Opinion
No. C 02-5533 MMC
February 26, 2003
ORDER GRANTING MOTION TO REMAND; DENYING REQUEST FOR ATTORNEY'S FEES AND COSTS (Docket No. 8)
Before the Court is plaintiffs motion to remand, filed December 10, 2002, pursuant to 28 U.S.C. § 1447 (c). Defendant Emery Air Freight Corporation, dba Emery Forwarding ("Emery Air Freight") has filed opposition, to which plaintiff has replied, and defendant has filed a sur-reply. Having considered the papers filed in support of and in opposition to the motion, the Court finds the matter appropriate for decision on the papers, VACATES the hearing scheduled for January 31, 2003, and rules as follows.
Defendant contends that Emery Air Freight was "erroneously sued as `Emery Worldwide.'" (See Not. Removal at 1.) Although the parties disagree as to which of several "Emery" corporate entities is the proper defendant, the Court, for purposes of the instant motion assumes the defendant is Emery Air Freight.
The Court hereby GRANTS defendant's motion for leave to file its sur-reply and related declarations.
BACKGROUND
On March 4, 2002, plaintiff filed the instant action in the Superior Court of California in and for the County of Alameda, alleging wrongful discharge in violation of public policy, false imprisonment, violation of plaintiffs "rights to safety and to privacy" under the California Constitution, and intentional infliction of emotional distress. (See Not. Removal Ex. 1.) On November 20, 2002, defendant filed a notice of removal on the basis of diversity jurisdiction. See 28 U.S.C. § 1332 ("district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs and is between . . . citizens of different states"). Specifically, defendant asserts in its notice of removal that diversity jurisdiction exists because: (1) plaintiff stated in deposition testimony on November 6, 2002, that he is seeking $500,000 in emotional distress damages, and (2) defendant is not a citizen of California, plaintiffs state of citizenship. (See Not. Removal at 3.) Thereafter, plaintiff filed the instant motion for remand, by which plaintiff further seeks attorney's fees and costs incurred as a result of the removal.
LEGAL STANDARD
A plaintiff may challenge removal by a motion to remand. See 28 U.S.C. § 1447 (c). The party invoking the federal court's removal jurisdiction bears the burden of establishing federal jurisdiction. See Emrich v. Toche Ross Co., 846 F.2d 1190, 1195 (9th Cir. 1988) ("The burden of establishing federal jurisdiction is upon the party seeking removal . . . Any doubt about the propriety of removal is resolved in favor of remand. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (citing Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979)).
DISCUSSION
Plaintiff argues that remand is appropriate for two reasons. First, plaintiff contends that the parties are not of diverse citizenship because defendant has its principal place of business in California and is therefore a citizen of California. See Mot. at 2; 28 U.S.C. § 1332 (c). Second, plaintiff contends that defendant's notice of removal was not timely because "defendant knew that the amount in controversy exceeded $75,000 at the time it was served with the complaint," and defendant failed to file its notice of removal within 30 days of service of said complaint. See Mot. at 2; 28 U.S.C. § 1446 (b).
A. Diversity of Citizenship
"Subject matter jurisdiction based upon diversity of citizenship requires that no defendant have the same citizenship as any plaintiff."Tosco Corp. v. Communities for a Better Environment, 236 F.3d 495, 499 (9th Cir. 2001). For purposes of determining whether diversity jurisdiction exists, "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." See 28 U.S.C. § 1332 (c)(1). Here, it is undisputed that Emery Air Freight is incorporated in the State of Delaware. (See McCurdy Decl. ¶ 5; Katzenbach Decl. Ex. 7.) Accordingly, the parties are diverse only if defendant's "principal place of business" is located in a state other than California.
There are two tests generally used by federal courts to determine a corporation's principal place of business: (1) the "place of operations test," which "locates a corporation's principal place of business in the state which contains a substantial predominance of corporate operations," and (2) the "nerve center test," which "locates a corporation's principal place of business in the state where the majority of its executive and administrative functions are performed." See Tosco, 236 F.3d at 500 (citing Industrial Tectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1092-93 (9th Cir. 1990)). The two tests, however, are to be applied in a prescribed order of priority.
