Nasrawi et al v. Buck Consultants, LLC et al, No. 1:2009cv02061 - Document 34 (E.D. Cal. 2010)

Court Description: MEMORANDUM DECISION RE: Plaintiffs' Motion for Remand 17 And Defendants' Motion To Strike Plaintiffs' Reply 29 , signed by Judge Oliver W. Wanger on 5/11/2010. (Gaumnitz, R)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 DENNIS NASRAWI, et al, 1:09-CV-02061-OWW-GSA 12 MEMORANDUM DECISION RE: PLAINTIFFS MOTION FOR REMAND (Doc. 17.) AND DEFENDANTS MOTION TO STRIKE PLAINTIFFS REPLY (Doc. 29.) Plaintiffs, 13 14 v. 15 16 BUCK CONSULTANTS, LLC, et al., 17 Defendants. 18 I. 19 INTRODUCTION. 20 Before the court for decision is Plaintiffs motion to remand 21 the case to the Stanislaus County Superior Court, pursuant to 28 22 U.S.C. § 1447(c). 23 matter 24 defendant of a California resident, Harold Loeb, prevents complete 25 diversity of citizenship between the parties under 28 U.S.C. § 26 1332. 27 cannot recover against Mr. Loeb based on a negligence theory, and 28 that his presence in this action does not destroy diversity. Plaintiffs contend that the court lacks subject jurisdiction over this action because inclusion as a Defendants oppose the motion on grounds that Plaintiffs 1 II. 1 BACKGROUND. 2 This is a negligence action filed by three beneficiaries of a 3 public retirement trust against a provider of actuarial services, 4 Buck Consultants, LLC, ( Buck ) and one of its employees, Harold 5 Loeb ( Loeb ). 6 company,1 7 employee retirement system covering employees of the County of 8 Stanislaus, City of Ceres, the Stanislaus Superior Court, and five 9 special districts located within Stanislaus County. (Compl. ¶ 2.) 10 Loeb, a California resident, is employed by Buck Consultants as an 11 actuary. 12 Resources Solutions, a Pennsylvania Corporation with its principal 13 place of business in New Jersey. Defendant Buck, a Delaware limited liability provided actuarial (Compl. ¶ 4, 7.) services to StanCERA, a public Buck is wholly owned by ACS Human 14 On October 8, 2009 Plaintiffs Dennis Nasrawi, Michael O Neal, 15 and Rhonda Biesemeir, California residents and beneficiaries of 16 StanCERA, filed a complaint against Defendants Buck Consultants and 17 Loeb in Stanislaus Superior Court.2 18 is that Buck and Loeb breached their duty of care in preparing 19 StanCERA s 20 inappropriate 21 particular, Plaintiffs allege that the 9.22% employer contribution 22 rate adopted by StanCERA, in reliance upon the actuarial valuation January 9, actuarial 2007 The substance of the complaint actuarial assumptions. valuations (Compl. ¶ by 14.) using In 23 24 1 25 2 26 27 28 Buck s principal place of business is New York. Plaintiffs, all former employees of Stanislaus County, allege that they obtained vested contractual rights to receive pension and related benefits. (Compl. ¶ 1.) Plaintiffs state that they filed a representative suit because StanCERA has failed or refused to assert a negligence claim on behalf of itself or the pension trust. (Compl. ¶ 22.) 2 1 negligently prepared by Buck and Loeb, was insufficient to 2 actuarially fund the benefits promised by the County. 3 15.) 4 allege that StanCERA suffered harm in the form of: (1) lost County 5 employer contributions; (2) lost earnings on those contributions; 6 and (3) costs paid to other actuarial firms to discover Defendants 7 negligence. 8 Consulting Actuary for StanCERA. (Compl. ¶ As a result of Defendants actuarial negligence, Plaintiffs The report is issued on Buck s letterhead as As to Defendant Loeb, Plaintiffs allege that he owed a duty 9 10 to 11 StanCERA, and breached that duty. 12 allege that he actively participated with, aided, and abetted in 13 StanCERA s breach of fiduciary duty by concealing their negligence 14 for almost two years. 15 Loeb covered up the effects of his actuarial negligence - and that 16 of Buck and StanCERA - for his own financial gain. 17 19.) 18 exercise due care in performing actuarial services (Compl. ¶ 13.) (Compl. ¶ 18.) for They also According to Plaintiffs, (Compl. ¶ On November 22, 2009, this case was removed on the basis of 19 diversity jurisdiction.3 20 that the presence of Loeb as a defendant in the action does not 21 defeat diversity jurisdiction because Loeb is a fraudulently joined 22 sham defendant. (Doc. 1.) The notice of removal provides (Id.) 23 On December 15, 2009, Plaintiffs moved to remand this action 24 based on their assertion of a negligence claim against a resident 25 26 27 28 3 The notice of removal provides that removal is proper because this is a civil action between citizens of different states and the matter in controversy exclusive of interest and costs, exceeds the sum or value of $75,000. 