1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 JESUS JIMENEZ, in a Representative Case No.: 3:19-CV-01547-JAH-MSB capacity only, on behalf of all aggrieved 12 employees, ORDER: 13 (1) DENYING PLAINTIFF’S Plaintiff, MOTION TO REMAND TO STATE 14 v. COURT [DOC. NO. 14]; AND 15 (2) DENYING DEFENDANT’S CRC PROPERTY MANAGEMENT MOTION FOR LEAVE TO FILE 16 WEST INC., a California Corporation; SUPPLEMENTAL EVIDENCE and DOES 1 through 10, inclusive, 17 [DOC. NO. 44] Defendants. 18 19 I. INTRODUCTION 20 This matter comes before the Court on Plaintiff’s Motion to Remand (Doc. No. 14) 21 and Defendant’s Motion for Leave to File Supplemental Evidence (Doc. No. 44). For the 22 reasons set forth below, both motions are DENIED. 23 II. BACKGROUND 24 On July 8, 2019, Plaintiff Jesus Jimenez (“Plaintiff”) filed a complaint under the 25 Private Attorneys General Act of 2004 (“PAGA”) (“Complaint”) in the Superior Court of 26 California against Defendants CRC Property Management West Inc. (“Defendant”) and 27 Does 1 through 10 for wage-and-hour violations of the California Labor Code. (Doc. No. 28 1-4). Plaintiff’s Complaint alleges claims for (1) meal and rest period violations, (2) 1 minimum wage violations, (3) overtime violations, (4) wage statement violations, and (5) 2 failure to reimburse for necessary business expenditures. (Id.). From approximately May 3 18, 2015, Plaintiff has been employed by Defendant as a non-exempt employee working 4 in San Diego County, California. (Id. at 11-12). On July 18, 2019, the Complaint and 5 Summons were personally served on Defendant. (Doc. No. 1 at 3). On August 16, 2019, 6 Defendant removed the action to federal court, asserting this Court has federal question 7 jurisdiction under 28 U.S.C. §§ 1331 and 1441(a) pursuant to the Federal Enclave Doctrine. 8 (Id. at 4-5). On September 13, 2019, Plaintiff filed the pending Motion to Remand. (Doc. 9 No. 14). On October 7, 2019, Defendant filed an opposition to Plaintiff’s Motion. (Doc. 10 No. 24). On October 11, 2019, Plaintiff replied. (Doc No. 25). 11 In addition, on April 17, 2020, Defendant filed a Motion for Leave to File 12 Supplemental Evidence in support of notice of removal and opposition to Plaintiff's Motion 13 to Remand. (Doc. No. 43). On May 4, 2020, Plaintiff filed an opposition to Defendant’s 14 Motion. (Doc. No. 45). On May 11, 2020, Defendant replied. (Doc. No. 46). 15 III. LEGAL STANDARD 16 The federal court is one of limited jurisdiction. See Gould v. Mutual Life Ins. Co. v. 17 New York, 790 F.2d, 774 (9th Cir. 1986). As such, it cannot reach the merits of any dispute 18 until it confirms its own subject matter jurisdiction. Steel Co. v. Citizens for a Better Env’t., 19 523 U.S. 83, 93-94 (1998). “Jurisdiction is power to declare the law, and when it ceases to 20 exist, the only function remaining to the court is that of announcing the fact and dismissing 21 the cause.” Id. at 94 (quoting Ex parte McCardle, 74 U.S. 506, 514 (1868)). District courts 22 must construe the removal statutes strictly against removal and resolve any uncertainty as 23 to removal in favor of remanding the case to state court. Boggs v. Lewis, 863 F.2d 662, 663 24 (9th Cir. 1988). 25 Removal jurisdiction is governed by 28 U.S.C. § 1441 et seq. A state court action 26 can only be removed if it could have originally been brought in federal court. Caterpillar, 27 Inc. v. Williams, 482 U.S. 386, 392 (1987). The Court determines its jurisdiction from the 28 complaint as it existed at the time of removal, not as subsequently amended. Libhart v. 1 Santa Monica Dairy Co., 592 F.2d 1062, 1065 (9th Cir. 1979). Thus, for an action to be 2 removed based on federal question jurisdiction, the complaint must establish either that 3 federal law creates the cause of action or that the plaintiff’s right to relief necessarily 4 depends on the resolution of substantial questions of federal law. See Franchise Tax Bd. of 5 State of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 10-13 (1983). At 6 the same time, “a plaintiff may not defeat removal by omitting to plead necessary federal 7 questions.” Id. at 22. If the plaintiff uses “artful pleading” in a claim, a court may uphold 8 removal regardless of whether a federal question appears on the face of the complaint. See 9 Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63-67 (1987). 