[W]here a majority of a corporation's business activity takes place in one state, that state is the corporation's principal place of business, even if the corporate headquarters are located in a different state. The "nerve center" test should be used only when no state contains a substantial predominance of the corporations business activities.Id. (citing Industrial Tectonics, 912 F.2d at 1094) (emphasis in original). A removing defendant, as the party asserting jurisdiction, has the burden of proving all facts necessary to establish jurisdiction. See Industrial Tectonics, 912 F.2d at 1092. Here, defendant concedes that its "executive offices are located in California. . . ." (See Opp. at 7.) As defendant's "nerve center" is located in California, defendant can avoid remand only if it establishes that one state, other than California, contains a "substantial predominance" of defendant's business activities. See Industrial Tectonics, 912 F.2d at 1094. With respect to the issue of substantial predominance, the Ninth Circuit has noted that:
[w]hen quantifying corporate activity to determine a corporation's principal place of business, one must keep in mind that the purpose of diversity jurisdiction is to avoid the effects of prejudice against outsiders. Thus, the principal place of business should be the place where the corporation conducts the most activity that is visible and impacts the public, so that it is least likely to suffer from prejudice against outsiders.Id. Because "[a]ctivities such as employment of personnel, purchasing of materials, and sales of goods and services increase local familiarity with the corporation," such local contact "alleviates problems with local prejudice against outsiders and justifies consideration of the corporation as a citizen of that state." Id. Consequently, courts "employed a number of factors to determine if a given state contains a substantial predominance of corporate activity, including the location of employees, tangible property, production activities, sources of income, and where sales take place." See Tosco, 236 F.3d at 500 (citing Industrial Tectonics, 912 F.2d at 1094).
Here, defendant argues that its principal place of business is Ohio, as, according to defendant, that is the state where its "business activity substantially predominates." (See Opp. at 5.) In support of this argument, defendant submits evidence as to several of the Tosco factors.
1. Location of Employees
Defendant submits evidence that in November 2002, of Emery Air Freight's 6,130 employees nationwide, 1,919 employees, or more than 31 percent, are located in Ohio, while 664, or 10 percent, are located in California, and 181, or 3 percent are located in Kansas. (See Id.; McCurdy Decl. ¶¶ 11, 12.)
"Employees are important in two respects. First, we must consider the bare number of employees in each state. . . . Second, we consider which types of employees interact with the public — i.e., the consumers."Ghaderi v. United Airlines, 136 F. Supp.2d 1041, 1045 (N.D. Cal. 2001);see also Ho v. Ikon Office Solutions, Inc., 143 F. Supp.2d 1163, 1165 (N.D. Cal. 2001) (citing Ghaderi, 136 F. Supp.2d at 1045). Defendant's showing is deficient in both respects.
First, defendant provides no evidence as to the number of employees in states other than Ohio, California, and Kansas, which together account for only 44 percent of defendant's work force. "Determining whether a corporation's business activity substantially predominates in a given state plainly requires a comparison of that corporations's business activity in the state at issue to is its activity in other individual states." See Tosco, 236 F.3d at 500. In that regard, although defendant need not show that a majority of its total business activity is located in a single state, it must show that "the amount of [its] business activity in one state [is] significantly larger than any other state in which the corporation conducts business." See id. (emphasis added). Defendant's failure to address the allocation of 56 percent of its work force precludes a meaningful comparison under Tosco.
In its opposition, defendant describes California as "the state with the next highest number of employees." (See Opp. at 5:23.) Defendant offers no evidence in support of such assertion.
Second, defendant provides no information as to which, and how many of, its employees interact with the public. As a consequence, defendant again omits information critical to the Court's analysis. See Industrial Tectonics, 912 F.2d at 1094 ("[T]he principal place of business should be the place where the corporation conducts the most activity that isvisible and impacts the public. . . .") (emphasis added).
2. Production Activities
Defendant submits evidence that during November 2002, a total of 65 million pounds of freight moved through Emery's North American Sortation Hub, located in Dayton, Ohio, and its six regional hubs, located in Illinois, Tennessee, New York, Florida, California and Texas. (See Slavens Decl. ¶¶ 4, 5.) of this total, 43 million pounds traveled through the Dayton hub; 4.9 million pounds traveled through a hub in Poughkeepsie, New York, the highest number for a regional hub; and 1.9 million pounds traveled through a hub in Los Angeles, California. (See Opp. at 3; Slavens Decl. ¶ 5.) Again, defendant's showing is deficient.
