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Swete v. Professional Bureau of Collections of Maryland

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA


January 14, 2010

ERIN SWETE, AN INDIVIDUAL, PLAINTIFF,
v.
PROFESSIONAL BUREAU OF COLLECTIONS OF MARYLAND, INC., A MARYLAND CORPORATION; PROFESSIONAL BUREAU OF COLLECTIONS, INC., A CALIFORNIA CORPORATION; MICHELLE ZAPATA, AN INDIVIDUAL; ERIK BRECHBILL, AN INDIVIDUAL; AND DOES 1-10, INCLUSIVE, DEFENDANTS.

The opinion of the court was delivered by: Frank C. Damrell, Jr. United States District Judge

MEMORANDUM AND ORDER

This matter is before the court on plaintiff Erin Swete's ("Swete") motion to remand this action to the Superior Court of California for the County of Sacramento pursuant to 28 U.S.C. § 1447. Defendants Professional Bureau of Collections of Maryland, Inc. ("PBM"), Professional Bureau of Collections, Inc. ("PBC"), Michelle Zapata ("Zapata"), and Erik Breckbill ("Brechkbill") oppose the motion, arguing that there is complete diversity between plaintiff and defendant PBM because PBC and the individual defendants were fraudulently joined. For the reasons set forth below,*fn1 plaintiff's motion to remand is GRANTED.

Plaintiff Swete was employed by defendant PBM as a collections agent from October 2008 until March 2009. (Am. Compl. ("Compl."), filed Oct. 9, 2009, ¶ 11.) Swete alleges that defendant PBC is an alter-ego, parent corporation, subsidiary corporation, agent, partner, and/or association and affiliated corporation of PBM. (Id. ¶ 3.) During the beginning of her employment with PBM, Swete and other collections agents were required to represent to debtors that they represented defendant PBC. (Id. ¶ 12.) Defendants contend that during 2008 and 2009, PBC was an active California corporation, but it had no employees and conducted no business in California or elsewhere. (Decl. of Travis Justus in Opp'n to Pl.'s Mot. ("Justus Decl."), filed Sept. 15, 2009, ¶ 3.) Further, defendants contend that PBM did not service PBC collection accounts during 2008 or 2009, and there was no business servicing agreement in place between the two entities. (Id. ¶ 6.)

During the course of her employment, Swete was in the process of divorcing her husband. (Compl. ¶ 13.) Legal proceedings concerning the divorce took place in the State of Arizona. (Id.) On or about March 8, 2009, Swete received notice that she was required to appear at a court hearing in Arizona on March 31, 2009. (Id. ¶ 14.) The next day, Swete submitted to Zapata, the General Manager, a written request to be granted two days off work, March 30 and March 31, to attend the March 31 hearing. (Id. ¶ 15.) Zapata declined the initial request. (Id.) On or about March 11, 2009, Swete requested time off from Brechbill, the Operations Manager. (Id. ¶ 16.) Brechbill brushed Swete off and told her to speak to Zapata, knowing that Zapata had declined the request. (Id.) On or about March 23, 2009, Sweet submitted a second written request to be granted one day off work, March 31, to attend the hearing; Zapata again declined the request. (Id. ¶ 17.) Swete advised Zapata that she would nevertheless have to attend the hearing and miss work. (Id.)

On or about March 30, 2009, Swete advised her other supervisor and Unit Manager, Misty McReynolds, that she was going to be absent from work on March 31 to attend the court hearing in Arizona. In the early morning hours of March 31, Swete called Zapata, who informed her that she had been terminated "for a no call, no show." (Id. ¶ 19.)

Plaintiff filed suit in the Superior Court of California for the County of Sacramento, alleging (1) wrongful termination in violation of public policy against defendants PBM and PBC; (2) violation of California Labor Code §§ 230, et seq., against defendants PBM and PBC; (3) violation of California Business and Professions Code §§ 17200, et seq., against defendants PBM and PBC; (4) slander against all defendants; (5) intentional infliction of emotional distress against all defendants; and (6) negligent infliction of emotional distress against all defendants.