3 1 of California, Mr. Loeb. (Doc. 17.) According to Plaintiffs, 2 [b]ecause well-established California law provides [that] Loeb is 3 liable for his own negligence, complete diversity of citizenship is 4 lacking and the case should be remanded to state court. (Id.) 5 In support of their opposition, Defendants submitted: (1) the 6 declaration of Michael Conger; (2) StanCERA s Board Minutes from 7 January 13 and February 24, 2007; (3) various actuary reports 8 allegedly submitted by Buck to StanCERA in 2006, 2007, and 2008; 9 (4) an annual Certification letter dated January 15, 2007; and (5) 10 a Notice of Lodgement. 4 (Docs. 17-3 through 17-5.) 11 Defendants opposed the motion on March 8, 2010. (Doc. 23.) 12 While Defendants acknowledge that both Plaintiffs and Loeb are 13 California citizens, they argue that federal diversity jurisdiction 14 is proper in this case because: (1) Loeb is a fraudulently joined 15 defendant, and should not be considered in establishing diversity; 16 (2) Buck Consultants are not California citizens; and (3) the 17 amount in controversy exceeds $75,000. 18 19 In support of their opposition, Defendants submitted: (1) the declaration of Harold Loeb; and (2) the declaration of Karl 20 21 22 23 24 25 26 27 28 4 Minutes from a public agency's board meeting are public records subject to judicial notice. See Sumner Peck Ranch, Inc. v. Bureau of Reclamation, 823 F. Supp. 715, 724-25 (E.D. Cal. 1993) (taking judicial notice of irrigation board's minutes). The Court takes judicial notice of these documents. However, Defendants object to the remaining documents on the grounds that they lack personal knowledge. Defendants are correct. The declarant was not present when these documents were drafted and/or presented to the StanCERA Board. Despite being publicly available on StanCERA s website, the declarant lacks personal knowledge of the authenticity and origin of these documents. 4 1 Lohwater, general counsel for Buck Consultants.5 2 The declarations describe Buck s nationwide operations and Mr. 3 Loeb s specific job responsibilities and employment status at Buck. 4 Specifically, Mr. Loeb declares that he is not an owner/member of 5 Buck, nor an officer/director of Buck, and that his work for 6 StanCERA did not include any tasks that are outside the usual 7 scope of what I do for other Buck clients [preparing actuarial 8 valuation reports and experience studies]. 9 According to Mr. Lohwater, nearly all of Buck s top executives are 10 located [at] Buck s headquarters in [New York] and all strategic 11 corporate decision-making occurs in New York. 12 Daily operations, as well as payroll, accounting, marketing, and 13 human resources are also based in New York. (Docs. 24 & 25.) (Doc. 24, ¶ 2.) (Doc. 25, ¶ 4.) (Id.) 14 III. 15 LEGAL STANDARD. 16 Federal courts have original jurisdiction over civil actions 17 where the amount in controversy exceeds $75,000, exclusive of 18 interest and costs, and the case is between citizens of different 19 states. 20 requires that each plaintiff be diverse from each defendant. Exxon 21 Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553 (2005) 22 (citing Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 375, 23 (1978)). 24 jurisdiction is strictly construed in favor of remand. 25 Bankers Life and Cas. Co., 425 F.3d 689, 698 (9th Cir. 2005) 26 (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 28 U.S.C. § 1332. Diversity jurisdiction under § 1332 To protect the jurisdiction of state courts, removal Harris v. 27 28 5 Both declarations were signed under penalty of perjury. 5 1 (1941)). Any doubt as to the right of removal must be resolved in 2 favor of remand. 3 Th[is] strong presumption against removal jurisdiction means 4 that the defendant always has the burden of establishing that 5 removal is proper. Gaus v. Miles, 980 F.2d 564, 566 (9th Cir. 1992). Id. (internal citations omitted). 6 But removal is proper despite the presence of a non-diverse 7 defendant if that defendant is a fraudulently joined or sham 8 defendant. See Caterpillar, Inc. v. Lewis, 519 U.S. 61, 68 (1996). 9 A defendant has been fraudulently joined if the plaintiff fails to 10 state a claim against a resident defendant, and the failure is 11 obvious according to the well-settled rules of the state. United 12 Computer Sys. v. AT & T Corp., 298 F.3d 756, 761 (9th Cir. 2002). 13 In the Ninth Circuit, a non-diverse defendant is deemed a sham 14 defendant 15 ambiguities in the controlling state law are resolved in the 16 plaintiff's favor, the plaintiff could not possibly recover against 17 the party whose joinder is questioned. 18 Corp., 872 F.2d 1416, 1426 (9th Cir. 1989). 19 beyond the pleadings to determine if a defendant is fraudulently 20 joined, but a plaintiff need only have one potentially valid claim 21 against a non-diverse defendant to survive a fraudulent joinder 22 challenge. 