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Elling v. Mesa Biotech, Inc.

United States District Court, D. New Mexico

October 15, 2019

JOHN ELLING, Plaintiff,
v.
MESA BIOTECH, INC., MESA TECH INTERNATIONAL, INC., HONG CAI, and ROBERT BRUCE CARY, a/k/a R. BRUCE CARY, a/k/a ROBERT CARY, Defendants.

          MEMORANDUM OPINION AND ORDER DENYING MOTION PLAINTIFF'S MOTION TO REMAND

          LAURA FASHING UNITED STATES MAGISTRATE JUDGE

         THIS MATTER comes before the Court on plaintiff John Elling's Motion to Remand (Doc. 8), filed July 12, 2019. Defendants Mesa Biotech, Inc., Hong Cai, and Robert Bruce Cary filed their response opposing the motion on July 31, 2019, and Mr. Elling filed his reply on August 14, 2019. See Docs. 15, 20. The parties consented to my conducting dispositive proceedings in this matter. See Docs. 6, 7, 9. For the following reasons, I DENY Mr. Elling's motion.

         I. Statement of the Case and Procedural Background

         This case arises out of a dispute between plaintiff John Elling, formerly Director, President, and Chief Executive Officer of defendant Mesa Tech International, Inc. (MTI), and his former colleagues, defendants Hong Cai and Robert Bruce Cary, who now are employed at defendant Mesa Biotech, Inc. See Doc. 1-1 ¶¶ 6-10, 20-34. According to the complaint, Mr. Elling founded MTI with Ms. Cai and Mr. Cary, and all three were initial shareholders. Id. ¶¶ 2-4. MTI was a New Mexico Corporation with its principal place of business in Los Alamos County, New Mexico. See Id. ¶ 5. In October 2010, Mr. Elling agreed to resign from his positions at MTI, but he retained nearly 9% of MTI's stock pursuant to a written agreement. Id. ¶¶ 20, 21; see also Doc. 1-1 at 10-12 (agreement between MTI and Mr. Elling).

         Mr. Elling alleges that over the years, he received scant information regarding MTI's operations. Id. ¶ 22. In August 2018, Mr. Elling learned that MTI had merged with Mesa Biotech, Inc., a Delaware Corporation whose principal place of business is in San Diego, California. Id. ¶¶ 11, 23, 24. According to the complaint, Mr. Elling received no notice of any proposed merger or proposed amendment to MTI's articles of incorporation, nor did he receive the opportunity to vote on the proposed merger, nor was a merger plan submitted to MTI's shareholders. Id. ¶¶ 25-27. Mr. Elling also alleges that MTI/Mesa Biotech has refused to allow him to inspect its books and records and has refused to address his concerns regarding the merger, amendments to the company's articles of incorporation and bylaws, the company's relocation to California, and changes to its stock plan. Id. ¶ 29-34. In count I of his complaint, Mr. Elling claims that Ms. Cai and Mr. Cary breached their fiduciary duties to him. Id. ¶¶ 35-38. Count II alleges that defendants collectively engaged in “shareholder oppression.” Id. ¶¶ 39-41. Count III alleges that MTI breached its contract with Mr. Elling, including breaching the covenant of good faith and fair dealing. Id. ¶¶ 42-46. Mr. Elling seeks compensatory, punitive, and statutory damages, as well as his attorneys' fees and costs. Id. at 8.

         Mr. Elling filed his complaint in the First Judicial District Court in Santa Fe, New Mexico, on May 7, 2019. Doc. 1-1 at 1 (file stamp showing location and date of filing). In his complaint, Mr. Elling alleged “[o]n information and belief, Cai and Cary are residents of Los Alamos County and Santa Fe County, respectively.” Id. ¶ 12. A process server served defendants Mesa Biotech, Hong Cai, and Robert Bruce Cary in San Diego, California on May 14, 2019.[1] Doc. 1-1 at 13-15. On June 13, 2019, these three defendants filed a notice of removal, and removed the case to this Court based on diversity jurisdiction. See Doc. 1.

