Nasrawi v. Buck Consultants LLC
| Decision Date | 12 May 2010 |
| Docket Number | No. 1:09-CV-02061-OWW-GSA.,1:09-CV-02061-OWW-GSA. |
| Citation | 713 F.Supp.2d 1080 |
| Parties | Dennis NASRAWI, et al, Plaintiffs,v.BUCK CONSULTANTS, LLC, et al., Defendants. |
| Court | U.S. District Court — Eastern District of California |
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Michael Anthony Conger, Law Office of Michael A. Conger, Rancho Santa Fe, CA, for Plaintiffs.
Michael N. Westheimer, Baker & McKenzie, Palo Alto, CA, for Defendants.
Before the court for decision is Plaintiffs' motion to remand the case to the Stanislaus County Superior Court, pursuant to 28 U.S.C. § 1447(c). Plaintiffs contend that the court lacks subject matter jurisdiction over this action because inclusion as a defendant of a California resident, Harold Loeb, prevents complete diversity of citizenship between the parties under 28 U.S.C. § 1332. Defendants oppose the motion on grounds that Plaintiffs cannot recover against Mr. Loeb based on a negligence theory, and that his presence in this action does not destroy diversity.
This is a negligence action filed by three beneficiaries of a public retirement trust against a provider of actuarial services, Buck Consultants, LLC, (“Buck”) and one of its employees, Harold Loeb (“Loeb”). Defendant Buck, a Delaware limited liability company,1 provided actuarial services to StanCERA, a public employee retirement system covering employees of the County of Stanislaus, City of Ceres, the Stanislaus Superior Court, and five special districts located within Stanislaus County. (Compl. ¶ 2.) Loeb, a California resident, is employed by Buck Consultants as an actuary. (Compl. ¶ 4, 7.) Buck is wholly owned by ACS Human Resources Solutions, a Pennsylvania Corporation with its principal place of business in New Jersey.
On October 8, 2009 Plaintiffs Dennis Nasrawi, Michael O'Neal, and Rhonda Biesemeir, California residents and beneficiaries of StanCERA, filed a complaint against Defendants Buck Consultants and Loeb in Stanislaus Superior Court.2 The substance of the complaint is that “Buck and Loeb breached their duty of care in preparing StanCERA's January 9, 2007 actuarial valuations by using inappropriate actuarial assumptions.” (Compl. ¶ 14.) In particular, Plaintiffs allege that the “9.22% employer contribution rate adopted by StanCERA, in reliance upon the actuarial valuation negligently prepared by Buck and Loeb, was insufficient to actuarially fund the benefits promised by the County.” (Compl. ¶ 15.) As a result of Defendants' actuarial negligence, Plaintiffs allege that StanCERA suffered harm in the form of: (1) lost County employer contributions; (2) lost earnings on those contributions; and (3) costs paid to other actuarial firms to discover Defendants' negligence. The report is issued on Buck's letterhead as Consulting Actuary for StanCERA.
As to Defendant Loeb, Plaintiffs allege that he “owed a duty to exercise due care in performing actuarial services for StanCERA,” and breached that duty. (Compl. ¶ 13.) They also allege that he “actively participated with, aided, and abetted in StanCERA's breach of fiduciary duty by concealing their negligence for almost two years.” (Compl. ¶ 18.) According to Plaintiffs, Loeb covered up the effects of his actuarial negligence-and that of Buck and StanCERA-for his “own financial gain.” (Compl. ¶ 19.)
On November 22, 2009, this case was removed on the basis of diversity jurisdiction.3 (Doc. 1.) The notice of removal provides that the presence of Loeb as a defendant in the action does not defeat diversity jurisdiction because Loeb is a fraudulently joined “sham defendant.” ( Id.)
On December 15, 2009, Plaintiffs moved to remand this action based on their assertion of a negligence claim against a resident of California, Mr. Loeb. (Doc. 17.) According to Plaintiffs, “[b]ecause well-established California law provides [that] Loeb is liable for his own negligence, complete diversity of citizenship is lacking and the case should be remanded to state court.” ( Id.)
In support of their opposition, Defendants submitted: (1) the declaration of Michael Conger; (2) StanCERA's Board Minutes from January 13 and February 24, 2007; (3) various actuary reports allegedly submitted by Buck to StanCERA in 2006, 2007, and 2008; (4) an annual Certification letter dated January 15, 2007; and (5) a “Notice of Lodgement.” 4 (Docs. 17-3 through 17-5.)
