Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-03999/USCOURTS-cand-3_07-cv-03999-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1331 Fed. Question

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

MARWAN A. HARARA,

Plaintiff,

 v.

LANDAMERICA FINANCIAL GROUP

INC.; LANDAMERICA CORPORATION;

LANDAMERICA NATIONAL

COMMERCIAL SERVICES;

LANDAMERICA LAWYERS TITLE

COMPANY; and LANDAMERICA

COMMERCIAL SEARCH SERVICES

COMPANY; 

Defendants. /

No. C 07-03999 WHA

ORDER (1) DENYING

PLAINTIFF’S MOTION TO

REMAND; (2) GRANTING

DEFENDANTS’ MOTION TO

DISMISS; AND (3) VACATING

HEARING

INTRODUCTION

In this action for negligence, breach of contract, and other claims, plaintiff moves to

remand this action back to state court, and defendants move to dismiss the action. Defendants

have shown that removal was timely because the grounds for removal were not apparent

within the four corners of the complaint. Defendants have also shown that the issue of

whether plaintiff had a right to purchase the property at stake here was already litigated in a

prior action. Plaintiff is precluded from litigating that issue again, and each of plaintiff’s

extant claims against defendants hinge on that issue. Accordingly, plaintiff’s motion to

remand is DENIED. Defendants’ motion to dismiss is GRANTED. Plaintiff will not be granted

Case 3:07-cv-03999-WHA Document 36 Filed 10/09/07 Page 1 of 8
United States District Court

For the Northern District of California

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leave to amend because doing so would be futile. Seeing that no further argument is

necessary on this motion, the hearing is hereby VACATED. 

STATEMENT

This action stems from plaintiff Marwan A. Harara’s attempts to purchase a gas station

located at 4280 Foothill Boulevard in Oakland from Tosco Operating Company (Compl.

¶¶ 6–7). Harara alleges that he entered into a written contract with Tosco for the sale of the

property and attached improvements on June 6, 2003 (id. at ¶ 7). He then opened an escrow

account for conveyance of the station, designating LandAmerica as the escrow agent (id. at

¶ 8). Harara paid an escrow desposit of $5,000 which he delivered to LandAmerica (ibid.). 

Ultimately, the sale did not go through because Harara was unable to obtain adequate

financing.

On February 6, 2004, plaintiff sued the franchisor of the gas station, ConocoPhillips

Company, for a number of claims related to his attempted purchase. Harara v.

ConocoPhillips Company, et al., Case No. C 04-00515 BZ. In that action, Harara alleged that

he had a franchise agreement with Tosco Marketing Company, a predecessor in interest to

ConocoPhillips (Eldredge Decl. Exh. B, ¶ 19). On April 22, 2003, ConocoPhillips sent

Harara a notice of non-renewal of the franchise agreement and offered to sell the station to

him, with a deadline for acceptance of June 9, 2003 (id. at ¶ 39). Plaintiff accepted the offer

and entered into an escrow with ConocoPhillips (id. at ¶ 44). 

On or about December 17, 2003, Harara accepted an offer to sell the station to a third

party (id. at ¶ 48). Plaintiff asked ConocoPhillips for consent to assign the right to purchase

the station, but it refused (id. at ¶¶ 51, 53, 54). ConocoPhillips cancelled escrow and

informed Harara (id. at ¶ 55). Harara instructed LandAmerica to keep the escrow account

open, but LandAmerica refused per ConocoPhillips’ instructions (id. at ¶ 56). Because of

this, Harara could not close escrow, and ConocoPhillips sold the property to a different third

party (id. at ¶ 60). 

In his complaint against ConocoPhillips, Harara alleged that he had been defrauded in

connection with the proposed sale, and that ConocoPhillips had violated the Petroleum

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Marketing Practices Act in several ways by failing to give him the right of first refusal and

selling the station to a third party for a lower price than what was originally offered to Harara

(id. at ¶¶ 67, 71–72). Harara also requested that the Court compel ConocoPhillips to sell the

station to him (id. at Prayer for Relief, ¶¶ 3–4).

Judge Zimmerman granted ConocoPhillips’ motion for partial summary judgment in a

lengthy order dated April 29, 2005. Harara v. ConocoPhillips Co., 377 F. Supp. 2d 779

(N.D. Cal. 2005). The decision found that ConocoPhillips decided not to renew its franchise

agreement with Harara in good faith. Id. at 786. Judge Zimmerman held that the facts

showed that Harara could not close escrow not “because of anything defendant said or did, but

because he could not obtain the necessary funding.” Id. at 796. All of Harara’s claims were

dismissed, and judgment was entered for ConocoPhillips in that action. ConocoPhillips had

filed counterclaims against Harara for failing to reimburse it for certain costs. Those claims

eventually settled. 

***

In this action, Harara alleges that LandAmerica cancelled the escrow account in

contravention of his instructions (id. at ¶ 10). LandAmerica then opened up another escrow

account so that a third party could purchase the property from ConocoPhillips. Harara claims

that he was damaged by LandAmerica’s cancelling the escrow account because he was unable

to purchase the gas station (id. at ¶ 17). As to the $5,000 deposit, he asserts that it was never

returned to him (id. at ¶ 22). His other alleged damages include loss of goodwill, loss of his

investment in the gas station, loss of merchandise, loss of equipment, and the loss of the

benefit of the proceeds from the sale of the business (id. at ¶ 36). 

