Craig v. Universum Communications, Inc. et.al.

• Court: District Court, N.D. California
• Decided: August 11, 2020
• Docket: 4:20-cv-01284
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 ROGER CRAIG, Case No. 20-cv-01284-HSG

8 Plaintiff, ORDER GRANTING MOTION TO REMAND AND DENYING REQUEST 9 v. FOR ATTORNEYS’ FEES

10 UNIVERSUM COMMUNICATIONS, Re: Dkt. No. 19 INC., 11 Defendant. 12 13 Pending before the Court is Plaintiff Roger Craig’s motion to remand this action to state 14 court. Dkt. No. 19. The Court finds this matter appropriate for disposition without oral argument 15 and the matter is deemed submitted. See Civil L.R. 7-1(b). For the reasons detailed below, the 16 Court GRANTS the motion. 17 I. BACKGROUND 18 Plaintiff filed this action in San Mateo Superior Court on September 4, 2018.1 Dkt. No. 1, 19 Ex. A (“Initial Compl.”). In the initial complaint, Plaintiff named four co-defendants: 20 “Universum, a business entity”; “Stepstone, a business entity”; “Jeff Berger, an individual”; and 21 “Petter Nylander, an individual.” Id. at ¶¶ 1, 4. Plaintiff alleged causes of action for (1) breach of 22 contract; (2) breach of fiduciary duty; and (3) a common count for recovery of money owed. See 23 id. at ¶ 8. Plaintiff alleged that the parties entered into a written agreement, with Plaintiff 24 investing “$30,000 in exchange for 50,733 shares of Series A preferred stock.” See id. at BC-1. 25 However, according to the initial complaint, Defendants repudiated the contract in January 2018. 26 See id. at BC-2. Plaintiff further alleged that Defendants owed duties and obligations to Plaintiff 27 1 as an investor and shareholder, and that they “breached their fiduciary duties, as officers and 2 directors of the company.” See IT-1. Plaintiff alleged that he is entitled to “30,000+” as “the 3 reasonable value . . . due and unpaid.” Id. at CC-2. 4 Plaintiff filed the initial complaint as an “unlimited civil case” that “exceeds $25,000.” See 5 id. at CC-1. However, Plaintiff did not specify the precise amount of damages at issue. Rather, 6 Plaintiff sought damages in an amount “TBD at trial,” as well as interest and attorneys’ fees 7 according to proof at trial. Id. at CC-2. Plaintiff also demanded an inspection of Defendants’ 8 books and records. Id. 9 Plaintiff served Defendants “Universum,” “Stepstone,” and “Petter Nylander” on 10 September 24, 2018. See Dkt. Nos. 19-3, 19-4, 19-5, Exs. B–D. All parties were served at the 11 same building in New York, left in the care of a “person in charge of office.” Id. On October 29, 12 2018, Defendant Jeff Berger entered a Motion to Quash Service of Summons, claiming that he 13 was not an officer, director, or employee of any of the named Defendant entities, and had no 14 relation to the investment underlying Plaintiff’s complaint. See Decl. of Jeff Berger in Support of 15 Motion to Quash Service of Summons at ¶¶ 3–6, Craig v. Universum, No. 18CIV04714 (Cal. 16 Super. Ct. Oct. 29, 2018). On November 9, 2018, default was entered against Defendants 17 Universum, Stepstone, and Petter Nylander. See Request to Enter Default (“Default”), Craig v. 18 Universum, No. 18CV04714 (Cal. Super. Ct. Nov. 9, 2018). Plaintiff additionally filed, and was 19 granted, a request for dismissal of Defendant Jeff Berger. See Request for Dismissal Partial for 20 Multiple Parties with Prejudice, Craig v. Universum, No. 18CIV04714 (Cal. Super. Ct. Jan. 15, 21 2019). 22 On August 23, 2019, Plaintiff sought leave to file an amended complaint. See Decl. of 23 Plaintiff’s Counsel ISO Motion for Leave to File a First Amended Complaint, Craig v. Universum, 24 No. 18CIV04714 (Cal. Super. Ct. Aug. 23, 2019). At the time, Plaintiff indicated that he had 25 identified “clerical errors in the names of the entities” comprising Defendant parties, and that the 26 proper name of Defendant “Universum” was “Universum Communications Sweden AB.” See id. 27 at ¶ 6. Plaintiff stated that he had repeatedly tried to reach out to Universum to see if it intended to 1 referenced newly “discovered allegations and law to support an additional cause of action” for 2 fraud and punitive damages. Id. at ¶ 8. Plaintiff formally filed the complaint on November 13, 3 2019. See Dkt. No. 1, Ex. B (“FAC”). The FAC was filed against Universum Communications 4 Sweden AB, Stepstone GmbH, Petter Nylander, and Does 1–10. Id. at CC-1. In the FAC, 5 Plaintiff alleged that he had made a $32,399.85 investment in a venture of Defendants’ based on 6 “representations, projections, and assurances made by Defendants,” and an “expected return . . . in 7 the amount of $291,598.65. Id. at CC-3. 