Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_18-cv-05211/USCOURTS-cand-5_18-cv-05211-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition For Removal--Other Contract

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Case No. 18-CV-05211-LHK 

ORDER DENYING PLAINTIFF’S MOTION TO REMAND

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

EDWARD R. MONFORT,

Plaintiff,

v.

ADOMANI, INC., et al.,

Defendants.

Case No. 18-CV-05211-LHK 

ORDER DENYING PLAINTIFF’S

MOTION TO REMAND

Re: Dkt. No. 9

Plaintiff Edward R. Monfort (“Plaintiff”) sues Defendants Adomani, Inc. (“Adomani”),

James L. Reynolds, Michael K. Menery, Robert E. Williams, and Kevin G. Kanning (collectively, 

“Defendants”) for causes of action including breach of contract, fraud, fraudulent inducement to 

contract, and declaratory relief. Before the Court is Plaintiff’s motion to remand. Having 

considered the submissions of the parties, the relevant law, and the record in this case, the Court 

DENIES Plaintiff’s motion to remand. 

I. BACKGROUND

A. Factual Background

Plaintiff is “the founder of Adomani” and “the author of the patents that were used to start 

Adomani.” Compl. ¶ 1. Plaintiff is a Florida resident. Id. ¶ 5. Adomani is a Delaware 

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Case No. 18-CV-05211-LHK 

ORDER DENYING PLAINTIFF’S MOTION TO REMAND

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corporation with its principal place of business in Corona, California. Id. ¶ 10. 

The individual named Defendants are all Adomani executives. Id. ¶¶ 6–9. Reynolds, who 

resides in California, “has served as Adomani’s President and CEO since September 2014 and a 

Director since July 2014,” and resides in California. Id. ¶ 6. Menerey, who resides in California,

is Adomani’s chief financial officer (“CFO”) and a Director of Adomani. Id. ¶ 7. Williams, who 

resides in California, is a vice president and Director of Adomani. Id. ¶ 8. Kanning, who resides 

in California, serves as Adomani’s Vice of President of Business Development and Vice President 

of Investor Relations. Id. ¶ 9. 

Plaintiff owns a patent on an electric drive train. Id. ¶ 17. In 2012, Plaintiff partnered with 

Dennis Di Ricco to start a limited liability company (“LLC”) “to manufacture an electric drive 

train.” Id. ¶¶ 18, 20. Di Ricco hired Defendants Williams and Kanning to serve as executives 

with the LLC. Id. ¶ 20. Later, at Di Ricco’s urging, Plaintiff and Di Ricco converted the LLC and 

incorporated Adomani as a Florida corporation. Id. ¶¶ 21–23. Di Ricco assured Plaintiff that 

Plaintiff would “remain the majority shareholder in the corporation.” Id. ¶ 21. In early 2014, Di 

Ricco persuaded Plaintiff and Adomani’s other Directors to hire Defendant Reynolds as 

Adomani’s CEO. Id. ¶¶ 30–33. Plaintiff alleges that Adomani’s S-1 Registration Statement filed 

in 2014 lists Plaintiff as the owner of over 34 million shares of common stock. Id. ¶ 38. 

Plaintiff alleges that prior to Adomani’s initial public offering, the individual 

Defendants—including Menerey, who had been hired as Adomani’s CFO—targeted Plaintiff to 

reduce his shares of common stock. Id. ¶ 40. Eventually, Plaintiff signed an employment 

agreement with Adomani “which appended a Release of Claims in order to accommodate 

[Adomani’s] initial public offering and monetize [Plaintiff’s] option awards in the amount of 

15,000,000 stock.” Id. ¶ 44. Plaintiff alleges that Defendants then reincorporated Adomani as a 

Delaware corporation and listed Plaintiff as owning “only 4 million shares of common stock and 

15 million options to purchase common stock.” Id. ¶ 46. In May 2016, Reynolds “caused 

Adomani to terminate [Plaintiff].” Id. ¶ 47. In March 2018, Reynolds sent a letter to Plaintiff 

stating that Plaintiff had been terminated “for cause,” which Plaintiff alleges Reynolds did to 

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Case No. 18-CV-05211-LHK 

ORDER DENYING PLAINTIFF’S MOTION TO REMAND

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“wrongfully deprive” Plaintiff of Plaintiff’s stock options. Id. ¶ 49. 

B. Procedural History

On August 2, 2018, Plaintiff filed a Complaint against Defendants in Superior Court for 

the County of Santa Clara. Compl. Plaintiff’s Complaint alleges four causes of action: (1) breach 

of contract against Adomani, id. ¶¶ 50–62; (2) fraud against the individual Defendants, id. ¶¶ 63–

71; (3) fraudulent inducement to contract against the individual Defendants, id. ¶¶ 72–77; and (4) 

declaratory relief against all Defendants. Id. ¶¶ 78–82. 

