Farwana v. Tesla, Inc.

Background

Ghazi Farwana sued Tesla, Inc. in Santa Clara County Superior Court. His amended complaint asserted state-law claims for workplace discrimination, retaliation, wrongful termination, and related misconduct based on events during and after his employment with Tesla. Tesla removed the case to federal court, relying on complete diversity of citizenship between Farwana and Tesla.

Farwana sought permission to file a second amended complaint adding his former supervisor, Xinye Bai, as a defendant and adding a claim under California’s Fair Employment and Housing Act for disability-based harassment or a hostile work environment against both Tesla and Bai. The proposed complaint alleged that Bai lived in Santa Clara County. The court concluded that it appeared likely Bai was a California citizen and that adding her would destroy complete diversity.

Tesla separately moved to compel arbitration based on an arbitration provision in the 2019 employment offer letter and to stay the litigation. Tesla argued that Farwana sought to add Bai to defeat federal jurisdiction and avoid arbitration. Farwana argued that his amendment motion should be decided first because it implicated subject-matter jurisdiction.

Motion for Leave to Amend

The court applied 28 U.S.C. § 1447(e), rather than the more liberal amendment standard in Federal Rule of Civil Procedure 15. That statute governs a request made after removal to add defendants whose joinder would destroy subject-matter jurisdiction. The court considered six factors: whether the new defendant was needed for a complete resolution, whether the statute of limitations would bar a separate state-court action, whether the plaintiff delayed, whether the purpose was solely to defeat federal jurisdiction, whether the proposed claims appeared valid, and whether denying joinder would prejudice the plaintiff.

The court found that Bai was needed for complete relief because she was alleged to be the principal actor in the conduct at issue, and Tesla had not stipulated that she acted within the scope of her employment. The court found that the timing of Farwana’s request—three months after the original complaint and two months after removal—did not show unexplained delay. It also found no bad-faith purpose solely to destroy diversity, despite Farwana’s awareness that Tesla planned to seek arbitration. The court distinguished a case in which a plaintiff sought to amend during a hearing on a motion to compel arbitration to abandon a claim.

The court found that Farwana’s proposed disability-harassment claim had facial legitimacy. It concluded that the allegations were sufficient at this stage to show a medical disability, harassment by Bai because of that disability, and harassment severe enough to create a hostile work environment. The court also found that denying joinder would prejudice Farwana by potentially requiring a largely duplicative state-court action.

Four factors favored amendment, one was neutral, and one—the absence of a statute-of-limitations bar to suing Bai in state court—weighed against amendment. The court therefore granted Farwana’s motion for leave to amend and ordered him to file the proposed second amended complaint within seven days, by April 21, 2025.

Subject-Matter Jurisdiction

Because adding Bai appeared likely to destroy diversity jurisdiction, the court ordered the parties to show cause why the case should not be remanded to Santa Clara County Superior Court for lack of subject-matter jurisdiction. Tesla was ordered to respond within fourteen days, by April 28, 2025, and Farwana was ordered to respond within seven days after Tesla’s response. The court did not remand the case in this order. It stated that any remand would not prevent Tesla from filing a motion to compel arbitration in state court.

Arbitration Motion and Disposition

The court deferred consideration of Tesla’s motion to compel arbitration and stay the case until it determined whether federal subject-matter jurisdiction remained. The motion to compel arbitration remained pending. The order terminated Farwana’s motion for leave to amend.