8 On January 21, 2020, Plaintiff filed an ex parte application to substitute the true names of 9 the Doe Defendants, adding Defendants “Universum Communications Inc.,” and “Universum 10 Communication Holding Inc.” See Dkt. No. 1 at 23, 24, Ex. C. The state court granted this 11 request, and Defendants Universum Communications Inc. and Universum Communication 12 Holdings Inc. were served with the FAC on January 30, 2020. See Proof of Service re First 13 Amended Complaint at 3, Craig v. Universum, 18CIV04714 (Cal. Super. Ct. Jan. 30, 2020). 14 Counsel for newly-served Defendants accepted service on February 14, 2020. See Dkt. No. 1 at 15 ¶ 7. 16 On February 20, 2020, approximately a year and a half after Plaintiff filed the initial complaint 17 in state court, Defendant Universum Communications, Inc. removed the case to federal court, 18 invoking federal diversity jurisdiction under 28 U.S.C. § 1332. Dkt. No. 1. Plaintiff now moves 19 to remand the action back to state court, arguing that removal was time-barred under 28 U.S.C. 20 § 1446(c)(1). See Dkt. No. 19. 21 II. LEGAL STANDARD 22 A. Removal Jurisdiction 23 A defendant may remove any civil action to federal court where the district court would 24 have original jurisdiction over the action. 28 U.S.C. § 1441; see also Caterpillar, Inc. v. Williams, 25 482 U.S. 386, 392 (1987). To do so, a party seeking removal must file a notice of removal within 26 30 days of either receiving (1) the initial pleading or (2) “an amended pleading, motion, order or 27 other paper from which it may first be ascertained that the case is one which is or has become 1 grounds for removal.” Id. § 1446(a). 2 The removing party bears the burden of establishing removal jurisdiction. Abrego Abrego 3 v. The Dow Chem. Co., 443 F.3d 676, 683–85 (9th Cir. 2006); see also Gaus v. Miles, Inc., 980 4 F.2d 564, 566 (9th Cir. 1992) (noting that there is a “‘strong presumption’ against removal 5 jurisdiction,” and the removing party “always has the burden of establishing that removal is 6 proper”). A plaintiff may seek to remand a case to the state court from which it was removed if 7 the district court lacks jurisdiction or if there was a defect in the removal procedure. Id. § 1447(c). 8 B. One-Year Removal Bar 9 Removal is generally barred when notice is filed more than one year after commencement 10 of the initial action in state court. Id. § 1446(c)(1). However, this one-year bar does not apply to 11 later-added defendants when a claim is removable on the face of the initial complaint. See Ritchey 12 v. Upjohn Drug Co., 139 F.3d 1313, 1317 (9th Cir. 1998). Additionally, the one-year bar, even if 13 applicable, may be tolled if the “district court finds that plaintiff has acted in bad faith in order to 14 prevent a defendant from removing the action.” 28 U.S.C. 1446(c)(1). Bad faith may be found 15 when “the plaintiff deliberately failed to disclose the actual amount in controversy to prevent 16 removal.” 1446(c)(3)(B). 17 III. DISCUSSION 18 Defendant removed this action based on diversity jurisdiction more than a year after the 19 initial complaint was filed in state court.2 Plaintiff contends that removal was untimely under 28 20 U.S.C. § 1446(c)(1) because the amount-in-controversy was not apparent from the face of the 21 initial complaint. See Dkt. No. 19. Rather, it only became apparent that the amount-in- 22 controversy exceeded the jurisdictional threshold 12 months later, when the FAC was filed in 23 September 2019. Id. In the FAC, Plaintiff sought $291,598.65 in damages and $1,166,394.60 in 24 punitive damages, as well as attorneys’ fees and costs, for his claims for breach of contract, breach 25 of fiduciary duty, fraud, and a common count for money had and received. See FAC. 26