On August 24, 2018, all Defendants filed a notice of removal and removed Plaintiff’s 

Complaint to federal court. ECF No. 1. Defendants removed the case on the basis of diversity 

jurisdiction pursuant to 28 U.S.C. §§ 1332 and 1441(a), (b). Id. at 2. 

On September 24, 2018, Plaintiff filed a motion to remand the case to state court. ECF No. 

9 (“Mot.”). On September 26, 2018, Defendants agreed to waive service of process. ECF No. 12. 

On October 9, 2018, Defendants filed their opposition. ECF No. 15 (“Opp.”). On October 16, 

2018, Plaintiff filed a reply. ECF No. 17 (“Reply”). 

On November 21, 2018, the parties filed a stipulation to extend the deadline for 

Defendants to respond to Plaintiff’s Complaint to 20 days after the Court’s ruling on the instant 

motion to remand. ECF No. 25. 

II. LEGAL STANDARD

A suit may be removed from state court to federal court only if the federal court would 

have had subject matter jurisdiction over the case. 28 U.S.C. § 1441(a); see Caterpillar Inc. v. 

Williams, 482 U.S. 386, 392 (1987) (“Only state-court actions that originally could have been filed 

in federal court may be removed to federal court by the defendant.”). If it appears at any time 

before final judgment that the federal court lacks subject matter jurisdiction, the federal court must 

remand the action to state court. 28 U.S.C. § 1447(c). In addition, a party may move to remand a 

case to state court “on the basis of any defect other than lack of subject matter jurisdiction,” 

provided that the party so moves within 30 days of the notice of removal. Id. 

The party seeking removal bears the burden of establishing federal jurisdiction. Provincial 

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ORDER DENYING PLAINTIFF’S MOTION TO REMAND

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Gov’t of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 (9th Cir. 2009). “The removal 

statute is strictly construed, and any doubt about the right of removal requires resolution in favor 

of remand.” Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009) (citing 

Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992)).

III. DISCUSSION

In his motion to remand, Plaintiff argues that even though the Court has diversity 

jurisdiction over this case pursuant to 28 U.S.C. § 1332, remand is warranted because Defendants’ 

notice of removal was procedurally improper. Specifically, Plaintiffs contends that the 

Defendants, all of whom are California residents, cannot remove Plaintiff’s Complaint on the basis 

of diversity jurisdiction. Mot. at 2. Under 28 U.S.C. § 1441(b)(2), “[a] civil action otherwise 

removable solely on the basis of [diversity jurisdiction] may not be removed if any of the parties 

in interest properly joined and served as defendants is a citizen of the State in which such action is 

brought.” 28 U.S.C. § 1441(b)(2). The Ninth Circuit has held that this rule “confines removal on 

the basis of diversity jurisdiction to instances where no defendant is a citizen of the forum state.” 

Lively v. Wild Oats Markets, Inc., 456 F.3d 933, 939–40 (9th Cir. 2006) (holding that the local

defendant rule is procedural rather than jurisdictional, and is thus subject to the 30-day limit in 28 

U.S.C. § 1447(c) for motions to remand based on procedural defects). 

Defendants do not dispute that all of the individual Defendants—Reynolds, Menerey, 

Williams, and Kanning—reside in California, and that Adomani has its principal place of business 

in California. See Opp. at 2. However, Defendants contend that 28 U.S.C. § 1441(b)(2) and the 

local defendant rule are not applicable to this case because Defendants filed their notice of 

removal before Defendants were served. By its plain language, § 1441(b)(2) states that an in-state 

defendant may not remove a case on the basis of diversity jurisdiction—if that defendant was 

“properly joined and served.” 28 U.S.C. § 1441(b)(2) (emphasis added). 

As a result, several courts in this district have held that “a defendant may remove an action 

prior to receiving proper service, even when the defendant resides in the state in which the 

plaintiff filed the state claim.” Sherman v. Haynes & Boone, 2014 WL 4211118, at *1 & n.8 

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Case No. 18-CV-05211-LHK 

ORDER DENYING PLAINTIFF’S MOTION TO REMAND

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(N.D. Cal. Aug. 22, 2014) (citing cases); see also Regal Stone Ltd. v. Longs Drug Stores Cal., 

LLC, 881 F. Supp. 2d 1123, 1127 (N.D. Cal. 2012) (holding that courts in this district “hold that 

the clear and unambiguous language of the statute only prohibits removal after a properly joined 

forum defendant has been served”). Some district courts in other districts have “declined to apply 

the plain meaning” of § 1441(b)(2) because, in their view, doing so would “defeat the statute’s 

purpose.” Marsh v. Monster Beverage Co., 2016 WL 11508266, at *4 (C.D. Cal. Jan. 4, 2016) 

(collecting cases). Only a few months ago, the Third Circuit became the first circuit court to 

consider whether an unserved in-state defendant may remove a case on the basis of diversity 

jurisdiction. See Encompass Ins. Co. v. Stone Mansion Restaurant Inc., 902 F.3d 147, 152 n.2 (3d 

Cir. 2018). The Third Circuit held that under the “plain meaning” of § 1441(b)(2), an unserved instate defendant may remove a case on the basis of diversity jurisdiction. Id. at 152–54. As 

explained below, the Court is persuaded by the reasoning of the Third Circuit and other district 

courts in this district, and concludes that § 1441(b)(2) does not bar an in-state defendant from 

removing an action before the defendant is served. 

