Broom et al v. Interact Communications, Inc., No. 3:2020cv02182 - Document 9 (S.D. Cal. 2021)
Court Description: ORDER Denying Defendant's Motion to Dismiss or, in the Alternative, to Stay Plaintiff's Case (Doc. 5 ). Plaintiff's request for judicial notice is granted. Signed by Judge Thomas J. Whelan on 3/1/2021. (jdt)
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Broom et al v. Interact Communications, Inc. Doc. 9 Case 3:20-cv-02182-W-AGS Document 9 Filed 03/01/21 PageID.249 Page 1 of 6 1 2 3 4 5 6 7 8 9 10 11 12 UNITED STATES DISTRICT COURT 13 SOUTHERN DISTRICT OF CALIFORNIA 14 15 CHERYL BROOM, et al., Case No.: 20-CV-2182 W (AGS) Plaintiffs, 16 17 v. 18 INTERACT COMMUNICATIONS, INC., 19 Defendant. 20 21 ORDER DENYING DEFENDANT’S MOTION TO DISMISS OR, IN THE ALTERNATIVE, TO STAY PLAINTIFFS’ CLAIMS [DOC. 5] Pending before the Court is a motion to dismiss or, in the alternative, stay this case 22 based upon a previously filed and currently pending Wisconsin state court action, 23 Interact Communications, Inc. v. Cheryl Broom and Christopher Walker, La Crosse 24 County Case No. 2020cv000342. [Doc. 5.] Plaintiffs oppose. The Court decides the 25 matters on the papers submitted and without oral argument pursuant to Civil Local Rule 26 7.1(d)(1). For the reasons that follow, the Court DENIES Defendant’s motion. 27 Plaintiffs’ request for judicial notice of state public records in support of their opposition 28 is GRANTED. 1 20-CV-2182 W (AGS) Dockets.Justia.com Case 3:20-cv-02182-W-AGS Document 9 Filed 03/01/21 PageID.250 Page 2 of 6 1 2 I. BACKGROUND On February 1, 2017, Defendant Interact Communications, Inc. (“Interact”) 3 entered into an employment contract with Plaintiff Cheryll Broom (“Broom”) whereby 4 Broom became the President of Interact and opened an office in California. (Compl. 5 [Doc. 1] ¶¶ 6, 8; Broom Employment Contract [Doc. 1-2, Ex. A].) The agreement 6 included terms restricting Broom from competing with Interact after termination. 7 (Compl. ¶ 7; Broom Non-Compete Agreement [Doc. 1-2, Ex. B].) The Broom 8 Employment Contract and Non-Compete Agreement were negotiated and signed in 9 California; Broom’s office was in California; Broom performed all of Broom’s duties in 10 and from California; and Broom was employed by Interact in California. (Compl. ¶ 9.) 11 On January 31, 2019, Broom’s husband, Plaintiff Christopher Walker (“Walker”) 12 entered into an employment contract with Interact whereby Walker became the Director 13 of Digital Marketing and Communications for Interact. (Compl. ¶ 11; Walker 14 Employment Contract [Doc. 1-2, Ex. C]. The Walker Employment Contract also 15 included a covenant not to compete. (Walker Employment Contract at 31.) The 16 employment contract was negotiated in California and Walker performed substantially all 17 of his duties in and from California. (Compl. ¶ 12.) 18 19 20 On July 20, 2020, Broom submitted her resignation from Interact. (Id. ¶ 8.) Walker submitted his resignation the next day. (Id. ¶ 11.) On August 6, 2020, Interact filed a complaint in the State of Wisconsin against 21 Plaintiffs to enforce the covenants not to compete and for breach of the covenant of good 22 faith and fair dealing, breach of fiduciary duty, tortious interference with contract, and 23 civil conspiracy. (Id. ¶ 44; Wisconsin Action [Doc. 1-2, Ex. D).) 24 On November 6, 2020, Plaintiffs filed this complaint seeking a declaration that the 25 non-compete provisions in their employment contracts are invalid under California 26 Business and Professions Code § 16600 and for breaches of California Labor Code § 925 27 and Business and Professions Code § 17200. Broom also alleges Interact breached her 28 employment contract by failing to provide her an accounting of the outstanding revenues 2 20-CV-2182 W (AGS) Case 3:20-cv-02182-W-AGS Document 9 Filed 03/01/21 PageID.251 Page 3 of 6 1 on her sales and for failing to pay her any earned commissions since her resignation. (Id. 2 ¶ 18.) 