23 983, 993-95 (D. Nev. 2005) (summarizing cases); 24 Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). Accordingly, a 25 defendant seeking removal based on an alleged fraudulent joinder 26 must do more than show that the complaint at the time of removal 27 fails to state a claim against the non-diverse defendant. See 28 Burris v. AT & T Wireless, Inc., 2006 WL 2038040, at *2 (N.D. Cal. if, after all disputed questions of fact and all Kruso v. Int'l Tel. & Tel. A court may look See Knutson v. Allis-Chalmers Corp., 358 F. Supp. 2d 6 Ritchey v. Upjohn 1 2006). Remand must be granted unless the defendant shows that the 2 plaintiff would not be afforded leave to amend his complaint to 3 cure [the] purported deficiency. Id. at *2. 4 5 IV. 6 7 A. Preliminary Issues 1. 8 DISCUSSION. Defendants Motion to Strike 9 Defendants move to strike Plaintiff s April 26, 2010 reply on 10 the grounds that it was filed five weeks after Plaintiffs were 11 required to file a reply. 12 knowingly filed an untimely reply brief without leave of Court in 13 bad faith and in violation of this Court s order, and should be 14 sanctioned accordingly. 15 that although the court continued the hearing dates for the motion 16 for remand, the court did not continue the filing deadlines and, in 17 fact, all briefing on the motion for remand was due on March 8, 18 2010. 19 20 21 22 23 24 25 26 According to Defendants, Plaintiffs The gravamen of Defendants motion is Defendants explain: Plaintiffs initially set the motion for hearing on March 8, 2010, and approximately five weeks later the Court issued an order continuing the hearing to March 22, 2010. Three weeks before the continued hearing date, the Court issued the following order: Due to the press of business the 17 MOTION to REMAND, 19 MOTION to DISMISS Hearings currently set for 3/22/2010 have been moved to 5/10/2010 at 10:00 AM in Courtroom 3 (OWW) before Judge Oliver W. Wanger, the Initial Scheduling Conference currently set for 4/1/2010 has been moved to 6/18/2010 at 08:15 AM in Courtroom 3 (OWW) before Judge Oliver W. Wanger. All motion related deadlines are to remain in effect. 27 28 The Court s order is clear that the Court was only moving the hearing dates to May 10, 2010, and all 7 motion related deadlines were to remain in effect i.e., the briefing would continue under the existing briefing schedule established by the March 22 hearing date. 1 2 3 4 (Doc. 29 at 2:14-2:24.) The untimeliness issue was resolved during oral argument on 5 6 May 10, 2010. Defendants motion is DENIED. 7 8 B. Merits 9 Plaintiffs move the court to remand the case for lack of 10 complete diversity. 11 possibility of recovering against Loeb because: (1) United States 12 Liability Ins. Co. v. Haidinger-Hayes, Inc., 1 Cal. 3d 586 (1970), 13 is distinguishable because Loeb personally breached professional 14 duties he owed to the trust and beneficiaries, not just duties he 15 owed to his employer; (2) he committed an intentional tort because 16 he 17 beneficiaries; and (3) he is liable to Plaintiffs as a principal 18 under California Civil Code § 2343(c). breached Plaintiffs argue that they have at least the fiduciary duties he owed to the trust and its 19 Defendants rejoin that Loeb s presence in this action does not 20 destroy diversity as Plaintiffs cannot recover against Mr. Loeb 21 based on a negligence theory. 22 easy case: 23 held liable individually for alleged negligence in performing 24 duties in the course and scope of his employment that allegedly 25 caused economic loss to a third party. 26 negligent actions were taken by Buck Consultants - Loeb was acting 27 in his official capacity at all times as an agent for a disclosed 28 principal - his conduct cannot be considered/interpreted as active According to Defendants, this is an Under well-established California law, Loeb cannot be 8 Because the alleged 1 participation. 2 The analysis of Loeb s liability begins with United States 3 Liability Ins. Co. v. Haidinger-Hayes, Inc., 1 Cal. 3d 586 (1970), 4 the seminal case in this context. 5 for the proposition that an employee cannot be held individually 6 liable for negligence because his duty of care is owed to his 7 employer, not the third party [...] therefore the essential element 8 of a negligence cause of action (duty) is absent. 9 7:18-7:21.) Defendants cite Haidinger-Hayes (Doc. 23 at According to Defendants, Haidinger-Hayes is squarely 10 on point and forecloses Plaintiffs negligence claim against Loeb. 11 Haidinger-Hayes stands for the proposition that directors 12 and/or officers of a corporation do not incur personal liability 13 for torts of the corporation merely by reason of their official 14 position, unless they personally participate in the wrong. 