27 2 Defendant alleged that jurisdiction existed because the action is one “where the matter in 1 In response, Defendant notes that the removal bar does not apply at all to actions that are 2 removable on the face of the initial complaint. See 28 U.S.C. § 1446(b)(3); see also Ritchey, 139 3 F.3d at 1316 (holding that only cases that become removable “sometime after the initial 4 commencement of the action” are “barred by the one-year exception”). Defendant further argues 5 that it timely removed this action because the scope of damages Plaintiff seeks in the FAC 6 demonstrates that the initial complaint, premised on similar causes of action and the same course 7 of conduct, was removable on its face. See Dkt. No. 21 at 2–6. The Court first addresses whether 8 the one-year removal bar in § 1446(c)(1) applies at all, and then turns to whether Plaintiff may 9 have acted in bad faith in obscuring the amount-in-controversy when he initially filed this action. 10 A. One-Year Removal Bar 11 Plaintiff’s initial complaint did not specify the amount of damages he sought in this action. 12 Instead it alleged damages “TBD at trial,” as well as attorneys’ fees and costs according to proof at 13 trial. See Initial Compl. at CC-2. The only indication about the scope of possible damages was 14 Plaintiff’s allegation that he invested $30,000 in exchange for stock. See id. at BC-1. The 15 amount-in-controversy was thus “indeterminate” on the face of the initial complaint. See Harris v. 16 Bankers Life and Cas. Co., 425 F.3d 689, 694 (9th Cir. 2005) (finding indeterminate pleadings 17 where “it is unclear from the complaint whether the case is removable, i.e., the citizenship of the 18 parties is unstated or ambiguous”). 19 Under such circumstances, Defendant bears the burden of putting forward a “plausible 20 allegation that the amount-in-controversy exceeds the jurisdictional threshold.” Dart Cherokee 21 Basin Operating Co., LLC v. Owens, 574 U.S. 81, 89 (2014) (holding that § 1446(a)’s requirement 22 of a “short and plain statement of the grounds of removal” tracks the liberal pleading standards of 23 the Federal Rules of Civil Procedure and only requires a “good-faith,” plausible claim). And here, 24 where Defendant contends that the one-year removal bar does not apply, Defendant must establish 25 that the amount-in-controversy exceeded the jurisdictional threshold on the face of the initial 26 complaint. See Ritchey, 139 F.3d at 1317; see also Harris, 425 F.3d at 694 (holding that 27 removability under § 144(b) is “determined through examination of the four corners of the 1 “conclusory allegations as to the amount in controversy are insufficient.” Mathewson v. 2 Progressive Specialty Ins. Co., 319 F.3d 1089, 1090–91 (9th Cir. 2003) (remanding for 3 consideration of jurisdiction where “[t]he complaint seeks ‘in excess’ of [$30,000] . . . but how 4 much ‘in excess’ is not explained” ); see also Arias v. Residence Inn by Marriott, 936 F.3d 920, 5 925 (9th Cir. 2019) (discussing amount-in-controversy in the context of CAFA jurisdiction). 6 Rather, Defendant must provide “reasonable assumptions” about the amount-in-controversy that 7 are grounded in the initial complaint. See Arias, 936 F.3d at 925; see also Harris, 425 F.3d at 694. 8 Here, Defendant’s notice of removal relied entirely on the amount-in-controversy alleged 9 in the FAC and did not make any effort to explain how this amount-in-controversy was “founded 10 on the allegations of” the initial complaint, filed over one year prior. See Arias, 936 F.3d at 925. 11 Similarly, in opposition to Plaintiff’s motion to remand, Defendant’s brief is short on discussions 12 of the initial complaint. Defendant asserts that Plaintiff could not “credibly contest” that the 13 amount-in-controversy in the initial complaint was more than $75,000 because of the significant 14 damages (totaling over $1 million) alleged in the FAC. See Dkt. No. 21 at 3, n.5. In doing so, 15 however, Defendant has flipped the proper analysis on its head. Under § 1446(c)(1), the question 16 is not whether the case is currently removable, but rather whether it was removable on the face of 17 the initial complaint when filed in state court. Ritchey, 139 F.3d at 1317. To the extent Defendant 18 suggests that it ascertained the amount-in-controversy from “an amended pleading, motion, order 19 or other paper,” see 28 U.S.C. § 1446(b)(3), and not from the face of the initial complaint, see id. 20 § 1446(b)(1), then the case was not removable on the face of the complaint and the one-year bar 21 under § 1446(c)(1) applies by its own terms. See id. § 1446(c)(1) (“A case may not be removed 22 under subsection (b)(3) on the basis of jurisdiction conferred by section 1332 more than 1 year 23 after commencement of the action . . . .”). 