1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 EASTERN DISTRICT OF CALIFORNIA 9 10 JEFFREY P. FORTIS, an individual, No. 2:19-cv-00627-MCE-KJN 11 Plaintiff, 12 v. MEMORANDUM AND ORDER 13 WARRIOR TRADING, INC., a Delaware Corporation; ROSS 14 CAMERON, an individual; and DOES 1 through 50, inclusive, 15 Defendants. 16 17 18 By way of this action, Jeffrey P. Fortis (“Plaintiff”) seeks to recover from 19 Defendants Warrior Trading, Inc. (“Warrior”) and Ross Cameron (“Cameron”) for 20 violations of California’s wage and hours laws, wrongful termination, and defamation. 21 Presently before the Court is Defendants’ Motion for Judgment on the Pleadings, or in 22 the Alternative, to Stay (“Motion”) (ECF No. 5) seeking to dismiss or stay this action on 23 the basis that it is substantially similar to Warrior Trading, Inc. v. Jeffery P. Fortis, Case 24 No. 2019-0140 (“Delaware Action”), filed by Warrior in Delaware. For the following 25 reasons, Defendants’ Motion is GRANTED to the extent this matter is stayed pending 26 disposition of the Delaware Action.1 27 1 Because oral argument was not of material assistance, the Court ordered this matter submitted 28 on the briefs. E.D. Cal. Local Rule 230(g). 1 BACKGROUND 2 3 Between March 2016 and October 2018, Plaintiff was employed with Warrior as 4 its Chief Operating Officer. Pl.’s Compl., ECF 1-1 at ¶¶ 11, 16. Additionally, Plaintiff 5 was a shareholder and also served as a stock trading mentor for Warrior. Defs.’ MPA 6 ISO MJOP, ECF 5-1 at 1:7–10. Plaintiff and Warrior entered into a Shareholder 7 Agreement wherein the parties agreed that if Plaintiff were terminated “for cause,” the 8 remaining shareholders of Warrior, which included its founder and Chief Executive 9 Officer, Defendant Cameron, would have the option of buying back all shares held by the 10 Plaintiff.2 Pl.’s Compl. at ¶ 12; Shareholder Agreement, ECF No. 5-5 at 19. Additionally, 11 the Shareholder Agreement provided, in pertinent part, that “[a]ny controversy or claim 12 arising out of or relating to this Agreement . . . shall be settled by binding arbitration to be 13 held in Delaware.” Defs.’ MPA ISO MJOP at 4:7–9; Shareholder Agreement at 19. 14 Sometime after September 2018, Cameron raised various concerns regarding 15 Plaintiff’s performance, and on October 12, 2018, Plaintiff was terminated. Pl.’s Compl. 16 at ¶¶ 14, 16. Plaintiff claims that Cameron wanted to oust him from the company after 17 Plaintiff complained of certain improprieties concerning access to Warrior’s bank 18 accounts and other confidential systems by unauthorized employees. Stating that 19 Plaintiff’s termination was nonetheless “for cause,” Warrior sought to enforce the process 20
21 2 As a preliminary matter, this Court considers Defendant’s’ Request for Judicial Notice (“RJN”) (ECF No. 5-4). Under Federal Rule of Evidence 201, a court may take judicial notice of matters which are 22 “not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy 23 cannot reasonably be questioned.” Fed. R. Evid. 201(b); Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). This includes “matters of public record.” Id. Pleadings are properly subject to judicial 24 notice. Mullis v. U.S. Bankr. Court for Dist. Of Nevada, 828 F.2d 1385, 1388 n.9 (9th Cir. 1987). Defendants ask the Court to take judicial notice of ECF No. 5-5 through ECF No. 5-10: (1) Ex. A, 25 Shareholder Agreement; (2) Ex. B, Jan. 2, 2019 Correspondence; (3) Ex. C, Demand for Arbitration; (4) Ex. D, AAA Demand for Arbitration; (5) Ex. E, AAA Acknowledgment Letter; and (6) Ex. F, Delaware Action Complaint. These materials are a matter of public record as they are the pleadings and papers on 26 file in the Delaware Action. Therefore, this Court may take judicial notice of Defendants’ requested materials. Defendants’ RJN is GRANTED, and Plaintiff’s’ objections to same (ECF No. 11-1) are 27 OVERRULED. Additionally, Plaintiff asks for judicial notice (ECF No. 11-2) of Defendant’s’ California Statement of Information. Because the Court did not need to consider the Statement of Information in its 28 determination, Plaintiff’s RJN is DENIED as moot. 1 to repurchase Plaintiff’s shares as determined in the Shareholder Agreement. Defs.’ 2 MPA ISO MJOP at 6:4–5. On October 16, 2018, Plaintiff received a Notice of Buy Back 3 regarding his shares. Id. at 6:6–8. By correspondence dated November 15, 2018, 4 Plaintiff disputed the “for cause” designation that Warrior claimed permitted it to buy back 5 the shares in accordance with the Shareholder Agreement and refused to sell back the 6 shares. Id. at 6:13–15. 