3 4 On December 3, 2020, Interact filed the instant motion to dismiss or, in the alternative, to stay. (MTD [Doc. 5].) 5 6 7 II. DISCUSSION Interact contends this case should be dismissed or stayed in its entirety based upon 8 the doctrines embodied in Wilton v. Seven Falls Co., 515 U.S. 277 (1995) or, 9 alternatively, Colorado River Water Conservation District v. United States, 424 U.S. 800 10 (1976). 11 A. 12 Interact first argues that the Court should dismiss or stay the action under the Abstention Under Wilton Is Not Appropriate 13 Wilton abstention doctrine. Typically, “it would be uneconomical as well as vexatious 14 for a federal court to proceed in a declaratory judgment suit where another suit is pending 15 in a state court presenting the same issues, not governed by federal law, between the 16 same parties.” Wilton, 515 U.S. at 282 (quoting Brillhart v. Excess Ins. Co. of America, 17 316 U.S. 491, 495 (1942). However, if the suit seeks more than merely declaratory relief, 18 the Wilton abstention doctrine does not apply. Snodgrass v. Provident Life & Accident 19 Ins. Co., 147 F.3d 1163, 1167 (9th Cir. 1998). “To determine whether a suit exclusively 20 seeks declaratory relief, we ask ‘whether there are claims in the case that exist 21 independent of any request for purely declaratory relief, that is, claims that would 22 continue to exist if the request for a declaration simply dropped from the case.’” Seneca 23 Ins. Co., Inc. v. Strange Land, Inc., 862 F.3d 835, 840 (9th Cir. 2017) (quoting 24 Snodgrass, 147 F.3d at 1167–68); see also R.R. St. & Co. v. Transp. Ins. Co., 656 F.3d 25 966, 976–77 (9th Cir. 2011) (“[I]f the same action contains claims for both monetary and 26 declaratory relief, the district court should not, as a general rule, remand or decline to 27 entertain the claim for declaratory relief.”). 28 3 20-CV-2182 W (AGS) Case 3:20-cv-02182-W-AGS Document 9 Filed 03/01/21 PageID.252 Page 4 of 6 1 Interact argues the Wilton doctrine applies because “[t]he declaratory relief sought 2 herein by Broom and Walker constitutes the overwhelming basis for this action.” (MTD 3 12:8–9.) This is not the test. The test is whether there are “claims that would continue to 4 exist if the request for a declaration simply dropped from the case.” Snodgrass, 147 F.3d 5 at 1168. Plaintiffs’ suit includes claims for breach of contract, breach of California Labor 6 Code § 925, and breach of Business and Professions Code § 17200. The Court has 7 diversity jurisdiction over Plaintiff’s claims, which would still exist without the 8 declaratory judgment claim. Moreover, Plaintiffs “have unfailingly sought damages, 9 bringing [their] suit squarely within the Colorado River framework.” Seneca Insurance, 10 862 F.3d at 841. The presence of Plaintiffs’ non-declaratory claims and prayer for 11 damages defeats Interact’s Wilton abstention argument. 12 13 B. 14 Interact next seeks to dismiss or stay this action in favor of the pending Wisconsin 15 state court action based on the Colorado River doctrine. Generally, “the pendency of an 16 action in the state court is no bar to proceedings concerning the same matter in the 17 Federal court having jurisdiction . . . .” Colo. River Water Conservation Dist. v. United 18 States, 424 U.S. 800, 817 (1976) (internal quotation marks omitted). “[F]ederal courts 19 have a virtually unflagging obligation . . . to exercise the jurisdiction given them, 20 including in cases involving parallel state litigation.” Id. However, in “exceedingly rare 21 circumstances” federal courts may stay a case where a concurrent state action with 22 identical issues is pending. Id. 23 Abstention Under Colorado River Is Not Appropriate Colorado River and subsequent Ninth Circuit opinions have identified eight non- 24 exhaustive