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ENGELS v. EXEL GLOBAL LOGISTICS

United States District Court, N.D. California


April 11, 2005.

FRANK ENGELS, Plaintiff,
v.
EXEL GLOBAL LOGISTICS, INC. and DOES 1-25, inclusive, Defendants.

The opinion of the court was delivered by: MARILYN PATEL, Chief Judge, District

MEMORANDUM AND ORDER Re: Defendant's Motion to Remand; Plaintiff's Motion to Transfer
On August 13, 2004, plaintiff Frank Engels filed a complaint seeking recovery of his unpaid sales commissions in Alameda County Superior Court. On September 17, 2004, defendant Exel Global Systems, Inc. ("Exel") removed the action to this court, asserting jurisdiction based on diversity of citizenship. Now before the court are Engels' motion to remand and Exel's motion to transfer venue to the United States District Court for the Northern District of Texas. Having considered the parties' arguments and for the reasons set forth below, the court enters the following memorandum and order.

BACKGROUND

  Defendant Exel is a supply chain management company that provides freight forwarding, warehousing, distribution services, and other "logistics solutions" to customers in the manufacturing and retail sectors. First Kelly Decl., Exh. F ¶ 6. Until his resignation in February 2004, Engels was employed at Exel's Hayward, California office and served as the company's Director of Sales and Pricing for Latin America and the Carribean. Id. ¶ 9; Notice of Removal, Exh. A ¶ 4. As part of his compensation, Engels received a commission based on "his performance as an employee." Notice of Removal, Exh. A ¶ 4. Engels now asserts that Exel refused to pay him the full amount of the commissions due to him under his contract of employment. Id. ¶ 10.

  Exel disputes its liability for the unpaid commissions and raises a host of claims against Engels, albeit not in this forum. These claims arise out of Engels' relationship with Velocita World Wide Logistics, Inc. ("Velocita"), one of Exel's competitors in the market for logistics management services. First Kelly Decl., Exh. F ¶¶ 6-7. According to Exel, Engels provided Velocita with Exel's confidential marketing and pricing data prior to his resignation from the company, thereby giving Velocita an unfair competitive advantage in the logistics management services market. Id. ¶ 7. Based on these allegations, Exel filed suit against Engels in the District Court of Dallas County, Texas on June 14, 2004, asserting numerous causes of action relating to Engels' alleged misappropriation of confidential business information. See generally id., Exh. A. Exel's Texas action also seeks declaratory judgment as to the amount of commissions owed to Engels. Id., Exh. F ¶¶ 50-53.

  On August 12, 2004, Engels entered a special appearance in the Dallas County District Court for the purpose of challenging that court's exercise of jurisdiction over his person or property. Id., Exh. D. In his pleadings, Engels asserted that he was a resident of California and that his contacts with Texas were insufficient to establish personal jurisdiction over him. Id. ¶¶ 1-7. However, before the Texas court could rule on the merits of his defense of lack of personal jurisdiction, Engels filed a Withdrawal of Special Appearance and Entry of Appearance and thus consented to the court's jurisdiction with respect to the subject matter of Exel's claims. Third Kelly Decl. ¶ 1 & Exh. A. Those claims are currently pending in Dallas County District Court.

  On August 13, 2004, the day after entering his special appearance, Engels filed a complaint in Alameda County Superior Court seeking to recover his unpaid sales commissions. Notice of Removal, Exh. A. In addition to alleging breach of his contract of employment, Engels' complaint asserts causes of action for willful failure to pay wages due in violation of the California Labor Code and unfair business practices in violation of California Business & Professions Code § 17200. Id. ¶¶ 5-16. Engels now alleges that Exel owes him $5 million in unpaid commissions. Id., Exh. B at 1. On September 17, 2004, Exel removed the California action to this court, asserting jurisdiction based on diversity of citizenship. Notice of Removal ¶ 9. Specifically, the notice of removal alleged that Exel is a New York corporation with its principal place of business in Irving, Texas and that Engels is a citizen of the state of California. Id. ¶¶ 5-6. Following the removal of this action, on September 24, 2004, Exel filed a motion to transfer venue pursuant to 28 U.S.C. § 1404(a), arguing that the convenience of the parties and witnesses and the interest of justice favored transferring the instant action to the United States District Court for the Northern District of Texas.