7 After this refusal, Warrior demanded arbitration pursuant to the Shareholder 8 Agreement. Demand for Arbitration, ECF No. 5-6. Plaintiff again refused, and Warrior 9 initiated the Delaware Action to compel arbitration on February 21, 2019. Delaware 10 Action, ECF No. 5-10. Subsequently, on March 7, 2019, Plaintiff filed Jeffery P. Fortis v. 11 Warrior Trading, Inc., Case No. CV-19-472 (“California Action”) in Yolo County Superior 12 Court asserting causes of action for retaliation and wrongful discharge in violation of 13 state law, wrongful termination in violation of public policy, and defamation. Pl.’s Compl. 14 at 1. 15 Defendants subsequently removed the California Action to this Court on diversity 16 of citizenship grounds pursuant to 28 U.S.C. § 1332 and now move for judgment on the 17 pleadings under the so-called “first-to-file” rule. Alternatively, they seek to stay this 18 action pending disposition of the Delaware Action. 19 20 STANDARD 21 22 A court may stay proceedings pending before it where interests of judicial 23 economy make a stay appropriate. Landis v. North Am. Co., 299 U.S. 248, 254 (1936). 24 This power stems from the court’s inherent ability to control the disposition of cases on 25 its docket. Fernandez v. Obesity Research Inst., LLC., 2013 WL 4587005 at *6 (E.D. 26 Cal. Aug. 28, 2013). A stay can be indicated where resolution of another case “may 27 have a substantial impact” on the pending matter. Doyle v. OneWest Bank, N.A., 2015 28 WL 4605776 at *3 (C.D. Cal. May 21, 2015). In determining the propriety of such a stay, 1 courts look to issues of judicial economy and the prejudice to either party that may result 2 if the stay is granted or denied. CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962). 3 Whether to issue a stay in this regard is a decision necessarily relegated to the court’s 4 discretion. Nken v. Holder, 556 U.S. 418, 433-34 (2009). 5 6 ANALYSIS 7 8 Defendants contend that judgment on the pleadings, or alternatively a stay of 9 these proceedings, is appropriate because “the first-filed Delaware Action involves the 10 substantially same parties and issues” as the California Action. Defs.’ MPA ISO MJOP 11 at 12:3–5. The federal comity doctrine allows a district court to “decline jurisdiction over 12 an action when a complaint involving the same parties and issues has already been filed 13 in another district.” Pacesetter Sys., Inc. v.
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1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 EASTERN DISTRICT OF CALIFORNIA 9 10 JEFFREY P. FORTIS, an individual, No. 2:19-cv-00627-MCE-KJN 11 Plaintiff, 12 v. MEMORANDUM AND ORDER 13 WARRIOR TRADING, INC., a Delaware Corporation; ROSS 14 CAMERON, an individual; and DOES 1 through 50, inclusive, 15 Defendants. 16 17 18 By way of this action, Jeffrey P. Fortis (“Plaintiff”) seeks to recover from 19 Defendants Warrior Trading, Inc. (“Warrior”) and Ross Cameron (“Cameron”) for 20 violations of California’s wage and hours laws, wrongful termination, and defamation. 21 Presently before the Court is Defendants’ Motion for Judgment on the Pleadings, or in 22 the Alternative, to Stay (“Motion”) (ECF No. 5) seeking to dismiss or stay this action on 23 the basis that it is substantially similar to Warrior Trading, Inc. v. Jeffery P. Fortis, Case 24 No. 2019-0140 (“Delaware Action”), filed by Warrior in Delaware. For the following 25 reasons, Defendants’ Motion is GRANTED to the extent this matter is stayed pending 26 disposition of the Delaware Action.1 27 1 Because oral argument was not of material assistance, the Court ordered this matter submitted 28 on the briefs. E.D. Cal. Local Rule 230(g). 1 BACKGROUND 2 3 Between March 2016 and October 2018, Plaintiff was employed with Warrior as 4 its Chief Operating Officer. Pl.’s Compl., ECF 1-1 at ¶¶ 11, 16. Additionally, Plaintiff 5 was a shareholder and also served as a stock trading mentor for Warrior. Defs.’ MPA 6 ISO MJOP, ECF 5-1 at 1:7–10. Plaintiff and Warrior entered into a Shareholder 7 Agreement wherein the parties agreed that if Plaintiff were terminated “for cause,” the 8 remaining shareholders of Warrior, which included its founder and Chief Executive 9 Officer, Defendant Cameron, would have the option of buying back all shares held by the 10 Plaintiff.2 Pl.’s Compl. at ¶ 12; Shareholder Agreement, ECF No. 5-5 at 19. Additionally, 11 the Shareholder Agreement provided, in pertinent part, that “[a]ny controversy or claim 12 arising out of or relating to this Agreement . . . shall be settled by binding arbitration to be 13 held in Delaware.” Defs.’ MPA ISO MJOP at 4:7–9; Shareholder Agreement at 19. 14 Sometime after September 2018, Cameron raised various concerns regarding 15 Plaintiff’s performance, and on October 12, 2018, Plaintiff was terminated. Pl.’s Compl. 16 at ¶¶ 14, 16. Plaintiff claims that Cameron wanted to oust him from the company after 17 Plaintiff complained of certain improprieties concerning access to Warrior’s bank 18 accounts and other confidential systems by unauthorized employees. Stating that 19 Plaintiff’s termination was nonetheless “for cause,” Warrior sought to enforce the process 20