factors to be considered on a motion to stay or dismiss under Colorado River: 25 (1) which court first assumed jurisdiction over any property at stake; (2) the inconvenience of the federal forum; (3) the desire to avoid piecemeal litigation; (4) the order in which the forums obtained jurisdiction; (5) whether federal law or state law provides the rule of decision on the merits; (6) whether the state court proceedings can adequately protect the rights of 26 27 28 4 20-CV-2182 W (AGS) Case 3:20-cv-02182-W-AGS Document 9 Filed 03/01/21 PageID.253 Page 5 of 6 1 2 3 4 the federal litigants; (7) the desire to avoid forum shopping; and (8) whether the state court proceedings will resolve all issues before the federal court. Seneca Ins., 862 F.3d at 841–42 (quoting R.R. Street, 656 F.3d at 979). Factors that are irrelevant to the particular inquiry are disregarded. Id. at 842. “Any doubt as to whether 5 a factor exists should be resolved against a stay, not in favor of one.” Id. (citation 6 omitted). 7 The circumstances surrounding this case are not so exceptional to warrant a stay 8 under Colorado River. This case, in large part, is centered in California. Plaintiffs’ 9 contracts were negotiated and signed in California; their offices were in California; and 10 they performed all of their duties in and from California. Plaintiffs allege claims based 11 on California law not alleged in the Wisconsin case: unfair competition under Business 12 and Professions Code § 17200 and breach of California Labor Code § 925. California 13 Labor Code § 925 stipulates, “[a]n employer shall not require an employee who primarily 14 resides and works in California, as a condition of employment, to agree to a provision 15 that would . . . [d]eprive the employee of the substantive protection of California law with 16 respect to a controversy arising in California.” Id. Plaintiffs claim Interact has violated 17 this provision by filing in Wisconsin and alleging claims there in direct contravention of 18 California’s laws and strong public policy against covenants not to compete such as those 19 contained in the Broom Non-Compete Agreement and Walker Employment Agreement. 20 This claim, among others, is not alleged in the Wisconsin state court action and therefore 21 will not be protected or resolved by that action. 22 23 Interact’s arguments of inconvenience and desire to avoid piecemeal litigation are unconvincing. Interact maintains a California office and Plaintiffs allege that 80% of 24 Interact’s clients are in California. Many, if not most, of the relevant witnesses will be in 25 California. Moreover, the only discovery conducted in the Wisconsin case thus far has 26 27 28 5 20-CV-2182 W (AGS) Case 3:20-cv-02182-W-AGS Document 9 Filed 03/01/21 PageID.254 Page 6 of 6 1 been narrowly confined to establishing whether Wisconsin has personal jurisdiction.1 “A 2 general preference for avoiding piecemeal litigation is insufficient to warrant” a stay 3 under Colorado River, instead there must be a showing of special concerns that would 4 make parallel litigation “particularly problematic.” Seneca Ins., 862 F.3d at 842–43. To 5 the extent there are any countervailing concerns here, they are greatly outweighed. The 6 Court thus declines to abstain from exercising jurisdiction over this action. 7 8 III. 9 10 Based on the foregoing, the Court DENIES Interact’s motion to dismiss or, in the alternative, to stay this case. [Doc. 5.] 11 12 CONCLUSION IT IS SO ORDERED. Dated: March 1, 2021 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 Plaintiffs raise at least a colorable argument that it does not since the contracts were negotiated in California, their offices were in California, and Plaintiffs had no contact with Wisconsin other than Interact having its headquarters there. 6 20-CV-2182 W (AGS)
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