  Engels opposed Exel's motion to transfer, and on December 3, 2004, he filed a motion to remand the instant action to Alameda Country Superior Court. Engels concedes that he was a resident of California at all times during his employment with Exel. Second Engels Decl. at 1. However, after Engels resigned from Exel, he accepted an offer of employment from UTi, Inc. and served as UTi's Vice President of Sales and Marketing for Latin America from April 13, 2004 until September 23, 2004. First Engels Decl. ¶¶ 4-5 & Exh. A. On June 22, 2004, UTi transferred Engels to its office in São Paolo, Brazil. Id. ¶ 3. After his transfer, Engels served as the managing director of UTi's São Paolo office and resided in Brazil until he was fired by UTi on September 23, 2004. Id. ¶¶ 3-5 & Exh. A at 1. Engels subsequently returned to the United States and began working in Chicago, where he is presently employed. Id. ¶ 10.

  Engels now contends that because he resided in Brazil with the intent to remain permanently at the time that this action was filed, he was not a citizen of California or of any other state at that time. Thus, according to Engels, this court lacks subject matter jurisdiction and must remand this action to Alameda County Superior Court. The discussion that follows addresses Engels' motion to remand as well as Exel's motion to transfer venue.

  LEGAL STANDARD

  I. Motion to Remand

  As a general rule, an action is removable to a federal court only if it might have been brought there originally. 28 U.S.C. § 1441(a). The removal statute is strictly construed, and the court must reject federal jurisdiction if there is any doubt as to whether removal was proper. Duncan v. Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996). The defendant bears the burden of proving the propriety of removal. Id. (citing Harris v. Provident Life & Accident Ins. Co., 26 F.3d 930, 932 (9th Cir. 1994)). Thus, where removal jurisdiction is premised upon diversity of citizenship, the defendant must establish that the court would have had original jurisdiction over the action pursuant to 28 U.S.C. § 1332, which grants district courts the authority to entertain any civil action "where the amount in controversy exceeds the sum or value of $75,000 . . . and is between . . . citizens of different States." 28 U.S.C. § 1332(a)(1). For removal purposes, diversity of citizenship must exist at both the time that the action was commenced in state court and at the time of removal. Strotek Corp. v. Air Transp. Ass'n of Am., 300 F.3d 1129, 1131 (9th Cir. 2002) (citation omitted).

  II. Motion to Transfer Venue

  A motion to transfer venue to another federal court may be brought under 28 U.S.C. § 1404, which provides: "For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). In adjudicating a motion to transfer, the court must first determine that venue would be appropriate in the transferee district. Id.; see also Goodyear Tire & Rubber Co. v. McDonnell Douglas Corp., 820 F. Supp. 503, 506 (C.D. Cal. 1992). Once the propriety of venue in the transferee district is established, the court must then consider whether the criteria set forth in section 1404(a) favor adjudicating the plaintiff's claims in that forum. See Goodyear, 820 F. Supp. at 506. The Ninth Circuit has characterized these criteria as embodying an "individualized, case-by-case consideration of convenience and fairness." Jones v. GNC Franchising, Inc., 211 F.3d 495, 498 (9th Cir.) (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988)), cert. denied, 531 U.S. 928 (2000). Among the factors that a district court may consider in deciding whether transfer is appropriate are: (1) the location where the relevant agreements were negotiated and executed; (2) the state that is most familiar with the governing law; (3) the plaintiff's choice of forum; (4) the respective parties' contacts with the forum; (5) the contacts relating to the plaintiff's cause of action in the chosen forum; (6) the differences in the costs of litigation in the two forums; (7) the availability of compulsory process to compel attendance of unwilling nonparty witnesses; (8) the ease of access to sources of proof; and (9) any relevant public policy of the forum state. Id. at 498-99 (citing Stewart, 487 U.S. at 29-31 and Lou v. Belzberg, 834 F.2d 730, 739 (9th Cir. 1987)).

