Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_08-cv-00816/USCOURTS-caed-2_08-cv-00816-0/pdf.json

Parties Involved:
Graham Brent
Defendant
California Crane School, Inc.
Plaintiff
Robert Hornauer
Defendant
International Assessment Institute
Defendant
Anthony Mitchell
Defendant
National Commission for Certification of Crane Operators
Defendant
John Nypl
Plaintiff

Document Text:

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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

CALIFORNIA CRANE SCHOOL, INC., No. 2:08-cv-00816-MCE-EFB

a California corporation; JOHN 

NYPL, an individual,

Plaintiffs,

v. MEMORANDUM AND ORDER

NATIONAL COMMISSION FOR

CERTIFICATION OF CRANE

OPERATORS,a non-profit

corporation; THE INTERNATIONAL

ASSESSMENT INSTITUTE, a

Florida corporation; GRAHAM

BRENT, an individual; ANTHONY

MITCHELL, an individual;

ROBERT HORNAUER, an

individual; DOES ONE through

100,

Defendants.

----oo0oo----

Through the present action, Plaintiffs California Crane

School and John Nypl (“Plaintiffs”) seek damages under California

state law for antitrust violations, interference with prospective

business, interference with contract, and unfair competition and

false advertising. 

Case 2:08-cv-00816-MCE -EFB Document 29 Filed 08/19/08 Page 1 of 10
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 Because oral argument will not be of material assistance, 1

the Court orders this matter submitted on the briefings. E.D.

Cal. Local Rule 78-230(h).

2

Plaintiffs filed the action in Superior Court of the State of

California in and for the County of Nevada. Defendants National

Commission for Certification of Crane Operators (“NCCCO”),

International Assessment Institute (“IAI”), and several

individuals including Robert Hornauer (“Hornauer”), later removed

the action to this Court. Presently before the Court is

Plaintiff’s Motion for Remand and Attorneys’ Fees.1

BACKGROUND

Plaintiff Nypl, a California resident, is the sole owner of

California Crane School (“CCS”), a California corporation that

provides training courses designed to assist in the certification

of crane operators in California. Defendants NCCCO and IAI are

incorporated, and maintain headquarters, in states other than

California. Together NCCCO and IAI are responsible for

developing and administering the standards and tests required for

crane certification in California. In the past, CCS worked

closely with NCCCO and IAI to properly certify those who take

their courses.

Defendant Hornauer is a NCCCO employee and a resident of

California. Plaintiffs claim that he plays an active role in the

Defendants’ “anti-competitive behavior and illegal activities,”

and name him as a defendant for all counts in the Complaint. 

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 If Hornauer’s California citizenship is disregarded, 2

complete diversity exists between the parties.

3

On the other hand, Defendants allege that he is named as a

defendant for the sole purpose of destroying diversity.2

Accordingly, Defendants removed the action to this Court pursuant

to 28 U.S.C. §§ 1332 and 1441 on the grounds that Hornauer was

fraudulently joined.

In now moving to remand, Plaintiffs argue that the Complaint 

as currently drafted contains claims to which Hornauer is

potentially liable.

STANDARD

Civil actions not premised upon federal questions are

removable to federal court only if there is complete diversity of

citizenship between the parties. 28 U.S.C. §§ 1332(a)(1), 1441.

Each of the plaintiffs' citizenship must be diverse from each of

the defendants’. Caterpillar, Inc. v. Lewis, 519 U.S. 61, 68, 117

S. Ct. 467, 136 L. Ed. 2d 437 (1996). However, if the plaintiff

fails to state a cause of action against a non-diverse defendant,

and the failure is obvious according to settled state law,

joinder of the non-diverse defendant is fraudulent and the

defendant will be ignored for the purposes of determining

diversity. McCabe v. General Foods, 811 F.2d 1336, 1339 (9th Cir.

1987).

///

///

///

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4

A defendant is entitled to present facts that prove

fraudulent joinder. Morris v. Princess Cruises, Inc., 236 F.3d

1061, 1067 (9th Cir. 2001) (citing McCabe, 811 F.2d at 1339). The

court may also consider summary judgment-type evidence, such as

affidavits and deposition testimony. Id. at 1068 (quoting

Cavallini v. State Farm Mutual Auto Ins. Co., 44 F.3d 256, 263

(5th Cir. 1995)). 

