United States District Court, N.D. California, San Jose Division
ORDER GRANTING PLAINTIFF'S MOTION TO REMAND Re: Dkt. No. 30
EDWARD J. DAVILA, District Judge.
Plaintiff Fred Murabito ("Plaintiff") filed the instant lawsuit in Santa Clara County Superior Court against Defendants Stericycle, Inc. ("Stericycle"), Stericycle Specialty ("Stericycle Specialty") Waste Solutions, Inc., Strongpak, All Chemical Disposal, Inc. ("All-Chem"), and John Simpson for wrongful termination, breach of contract, infliction of emotional distress and related causes of action. According to the Complaint, Plaintiff is the former President and Chief Executive Officer of All-Chem. He took a general management position at Stericycle when it acquired All-Chem in 2009, but was ultimately terminated from that position in 2012. Plaintiff alleges that his termination was wrongful, retaliatory, and in breach of several representations made to him by Stericycle.
Stericycle, Stericycle Specialty and Simpson removed the case to this court on October 27, 2014, claiming federal jurisdiction on the basis of diversity. Plaintiff now moves to remand. See Docket Item No. 30. Stericycle and Stericycle Specialty (collectively, the "Stericycle Defendants") oppose. See Docket Item No. 31.
The court found this matter suitable for disposition without oral argument pursuant to Civil Local Rule 7-1(b). The Stericycle Defendants have not satisfied their burden to demonstrate the existence of federal jurisdiction. Accordingly, Plaintiff's motion will be granted and this case will be remanded for the reasons explained below.
I. LEGAL STANDARD
Removal jurisdiction is a creation of statute. See Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979) ("The removal jurisdiction of the federal courts is derived entirely from the statutory authorization of Congress."). In general, only those state court actions that could have been originally filed in federal court may be removed. 28 U.S.C. § 1441(a) ("Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant."); see also Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987) ("Only state-court actions that originally could have been filed in federal court may be removed to federal court by defendant."). Accordingly, the removal statute provides two basic ways in which a state court action may be removed to federal court: (1) the case presents a federal question, or (2) the case is between citizens of different states and the amount in controversy exceeds $75, 000. 28 U.S.C. §§ 1441(a), (b).
On a motion to remand, it is the removing defendant's burden to establish federal jurisdiction, and the court must strictly construe removal statutes against removal jurisdiction. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) ("The strong presumption' against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper."). "Where doubt regarding the right to removal exists, a case should be remanded to state court." Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003).
The court will first address relevant undisputed points. The parties agree that Plaintiff is a resident of California. See Am. Compl., Docket Item No. 28, at ¶ 4; see also Answer, Docket Item No. 29, at ¶ 4. There is also no dispute that All-Chem was a California corporation with its principal place of business in this state. See Am. Compl., at ¶ 3. In addition, the parties agree that, at least on a conceptual level, a dissolved corporation like All-Chem continues to exist "for the purpose of... prosecuting and defending actions by or against it." Cal. Corp. Code § 2010(a). Thus, on the face of the pleading, this action was not removable because Plaintiff did not raise a federal question in the Complaint, and California domiciles appear on both sides.
The Stericycle Defendants make two arguments in response to the presumption that this court lacks jurisdiction. First, they argue that All-Chem's domicile should be disregarded because it is a nominal party. Second, they contend that All-Chem is a "sham" defendant. These arguments are unpersuasive.
A. Nominal Party
When examining for the existence diversity jurisdiction, "a federal court must disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy." Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 461 (1980). Nominal parties are those "with nothing at stake... despite the propriety of their technical joinder." Strotek Corp. v. Air Transp. Ass'n of Am., 300 F.3d 1129, 1133 (9th Cir. 2002).
Here, the Stericycle Defendants argue that All-Chem is a nominal party because all of its stock was acquired by Stericycle on December 31, 2008, and then transferred to Stericycle Specialty. They also point out that all of All-Chem's liabilities were transferred to Stericycle, that All-Chem was dissolved in 2012, and that it no longer has any assets or insurance. Accordingly, the Stericycle Defendants maintain that any judgment obtained by Plaintiff could not be enforced against All-Chem, rendering it a party with nothing at stake or "technically joined."
While the Stericycle Defendants' argument is appealing on a logical level, the court must nonetheless reject it because it conflicts with the spirit of the California Corporations Code, which treats dissolved corporations as anything but nominal. Indeed, the relevant statutes embody a departure from how corporate dissolution was treated at common law, where "the dissolution of a corporation was treated like the death of a natural person: Once it had dissolved, a corporation ceased to exist and could not sue or be sued, any actions pending against it abated." Penasquitos, Inc. v. Super. Ct., 53 Cal.3d 1180, 1184 (1991). California has abandoned that rule, such that "the effect of dissolution is not so much a change in the corporation's status as a ...