  DISCUSSION

  I. Engels' Motion to Remand

  The court first considers Engels motion to remand this action to Alameda County Superior Court. Because no federal question is raised by Engels' complaint, the court must determine whether it would have had original jurisdiction over the instant action pursuant to 28 U.S.C. § 1332(a)(1). There is no question that the amount in controversy requirement of section 1332 is satisfied by Engels' prayer for $5 million in damages. See Notice of Removal, Exh. B at 1. Accordingly, the court turns to the sole disputed issue, the citizenship of the parties.

  A. Engels' Citizenship

  Engels' motion to remand focuses on his own citizenship. For diversity purposes, the citizenship of a natural person is determined based on the state in which that person is domiciled. Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001). "A person's domicile is her permanent home, where she resides with the intention to remain or to which she intends to return." Id. (citing Lew v. Moss, 797 F.2d 747, 749 (9th Cir. 1986)). Thus, a person's state of residence is not necessarily her domicile. Id. As the Ninth Circuit observed in Weible v. United States, 244 F.2d 158 (9th Cir. 1957), "[r]esidence is physical, whereas domicile is generally a compound of physical presence plus an intention to make a certain definite place one's permanent abode, though, to be sure, domicile often hangs on the slender thread of intent alone." Id. at 163. However, while it may be true that domicile turns on the domiciliary's subjective intent, that intent must be evaluated based on the objective facts in the record. Lew, 797 F.2d at 750 (citations omitted). Consequently, "statements of intent are entitled to little weight when in conflict with [those] facts." Id. Among the sources of objective evidence that a court may consider in determining an individual's domicile are current residence, voting registration and voting practices, location of personal and real property, location of brokerage and bank accounts, location of spouse and family, membership in unions and other organizations, place of employment or business, driver's license and automobile registration, and payment of taxes. Id. (citing C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 3612, at 529-31 (1984 & Supp. 1986)).

  However, while the location of a party's domicile may not be clear-cut in every instance, the statutory definition of citizenship that applies in diversity actions leaves no doubt that United States citizens must be domiciled in one of the United States if a federal court is to assert jurisdiction on the basis of diversity. See 28 U.S.C. § 1332(a). Consequently, a United States citizen who is domiciled abroad is "stateless" for purposes of applying section 1332(a) and cannot sue or be sued in federal court in the absence of a federal question. Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 828 (1989). Here, Engels submits that at the time that he filed his state court complaint against Exel, he resided in Brazil with an intent to remain indefinitely. Thus, according to Engels, he is not a citizen of any state for purposes of determining whether this court has jurisdiction under 28 U.S.C. § 1332(a)(1).

  In support of this position, Engels submits his own declarations, which attest to the fact that he accepted an offer of employment with UTi on April 13, 2004 and was transferred to the company's São Paolo office on June 22, 2004. First Engels Decl. ¶¶ 3-5 & Exh. A. According to his first declaration, Engels remained in Brazil and intended to remain there permanently until he was "unexpectedly and abruptly" fired by UTi on September 23, 2004. Id. ¶¶ 3, 10 & Exh. C. This statement is corroborated by the declaration of Engels' wife, Katrina Kleinman. See generally Kleinman Decl. Kleinman submits that she joined her husband in Brazil on approximately July 17, 2004 and intended to remain there permanently. Id. ¶ 5. Her declaration also states that she and Engels contracted to lease a home in São Paolo for three years, that they spent approximately $25,000 to furnish their new home, and that she began studying Portugese upon arriving in Brazil. Id. ¶¶ 5-6; see also First Engels Decl. ¶¶ 5-9 (attesting to same facts). In addition, Kleinman submits that she and her husband intended to sell their Guerneville, California home after they remodeled it and prepared it for sale. Id. ¶ 7. There is some documentary evidence corroborating Engels' subjectively expressed intent to remain in Brazil indefinitely. Specifically, the record shows that Engels leased a home in São Paolo though December 31, 2006, Rivas Decl. at 2 & Exh. A, and that he listed his Guerneville, California home for sale with a real estate agent on September 2, 2004, Engels Decl. ¶ 5 & Exh. B. In addition, Engels received a one-year temporary visa for entry into Brazil in April 2004 and obtained a five-year Brazilian visa on September 6, 2004. Kelly Supp. Decl., Exh. A at 9-10. Thus, in spite of what turned out to be his very brief tenure at UTi, the record supports a finding that Engels' contract of employment was bona fide and that he intended to maintain a residence in Brazil for approximately three years. However, this is not atypical of United States citizens who work for foreign companies and live abroad for a period of time. They rent houses or apartments, even for significant periods of time, in the country where they are posted; they buy furniture; they rent or sell their homes in the United States; they learn the local language. This does not necessarily mean that they have taken up "domicile" in the foreign country.