21 2 As a preliminary matter, this Court considers Defendant’s’ Request for Judicial Notice (“RJN”) (ECF No. 5-4). Under Federal Rule of Evidence 201, a court may take judicial notice of matters which are 22 “not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy 23 cannot reasonably be questioned.” Fed. R. Evid. 201(b); Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). This includes “matters of public record.” Id. Pleadings are properly subject to judicial 24 notice. Mullis v. U.S. Bankr. Court for Dist. Of Nevada, 828 F.2d 1385, 1388 n.9 (9th Cir. 1987). Defendants ask the Court to take judicial notice of ECF No. 5-5 through ECF No. 5-10: (1) Ex. A, 25 Shareholder Agreement; (2) Ex. B, Jan. 2, 2019 Correspondence; (3) Ex. C, Demand for Arbitration; (4) Ex. D, AAA Demand for Arbitration; (5) Ex. E, AAA Acknowledgment Letter; and (6) Ex. F, Delaware Action Complaint. These materials are a matter of public record as they are the pleadings and papers on 26 file in the Delaware Action. Therefore, this Court may take judicial notice of Defendants’ requested materials. Defendants’ RJN is GRANTED, and Plaintiff’s’ objections to same (ECF No. 11-1) are 27 OVERRULED. Additionally, Plaintiff asks for judicial notice (ECF No. 11-2) of Defendant’s’ California Statement of Information. Because the Court did not need to consider the Statement of Information in its 28 determination, Plaintiff’s RJN is DENIED as moot. 1 to repurchase Plaintiff’s shares as determined in the Shareholder Agreement. Defs.’ 2 MPA ISO MJOP at 6:4–5. On October 16, 2018, Plaintiff received a Notice of Buy Back 3 regarding his shares. Id. at 6:6–8. By correspondence dated November 15, 2018, 4 Plaintiff disputed the “for cause” designation that Warrior claimed permitted it to buy back 5 the shares in accordance with the Shareholder Agreement and refused to sell back the 6 shares. Id. at 6:13–15. 7 After this refusal, Warrior demanded arbitration pursuant to the Shareholder 8 Agreement. Demand for Arbitration, ECF No. 5-6. Plaintiff again refused, and Warrior 9 initiated the Delaware Action to compel arbitration on February 21, 2019. Delaware 10 Action, ECF No. 5-10. Subsequently, on March 7, 2019, Plaintiff filed Jeffery P. Fortis v. 11 Warrior Trading, Inc., Case No. CV-19-472 (“California Action”) in Yolo County Superior 12 Court asserting causes of action for retaliation and wrongful discharge in violation of 13 state law, wrongful termination in violation of public policy, and defamation. Pl.’s Compl. 14 at 1. 15 Defendants subsequently removed the California Action to this Court on diversity 16 of citizenship grounds pursuant to 28 U.S.C. § 1332 and now move for judgment on the 17 pleadings under the so-called “first-to-file” rule. Alternatively, they seek to stay this 18 action pending disposition of the Delaware Action. 19 20 STANDARD 21 22 A court may stay proceedings pending before it where interests of judicial 23 economy make a stay appropriate. Landis v. North Am. Co., 299 U.S. 248, 254 (1936). 24 This power stems from the court’s inherent ability to control the disposition of cases on 25 its docket. Fernandez v. Obesity Research Inst., LLC., 2013 WL 4587005 at *6 (E.D. 26 Cal. Aug. 28, 2013). A stay can be indicated where resolution of another case “may 27 have a substantial impact” on the pending matter. Doyle v. OneWest Bank, N.A., 2015 28 WL 4605776 at *3 (C.D. Cal. May 21, 2015). In determining the propriety of such a stay, 1 courts look to issues of judicial economy and the prejudice to either party that may result 2 if the stay is granted or denied. CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962). 3 Whether to issue a stay in this regard is a decision necessarily relegated to the court’s 4 discretion. Nken v. Holder, 556 U.S. 418, 433-34 (2009). 5 6 ANALYSIS 7 8 Defendants contend that judgment on the pleadings, or alternatively a stay of 9 these proceedings, is appropriate because “the first-filed Delaware Action involves the 10 substantially same parties and issues” as the California Action. Defs.’ MPA ISO MJOP 11 at 12:3–5. The federal comity doctrine allows a district court to “decline jurisdiction over 12 an action when a complaint involving the same parties and issues has already been filed 13 in another district.” Pacesetter Sys., Inc. v. Medtronic, Inc., 678 F.2d 93, 94-95 (9th Cir. 14 1982). When two cases are substantially identical and are filed “in courts of concurrent 15 jurisdiction, the court which first acquired jurisdiction should try the lawsuit and no 16 purpose would be served by proceeding with a second action.” Id. at 95. In evaluating 17 whether to apply this so-called first-to-file rule, “a court analyzes three factors: 18 chronology of the lawsuits, similarity of the parties, and similarity of the issues.” Kohn 19 Law Grp., Inc. v. Auto Parts Mfg. Miss., Inc., 787 F.3d 1237, 1240 (9th Cir. 2015). 20 Plaintiff appears to dispute the “similarity of issues” factor above, although this is 21 not perfectly clear since Plaintiff fails to specifically address Defendants’ first-to-file rule 22 analysis in its Opposition. As to the chronology of the lawsuits, there can be no dispute 23 that the Delaware Action was filed first. The Delaware Action was filed February 21, 24 2019, whereas the California Action was filed on March 7, 2019. Delaware Action at 1; 25 Pl.’s Compl. at 1. Additionally, as to the similarity of parties, both Plaintiff and Warrior 26 are parties to both suits. However, in the California Action, Plaintiff also sues Defendant 27 Cameron. Id. Strict identity between the parties and the issues of the two actions in 28 question is not required, but rather only “substantial similarity.” Negrete v. Petsmart, 1 Inc., 2013 U.S. Dist. LEXIS 129237 at *2–*3 (E.D. Cal. Sept. 10, 2013). Because the 2 disputes in both actions are primarily between Fortis as Plaintiff and Warrior, or an agent 3 of Warrior, as Defendant, the parties are substantially similar. 4 As to the similarity of issues, Plaintiff contends that the claims brought in the 5 California Action “have nothing to do with the Shareholder Agreement” and further 6 alleges he is “not invoking any provision within the Shareholder Agreement.” Pl.’s Opp., 7 ECF 11 at 4:1–4. This argument is not well taken. Plaintiff specifically references the 8 Shareholder Agreement in the “Facts Common to All Causes of Action” portion of the 9 Complaint. Pl.’s Compl. at 3:7–8. Plaintiff further contends that Defendant Cameron 10 manufactured performance deficiencies and made defamatory accusations against 11 Plaintiff, both in retaliation for raising concerns during employment and to establish 12 “cause” for termination, as defined in the Shareholder Agreement, all in order to force 13 Plaintiff to relinquish his shares at a reduced price. Id. at ¶¶ 14, 32. Alternatively, 14 Defendants contend Plaintiff was terminated “for cause” due to a myriad of performance 15 issues. Defs.’ MPA ISO MJOP at 5:12–22. Plaintiff responds by alleging that 16 Defendants’ reasons for termination were entirely pretextual. Pl.’s Compl. at ¶¶ 13–17. 17 Thus, the issues share substantial similarity in revolving around the determination of the 18 reason for Plaintiff’s termination. As such, each factor is met, and the so-called first-to- 19 file rule applies. 20 Engaging in similar proceedings before two different courts will unnecessarily 21 burden the courts and may subject the parties to inconsistent rulings. Particularly given 22 the savings of time and money that will result by refraining from litigation in California 23 that may prove unnecessary depending on the Delaware court’s findings, it appears 24 there will be no prejudice to either party. 25 Consequently, after considering the factors for and against a stay of these 26 proceedings, the Court finds a stay to be proper at this time. 27 /// 28 /// 1 CONCLUSION 2 3 For the reasons set forth above, Defendants’ Motion for Judgment on the 4 | Pleadings, or in the Alternative To Stay (ECF No. 5), is GRANTED. This matter is 5 | hereby stayed pending judgment in Warrior Trading, Inc. v. Jeffery P. Fortis, Case 6 | No. 2019-0140 currently before the Delaware Chancery Court. Not later than sixty (60) 7 | days following the date this Memorandum and Order is electronically filed, and every 8 || sixty (60) days thereafter until the stay is lifted, the parties are directed to file a Joint 9g | Status Report advising the Court as to the status of the Delaware Action. 10 IT IS SO ORDERED. 41 || Dated: November 4, 2019
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