10 The defendant has the burden of establishing that removal is proper and supporting 11 its jurisdictional allegations with competent proof. Gaus v. Miles, Inc., 980 F.2d 564, 566- 12 67 (9th Cir. 1992) (per curiam); Nishimoto v. Federman-Bachrach & Assocs., 903 F.2d 13 709, 712 n.3 (9th Cir. 1990). In addition, the defendant must file a timely notice of removal. 14 28 U.S.C. § 1446(b). The notice of removal must be filed within 30 days after receipt of a 15 copy of the initial pleading if removal can be determined from its text. Id. If at any time 16 before final judgment it appears that the district court lacks subject matter jurisdiction, the 17 case shall be remanded. 28 U.S.C. § 1447(c). 18 IV. DISCUSSION 19 Defendant removed this action on the basis that all of Plaintiff’s claims relate to his 20 employment with Defendant at Naval Base San Diego, an alleged federal enclave 21 (specifically, his employment at Pacific Beacon Property [“Pacific Beacon”]).1 (Doc. No. 22 1 at 4). Whether the United States has acquired exclusive jurisdiction over a federal enclave 23 is a federal question that falls under this Court’s jurisdiction. Paul v. United States, 371 24 U.S. 245, 267 (1963). 25 To determine whether to remand the pending action, the Court must first address 26
27 1 Pacific Beacon (3705 Norman Scott Rd, San Diego, CA 92113) is a housing area located within Naval 28 1 four issues: whether the grant of partial jurisdiction over Pacific Beacon is sufficient to 2 establish federal enclave status; whether Pacific Beacon is a federal enclave; whether the 3 Court has federal subject matter jurisdiction over Plaintiff’s state law claims; and whether 4 Defendant’s removal is valid despite Defendant’s suspended business entity status with the 5 California Secretary of State at the time of removal. Based on the following reasons, the 6 Court finds removal appropriate. 7 A. Pacific Beacon’s Federal Enclave Status 8 Parties concede that (i) Naval Base San Diego has varying legislative jurisdiction 9 throughout the base; and (ii) Pacific Beacon is subject to partial legislative jurisdiction of 10 the United States. (Doc. No. 14-1 at 19; Doc. No. 24-1 at 7). Notably, all four properties 11 that make up Pacific Beacon are also subject to the same partial jurisdiction.2 Parties 12 dispute, however, whether Pacific Beacon qualifies as a federal enclave. Plaintiff argues 13 Pacific Beacon is not a federal enclave because federal enclave status requires a grant of 14 exclusive jurisdiction. (Doc. No. 14-1 at 18). Defendant asserts exclusive jurisdiction is 15 not necessary for federal enclave status because a federal enclave is defined as land over 16 which the federal government exercises legislative jurisdiction, including partial legislative 17 jurisdiction. (Doc. No. 24 at 19). The Court holds that Pacific Beacon is a federal enclave 18 for the reasons set forth below. 19 A federal enclave is land over which the federal government exercises legislative 20 jurisdiction, except to the extent that the state reserves to itself certain jurisdiction at the 21 time of cession. Hammer v. Dynamic Aviation Grp., Inc., No. CV 08-8174 ODW(CWX), 22 2009 WL 10675681, at *2 (C.D. Cal. 2009) (citing Taylor v. Lockheed Martin Corp., 78 23 Cal. App. 4th 472, 478 (2000)); George v. UXB Intern., Inc., 1996 WL 241624, at *3 (N.D. 24 25 2 Patrick Huber, Attorney for the California State Lands Commission, confirms the four buildings which 26 encompass the Pacific Beacon Property are subject to the same partial jurisdiction: Retzer (A) Building #3631, 3705 Norman Scott Rd., San Diego, CA 92135; Dietz (B) Building #3630, 3715 Norman Scott 27 Rd., San Diego, CA 92135; Axelson (C) Building #3632, 3695 Norman Scott Rd., San Diego, CA 92136; and Palmer Hall #3621, 3725 Norman Scott Rd., San Diego, CA 92136. (Doc. No. 24-1 at 2, 5-6). 