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granting remand to state court although plaintiff could have recovered from the corporation alone without naming a resident manager as a defendant
Summary of this case from BECK v. ALBERTSONS, INC.Opinion
CIVIL ACTION NO. 03-3797
November 12, 2003
MEMORANDUM
David G. Dailey originally filed suit against The Progressive Corporation and other related defendants in the Pennsylvania courts. The defendants promptly removed the case to our Court and then moved to dismiss in favor of a previously filed action currently pending in the Eastern District of Louisiana. Also, Dailey has moved to remand this case to the state court, and we here address both Dailey's motion to remand and the defendants' motion to dismiss.
Factual and Procedural Background
This case's windy path to our Court began in the unlikely hamlet of Harvey, Louisiana, where Progressive employed Kelly Marie Camp as a claims adjuster. Defs.' Mem. Supp. Mot. to Dismiss Ex. 2, at ¶ 27 ("Camp Complaint"). Progressive paid Camp a salary, but it did not provide any overtime compensation, even on those frequent occasions when she worked more than forty hours per week. Id. at ¶¶ 27, 33.
We refer to the following entities, collectively, as "Progressive" or the "Progressive companies": The Progressive Corporation, Progressive Casualty Insurance Company ("Progressive Casualty"), Progressive Classic Insurance Company, Progressive Halcyon Insurance Company, Progressive Northern Insurance Company, Progressive Northwestern Insurance Company, Progressive Security Insurance Company ("Progressive Security"), and Progressive Specialty Insurance Company.
The Camp Complaint alleged that Progressive Security was a Louisiana corporation. See Camp Compl. § 13.
On August 31, 2001, Camp filed a lawsuit against the Progressive companies in the United States District Court for the Eastern District of Louisiana. On her own behalf and on behalf of similarly situated claims adjusters, Camp alleged that Progressive Insurance Company's failure to pay overtime violated the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201-219 (2003). Id. at ¶¶ 34-37. Magistrate Judge Joseph C. Wilkinson, Jr. conditionally certified the Camp class, but limited the class to include only those plaintiffs who "opted in" to the class by filing a written consent form. Defs.' Mem. Supp. Mot. to Dismiss Ex. 4, at 15-16. David Dailey became a member of the Camp class when he filed his written consent on December 10, 2002. Defs.' Mem. Supp. Mot. to Dismiss Ex. 5.
We refer to the case initiated by this filing, Kelly Marie Camp v. The Progressive Corp., et al., No. 01-2680 (E.D. La.), as the "Camp action."
Section 16(b) of the FLSA, 29 U.S.C. § 216(b) (2003), authorizes "opt-in," private class actions as one of the Act's enforcement mechanisms.
David Dailey began working as a Progressive claims adjuster in October of 1993. pls.' Mem. Supp. Remand Ex. 5, at 8 ("Dailey Deposition"); Defs.' Mem. Supp. Jurisdiction Ex. 5, ¶ 3 ("Pekarovsky Declaration"). In August of 1998, John Pekarovsky became the branch manager of the Williamsport, Pennsylvania office where Dailey worked. Pekarovsky Decl. ¶ 1. As branch manager, Pekarovsky's responsibilities included supervising Dailey. Id. at ¶ 2; Dailey Decl. ¶ 3. Dailey recognized that Pekarovsky was his supervisor and that one of the Progressive companies was his employer. Dailey Dep. 12-13. On August 23, 2002, Pekarovsky terminated Dailey because Progressive had come to believe that Dailey had been providing false information about estimates for automobile damage claims. Id. at 60-61; Pekarovsky Decl. ¶ 24.
According to Dailey, Pekarovsky also had the authority to hire and fire employees, to set employee work schedules, to act on Progressive's behalf, to award pay raises, and to discipline employees. Dailey Decl. ¶¶ 4-5, 8, 10-11, 13.
Pekarovsky reports that Progressive Casualty was the Progressive entity that actually employed Dailey. Pekarovsky Decl. ¶ 3.
On May 22, 2003, Dailey, who claimed to be a Pennsylvania citizen, filed a class action lawsuit in the Court of Common Pleas of Philadelphia County, David G. Dailey v. The Progressive Corporation, et al., May Term 2003, No. 2932 (C.P. Phila. County). Defs.' Mem. Supp. Mot. to Dismiss Ex. 1 ("Complaint"). The Complaint named as defendants all of the Progressive companies that were parties to the Camp action. In addition, it named Pekarovsky as a defendant and alleged that he was a Pennsylvania citizen. Id. at ¶ 13. Like the Camp action, this case challenged Progressive's failure to pay overtime to its salaried claims adjusters, but its claims arose under Pennsylvania's Minimum Wage Act of 1968 ("MWA"), 43 Pa. Cons. Stat. §§ 333.101 to 333.115 (2003), rather than the FLSA. Id. at ¶¶ 35-38.