Harara filed this complaint in Alameda County Superior Court on December 6, 2006. 

None of defendants were served until May 30, 2007. The complaint alleged claims for

negligence, breach of contract, breach of contractual covenant of good faith and fair dealing,

unjust enrichment, breach of fiduciary duty, conspiracy, and unfair business practices in

violation of California Business and Professions Code § 17200. The complaint does not

allege the states of incorporation or principal places of business for all defendants. It alleges

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that one defendant’s principal place of business is located in San Francisco (See Eldredge

Decl. Exh. A ¶ 2). The complaint does not specify an amount for plaintiff’s damages, nor

does it allege that his damages exceed $75,000. 

Defendants appeared at a case management conference in Alameda County Superior

Court on June 29, 2007. At that conference, defendants orally requested an extension of time

to respond to the complaint, and the request was granted. Defendants filed a notice of

removal on August 3, 2007. Defendants then filed their motion to dismiss on August 8, 2007. 

Plaintiff filed the motion to remand on August 30, 2007. 

ANALYSIS

1. PLAINTIFF’S MOTION TO REMAND.

Plaintiff moves to remand, arguing that defendants did not timely file a notice of

removal. Removal based on diversity jurisdiction under 28 U.S.C. 1441(b) is permitted if a

federal court would have original jurisdiction under 28 U.S.C. 1332. Diversity jurisdiction

requires that all parties must be citizens of different states and that the amount in controversy

must exceed $75,000. 28 U.S.C. 1332. In addition, 28 U.S.C. 1441(b) requires that “none of

the parties in interest properly joined and served as defendants is a citizen of the State in

which such action is brought.” Diversity jurisdiction, as a basis for removal, must exist both

at the time the complaint is filed and when removal is effected. Strotek Corp. v. Air Transport

Ass’n of Am., 300 F.3d 1129, 1131–32 (9th Cir. 2002). 

To properly file a notice of removal:

The notice of removal of a civil action or proceeding shall be filed within thirty

days after the receipt by the defendant, through service or otherwise, of a copy

of the initial pleading setting forth the claim for relief upon which such action

or proceeding is based, or within thirty days after the service of summons upon

the defendant if such initial pleading has then been filed in court and is not

required to be served on the defendant, whichever period is shorter. 

28 U.S.C. 1446(b). Defendants concede that they did not file their notice of removal within

thirty days of being served with the complaint. Instead, they argue that the facts to support

the notice of removal were not found within the four corners of the complaint. Defendants

had to conduct a further investigation in order to discover that the action was, in fact,

removable. 

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In the Ninth Circuit, “notice of removability under § 1446(b) is determined through an

examination of the four corners of the applicable pleadings, not through subjective knowledge

or a duty to make further inquiry.” Harris v. Bankers Life and Casualty Company, 425 F.3d

689, 694 (9th Cir. 2005). Moreover, when a defendant receives an initial pleading, “[i]f no

ground for removal is evident in that pleading, the case is ‘not removable’ at that stage.” Ibid. 

Thus, the thirty-day removal clock relies on the facts actually pleaded in the complaint, not

any separate or independent inquiry a defendant needs to perform on receipt of a pleading. 

According to defendants, plaintiff’s complaint did not plead sufficient facts to put it on

notice that this action could be removable for diversity jurisdiction. First, plaintiff did not

properly allege the residency of defendants. In his complaint, plaintiff alleged that

“Defendants LandAmerica Financial Group, Inc., LandAmerica Corporation, LandAmerica

National Commercial Services, LandAmerica Lawyers Title Company (“LandAmerica”) were

formed, and now are, as a parent Virginia corporation have operation divisions and

subsidiaries in California and having its principal place of business [in San Francisco]”

(Compl. ¶ 2). Here, this allegation arguably alleges the citizenship of the parent corporation,

but not each of the subsidiaries. It also does not allege the citizenship of defendant

LandAmerica Commercial Search Services Company at all. After investigation, defendants

confirmed that LandAmerica’s principal place of business is in Virginia, not California as

plaintiff alleged (Not. of Removal ¶ 4). Defendants also found that the entity LandAmerica

Corporation is unknown to them and is a suspended corporation originally formed in

California. In response, plaintiff protests that he did correctly allege that LandAmerica was a

Virginia corporation. This ignores that plaintiff incorrectly pleaded that at least some

divisions or subsidiaries of LandAmerica had their principal places of business in California. 

Accordingly, the facts that made this action removable were not apparent on the face of the

complaint, so defendants did not untimely file their notice of removal. 