28 1 Cal. 1996) (citing Paul v. United States, 371 U.S. 245, 264 (1963)); see also U.S. Const. 2 art. I, § 8, cl. 17. When a state cedes jurisdiction and Congress accepts that cession, the 3 federal government can obtain either exclusive, concurrent, or partial jurisdiction. Kleppe 4 v. New Mexico, 426 U.S. 529, 542 (1976); United States v. Jones, 921 F.3d 932, 935 n.2 5 (10th Cir. 2019); Allison v. Boeing Laser Tech. Servs., 689 F.3d 1234 (10th Cir. 2012); 3 6 U.S. General Accountability Office, Principles of Federal Appropriations Law, 13 GAO- 7 RB pt. D, s. 1 WL 6969324, at *3 (3rd ed. 2008). As is relevant here, partial legislative 8 jurisdiction exists where the state of California has ceded all its jurisdiction except the 9 powers to tax and serve process. (Doc. No. 24-1 at 7). 10 The Court finds Plaintiff’s reliance on Kelly v. Lockheed Martin Services Group to 11 support its argument that federal enclave status requires a grant of exclusive jurisdiction is 12 misplaced. (Doc. No. 14-1 at 18); Kelly v. Lockheed Martin Servs Grp., 25 F. Supp. 2d 1, 13 3-4 (D. Puerto Rico 1998). The Kelly court clarifies that exclusive jurisdiction is not the 14 only form of federal enclave jurisdiction. Kelly, 25 F. Supp. 2d 1, 3 n.3. Notably, a 15 reservation of authority by the state in a grant of jurisdiction does not negate federal enclave 16 status. Paul v. United States, 371 U.S. 245, 264 (1963) (“a state [can] complete the 17 ‘exclusive’ jurisdiction of the Federal Government over such an enclave by ‘a cession of 18 legislative authority and political jurisdiction.’”); see also Collins v. Yosemite Park & 19 Curry Co., 304 U.S. 518, 530 (1938); Mersnick v. USProtect Corp., 2006 WL 3734396, at 20 *6 (N.D. Cal. 2006); Kerr v. Delaware North Companies, Inc., 2017 WL 880409, at *5 21 (E.D. Cal. 2017). The main principle of the federal enclave doctrine is that the federal 22 government has exclusive authority over a federal enclave, not that a grant of exclusive 23 jurisdiction is required for a land to obtain federal enclave status. See U.S.C. art. 1, § 8, cl. 24 17; see also Paul v. United States, 371 U.S. 245 (1963); Kennicott v. Sandia Corporation, 25 314 F. Supp. 3d 1142 (D.N.M. 2018). 26 Accordingly, Pacific Beacon is a federal enclave because California has ceded all 27 jurisdiction over Pacific Beacon to the federal government except the powers to tax and 28 serve process. (Doc. No. 24-1 at 7). 1 B. Application of Federal Enclave Doctrine to Plaintiff’s State Law Claims 2 Now that the Court has determined Pacific Beacon is a federal enclave, the 3 discussion turns toward whether Plaintiff’s state law claims3 are barred by the federal 4 enclave doctrine. 5 Plaintiff requests recovery for his claims under PAGA, which allows employees to 6 recover state civil penalties on behalf of themselves, other employees, and the state of 7 California for Labor Code (“Labor Code”) violations. Cal. Lab. Code § 2698 et seq. 8 Plaintiff argues his claims are not barred because the Industrial Welfare Commission 9 (“IWC”) regulatory regime and California’s minimum wage laws were enacted in 1916, 10 prior to the federal government’s acquisition of Naval Base San Diego on February 23, 11 1922. (Doc. No. 14-1 at 22) (citing Murphy v. Kenneth Cole Productions Inc., 50 Cal. 4th 12 1094 (2007)). Plaintiff makes no concession to amend the Complaint to exclude claims 13 arising from work performed on the federal enclave. Defendant opposes, contending that 14 Plaintiff’s claims are barred because the California state wage-and-hour laws at issue (i) 15 did not exist at the time of cession, and (ii) are inconsistent with the federal Fair Labor 16 Standards Act (“FLSA”). (Doc. No. 24 at 22-23). For the reasons set forth below, the Court 17 holds Plaintiff’s state law claims are barred by the federal enclave doctrine. 