Defendant is a freight shipping company. As such, "[i]ts primary business is the transportation of freight." (See Slavens Decl. ¶ 3.) In discussing the location of its production activities, however, defendant has limited its showing to only one aspect of its business, freight shipped through a given state for purposes of sorting. Defendant submits no evidence of the amount of freight shipped to and from the various states in which it does business. See, e.g., Ghaderi, 136 F. Supp.2d at 1046 (comparing combined percentages of cargo "shipped to, from or through," states at issue). Defendant conducts business in all 50 states (see Slavens Decl. ¶ 3), and "the `client' may be located in New York, while the freight to be transported is picked up in Nevada, transferred through Ohio and finally delivered to Florida." (See Sur-Reply at 2.) Defendant, however, offers no evidence as to the other operations it performs in addition to sorting nor the percentage of its business activities such sorting represents. In the absence of such evidence, the weight of defendant's showing as to this factor is significantly diminished.
3. Location of Tangible Property
Defendant submits evidence that it "leases 1,289,541 square feet of covered space in the state of Ohio, compared to only 444,948 square feet of covered space in the state of California." (See Dudley Decl. ¶ 3.) There are a number of deficiencies in this showing. First, defendant does not reference the property, if any, it owns in the various states but only discusses the space it leases. See, e.g., Ho, 143 F. Supp.2d at 1166 (examining amount of real property owned by removing defendant). Second, defendant does not indicate whether it leases space other than "covered space." Third, defendant offers no evidence as to the value of its tangible property. See, e.g., Ghaderi, 136 F. Supp.2d at 1046 (comparing "replacement cost" of assets owned in different states). Finally, the only states offered for comparison are Ohio and California.See Tosco, 236 F.3d at 500 (requiring comparison of business activity in all states in which corporation does business).
This factor is addressed for the first time by defendant in its sur-reply. (See Sur-Reply at 2.)
4. Other Factors
Defendant fails to discuss two of the factors the Ninth Circuit found significant in Tosco and Industrial Tectonics, Specifically, defendant offers no evidence as to either the location of Emery's "sources of income" or "where sales take place." See Tosco, 236 F.3d at 500; Industrial Tectonics, 912 F.2d at 1094. While defendant asserts "[c]ommon sense dictates that the Tosco factors be altered, as necessary, in order to reflect the actual business of the entity in question," (see Sur-Reply at 2), defendant does not provide an adequate explanation for wholly ignoring the remaining Tosco factors. Contrary to defendant's argument, the fact that "the `client' may be located in New York, while the freight to be transported is picked up in Nevada, transferred through Ohio and finally delivered to Florida," (see id.) is not sufficient reason to disregard the presence of those clients in any given state, the sales they represent, or the income attributable thereto.
For all of the above reasons, the Court finds that defendant has failed to meet its burden of showing that a "substantial predominance" of its business activity is contained in any particular state. Accordingly, as set forth in Tosco, defendant's principal place of business is determined by application of the "nerve center" test. See Tosco, 236 F.3d at 500. As noted, defendant's "nerve center" is located in California. Consequently, defendant has failed to demonstrate that the parties are diverse for purposes of establishing federal jurisdiction.
In light of this finding, the Court does not reach the issue of whether defendant's of removal was timely.
B. Attorney's Fees
"An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." 28 U.S.C. § 1447 (c). Although a district court has "wide discretion" to award attorney's fees and costs under § 1447(c), even in the absence of a finding that defendant acted in bad faith, see Moore v. Permanente Medical Group, Inc., 981 F.2d 443, 446-47 (1992), the Court finds, given the factual and legal issues raised in connection with the removal, that an award of attorney's fees and costs is not appropriate in the instant matter.
CONCLUSION
For the reasons stated:
1. Plaintiffs motion to remand is hereby GRANTED, and the action is REMANDED to the Superior Court of California in and for the County of Alameda, pursuant to 28 U.S.C. § 1447 (c).
2. Plaintiffs request for attorney's fees and costs is hereby DENIED.
This order closes Docket No. 8.
The Clerk shall close the file.