“A ‘strong presumption’ exists against fraudulent joinder,

and all factual disputes and ambiguities in the controlling state

law must be resolved in favor of the non-moving party.” Rodriguez

v. Hall Ambulance, 2007 WL 470624, *6 (E.D.Cal. 2007) (citing

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

If the defendant cannot prove fraudulent joinder and the

federal court lacks jurisdiction, the action is remanded to state

court. 28 U.S.C. § 1447(c). An order remanding a removed case to

state court “may require payment of just costs and any actual

expenses, including attorney fees, incurred as a result of the

removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 134,

126 S. Ct. 704, 163 L. Ed. 2d 547 (2005) (quoting 28 U.S.C.

§ 1447(c)). Courts may award attorney's fees only where the

removing party lacks an objectively reasonable basis for seeking

removal. Id.

ANALYSIS

As noted above, on a motion for remand, the alleged “sham”

defendant need only be potentially liable for one of the stated

causes of action. McCabe, 811 F.2d at 1339. 

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5

The burden of proof is on the defendant/removing party to show

that the allegedly “sham” defendant can not be found liable under

established California law. Gaus v. Miles, Inc., 980 F.2d 564,

567 (9th Cir. 1992). 

Plaintiffs’ Third Cause of Action alleges tortious

interference with business against Defendant Hornauer. Tortious

interference with business may also be referred to as intentional

interference with prospective economic advantage. Fisher v. San

Pedro Peninsula Hosp., 214 Cal. App. 3d 590, 618 (1989). Under

California law, “The elements of intentional interference with

prospective economic advantage have been stated as follows:

(1) an economic relationship between the plaintiff and some third

party, with the probability of future economic benefit to the

plaintiff; (2) the defendant's knowledge of the relationship;

(3) intentional acts on the part of the defendant designed to

disrupt the relationship; (4) actual disruption of the

relationship; and (5) economic harm to the plaintiff proximately

caused by the acts of the defendant.” Westside Center Associates

v. Safeway Stores 23, Inc., 42 Cal. App. 4th 507, 521-522 (1996)

(internal quotations and citations omitted). 

Although mutually exclusive, the tort of intentional

interference with prospective economic advantage is similar to

that of interference with contract in many respects. Under

California law, the difference between the two torts is found in

the “independent wrongfulness requirement of the tort of

interference with prospective economic advantage.” Korea Supply

Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134 (Cal. 2003). 

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6

While interference with a contract is considered wrong “in and of

itself,” the interference with a prospective economic advantage

is not. Id. Therefore, an act must be unlawful in order to be

considered wrongful under the tort of intentional interference

with prospective economic advantage.

In the instant case, it is possible that a California

Superior Court could find that Plaintiffs have stated a cause of

action against Defendant Hornauer for tortious interference with

business. The Complaint alleges the probability of future

economic benefit between Plaintiffs and their current and past

clients due to cyclical certification requirements. Compl. ¶ 43. 

It is not disputed that Defendant knew of these relationships. 

The Complaint also alleges several specific instances of unlawful

interference which are allegedly “intended to disrupt plaintiff’s

relations with its customers” and “maintain an illegal monopoly.” 

Compl. ¶¶ 44-45. Although these events are alleged generally

against “defendants,” Plaintiffs establish that Hornauer “fully,

knowingly, and intentionally participated in the conspiratorial,

tortious and illegal conduct alleged herein.” Compl. ¶ 3. 

Additionally, Plaintiffs allege causation and damages. Compl.

¶¶ 46-48. 

In considering a motion to remand for fraudulent joinder,

the Court may consider evidence in addition to the Complaint. 

Morris, 236 F.3d at 1068. Defendants offer the Declarations of

Hornauer and his supervisor in rebuttal to Plaintiffs’ claims. 

However, the Declarations do not meet Defendants’ burden in

proving there is no reasonable possibility Plaintiff may have a

claim against Hornauer. 

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7

Rather they seek to explain several events alleged in the

Complaint, but alone are not dispositive of the lack of a valid

claim against Hornauer.

Defendants argue, under TPS Utilicom Services, Inc. v. AT&T

Corp., 223 F. Supp. 2d 1089 (C.D. Cal. 2002), that to withstand

fraudulent joinder, a plaintiff must have alleged specific,

intentional acts by the non-diverse defendant. However, in TPS

Utilicom, the non-diverse defendant was deemed improper because

TPS based its joinder on speculation about future conduct, and

nothing in the complaint alleged any conduct on the part of the

non-diverse defendants. Id. at 1103. The instant case is

distinguishable in that Hornauer was named as a defendant based

on actions he already allegedly completed, and not on speculation

about future acts that he may carry out. 

Additionally, Defendants assert that Hornauer may not be

held liable for actions taken within the scope of his employment. 

