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8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 LISA JOHNSON, No. 2:25-cv-02917 WBS SCR 13 Plaintiff, 14 v. MEMORANDUM AND ORDER RE: 15 PLAINTIFF’S MOTION TO REMAND M.A.C. COSMETICS INC., ELC COMPANIES INC., ESTEE LAUDER GRAND, SARAH RICHIE, and DOES 1 18 through 20, inclusive, 19 Defendants. 20 21 ----oo0oo---- 22 Plaintiff filed the present action in the Sacramento 23 County Superior Court; she alleges various causes of action under 24 California’s Fair Employment and Housing Act arising from her 25 employment with defendants. (See Docket No. 11-1 at 2.) 26 Shortly thereafter, defendants filed a notice of 27 removal, in which they argue that the individual defendants in 28 this action were fraudulently joined to destroy diversity 1 jurisdiction (see Docket No. 1 at 8-13), which plaintiff disputes 2 (see Docket No. 11-1 at 8-11). 3 “Any civil action brought in a State court of which the 4 district courts of the United States have original jurisdiction, 5 may be removed by the defendant or the defendants, to the 6 district court of the United States for the district and division 7 embracing the place where such action is pending.” 28 U.S.C. § 8 1441(a). District courts have original jurisdiction over civil 9 actions in which the parties are completely diverse and “the 10 matter in controversy exceeds the sum or value of $75,000, 11 exclusive of interest and costs.”1 28 U.S.C. § 1332(a). 12 The requirement of complete diversity is satisfied 13 “only” when “the citizenship of each plaintiff is diverse from 14 the citizenship of each defendant.” Caterpillar Inc. v. Lewis, 15 519 U.S. 61, 68 (1996). Plaintiff’s complaint provides that 16 there is complete diversity between herself and the corporate 17 entity defendants. (See Docket No. 1-1 at 109.) But complete 18 diversity does not exist between plaintiff, who is a California 19 citizen (see id.), and individual defendants Graham and Richie, 20 who are also California citizens (see id. at 110). See 21 Caterpillar, 519 U.S. at 68. 22 “In determining whether there is complete diversity, 23 district courts may disregard the citizenship of a non-diverse 24 defendant who has been fraudulently joined.” Grancare, LLC v. 25 Thrower by & through Mills, 889 F.3d 543, 548 (9th Cir. 2018). 26 27 1 Plaintiff concedes that the amount in controversy exceeds 28 $75,000. (Docket No. 11-1 at 3.) 1 “[T]here are two ways to establish improper joinder: 2 (1) actual fraud in the pleading of jurisdictional facts, or (2) 3 inability of the plaintiff to establish a cause of action against 4 the non-diverse party in state court.” Hunter v. Philip Morris 5 USA, 582 F.3d 1039, 1044 (9th Cir. 2009) (quotations omitted). 6 “Fraudulent joinder is established the second way if a defendant 7 shows that an individual joined in the action cannot be liable on 8 any theory.” Pool v. F. Hoffman-La Roche, Ltd., 386 F. Supp. 3d 9 1202, 1209 (N.D. Cal. 2019) (citation modified). Put 10 differently, a defendant must show that there is no “possibility 11 that a state court would find that the complaint states a cause 12 of action against any of the [in-state] defendants,” which may be 13 the case where that defendant “presents extraordinarily strong 14 evidence or arguments that a plaintiff could not possibly prevail 15 on her claims against the allegedly fraudulently joined 16 defendant[s].” Grancare LLC, 889 F. 3d at 548 (citation 17 modified). 