15 3d at 594-95. 16 filed a negligence action against two defendants - a corporate 17 insurance agent and its president and CEO (Mr. Haidinger) - for 18 negotiating and issuing an insurance policy with insufficient 19 premiums to cover anticipated losses. 20 insurance company sought to recovery monetary losses caused by 21 Defendants 22 Haidinger 23 personally carried on the negotiations with the insured s broker, 24 reviewed and analyzed the underwriting information concerning the 25 insured s risk, issued the policy setting the allegedly low premium 26 rate, and reduced the reserves for open claims without checking to 27 ascertain the validity of the prior reserves. 28 Haidinger contended that he was not a fiduciary to Plaintiff and 1 Cal. In Haidinger-Hayes, Plaintiff insurance company alleged negligence. individually liable The based 9 Id. at 591-93. on trial court evidence Id. Plaintiff found that he Mr. had On appeal, Mr. 1 owed it no duty of care. Id. at 594. The Supreme Court agreed 2 with Mr. Haidinger and reversed the judgment against him: As president and principal officer of defendant corporation, the individual defendant was a fiduciary to and an agent of that corporation. He had a duty to the corporation to exercise his corporate powers in good faith and with a view to its interests. Directors and officers are not personally liable on contracts signed by them for and on behalf of the corporation unless they purport to bind themselves individually [...] the acts of this defendant were done in the course and scope of his employment, for and on behalf of the corporation, and not as a contracting party [...] 3 4 5 6 7 8 9 Directors or officers of a corporation do not incur personal liability for torts of the corporation merely by reason of their official position, unless they participate in the wrong or authorize or direct that it be done. They may be liable, under the rules of tort and agency, for tortious acts committed on behalf of the corporation. They are not responsible to third persons for negligence amounting merely to nonfeasance, to a breach of duty owing to the corporation alone; the act must also constitute a breach of duty owed to the third person. 10 11 12 13 14 15 16 Id. at 594-95. 17 The California Supreme Court in Haidinger-Hayes set forth an 18 additional limitation on imposing liability against an active 19 agent: 20 21 22 Liability imposed upon agents for active participation in tortious acts of the principal have been mostly restricted to cases involving physical injury, not pecuniary harm, to third persons. More must be shown than breach of the officer's duty to his corporation to impose personal liability to a third person upon him. 23 24 Id. at 595 (emphasis added). 25 Plaintiffs distinguish Haidinger-Hayes on grounds that they 26 are not contending that Loeb has vicarious liability for Buck s 27 breach of contract [...] they are contending that he personally 28 failed to exercise due care as a professional actuary by using 10 1 inappropriate 2 (emphasis 3 Haidinger-Hayes supports the proposition that officers may be 4 personally liable for the torts of the corporation if they are 5 personally involved in these torts. 6 Michaelis v. Benavides, 61 Cal. App. 4th 681 (1998) applies to the 7 facts of this case.6 8 9 in actuarial assumptions. original). Rather, (Doc. 17 Plaintiffs at 7:5-7:9) argue that Plaintiffs contend that Michaelis involved a general contractor who subcontracted the cement work on the Michaelis patio and driveway to a 10 subcontractor, A & J Stamped Concrete, Inc ( A & J ). Mr. 11 Benavides was the president, director and 50 percent stockholder of 12 A & J. 13 contractor's cement license, personally bid and negotiated for the 14 job, and 15 and driveway. His brother, however, provided most of the manual 16 labor. cement 17 incorrectly placed drains that posed a hazard to the home s 18 structural integrity and caused a safety hazard to persons entering 19 or leaving the property. 20 A & J and Mr. Benavides for damages. 21 negligence action against Mr. Benavides based on Haidinger-Hayes. 22 The appellate court reversed, finding that the case presented a He was the only person at A & J who held a state personally made the construction decisions for the patio The job resulted in Id. at 684. severe cracking and Mr. and Mrs. Michealis sued The trial court dismissed the 23 24 25 26 27 28 6 Specifically, Plaintiffs argue that: The facts of this case are distinguishable from those of Haidinger-Hayes for the same reasons the facts of Michaelis were distinguishable from those of Haidinger-Hayes. (Doc. 17 at 7:4-7:6.) 