  Engels' decision to maintain a residence in Brazil is not necessarily sufficient to prove that he intended to make Brazil his "permanent home," as is required to establish his domicile there for diversity of citizenship purposes, Kanter, 265 F.3d at 857, and there is evidence in the record suggesting that Engels had no intent to do so. Of particular significance is the testimony that Engels gave upon being deposed by Exel's counsel. For example, Engels testified that his position at UTi required extensive travel to the United States as well as to other international destinations and that he expected to spend as much as sixty percent of his time traveling outside of Brazil. Kelly Supp. Decl., Exh. A at 13. Engels also testified that despite listing his Guerneville, California home for sale in September 2004, he "was never really serious about selling the house," and that it was eventually taken off the market due to lack of buyer interest. Id. at 20. Finally, and perhaps most tellingly, when asked where he and his spouse were living on August 13, 2004, the date on which his state court complaint was filed, Engels responded that they lived in Guerneville. Id. at 6.

  In weighing the above-cited evidence, the court is mindful of its obligation to focus on any "objective facts" that might shed light on Engels' intent to remain in a particular jurisdiction on a permanent or indefinite basis. See Lew, 797 F.2d at 750. The relevant facts here establish that Engels resided in California on the date on which his state court complaint was filed and that he neither sold nor seriously intended to sell his home in that state. Such evidence strongly suggests that, notwithstanding his decision to accept a transfer to UTi's São Paolo, Brazil office, Engels resided in California with an intention to remain there permanently at the time this action was filed. Balancing this evidence against Engels' assertion that he intended remain in Brazil and considering the fact that such subjective evidence is "entitled to little weight when in conflict with facts," id., the court concludes that Engels was domiciled in California on the date on which his complaint against Exel was filed in state court.

  Nor is there any doubt that Engels remained a citizen of California at the time that his state court action was removed, a further requirement for establishing diversity of citizenship on removal. See Strotek, 300 F.3d at 1131. Indeed, the only relevant change in Engels' circumstance between the time his state court complaint was filed and the September 24, 2004 removal date was his firing by UTi, which obviously diminished any enthusiasm for remaining indefinitely in Brazil that he might have otherwise had. The court therefore concludes that for the purpose of determining diversity of citizenship, Engels must be considered a citizen of California.

  B. Exel's Citizenship

  The other side of the diversity equation in the instant action is the citizenship of Exel, a New York corporation that does business in a number of states and foreign countries, including California and Texas. In determining whether there is diversity of citizenship between corporate parties, "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." 28 U.S.C. § 1332(c)(1); United Computer Sys., Inc. v. AT&T Corp., 298 F.3d 756, 763 (9th Cir. 2002) (quoting Tosco Corp. v. Communities for a Better Env't, 236 F.3d 495, 499 (9th Cir. 2001)). Like most federal courts, the Ninth Circuit generally employs one of two tests to determine a corporation's principal place of business. See Industrial Tectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1092 (9th Cir. 1990) (citing 1 J. Moore, Moore's Federal Practice ¶ 0.77 [3] (2d ed. 1989)). 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. (quoting Co-Efficient Energy Sys. v. CSL Indus., Inc., 812 F.2d 556, 558 (9th Cir. 1987)). This test is appropriate where "the amount of [a] corporation's business activity in one state [is] significantly larger than any other state in which the corporation conducts business." Tosco, 236 F.3d at 500. On the other hand, if a "substantial predominance" of corporate operations do not take place in any one state, the Ninth Circuit has instructed district courts to apply the so-called "nerve center" test to determine where the corporation's principal place of business is located. See id. (citing Industrial Tectonics, 912 F.2d at 1094). This test focuses on location of where the corporation's executive and administrative functions are performed, Industrial Tectonics, 912 F.2d at 1092, and typically applies "when a corporation's activities are far flung and operations are conducted in many states." Arellano v. Home Depot U.S.A., Inc., 245 F. Supp. 2d 1102, 1106 (S.D. Cal. 2003) (citing Lurie Co. v. Loew's San Francisco Hotel Corp., 315 F. Supp. 405, 412 (N.D. Cal. 1970) (Jameson, J.)).

