Opinion
No. C 05-00196 VRW.
April 8, 2005
ORDER
Plaintiff brought this suit in California state court against his employer, Electronic Data Systems Corporation ("EDS"), James Best ("Best"), Darl Davison ("Davison"), Mark Kizzar ("Kizzar"), Desi Rodriguez ("Rodriguez") and ten unknown "Does" ("the Does"), alleging eleven causes of action. Doc #1, Ex A. Only two of these claims — interference with contractual relations and interference with prospective economic advantage — are directed against Best, Davison, Kizzar and Rodriguez (collectively "the individual defendants"). Id at 15-16. Now before the court is plaintiff's motion to remand and for attorney's fees. Doc #11. The court GRANTS plaintiff's motion to remand and GRANTS plaintiff's motion for attorney's fees.
I A
According to plaintiff's complaint, he was employed as a client sales executive ("CSE") at EDS, working on the largest EDS account in its western region, California State Automobile Association ("CSAA"). Doc #1, Ex A at 3:22-24, 4:1-8. In February 2002, EDS and CSAA began negotiations to terminate their previous contract and put in place a modified agreement at significantly reduced fees. Id at 4:9-24. Plaintiff took part in virtually all of these negotiations. Id at 4:15-16. By November, 2002, CSAA and EDS had agreed on all material terms of the modified agreement, with only the amount of penalty for breach of contract to be settled upon. Id at 4:17-22. The modified agreement with CSAA was ultimately completed in 2003 and valued at over $250 million. Id at 7:13-17.
Under EDS's 2002 sales commission plan, all commissions were based upon several terms of the negotiated contract, "plugged into a matrix * * * resulting in a commission payable to the CSE." Id at 5:11-18. The maximum commission payable to a CSE under the 2002 plan was $500,000, regardless of the transaction size. Id. In 2003, however, the commission plan was changed: The new plan provided that CSE commissions on deals up to $250 million would be based upon the size of the transaction, "objectively determined," and capped at $500,000, but if a deal was greater than $250 million, the 2003 plan "left in management's discretion the amount which could be paid the CSE." Id. Because the modified agreement with CSAA was reached in 2003 and valued at over $250 million, the amount of plaintiff's commission was left to management's discretion. Id at 7:13-20. EDS management ultimately decided that plaintiff should receive a commission of $50,000 for his work on the CSAA transaction. Id.
Plaintiff contends that individual defendants wrongfully deferred completion of the modified agreement from 2002 to 2003, in violation of EDS policy and they fraudulently valued the deal above $250 million in order to prevent him from earning a $500,000 commission as provided under the commission plans. Id at 15:7-20. In undertaking these actions, plaintiff alleges that individual defendants were all "acting outside the course and scope of their employment in denying plaintiff his just compensation to enrich themselves." Id at 15:23-24 (emphasis added). Specifically, plaintiff alleges that individual defendants "received in excess of $500,000 in bonus compensation for the CSAA modified contract." Id at 8:11-13.
B
On October 28, 2004, plaintiff commenced this action in the San Francisco superior court. Doc #1 at 1 (Notice Remov). On January 12, 2005, defendants removed the case to this court pursuant to 28 USC § 1441(b) (permitting removal on the basis of diversity jurisdiction). Doc #1 at 1. In their notice of removal, defendants stated that: (1) plaintiff seeks almost $500,000 in damages; (2) defendant EDS is a citizen of Delaware and Texas; (3) plaintiff is a citizen of California; and (4) the individual defendants, three of whom are California citizens, should be disregarded as "sham defendants" for the purposes of determining diversity jurisdiction. Id at ¶ 5. Accordingly, the court must determine whether the individual defendants are fraudulently joined to this case.
II
Civil actions not involving a federal question are removable to a federal district court only if there is diversity of citizenship between the parties. 28 USC § 1332(a)(1). Moreover, § 1332 requires complete diversity; that is, each plaintiff's citizenship must be diverse as to each defendant's citizenship. Id. Where a non-diverse defendant has been "fraudulently joined" to an otherwise completely diverse case, a finding of complete diversity will not be defeated. See e.g., Calero v. Unisys Corp, 271 F Supp 2d 1172, 1176 (N D Cal 2003). "[F]raudulent joinder is a term of art. If the plaintiff fails to state a cause of action against a resident defendant, and the failure is obvious according to the settled rules of the state, the joinder of the resident defendant is fraudulent.'" Ritchey v. Upjohn Drug Co, 139 F3d 1313, 1318 (9th Cir 1998) (quoting McCabe v. General Foods Corp, 811 F2d 1336, 1339 (9th Cir 1987)) (citations omitted).
