-GGH Stellar Health Systems, Inc. et al v. Advanced Home Health, Inc. et al, No. 2:2011cv00666 - Document 14 (E.D. Cal. 2011)
Court Description: ORDER Granting 4 Motion to Dismiss, or in the Alternative, to Transfer Case to the Eastern District of California and Denying 10 Motion to Remand. Case transferred to the Eastern District of California. Signed by Judge James C. Mahan on 3/10/11. (Copies have been distributed pursuant to the NEF - ASB) [Transferred from nvd on 3/10/2011.]
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-GGH Stellar Health Systems, Inc. et al v. Advanced Home Health, Inc. et al Doc. 14 1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 7 STELLAR HEALTH SYSTEMS, INC., et al., 2:10-CV-2009 JCM (PAL) 8 Plaintiffs, 9 10 v. 11 ADVANCED HOME HEALTH, INC., et al., 12 13 Defendants. 14 15 ORDER 16 Presently before the court is defendants Advanced Home Health, Inc. (“Advanced”) and 17 Angela Allen’s motion to dismiss for improper venue or, in the alternative, to transfer to Eastern 18 District of California, and the declaration of Angela Allen in support of their motion. (Doc. #4). 19 Plaintiffs Stellar Home Health Systems, Inc. (“Stellar”) and Nester Z. Lim filed an opposition to the 20 motion to dismiss, the petition for removal and the statement concerning removal. (Doc. #9). 21 Defendants filed a reply (doc. #10) and the supplemental declaration of Angela Allen in support of 22 the reply (doc. #11). 23 The present case stems from an alleged breach of contract. The parties had entered into an 24 asset purchase agreement (“purchase agreement”), whereby Advanced purchased the assets of 25 Stellar. The purchase price for the assets was $760,000.00, with $210,000.00 paid to Stellar at 26 closing and the remaining $550,000.00 payable to Stellar in the form of a promissory note (“the 27 note”). After certain discrepancies arose regarding the contract and the parties’ obligations, the 28 James C. Mahan U.S. District Judge Dockets.Justia.com 1 plaintiffs filed suit against the defendants in the state district court for Clark County, Nevada. 2 The complaint (doc. #4-3) contains twelve claims for relief, including (1) breach of contract, 3 (2) breach of the implied covenant of good faith and fair dealing, (3) fraud/intentional 4 misrepresentation, (4) fraud/concealment, (5) negligent misrepresentation, (6) express contractual 5 indemnification, (7) equitable indemnification, (8) accounting, (9) breach of guaranty, (10) 6 exploitation of elderly person over 65 years of age, (11) conversion of property, and (12) declaratory 7 relief. 8 The defendants, asserting diversity of citizenship, removed the action to this court on 9 November 16, 2010 (doc. #1), and then filed the present motion to dismiss (doc. #4). In the motion, 10 defendants assert that the purchase agreement and the note, which are the subject matter of the 11 litigation, contain forum selection clauses that designate Sacramento County, California as the 12 “exclusive venue” for any action, suit or proceedings. 13 In the plaintiffs’ opposition to the motion, they oppose the removal of the case and the 14 statement regarding removal. (Doc. #9). They assert not only that dismissal or transfer is improper, 15 but that this court lacks removal jurisdiction. Although they have not made a proper motion to 16 remand, they assert that the removal was improper due to the fact that certain defendants are not 17 diverse from the plaintiffs, and that consequently the motion to dismiss or transfer is moot. 18 Removal to Federal Court 19 As set forth in 28 U.S.C. § 1441, defendant may remove a state court action to federal court 20 if the federal court has original jurisdiction over the matter. Original jurisdiction lies with a federal 21 court when a case is "founded on a claim or right arising under the Constitution, treaties or laws of 22 the United States," or when the amount in controversy exceeds the sum of $75,000 and the 23 citizenship of each plaintiff is different from that of each defendant. 28 U.S.C. § 1331; 28 U.S.C. 24 § 1332(a); 28 U.S.C. § 1441(b). 25 Here, the defendants removed this action based on diversity, as plaintiff Stellar is a 26 corporation with its principal place of business in Nevada, plaintiff Lim has his domicile in Nevada, 27 defendant Advanced is a California corporation with its principal place of business there, and 28 James C. Mahan U.S. District Judge -2- 1 defendant Angela Allen, the owner/director/shareholder of Advance, is domiciled in California. 