  Here, the determination of Exel's principal place of business is complicated by the fact that Exel was in the process of relocating its corporate headquarters from California to Texas in the months that proceeded the filing of Engels' state court complaint. Straff Decl. ¶ 2. However, Exel submits uncontroverted evidence that on July 16, 2004, it announced the relocation of its executive staff, its finance, project management, and sales and marketing divisions, and a customer support center to 38,000 square feet of newly leased office space located in Irving, Texas. Id., Exh. B. In light of the "far flung" nature of Exel's corporate activities, see Arellano, 245 F. Supp. 2d at 1106, the court finds that this Irving, Texas location — i.e., the corporation's "nerve center" — best defines the its principal place of business for diversity purposes. The court therefore concludes that Exel was a citizen of the states of New York and Texas both at the time that Engels' state court complaint was filed and on the date that this action was removed to federal court.

  C. Conclusion

  In summary, the court finds that for the purpose of determining diversity of citizenship in this action, Engels must be considered a citizen of the state of California and Exel must be deemed a citizen of the states of New York and Texas. Accordingly, the court finds complete diversity of citizenship to be present and denies Engels' motion to remand the instant action to state court.

  II. Motion to Transfer

  Having established that it has jurisdiction over this action pursuant to 28 U.S.C. § 1332(a)(1), the court now turns to Exel's motion to transfer venue to the Northern District of Texas. The parties do not dispute that venue in that district is proper under 28 U.S.C. § 1391(a)(1). The court thus has discretion to transfer this action if the interest of justice and the convenience of the parties favor adjudicating Engels' claims Texas. See 28 U.S.C. § 1404(a); Howard Elec. & Mech. Co. v. Frank Briscoe Co., 754 F.2d 847, 850 (9th Cir. 1985).

  In support of its motion, Exel relies primarily on the fact that its corporate headquarters is now located in Irving, Texas, and as a consequence of this fact, a majority of party and nonparty witnesses (as well as most of the relevant documentary evidence) can be found in that district. However, in adjudicating a motion to transfer venue, considerations related to the convenience of the defendant or of nonparty witnesses are rarely sufficient to warrant upsetting the plaintiff's choice of forum. See Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986) (observing that a motion to transfer premised upon the convenience of the parties or witnesses should be granted only if the defendant makes a "strong showing of inconvenience") (citations omitted). That general rule is particularly apposite here, given that the factual predicate for Engels' action arises out of his employment in this district and that Engels' claims will be governed by California law. These factors easily outweigh any inconvenience that Exel or any of the witnesses might suffer as a consequence of adjudicating the parties' dispute in this forum.

  Exel also contends that the pendency of its claims against Engels in Texas state court favors granting its motion to transfer, citing the possibility that a court in the Northern District of Texas could coordinate discovery in this action with parallel efforts in the state court proceedings. However, Engels made no attempt to remove the Texas action to federal court, and Exel concedes that consolidation of two proceedings is not possible at this time. Thus, while the court very well might reach a different conclusion if the Texas action had been filed in or removed to federal court, it finds that whatever limited efficiency gains that might be realized by transferring this action to the Northern District of Texas are easily outweighed by the aforementioned considerations favoring the adjudication of Engels' claims in this court. Accordingly, the court denies Exel's motion to transfer.

  CONCLUSION

  For the reasons stated above, the court DENIES plaintiff's motion to remand and DENIES defendant's motion to transfer venue. A case management conference shall be held in this action on May 2, 2005 at 3:00 p.m. The parties shall file a joint case management statement on or before April 25, 2005.

  IT IS SO ORDERED.

20050411

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