Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_15-cv-00451/USCOURTS-casd-3_15-cv-00451-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441bc Removal- Breach of Contract

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CELIA WAKEFIELD,

Plaintiff,

CASE NO. 15CV0451 JM(JMA)

ORDER DENYING MOTION TO

REMAND; PERMITTING

JURISDICTIONAL DISCOVERY;

VACATING MOTION TO DISMISS;

ORDER TO SHOW CAUSE WHY

COURT SHOULD NOT COMPEL

ARBITRATION

vs.

GLOBAL FINANCIAL PRIVATE

CAPITAL, LLC; and G.F.

INVESTMENT SERVICES, LLC,

Defendants.

Plaintiff Celia Wakefield, individually and as the executor of the estate of

Charles T. Wakefield, deceased, and as the Trustee of the Wakefield Family Trust

Dated April 23, 1997 (“Trust”), moves to remand the action to the Superior Court of

California, County of San Diego. Defendants Global Financial Private Capital, LLC

(“Global Financial”) and G.F. Investment Services, LLC (“G.F. Investment”) oppose

the motion and separately move to dismiss Plaintiff’s complaint on res judicata

grounds. Plaintiff opposes the motion to dismiss. Pursuant to Local Rule 7.1(d)(1),

the court finds the matters presented appropriate for resolution without oral argument. 

For the reasons set forth below, the court denies the motion to remand, permits

jurisdictional discovery, vacates Defendants’ motion to dismiss, and issues an Order

to Show Cause re: Why the Court Should Not Compel Arbitration of Plaintiff’s Claims

(“OSC”). The parties shall file responsive briefs to the OSC within 14 days of entry

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Case 3:15-cv-00451-JM-JMA Document 16 Filed 06/15/15 Page 1 of 6
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of this order, and reply briefs may be filed seven days later.

BACKGROUND

The Notice of Removal

On February 2, 2015, Defendants removed this action from the Superior Court

based upon diversity jurisdiction under 28 U.S.C. §§ 1332, 1441(d), and 1446. 

Defendants allege that they are both Florida limited liability companies(“LLCs”) with

licenses to do business in California, Plaintiff is a California citizen, and the amount

in controversy exceeds $75,000, exclusive of costs and interest. (Ct. Dkt. 1 ¶¶3-9). 

The Notice of Removal (“Notice”) does not allege the citizenship of the members of

the LLCs.

The Complaint

Filed on December 9, 2014, the Complaint alleges eight causes of action for (1)

breach of fiduciary duty; (2) violation of the California Consumer Legal Remedies

(“CLRA:); (3) tort of another claim for attorney’s fees; (4) violation of Elder Abuse

Welf. and Insti. Code Section 15610, et. seq.; (5) violation of Cal. Bus. and Prof. Code

Section 17200; (6) breach of contract; (7) breach of duty to supervise; and (8)

declaratory relief. Plaintiff’s claims arise from the following generally described

conduct.

In mid-summer 2007, Plaintiff and her late husband, Charles T. Wakefield,

(collectively, the “Wakefields”) attended a free financial seminar presented by Mr.

Reid Johnson. On July 18, 2007, the Wakefields entered into an agreement with Reid

Johnson, through his company The Planning Group of Scottsdale, LLC and a WRAP

fee investment advisory contract with Global Financial. Plaintiff alleges thatJohnson

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was an agent of Global Financial. At the time, Plaintiff wasin her late 80s and Charles

/ / /

/ / /

A WRAP fee agreement permits the investment advisor to charge a percentage 1

of the overall client assets being managed. Investopedia,

http://www.investopedia.com/terms/w/wrap-fee.asp (last visited June 11, 2015). 

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 T. Wakefield was in his late 70s.

