Open Text Inc. v. Beasley

OPEN TEXT INC., Plaintiff, v. MICHELLE BEASLEY, Defendant.

No. 21-cv-03986-EMC

United States District Court, N.D. California

July 30, 2021

ORDER GRANTING PLAINTIFF'S MOTION TO REMAND

DOCKET NO. 21

EDWARD M. CHEN, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

This case involves a dispute over commission payments advanced by an employer, Plaintiff Open Text, Inc. (“Open Text”), to its former employee, Defendant Michelle Beasley. Docket No. 6-1 (“Compl.”) ¶¶ 1-6. Open Text originally filed the action in the Superior Court of San Mateo County, California, on April 1, 2021. See Id. at 3.^[1] Ms. Beasley then removed the case to this Court on May 26, 2021. See Docket No. 1. Pending before the Court is Open Text's motion to remand to state court and request for attorneys' fees and costs pursuant to 28 U.S.C. § 1447(c). See Docket Nos. 21 and 22 (“Mot.”). For the reasons given below, the Court GRANTS Open Text's motion to remand as well as its request for attorneys' fees and costs.

II. BACKGROUND

According to Open Text's First Amended Complaint, Open Text is a software company that is incorporated in Delaware and has its principal place of business in San Mateo, California. Compl. ¶¶ 7, 11-13. In September 2019, Open Text hired Ms. Beasley, a resident of California, as a Senior Account Executive in its San Mateo office; she began working for the company the following month. Id. ¶¶ 14-16. In addition to her base salary, Ms. “Beasley was eligible to earn up to $140, 000 per year in commissions.” Id. ¶ 18. Ms. Beasley's employment agreement provided, however, that if she were to “voluntarily resign from Open Text within 18 months of [her] employment start date, ” she would be obliged to repay any “advanced, but unearned, commissions [that] she received during the first three months of her employment.” Id. ¶¶ 20-21. “During the first three months of her employment [Ms.] Beasley was paid $11, 666.67 per month ($35, 000.01 total) in advanced, but unearned, commissions in the form of a draw.” Id. ¶ 25. Ms. Beasley “voluntarily resigned from Open Text effective June 30, 2020, ” or just over nine months after she began working for the company. See Id. ¶ 26. Open Text alleges that “$28, 339.70 of the advanced commission was unearned at the time of [Ms.] Beasley's resignation” and that she was therefore obliged to repay that amount to Open Text. Id. ¶¶ 26-27. In October 2020, after Open Text informed Ms. Beasley that it was seeking reimbursement of the unearned commissions, Ms. Beasley refused repayment. Id. ¶¶ 28-31.

Open Text filed its original complaint in state court on March 17, 2021. Id. at 15. The company then filed a First Amended Complaint on April 1, 2021. Id. at 3. The latter pleading asserted four state-law causes of action against Ms. Beasley for breach of contract, unjust enrichment, open book account, and conversion. Id. ¶¶ 32-59. Open Text sought compensatory and exemplary damages, “[d]isgorgement from [Ms.] Beasley in the amount of $28, 339.70, ” pre-judgment interest, litigation costs, and any other relief that the Superior Court deemed just and proper. Id., Prayer for Relief.

Pursuant to 28 U.S.C. § 1446(a), Ms. Beasley filed a Notice of Removal with this Court on May 26, 2021. See Docket No. 1; see also 28 U.S.C. § 1446(a) (requiring defendants to file with the district court “a short and plain statement of the grounds for removal”). Later that same day she filed an “errata” version of the removal notice, as the earlier filing erroneously included an exhibit with Open Text's confidential and proprietary busines-practice information. See Docket Nos. 4 and 17. On June 1, 2021, Ms. Beasley filed a motion to remove the exhibit that was incorrectly appended to her original removal notice from this Court's docket, see Docket No. 8, and the Court later granted the motion, see Docket No. 25. Prior to the Court's order granting Ms. Beasley's motion, however, Open Text filed a four-page administrative motion pursuant to Civil Local Rule 7-11 to remove the same exhibit from Ms. Beasley's original and errata removal notices filed with this Court, as well as the removal notice that she filed with the Superior Court.^[2]See Docket No. 17; see also Civ. L.R. 7-11 (permitting parties to file motions “for an order concerning a miscellaneous administrative matter, ” such as “to file documents under seal, ” with such motions not exceeding five pages). On June 1, 2021, along with her motion to remove the erroneously filed exhibit, Ms. Beasley also filed an Amended Notice of Removal, which again omitted the contested exhibit.^[3] See Docket No. 6 (“Notice”).

