Guggenberger v. Starkey Labs., Inc.
| Decision Date | 29 December 2016 |
| Docket Number | Civil No. 16-2022 (JRT/LIB),Civil No. 16-2021 (JRT/LIB) |
| Parties | KEITH GUGGENBERGER, Plaintiff, v. STARKEY LABORATORIES, INC., Defendant, and UNITED STATES OF AMERICA, Movant. JULIE MILLER, Plaintiff, v. STARKEY LABORATORIES, INC., Defendant, and UNITED STATES OF AMERICA, Movant. |
| Court | U.S. District Court — District of Minnesota |
William Michael, Jr., MAYER BROWN LLP, 71 South Wacker Drive, Chicago, IL 60606, and Mark J. Briol and William G. Carpenter, BRIOL & ASSOCIATES, 80 South Eighth Street, Suite 3700, Minneapolis, MN 55402, for plaintiff Keith Guggenberger.
David H. Redden, FABIAN MAY & ANDERSON, PLLP, 1625 Medical Arts Building, 825 Nicollet Mall, Minneapolis, MN 55402, for plaintiff Julie Miller.
David Bradley Olsen and Scott Nielson, HENSON & EFRON, PA, 220 South Sixth Street, Suite 1800, Minneapolis, MN 55402, for defendant.
Benjamin F. Langner, Craig R. Baune, Erin M. Secord, and Lola Velazquez-Aguilu, Assistant United States Attorneys, UNITED STATES ATTORNEY'S OFFICE, 600 United States Courthouse, 300 South Fourth Street, Minneapolis, MN 55415, for movant.
Plaintiffs Keith Guggenberger and Julie Miller filed these two related employment cases in state court, seeking damages arising from their September 2015 termination by Defendant Starkey Laboratories, Inc. ("Starkey"). In state court, Guggenberger and Miller served Starkey with various discovery requests. In separate proceedings, the United States indicted a number of other former Starkey employees, who were also terminated in September 2015, on federal conspiracy, mail fraud, wire fraud, and money laundering charges; the indictment alleges that those employees defrauded Starkey of more than $20 million. The United States attempted to permissively intervene in the civil state-court matters for the purpose of delaying discovery pursuant to Minn. R. Civ. P. 24.02, arguing discovery in the civil matters could disturb the integrity of the federal criminal case. The state court denied intervention and the United States subsequently removed both cases to federal court pursuant to 28 U.S.C. § 1442(a)(1).
Guggenberger and Miller move for remand to state court, arguing the Court lacks jurisdiction; they also request an award to cover costs and fees related to the improper removal. The United States moves for permissive intervention and a stay of discovery. Starkey moves to stay the civil litigation, or alternatively, to stay discovery.
The Court will grant Guggenberger's and Miller's motions for remand because it lacks jurisdiction and removal under § 1442(a)(1) was improper. However, because the United States' good-faith argument for removal was objectively reasonable, the Courtwill deny Guggenberger's and Miller's requests for costs and fees. The Court will deny as moot all other pending motions.
Starkey is a large hearing aid company based in Minnesota. Starkey terminated a number of employees in September 2015, when an alleged large-scale fraud scheme orchestrated by top-level executives came to light. Guggenberger and Miller were among those fired. On September 21, 2016, three of the terminated employees - Scott Nelson, Larry Miller, and former Starkey President Jerry Ruzicka - were federally indicted on charges including mail fraud, wire fraud, money laundering, and conspiracy. (Indictment ¶¶ 1, 17-55.) The indictment alleges that the criminal defendants defrauded Starkey of more than $20 million over many years. (Id. ¶ 64.)
At the time of his termination, Guggenberger was a twenty-nine-year employee of Starkey who most recently served as Senior Vice President of Operations; he reported toRuzicka. (Guggenberger Am. Compl. ¶¶ 2, 9.) Miller worked at Starkey for almost forty years; at the time of her termination she was Senior Executive Assistant to Ruzicka, and she is married to Larry Miller.