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In essence, Plaintiff alleges she and her husband were advised to sell their

investments and to reinvest the proceeds in a series of unsuitable investments and

insurance transactions that caused the Wakefields harm. (Compl. ¶¶29, 40). Plaintiff

alleges damages of about $1.6 million. (Compl. ¶49). Plaintiff also alleges that

Johnson, the advisor, failed to disclose material adverse information, including that he

owed about $11 million in taxes to the IRS. In broad brush, Plaintiff alleges that

Defendants failed to adequately supervise Johnson and caused her harm.

This action isrelated to an earlier filed action that commenced on April 30, 2013,

in the Superior Court for the State of California, County of San Diego (Wakefield v.

Reid Stuart Johnson, et al.. Case No. 37-2013-000-046502-CU-FR-CTL, the “Johnson

Action”). The thrust of the Johnson Action is that Johnson, the financial advisor,

breached fiduciary dutiesto Plaintiff and violated severalstate consumer statutes. The

state court complaint does not identify any role played by Global Financial and/or G.F.

Investment in the underlying misconduct. Following mediation, on February 21, 2014,

the Johnson Action settled. (Plaintiff’s Exh. 7).

After the Johnson Action settled, Plaintiff’s counsel discovered the existence of

the relationship between the Wakefields and Defendants. After Mr. Wakefield passed

away in 2010, Plaintiff had no recollection that she and her husband had entered into

a separate contract with Defendants. Neither Plaintiff nor her counsel were allegedly

aware that there existed an advisory contract with Global Financial. (Compl. ¶45, 46). 

On December 8, 2012, Plaintiff’s counsel sent a letter to Global Financial

requesting copies ofrelevant documents. Plaintiff’s counsel did not receive a response

to this letter. (Compl. ¶43). On June 14, 2013, counsel for Johnson in the Johnson

Action provided a copy of the Global Financial WRAP contract to Plaintiff. Plaintiff

alleges that she recently learned of the role of G.F. Investment in the alleged

wrongdoing. 

 Mr. Wakefield died at age 80 and Mrs. Wakefield is currently 93 years old. 2

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DISCUSSION

The Motion to Remand

Plaintiff contends that this action must be remanded because the Notice of

Removal and complaint fail to adequately allege the citizenship of each member of the

limited liability company (“LLC”) Defendants. Diversity jurisdiction under 28 U.S.C.

§1332(d) requires a LLC to identify the citizenship of its members. Johnson v.

Columbia Properties LP, 437 F.3d 894, 899 (9th Cir. 2006). Defendants, who have the

burden of demonstrating jurisdiction, In re DynamicRandomAccess MemoryAntitrust

Litig., 546 F.3d 981, 984 (9th Cir. 2008), did not allege the citizenship of Defendants’

members in the Notice of Removal but have informed Plaintiff that all of Defendants’

members are Florida citizens. The members of Global Financial are two Florida LLCs:

GEMGC, LLC, whose only member is Florida resident Geoffrey Frazier and MCCE

Associates, LLC whose only member is Florida resident Michael Dixon. (Kirby Decl.

¶¶5, 6; Lyle Decl. ¶3). The members of G.F. Investment, Geoffrey Frazier and Michael

Dixon, are both Florida residents. (Lyle Decl. ¶4).

While Plaintiff correctly objects to the declaration of Timothy J. Lyle, based

upon a lack of personal knowledge under Federal Rule of Evidence 602, that is not

grounds for remand at this point in time. Similarly, the Notice of Removal and/or 3

complaintshould have alleged the citizenship of Defendants’ members. However, that

also is not grounds for dismissal. Rather, Defendants have the burden to demonstrate

diversity jurisdiction and maintain that they are able to do so. The court rejects

Plaintiff’s technical argument that the failure to allege Defendants’ members domicile

in the Notice of Removal categorically requires remand. The Notice of Removal

provided notice to Plaintiff ofthe grounds for removal and permitted Plaintiff’s counsel

to inquire into the domicile of the unnamed Defendants’ members. Early in the case

Mr. Lyle declares that he is the Director of Risk Management and Chief

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Compliance Officer (“Risk Officer”) for Global Financial. However, Mr. Lyle does not

identify how, as Risk Officer, he possesses personal knowledge that Defendants’

members are domiciled in Florida.