18 Federal courts have original jurisdiction over all civil actions arising under the 19 Constitution, laws, or treaties of the United States, including claims pursuant to the federal 20 enclave doctrine. 28 U.S.C. § 1331. The federal enclave doctrine draws its authority from 21 Article I, section 8, Clause 17 of the U.S. Constitution: 22 Congress shall have power * * * To exercise exclusive Legislation in all Cases 23 whatsoever, over such District (not exceeding ten miles square) as may, by 24 Cession of particular States, and the Acceptance of Congress, become the Seat 25 26 27 3 Plaintiff’s complaint alleges the following violations of California Labor Code section 2698 et seq.: (1) meal and rest period violations, (2) minimum wage violations, (3) overtime violations, (4) wage 28 1 of Government of the United States, and to exercise like Authority over all 2 Places purchased by the Consent of the Legislature of the State in which the 3 same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, 4 and other needful Buildings. 5 U.S. Const. art. I § 8, cl. 17. Unless repudiated by Congress, the laws applicable to a federal 6 enclave include (i) federal law and (ii) state laws that were in effect at the time of cession 7 and are not inconsistent with federal law. Parker Drilling Mgmt. Servs., Ltd. v. Newton, 8 139 S. Ct. 1881, 1889-90 (2019) (citing James Stewart & Co. v. Sadrakul, 309 U.S. 94, 9 100 (1940)); see Chicago, R. I. & P. R. Co. v. McGlinn, 114 U. S. 542, 547 (1885). Given 10 the federal government’s exclusive jurisdiction over federal enclaves, preexisting state law 11 not inconsistent with federal law continues in force as surrogate federal law, unless altered 12 by Congress. Korndobler v. DNC Parks & Resorts at Sequoia, 2015 WL 3797625 (E.D. 13 Cal. 2015); Zuniga v. Chugach Maint. Servs., 2006 WL 769317 (E.D. Cal. 2006). 14 Three exceptions to exclusive enclave jurisdiction exist. First, state regulatory 15 schemes in existence prior to the date of cession, but which require ongoing regulatory 16 changes, will not be preempted, unless they are inconsistent with federal law. Paul, 371 17 U.S. 245, 268-69 (1963); Parker Drilling Mgmt. Servs., 139 S. Ct. at 1889-90. Second, 18 state law is not preempted if Congress specifically authorized such state regulation over 19 the federal enclave. Swords to Plowshares v. Kemp, 423 F. Supp. 2d 1031 (N.D. Cal. 2005). 20 Finally, state laws subsequently enacted by a state are inapplicable in the federal enclave 21 unless the state legislature reserved the right to do so at the time of cession. See Paul, 371 22 U.S. 245, 268 (1963); Allison, 689 F.3d 1234, 1238 (10th Cir. 2012); Cooper v. S. Cal. 23 Edison Co., 2006 WL 616264 (9th Cir. May 10, 2006) (holding claims based on state law 24 recognized after government acquisition are barred by federal enclave doctrine). 25 Here, the Court finds no such exception applies to Plaintiff’s claims because (i) the 26 state laws at issue were enacted after the federal government acquired Pacific Beacon; (ii) 27 the state laws at issue are inconsistent with FLSA; (iii) Congress did not authorize state 28 regulation of wage-and-hour issues on Pacific Beacon at the time of cession; and (iv) 1 California did not reserve the right to apply state wage-and-hour laws to Pacific Beacon at 2 the time of cession. Because parties dispute the validity of the first two reasons in their 3 respective pleadings, the Court will address these issues in turn below. 4 1. State Laws Adopted After Federal Acquisition of Pacific Beacon 5 Parties do not dispute that Naval Base San Diego, the property upon which Pacific 6 Beacon is located, was founded on February 23, 1922. (Doc. No. 1 at 4-5; Doc. No. 14-1 7 at 22).4 Thus, the Court considers February 23, 1922 as the date of acquisition in its 8 discussion of federal enclave jurisdiction. 9 Here, PAGA is inapplicable to the present action because the law was enacted in 10 2004, unquestionably after the federal government’s acquisition of Pacific Beacon in 1922. 