Unlike the Camp Complaint, however, the Complaint in this case alleges that Progressive Security is a Pennsylvania corporation. Compl. ¶ 11; see also supra note 2. None of the other Progressive companies was alleged to be a citizen of Pennsylvania. See Compl. ¶¶ 5-10, 12.
Although the Complaint also named Unknown Companies 1-70, John Does 1-50, and XYZ Insurance Company as defendants, such allegations are not relevant to the issues before us. See 28 U.S.C. § 1441(a) (2003) ("For purposes of removal . . . the citizenship of defendants sued under fictitious names shall be disregarded.").
On June 24, 2003, before Dailey had even served them with his Complaint, Progressive removed the case from the Court of Common Pleas to this Court. Pls.' Mem. Supp. Remand Ex. 2, at ¶ 2 ("Notice of Removal"). Progressive asserts that we have subject matter jurisdiction over the case because the parties are completely diverse. Although the Complaint alleges that two of the defendants — Progressive Security and Pekarovsky — are, like Dailey, Pennsylvania citizens, Progressive argues that we should disregard such claims. Notice of Removal ¶¶ 11, 13.
Pekarovsky also consented to removal, but we continue to refer to all of the defendants as "Progressive" for brevity's sake.
Soon after this case's removal, Dailey filed an Amended Complaint that deleted references to Progressive Security and added Mount Laurel Assurance Company ("Mount Laurel"), a Pennsylvania corporation, as a new defendant. Amended Compl. ¶ 11. Dailey also moved to remand this case to the Pennsylvania courts based on the alleged lack of the parties' diversity. Not content to rest on its jurisdictional arguments, Progressive moved to dismiss this case in favor of the Camp action.
Analysis
Bailey's motion to remand and Progressive's motion to dismiss are both now before us. Because we may not consider a case over which we lack jurisdiction, we begin with the jurisdictional challenges that Dailey raises in his motion to remand.
Pursuant to 28 U.S.C. § 1441 (a), Progressive removed this case from the Court of Common Pleas of Philadelphia County to this Court. This procedure is proper only if we have jurisdiction over the claims, and we must remand the case to the Pennsylvania courts if we lack subject matter jurisdiction. See 28 U.S.C. § 1447(c) (2003).
Progressive contends that 28 U.S.C. § 1332 confers on us subject matter jurisdiction over this case because the "matter in controversy . . . is between . . . citizens of different States." The Supreme Court consistently has held that this statute requires "complete diversity"; that is, the federal district courts have diversity jurisdiction only over those cases where no defendant is a citizen of the same state as any plaintiff. See Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806); see also State Farm Fire Casualty Co. v. Tashire, 386 U.S. 523, 530-531 (1967) ("[W]here co-citizens appeared on both sides of a dispute, jurisdiction was lost."); Dev. Fin. Corp. v. Alpha Hous. Health Care, 54 F.3d 156, 158 (3d Cir. 1995).
There is no dispute that the amount in controversy exceeds $75,000.
The inquiry into the completeness of the parties' diversity of citizenship rarely poses serious problems because the face of the complaint usually reveals the parties' citizenship. In this case, however, we must probe deeper because Dailey filed two complaints and because Progressive alleges that both of these complaints have fraudulently joined defendants designed to defeat our diversity jurisdiction.
At the threshold, we note that Dailey filed his original Complaint in the Court of Common Pleas and that he filed his Amended Complaint only after Progressive had removed the case to this Court. While Dailey would prefer that we consider the Amended Complaint in our jurisdictional inquiry, see Pls.' Mem. Supp. Remand at 7 n. 3, we "must focus on the plaintiff's complaint at the time the petition for removal was filed."Steel Valley Auth. v. Union Switch Signal Div., 809 F.2d 1006, 1010 (3d Cir. 1987); see also Abels v. State Farm Fire Cas. Co., 770 F.2d 26, 29 (3d Cir. 1985) ("The defendant's right to remove is to be determined according to the plaintiffs' pleading at the time of the petition for removal. . . ."); cf. Westmoreland HOSP. Ass'n v. Blue Cross, 605 F.2d 119, 123 (3d Cir. 1979) ("A subsequent amendment to the complaint after removal designed to eliminate the federal claim will not defeat federal jurisdiction."). Thus, we will analyze the jurisdictional issues with exclusive reference to the original Complaint.
