BGC, Inc. v. Bryant

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 BGC, INC., Case No. 22-cv-04801-JSC

8 Plaintiff, ORDER RE: MOTION TO DISMISS 9 v. COUNTERCLAIM; MOTION TO STRIKE ANSWER 10 KIMBERLY BRYANT, Re: Dkt. Nos. 70, 72 Defendant. 11

12 13 BGC, Inc. filed this action against its founder and former CEO, Kimberly Bryant, in 14 August 2022 alleging Ms. Bryant hijacked the company’s websites and rerouted them to her own 15 website following her removal by the Board of Directors a few weeks earlier. Ms. Bryant 16 answered the complaint and separately filed a cross-complaint alleging 14 claims against BGC and 17 8 additional parties. (Dkt. Nos. 50, 51.1) BGC filed two responsive motions: (1) a motion to 18 dismiss the counterclaim for lack of subject matter jurisdiction and for failure to state a claim; and 19 (2) a motion to strike Ms. Bryant’s Answer. (Dkt. Nos. 70; 72.) After carefully considering the 20 parties’ briefs and the relevant legal authority, the Court concludes oral argument is unnecessary, 21 see Civ. L.R. 7-1(b), VACATES the June 29, 2023 hearing, and GRANTS BGC’s motions. 22 DISCUSSION 23 A. Motion to Dismiss 24 BGC moves to dismiss for lack of subject matter jurisdiction, or alternatively, for failure to 25 state a claim. The former argument is dispositive. 26 // 27 1 1. Subject Matter Jurisdiction 2 “Federal courts are courts of limited jurisdiction. They possess only the power authorized 3 by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 4 (1994). “Subject matter jurisdiction can never be forfeited or waived and federal courts have a 5 continuing independent obligation to determine whether subject-matter jurisdiction exists.” Leeson 6 v. Transamerica Disability Income Plan, 671 F.3d 969, 975 n.12 (9th Cir. 2012) (internal 7 quotation marks and citations omitted); Valdez v. Allstate Ins. Co., 372 F.3d 1115, 1116 (9th Cir. 8 2004) (noting district courts are “obligated to consider sua sponte whether [they] have subject 9 matter jurisdiction”). 10 In her cross-complaint Ms. Bryant invokes federal question jurisdiction under 28 U.S.C. § 11 1331 and 12 U.S.C. § 3401. (Dkt. No. 51 at ¶ 19.) The only possible basis for federal question 12 jurisdiction is Ms. Bryant’s second claim: a violation of the Right to Financial Privacy Act 13 (RFPA), 12 U.S.C. §§ 3401-3402. (Id. at ¶¶ 99-102.) The RFPA, Section 3402, governs 14 government access to customer financial records maintained by a financial institution. BGC insists 15 this claim is “too frivolous and unsubstantial to invoke subject matter jurisdiction.” Balik v. City 16 of Torrance, 841 F. App’x 21, 22 (9th Cir. 2021) (internal citations omitted); Bell v. Hood, 327 17 U.S. 678, 682–83 (1946) (“a suit may sometimes be dismissed for want of jurisdiction where the 18 alleged claim under the Constitution or federal statutes clearly appears to be immaterial and made 19 solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial and 20 frivolous.”). That is, because a claim under section 3402 only arises when financial records are 21 disclosed to the government, and Ms. Bryant’s claim is based upon Wells Fargo’s alleged 22 disclosure of her financial records to BGC, the RFPA has no application here and is pled solely to 23 invoke federal question jurisdiction. (Dkt. No. 51 at ¶ 100.) 24 In her opposition, Ms. Bryant concedes “RFPA’s limitation” and pivots to a different 25 theory implicitly conceding her RFPA claim was pled solely for the purpose of obtaining federal 26 jurisdiction. (Dkt. No. 81 at 14.) Thus, the Court finds the RFPA claim is so insubstantial and 27 frivolous that it does not confer subject matter jurisdiction. 1 right to financial privacy against encroachment by governmental agencies, ” a right further 2 recognized in the Gramm-Leach-Bliley Act, 15 U.S.C. § 6801, “which requires financial 3 institutions to keep nonpublic personal information confidential unless they have permission to 4 disclose the information.” (Dkt. No. 81 at 14-15.) Ms. Bryant, however, has not alleged a claim 5 under Gramm-Leach-Bliley Act and concedes she cannot because it does not contain a private 6 right of action. (Id. at 15.) Instead, Ms. Bryant contends the California equivalent to the RFPA 7 and the Gramm-Leach-Bliley Act—the California Financial Information Privacy Act of 2005, Cal. 8 Fin. Code § 4052.5—provides a private right of action. Ms. Bryant asks the Court to allow her to 9 amend her cross-complaint to include a California Financial Information Privacy Act claim and 10 find the claim sufficient to establish federal question jurisdiction because it “implicates a 11 substantial federal interest” within the purview of Grable & Sons Metal Products, Inc. v. Darue 12 Engineering & Manufacturing, 545 U.S. 308 (2005) (“Grable”). 