However, California Law is clear that under an intentional tort

action, all individual defendants shown to have participated are

liable for damages, even though the corporation may be liable as

well. Golden v. Anderson, 256 Cal. App. 2d 714 (1967); (employee

held liable for intentionally interfering with a contract to

which neither the employee nor the employer was a party); Frances

T. v. Village Green Owners Ass'n, 42 Cal. 3d 490 (1986); Klein

v. Oakland Raiders, Ltd., 211 Cal. App. 3d 67 (1989) (collecting

cases). In the instant case, absent some immunity or privilege,

Hornauer is not shielded from liability merely because he was

acting within the scope of his employment.

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8

Defendants also assert that Hornauer is immune from

prosecution under California’s Manager’s Privilege. 

Consideration of the Manager’s Privilege as a defense to a motion

to remand has been questioned. See Ritchey v. Upjohn Drug Co.,

139 F.3d 1313 (9th Cir. 1998) (statute of limitations is a bar to

recover and therefore joinder was fraudulent, but normally courts

do not consider defendant’s defenses); Collins v. Liberty Life

Ins. Co. of Boston, 2007 WL 1430088 (N.D. Cal. 2007) (noting that

manager’s privilege is not procedural bar like statute of

limitations). However, this Court need not determine the

applicability of the manager’s privilege in a motion to remand

for fraudulent joinder because Defendants fail to show that,

under established California law, the privilege applies to the

facts of this case. 

Under California's common law, the manager's privilege

protects an agent from individual liability for acts taken on

behalf of his employer or principal. Huynh v. Vu, 111 Cal. App.

4th 1183, 1194 (2003). Courts have noted that the scope of the

manager's privilege is neither clear nor consistent. Id.

(discussing uncertainties as to whether the privilege offers

absolute or qualified immunity). The privilege is designed to

protect the interests between an employee and his employer by

protecting otherwise tortuous activity as privileged when an

employee induces interference between her employer and another

employee or agent. Los Angeles Airways, Inc. v. Davis, 687 F.2d

321 (9th Cir. 1982). 

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9

The privilege is not extended to instances where the interfering

employee or the employer have no rightful interest in the business

relationship. See Klein, 211 Cal. App. 3d at 81.

In the case at bar, Defendants contend that the Complaint

alleges, in effect, that NCCCO and/or IAI refused to permit

Plaintiffs to act as agents of NCCCO or IAI. Thus the Manager’s

privilege applies to Hornauer and he cannot be held personally

liable for wrongful discharge or interference with contractual

relations so long as the discharge or contractual interference

was done on behalf of the employer, and not for the employee's

personal advantage. Defendants cite cases in support of their

argument which pertain to a tortious interference created by a

manager or agent providing information to a employer. Defs.’

Mem. in Supp. of Opp’n. to Remand p. 13 (citing Halvorsen v.

Aramark Unif. Services, Inc., 65 Cal. App. 4th 1383, 1393 (1998);

McCabe 811 F.2d 1336; Los Angeles Airways, Inc., 687 F.2d 321;

Olivet v. Frischling, 104 Cal. App. 3d 831 (1980)). However,

several incidents alleged in the Complaint involve Hornauer

giving advice to a third party, to which neither Hornauer nor

NCCCO had a specific interest, regarding its business with

Plaintiffs. This type of situation is not contemplated by the

line of cases cited by Defendants and settled California law does

not require this Court to find the Manager’s privilege applicable

in the present situation. 

For the reasons stated above, it is not clear that a

California Court would find that Plaintiffs failed to state a

cause of action for tortious interference with business against 

Hornauer. 

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10

A non-diverse defendant need only be potentially liable for one

of the stated causes of action. McCabe, 811 F.2d at 1339. 

Therefore it is unnecessary for the Court to consider the

remaining causes of action against Defendant. Accordingly,

Defendants have not met their burden of proof. Plaintiffs’ Motion

to Remand based upon a lack of diversity is GRANTED.

As noted above, the award of Attorney’s fees is

discretionary and should only be awarded when defendants lack an

objectively reasonable basis for seeking removal. Martin, 546

U.S. at 134. In this case, the facts as pled along with the

declarations create uncertainty as to the liability of Defendant

Hornauer and consequently there was reasonable basis for seeking

removal. Accordingly, Plaintiffs’ request for attorney’s fees is

DENIED.

CONCLUSION

For the reasons set forth above, Plaintiffs’ Motion to

Remand is GRANTED, and Plaintiffs’ Motion for Costs and

Attorney’s Fees is DENIED. The case is hereby remanded to the

Superior Court of the State of California in and for the County

of Nevada for all further proceedings.

IT IS SO ORDERED.

Dated: August 18, 2008

_____________________________

MORRISON C. ENGLAND, JR.

UNITED STATES DISTRICT JUDGE

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