Raffaelli v. Brookfield Asset Management LLC

Background

Josh Raffaelli sued various Brookfield business entities in state court based on what the court described as an accusation of wrongful employment termination. Raffaelli alleges that the termination occurred shortly after he filed a whistleblower complaint with the Securities and Exchange Commission concerning Pinegrove, a Brookfield-related investment fund.

Raffaelli filed an amended complaint in state court before serving it on Brookfield. Brookfield removed the case to federal court based on diversity jurisdiction. The court later clarified that Raffaelli’s original complaint remained the operative complaint because the amended complaint had not yet been served.

Motions and Legal Standard

Raffaelli moved to amend the complaint to add claims and defendants. He also moved to remand the case to state court if the amendment were allowed, because adding some of the proposed defendants would destroy diversity jurisdiction. Brookfield did not contest whether Raffaelli otherwise met the requirements for amending his pleading under Federal Rule of Civil Procedure 15. The court therefore addressed joinder under 28 U.S.C. § 1447(e).

Section 1447(e) allows a court, after removal, either to deny the addition of defendants whose joinder would destroy federal jurisdiction or to allow the joinder and remand the case to state court. Courts commonly consider whether the new defendants are needed for a fair resolution, whether the statute of limitations would bar a separate state-court action, whether the plaintiff delayed without explanation, whether the joinder is intended only to defeat federal jurisdiction, whether the claims appear valid, and whether denying joinder would prejudice the plaintiff.

Analysis

Brookfield did not contest that four proposed defendants—Brookfield Business Partners L.P., Nicholas Sammut, and two Pinegrove entities—were California citizens whose addition would destroy diversity jurisdiction.

The court found that the first factor generally favored joinder. It viewed Brookfield Business Partners L.P. as only tangentially related because the proposed amended complaint contained few detailed allegations about its conduct. The court found that Pinegrove and Sammut were more closely connected to Raffaelli’s claims because of their alleged roles in matters affecting his compensation and employment, including alleged interference with his contract and alleged assistance with a breach of fiduciary duty.

The second factor weighed against joinder because the parties agreed that the applicable statutes of limitations would not prevent Raffaelli from bringing a separate state-court action against the proposed defendants. The third factor favored joinder because Raffaelli filed his motions within the schedule set by the court and the court found no unexplained delay.

The fourth and fifth factors also favored joinder. The court explained that a claim need only show a “glimmer of hope” of being established to appear facially valid for this analysis; the court was not conducting the more detailed review used for a motion to dismiss. The court concluded that Raffaelli met that standard. It also rejected Brookfield’s argument that the aiding-and-abetting claim was invalid under any possible allegations because Raffaelli raised a genuine dispute about the purpose of the assets involved. The court found that the argument concerning the basis for Raffaelli’s unfair-competition claim did not defeat facial validity because Raffaelli relied on other alleged statutory violations as well.

The sixth factor favored joinder because denying it would require Raffaelli to pursue substantially similar lawsuits in federal and state court. The court noted that the related claims, the absence of discovery, and the lack of a trial date made this factor especially important. Brookfield’s preference for litigating in federal court did not outweigh that consideration.

Disposition

Because almost all the factors favored joinder, the court exercised its discretion to allow the proposed defendants to be added. Their addition destroyed diversity jurisdiction because Raffaelli and the new defendants were California citizens for diversity purposes. The court therefore granted the motion to amend, joined Brookfield Business Partners L.P., Nicholas Sammut, and the two Pinegrove entities, and remanded the case to the Superior Court for the County of San Mateo.