18 Resolution of whether Graham and Richey were 19 fraudulently joined turns on one issue: whether it is possible 20 that they may be held liable under Cal. Lab. Code § 558.1 21 (“Section 558.1”), which “allows plaintiffs to hold a[] ‘ . . . 22 person acting on behalf of an employer’ directly liable for 23 certain wage-and-hour violations,” Russo v. Fed. Med. Servs., 24 Inc., 793 F. Supp. 3d 1121, 1138 (N.D. Cal. 2025). (See Docket 25 Nos. 12 at 2; 11-1 at 7.) Individual liability under Section 26 558.1 is restricted to employees who are “owner[s], director[s], 27 officer[s], or managing agent[s] of the employer,” where “the 28 1 term ‘managing agent’ has the same meaning as in” Cal. Civ. Code 2 § 3294(b). Cal. Lab. Code § 558.1(b). To be held liable, an 3 employee must also have “violate[d], or cause[] to be violated, 4 any provision regulating minimum wages or hours and days of work 5 in any order of the Industrial Welfare Commission, or violate[d], 6 or cause[] to be violated,” certain, other sections of 7 California’s Labor Code. Id. § 558.1(a).2 8 Neither party contends that Graham or Richey are 9 owners, directors, or officers of the corporate entity 10 defendants. Rather, the parties contest whether Graham or Richey 11 are “managing agents” of those defendants. The California 12 Supreme Court, in giving effect to the California Legislature’s 13 intent, has narrowly interpreted the term “managing agent” to 14 mean “those employees who exercise substantial independent 15 authority and judgment over decisions that ultimately determine 16 corporate policy.” White v. Ultramar, Inc., 21 Cal. 4th 563, 17 573, 981 P.2d 944, 951 (1999). “A later decision” of the 18 California Supreme Court “clarified that Ultramar was referring 19 to formal policies that affect a substantial portion of the 20 company and that are of the type likely to come to the attention 21 of corporate leadership ... such that they justify punishing an 22 entire company for an otherwise isolated act of oppression, 23
24 2 At oral argument, plaintiff’s counsel seemed to argue that individual liability may attach if an employee was a managing 25 agent or violated or caused to be violated the relevant sections of the California Labor Code. But the California Labor Code 26 unambiguously provides that, for individual liability to attach, 27 an employee must be a managing agent and have violated or caused to have been violated the relevant sections of that code. Cal. 28 Lab. Code §§ 558.1(a), (b). 1 fraud, or malice.” Soto v. Thermo Fisher Sci. (Asheville LLC), 2 No. 24-cv-02997 WHA, 2024 WL 3834194, at *2 (N.D. Cal. Aug. 15, 3 2024) (citation modified). 4 Graham’s declaration unequivocally provides that, in 5 her role as a Director of Field Sales, she “did not set company- 6 wide policies or handle/oversee payroll”; lacked “authority or 7 discretion to create, modify, or approve company-wide policies 8 relating [to] any wage-and-hour practices”; was “[a]t no point . 9 . . invited to provide input” regarding corporate policies; and 10 did not possess final authority to determine employees’ “pay, 11 raises, or bonuses.” (Docket No. 12-2 at 2-3.) 12 Richey’s declaration likewise unequivocally establishes 13 that, in her role as a Field Executive Sales Manager, she “did 14 not set company-wide policies, manage payroll, or make executive- 15 level decisions”; and lacked “authority to determine or set 16 policies relating to wage and hour [issues], equal 17 employment/anti-discrimination and harassment, payroll practices, 18 employee classifications, or compensation structure.” (Docket 19 No.
