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Stelzer v. Carmax Auto Superstores California, LLC

United States District Court, Ninth Circuit

December 20, 2013

CYNTHIA STELZER, Plaintiff,
v.
CARMAX AUTO SUPERSTORES CALIFORNIA, LLC, A Limited Liability Company; and Does 1 through 75, inclusive, Defendant.

ORDER ON PLAINTIFF'S MOTION TO REMAND

LARRY ALAN BURNS, District Judge.

Stelzer filed this case in San Diego Superior Court on June 20, 2013, and CarMax removed it on August 1 and promptly filed a motion to dismiss. Then, with the motion fully briefed and under submission, CarMax filed a motion to remand. That motion challenges the Court's subject matter jurisdiction, which the parties can't waive and which the Court has a continuing obligation to monitor. Indeed, "[i]f at any time before final judgment, it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c). For the reasons given below, the motion to remand is DENIED.

I. CarMax's Removal

CarMax removed this case on the basis of diversity jurisdiction, which requires complete diversity of citizenship and an amount in controversy in excess of $75, 000. 28 U.S.C. § 1332(a). There's no dispute that Stelzer is a citizen of California, but CarMax asserted that it is a citizen of Virginia, organized under its law and with its principal place of business there. As for the amount in controversy, CarMax acknowledged that Stelzer is seeking only $40, 000 in actual damages and $32, 000 in punitive damages, but asserted that the cost of attorney's fees and injunctive relief would take the amount well above the $75, 000 threshold.

II. Legal Standard

A defendant can remove any action filed in state court over which federal courts have original jurisdiction. 28 U.S.C. 1441(a). That said, the removal statute is strictly construed against removal, and "[t]he strong presumption against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). "Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Id. The propriety of removal turns on whether the case could have originally been filed in federal court, Chicago v. Int'l Coll. of Surgeons, 522 U.S. 156, 163 (1997), and the Court's analysis must focus on the pleadings "as of the time the complaint is filed and removal is effected." Strotek Corp. v. Air Transport Ass'n of America, 300 F.3d 1129, 1131 (9th Cir. 2002). See also Sparta Surgical Corp. v. Nat'l Ass'n of Sec. Dealers, Inc., 159 F.3d 1209, 1213 (9th Cir. 1998).

III. Discussion

Stelzer now contests both elements of diversity jurisdiction. She argues, first, that CarMax is, like her, a citizen of California. She argues, second, that some amount less than $75, 000 is in controversy. The Court will discuss those arguments individually.

A. Diversity

For diversity jurisdiction to exist in this case, Stelzer and CarMax must be citizens of different states. There's no dispute that Stelzer is a citizen of California. But as she sees it, CarMax is too. Indeed, this case is about a Mercedes that Stelzer bought from a CarMax location in Kearney Mesa, CA. CarMax, on the other hand, insists that it's a citizen of Virginia, organized under Virginia's law and with its principal place of business there.

CarMax is a limited liability company, which is treated as a partnership for purposes of diversity jurisdiction. Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006). Thus, "an LLC is a citizen of every state of which its owners/members are citizens." Id. If that owner or member is a corporation, it is a citizen where it is incorporated and where it has its principal place of business, or where "its high level officers direct, control, and coordinate the corporation's activities." Hertz Corp. v. Friend, 559 U.S. 77, 80 (2010); 28 U.S.C. § 1332(c)(1). If it is an individual, he or she is a citizen of the state where he or she is domiciled, which is where he or she has established a fixed habitation and intends to remain indefinitely. Lew v. Moss, 797 F.2d 747, 750 (9th Cir. 1986).

When it removed this case (and now), CarMax asserted that its sole member is CarMax Auto Superstores West Coast, Inc., a corporation incorporated under the laws of Virginia with its principal place of business there. (Notice of Removal ¶ 3(c); Opp'n Br. at 5.) But the story is a little more complicated than that. CarMax used to be a California LLC, but claims it "converted out and became a Virginia company" sometime during July 2012. (Opp'n Br. at 5.) Also, CarMax Auto Superstores West Coast, Inc. used to be a California corporation "before it merged out and became a Virginia corporation." (Opp'n Br. at 5.) The evidentiary record is a little hard to piece together, but it's clear enough that this corporate restructuring took place in early July 2012, no doubt well before this case was filed. Both CarMax and CarMax Auto Superstores West Coast have identified a California main office in Buena Park, but it is just that: a main office in California that CarMax keeps for the purposes of conducting business in the state. As an in-house lawyer for CarMax puts it, "[t]he Buena Park location is an actual CarMax retail store that performs no executive or management functions for the company; it was designated for purposes of the various California statutes that require or allow a foreign company to designate a main office." (Bloor Decl. ¶ 19.) Its nerve center, by contrast, "where its high level officers and executives direct and control CarMax's activities, " is in Richmond, Virginia. ( Id. )

Stelzer disputes that Carmax's principal place of business is in Virginia because, among other reasons, in an earlier case it said its principal place of business was in Orange County, California. That case was Brooks v. Carmax Auto Superstore California, LLC, filed in San Diego Superior Court on May 10, 2012, and CarMax's admission came in a responses to form interrogatories dated August 31, 2012. CarMax was asked to state the address of its principal place of business and it responded, "12800 Tuckahoe Creek Parkway, Richmond, VA 23238. As of July 1, 2012, CarMax Auto Superstores California, LLC's principal place of business is in Orange County, California." (Rosner Decl., Ex. 1 at 4.) Stelzer also notes that CarMax's website lists sixteen dealerships in California as of August 23, 2013, the implication being that it's hard to believe sixteen California dealerships (and others in other western states) are run out of Richmond, Virginia.

CarMax first tries to get around the Brooks interrogatory response by pointing out that the case pre-dated its corporate restructuring that moved its operations to Virginia. This isn't entirely convincing, because the response is dated August 31, 2012 and the restructuring took place in early July of that year. Indeed, CarMax asserts in its opposition brief now that it hasn't "represented itself as a California entity in any legal proceeding or other context since the July 2012 transition, " which is untrue ...


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