13 Under Grable, “federal jurisdiction over a state law claim will lie if a federal issue is: (1) 14 necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal 15 court without disrupting the federal-state balance approved by Congress.” Gunn v. Minton, 568 16 U.S. 251, 258 (2013). Federal jurisdiction under Grable exists only for a “special and small 17 category” of cases. See Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 701 (2006) 18 (“Grable emphasized it takes more than a federal element ‘to open the ‘arising under’ door. This 19 case cannot be squeezed into the slim category Grable exemplifies.”) (internal citations omitted). 20 Indeed, only a few cases have fallen into the “slim category” set forth in Grable: “(1) a series of 21 quiet-title actions from the early 1900s that involved disputes as to the interpretation and 22 application of federal law; (2) a shareholder action seeking to enjoin a Missouri corporation from 23 investing in federal bonds on the ground that the federal act pursuant to which the bonds were 24 issued was unconstitutional; and (3) a state-quiet title action claiming that property had been 25 unlawfully seized by the Internal Revenue Service (IRS) because the notice of the seizure did not 26 comply with the Internal Revenue Code.” City of Oakland v. BP PLC, 969 F.3d 895, 904 (9th Cir. 27 2020) (cleaned up). At bottom, the question is whether “a case turns on substantial questions of 1 at 905 (cleaned up). 2 Ms. Bryant does not explain how either her intended claim under the California Financial 3 Information Privacy Act of 2005 or any of her existing state law claims satisfy any of the Grable 4 requirements, let alone all of them. She makes no attempt to identify the substantial question of 5 federal law at issue nor the federal/state comity principles involved. Accordingly, her cross- 6 complaint, and her proposed amended cross-complaint, do not establish a basis for federal 7 question jurisdiction. 8 2. Supplemental Jurisdiction 9 When a federal court has original jurisdiction over a claim—such as BGC’s Computer 10 Fraud and Abuse Act claim—the court “shall have supplemental jurisdiction over all other claims 11 that are so related to claims in the action ... that they form part of the same case or controversy.” 12 28 U.S.C. § 1367(a). State claims are part of the same case or controversy as federal claims 13 “when they derive from a common nucleus of operative fact and are such that a plaintiff would 14 ordinarily be expected to try them in one judicial proceeding.” Kuba v. 1–A Agric. Ass’n, 387 F.3d 15 850, 855–56 (9th Cir. 2004) (citation and quotation marks omitted). 16 Ms. Bryant insists even if the Court finds her cross-complaint does not provide a basis for 17 subject matter jurisdiction, the Court can nonetheless exercise supplemental jurisdiction under 18 section 1367(a) because her state law unlawful and retaliatory termination counterclaims share a 19 common nucleus of operative facts with BGC’s federal claims. BGC counters that its claims are 20 narrowly focused on one aspect of Ms. Bryant’s post-termination conduct and have nothing to do 21 with BGC’s suspension of Ms. Bryant as the CEO, termination of her employment with BGC, and 22 withdrawal of her access to the Wells Fargo bank accounts—the conduct underlying Ms. Bryant’s 23 counterclaims. 24 While Ms. Bryant’s termination and ouster provide background to BGC’s claims here, “the 25 mere existence of an employment relationship between plaintiffs and defendants [is] insufficient to 26 establish supplemental jurisdiction over Defendants’ counterclaims that have nothing to do with 27 the underlying [claims regarding ownership of the BGC domain names].” Poehler v. Fenwick, 1 Ms. Bryant’s counterclaims regarding her termination go well beyond the narrow scope of BGC’s 2 claims here and involve 14 claims against 8 different individuals and entities including members 3 of BGC’s Board of Directors, BGC employees, Wells Fargo, Wells Fargo’s Chief Executive 4 Officer and President, and Wells Fargo’s Senior Executive Vice President. (Dkt. No. 51 at ¶¶ 4- 5 15.) There is “little relationship between the facts necessary for [BGC] to prove [its] claims—that 6 [Ms. Bryant wrongfully accessed and appropriated the BGC domain names and website]—and 7 those facts necessary to prove [Ms. Bryant’s] state law counterclaims.” Ader v. SimonMed 8 Imaging Inc., 324 F. Supp. 3d 1045, 1051 (D. Ariz. 2018). “Indeed, the two sets of claims overlap 9 only insofar as each arises from [Ms. Bryant’s] employment relationship with [BGC].” Id. 10 Accordingly, because there is no common nucleus of operative facts between BGC’s 11 claims and any of Ms. Bryant’s counterclaims, there is no basis for supplemental jurisdiction here. 12 *** 13 The Court thus grants BGC’s motion to dismiss Ms. Bryant’s cross-complaint for lack of 14 subject matter jurisdiction. Ms. Bryant has not established a basis for federal question jurisdiction 15 and the Court lacks supplemental jurisdiction over her state law counterclaims under 28 U.S.C. § 16 1367(a). 