The original Complaint names Progressive Security and Pekarovsky as defendants and alleges that both are Pennsylvania citizens. On their face, these allegations appear to destroy the parties' complete diversity of citizenship, thereby depriving us of jurisdiction. Progressive, however, contends that we should disregard the allegations related to Progressive Security's citizenship and ignore Pekarovsky's presence because Bailey's pleading fraudulently joined those defendants.
When "[r]uling on whether an action should be remanded to the state court from which it was removed," we must "disregard" allegations in a complaint that relate to "nominal or fraudulently joined parties." Steel Valley, 809 F.2d at 1010. Joinder is fraudulent "where there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendant or seek a joint judgment." Abels, 770 F.2d at 32 (quoting Goldbercr v. CPC International, 495 F. Supp. 233, 239 (N.D. Cal. 1980)); accord Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 (3d Cir. 1992); Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990).
"Because lack of jurisdiction would make any decree in the case void and the continuation of the litigation in federal court futile, . . . all doubts should be resolved in favor of remand." Abels, 770 F.2d at 29. More concretely, we "must resolve all contested issues of substantive fact in favor of the plaintiff and must resolve any uncertainties as to the current state of controlling substantive law in favor of the plaintiff." Boyer, 913 F.2d at 111. Throughout this analysis, "[a] removing defendant . . . has a heavy burden of persuasion," Steel Valley, 809 F.2d at 1012 n. 6, so we must remand the case to state court "[i]f there is even a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants," Boyer, 913 F.2d at 111 (quoting Coker v. Amoco Oil Co., 709 F.2d 1433, 1440-41 (11th Cir. 1983)); accord Batoff, 977 F.2d at 851. In other words, we will not treat a resident defendant as fraudulently joined unless the claims against him are "wholly insubstantial and frivolous." Id. at 852 (quotingLunderstadt v. Colafella, 885 F.2d 66, 70 (3d Cir. 1989)).
With these principles in mind, we turn now to the two resident defendants named in Bailey's original Complaint. First, the Complaint alleges that Progressive Security is a Pennsylvania corporation. Compl. ¶ 11. Aside from this bare allegation, Dailey has submitted no evidence to substantiate Progressive Security's Pennsylvania citizenship and now concedes that his counsel made "an inadvertent error" in naming Progressive Security, rather than Mount Laurel, in the original Complaint. pls.' Mem. Opp. Mot. to Dismiss at 2-3 n. 1. Moreover, Michael Uth, Progressive's Assistant General Counsel, reports that Progressive Security is a Louisiana corporation, Uth Decl. ¶ 9, a fact recognized in the Camp action, see Camp Compl. ¶ 13. Given this unambiguous evidence, we hold that there is no contested issue of substantive fact about Progressive Security's Louisiana citizenship. See Boyer, 913 F.2d at 111. Because Progressive Security is diverse from Dailey, its citizenship supplies no basis for remanding this case to the Pennsylvania courts.
John Pekarovsky is the second resident defendant named in Bailey's original Complaint. See Compl. ¶ 13 (alleging that Pekarovsky is a Pennsylvania citizen). Though it does not contest Pekarovsky's citizenship, Progressive maintains that Dailey fraudulently joined Pekarovsky in an attempt to defeat our diversity jurisdiction. Notice of Removal ¶ 13. It considers joinder of Pekarovsky to be fraudulent because the MWA claim against him is "entirely frivolous." Defs.' Mem. Supp. Jurisdiction at 18.
Among its many protections for workers, the MWA declares that employees "shall be paid for overtime [at] not less than one and one-half times" their regular rates, 43 Pa. Cons. Stat. § 333.104(c) (2003), and it authorizes civil actions against noncompliant employers, § 333.113. Because Bailey's lawsuit arises under the MWA, see Compl. ¶¶ 35-38, it follows that he can recover only from his employer. Dailey alleges that supervisors, like Pekarovsky, are "employers" within the meaning of Pennsylvania's MWA, see Compl. ¶ 13, and we must determine whether this claim is "colorable," Abels, 770 F.2d at 32, or "wholly insubstantial and frivolous," Batoff, 977 F.2d at 852.
