Josemite IV, Inc. v. FEDEX Ground Package System, Inc.

Background

Josemite IV, Inc. and Long Nguyen sued FedEx Ground Package System, Inc., Michael Valenzuela, Stephen Everson, and Angela AcMoody in Santa Clara County Superior Court. The complaint asserted 12 claims, including harassment under California’s Fair Employment and Housing Act, discrimination under the Unruh Civil Rights Act, trade-secret misappropriation, breach of contract, misrepresentation, interference with contracts and prospective economic advantage, unfair competition, and declaratory relief.

The plaintiffs alleged that Nguyen, through Josemite, had entered into Independent Service Provider Agreements with FedEx and had bought and sold FedEx routes. They further alleged that Valenzuela, Everson, and AcMoody engaged in conduct that harmed Josemite and contributed to the termination of its FedEx contracts.

FedEx removed the case to federal court based on diversity jurisdiction and argued that the individual defendants had been fraudulently joined. Fraudulent joinder is a doctrine that can permit removal despite a lack of complete diversity when the removing defendant shows there is no possibility the plaintiff can establish a claim against the non-diverse defendant. The plaintiffs argued that the individual defendants were California residents and that California law potentially allowed claims against them, so the case lacked complete diversity.

Remand Decision

The court held that FedEx did not meet its heavy burden of showing fraudulent joinder. For the economic-interference claims, the parties disputed whether FedEx was a party to the contracts involving the sale of routes. The court resolved that factual dispute in the plaintiffs’ favor and concluded that the individual defendants could possibly be liable if FedEx was not a party to those contracts.

For the harassment claim, the court noted that California law provides for personal liability for harassment. It concluded that the alleged conduct—including sabotaging efforts to sell routes, providing false or confidential information to buyers, imposing fees, denying contractual rights, and terminating contracts—could possibly support a harassment claim under California law.

For the trade-secret claim, the court found that the allegations concerning disclosure of information about Josemite’s business operations, equipment, employees, and services were sufficient at the pleading stage to show a possibility of a claim against Valenzuela. The parties also disputed whether Valenzuela had authority to disclose the information, and the court resolved that dispute in the plaintiffs’ favor.

Because FedEx did not establish fraudulent joinder, the court determined that complete diversity was absent and that it lacked subject-matter jurisdiction. The court therefore granted the plaintiffs’ motion to remand the action to state court.

Attorney’s Fees

Under 28 U.S.C. § 1447(c), a court may award reasonable fees and costs when removal was not objectively reasonable. The court concluded that FedEx lacked an objectively reasonable basis for removal because several claims against the individual defendants could impose personal liability under settled California law and FedEx had applied the wrong standard by focusing on whether the complaint stated a claim rather than whether there was any possibility of liability.

The court granted in part the plaintiffs’ request for attorney’s fees. Although the plaintiffs requested $7,500, the court found that 12 hours of work at $465 per hour was reasonable and awarded $5,580. The court also noted that the hearing had been vacated and counsel had not incurred expenses attending it.

Order

The court granted the motion to remand to state court and granted in part the request for attorney’s fees in the amount of $5,580. The Clerk was directed to remand the action to the Superior Court of California for Santa Clara County and close the federal case. The court expressly made no ruling on FedEx’s pending motion to compel arbitration; that motion would be remanded to state court with the action. Judge Beth Labson Freeman signed the order.