17 B. Motion to Strike 18 Pursuant to Rule 12(f), a court may “strike from a pleading an insufficient defense or any 19 redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). BGC moves to 20 strike Ms. Bryant’s Answer as failing to comply with Rule 8 and her affirmative defenses as 21 inadequately pled. 22 1. Motion to Strike Under Rule 8 23 Under Rule 8(b)(1), a party’s answer must “(A) state in short and plain terms its defenses 24 to each claim asserted against it; and (B) admit or deny the allegations asserted against it by an 25 opposing party.” A party may plead a general denial or specific denials; however, “[a] party that 26 does not intend to deny all the allegations must either specifically deny designated allegations or 27 generally deny all except those specifically admitted.” See Fed. R. Civ. Pro. 8(b)(3). There are 1 First, Ms. Bryant concedes her Answer responded to the original version of the 2 complaint—not the operative Amended Complaint which added a claim and 30 paragraphs of 3 allegations. (Dkt. No. 82 at 4, n.2.) Second, Ms. Bryant’s Answer consists of a 16-page factual 4 summary followed by 2 paragraphs under a heading “Admissions and Denials,” which states in 5 relevant part that she admits a portion of the paragraph 20 allegations, but otherwise denies the 6 paragraph and denies the allegations in paragraphs 21-57. (Dkt. No. 50 at 18.) However, because 7 Ms. Bryant answered the wrong version of the complaint, the paragraph 20 she purports to answer 8 does not match paragraph 20 in the operative Amended Complaint. Further, because the Amended 9 Complaint has 87 rather than 57 paragraphs, the Answer includes no response to these additional 10 paragraphs. Finally, Ms. Bryant “acknowledges that [her Answer] failed to comply with the letter 11 of Rule 8(b)(3),” but still contends her “specific narrative” responds to the substance of Plaintiff’s 12 allegations. (Dkt. No. 82 at 4.) Not so. An answer must admit the part of the allegations that are 13 true and deny the parts that are not and “fairly respond to the substance of the allegation[s].” Fed. 14 R. Civ. Pro. 8(b)(2)-(4). Ms. Bryant’s Answer does not do so and thus must be stricken. 15 Accordingly, the Court grants the motion to strike the Answer with leave to file an answer 16 to the operative Amended Complaint that complies with the specificity required by the Federal 17 Rules of Civil Procedure. 18 2. Motion to Strike Affirmative Defenses 19 “A defense is insufficiently pled if it fails to give the plaintiff fair notice of the nature of 20 the defense.” Barnes v. AT&T Pension Benefit Plan-Nonbargained Program, 718 F. Supp. 2d 21 1167, 1170 (N.D. Cal. 2010) (citing Wyshak v. City Nat’l Bank, 607 F.2d 824, 827 (9th Cir. 22 1979)). While the Ninth Circuit has not yet ruled on the issue, “courts in this district continue to 23 require affirmative defenses to meet” the standards set forth in Bell Atl. Corp. v. Twombly, 550 24 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (2009). See Fishman v. Tiger Nat. Gas Inc., 25 No. C 17-05351 WHA, 2018 WL 4468680, at *2-3 (N.D. Cal. Sept. 18, 2018) (internal quotation 26 marks and citation omitted); see also Hartford Underwriters Ins. Co. v. Kraus USA, Inc., 313 27 F.R.D. 572, 574 (N.D. Cal. 2016) (collecting cases). Thus, “[w]hile a defense need not include 1 conclusions may not be sufficient.” Perez v. Gordon & Wong Law Grp., P.C., No. 11–03323- 2 LHK, 2012 WL 1029425, at *8 (N.D. Cal. Mar. 26, 2012). “Just as a plaintiff’s complaint must 3 allege enough supporting facts to nudge a legal claim across the line separating plausibility from 4 mere possibility, a defendant’s pleading of affirmative defenses must put a plaintiff on notice of 5 the underlying factual bases of the defense.” Id. (internal quotation marks and citation omitted). 6 The bar is not high, however, and “[a] defendant need only point to the existence of some 7 identifiable fact that if applicable ... would make the affirmative defense plausible on its face.” Ear 8 v. Empire Collection Auths., Inc., No. 12-1695-SC, 2012 WL 3249514, at *1 (N.D. Cal. Aug. 7, 9 2012) (internal quotation marks and citation omitted). 