11 Plaintiff’s claims that are pursuant to specific California Labor Codes are barred because 12 they were also enacted after the federal government’s acquisition of Pacific Beacon in 13 1922. Plaintiff’s claim for meal and rest period violations pursuant to Labor Code sections 14 226.7 and 512 are barred because section 226.7 was enacted in 2000 and section 512 was 15 enacted in 1999. See Cal. Lab. Code §§ 226.7, 512. Plaintiff also asserts a claim for 16 minimum wage and overtime wage violations pursuant to Labor Code sections 510 and 17 1194, which were both enacted in 1937. See Cal. Lab. Code §§ 510, 1194. Similarly, Labor 18 Code section 226 (pertaining to wage statements) was enacted in 1943, and Labor Code 19 section 2802 (pertaining to expense reimbursements) was enacted in 1937. See Cal. Lab. 20 Code §§ 226, 2802. 21 To the extent any of the IWC regulatory schemes for the Plaintiff’s asserted claims 22 was in place at the time of cession and require ongoing regulatory changes, as explained 23 below, the claims are nonetheless barred because they are inconsistent with federal law. 24 2. State Laws Inconsistent with Federal Laws 25 Now that the Court has determined the California laws in Plaintiff’s complaint were 26
27 4 Both Plaintiff and Defendant fail to provide a specific date of federal acquisition for Pacific Beacon, 28 1 enacted after the federal government’s acquisition of Pacific Beacon in 1922, the 2 discussion turns towards whether those laws are inconsistent with federal law. For the 3 following reasons, Plaintiff’s claims premised on IWC Wage Order 4 and the California 4 Labor Code fail because they are inconsistent with federal law, and federal law applies. 5 The Court applies the Supreme Court’s standard in addressing the question of 6 whether the relevant California state laws are inconsistent with federal law. Parker Drilling 7 Mgmt. Servs. v. Newton, 139 S. Ct. 1881 (2019). In Parker Drilling Mgmt. Servs., the 8 Supreme Court held that state law is inconsistent with federal law if federal law has already 9 addressed the issue at hand because “state law addressing the same issue would necessarily 10 be inconsistent with existing federal law and cannot be adopted as surrogate federal law.” 11 139 S. Ct. at 1889. Put simply, state laws are inapplicable on a federal enclave when federal 12 law provides coverage for a particular issue. Id. at 1892. 13 Plaintiff’s first claim for violation of IWC Wage Order 4 and Labor Code sections 14 226.7 and 512 is premised on (i) Defendant’s written policies being non-compliant with 15 California law; (ii) Defendant’s failure to allow its employees duty-free breaks on 16 occasion; and (iii) Defendant’s failure to properly provide meal and rest break premiums 17 in accordance with the law. (Doc. No. 1-4 at 13). Under Labor Code sections 226.7 and 18 512, Defendant should have paid Plaintiff one extra hour of pay at his normal hourly rate 19 for each rest or meal period Plaintiff was on duty. While FLSA does not mirror the meal 20 and rest period requirements of the Labor Code, it provides sufficient coverage of meal 21 period requirements and there exists no “significant void or gap.” See 29 U.S.C. § 207; 22 Cal. Dairies, Inc. v. RSUI Indem. Co., 617 F. Supp. 2d 1023, 1044 (E.D. Cal. 2009) (noting 23 that while state law meal and rest benefits are not identical to the FLSA, both provide some 24 form of meal and rest benefits to be paid by, and which are entirely within the control of, 25 the employer even if the amounts are calculated differently). Specifically, FLSA requires 26 an employer to compensate an employee at a straight-time wage rate for non-bona fide 27 28 1 meal periods, and at an over-time wage rate for all hours worked in excess of forty hours 2 per week, including non-bona fide meal periods. 29 U.S.C. § 207(a)(1). Because federal 3 law addresses Plaintiff’s first claim, IWC Wage Order 4 and Labor Code sections 226.7 4 and 512 are inconsistent with federal law and do not apply to Pacific Beacon. 