2 1. 3 The plaintiffs assert that Angela Allen and Advanced destroy complete diversity because 4 Allen is an “individual [who was] doing business and committed the acts and torts within the state 5 of Nevada,” and Advanced was qualified to do business in Nevada. They support this assertion by 6 stating that letters were sent to Allen at a Nevada address, and that according to the Nevada Secretary 7 of State’s website, “Advanced was a foreign California corporation qualified to do business in 8 Nevada as of 1/22/2010,” and Angela Allen is identified as the president, secretary, treasurer, and 9 director of Advanced with a Nevada address. 10 Citizenship of Angela Allen and Advanced a. Corporation’s Citizenship 11 For purposes of determining diversity jurisdiction, a corporation is a “citizen” of the state 12 in which it is incorporated and has its principal place of business. 28 U.S.C. § 1332(c)(1); Wachovia 13 Bank v. Schmidt, 546 U.S. 303, 317-18 (2006). Contrary to the plaintiffs’ position, a corporation is 14 not deemed a citizen of each and every state in which it conducts business or is otherwise susceptible 15 to personal jurisdiction, and its “principal place of business” refers to the place “where the 16 corporation’s high level officers direct, control, and coordinate the corporation’s activities.” Id. at 17 318; Hertz v. Friend, 130 S.Ct. 1181, 1185 (2010). 18 Defendants assert that Advanced is an organized California corporation existing under the 19 state laws of California, conducting “virtually 100 percent of its operations within California,” 20 having its offices and headquarters in California, handling all of its clients in California, and 21 employing all of its employees in California. (Doc. #10). Further, the fact that Advanced is 22 authorized to do business in Nevada does not render it a citizen of Nevada, because the corporation’s 23 citizenship is based on the locale of its “nerve center,” and not on the site of its business activities. 24 Hertz Corp., 130 S.Ct. at 1190-94. 25 The record supports a finding that Advanced’s “nerve center” is in California, and that it is 26 a citizen of California for purposes of diversity jurisdiction. Therefore, Advanced does not destroy 27 diversity. 28 James C. Mahan U.S. District Judge -3- 1 b. Individual’s Citizenship 2 In determining an individual’s citizenship for purposes of diversity jurisdiction, the court 3 looks at the individual’s “domicile,” and not her state of residence. Kanter v. Warner-Lambert Co., 4 265 F.3d 853, 857 (9th Cir. 2001). The domicile of an individual is the person’s “permanent home,” 5 and the individual must intend on remaining there and intend to return there. Id. at 857 (citing Lew 6 v. Moss, 797 F.2d 747, 749 (9th Cir. 1986). Further, the fact that a person may reside in a state does 7 not deem that state her domicile, and the domicile is determined at the time the lawsuit was filed. 8 Kanter, 265 F.3d at 857 (citing Weible v. United States, 244 F.2d 158, 163 (9th Cir. 1957); Safeco 9 Ins. Co. Of America v. Mirczak, 622 F.Supp. 1155, 1157 (D.Nev. 1987). 10 Defendant Allen has admittedly done business and received a letter in Las Vegas, Nevada. 11 (Doc. #10). However, as stated above, her domicile is not effected by these acts. According to her 12 affidavit (doc. #4) and supplemental declaration (doc. #11), defendant Allen has resided in 13 Sacramento, California for 14 years, owns a home in Granite Bay where she has lived for one year, 14 directs all her personal mail to her home in Granite Bay, has leased office space in Sacramento since 15 2007, conducts all of her business in Sacramento unless she is required to leave, and has never 16 intended to “regard or treat any other city or location as [her] residence or home.” 17 18 As defendant Allen is a citizen of California with her “domicile” there, she does not destroy complete diversity as plaintiffs assert. 19 2. 20 Plaintiffs further assert that they “were going to” be adding Nevada domiciled defendants, 21 Lino S. Loyola and Edith Loyola (“the Loyolas”), to the present litigation before it was removed to 22 this court. (Doc. #9). Citizenship of Lino S. Loyola and Edith Loyola 23 Pursuant to 28 U.S.C. § 1441(a), the “citizenship of defendants sued under fictitious names 24 shall be disregarded” for purposes of establishing diversity jurisdiction. Further, any defendant that 25 has not been properly served at the time of removal shall be disregarded for purposes of determining 26 whether diversity exists. Republic Western Ins. Co. v. Intern. Ins. Co., 765 F.Supp. 628 (N.D.Cal. 27 1991). 