11 1 factual situation wholly unlike that found in Haidinger-Hayes:7 [The] allegations here show that respondent did not merely make a corporate policy decision which was carried out by someone else. He personally participated in and directed the construction of appellants' patio and driveway. He personally bid for appellants' job and he personally negotiated with appellants for completion of the job. He personally made the decisions to use cheaper materials and construction methods which allegedly resulted in the patio's and driveway's structural inadequacies [...] 2 3 4 5 6 7 [T]he distinguishing features in Haidinger-Hayes which absolved the defendant corporate officer of personal liability - the breach of duty to the corporation alone, the non-tortious personal conduct, and the absence of physical damage - do not exist here. The instant circumstances involve a corporate officer's personal tortious conduct, which conduct breached a duty of care to a third party and caused the third party to suffer physical damage to his property. 8 9 10 11 12 13 Id. at 685-87. 14 Michaelis also harmonized its ruling and Frances T. v. Village 15 Green Owners Assn., 42 Cal. 3d 490 (1986), another case cited by 16 Plaintiffs: The Supreme Court in [Frances T] reviewed a corporate officer's duty of care. In that case, plaintiff condominium owner was raped and robbed in her condominium after the owners association had refused to allow her to utilize exterior lighting at her unit to protect herself against crimes occurring in the area of her condominium. Plaintiff sued the individual directors on the association's board, claiming they breached a duty of care owed to her by ordering her to remove the external lighting she had installed. 17 18 19 20 21 22 23 24 25 26 27 28 7 The Court in Michaelis also relied on Mr. Benavides stipulation that he was negligent in constructing the patio and driveway. See id. at 686 ( They agreed that respondent was individually negligent in building appellants a patio and driveway [...] [t]his acknowledges that a breach of duty owed to appellants as third parties was violated, rather than merely a breach of duty respondent owed to A & J. ). There is no such stipulation in this case. 12 Frances T. interpreted Haidinger-Hayes as prohibiting a corporate officer's vicarious liability, based on his official status in the corporation, for torts committed by his corporation in which he does not personally participate or direct. Frances T. further interpreted Haidinger-Hayes to allow an officer's liability for his own tortious conduct. Unlike ordinary employees or other subordinate agents under their control, a corporate officer is under no compulsion to take action unreasonably injurious to third parties. But like any other employee, [officers] individually owe a duty of care, independent of the corporate entity's own duty, to refrain from acting in a manner that creates an unreasonable risk of personal injury to third parties. The reason for this rule is that otherwise, a[n officer] could inflict injuries upon others and then escape liability behind the shield of his or her representative character, even though the corporation might be insolvent or irresponsible. 1 2 3 4 5 6 7 8 9 10 Additionally, in contrast to the alleged facts here, the plaintiff in Haidinger-Hayes did not experience any personal injury or injury to property, but only pecuniary harm in the form of a monetary loss under an insurance policy. Liability imposed upon agents for active participation in tortious acts of the principal have been mostly restricted to cases involving physical injury, not pecuniary harm, to third persons. Respondent's negligence here allegedly caused serious physical damage to appellants' home [...] [i]t is not unlikely that personal injury could have resulted from the unsafe conditions caused by the structurally defective patio and driveway. Physical harm may be a consequence in either a personal injury or a property damage case. 11 12 13 14 15 16 17 18 19 Id. at 686-87 (citations omitted). 20 Plaintiffs broadly interpret the active participation 21 language of Haidinger-Hayes to argue Loeb is personally liable on 22 a negligence theory, because he signed an actuarial certification 23 letter on January 15, 2007 and listed several professional 24 credentials after his name. Moreover, he was part of the actuarial 25 team that formatted the assumptions and, on a few occasions, 26 presented those findings to StanCERA. Plaintiff argues that these 27 facts, taken together, rise to the level of active participation 28 13 1 2 recognized by Michaelis and Frances T. Plaintiffs characterization of Loeb s conduct is inconsistent 3 with California Supreme Court authority. 