Serving Seniors Care, Inc. v. Serratore-Rebong Group of Companies Corp ( 2023 )

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 NORTHERN DISTRICT OF CALIFORNIA 8 9 10 SERVING SENIORS CARE, INC., and RAQUEL HECK, 11 No. C 23-02333 WHA Plaintiffs, 12 v. 13 ORDER RE MOTIONS TO REMAND SERRATORE-REBONG GROUP OF AND TO DISMISS AND TRANSFER 14 COMPANIES CORP, VENUE 15 Defendant. 16 17 INTRODUCTION 18 This action concerns a dispute over financial accounting services between a provider and 19 its clients. Plaintiffs assert contract breach and fraud claims alleging that they overpaid for 20 services provided by defendant. Defendant removed this action, and plaintiffs now move to 21 remand. Because this district court may properly assert subject-matter jurisdiction over this 22 action, plaintiffs’ motion is DENIED. Defendant also moves to transfer venue and dismiss 23 plaintiffs’ fraud claims, which, for the reasons below, are DENIED and GRANTED, respectively. 24 STATEMENT 25 Plaintiff Serving Seniors Care, Inc. is a California corporation, of which plaintiff Raquel 26 Heck, also a California resident, is the CEO. Defendant Serratore-Rebong Group of 27 Companies Corp. is a Nevada corporation. According to our complaint, Serving Seniors hired 1 loan. Plaintiff Heck likewise hired defendant to prepare and file her tax returns and prepare a 2 loan application. Plaintiffs allege that defendant’s CEO, Jean Serratore, falsely represented 3 that she is a Certified Public Accountant, and that defendant overstated the amount of hours 4 billed for services rendered. Plaintiffs allege that Serratore-Rebong refuses to provide 5 “documentation necessary to evaluate whether and in what amounts Defendant has 6 overcharged.” Plaintiffs thus each assert two claims of contract breach and fraud, claiming that 7 they each have been overcharged by Serratore-Rebong “in an amount which, upon information 8 and belief, does not exceed $75,000” (Compl. ¶¶ 7–18). 9 This action was filed in San Mateo County Superior Court on April 6, 2023. Defendant 10 removed the action to this district court on May 12, 2023, asserting diversity jurisdiction 11 pursuant to 28 U.S.C. § 1332. Shortly thereafter, defendant filed a motion to dismiss the fraud 12 claims and to transfer venue to the District of Nevada. Plaintiffs then filed a motion to remand 13 for failing to meet the amount-in-controversy requirement under diversity jurisdiction. There 14 is a related action pending in Nevada state court where Serratore-Rebong has sued our 15 plaintiffs for unpaid invoices regarding the same services at issue here. That action was filed 16 subsequent to this one. The Nevada action is currently stayed pursuant to stipulation, pending 17 the outcome of the instant motions (Dkt. No. 26 at 3). Both motions have been fully briefed, 18 and this order follows oral argument on both motions. 19 ANALYSIS 20 1. MOTION TO REMAND. 21 Whether the amount-in-controversy requirement has been met is solely dispositive of 22 plaintiffs’ motion to remand. Section 1332(a) states that “district courts shall have original 23 jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of 24 $75,000, exclusive of interest and costs.” Our complaint states that each plaintiff seeks no 25 more than $75,000. Defendant points out that because both plaintiffs were invoiced together 26 given that Heck was CEO of Serving Seniors, the amount in controversy should be the 27 aggregate of both plaintiffs’ claims (Remand Opp. 2–3). However, our complaint specifies 1 “common and undivided interest” that forms a “single title or right,” and thus plaintiffs “who 2 assert separate and distinct claims are precluded from aggregating them to satisfy the amount 3 in controversy requirement.” Urbino v. Orkin Servs. of Cal., Inc., 726 F.3d 1118, 1122 (9th 4 Cir. 2013) (citations omitted). “[S]imply because claims may have ‘questions of fact and law 5 common to the group’ does not mean they have a common and undivided interest.” Ibid. 6 (quoting Potrero Hill Cmty. Action Comm. v. Hous. Auth. of S.F., 410 F.2d 974, 977 (9th Cir. 7 1969)). Here, each plaintiff’s claim is considered separately in determining the amount in 8 controversy. 9 Our court of appeals has “identified at least three different burdens of proof which might 10 be placed on a removing defendant” to show that the amount-in-controversy threshold for 11 removal has been met. Guglielmino v. McKee Foods Corp., 506 F.3d 696, 699 (9th Cir. 2007). 