28 James C. Mahan U.S. District Judge -4- 1 Plaintiffs admit that they never served the Loyolas in this action, and that they were not 2 named at the time of removal. Therefore, the court need not consider the Loyolas’ domicile in 3 determining diversity jurisdiction. Thus, as complete diversity exists, removal to this court was 4 proper. 5 Motion to Dismiss 6 In the defendants’ motion to dismiss (doc. #4), they assert that the case should be dismissed 7 or transferred because the agreement and note at issue in the case both contain a mandatory forum 8 selection clause. 9 The Ninth Circuit has continuously held that when a forum selection clause provides that 10 litigation shall be instituted in a particular venue, litigation must be brought in that venue. Hunt 11 Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75,77 (9th Cir. 1987); Docksider, Ltd v. Sea Tech., 12 Ltd., 875 F.2d 762, 764 (9th Cir. 1989) (“where venue if specified with mandatory language[,] the 13 clause will be enforced.”). When a forum selection provision is found, the case must be dismissed 14 from the improper forum or transferred to the appropriate forum. Federal Rule of Civil Procedure 15 12 (b)(3); 28 U.S.C. § 1406(a). Further, forum selection clauses are prima facie valid unless there 16 is a showing that enforcement is clearly unreasonable and unjust or the clause was obtained through 17 fraud or overreaching. The Brenmen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972). 18 The plaintiffs do not contest that their twelve claims for relief stem from the purchase 19 agreement and note between the parties. It is undisputed that the purchase agreement contained 20 language stating that “[a]ny legal action, suit or proceeding relating to any matter arising under or 21 relating to this [a]greement shall be instituted in a state or federal court in Sacramento County, 22 California,” and that it “shall be the exclusive venue for such action, suit or proceeding.” 23 (Emphasis added) Additionally, there is no dispute that the note also contained language stating that 24 “[a]ny dispute arising under or related to this [n]ote will be resolved exclusively in federal or state 25 court in Sacramento County, California.” 26 Both of these provisions are mandatory and require this action, which undoubtably “relate[s] 27 to” and “arises under” such agreements, to be brought in California. To contest this, plaintiffs assert 28 James C. Mahan U.S. District Judge -5- 1 that the case also includes a claim related to the guarantee, which does not contain a mandatory 2 forum clause. The guarantee that was signed by defendant Allen states that any dispute “may” be 3 brought in the state or federal court of Sacramento California. (Doc. #9). However, this non- 4 mandatory language in one of the documents at issue does not negate the mandatory language of the 5 two other documents related to the case. Further, the language in the guarantee simply supports the 6 argument that the parties intended to litigate any issue between the parties in California. 7 Therefore, the forum selection clauses in the purchase agreement and the note require this 8 case to be dismissed or transferred to the United States District Court for the Eastern District of 9 California. Federal Rule of Civil Procedure 12(b)(3); 28 U.S.C. § 1406(a)1. 10 Accordingly, 11 IT IS HEREBY ORDERED ADJUDGED AND DECREED that plaintiffs’ request for 12 remand (doc. #10) be, and the same hereby is, DENIED. 13 IT IS FURTHER ORDERED that defendants Advanced Home Health, Inc. and Angela 14 Allen’s motion to dismiss for improper venue or, in the alternative, to transfer to Eastern District of 15 California (doc. #4) be, and the same hereby is, GRANTED. 16 17 18 IT IS THEREFORE ORDERED that the above captioned case be TRANSFERRED to the United States District Court for the Eastern District of California. DATED March 10, 2011. 19 20 UNITED STATES DISTRICT JUDGE 21 22 23 24 25 26 27 28 James C. Mahan U.S. District Judge 1 “For the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.” -6-
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