In opposition, Plaintiff points to one order in this district granting a motion to remand after 

an unserved in-state defendant had removed the action to federal court, but Plaintiff’s argument is 

unavailing. Mot. at 6 (citing Tourigny v. Symantec Corp., 110 F. Supp. 3d 961 (N.D. Cal. 2015)). 

By its own admission, Tourigny is distinguishable from the other cases in this district permitting 

unserved in-state defendants to remove prior to service. Tourigny involved a single local 

defendant who was notified of an error in service, and then removed the case to federal court

before proper service was effectuated. Id. at 962. Tourigny held that 28 U.S.C. § 1441, by its 

plain language, applies only “when plaintiff sues multiple defendants,” because the statute refers 

to “defendants” rather than a single defendant. Id. at 964; see 28 U.S.C. § 1441(b)(2) (prohibiting

removal when “any of the parties in interest properly joined and served as defendants” is local) 

(emphasis added). Thus, Tourigny does not conflict with the conclusion that § 1441(b)(2)’s 

“joined and served” language means what it says: when a plaintiff sues multiple defendants, only a 

joined and served local defendant is prohibited from removing the case on the basis of diversity 

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ORDER DENYING PLAINTIFF’S MOTION TO REMAND

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jurisdiction. Tourigny itself recognized as much. Id. at 964 (stating that Tourigny’s interpretation 

of § 1441(b)(2) as applied to a single defendant “does not contradict” the several cases in this 

district holding that when a plaintiff sues multiple defendants, only a joined and served defendant 

is prohibited from removing). 

Lastly, Plaintiff contends that the Court’s plain language reading of § 1441 is 

“unreasonably literal,” and that permitting an unserved local defendant to remove conflicts with 

the statute’s purpose. However, Plaintiff’s argument is unsupported. The Ninth Circuit has held 

that removal on the basis of diversity jurisdiction exists to “protect out-of-state defendants from 

possible prejudices in state court.” Lively, 456 F.3d at 940. The local defendant rule recognizes 

that “[t]he need for such protection is absent . . . where the defendant is a citizen of the state in 

which the case is brought.” Id. Failing to further a purpose is not equivalent to the purpose’s 

impairment, however. Interpreting “joined and served” to permit pre-service removal does not 

impair an out-of-state defendant’s ability to avoid “possible prejudices in state court.” Id. 

District courts in other districts have concluded that permitting pre-service removal 

frustrates § 1441(b)(2)’s general purpose of preventing “gamesmanship.” Marsh, 2016 WL 

11508266, at *2. However, the more precise question is whether pre-service removal frustrates 

the purpose behind § 1441(b)(2)’s “joined and served” language. As the Third Circuit explained, 

the “joined and served” language reflects Congress’s intent to prevent a plaintiff from fraudulently 

joining a resident party in order to avoid removal to federal court. Encompass, 902 F.3d at 153. 

Interpreting “joined and served” to permit pre-service removal by an in-state defendant does not 

impair the provision’s anti-fraudulent joinder purpose, which focuses on what a plaintiff may or 

may not do to defeat diversity jurisdiction. Id. (noting that a plain language interpretation of 

joined and served “protects the statute’s goal without rendering any of the language unnecessary”). 

Moreover, as the district court in Regal Stone pointed out, Congress amended the removal statute 

after decisions permitting pre-service removal, but did not alter the “joined and served” language. 

Regal Stone, 881 F. Supp. 2d at 1129 (observing that a court “must interpret Congress’s inaction 

as satisfaction with the unamended portion, or at least tolerance of its inadequacies”). 

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ORDER DENYING PLAINTIFF’S MOTION TO REMAND

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Therefore, for all of the above reasons, the Court agrees with the Third Circuit and the 

district courts in this district to have considered the question presented by this case. By its plain 

language, 28 U.S.C. § 1441(b)(2) permits an in-state defendant who has not been both joined and 

served to remove a case to federal court on the basis of diversity jurisdiction. Here, it is 

undisputed that Defendants removed Plaintiff’s Complaint before any Defendants were served. 

Thus, Defendants’ notice of removal was not procedurally improper, and remand is not warranted. 

IV. CONCLUSION

For the foregoing reasons, the Court DENIES Plaintiff’s motion to remand. 

IT IS SO ORDERED.

Dated: January 8, 2019

______________________________________

LUCY H. KOH

United States District Judge

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