4 evidence 5 actuary/employee at Buck Consultants and was not directed toward 6 Plaintiffs in response to their actions and/or requests. 7 performing his actuarial duties as part of a larger actuarial firm 8 that had a contract with StanCERA. 9 director, majority shareholder or a named party to the StanCERA is limited to Loeb s Here, the proffered corporate duties as an Loeb was Loeb was not an owner, 10 contract. 11 schedule, or took any action directed at Plaintiffs. 12 actions do not rise to personal participation, his duty was to 13 Buck Consultants, not Plaintiffs or StanCERA. 14 He never personally negotiated the terms, payment Loeb s The decisions in Michaelis and Frances T. do not dictate a 15 different result. In Michaelis, the defendant was a qualifying 16 licensee, president, director, and 50 percent stockholder of that 17 corporation. 18 nonsuit because he personally participated in the substandard 19 construction 20 contention that an actuary is necessarily personally liable for all 21 negligent actuarial work produced by a corporate entity or one its 22 employees. 23 qualifying 24 corporate contractor cannot be liable for negligent construction 25 work unless he or she personally breaches a legal duty owed to a 26 plaintiff by personally participating in the negligent work or 27 authorizing or directing that the negligent work be done. 28 facts here are different. The Court found that Defendant was not entitled to work. Michaelis does not support Plaintiffs Rather, Michaelis stands for the proposition that a licensee, officer, director, or shareholder of a The Loeb is a corporate employee who, with 14 1 other employees, worked on actuary calculations. 2 contract to provide his services nor was the job premised on his 3 personal performance of the work. 4 Loeb did not Self-Insurers' Security Fund v. ESIS, Inc., 204 Cal. App. 3d 5 1148, 1163 (1988) addresses Francis T. 6 Inc. found that although the complaint recited Francis T. s magic 7 words, it did not resolve whether the defendant owed a duty of 8 care to third parties: 9 10 11 12 13 14 On similar facts, ESIS, The opinion in Francis T. responded to an especially troubling factual situation in which the plaintiff condominium owner, whose unit previously had been burglarized, installed her own exterior lights after the owners' association failed to act on repeated requests for lighting. It was well known by the association directors that the project was subject to an exceptional crimewave at the time. The directors ordered the lighting removed because it violated the project's covenants, conditions and restrictions. Plaintiff complied with the order and was raped and robbed the very night she disconnected the lighting. 15 16 17 18 19 20 21 In discussing the nature of the duty the directors' owed to plaintiff, the court in Francis T. discussed the two traditional limits on a corporate officer's personal liability for negligence as set forth in United States Liab., namely, (1) the oft-stated disinclination to hold an agent personally liable for economic losses when, in the ordinary course of his duties to his own corporation, the agent incidentally harms the pecuniary interests of a third party; and (2) the traditional rule that directors are not personally liable to third persons for negligence amounting merely to a breach of duty the officer owes to the corporation alone. 22 23 24 25 The present case fits squarely within both of these limits and is distinguished easily from Francis T., which involved alleged tortious conduct resulting in serious physical injury to the plaintiff. The directors' conduct [in Francis T.] specifically was directed towards the plaintiff in response to her actions and requests. 26 27 28 Id. at 1162-63 (citations omitted). Here, Loeb s lack of personal participation is clear from 15 1 the documents submitted by the parties in connection with this 2 motion. 3 stationary and introduced the actuarial results with an appropriate 4 plural pronoun. 5 January 9, 2007 letter wherein he states: We are pleased to report 6 on the actuarial valuation of the [StanCERA] as of June 30, 2006. 7 (Doc. 17-4, pg. 5.) 8 and January 15, 2007 letters, as well as the Board Minutes. 9 17-4 and 17-5.) First, Loeb signed every document on Buck Consultants For instance, Loeb s signature appears on a The same is true as to the attached January 4 (Docs. Second, there are a number of Buck employees who 10 worked on the actuarial tables and presented actuarial results to 11 the StanCERA board, yet Mr. Loeb is identified as the active 12 participant. 13 contractual duty to StanCERA. 14 to the contract, nor did it create individual liability when he 15 signed letters on behalf of the corporation, not individually. 