Id. at 994. (citation
Plaintiff makes the following allegations in her Complaint in support of single employer
--Defendant Jefferies Investments, LLC is an Ohio limited liability company. Upon
information and belief, Jefferies Investments, LLC is a wholly owned subsidiary of Jefferies,
LLC and/or Jefferies & Company, Inc. which was created for the particular purpose of
developing and conducting business in the State of Ohio and for other clients located in Ohio.
Upon information and belief, all revenues earned by Jefferies Investments, LLC flow through to
Jefferies, LLC and/or Jefferies & Company, Inc. As well, upon information and belief, Jefferies
LLC, Jefferies & Company, Inc. and Jefferies Investments, LLC are served by centralized and
joint legal and human resources department....[and] served by common management officials.
(Compl. § 4)
–Upon information and belief, under the “single employer” or “integrated entity”
doctrine, Defendants Jefferies & Company, Inc., Jefferies, LLC and Jefferies Investments, LLC
constitute a single employer/integrated entity given, among other things, the following factors:
(1) the interrelated nature of the two entities in areas such as corporate offices and structure,
record keeping, bank accounts, and equipment: (2) the commonality in management amongst
these organizations in areas such as supervisory authority, directors, and boards; (c) the
centralized nature of their human resources, employee relations, and legal functions; and/or (d)
the fact that these entities share common ownership and financial control. (Id. ¶6)
–Plaintiff was hired in or about 2006 to work as a Senior Vice President in sales in
[Jefferies & Company, Inc.]’s Prime Brokerage division. Jefferies employees are expected to
cross sell and Ms. Kamrass assisted directly or indirectly in marketing the services of other
Jefferies’ divisions, including Jefferies Investments, LLC to her hedge fund client base. Ms.
Kamrass had the opportunity to derive compensation for business directed toward other Jefferies
divisions, including Jefferies Investments, LLC. (Id. ¶12)
Ms. Kamrass also submitted two declarations in which she explains the connections
between the Jefferies entities. In her first declaration, Ms. Kamrass states:
“[B]y virtue of more than a decade of employment with Jefferies, LLC and its
predecessor, Jefferies & Company, Inc., I have become familiar with the corporate structure of
both entities and some of their respective parent corporations, subsidiaries and affiliated
companies.” (ECF #5-4 ¶ 4)
“[I]t is my understanding that Jefferies Investments, Inc. was organized by or in
association with Jefferies & Company, Inc. for the purpose of pursuing public finance and bond
work in the State of Ohio. I understand that without maintaining an Ohio entity, Jefferies &
Company, Inc. would be unable to pursue such business.” (Id. ¶ 5) In her second declaration,
Ms. Kamrass states that when it was announced that the Cleveland office would be closing, she
inquired if she would be reassigned to work under the supervision of Jefferies’ office in Chicago,
such that her work location would remain in Ohio but her business address would be in Illinois.
In response to that inquiry, a Jefferies employee, Aiko Nomura, who was involved with the
logistics of the closure of the Cleveland office, conveyed to Ms. Kamrass the information set
forth at paragraph 5 of her May 26, 2017 declaration above. (ECF #12-1 ¶ 1-3)
“It’s is also my understanding that Jefferies Investments, LLC is part of the investment
banking division of Jefferies LLC or falls under Leucadia Asset Management, a division of
Leucadia National Corporation....these entities are ultimately under the leadership and
management of Richard Handler, the Chief Executive Officer of both Jefferies LLC and
Leucadia National Corporation. Likewise, it is my understanding that Jefferies Investments, LLC
and Jefferies LLC and/or Jefferies & Company are served by common legal and human
resources departments.” (Id. ¶ 6)
Ms. Kamrass states that throughout her employment, she has been encouraged to cross
sell services offered by other divisions of Jefferies and related companies to her clients. She
references a referral she recently made to the co-head of Equity Capital Markets in the
Investment Banking division of Jefferies LLC, emphasizing the integrated nature of the business
offerings at Jefferies LLC, including the relationship between her Prime Brokerage division and
the Investment Banking arm through which Jefferies Investments LLC may operate. (Id. ¶ 9.)
Ms. Kamrass states that she regularly hears Jefferies employees make reference to
“Jefferies Investments” and to services offered by Jefferies Investments since this lawsuit was
filed. (Id. ¶8) She describes a recent meeting held by a high ranking Jefferies LLC employee to
update the Prime Brokerage sales team regarding the Jefferies LLC balance sheet. She claims
that the speaker discussed “Jefferies Investments” in the context of the balance sheets of both
Jefferies LLC and Leucadia National Corporation. (Id. ¶ 10)
The facts alleged by Plaintiff in her Complaint and declarations, if taken as true with all
inferences drawn in her favor, are sufficient to support a colorable claim against Jefferies
Investments LLC under the single employer/integrated entity theory. However, in opposition
Defendants offer a second declaration from Michael Sharp, the General Counsel for Jefferies
LLC and Leucadia National Corporation. (ECF #10-1) Mr. Sharp asserts that Plaintiff is
employed by Jefferies LLC; is paid by Jefferies LLC; her tax forms are issued from Jefferies
LLC; and she gets her health insurance through Jefferies LLC. (Id. ¶3) More importantly, with
respect to the alleged integration of Jefferies Investments LLC with the rest of the Jefferies
entities, Mr. Sharp attaches a copy of the Jefferies Group organizational structure as of May 31,
2017, as well as the Leucadia organizational structure and asserts that there is no entity named
Jefferies Investments LLC in either of those structures. (Id. ¶5) Mr. Sharp notes that there is an
entity named Jefferies Investment Advisers, LLC that is part of the Group structure, but that
entity is a Delaware LLC whose sole member is Jefferies Group LLC, with its principal place of
business in New York. It is not a citizen of Ohio.
Negating any theory that Jefferies Investments LLC shares legal resources with Jefferies
LLC, Mr. Sharp states that as General Counsel of Leucadia, Jefferies Group LLC and Jefferies
LLC, he has never serviced any entity named Jefferies Investments, LLC. (Id. ¶6) Mr. Sharp
further notes that the Jefferies Employee Handbook, which applies to U.S. employees of
Jefferies Group LLC and its subsidiaries and affiliates, makes no mention of Jefferies
Defendants’ submissions present sufficient evidence to show that Plaintiff can not
establish a cause of action against Jefferies Investments LLC under an integrated entity theory.
The undisputed evidence of the Defendants’ structure demonstrates that Jefferies Investments
LLC is not part of the Defendants’ organizations and thus can not share any of the four factors in
the Swallows test. As such, Plaintiff’ employment discrimination claim against Jefferies
Investments LLC is not colorable. Accordingly, Defendants have established that Jefferies
Investments LLC was fraudulently joined. With the citizenship of Jefferies Investments LLC
discounted, this Court has diversity jurisdiction over this action.
For the reasons set forth above, Plaintiff’s Motion to Remand (ECF #5) is denied.
IT IS SO ORDERED.
__/s/Donald C. Nugent____
DONALD C. NUGENT
United States District Judge
DATED:__September 25, 2017___
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