5 Plaintiff’s second and third claims for violation of Labor Code sections 510 and 1194 6 are premised on Defendant’s failure to pay its employees appropriate straight-time, 7 overtime, and double time wages. (Doc. No. 1-4 at 13). FLSA addresses the minimum 8 wage issue in 29 U.S.C. §§ 206(a)(1) and 218 (requiring employers to provide a minimum 9 wage of no less than $7.25 an hour), and the overtime wage issue in 29 U.S.C. § 207(a)(1) 10 (requiring employers to compensate employees at an over-time wage rate for all hours 11 worked in excess of forty hours per week).6 FLSA also provides a path for enforcing 12 penalties in 29 U.S.C. § 216(b), subjecting employers who fail to pay minimum or overtime 13 wages to penalties equal to the amount of unpaid wages. For these reasons, Labor Code 14 sections 510 and 1194 are inconsistent with federal law and are inapplicable on Pacific 15 Beacon. 16 Plaintiff’s fourth claim for violation of Labor Code section 226 is premised on 17 Defendant’s failure to provide accurate itemized wage statements. (Doc. No. 1-4 at 13-14). 18 FLSA requires employers to maintain accurate records of employee hours worked and 19 wages paid, inter alia, and to provide copies of these records to employees. See 29 U.S.C. 20 § 211(c) (requiring employers to maintain records of employee wages and hours). Because 21 FLSA addresses employer requirements for recordkeeping of wages and hours, and 22 penalties for violation of such requirements, Labor Code section 225 is inconsistent with 23 federal law and inapplicable on Pacific Beacon. 24 25
26 5 See 29 C.F.R. § 785.19 (defining bona fide meal periods as time during which an employee “must be 27 completely relieved from duty for the purposes of eating regular meals.”). 6 See Parker Drilling Mgmt. Servs., 139 S. Ct. at 1893 (noting that the question is whether federal law 28 1 Plaintiff’s fifth claim for violation of Labor Code section 2802 is premised on 2 Defendant’s failure to properly reimburse employees for necessary business expenditures 3 such as “cell phone costs and other work supplies.” (Doc. No. 1-4 at 13). Federal law 4 addresses the issue of payment by an employer for work-related expenses: “[I]f it is a 5 requirement of the employer that the employee must provide tools of the trade which will 6 be used in or are specifically required for the performance of the employer’s particular 7 work, there would be a violation of the Act in any workweek when the cost of such tools 8 purchased by the employee cuts into the minimum or overtime wages required to be paid 9 him under the Act.” 29 C.F.R. § 531.35. Put simply, federal law allows an employer to 10 deduct such costs from an employee’s wages as long as the weekly wage meets the federal 11 minimum requirement. Id. Therefore, Labor Code section 2802 is inconsistent with federal 12 law and inapplicable on Pacific Beacon. 13 As such, Plaintiff’s claims premised on the IWC Wage Order 4 and California Labor 14 Code for wage-and-hour violations fail because federal law already addresses the issues at 15 hand. State laws inconsistent with federal law are inapplicable on Pacific Beacon. 16 C. Defendant’s Suspended Business Entity Status 17 Plaintiff argues that Defendant’s removal was procedurally improper. (Doc. No. 14- 18 1 at 7). Specifically, that Defendant lacked the right to remove this case to federal court 19 because Defendant’s business entity status was suspended by the California Secretary of 20 State when it filed for removal on August 16, 2019. (Id. at 7-8). Thus, Plaintiff argues, 21 Defendant was prohibited from proceeding in litigation pursuant to Federal Rule of Civil 22 Procedure section 17(b)(2) and California Revenue and Tax Code section 23301. (Id.) 23 The parties admit that Defendant was erroneously named and sued as a corporation, 24 and that Defendant instead is a limited liability company (“LLC”). (Doc No. 1 at 2; Doc. 25 No. 14-1 at 7). As such, its capacity to engage in litigation is governed by the law of the 26 state where this Court is located: California. Fed. R. Civ. P. 17(b)(3). “Capacity” to engage 27 in litigation is a party’s right to come into court. De Franco v. United States, 18 F.R.D. 28 156, 159 (S.D. Cal. 1955). 