Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_07-cv-05447/USCOURTS-cand-5_07-cv-05447-0/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 28:1332 Diversity-Account Receivable

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United States District Court

For the Northern District of California

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1 Although there are multiple defendants, for convenience, they are here usually

referred to in the singular as "Indalex."

2 Plaintiff does not dispute that the amount in controversy exceeds $75,000. 

*E-filed 1/4/08*

NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

TERRY PASKAL,

Plaintiff,

v.

INDALEX, INC. et al,

Defendants.

 /

Case No. C07-05447 HRL

ORDER ON PLAINTIFF'S MOTION TO

REMAND

Re: Docket No. 6

Plaintiff Terry Paskal sued Indalex1

 in state court alleging fraud and wrongful

termination. While working for Indalex in Canada, Paskal was offered a position as general

manager at the company's Watsonville, California plant. He alleges that Indalex assured him

that the Watsonville plant was stable and encouraged him to relocate his family. In 2005,

Paskal sold his Alberta home, purchased a house in Watsonville, and relocated his family. In

early 2007, Indalex closed the Watsonville plant and terminated Paskal. 

Indalex removed the case on the basis of diversity jurisdiction. It claims that the amount

in controversy exceeds $75,000,2

 that Paskal is a Canadian citizen, and that Indalex is not a

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United States District Court

For the Northern District of California

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3

 Pursuant to 28 U.S.C. § 636(c) and Fed. R. Civ. P. 73, all parties have expressly

consented that this matter may be heard and finally adjudicated by the undersigned.

2

citizen of California. Paskal now moves to remand this case to the Superior Court of the

County of Santa Cruz and seeks attorney's fees under 28 U.S.C. § 1447(c).3

 

LEGAL STANDARD

In any case where subject matter jurisdiction depends on 28 U.S.C. § 1332, there must

be complete diversity of the parties; that is, all plaintiffs must be of different citizenship than all

defendants. Strawbridge v. Curtiss, 7 U.S. 267 (1806). A removal on the basis of diversity is

not permitted if any of "the parties in interest properly joined and served as defendants [are]

citizen[s] of the State in which such action is brought." 28 U.S.C. § 1441(b). The defendant

has the burden of establishing that removal is proper. Gaus v. Miles, Inc., 980 F.2d 564, 566-67

(9th Cir. 1992) (citations omitted).

Diversity jurisdiction may exist in certain cases involving foreign parties. 28 U.S.C.

§1332(a) (diversity requirement met between "citizens of a State and citizens or subjects of a

foreign state" and between "citizens of different States and in which citizens or subjects of a

foreign state are additional parties"). However, there is no jurisdiction in cases involving an

alien plaintiff suing an alien defendant, even if there are citizen defendants present. Faysound,

Ltd. v. United Coconut Chemicals, Inc., 878 F.2d 290, 294-95 (9th Cir. 1989); Cheng v. Boeing,

Co., 708 F.2d 1406, 1412 (9th Cir. 1983), cert. denied, 464 U.S. 1017 (1983).

DISCUSSION

I. Plaintiff's Motion for Remand

To begin, the court must determine the citizenship of Paskal and Indalex. If the parties

are diverse, then it will be necessary to consider the effect of the contested joinder of a nondiverse defendant in an amended state court pleading.

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4 In fact, neither party cited Faysound or Boeing, which may explain their confusing

positions with respect to citizenship. Given the lack of briefing and the fact that the caselaw

on this point is a bit murky, the court includes an alternative basis for deciding this motion. 

3

 A. Citizenship of Paskal and Indalex

 1. Paskal

Plaintiff's complaint alleges that he is a California citizen based on his ownership of

property here. Defendant argues that Paskal is a Canadian citizen. At the hearing on this

motion, the court inquired as to Plaintiff's domicile during the relevant time periods. Based on

the candid responses of Plaintiff's attorney, it cannot be seriously disputed that for diversity

purposes Paskal is a Canadian citizen. 

2. Indalex, Inc.; Indalex Holding Corp.; Indalex, Ltd.

A corporation "shall be deemed to be a citizen of any State by which it has been

incorporated and of the State where it has its principal place of business." 28 U.S.C. § 1332(c). 

The Ninth Circuit test for determining principal place of business is the "total activities test." 

Combining the "nerve center" and the "place of operations" tests, a corporation will be deemed

a citizen of a state if its activities are centralized in that state (e.g., where the physical

operations are predominantly located). But when the corporation's activities are more

dispersed, courts should utilize the "nerve center test" (i.e., typically the location of the

corporate headquarters). 

Defendant's removal papers state that Indalex, Incorporated ("I-INC") and Indalex

Holding Corporation ("I-HC") were both incorporated in Delaware and have their principal

places of business in Illinois. The papers also assert that Indalex, Limited ("I-LTD") is

incorporated in and has its principle place of business in Ontario, Canada. Plaintiff's motion

contends that I-INC has its principal place of business in California (arguing for application of

the "no removal by a forum defendant rule). However, there is no support in the record for such

a claim and accordingly I-INC and I-HC are deemed citizens of Delaware and Illinois.

The citizenship of I-LTD was not addressed by Paskal and the court sees no reason to

dispute the assertion of Defendant that it is a citizen of Canada.4

 Because I-LTD and Paskal are

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5 Defendant says that its answer was filed around 11:00 a.m. Plaintiff does not

provide a time for filing, but his counsel declares that before filing the FAC the clerk

informed him than an answer was not currently filed on the electronic docket. 