12 Relevant here, a preponderance of the evidence standard applies “where it is unclear or 13 ambiguous from the face of a state-court complaint whether the requisite amount in 14 controversy is pled.” Ibid. (citing Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th 15 Cir. 1996)). Alternatively, defendants must prove the amount in controversy to a “legal 16 certainty” when “a state-court complaint affirmatively alleges that the amount in controversy is 17 less than the jurisdictional threshold.” Ibid. (citing Lowdermilk v. U.S. Bank Nat’l Ass’n, 479 18 F.3d 994, 1000 (9th Cir. 2007)). Plaintiffs argue that the latter standard applies, while 19 defendant argues for the former. 20 Our complaint is ambiguous as to whether the amount in controversy has been met. 21 Lowdermilk assessed an amount-in-controversy pleading in the Class Action Fairness Act 22 context, and the theory underpinning that decision within that context “no longer holds true.” 23 See Rodriguez v. AT & T Mobility Servs. LLC, 728 F.3d 975, 981 (9th Cir. 2013) (citing 24 Standard Fire Ins. Co. v. Knowles, 568 U.S. 588, 594–95 (2013)). In any event, Lowdermilk 25 itself explains that “[w]e have reserved the preponderance of evidence standard for situations 26 where a plaintiff ‘seeks no specific amount in damages,’ . . . and a court is forced to look 27 beyond the complaint to determine whether the suit meets the jurisdictional requirements.” 1 The complaint in Guglielmino — which found that the preponderance of evidence 2 standard applied — similarly alleged that “[t]he damages to each Plaintiff are less than 3 $75,000.” Guglielmino, 506 F.3d at 700. The problem was, among other things, that the 4 damages allegations “d[id] not take account of attorneys’ fees” which “do not fall comfortably 5 within the realm of ‘damages’ and are not labeled as such in the Prayer for Relief.” Id. at 701. 6 Because “recovery of these sums would entail a payment by [defendant],” our court of appeals 7 was “convinced that they must be included within any amount-in-controversy calculation” and 8 that “the complaint fail[ed] to allege a sufficiently specific total amount in controversy” as a 9 result. Ibid. So too here. 10 Plaintiffs attempt to distinguish Guglielmino by arguing that their prayer for relief 11 “requests no other specific type of relief, such as attorneys’ fees, that is not included in the 12 damages already alleged as not exceeding $75,000” (Remand Mot. 7). First, Guglielmino was 13 not decided solely on the basis that the $75,000 limitation was not repeated in the prayer for 14 relief. Rather, as explained above, the real issue was that it did not sufficiently account for 15 recovery that should be considered part of the amount in controversy. See Guglielmino, 506 16 F.3d at 700–01. Second, our complaint’s prayer requests “compensatory damages” for each 17 plaintiff that is limited to $75,000, but then separately contemplates unspecified “other proper 18 relief,” suggesting potential recovery not accounted for by the $75,000 damages limitation for 19 each plaintiff. Third, this district court requested clarification on this exact point, that is 20 whether plaintiffs’ $75,000 limit each includes all contemplated recovery exclusive of costs 21 (and inclusive of reasonable attorney’s fees). Plaintiffs’ response waffled, stating only that 22 “[t]he Complaint contains no reference to or request for attorney’s fees or expenses” and that it 23 was nevertheless defendant’s burden (Dkt. No. 27 at 3). This order thus finds that “[t]he 24 uncertainty which is inherent in [plaintiffs’] Prayer for Relief places this case within the 25 Sanchez line of cases, and we therefore apply the preponderance of the evidence burden of 26 proof to the removing defendant.” Guglielmino, 506 F.3d at 701 (citing Sanchez, 102 F.3d 27 398, 404 (9th Cir. 1996). 1 To sustain its burden, defendant points to its complaint and accompanying exhibits in the 2 Nevada action that it filed in this action as part of its notice of removal (Remand Opp. 6–7). 3 Defendant asserts that the unpaid amounts on invoices billed to plaintiffs (which form the basis 4 of its claims against plaintiffs in the Nevada suit) constitute part of the amount in controversy 5 in this action. Not so. “[T]he amount in controversy includes all relief to which the plaintiff is 6 entitled if the action succeeds.” Fritsch v. Swift Transportation Co. of Ariz., LLC, 899 F.3d 7 785, 795 (9th Cir. 2018) (second emphasis added) (citing Chavez v. JPMorgan Chase & Co., 8 888 F.3d 413, 418 (9th Cir. 2018)). What defendant points to is a compulsory counterclaim, 9 because it is defendant’s own claim against plaintiffs that “arises out of the transaction or 10 occurrence that is the subject matter of the opposing party’s claim.” FRCP 13(a)(1)(A). 