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8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 LISA JOHNSON, No. 2:25-cv-02917 WBS SCR 13 Plaintiff, 14 v. MEMORANDUM AND ORDER RE: 15 PLAINTIFF’S MOTION TO REMAND M.A.C. COSMETICS INC., ELC COMPANIES INC., ESTEE LAUDER GRAND, SARAH RICHIE, and DOES 1 18 through 20, inclusive, 19 Defendants. 20 21 ----oo0oo---- 22 Plaintiff filed the present action in the Sacramento 23 County Superior Court; she alleges various causes of action under 24 California’s Fair Employment and Housing Act arising from her 25 employment with defendants. (See Docket No. 11-1 at 2.) 26 Shortly thereafter, defendants filed a notice of 27 removal, in which they argue that the individual defendants in 28 this action were fraudulently joined to destroy diversity 1 jurisdiction (see Docket No. 1 at 8-13), which plaintiff disputes 2 (see Docket No. 11-1 at 8-11). 3 “Any civil action brought in a State court of which the 4 district courts of the United States have original jurisdiction, 5 may be removed by the defendant or the defendants, to the 6 district court of the United States for the district and division 7 embracing the place where such action is pending.” 28 U.S.C. § 8 1441(a). District courts have original jurisdiction over civil 9 actions in which the parties are completely diverse and “the 10 matter in controversy exceeds the sum or value of $75,000, 11 exclusive of interest and costs.”1 28 U.S.C. § 1332(a). 12 The requirement of complete diversity is satisfied 13 “only” when “the citizenship of each plaintiff is diverse from 14 the citizenship of each defendant.” Caterpillar Inc. v. Lewis, 15 519 U.S. 61, 68 (1996). Plaintiff’s complaint provides that 16 there is complete diversity between herself and the corporate 17 entity defendants. (See Docket No. 1-1 at 109.) But complete 18 diversity does not exist between plaintiff, who is a California 19 citizen (see id.), and individual defendants Graham and Richie, 20 who are also California citizens (see id. at 110). See 21 Caterpillar, 519 U.S. at 68. 22 “In determining whether there is complete diversity, 23 district courts may disregard the citizenship of a non-diverse 24 defendant who has been fraudulently joined.” Grancare, LLC v. 25 Thrower by & through Mills, 889 F.3d 543, 548 (9th Cir. 2018). 26 27 1 Plaintiff concedes that the amount in controversy exceeds 28 $75,000. (Docket No. 11-1 at 3.) 1 “[T]here are two ways to establish improper joinder: 2 (1) actual fraud in the pleading of jurisdictional facts, or (2) 3 inability of the plaintiff to establish a cause of action against 4 the non-diverse party in state court.” Hunter v. Philip Morris 5 USA, 582 F.3d 1039, 1044 (9th Cir. 2009) (quotations omitted). 6 “Fraudulent joinder is established the second way if a defendant 7 shows that an individual joined in the action cannot be liable on 8 any theory.” Pool v. F. Hoffman-La Roche, Ltd., 386 F. Supp. 3d 9 1202, 1209 (N.D. Cal. 2019) (citation modified). Put 10 differently, a defendant must show that there is no “possibility 11 that a state court would find that the complaint states a cause 12 of action against any of the [in-state] defendants,” which may be 13 the case where that defendant “presents extraordinarily strong 14 evidence or arguments that a plaintiff could not possibly prevail 15 on her claims against the allegedly fraudulently joined 16 defendant[s].” Grancare LLC, 889 F. 3d at 548 (citation 17 modified). 18 Resolution of whether Graham and Richey were 19 fraudulently joined turns on one issue: whether it is possible 20 that they may be held liable under Cal. Lab. Code § 558.1 21 (“Section 558.1”), which “allows plaintiffs to hold a[] ‘ . . . 22 person acting on behalf of an employer’ directly liable for 23 certain wage-and-hour violations,” Russo v. Fed. Med. Servs., 24 Inc., 793 F. Supp. 3d 1121, 1138 (N.D. Cal. 2025). (See Docket 25 Nos. 12 at 2; 11-1 at 7.) Individual liability under Section 26 558.1 is restricted to employees who are “owner[s], director[s], 27 officer[s], or managing agent[s] of the employer,” where “the 28 1 term ‘managing agent’ has the same meaning as in” Cal. Civ. Code 2 § 3294(b). Cal. Lab. Code § 558.1(b). To be held liable, an 3 employee must also have “violate[d], or cause[] to be violated, 4 any provision regulating minimum wages or hours and days of work 5 in any order of the Industrial Welfare Commission, or violate[d], 6 or cause[] to be violated,” certain, other sections of 7 