Jones v. Wyndham Vacation Ownership, Inc.

Background

Cathy Jones filed the case in San Francisco County Superior Court on January 4, 2021. The defendants later removed it to the U.S. District Court for the Northern District of California. Jones moved to remand, meaning she asked the federal court to return the case to state court.

Jones alleged that Wyndham Vacation Ownership, Inc., Wyndham Destinations, Inc., and Wyndham Worldwide Corp. failed to provide required meal and rest breaks under California law. She also sued Jason Cooksey, whom she alleged was a managing agent of the corporate defendants and personally liable for certain Labor Code violations. Jones and Cooksey were citizens of California, while the corporate defendants were citizens of Delaware, Oregon, and Florida.

Issue

The defendants relied on diversity jurisdiction, which generally requires complete diversity of citizenship between the parties and more than $75,000 in controversy. They argued that Cooksey was a “fraudulently joined” or “sham” defendant. In this context, that means a non-diverse defendant whose joinder cannot support any possible claim, allowing the federal court to disregard that defendant when deciding whether diversity jurisdiction exists.

Analysis

The court explained that the defendants had the heavy burden of proving that Jones had no possibility of recovering against Cooksey. California Labor Code section 558.1 allows certain owners, directors, officers, and managing agents to be held liable for specified Labor Code violations, including violations of section 226.7. Whether an employee is a managing agent depends on whether the employee exercises substantial independent authority and judgment in corporate decision-making; the court noted that this is generally a factual question.

The parties submitted conflicting declarations. Cooksey stated that he lacked authority to depart from company policy, did not create Jones’s schedules, and did not know when her tours and breaks were scheduled. Jones stated that the tour schedules generally prevented her from taking an uninterrupted 30-minute meal break, that the marketing team said Cooksey required many tours to be scheduled, and that Cooksey knew or should have known about the scheduling problem.

The court was required to resolve disputed facts and legal ambiguities in Jones’s favor when evaluating fraudulent joinder. It concluded that Jones’s allegations and declaration, if proven, could potentially create liability against Cooksey as a managing agent. The court therefore held that the defendants had not met their burden of proving fraudulent joinder. It also rejected the argument that Jones’s alleged motive for joining Cooksey was enough to establish fraudulent joinder, explaining that the plaintiff’s motive is not by itself determinative when there is a reasonable basis for a claim against the non-diverse defendant.

Disposition

The court granted Jones’s motion to remand. It ordered the Clerk to remand the matter to San Francisco County Superior Court and close the federal case. This order addressed removal and remand; it did not decide the merits of Jones’s meal-and-rest-break claims.