Defendants opposed the motion on March 8, 2010. (Doc. 23.) While Defendants acknowledge that both Plaintiffs and Loeb are California citizens, they argue that federal diversity jurisdiction is proper in this case because: (1) Loeb is a fraudulently joined defendant, and should not be considered in establishing diversity; (2) Buck Consultants are not California citizens; and (3) the amount in controversy exceeds $75,000.
In support of their opposition, Defendants submitted: (1) the declaration of Harold Loeb; and (2) the declaration of Karl Lohwater, general counsel for Buck Consultants.5 (Docs. 24 & 25.) The declarations describe Buck's nationwide operations and Mr. Loeb's specific job responsibilities and employment status at Buck. Specifically, Mr. Loeb declares that he is not an “owner/member of Buck, nor an officer/director of Buck,” and that his work for StanCERA “did not include any tasks that are outside the usual scope of what I do for other Buck clients [preparing actuarial valuation reports and experience studies].” (Doc. 24, ¶ 2.) According to Mr. Lohwater, “nearly all of Buck's top executives are located [at] Buck's headquarters in [New York]” and “all strategic corporate decision-making occurs in New York.” (Doc. 25, ¶ 4.) Daily operations, as well as payroll, accounting, marketing, and human resources are also based in New York. ( Id.)
Federal courts have original jurisdiction over civil actions where the amount in controversy exceeds $75,000, exclusive of interest and costs, and the case is between citizens of different states. 28 U.S.C. § 1332. Diversity jurisdiction under § 1332 requires that each plaintiff be diverse from each defendant. Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005) (citing Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 375, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978)). To protect the jurisdiction of state courts, removal jurisdiction is strictly construed in favor of remand. Harris v. Bankers Life and Cas. Co., 425 F.3d 689, 698 (9th Cir.2005) (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 85 L.Ed. 1214 (1941)). Any doubt as to the right of removal must be resolved in favor of remand. Gaus v. Miles, 980 F.2d 564, 566 (9th Cir.1992). “Th[is] ‘strong presumption’ against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper.” Id. (internal citations omitted).
But removal is proper despite the presence of a non-diverse defendant if that defendant is a “fraudulently joined” or “sham” defendant. See Caterpillar, Inc. v. Lewis, 519 U.S. 61, 68, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996). A defendant has been fraudulently joined if the plaintiff fails to state a claim against a resident defendant, and the failure is “obvious according to the well-settled rules of the state.” United Computer Sys. v. AT & T Corp., 298 F.3d 756, 761 (9th Cir.2002). In the Ninth Circuit, a non-diverse defendant is deemed a sham defendant if, after all disputed questions of fact and all ambiguities in the controlling state law are resolved in the plaintiff's favor, the plaintiff could not possibly recover against the party whose joinder is questioned. Kruso v. Int'l Tel. & Tel. Corp., 872 F.2d 1416, 1426 (9th Cir.1989). A court may look beyond the pleadings to determine if a defendant is fraudulently joined, but “a plaintiff need only have one potentially valid claim against a non-diverse defendant” to survive a fraudulent joinder challenge. See Knutson v. Allis-Chalmers Corp., 358 F.Supp.2d 983, 993-95 (D.Nev.2005) (summarizing cases); Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir.1998). Accordingly, a defendant seeking removal based on an alleged fraudulent joinder must do more than show that the complaint at the time of removal fails to state a claim against the non-diverse defendant. See Burris v. AT & T Wireless, Inc., 2006 WL 2038040, at *2 (N.D.Cal.2006). Remand must be granted unless the defendant shows that the plaintiff “would not be afforded leave to amend his complaint to cure [the] purported deficiency.” Id. at *2.
1. Defendants' Motion to Strike
Defendants move to strike Plaintiff's April 26, 2010 reply on the grounds that it was filed five weeks after Plaintiffs were required to file a reply. According to Defendants, “Plaintiffs knowingly filed an untimely reply brief without leave of Court in bad faith and in violation of this Court's order, and should be sanctioned accordingly.” The gravamen of Defendants' motion is that although the court continued the hearing dates for the motion for remand, the court did not continue the filing deadlines and, in fact, all briefing on the motion for remand was due on March 8, 2010. Defendants explain:
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