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O'Grady v. Conmed Corporation

United States District Court, N.D. California

February 26, 2014

MICHAEL O'GRADY, an individual; ALLEN SMOOT, an individual; PRO-SURGICAL ASSOCIATES, LLC, a California Limited Liability Company; Plaintiffs,
v.
CONMED CORPORATION, a corporation; LINVATEC CORPORATION, a corporation; ROB CHRISTENSEN, an individual; Defendants.

ORDER REGARDING DEFENDANTS' MOTION TO DISMISS AND PLAINTIFFS' MOTION TO REMAND (Docket Nos. 6, 18)

CLAUDIA WILKEN, District Judge.

On October 16, 2013, Plaintiffs Michael O'Grady, Allen Smoot, and Pro-Surgical Associates, LLC (PSA) filed this action against Defendants CONMED Corporation, Linvatec Corporation, and Rob Christensen in Superior Court in California. On November 12, 2013, Defendants removed this action based on diversity of citizenship. Defendants now move to dismiss based on improper venue or, in the alternative, to transfer the action to the Northern District of New York; Plaintiffs move to remand the action back to Superior Court. The Court finds these motions suitable for disposition without oral argument pursuant to Civil Local Rule 7-1(b). Having considered the papers submitted, the Court GRANTS Plaintiffs' motion to remand and DENIES AS MOOT Defendants' motion to dismiss or, in the alternative, to transfer venue.

FACTUAL BACKGROUND

Unless otherwise noted, the following facts are taken from Plaintiffs' complaint. See Docket No. 1, Ex. A.

CONMED is the parent corporation of Linvatec, a wholly-owned subsidiary through which CONMED manufactures medical and orthopedic products and accessories. Docket No. 1, Ex. C. CONMED and Linvatec are both foreign corporations doing business in California. Christensen is the Vice President of CONMED and resides in California.

Plaintiffs O'Grady and Smoot reside in California. O'Grady started working for CONMED in 1976, while Smoot began working with CONMED in or about 2005. Around 2005, CONMED required O'Grady to create a separate entity, PSA, and execute a Manufacturer's Representative Agreement (MRA) with Linvatec on a "take it or leave it basis." PSA is a California limited liability company located in Fremont. Both O'Grady and Smoot worked under the PSA entity. CONMED purported to establish a distributorship model, whereby it contracted with distributors such as PSA as independent contractors. In reality, CONMED acted as a franchisor by exerting substantial control over the distributors' operations and employees, even referring internally to the distributors as franchisees. CONMED allegedly categorized PSA as a contracted distributor in order to avoid paying employee-associated labor costs.

CONMED/Linvatec terminated the contract on December 31, 2012. Docket No. 1, Ex. D. Shortly before termination, Christensen approached several PSA representatives, who later began working for CONMED directly.

Plaintiffs filed their first action against CONMED and Linvatec regarding these events on August 30, 2013, in Alameda County Superior Court. See Case No. 13-CV-4453. Plaintiffs alleged that PSA employees were in fact employees of CONMED and Linvatec under California law. If they were not employees, Plaintiffs argue in the alternative that PSA was a franchise of CONMED and Linvatec because they exerted substantial control over PSA. Plaintiffs contend that Defendants violated their duties as either an employer or franchisor of PSA, asserting a number of common law and California statutory claims against Defendants. Additionally, Plaintiffs charge that the MRA was unenforceable because it was a contract of adhesion. On September 25, 2013, Defendants removed the first action on diversity grounds and then moved to dismiss, or in the alternative, to transfer the action. Plaintiffs did not oppose the motions, but instead voluntarily dismissed the action pursuant to Rule 41(a). See Case No. 13-CV-4453, Docket No. 15.

On October 16, 2013, Plaintiffs commenced a second action against Defendants, asserting a similar set of claims but adding three additional causes of action against Christensen: (21) interference with prospective economic advantage; (24) defamation per se; and (25) defamation per quod. All three of these causes of action arise from Plaintiffs' allegation that Christensen told a number of PSA sales representatives that Plaintiffs "had mismanaged the business as it related to open territory, thereby not distributing PSA sales representatives actual commissions or other monies earned." See, e.g., Complaint ¶ 208. Plaintiffs allege that Christensen knew his statements were false but made them anyway with the intent to injure Plaintiffs' business. Id . ¶ 209. His discussions with various PSA sales representatives caused them to leave their employment with PSA. See generally Docket No. 30, Exs. 1, 2, 3.

On November 12, 2013, Defendants removed this action based on diversity of citizenship and moved to transfer the action to the Northern District of New York based on the forum selection clause in the MRA. Docket Nos. 1, 6.

LEGAL STANDARDS

I. Motion to remand

Title 28 U.S.C. § 1441(a) permits a defendant to remove to federal court "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." Removal is therefore only appropriate if the state court action could have been filed in federal court in the first instance. Caterpillar, Inc. v. Williams , 482 U.S. 386, 392 (1987). Upon notice of removal, the defendant bears the burden of establishing federal jurisdiction. Ethridge v. Harbor House Rest. , 861 F.2d 1389, 1393 (9th Cir. 1988). The removal statute is strictly ...


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