10 Ms. Bryant’s affirmative defenses fail to satisfy even this low bar as she only lists the 11 affirmative defense by name, but does not identify which facts support each affirmative defense 12 nor otherwise allege a cognizable theory for each affirmative defense. 13 a) Affirmative Defenses Nos. 1 and 2 14 BGC moves to strike Ms. Bryant’s first and second affirmative defenses for fraud and 15 unclean hands, respectively, because neither allege a factual basis and an affirmative defense of 16 fraud must satisfy the heightened pleading requirements of Rule 9(b). See Fed. R. Civ. P. 9(b) 17 (“In alleging fraud or mistake, a party must state with particularity the circumstances constituting 18 fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be 19 alleged generally.”); Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997) (fraud allegations “must 20 be accompanied by ‘the who, what, when, where, and how’ of the misconduct charged”) (quoting 21 Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003)). 22 Ms. Bryant contends her Answer’s narrative statement of facts provides the degree of 23 specificity required and her fraud affirmative defense relates to BGC’s allegations regarding 24 control and ownership of the domain names, and her unclean hands affirmative defense relates to 25 the “concerted plan to expel her presence form BGC.” (Dkt. No. 82 at 9.) But Ms. Bryant’s 16- 26 page factual statement does not provide BGC with specific notice of the factual basis for her 27 affirmative defenses. To the extent Ms. Bryant contends these affirmative defenses are tethered to 1 affirmative defenses to so plead. 2 b) Affirmative Defense No. 21 3 BGC moves to dismiss Mr. Bryant’s 21st affirmative defense—failure to join an 4 indispensable party—because among other issues, Ms. Bryant has not identified who the 5 indispensable party is BGC failed to join. Ms. Bryant’s response states: 6 Plaintiff’s complaint asserts that a certain John Hanawalt’s services 7 were engaged by BGC to restructure the BGC website, as was a vendor named Numbered Studios. Complaint, 30. Administrative 8 control was thereafter transferred to Karla Tai. Answer, p. 16:21-26. In undertaking website restructuring, these three parties would have 9 had administrative access to the website such that their role in the purported re-routing could conceivably warrant involvement in 10 BGC’s lawsuit. 11 (Dkt. No. 82 at 10.) To the extent Ms. Bryant suggests she could amend her affirmative defense 12 to specify these three individuals are indispensable parties, she has not explained why in their 13 absence the Court either “cannot accord complete relief among existing parties” or how they have 14 an interest in this action that would be impeded by resolving the action without them or would 15 lead to inconsistent obligations. See Fed. R. Civ. Pro. 19(b). That they might be percipient 16 witnesses does not make them indispensable parties. 17 c) Affirmative Defense No. 22 18 BGC moves to strike Ms. Bryant’s 22nd affirmative defense—failure to mitigate— 19 for failing to provide a factual basis for the defense. In response, Ms. Bryant indicates this 20 affirmative defense relates to her allegation BGC has administrative control over the BGC website 21 and thus had the means to mitigate its damages when the domain names were rerouted. (Dkt. No. 22 82 at 10.) Ms. Bryant is granted leave to amend her affirmative defense to plead this factual basis. 23 d) Affirmative Defenses Nos. 11, 12, 13, 16, 17, 19, 20, 25, 24 28, 29, 32, and 33 25 BGC moves to strike these affirmative defenses as inadequately pled. In response, Ms. 26 Bryant contends these affirmative defenses “wholeheartedly stem from the ‘common nucleus of 27 operative facts’ with respect to Plaintiff’s claims.” (Dkt. No. 82 at 11.) This statement does not 1 827. 2 e) Remaining Affirmative Defenses 3 Ms. Bryant offers no response as to BGC’s motion to strike affirmative defenses Nos. 3, 4 10, 14, 15, 23, 24, 26, 27, 30, and 31. It is unclear if this was an oversight or a concession these 5 affirmative defenses should be struck. If Ms. Bryant has a good faith belief there is a factual basis 6 || for these affirmative defenses, she may plead them in her amended answer. 7 CONCLUSION 8 For the reasons stated above, BGC’s motion to dismiss Ms. Bryant’s Cross-complaint is 9 || GRANTED for lack of subject matter jurisdiction with leave to amend consistent with Rule 11 and 10 || its motion to strike her Answer is GRANTED with leave to amend. Ms. Bryant’s amended 11 answer is due July 7, 2023. 12 This Order disposes of Docket Nos. 70 and 71. 13 IT IS SO ORDERED. || Dated: June 21, 2023

5 CQUELINE SCOTT CORLE nited States District Judge 18 19 20 21 22 23 24 25 26 27 28