Second, defendants contend that plaintiff did not plead damages to satisfy the amountin-controversy requirement of $75,000. Plaintiff did not plead a specific amount of damages

in the complaint, nor did he allege that his damages exceeded $75,000. Defendants’ counsel

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declared that he was not aware if plaintiff’s alleged damages would exceed the jurisdictional

amount until he looked at the complaint in the prior action against ConocoPhillips (Eldredge

Decl. ¶ 4). Plaintiff responds by noting that there was an indemnification agreement between

ConocoPhillips and LandAmerica from the first action. According to plaintiff, the agreement

should have put defendants on notice of the amount of damages at issue. Any indemnification

agreement between ConocoPhillips and LandAmerica is well outside the four corners of this

complaint. Moreover, this argument assumes that the amounts of damages for the two actions

are the same, which may or may not be true. 

Finally, Harara argues that defendants waived their right to remove by asking for

additional time to respond to the complaint at the case management conference held in

Alameda County Superior Court. Answering a complaint in state court does not constitute

waiver of removal. See Harris, 425 F.3d at 694 (allowing defendants to remove action

several years after it commenced upon finding of new facts supporting removal). If an action

is still removable after an answer is filed, logic dictates that merely asking for an extension of

time to answer could not be considered a waiver of removal. Accordingly, plaintiff’s motion

to remand is DENIED. 

2. DEFENDANTS’ MOTION TO DISMISS. 

A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims

alleged in the complaint. “While a complaint attacked by a Rule 12(b)(6) motion to dismiss

does not need detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of

his ‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation

of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, ___ U.S.

____, 127 S.Ct. 1955, 1964–65 (May 21, 2007). “All allegations of material fact are taken as

true and construed in the light most favorable to plaintiff. However, conclusory allegations of

law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to

state a claim.” Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996).

Defendants contend that all of plaintiff’s claims are barred by collateral estoppel from

the prior action between Harara and ConocoPhillips. In a diversity action, the law of the

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forum state controls as to collateral estoppel. Pardo v. Olson & Sons, Inc., 40 F.3d 1063,

1066 (9th Cir. 1994). Five requirements must be met for collateral estoppel to apply under

California law. First, the issue sought to be precluded must be identical to an issue decided in

the former proceeding. Second, the issued must have been actually litigated. Third, it must

have been necessarily decided in the first proceeding. Fourth, the prior decision must have

been final and on the merits. Finally, the party against whom preclusion is sought must be the

same or in privity with a party to the former proceeding. Gikas v. Zolin, 6 Cal. 4th 841, 849

(1993). The final requirement is satisfied because Harara was a party to the former action. 

As to the first requirement, defendants argue that the issues of whether Harara had a

right to purchase the gas station and whether his $5,000 security deposit was returned to him

have already been decided. In the prior action, Judge Zimmerman granted partial summary

judgment holding that Harara did not have a right to purchase the gas station, and that

ConocoPhillips had a right to cancel the escrow. The same issues are at stake here. Each of

plaintiff’s claims hinges on a theory that LandAmerica should not have cancelled the escrow

account per ConocoPhillips’ orders. Harara repackages his claims by arguing that

LandAmerica was engaged in self-dealing, or that they breached a fiduciary duty, or that they

breached a contract, but each claim relies on whether or not it was proper to cancel the

escrow. In turn, that depends on whether Harara had a right to purchase the gas station. The

prior action found that Harara had no such right, so cancelling escrow was proper. Plaintiff

claims that defendants’ motion does not address the question of his $5,000 security deposit. 

The order in the prior case, however, found that it had, in fact, been returned to him. Harara,

377 F. Supp. 2d at 789. Accordingly, the same issue was reached in the prior action.

The second and third prongs require that the issue must have been actually litigated

and necessarily decided in the prior action. Before the decision in the prior action, both

parties filed cross-motions for summary judgment and presented evidence on the question of

whether Harara had any right to purchase the station. It was also necessarily decided in that

action, because a number of Harara’s claims, including fraud and breach of contract, stemmed

from his asserted right to purchase the station. 

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As to the fourth element, plaintiff argues that there was no final judgment on these

issues because the action later went to trial. In the summary-judgment order in the prior

action, defendants prevailed on all of plaintiff’s claims. The only claims left for trial were

three counterclaims by ConocoPhillips related to plaintiff’s failure to reimburse it for amounts

it paid to the City of Oakland for drug-abatement efforts. Plaintiff’s claims against

ConocoPhillips were finally decided on the merits. The remaining indemnification claims

settled, and the entire action was dismissed with prejudice. The entire action was not decided

on the merits, but plaintiff’s claims regarding his purported right to purchase the gas station

were decided on the merits. Accordingly, plaintiff is collaterally estopped from asserting his

claims against defendants. Defendants’ motion is GRANTED, and these claims are

DISMISSED. Plaintiff’s request for leave to amend is denied as futile. Any claims he could

assert based on LandAmerica’s cancelling the escrow against his wishes are barred by

collateral estoppel from the prior action. 

CONCLUSION

For all of the above-stated reasons, plaintiff’s motion to remand is DENIED. 

Defendants’ motion to dismiss is GRANTED. Granting plaintiff leave to amend would be

futile, so this action is DISMISSED. Judgment shall be entered for defendants. No further

argument is necessary on this matter, thus the hearing is hereby VACATED. 

IT IS SO ORDERED.

Dated: October 9, 2007. ______________________________________ 

WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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