In her operative removal notice, Ms. Beasley stated that “this Court has original jurisdiction over this action under 28 U.S.C. § 1332(a) on the grounds that complete diversity exists between all parties and the amount in controversy exceeds the sum of $75, 000.” Notice at 2. In asserting that Open Text and Ms. Beasley are diverse for purposes of § 1332(a), Ms. Beasley acknowledged that Open Text is a citizen of California (based on its principal place of business), ^[4]and that she herself “is a resident, citizen, and domiciliary” of California, ” but argued that Open Text is the “alter ego” of its parent company, Open Text Corporation, which is located in Ontario, Canada. See Id. at 2, 4; see also Danjaq, S.A. v. Pathe Commc'ns Corp., 979 F.2d 772, 775 (9th Cir. 1992) (stating that courts typically “look[] to the state of incorporation and principal place of business of the subsidiary, not its parent, ” but that an exception exists “where the subsidiary is the alter ego of the parent corporation”). “[B]ased on the corporate citizenship of Open Text Corporation, ” she asserted, “complete diversity of citizenship is satisfied.” Notice at 8. Regarding the amount-in-controversy requirement of § 1332(a), Ms. Beasley argued that while the only monetary figure mentioned in the First Amended Complaint is the $28, 339.70 that Open Text seeks in disgorgement, Open Text's request for punitive damages could bring its total award to more than $75, 000. See Notice at 8-9. Ms. Beasley noted that “[r]ecent California verdicts and punitive damages awards in alleged conversion contexts can range from a multiplier of three to one or more, ” and that “the potential of $50, 000 in punitive damages” in this case “is not improbable.” Id. at 9.

Open Text filed the instant motion to remand on June 8, 2021, one week after Ms. Beasley filed her Amended Notice of Removal. See Docket No. 21, Mot. In addition to seeking an “immediate” remand to state court, Open Text requested “an award of attorneys' fees and costs pursuant to 28 U.S.C. § 1447(c).” Mot. at 1. Ms. Beasley opposed the motion on June 22, 2021, see Docket No. 27 (“Opp'n”), and Open Text replied on June 29, 2021, see Docket No. 29 (“Reply”). Pursuant to Civil Local Rule 7-1(b), the Court took the motion under submission without conducting a hearing. See Civ. L.R. 7-1(b) (“In the Judge's discretion . . . a motion may be determined without oral argument. . . .”).

III. DISCUSSION

A. Motion to Remand

In its moving papers, Open Text offers three arguments in favor of remanding the case to state court. First, it contends that Ms. Beasley's removal of the action to this Court was improper under 28 U.S.C. § 1441(b)(2), which bars a defendant from removing a case where the federal court's jurisdiction is based solely on diversity jurisdiction and the defendant “is a citizen of the State in which [the] action is brought.” See 28 U.S.C. § 1441(b)(2). Because Open Text originally filed this action in California state court and Ms. Beasley is a citizen of California, Open Text asserts that its motion should be granted. Mot. at 3-4, Reply at 6-8. Second, Open Text argues that this Court lacks jurisdiction to hear the case under § 1332(a) because the amount-in-controversy is less than $75, 000. It notes that the First Amended Complaint “seeks a judgment in the amount of $28, 339.70, the sum of the advanced, but unearned, funds” paid to Ms. Beasley, and contends that any punitive-damages award would be unlikely to bring the total damages award over the jurisdictional threshold. Mot. at 4-6, Reply at 5. Third, Open Text asserts that this Court lacks jurisdiction under § 1332(a) for the additional reason that the parties are not completely diverse, as Open Text is a citizen of California and the citizenship of its (non-party) parent company is irrelevant to the jurisdictional analysis. Reply at 4-5. Ms. Beasley opposes the motion on all three grounds, arguing that Open Text waived its right to remand by engaging in affirmative litigation in this Court, Opp'n at 5-8; that the possibility of Open Text being awarded punitive damages satisfies the amount-in-controversy requirement, id. at 8-11; and that Open Text has failed to rebut her allegations that it is the alter ego of its parent company, id. at 5, 11.

While the Court doubts whether Ms. Beasley has shown, by a preponderance of the evidence, that the parties are completely diverse and that the amount-in-controversy exceeds $75, 000, as § 1332(a) requires, the Court need not decide these questions. Instead, it finds that that the case must be remanded to state court on the basis of § 1441(b)(2).

According to 28 U.S.C. § 1441(a), “any civil action brought in a State court of which the district courts of the United have original jurisdiction[] may be removed by the defendant . . . to the district court of the United States for the district and division embracing the place where such action is pending.” 28 U.S.C. § 1441(a). As mentioned above, however, § 1441(b)(2) provides that an “action otherwise removable solely on the basis of the jurisdiction under section 1332(a) of this title may not be removed if...