The MWA defines an employer as "any individual [or] corporation . . . acting, directly or indirectly, in the interest of an employer in relation to any employee." 43 Pa. Cons. Stat § 333.103(g) (2003). The circularity of this definition renders the statutory language decidedly unhelpful: how can one determine if an individual is "acting . . . in the interest of an employer" if one cannot identify the "employer" in the first place? Neither the parties nor our own research has turned up a decision from the Pennsylvania courts that interprets section 333.103(g) in a way that would help us unravel this tautology. In another procedural posture, we might have accepted the invitation that this dearth of relevant precedent offers and construe the MWA's use of "employer" for the first time. At this stage in the proceeding, however, we may only ask whether there is a "possibility that a state court would find that the complaint states a cause of action against" Pekarovsky.Boyer, 913 F.2d at 111 (emphasis added). Because there is a possibility that Pennsylvania courts would interpret the MWA's use of the term "employer" expansively enough to cover Pekarovsky, we hold that Bailey's claim against him is not "wholly insubstantial and frivolous," Batoff, 977 F.2d at 852.
Although Dailey claims that Pennsylvania courts have borrowed the "economic reality" test that the federal courts use in FLSA cases "to determine whether a defendant is an employer," Pls.' Mem. Supp. Remand at 9 (emphasis added), courts have actually used that test only to distinguish employees from independent contractors. See Commonwealth v. Stuber 822 A.2d 870, 872-73 (Pa. 2003); Donovan v. DialAmerica Marketing, Inc., 757 F.2d 1376 (3d Cir. 1985). The limited utility of the economic reality test is not surprising when one considers the following six factors that weigh in its balance:
1) the degree of the alleged employer's right to control the manner in which the work is to be performed; 2) the alleged employee's opportunity for profit or loss depending upon his managerial skill; 3) the alleged employee's investment in equipment or materials required for his task, or his employment of helpers; 4) whether the service rendered requires a special skill; 5) the degree of permanence of the working relationship; 6) whether the service rendered is an integral part of the alleged employer's business.Id. at 1382 (quoting Real v. Driscoll Strawberry Assocs., 603 F.2d 748, 754 (9th Cir. 1979)). While relevant in patrolling the often blurry common law distinction between employees and independent contractors, these factors would not help us determine whether a supervisor, like Pekarovsky, is an "employer" within the MWA's meaning.
To support its contention that Pekarovsky is not an "employer," Progressive cites several cases interpreting Pennsylvania's Wage Payment and Collection Law ("WPCL"), 43 Pa. Cons. Stat. §§ 260.1 to 260.12 (2003). Because we have discovered no case holding that courts should interpret the MWA in light of previous constructions of the WPCL, Progressive's citations fail to illuminate the precise issue here: who is an "employer" within the meaning of the MWA?
Progressive, however, does cite one case interpreting the MWA's use of the term "employer," Messmer v. Colors in Bloom, Inc., 67 Fed. Appx. 719 (3d Cir. 2003). There, Bernard Messmer sued his former employer, Colors in Bloom; its owner, Frances Loizes; and her husband, James Loizes, for overtime compensation under both the FLSA and the MWA. Id. at 720. After observing that Mr. Loizes "visited the shop to collect receipts and assisted his wife with operations during her illness," our Court of Appeals held that the district court's "conclusion that James Loizes was not an employer under the economic realities test is not in error." Id. at 721-22 (quotation and citation omitted).
Although the opinion — which was "writ[ten] solely for the parties," id. at 720 — does not fully explain this point, we understand the Court of Appeals's apparent endorsement of the economic realities test as applicable only to those situations where there was a dispute as to whether an alleged employer was himself an employee. InMessmer, the plaintiff sued Mr. Loizes even though Mr. Loizes denied any formal relationship to Colors in Bloom, the plaintiff's apparent employer. The Third Circuit recognized that the economic reality test could be useful in determining whether Mr. Loizes was an employee of Colors in Bloom (and thus potentially Messmer's employer). If Mr. Loizes was not a Colors in Bloom employee then he could not possibly be Messmer's employer, unless Messmer was simultaneously employed by Colors and Bloom and its independent contractor.
Here, however, Pekarovsky admits that he was a Progressive employee, so we need not resort to the economic realities test to decide whether he was an employee or an independent contractor. Even if our interpretation unduly narrows the Court of Appeals's non-precedential Messmer opinion, its reasoning does not control the resolution of this case because it dealt only with the meaning of "employer" in the FLSA and did not purport to construe the MWA. Id. at 721 n. 1.
Under our Court of Appeals's jurisprudence, therefore, Dailey has not fraudulently joined Pekarovsky, and we may not disregard his presence in this suit when addressing the question of our jurisdiction. Since Pekarovsky is a citizen of the same state as Dailey, the defendants are not completely diverse from the plaintiffs, and we lack subject matter jurisdiction over this case.
Having determined that we lack jurisdiction, we will grant Bailey's motion to remand this case to the Pennsylvania courts, and we will deny Progressive's motion to dismiss as moot. An appropriate Order follows.