16 Compare Slottow v. American Casualty Co., 10 F.3d 1355 (9th Cir. 17 1993) (mere fact that Defendant signed the agreements in the 18 ordinary course of his duties as President did not convert his 19 actions into the type of personal direction or participation in the 20 tort 21 liability) with Carolina Cas. Ins. Co. v. RDD, Inc., --- F. Supp. 22 2d ----, 2010 WL 597097 at *6 (N.D. Cal. Feb. 17, 2010) ( Here, 23 Lemke alleged that Devincenzi sexually harassed her, and Plaintiff 24 defended and settled Lemke's claims pursuant to a reservation of 25 rights. Moreover, Devincenzi signed the false application himself. 26 Therefore, the present case is distinguishable from one in which 27 corporate 28 official position. ). that would Buck Consultants, expose officers are him not not Loeb, had an express Loeb s conduct did make him a party to substantial liable solely by risk of reason personal of their Loeb did not have a personal duty to 16 1 StanCERA at the time he signed letters on behalf of Buck and made 2 presentations to the Board. 3 scope of his duties as a corporate employee. 4 allegations allege nothing more than Loeb performing his corporate 5 duties in the course and scope of his corporate employment. 6 None of this took Loeb outside the Here, Plaintiffs Plaintiffs conspiracy allegations do not change the remand 7 analysis. According to Plaintiffs, Loeb is liable for StanCERA s 8 breach because he aided and abetted that breach. 9 provides, in relevant part: The Complaint 10 18. Buck and Loeb have actively participated with, aided, and abetted in StanCERA s breach of fiduciary duty by concealing their negligence for almost two years. 19. Buck and Loeb have participated with, aided, and abetted in StanCERA s breach of fiduciary duty for their own financial gain. 11 12 13 14 15 (Compl. at ¶ s 18-19.) 16 Plaintiffs argument is a nonstarter. First, they cite Fiol 17 v. Doellstedt, 50 Cal. App. 4th 1318 (1996) for the proposition 18 that liability for aiding and abetting may be imposed on one who 19 aids and abets the commission of an intentional tort if the person 20 knows the other's conduct constitutes a breach of duty and gives 21 substantial assistance or encouragement to the other to so act or 22 gives substantial assistance to the other in accomplishing a 23 tortious result and the person's own conduct, separately 24 considered, constitutes a breach of duty to the third person. Id. 25 at 1325-26. Fiol involved a second-tier supervisor's failure to 26 take action when plaintiff reported to him that his immediate 27 supervisor was sexually harassing him - an unlawful employment 28 17 1 practice.8 2 Fiol and its progeny emphasize that liability for aiding and 3 abetting may only be imposed for the commission of an intentional 4 tort. 5 Loeb; they only allege negligence. 6 The It is distinguishable on that basis alone. Second, Plaintiffs have not alleged an intentional tort against same reasoning applies to Plaintiffs reliance on 7 California Civil Code § 2343(c). That section provides that [o]ne 8 who assumes to act as an agent is responsible to third persons as 9 a principal for his acts in the course of his agency [...] when his 10 acts are wrongful in their nature. 11 Scott, Lancaster, Mills & Atha, Inc., 205 Cal. App. 3d 442, 449 12 (1998). Plaintiffs contend that [b]ecause professional negligence 13 and aiding and abetting a breach of fiduciary duty are both 14 wrongful in their nature, Loeb has personal liability. 15 further 16 Legislature 17 wrongful acts, and it did not distinguish between wrongful acts 18 causing bodily/physical injury and those causing only economic support, drew Plaintiffs no argue distinction Midwest Television, Inc. v. that between the In [California] negligence and other 19 20 8 21 22 23 24 25 26 27 28 Fiol imposed liability against the second-tier supervisor for a number of reasons, including that imposition of individual liability furthers the purposes of the FEHA. Id. at 1341. Fiol explained: Supervisory personnel who, with knowledge of sexual harassment occurring in the workplace, or of a complaint of such misconduct, fail to prevent the wrongful conduct should be held personally liable under the FEHA. Holding such individuals civilly liable furthers the public policy underlying the act. The Legislature, in enacting the FEHA, sought to protect the right to hold employment free from discrimination or harassment on the basis, inter alia, of sex. The purpose of the FEHA was to provide effective remedies to eliminate such wrongful practices. The elimination of unlawful employment practices can best be achieved by holding the guilty parties responsible. Id. at 1341-42. 18 1 injury. Plaintiffs arguments based on § 2343(c) are unpersuasive. 