United States District Court, N.D. California
April 11, 2005.
FRANK ENGELS, Plaintiff,
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.
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
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.
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)).
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
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  (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
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
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.
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.
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