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the parties have squarely placed the citizenship of Defendants’ members at issue and

have expeditiously pursued this issue. 

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Here, notwithstanding the inadmissible Lyle Declaration, there does not appear

to be a genuine dispute about the citizenship of Defendants’ members. Complete

diversity existed both at the time of filing the complaint and at the time of removal. 

See Lopez v. General Motors Corp., 697 F.2d 1328, 1332 (9th Cir. 1983). Remand is

appropriate for either lack of subject matter jurisdiction or for defects in the removal

procedures. 28 U.S.C. §(c). There are no identifiable procedural defects and complete

diversity exists. Notwithstanding, the evidentiary record submitted by Defendants is

insufficient. Defendants are instructed to provide Plaintiff’s counsel with admissible

evidence of the citizenship of Defendants’ members within 14 days of entry of this

order. In the event Plaintiff desires to take deposition testimony, Defendants shall

make the members available for deposition, limited in scope to establishing the

domicile of the members. The depositions, if any, will go forward within 14 days of

entry of this Order in the state of Defendants’ members domicile.

In sum, the court denies the motion to remand without prejudice, subject to

Defendants’ members providing satisfactory evidence of domicile to Plaintiff within

14 days of entry of this order. Any further motion to dismiss for lack of removal

jurisdiction must be filed within 21 days of entry of this order.

The Motion to Dismiss

The court declines to address Defendants’ Motion to Dismiss until the parties

respond to the court’s OSC, as more fully discussed below. The court vacates the

hearing date on Defendants’ motion to dismiss, subject to renewal upon resolution of

the OSC and a renoticed motion to dismiss. 

Order to Show Cause re: Why the Court Should Not Compel Arbitration of

Plaintiff’s Claims

The WRAP contract entered into by the parties contains an arbitration provision. 

The court notes that the authorities cited by the parties are not dispositive on 4

the issues raised. 

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 (Compl., Exh. 3, ¶14). The Federal Arbitration Act (“FAA”) provides that

a written provision in . . . a contract evidencing a transaction involving

commerce to settle by arbitration a controversy thereafter arising . . . shall

be valid, irrevocable and enforceable, save upon such grounds as exist at

law or equity for the revocation of any contract.

9 U.S.C. §2. The FAA establishes federal policy favoring arbitration of disputes. 

Federal courts are required to “rigorously” enforce the parties agreement to arbitrate. 

Sherson/American Express, Inc. v. McMahon, 482 U.S. 220 (1987). Indeed, “any

doubts concerning the scope of arbitrable issues should be resolved in favor of

arbitration, whether the problem at hand is the construction of the contract language

or an allegation of waiver, delay, or a like defense to arbitrability.” Moses H. Cone

Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (1983).

[W]here a contract contains an arbitration clause, there is a presumption

of arbitrability in a sense that [a]n order to arbitrate the particular

grievance should not be denied unless it may be said with positive

assurance that the arbitration clause is not susceptible of an interpretation

that covers the asserted dispute. Doubts should be resolved in favor of

coverage.

A.T.&T. Tech. Inc. v. Communications Workers of America, 475 U.S. 643, 650 (1986)

(citations omitted).

As the arbitration provision is presumptively valid, the court issues this OSC. 

The parties shall file responsive briefs 14 days after entry of this order and reply briefs

7 days later. Unless otherwise notified by the court, the matter will be taken under

submission without oral argument pursuant to L.R. 7.1(d)(1).

In sum, the court denies the motion to remand without prejudice, permits

jurisdictional discovery, vacatesthe motion to dismiss, and issues an OSC to the parties

to show cause why the court should not compel arbitration.

IT IS SO ORDERED.

DATED: June 15, 2015

 Hon. Jeffrey T. Miller

 United States District Judge

cc: All parties

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