Defendants' argument is as follows: Plaintiff alleges that individual defendants tortiously interfered with his employment contract and prospective economic advantage. Doc #1, Ex A at 15-16. Because individual defendants' actions were taken in their capacity as EDS employees, individual defendants were parties to plaintiff's employment contract with EDS. Doc #14 at 6. But "corporate agents and employees acting for and on behalf of a corporation cannot be held liable for inducing a breach of the corporation's contract." Id at 4 (citing Shoemaker v. Myers, 52 Cal 3d 1, 24 (1990)). See also Applied Equipment Corp v. Litton Saudi Arabia Ltd, 7 Cal 4th 503, 513-14 (1994) (holding that a party to a contract may not be sued for tortious interference with its own contract). Consequently, defendants contend, plaintiff obviously fails to state a cause of action for tortious interference against individual defendants. Id at 6. And plaintiff asserts no other cause of action against individual defendants. See Doc #1, Ex A. If that is the case, then individual defendants are "sham defendants" fraudulently joined to this action, and the court has subject matter jurisdiction over this case on the basis of diversity jurisdiction. Doc #14 at 4-5.
Defendants' argument that individual defendants are fraudulently joined fails to persuade. First, plaintiff has not alleged that individual defendants' actions were undertaken on behalf of, or for the benefit of, EDS. To the contrary, plaintiff alleges that individual defendants' actions were taken outside the scope of EDS policy in order to enrich themselves. Doc #1, Ex A at 7:10-12, 8:11-13, 15:65. Indeed, plaintiff has not alleged that individual defendants' conduct inured to EDS's benefit in any way; as such, it is difficult to characterize the individual defendants as acting on behalf of EDS.
Second, the controlling law of California cited by defendants states only that a corporate agent "acting for and on behalf of a corporation cannot be held liable for inducing a breach of the corporation's contract." Shoemaker, 52 Cal 3d at 24 (emphasis added). Shoemaker says nothing about the issue at bar: whether an employee acting to benefit himself may be liable for tortious interference. Hence, it cannot be said that plaintiff has obviously failed to state a cause of action against individual defendants. Accordingly, the individual defendants are non-sham — and non-diverse from plaintiff — and therefore plaintiff's motion to remand is GRANTED.
III
Plaintiff requests that the court order defendants to pay plaintiff's reasonable attorney's fees incurred in preparing this motion. Doc #11 at 9. 28 USC § 1447(c) provides in relevant part: "An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." As this court stated in Moore v. Kaiser Foundation Hospitals, Inc, 765 F Supp 1464, 1466 (N D Cal 1991), aff'd 981 F2d 443 (9th Cir 1992):
As a matter of public policy, the party forced to bring a motion to remand an improperly removed case generally should be fully reimbursed for its costs in remanding the case whether the removal was in bad faith or otherwise. The court's award of fees in this case is not a punitive award against defendants; it is simply reimbursement to plaintiffs of wholly unnecessary litigation costs the defendants inflicted. Attorney fees spent to remand an improperly removed case without bad faith cost just as much as fees spent to remand a case removed in bad faith.
The court orders the remand of this case and, accordingly, finds that an award of reasonable attorney's fees is appropriate. To determine a reasonable attorney fee award, the court employs the lodestar method, under which the court multiplies the number of hours the prevailing party reasonably expended on the litigation by a reasonable hourly rate. Yahoo!, Inc v. Net Games, Inc, 329 F Supp 2d 1179, 1182 (N D Cal 2004). "[T]o convert the data provided by fee applicants to a `reasonable attorney fee,' the court first compares the requested number of hours to the number of hours that `reasonably competent counsel' would have billed." Id at 1188.
Plaintiff requests 42.9 hours for services performed by attorneys in connection with the preparation and filing of his motion to remand and his reply to defendants' opposition to plaintiff's motion to remand. Docs ##12, 17. Having considered the nature of the factual and legal questions in this case, as well as the quality of the attorneys' work, the court finds the claim for 42.9 hours of attorney time to be reasonable in preparing a motion to remand and reply in support thereof in this case.
