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January 21, 2003


The opinion of the court was delivered by: Napoleon A. Jones, District Judge



This matter comes before the court on plaintiff's motion to remand. For the reasons set forth below, plaintiff's motion is DENIED. In addition, both parties' requests for sanctions are DENIED.


On January 22, 2002, plaintiff Oscar Arellano, an employee of defendant Home Depot U.S.A., Inc. ("Home Depot"), urinated in the bushes behind the Home Depot store. Arellano was observed by a coworker, who reported the incident to management. The next day, Arellano provided Home Depot management with a note from his doctor explaining that he had an enlarged prostate causing him to urinate frequently. Arellano was suspended for three days and received a written reprimand from the store manager, Andrew Calica. Shortly thereafter, Home Depot terminated Arellano for inappropriate conduct. Mem. P. & A. Supp. Mot. Remand ("P&A") at 2.

On August 7, 2002, Arellano commenced this action against Home Depot and Calica in California Superior Court, raising claims under the California Fair Employment and Practices Act, Cal. Gov't Code §§ 12940 et. seq., and common law. See Compl. at 4-12. Arellano and Calica are citizens of California, and Home Depot is a Delaware corporation. Arellano's complaint alleges discrimination based upon his "medical disability," wrongful termination, breach of implied-in-fact covenant of continued employment, breach of implied covenant of good faith and fair dealing, and intentional and negligent infliction of emotional distress. P&A at 2-3. Arellano requests damages in the amount of at least $25,000, the exact amount to be determined at trial. See P&A at 7.

In a letter to defendants dated November 4, 2002, Arellano offered to settle the case for $70,000 and immediate reinstatement, or, alternatively, $95,000 and the "cleansing" of his file. See Def.'s Opp'n Pl.'s Mot. Remand ("Opp'n"), Decl. of Robert B. King ("King Decl."), ¶ 3, Ex. B. On November 5, 2002, plaintiff dismissed Calica as a defendant, leaving Home Depot as the sole defendant. Opp'n at 1. Following the dismissal of Calica, Home Depot removed the case to this court, claiming this court has original jurisdiction over the case based on diversity of citizenship under 28 U.S.C. § 1332 and 1441(b). Arellano has moved to remand this matter to state court.


A. Diversity of Citizenship

Arellano argues remand is appropriate because Home Depot has failed to establish that the citizenship of the parties is completely diverse and that the amount in controversy exceeds $75,000. Diversity jurisdiction exists in federal court if the plaintiff and the defendant(s) are citizens of different states, and the amount of controversy exceeds $75,000. 28 U.S.C. § 1332(a)(1). Federal jurisdiction must "be rejected if there is any doubt as to the right of removal in the first instance." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). Here, Home Depot, the party seeking to invoke federal jurisdiction, bears the burden of establishing jurisdiction. See Indus. Tectonics, Inc. v. Aero Alloy ["ITI"], 912 F.2d 1090, 1092 (9th Cir. 1990). The primary purpose of diversity jurisdiction is to "avoid prejudice against `outsiders.'" Ho v. Ikon Office Solutions, Inc., 143 F. Supp.2d 1163, 1164 (N.D. Cal. 2001).

If a party is a corporation, it is a citizen of both its state of incorporation and the state where it has its principal place of business. 28 U.S.C. § 1332(c)(1). In the present case, it is undisputed that Home Depot is a citizen of Delaware, its state of incorporation. However, the parties dispute Home Depot's principal place of business.

In determining a corporation's principal place of business for the purposes of citizenship, courts utilize one of two tests. ITI, 912 F.2d at 1092. Under the "place of operations" test, a corporation's principal place of business is the state which "contains a substantial predominance of corporate operations." Id. This test is appropriate "where a corporation conducts `substantially all' of its operations in one state and its headquarters are located in another state." Id. at 1093. Additionally, "substantial predominance" in a particular state exists if "the amount of [the] corporation's business activity in one state [is] significantly larger than any other state in which the corporation conducts business." Tosco Corp. v. Communities For a Better Environment, 236 F.3d 495, 500 (9th Cir. 2001). Courts consider several factors to determine whether a particular state contains a "substantial predominance," including "the location of employees, tangible property, production activities, sources of income, and where sales take place." Id. at 500. This inquiry "plainly requires a comparison of that corporation's business activity in the state at issue to its business activity in other individual states." Id. The Ninth Circuit has held that the "place of operations test" should apply unless the corporation demonstrates that its activities do not substantially predominate in any one state. Id.

The second test used to determine a corporation's principal place of business is the "nerve center" test, which focuses on the location of the corporation's executive and administrative functions. See ITI, 912 F.2d at 1092. The "nerve center" test is applicable "where a corporation conducts business in many states, and does not conduct a substantial predominance of its business in any single state." Id. at 1093. This test is generally utilized when a corporation's activities are far flung and ...

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