1 Neither party expressly indicates, or provides evidence of, the specific reason(s) why 2 Defendant’s corporate status was suspended (e.g., for failing to pay taxes or file required 3 statements with the state). For instance, California requires every LLC to file a statement 4 of information. Cal. Corp. Code § 17702.09. If an LLC fails to file the statement for two 5 years, then the Secretary of State must notify the LLC that its powers, rights, and privileges 6 will be suspended if it fails to file the statement within sixty days. Id. §§ 17713.10(a)-(c). 7 However, once suspended, an LLC can file the statement to become active again and 8 restore its powers, rights, and privileges, unless the LLC is suspended for not paying taxes. 9 Id. § 17713.10(d). Similarly, an LLC that is suspended for failing to pay taxes can be 10 relieved from suspension and become active if it pays the taxes, penalties, and interest 11 owed. Cal. Rev. & Tax. Code §§ 23305 & 23305a. Despite the reason why Defendant’s 12 LLC status was suspended, Plaintiff nevertheless asserts that section 23301 of the 13 California Revenue and Tax Code controls Defendant’s inability to proceed in this 14 litigation. (Doc. No. 14-1 at 10-11). 15 A corporation that is suspended pursuant to section 23301 cannot litigate while 16 suspended because they lack the right (i.e., capacity) to do so. Welco Constr., Inc. v. 17 Modulux, Inc., 47 Cal. App. 3d 69, 71 (1975). Suspension of rights under section 23301 18 applies to corporations that fail to meet their franchise tax obligations. See Cal. Rev. & Tax 19 Code § 23301. Indeed, the purpose of section 23301 is to put pressure on delinquent 20 companies to pay their taxes. A. E. Cook Co. v. K S Racing Enterprises, 274 Cal. App. 2d 21 499, 501 (1969). “That purpose is ordinarily satisfied by a rule viewing a corporation’s tax 22 delinquencies, after correction, as mere irregularities.” Benton v. Cty. of Napa, 226 Cal. 23 App. 3d 1485, 1490 (1991). Since Plaintiff did not allege that Defendant’s business entity 24 status was suspended because of its failure to pay taxes or provide any evidence that the 25 California Secretary of State’s action to suspend Defendant was made under the authority 26 of the California Revenue and Tax Code, Plaintiff’s argument is unavailing. 27 Defendant admits that its corporate status was suspended when it filed the removal 28 notice on August 16, 2019, but it resolved this issue with the State of California to revive 1 its corporate status as active on or about September 23, 2019. (Doc. No. 24 at 13-14; Doc. 2 No. 24-3) Therefore, the issue is whether Defendant’s revival as an active LLC 3 retroactively validated its actions taken during the suspension. The answer depends on 4 whether filing the removal notice is treated as a “procedural act” or a “substantive act.” 5 Page v. Children's Council, 2006 WL 2595946, at *2 (N.D. Cal. 2006). Substantive acts 6 taken during suspension may not be retroactively applied to the benefit of the now-active 7 or revived business entity, whereas procedural acts taken during suspension are validated 8 upon revival or reinstatement of corporate powers, rights, and privileges by the state of 9 California. Benton, 226 Cal. App. 3d at 1490-91. 10 Most litigation activity has been characterized as procedural for purposes of 11 corporate revival. Benton, 226 Cal. App. 3d at 1490. For example, a judgment obtained 12 during suspension is validated by subsequent revivor. Traub Co. v. Coffee Break Service, 13 Inc., 66 Cal.2d 368, 371 (1967). A motion to dismiss an appeal because of a corporate 14 party’s suspension under section 23305 of the California Revenue and Taxation code may 15 be denied if they comply with the code and are revived or reinstated as active by the state. 16 Peacock Hill Assn. v. Peacock Lagoon Constr. Co., 8 Cal.3d 369, 371–74 (1972). 17 Appearing on and filing motions, as well as performing discovery, are validated by revivor. 