Heller v. Allied Textile Companies, Ltd.

• Decision Date: 28 July 2003
• Docket Number: No. 03-CV-81-B-S.,03-CV-81-B-S.
• Citation: 276 F.Supp.2d 175
• Parties: Lawrence E. HELLER, Plaintiff, v. ALLIED TEXTILE COMPANIES LIMITED, Defendant.
• Court: U.S. District Court — District of Maine

Page 175

276 F.Supp.2d 175

Lawrence E. HELLER, Plaintiff, v. ALLIED TEXTILE COMPANIES LIMITED, Defendant.

No. 03-CV-81-B-S.

United States District Court, D. Maine.

July 28, 2003.

COPYRIGHT MATERIAL OMITTED

Glenn Israel, Bernstein, Shur, Sawyer, & Nelson, Portland, ME, for Lawrence E. Heller.

Adam C. Paul, Kirkpatrick & Lockhart LLP, Washington, DC, U. Charles Remmel, II, Kelly, Remmel & Zimmerman, Portland, ME, for Allied Textiles Companies Limited.

ORDER

SINGAL, Chief Judge.

The former president and chief executive officer of a woolen mill seeks damages from the mill's parent company for breach of contract and violation of Maine wage statutes. Presently before the Court are Plaintiff's Motion to Remand (Docket # 4) and Defendant's Motion to Dismiss for Lack of Personal Jurisdiction and For Failure to State a Claim (Docket # 7). For the following reasons, the Court DENIES Plaintiff's motion and GRANTS Defendant's motion.

I. LEGAL STANDARD

As this case involves disputes regarding both subject matter and personal jurisdiction, the Court first sets forth the different legal standards appropriate in each jurisdictional context. Subject matter jurisdiction represents a threshold issue where removal from state court is contested. Danca v. Private Health Care Sys., Inc., 185 F.3d 1, 4 (1st Cir.1999). The removing party bears the burden of making a "colorable" showing of the underlying jurisdictional basis. Id.

However, Plaintiff bears the burden of making a prima facie showing of jurisdiction over Defendant if the Court proceeds without holding an evidentiary hearing when ruling on a motion to dismiss for lack of personal jurisdiction. United States v. Swiss Am. Bank, Ltd., 274 F.3d 610, 618 (1st Cir.2001); Nowak v. Tak How Invs., Ltd., 94 F.3d 708, 712 (1st Cir.1996). Under the prima facie standard, Plaintiff must cite to specific evidence in the record demonstrating the relevant jurisdictional facts. Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42, 51 (1st Cir.), cert. denied, 537 U.S. 1029, 123 S.Ct. 558, 154 L.Ed.2d 444 (2002). The Court accepts sufficiently supported facts as true and views them in the light most favorable to Plaintiff. Daynard, 290 F.3d at 51. The Court must also accept as true any uncontested facts put forward by Defendant. Id.

II. BACKGROUND

Plaintiff Lawrence Heller ("Heller") is the former President and Chief Executive Officer ("CEO") of Carleton Woolen Mills, Inc. ("Carleton"). Heller resides in Pennsylvania. Carleton is a Delaware corporation with its principal place of business in Winthrop, Maine that designs, produces and markets woven woolen fabrics. By contract dated August 23, 1995, Heller agreed to serve as an officer and employee of Carleton. Carleton, in return, agreed to pay Heller an annual salary of $180,000 for the first year of the contract and at least $200,000 each fiscal year thereafter in addition to providing vacation, benefits, annual bonuses and a company automobile. The contract was negotiated and executed in New York and is subject to a New York choice of law provision. Although all of Carleton's production facilities were located in Maine, its design and marketing headquarters, as well as the CEO's primary place of work, were in New York. Carleton employed twenty-one people in the New York office and hundreds of individuals in its Maine mills. The facilities worked in close cooperation and required daily contact.

Carleton's parent corporation, Defendant Allied Textile Companies, Plc. ("Allied"), is a private company with its principal place of business in West Yorkshire, England. In 1994, prior to the execution of the contract, Allied purchased all of Carleton's stock, making it a wholly owned subsidiary. Presumably as a result of its ownership status, Allied also signed the employment agreement. However, the nature of the parent corporation's rights and duties under the document are less clear than those of Heller and Carleton. While the preamble states that the agreement is between Carleton and Heller, without mention of Allied, the contract appears to provide three rights to Allied's benefit. Heller must report to a designated Allied "liaison officer" as well as perform any duties assigned by that individual under the terms of the agreement. In addition, all notices under the contract are to be addressed to Allied.¹ The parent company does not appear to have incurred any duties from the face of the employment contract.