4

both Canadian citizens, this case fits squarely into Faysound: an alien plaintiff suing an alien

defendant along with citizen co-defendants. 878 F.2d at 294-95. As such, no jurisdiction exists

to keep this case in federal court and the motion to remand is GRANTED. Id. However, as

noted previously, the court now considers an alternative basis for remand. 

B. Additional Defendant Basilotta

On October 24, 2007, Paskal filed a First Amended Complaint ("FAC") in the Santa

Cruz Superior Court ("state court"). The FAC adds Plaintiff's supervisor, Lee Basilotta, as a

defendant. Basilotta is a citizen of California. Defendant says that the FAC is defective

because it was filed after Indalex filed an answer in state court. (Once the answer is filed, state

court rules require leave of court before an amended complaint may be filed. Paskal did not

secure such leave). 

1. Which is the operative pleading? 

The FAC and the answer were filed in state court on the same day. Neither party has

established which pleading was filed first.5 Both the FAC and the answer are now filed on the

state court docket. Because this court is to construe the removal statutes strictly, the ambiguity

concerning which pleading was filed first should be resolved in favor of remanding the case to

state court. Gaus, 980 F.2d at 566-67. Especially where Indalex has failed to establish beyond a

preponderance of evidence that it won the "race to the courthouse." See id.

Furthermore, once removal is effected, all "orders[] and other proceedings had in such

action [i.e., the state court] prior to its removal shall remain in full force and effect until

dissolved or modified by the district court." 28 U.S.C. § 1450. Because the clerk permitted the

FAC to be filed (even if, perhaps, erroneously) and because there was no order striking the FAC

prior to removal, this court must take the action as it stood in the state court. Accordingly, the

FAC is the operative pleading. 

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2. Is Basilotta a "Sham Defendant"?

Defendant next argues that, even if the FAC is deemed the operative pleading, the case

should stay in federal court because Basilotta is a so-called "sham defendant." United

Computer Systems v. AT&T Corp., 298 F.3d 756, 761-62 (9th Cir. 2002) (a court may ignore a

defendant's citizenship if the party was fraudulently joined for the sole purpose of defeating

subject matter jurisdiction). A defendant is a sham only if the plaintiff could not possibly

recover against the party whose joinder is questioned. Kruso v. International Telephone &

Telegraph Corp., 872 F.2d 1416, 1426 (9th Cir. 1989). 

The FAC alleges fraud claims, negligent misrepresentation, and intentional infliction of

emotional distress against Basilotta. Indalex argues, but has not demonstrated, that under

well-settled California law Paskal could not possibly prevail against Basilotta. See United

Computer Systems, 298 F.3d 756 at 761-62. As to the misrepresentation claims, an agent

(Basilotta) could be found personally liable along with his principal (Indalex). And, while it is

true that the emotional distress claim does not currently allege the requisite "extreme or

outrageous conduct," Paskal would certainly be given leave to amend the complaint to cure

such a defect. See Nickelberry v. DaimlerChrysler Corp., 2006 WL 997391, *1-2 (N.D.Cal.). 

3. Was Basilotta Served Prior to Removal? 

As a properly named defendant, this court must finally consider whether Basilotta's

inclusion requires a remand to state court. As a citizen of California, his presence in the suit

does not destroy diversity (Paskal is a citizen of Canada). It is Basilotta's status as a "local

defendant" which may require remand. However, such a result is compelled only if he was

served prior to the removal being effected. Spencer v. U.S. District Court for N.D. Cal. (Altec

Industries, Inc.), 393 F.3d 867, 870-71 (9th Cir. 2004). This is because the forum defendant

rule of 28 U.S.C. § 1441(b) is only applicable at the time a notice of removal is filed. Id. Here,

Indalex filed the copy of the notice of removal in state court two days after Basilotta was served

with the summons. See 28 U.S.C. § 1446(d). Therefore, the rule prohibiting forum defendant

removal applies and the motion to remand is GRANTED on this alternative basis. 

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II. Plaintiff's Request for Attorneys' Fees

Paskal requests an award of attorney's fees and costs incurred as a result of Indalex's

allegedly improper removal. 28 U.S.C. § 1447(c). This court has a "great deal of discretion" to

determine whether costs and fees should be awarded under this provision. Morris v.

Bridgestone / Firestone, Inc., 985 F.2d 238, 240 (9th Cir. 1993). Although it was not ultimately

persuaded by Defendant's arguments, Indalex's removal was not frivolous, nor was it motivated

by bad faith. The Court therefore declines to exercise its discretion to award Paskal's fees and

costs. Accordingly, Paskal's request for costs and fees is DENIED.

CONCLUSION

Because this motion to remand is GRANTED, the Case Management Conference

scheduled for February 12, 2008 is VACATED. The case is remanded to the Superior Court for

County of Santa Cruz. The Clerk shall close this court's file.

IT IS SO ORDERED.

Dated: 1/4/08 

HOWARD R. LLOYD

UNITED STATES MAGISTRATE JUDGE

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United States District Court

For the Northern District of California

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THIS IS TO CERTIFY THAT A COPY OF THIS NOTICE WILL BE SENT TO:

David Y. Imai davidimai@sbcglobal.net 

Jason Wade Kearnaghan jkearnaghan@sheppardmullin.com 

Tracey Adano Kennedy tkennedy@sheppardmullin.com 

Kevin Michael Rivera krivera@sheppardmullin.com 

Dated: 1/4/08

 /s/ KRO 

Chambers of Magistrate Judge Howard R. Lloyd

Case 5:07-cv-05447-HRL Document 17 Filed 01/04/08 Page 7 of 7