California’s Labor Code. Id. § 558.1(a).2 8 Neither party contends that Graham or Richey are 9 owners, directors, or officers of the corporate entity 10 defendants. Rather, the parties contest whether Graham or Richey 11 are “managing agents” of those defendants. The California 12 Supreme Court, in giving effect to the California Legislature’s 13 intent, has narrowly interpreted the term “managing agent” to 14 mean “those employees who exercise substantial independent 15 authority and judgment over decisions that ultimately determine 16 corporate policy.” White v. Ultramar, Inc., 21 Cal. 4th 563, 17 573, 981 P.2d 944, 951 (1999). “A later decision” of the 18 California Supreme Court “clarified that Ultramar was referring 19 to formal policies that affect a substantial portion of the 20 company and that are of the type likely to come to the attention 21 of corporate leadership ... such that they justify punishing an 22 entire company for an otherwise isolated act of oppression, 23
24 2 At oral argument, plaintiff’s counsel seemed to argue that individual liability may attach if an employee was a managing 25 agent or violated or caused to be violated the relevant sections of the California Labor Code. But the California Labor Code 26 unambiguously provides that, for individual liability to attach, 27 an employee must be a managing agent and have violated or caused to have been violated the relevant sections of that code. Cal. 28 Lab. Code §§ 558.1(a), (b). 1 fraud, or malice.” Soto v. Thermo Fisher Sci. (Asheville LLC), 2 No. 24-cv-02997 WHA, 2024 WL 3834194, at *2 (N.D. Cal. Aug. 15, 3 2024) (citation modified). 4 Graham’s declaration unequivocally provides that, in 5 her role as a Director of Field Sales, she “did not set company- 6 wide policies or handle/oversee payroll”; lacked “authority or 7 discretion to create, modify, or approve company-wide policies 8 relating [to] any wage-and-hour practices”; was “[a]t no point . 9 . . invited to provide input” regarding corporate policies; and 10 did not possess final authority to determine employees’ “pay, 11 raises, or bonuses.” (Docket No. 12-2 at 2-3.) 12 Richey’s declaration likewise unequivocally establishes 13 that, in her role as a Field Executive Sales Manager, she “did 14 not set company-wide policies, manage payroll, or make executive- 15 level decisions”; and lacked “authority to determine or set 16 policies relating to wage and hour [issues], equal 17 employment/anti-discrimination and harassment, payroll practices, 18 employee classifications, or compensation structure.” (Docket 19 No. 12-3 at 2-3.) 20 Defendants have also provided a declaration by Morgan 21 Bridges, a “Human Resources Manager” with “access to [employees’] 22 personnel files”; Bridges attests that Graham and Richie’s 23 “responsibilities were strictly limited to enforcing existing 24 policies and managing general day-to-day business operations, 25 including marketing and sales execution, people management, and 26 escalating issues outside their scope to Human Resources or 27 corporate leadership.” (Docket No. 12-1 at 2-3.) 28 IE I EEE I IIE REEDED IEEE IRI EI EE EO Plaintiff nowhere contests the accuracy or veracity of 2 these declarations. (See Docket Nos. 11-1, 15.) Instead, she offers repeated, conclusory assertions that Graham and Richey occupied “supervisory roles with extensive authority” that render ° them “managing agents” under Section 558.1. (Docket No. 15 at ° 9.) Plaintiff’s “ipse dixit . .. . legal conclusions,” Soto, 2024 WL 3834194, at *2, flout Ultramar’s instruction that “mere supervisory status” is insufficient to establish “managing agent ° status,” 21 Cal. 4th 563 at 575. Defendants have thus demonstrated that there is no “possibility of recovery” against Graham or Richey. Grancare, 889 F. 3d at 549. Therefore, the court must disregard these individuals’ citizenship when determining whether complete diversity exists. See Chesapeake & Ohio Ry. Co. v. Cockrell, 232 U.S. 146, 152 (1914). The court must also disregard the citizenship of the Doe defendants when determining whether complete diversity exists. See 28 U.S.C. § 1441(b) (1). There being complete diversity between plaintiff and the remaining defendants, the court will accordingly deny plaintiff’s motion to 20 remand. 21 IT IS THEREFORE ORDERED that plaintiff’s motion to 22 remand (Docket No. 11) be, and the same hereby is, DENIED. 23 - Dated: March 3, 2026 dete ; DY Le 2a Pt Cen Vo 25 UNITED STATES DISTRICT JUDGE 26 27 28