24 Critically, Defendant does not offer any explanation as to how an amount-in-controversy 25 sufficient to support removability was plausible based on the allegations in the initial complaint. 26 Defendant suggests, without support, that because “[e]ven if Plaintiff recovered only a ‘moderate’ 27 amount” on his claims, the combination of damages and attorneys’ fees would eclipse $75,000. 1 could draw such a conclusion. Cf. Rahimi v. Crossroads Hospitality Co. LLC, 2:19-cv-10661- 2 SVW-AS, 2020 WL 1042512 at *2 (C.D. Cal. March 2, 2020) (denying remand in wage and hour 3 case where defendants presented “unrebutted evidence” establishing “damages based on earnings 4 given Plaintiff’s prior work schedule and hourly rate . . . .”); Barnes v. Target Corp., No. EDCV 5 20-00831JVS(SPx), 2020 WL 3469266 at *4 (C.D. Cal. June 25, 2020) (granting remand because 6 “[w]ithout . . . explanation as to how [the defendant] reached each figure, the Court cannot verify 7 whether the adjusted amount in controversy totals are anything other than ‘mere speculation’ or 8 ‘conjecture’”); Jaramillo v. Ott, No. EDCV 20-330 PA (KKx), 2020 LEXIS 32872 at *4 (C.D. 9 Cal. Feb. 24, 2020) (finding that removing defendant “failed to sufficiently support the Notice of 10 Removal’s allegations” and granting remand where “[n]either the Complaint nor the Notice of 11 Removal alleges any evidentiary facts concerning the nature of Plaintiff’s injuries . . . .”). Without 12 knowing the scale of Defendants’ alleged breach, the growth in value of the stock that Plaintiff 13 was to receive in exchange for this investment, or the amount of attorneys’ fees in similar cases, 14 the Court cannot say that the initial complaint plausibly established on its face that the breach of 15 contract, breach of fiduciary duty, and common count causes of action would exceed $75,000. 16 The Court therefore finds that Defendant has not met its burden of establishing that 17 removal was proper and timely. To the extent Defendant suggests that Plaintiff may have 18 strategically omitted information about the amount-in-controversy from his initial complaint, this 19 does not empower the Court to consider the FAC as if it were incorporated into the initial 20 complaint. Still, the Court addresses such concerns as part of the bad faith exception to the one- 21 year ban in Section III.B below. 22 B. Bad Faith 23 Even if the one-year bar would otherwise preclude removal, § 1446(c)(1) does not apply 24 where “the plaintiff has acted in bad faith in order to prevent a defendant from removing the 25 action.” See also 28 U.S.C. § 1446(c)(3)(B) (“If . . . the district court finds that the plaintiff 26 deliberately failed to disclose the actual amount in controversy to prevent removal, that finding 27 shall be deemed bad faith”). 1 added to an action late. See Destfino v. Reiswig, 630 F.3d 952, 955 (9th Cir. 2011) (holding that 2 preventing later-served defendants from removing actions to federal court “could deprive some 3 defendants of their right to a federal forum . . . and encourage plaintiffs to engage in unfair 4 manipulation by delaying service on defendants most likely to remove”). Nonetheless, “[b]ecause 5 the removing defendant has always borne the burden of establishing federal jurisdiction, the 6 defendant bears the burden of proving that the plaintiff acted in bad faith.” Lindquist v. Target 7 Corp., No. 19-cv-08029-HSG, 2020 WL 789568 at *1 (N.D. Cal. Feb. 18, 2020). Although the 8 Ninth Circuit has not established an exact standard for determining bad faith under § 1446(c)(1), 9 lower courts generally have found that it “sets a high threshold.” NKD Diversified