"[A]ny civil action brought in State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court" in which the action is pending. 28 U.S.C. § 1441(a). Federal district courts "have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000" and is between citizens of different states.

28 U.S.C. § 1332(a). "If the plaintiff fails to state a cause of action against a resident defendant, and the failure is obvious according to the settled rules of the state, the joinder of the resident defendant is fraudulent and the defendant's presence in the lawsuit is ignored for purposes of determining diversity." United Computer Sys., Inc. v. AT&T Corp., 298 F.3d 756, 761 (9th Cir. 2002) (internal quotations and citations omitted); McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). There is a general presumption against fraudulent joinder, and the burden on defendant is a "heavy one." Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007); Davis v. Prentiss Props. Ltd., Inc., 66 F. Supp. 2d 1112, 1113 (C.D. Cal. 1999) (citing Green v. Amerada Hess Corp., 707 F.2d 201, 205 (5th Cir. 1983). "Fraudulent joinder must be proven by clear and convincing evidence." Hamilton Materials, Inc., 494 F.3d at 1206 (9th Cir. 2007). "The removing party must prove that there is absolutely no possibility that the plaintiff will be able to establish a cause of action against the in-state defendant in state court, or that there has been outright fraud in the plaintiff's pleadings of jurisdictional facts." Davis, 66 F. Supp. 2d at 1113.

Defendants argue that complete diversity exists because plaintiff Swete fraudulently joined PBC and the individual defendants and thus, their residency should be not be relevant to the determination of jurisdiction. Specifically, defendants contend that PBC never employed plaintiff and therefore, cannot be liable for any of the alleged violations.*fn2 Defendant asserts that plaintiff has pled insufficient facts to support a theory that the two corporations should be treated as one.

Plaintiff alleges that defendant PBC is an alter-ego, parent corporation, subsidiary corporation, agent, partner, and/or association and affiliated corporation of PBM and that, during her employment with PBM, she was instructed to represent to debtors that they represented defendant PBC. Plaintiff also asserts that defendant Brechbill was designated by PBC as an agent for service of process. (Ex. 2 to Decl. of Eran Lagstein in Supp. of Pl.'s Mot. for Remand, filed Oct. 22, 2009.)

In deciding whether a corporation is the alter ego of another, "the court must determine (1) that there is such unity of interest and ownership that the separate personalities of the corporation[s]... no longer exist and (2) that failure to disregard [their separate identities] would result in fraud or injustice." Flynt Distrib. Co. v. Harvey, 734 F.2d 1389, 1393 (9th Cir. 1984) (citing Watson v. Commonwealth Ins. Co., 8 Cal. 2d 61, 68 (1936)).

On the facts and allegations before it, defendants have failed to demonstrate that there is absolutely no possibility that the plaintiff will be able to establish a cause of action against PBC. While defendants present evidence that there was no servicing agreement in place between PBM and PBC and that PBM did not service PBC collection accounts, they utterly fail to provide any information regarding what the relationship between PBM and PBC is. Defendants fail to address whether PBM is a parent or subsidiary corporation of PBC or whether PBM worked as PBC's agent. Further, defendants fail to present any evidence regarding whether collection agents were advised to tell debtors that they represented defendant PBC. Moreover, they fail to present any explanation why collection agents were given such instructions. Accordingly, it is not "obvious" that plaintiff has failed to state a claim against defendant PBC. United Computer Sys., Inc., 298 F.3d at 761; see Good v. Prudential Ins. Co. of America, 5 F. Supp. 2d 804, 807 (N.D. Cal. 1998)("the defendant must demonstrate that there is no possibility that the plaintiff will be able to establish a cause of action in state court against the alleged sham defendant").

Therefore, plaintiff's motion to remand this action to the Superior Court of California for the County of Sacramento is GRANTED.

IT IS SO ORDERED.


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