The court now turns to determining a reasonable hourly rate. More than one methodology exists to make this determination. InLaffey v. Northwest Airlines, Inc, 572 F Supp 354 (DDC 1983), aff'd in part, rev'd in part on other grounds, 746 F2d 4 (DC Cir 1984) the court employed a variety of hourly billing rates to account for the various attorneys' different levels of experience. The Laffey methodology is useful when an unusually large fraction of senior attorney time is necessary, and spent, by counsel on behalf of a client. By contrast, a "blended" hourly rate is appropriate in a lodestar computation when there is no need for legal skills greater than that of a market-wide average. Indeed, that is true of the present case. Counsel has not shown any reason — nor is any reason apparent from the record — why a blended rate is not appropriate in this case. Accordingly, the court declines to apply the Laffey methodology.
Plaintiff requests an hourly rate of $475 for the services of Kathleen Lucas and $175 for the services Ms Lucas' associate. Docs ##12, 17. By plaintiff's calculations, plaintiff requests total fees of $11,077.50. Id. But because "[t]he purpose of using prevailing market rates is to estimate the hourly rate reasonably competent counsel would charge[,] * * * [and] not to determine whether or not a specific attorney could command a specific hourly rate in the market," the court concludes that "the average market rate in the local legal community as a whole is a better approximation of the hourly rate that would be charged by reasonably competent counsel than the actual billing rate charged by a single attorney." Yahoo!, 329 F Supp 2d at 1185.
In several of the court's previous orders, the court has calculated an average market rate in the local legal community as a whole using public data from the United States Census Bureau and Bureau of Labor Statistics ("BLS"). See, e.g., Yahoo!, 329 F Supp 2d 1179; Allen v. BART, 2003 WL 23333580 (N D Cal 2003);Gilliam v. Sonoma City, 2003 WL 23341211 (N D Cal 2003). InYahoo!, the court explained that:
The BLS provides data on the hourly wages earned by attorneys * * *. To estimate the hourly rates billed to clients, the court first calculated the ratio of net receipts to gross receipts from data compiled by the Census Bureau. This ratio was used to approximate the overhead costs that would be incorporated in the hourly rates billed to clients. The court then divided the BLS wage data ( w) by the ratio of net receipts ( nr) to gross receipts ( gr) to determine an estimated average market rate ( r)
* * *.
Id at 1189.
This methodology is represented by the following equation: r = w/(nr/gr). Stated another way, the average market rate r = w * (gr/nr). The most recent census data describing gross and net receipts by law partnerships are located in "Statistical Abstract of the United States: 2004-2005" ("2004 Statistical Abstract"). See United States Census Bureau, Statistical Abstract of the United States: 2004-2005, tbl 718, available at http://www.census.gov/statab/www/. The 2004 Statistical Abstract provides gross and net receipts for the year 2001. For law partnerships, gross receipts totaled $91 billion and net receipts totaled $32 billion. This yields a ratio of net receipts to gross receipts of 0.351. Even though this datum is four years old, it is adequate for present purposes because law firm economics should not vary significantly over such a short period.
The most recent data available from the BLS describing hourly wages in the San Francisco area are located in "November 2003 Metropolitan Area Occupational Employment and Wage Estimates San Francisco, CA PMSA," available at http://www.bls.gov/oes/current/oes_7360.htm#b23-0000 ("2003 BLS Wage Estimates"). The BLS provides wage estimates for "Legal Occupations" in the year 2003. The BLS's estimates for lawyers are a median hourly wage of $65.01/hr and a mean hourly wage of $70.23/hr. Id. As in Yahoo!, the court selects the higher of the median or mean hourly wage because it is more favorable to the party seeking the grant of attorney fees. Id at 1191.
Dividing the most recent mean hourly wage for lawyers, $70.23/hr, by the most recent ratio of net to gross receipts, 0.351, yields an estimate of $200/hr (rounded down from $200.08/hr) as the average market rate for lawyers in the San Francisco area. Accordingly, the court finds the following award of attorney's fees to be justified: 42.9 hours at $200/hr. The total reasonable attorney's fees awarded to plaintiff is therefore $8,580.
IV
In sum, plaintiff's motion to remand and for attorney's fees in the amount of $8,580 (Doc #11) is GRANTED. Because the court finds these matters suitable for determination without oral argument, the motion hearing set for April 7, 2005, at 2pm is VACATED. See Civ L R 7-1(b).
IT IS SO ORDERED.