On September 30, 2015, Guggenberger filed a lawsuit against Starkey in Minnesota state court, alleging breach of employment contract, breach of the implied covenant of good faith and fair dealing, defamation, unpaid wages under Minn. Stat. § 181.13, unjust enrichment/quantum meruit, and a federal statutory claim under 29 U.S.C. § 1132. (Guggenberger Removal Notice ¶ 2; Guggenberger Am. Compl. ¶¶ 24-45.) Guggenberger demands damages in excess of $11 million. (Guggenberger Am. Compl. ¶¶ 29, 35.)
On December 22, 2015, Miller filed a lawsuit against Starkey in Minnesota state court. Miller asserts three claims: marital status discrimination under the Minnesota Human Rights Act, Minn. Stat. § 363A.08, subd. 2, breach of contract, and promissory estoppel. (Miller Compl. ¶¶ 14-30.) Miller demands damages in excess of $50,000. (Id. ¶¶ 18, 24, 30.)
On March 16, 2016, the state court granted Starkey's motion to companion Guggenberger and Miller for discovery pursuant to Minn. Gen. R. Prac. 113 and Minn. R. Civ. P. 42.01 because of the substantial overlap of fact and law between the cases. (Guggenberger Aff. of William Carpenter ("Carpenter Aff."), Ex. 2 at 33-34, July 1,2016, Docket No. 15.) The state court reasoned that "[t]here will be identical questions of law presented by discovery, particularly concerning Fifth Amendment protections for witnesses while a criminal investigation is pending." (Id. at 33.)2 Starkey has not yet filed an Answer in either case.3
On April 29, 2016, Guggenberger served discovery requests on Starkey, seeking the names of all Starkey employees and vendors who provided information about Guggenberger to law enforcement; the names of the law enforcement officers who received that information; a description of all such communications between Starkey and law enforcement; and documents related to any law enforcement investigation of Guggenberger in Starkey's possession. (Id., Ex. 3 at 39-40, 46-47.) Guggenberger also noticed a number of depositions, including a deposition of Starkey and Starkey's private investigation firm. (Id. at 49-50, 58; see also id. at 60-61.)4
On May 9, 2016, Miller served Starkey with discovery requests. ( Miller requested, among other things, documents relating to and a detailed explanation of the reasons for Miller's and her spouse's termination, and information regarding Miller's employment contract and Starkey's anticipated defenses. (Id. at 40-42.) Like Guggenberger, Miller noticed depositions of Starkey executives. (Id. at 4.) Unlike Guggenberger's requests, Miller's discovery requests make no mention of the criminal investigation or Starkey's communications with law enforcement. (See id. at 4-5, 37-50.)
On May 19, 2016, the United States filed Notices of Permissive Intervention in Guggenberger and Miller pursuant to Minn. R. Civ. P. 24.02,5 stating:
(Carpenter Aff., Ex. 5 (citation omitted); see also Miller Secord Decl., Ex. D (near-identical language).) Guggenberger stipulated to the United States' permissive intervention for the sole purpose of allowing the United States to argue for a stay of discovery and reserved the right to object to the motion to stay discovery. (Carpenter Aff., Ex. 6.) Miller objected to the United States' intervention, and the United States moved to intervene as required by Minn. R. Civ. P. 24.03. (Miller Secord Decl., Exs. E-F.) The United States argued that it sought intervention to "protect the integrity of its criminal investigation" by (1) "preventing circumvention of limitations on discovery pursuant to the Federal Rules of Criminal Procedure" and (2) "protect[ing] from disclosure the focus and scope of the grand jury investigation as well as information provided to the grand jury." (Id., Ex. A ¶ 8.)
Five days before the state-court hearing on the United States' motion for permissive intervention, the United States filed briefing indicating, for the first time, its intent to remove the case to federal court after intervention in order to "submit its Motion to Stay Discovery to a federal judge authorized to receive and evaluate federal grand jury materials that are subject to [Fed. R. Crim. P.] 6(e) protection." (Carpenter Aff., Ex. 7; id., Ex. 8 at 82.) Guggenberger responded that his prior "stipulation to intervention [was] not valid for intervening for the purpose of removal," and objecting to the United States' intervention for that purpose. (Id., Ex. 9 at 85.)
Shortly before the state-court hearing began, the court issued a written order granting the United States...
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