Dole v. Verisk Analytics, Inc.

Background

Kristy Dole originally filed the lawsuit in the Superior Court of California for Alameda County against Verisk Analytics, Inc., Insurance Services Office, Inc., and Kurt Arthington. She asserted claims under the California Fair Employment and Housing Act, for wrongful termination, and under other California labor laws. The defendants removed the case to federal court based on diversity jurisdiction, which generally requires the parties to be citizens of different states and the amount in controversy to exceed $75,000.

Dole sought remand, meaning she asked the federal court to return the case to state court. She argued that she and Arthington are both California citizens, which defeats the complete diversity required for federal jurisdiction. The defendants argued that Arthington should be disregarded because he was fraudulently joined—that is, allegedly added only to prevent removal to federal court.

Reasoning

The court explained that defendants bear a heavy burden to prove fraudulent joinder by clear and convincing evidence. Under the applicable test, remand is required if there is any nontrivial possibility that a state court would find that the complaint states a claim against the nondiverse defendant. This test is less demanding than the standard used to dismiss a claim for failure to state a claim.

The court focused on California Labor Code section 558.1, which can impose direct liability on a natural person acting for an employer who violates or causes violations of specified labor-law provisions. The statute covers an owner, director, officer, or managing agent. A managing agent is an employee who exercises substantial independent authority and judgment in corporate decision-making.

The record plausibly indicated that Arthington could qualify as a managing agent. Dole alleged that Arthington was her manager, ordered her to falsify time sheets, refused to pay overtime wages, and denied her work-assignment points while awarding points to male employees for similar assignments. Dole also declared that Arthington managed 25 field representatives across four states and could classify representatives as exempt or nonexempt, change point requirements connected to job duties and bonuses, and distribute assignments and clients.

Arthington offered a different description of his authority, stating that his primary responsibility was supervising day-to-day field operations and that he lacked authority to change corporate policies. The court said these competing accounts created factual disputes but did not eliminate the possibility of a viable claim against him. The defendants therefore had not proved fraudulent joinder.

Disposition

The court held that the case had been removed improperly and without federal jurisdiction. It remanded the case to the Superior Court of California for Alameda County. The court denied Dole’s request for attorneys’ fees under 28 U.S.C. § 1447(c), concluding that the unsuccessful removal was not objectively unreasonable. Judge James Donato entered the order.