Allied is a textile holding company that employs seven people in England and does not have any offices in the United States. Carleton is one of seventeen Allied subsidiaries. Derek Wood ("Wood"), the Allied liaison officer described in the contract, monitored the parent corporation's investment in Carleton. He traveled to Carleton's facilities approximately nine or ten times a year and generally visited both the New York and Maine facilities over the course of a three-day trip. Other Allied employees infrequently visited the Carleton sites. Approximately ten percent of Wood's efforts on behalf of Allied were dedicated to Carleton. Additionally, Wood and another Allied employee sat on the Carleton Board of Directors and engaged in telephonic and facsimile contact with Carleton management from the United Kingdom.

In January of 1998, financial conditions at Carleton began to deteriorate. Carleton's declining fiscal state necessitated significant borrowing from Allied to continue operations. Having invested more than $25 million in the subsidiary, Allied ceased financing Carleton operations on December 10, 1999. Approximately two months later, Carleton filed for bankruptcy. Carleton then stopped paying Heller's full salary, although he continued to receive a portion of his salary until September 2, 2000 when the bankruptcy proceeding was converted to liquidation.

Heller brought suit against Allied on April 2, 2003 in the Superior Court for Kennebec County, alleging three causes of action based on the employment agreement and Allied's "joint employer" status with Carleton. Count I seeks damages for breach of contract resulting from the failure to pay Heller's salary and benefits. Count II alleges a failure to make timely payment of wages in violation of 26 M.R.S.A. § 621-A (Supp.2003).² Count III brings a cause of action pursuant to 26 M.R.S.A. § 626 (Supp.2003) for failure to pay all wages due upon cessation of employment.

Defendant received a copy of the complaint on April 10, 2003. On May 8, 2003, Defendant attempted to remove the action to this Court (Docket # 1). Realizing that it had improperly cited to the bankruptcy removal statute in the original notice of removal, however, Defendant filed a praecipe on May 16, 2003 to amend the notice (Docket # 3). Plaintiff objected and filed a motion to remand to state court on May 21, 2003 (Docket # 5). Additionally, on June 12, 2003 Defendant filed a motion to dismiss for lack of personal jurisdiction and failure to state a claim (Docket # 7). Both the motion to remand and the motion to dismiss were argued at a motions hearing before the Court on July 9, 2003.

III. DISCUSSION

Because subject matter jurisdiction represents a threshold determination the Court first addresses Plaintiff's motion to remand. Finding removal proper in the instant case, the Court then proceeds to rule on Defendant's motion to dismiss.

A. Motion to Remand

Plaintiff challenges the sufficiency of Defendant's original notice of removal in this case. Defendant first attempted to remove the matter pursuant to the bankruptcy removal statute, 28 U.S.C. § 1452(a) (1994), but now concedes that the Court does not have bankruptcy jurisdiction. As a result, Defendant seeks to amend its notice to reflect diversity of citizenship under 28 U.S.C. § 1332 (Supp. 2003) and remove pursuant to 28 U.S.C. § 1441(a) (1994).

Section 1441(a) permits removal of "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." Under section 1332(a), in turn, courts have original jurisdiction over cases brought in diversity. Diversity of citizenship jurisdiction extends to all civil controversies exceeding $75,000 in value between "citizens of a State and citizens or subjects of a foreign state." § 1332(a)(2). For the purposes of diversity, the phrase "citizens or subjects of a foreign state" includes a corporation of a foreign state. JPMorgan Chase Bank v. Traffic Stream (BVI) Infrastructure Ltd., 536 U.S. 88, 91, 122 S.Ct. 2054, 153 L.Ed.2d 95 (2002).

Under 28 U.S.C. § 1446(a) (1994), the removing party must file with the federal court "a notice of removal ... containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings and orders served upon such defendant." The provision imposes the additional requirement that the notice be filed within thirty days of receipt of proper service of the complaint and summons by Defendant.³ § 1446(b); Danca, 185 F.3d at 4 (citing Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 350-51, 119 S.Ct. 1322, 143 L.Ed.2d 448 (1999)).

Failure to follow the removal procedures set forth in section 1446 invokes the remand provisions of 28 U.S.C. § 1447(c) (Supp.2003). Section 1447(c) allows for the filing of a motion to remand within thirty days of the notice of removal "on the basis of any defect in removal procedure." Additionally, remand at the Court's own initiative is appropriate at any point prior to final judgment if it appears that subject matter jurisdiction is lacking. § 1447(c). The removal statutes are strictly construed. Danca, 185 F.3d at 4 (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 85 L.Ed. 1214 (1941)).

Plaintiff argues that the praecipe was untimely under section 1446(b) because the amendment was filed more than thirty days after Defendant's receipt of proper service. As a result, Plaintiff maintains that...