Enterprises 10 Inc. v. First Mercury Ins. Co., No. 1:14-cv-00183-AWI-SAB, 2014 WL 1671659 at *3 (E.D. Cal. 11 Apr. 28, 2014) (citations omitted); see, e.g., Craig v. MTD Products Co., No. 2:16-cv-00480- 12 TLN-EFB, 2020 WL 6090899 at *3 (E.D. Cal. Oct. 18, 2018) (finding bad faith when, after 13 defendant had made multiple attempts to determine the amount of damages at stake, plaintiff 14 “refused to provide defendant with any information” and only served defendant with the full 15 damages claim after the “30-day time limit had elapsed”); Heller v. American States Insurance 16 Co., No. CV 15-9771 DMG (JPRx), 2016 WL 1170891 at * 3 (C.D. Cal. Mar. 25, 2016) (finding 17 bad faith when plaintiff did not produce “sufficient evidence of . . . diligence” after failing to 18 effect service upon the removing defendant within a year of the action commencing in state court). 19 Defendant contends that Plaintiff acted in bad faith, pointing to the dearth of information in 20 the initial complaint and the timing of the amendments. See Dkt. No. 21 at 6–8. More 21 specifically, Defendant notes that Plaintiff did not amend the complaint to include the fraud cause 22 of action or a more detailed breakdown of the damages he sought until November 2019, over a 23 year after he filed the initial complaint. Id. And Plaintiff did not add Defendant Universum 24 Communications, Inc. as a party until January 2020. See Dkt. No. 1 at 23, 24, Ex. C. Defendant 25 argues that the timing of the FAC and serving Defendant Universum Communications, Inc. is 26 suspicious because these amendments fell outside the one-year removal ban under § 1446(c)(1), 27 and Plaintiff offers no explanation for the delay. Dkt. No. 21 at 7. 1 after the case had been pending in state court for over a year. However, Plaintiff has explained, 2 both here and to the state court, that it took time and research to determine the true name of 3 Defendant Universum Communications, Inc. See Dkt. No. 23 at 5–6. The state court docket 4 indicates that Plaintiff attempted to serve the correct entities. See Wang v. Foot Locker Retail, 5 Inc., No. CV 19-07385-CJC, 2019 WL 5389866 at *3 (C.D. Cal, Oct. 21, 2019) (granting remand 6 and refusing to find bad faith when “there [was] every indication that [p]laintiff tried to serve that 7 entity” and when “there [was] not enough evidence for the [c]ourt to conclude that [p]laintiff’s 8 failure to . . . prosecute the case” reflected an intentional or reckless attempt to prevent removal). 9 Indeed, Plaintiff served several different “Universum” entities as well as the holding company 10 believed to have acquired them, though none appeared in the state court action and default was 11 entered against them in November 2018. See Default, Craig v. Universum, No. 18CV04714. As 12 for the amount-in-controversy that was explained in more detail only in the FAC filed in 2019, 13 Defendant offers nothing but speculation as to why this was not included in the initial complaint. 14 This is insufficient. 15 On the basis of the record before it, the Court does not find that Plaintiff acted in bad faith. 16 Thus, § 1446(c)(1) applies, and the Court finds that Defendant’s notice of removal was untimely. 17 C. Attorneys’ Fees 18 Plaintiff seeks attorneys’ fees under § 1446(c) for Defendant’s untimely removal. See Dkt. 19 No. 19 at 8–9. “Absent unusual circumstances, courts may award attorney’s fees under § 1447(c) 20 only where the removing party lacked an objectively reasonable basis for seeking removal. 21 Conversely, when an objectively reasonable basis exists, fees should be denied.” Martin v. 22 Franklin Capital Corp., 546 U.S. 132, 141 (2005). Although the Court ultimately disagreed with 23 Defendant’s reasoning that removal was timely in this case, the Court does not find that 24 Defendant’s arguments were frivolous. Thus, the Court declines to award attorneys’ fees under 25 these circumstances. 26 IV. CONCLUSION 27 Accordingly, the Court GRANTS the motion to remand and DENIES Plaintiff’s request 1 close the case. 2 IT IS SO ORDERED. 3 Dated: 8/11/2020 | ‘ HAYWOOD S. GILLIAM, JR. 5 United States District Judge 6 7 8 9 10 11 a 12

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