2 3 Section 2343(c) only makes an agent liable for affirmative 4 misfeasance. 5 65 (2005). 6 the 7 Disregarding the conclusions of law that Loeb aided and abetted 8 his employer, the complaint does not allege any specific acts of 9 affirmative misfeasance with respect to the performance of his Ruiz v. Herman Weissker, Inc., 130 Cal. App. 4th 52, It does not render an agent liable to third parties for failure to perform 10 actuarial duties. 11 duties owed to the principal. Id. Hoffman v. May, 313 F. App x 955 (9th Cir. 2009) is instructive: Hoffman s assertion that May can nonetheless be held liable for her wrongful acts pursuant to California Civil Code section 2343(3) does not save his claim. Although an agent may be held liable for his own wrongful acts under section 2343(3), that statute does not render an agent liable to third parties for the failure to perform duties owed to his principal. Hoffman's claim fails because he premises May's alleged liability on that very theory, asserting that she failed to apprise Lions Gate of the sums owed to Jonesfilm. Based on the foregoing, we conclude that the district court properly [denied the motion to remand] [and] dismissed the amended complaint against May. 12 13 14 15 16 17 18 19 20 21 Id. at 958. Plaintiffs dependence on § 2343(c) is flawed for another 22 reason, namely that it is inconsistent with Haidinger-Hayes 23 holding that liability imposed upon agents is limited to cases 24 involving physical injury and/or property damage. 9 1 Cal. 3d at 25 9 26 27 28 By analogy, California Courts have held that an independent adjuster engaged by an insurer owes no duty of care to the claimant insured, with whom the adjuster has no contract. The adjuster is not liable in tort to the insured for alleged negligent claims handling which causes only economic loss. Sanchez v. Lindsay 19 1 595. As currently pled, this is an economic injury case involving 2 alleged actuarial negligence, nothing more. 3 distinguish 4 Michaelis and Frances T., with § 2343(c). 5 citing § 2343(c) generally, Plaintiffs do not provide a single case 6 citation where § 2343(c) was analyzed and applied to find liability 7 against a corporate employee for duties performed in the course and 8 scope of regular employment.10 the relevant case law, Plaintiffs do not including Haidinger-Hayes, Additionally, while 9 Courts have held that a defendant is not a fraudulently joined 10 or a sham defendant simply because the facts and law may further 11 develop in a way that defendant or the defendant is dismissed. 12 Dickinson v. Allstate Insurance, Co., 09-1374-AG-ANX, 2010 WL 13 366583 (C.D. Cal. Jan. 25, 2010). On the current record, Loeb owed 14 no duty to Plaintiffs as a matter of well-established California 15 law. 16 involved in the wrongdoing to the same degree as the defendants in 17 Michaelis and Frances T. Plaintiffs attempts to convert actuarial 18 negligence 19 misfeasance case against an individual actuary are without legal or 20 factual support. 21 (9th Cir. 1993) provides the last word: See It is equally as clear that Loeb was not personally resulting in economic loss into an affirmative Slottow v. American Casualty Co., 10 F.3d 1355 Although Slottow may have faced liability to the bank for his mistakes, a corporation's employees owe no independent fiduciary duty to a third party with whom they deal on behalf of their employer. The mere fact that Slottow signed the agreements in the ordinary 22 23 24 25 26 27 28 Morden Claims Servs., Inc., 72 Cal. App. 4th 249, 255 (1999). 10 The aiding and abetting allegations add nothing under § 2343(c) because Loeb, as a corporate employee, is bound to carry out and perform his actuarial work incident to his employment. 20 course of his duties as President of FNT does not convert his actions into the type of personal direction or participation in the tort that would expose him to substantial risk of personal liability. 1 2 3 4 Id. at 1359 (citations omitted). 5 Defendants have met their burden of establishing that Loeb is 6 a sham defendant whose presence in this action does not bar 7 removal 8 jurisdiction. 9 reveals different facts, the matter can be revisited. 10 and exists for the purposes of defeating His citizenship is disregarded. diversity If discovery Plaintiffs motion to remand is DENIED. 11 V. CONCLUSION. 12 13 For the reasons stated: 14 1. Defendants motion to strike Plaintiffs reply is DENIED; and 15 2. 16 Plaintiffs motion to remand this case to the Stanislaus County Superior Court is DENIED. 17 18 19 IT IS SO ORDERED. 20 Dated: aa70i8 May 11, 2010 /s/ Oliver W. Wanger UNITED STATES DISTRICT JUDGE 21 22 23 24 25 26 27 28 21

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