18 Diverco Constructors, Inc. v. Wilstein, 4 Cal. App. 3d 6, 12 (1970); see Welco Constr., 19 Inc., 47 Cal. App. 3d at 73. 20 Plaintiff correctly points out that Defendant’s removal was a procedural act. (Doc. 21 No. 14-1 at 7); see Scott v. Gino Morena Enter. L.L.C., 2015 WL 847160, at *3 (C.D. Cal. 22 2015). Moreover, Plaintiff did not raise any other procedural issues related to Defendant’s 23 removal notice. Thus, under California law, Defendant’s revivor retroactively validated its 24 removal notice. Therefore, Plaintiff’s argument that Defendant’s removal was procedurally 25 improper because Defendant’s corporate status was suspended at the time of removal is 26 moot. 27 D. Defendant’s Motion for Leave to File Supplemental Evidence 28 Defendant’s Motion requests that the Court consider supplemental evidence in 1 support of its removal notice and opposition to Plaintiff’s Remand Motion. (Doc. No. 44). 2 Specifically, Defendant wants the Court to consider Verizon cell phone location records to 3 show that Plaintiff did not work at non-enclave locations under Defendant’s employ. (Doc. 4 No. 44-1). The Court need not consider supplemental evidence because, as discussed 5 herein, the Court finds jurisdiction over Plaintiff’s claims arising from events that occurred 6 on Pacific Beacon. As for any claims arising from events that occurred at non-enclave 7 locations, the Court will accept related state law claims as supplemental to federal law 8 claims. Thus, for the following reasons, the Court denies Defendant’s Motion for Leave. 9 Federal courts have original jurisdiction over all civil actions arising under the 10 Constitution, laws, or treaties of the United States, including claims pursuant to the federal 11 enclave doctrine. 28 U.S.C. § 1331. In such cases, district courts “have supplemental 12 jurisdiction over all other claims that are so related to claims in the action within such 13 original jurisdiction that they form part of the same case or controversy.” 28 U.S.C. § 14 1367(a). Put simply, in cases involving both federal law and state law claims, state law 15 claims generally fall within supplemental jurisdiction of federal courts. Id. 16 Here, Plaintiff shall have an opportunity to re-file their Complaint in federal court. 17 Plaintiff may plead federal law claims with respect to violations that occurred on Pacific 18 Beacon, and plead state law claims with respect to violations that occurred at non-enclave 19 locations. Indeed, both parties fail to provide specific dates, times, or locations for the 20 violations stated in the Complaint. Out of over 100 aggrieved employees (Doc. 1-4 at 13), 21 Plaintiff vaguely indicates they and two others worked at two alleged non-enclave 22 locations, Veer and La Rancho Verde (Doc. 14-1 at 16-17, 21; Doc. 14-2; Doc. 14-3; Doc. 23 14-4). However, absent is when they worked at those locations and whether and when any 24 of the violations stated in the Complaint occurred at those locations. Based on the 25 information provided in the pleadings, the pertinent events took place on Pacific Beacon 26 and “form part of the same case or controversy” as other events that may have taken place 27 at non-enclave locations. 28 Accordingly, this Court has original jurisdiction over claims arising from events that 1 || took place on Pacific Beacon and supplemental jurisdiction over claims arising from events 2 || that took place at non-enclave locations. Thus, Defendant’s removal was proper, and the 3 || Court need not consider Defendant’s Motion for Leave to File Supplemental Evidence in 4 || Support of Removal. 5 V. CONCLUSION 6 For the foregoing reasons, the Court DENIES Plaintiff's Motion to Remand to State 7 ||Court and DENIES Defendant’s Motion for Leave to File Supplemental Evidence in 8 || Support of Notice of Removal and Opposition to Plaintiff's Motion to Remand. 9 IT IS SO ORDERED. 10 DATED: September 17, 2021
12 B JC A. HOUSTON YNITED STATES DISTRICT JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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