         In the notice of removal, the defendants assert that MTI formerly was a New Mexico Corporation but formally merged with Mesa Biotech on July 14, 2015, and therefore ceased to exist on that date. Id. ¶ 11; see also Doc. 1-2; Doc. 1-4 at 5. Because MTI no longer existed as a New Mexico corporation when Mr. Elling's lawsuit was filed, and because it had been subsumed by Mesa Biotech, the remaining defendants assert that MTI is no more than a “nominal party to the lawsuit, ” and that the Court should disregard MTI's citizenship in determining whether the Court has jurisdiction over this lawsuit based on diversity. Doc. 1 ¶ 13. Thus, Mr. Elling, Ms. Cai, Mr. Cary, and Mesa Biotech are the only real parties in interest in this lawsuit. Id.

         The three remaining defendants further assert that there was complete diversity between Mr. Elling and the three “properly joined, real party in interest Defendants” when Mr. Elling filed his complaint and at the time is was removed. Doc. 1 ¶¶ 14, 15 (citing 28 U.S.C. § 1441(b)(2)[2]). As alleged in Mr. Elling's complaint, Mesa Biotech is a Delaware corporation with its principal place of business in California. Doc. 1-1 ¶ 11; see also Doc. 1-2; Doc. 1-4 at 4. Ms. Cai and Mr. Cary assert that contrary to the allegations in Mr. Elling's complaint, they both are domiciled in California and therefore are citizens of California. Doc. 1 ¶¶ 9, 10. They each attached affidavits to the notice of removal in which they stated that they considered California to be their domicile, and that they planned to remain there indefinitely. Doc. 1-3 ¶ 4; Doc 1-4 ¶ 4. These three defendants also assert that the amount in controversy exceeds $75, 000. Doc. 1 at 5-7.

         II. Mr. Ellington's Motion to Remand

         Mr. Elling argues that this case should be remanded to the First Judicial District Court in Santa Fe because there is not complete diversity among the parties.[3] Doc. 8 at 1. He argues that neither Ms. Cai nor Mr. Cary can meet their burden of proving that they are domiciled in California. See id.; see also Docs. 8-1, 8-2, 8-3, 10, 10-1, 10-2, 10-3, 10-4, 10-5, 20. In response, Ms. Cai and Mr. Cary rely not only on their original affidavits in which they each asserted that they resided in and intended to remain in California, but they also submit additional affidavits with additional evidence relating to their residency and intent to remain in California. See Docs. 15, 15-1, 15-2. Based on the evidence presented, I find that Ms. Cai and Mr. Cary have shown by a preponderance of the evidence that they are domiciled in California.

         A. Legal Standard for Diversity Jurisdiction

         Diversity jurisdiction requires complete diversity: “the citizenship of each plaintiff [must be] diverse from the citizenship of each defendant.” Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). Jurisdictional facts such as citizenship must be proven by a preponderance of the evidence. McPhail v. Deere & Co., 529 F.3d 947, 953 (10th Cir. 2008). “[T]he party invoking federal jurisdiction bears the burden of proof.” Penteco Corp. Ltd. P'ship-1985A v. Union Gas Sys., Inc., 929 F.2d 1519, 1521 (10th Cir. 1991). “The burden of showing something by a preponderance of the evidence . . . simply requires the trier of fact to believe that the existence of a fact is more probable than its nonexistence . . . .” Concrete Pipe & Prods. of Cal, Inc. v. Constr. Laborers Pension Trust for S. Cal, 508 U.S. 602, 622 (1993) (quoting In re Winship, 397 U.S. 358, 371-72 (1970) (Harlan, J., concurring) (quotations omitted)).

         Because defendants are the removing party, they must establish by a preponderance of the evidence that defendants Hong Cai and Robert Bruce Cary were citizens of California at the time this case was filed and removed.[4] “For diversity purposes, citizenship is determined by a person's domicile.” Macias v. N.M. Dep't of Labor, 300 F.R.D. 529, 548 (D.N.M. 2014). One's domicile, in turn, is defined as the state where the individual physically resides and intends to remain indefinitely. Middleton v. Stephenson, 749 F.3d 1197, 1200 (10th Cir. 2014). When ascertaining a person's domicile, a court “should consider the totality of the circumstances.” Id. at 1201. “[A]ny number of factors might shed light on the subject in any given case.” Id. Relevant evidence includes, inter alia, “the party's current residence; voter registration and voting practices; situs of personal and real property; location of brokerage and bank accounts; membership in unions, fraternal organizations, churches, clubs, and other associations; place of employment or business; driver's license and automobile registration; payment of taxes . . . .” 13E Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3612 (3d ed. 2014) (West).

         B. Defendants Hong Cai and Robert Bruce Cary Have Shown by a Preponderance of the Evidence That They Were Domiciled in ...


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