11 Plaintiffs’ complaint does not seek relief from or mention any outstanding invoices or amounts 12 owed. Our complaint seeks recovery of overpayment, which by definition does not include 13 amounts unpaid. This order “agrees with the courts that have taken the position that 14 counterclaims cannot be used to satisfy the amount-in-controversy requirement in removed 15 cases.” See Rla v. Cape Cod Biolab Corp., No. C-01-3675 PJH, 2001 WL 1563710, at *3 16 (N.D. Cal. Nov. 30, 2001) (Judge Phyllis J. Hamilton) (collecting cases); Breckenridge Prop. 17 Fund 2016, LLC v. Gonzalez, No. 17-CV-03915-JCS, 2017 WL 3381155, at *3 (N.D. Cal. 18 Aug. 7, 2017) (Judge Joseph C. Spero) (same). 19 However, by that same token, defendant’s evidence does illuminate amounts that have 20 been paid by plaintiffs, a portion of which our complaint seeks to recoup. This includes a letter 21 from plaintiffs’ counsel to defendant explaining that plaintiffs (along with three other 22 individuals) “have already paid Serratore over $1.2 million its [sic] services over the past four 23 years” (Nevada Compl. Exh. 6, Dkt. No. 3-3 at 39). Various invoice summaries list specific 24 amounts paid for specific time periods: for example, a document titled “2020 Invoice 25 Summary” shows “Payments received from January 2022 to September 30 2022 (SSC)” as 26 $126,000 (Nevada Compl. Exh. 3, Dkt. No. 3-3 at 21). Likewise, a “2019 Invoice Summary” 27 shows “LESS PAYMENTS Mar 2021 to Sep 2021” as $91,000 (Nevada Compl. Exh. 2, Dkt. 1 $75,000, it is likely that in light of the foregoing figures, the amount in controversy is 2 significantly closer to that limit than not. 3 Furthermore, defendant asserts that an engagement letter it sent to Serving Seniors dated 4 May 16, 2019, consists of the contract governing the services at issue (Dkt. No. 26 at 1–2). 5 That letter states: “In the event that any action is required to collect unpaid balances due us, 6 you agree to reimburse us for our costs of collection, including attorneys’ fees” (Nevada 7 Compl. Exh. 1, Dkt. No. 3-3 at 11). Defendant argues that “California statutory authority 8 deems contractual attorney’s fee provisions mutual and non-waivable,” which is why 9 attorney’s fees must be considered as part of the amount in controversy here (Dkt. No. 26 at 2– 10 3). Indeed, “Section 1717 [of the California Civil Code] was enacted to provide for a 11 mutuality of remedy when a contract makes recovery of attorneys’ fees available only to one 12 party.” Farmers Ins. Exch. v. L. Offs. of Conrado Joe Sayas, Jr., 250 F.3d 1234, 1237 (9th Cir. 13 2001) (citing Trope v. Katz, 902 P.2d 259, 267 (Cal. 1995)). Without deciding the merits of 14 whether Section 1717 properly applies to that provision, let alone whether a valid contract 15 exists in this action, this order finds it more likely than not that attorney’s fees are properly at 16 stake as part of the amount in controversy. 17 Given the foregoing conclusions drawn from the evidence proffered, defendant has 18 shown by a preponderance of the evidence “it is ‘more likely than not’ that the amount in 19 controversy exceeds [$75,000].” Guglielmino, 506 F.3d at 699 (quoting Sanchez, 102 F.3d at 20 404). The amount plaintiffs have already paid defendant shows the amount at stake to be at 21 least at the upper bound of plaintiffs’ alleged limits of $75,000, and would be beyond it but for 22 plaintiffs’ forswearing relief over that amount. Even a relatively minimal attorney’s fees 23 award would easily push the amount in controversy over $75,000 on either plaintiff’s claims, 24 satisfying the requirement for jurisdiction under Section 1332(a). Remand is thus DENIED. 25 2. MOTION TO TRANSFER. 26 Defendant moves to transfer this action to its home state of Nevada. Pursuant to 28 27 U.S.C. § 1404(a), an action may be transferred to another district “[f]or the convenience of 1 might have been brought.” Venue is proper in a judicial district where “a substantial part of 2 the events . . . giving rise to the claim occurred.” 28 U.S.C. § 1391(b)(2). If the proposed 3 venue is proper, the district court may consider the following list of factors to determine 4 whether to grant a motion to transfer venue under Section 1404(a): 5 (1) plaintiff’s choice of forum, (2) convenience of the parties, (3) convenience of the witnesses, (4) ease of access to the evidence, 6 (5) familiarity of each forum with the applicable law, (6) feasibility of consolidation of other claims, (7) any local interest in the 7 controversy, and (8) the relative court congestion and time of trial in each forum. 8 Williams v. Bowman, 157 F. Supp. 2d 1103, 1106 (N.D. Cal. 2001) (Judge Vaughn R. Walker) 9 (citing Royal Queentex Enterprises v. Sara Lee Corp., No. C-99-4787 MJJ, 2000 WL 246599, 10 at *2 (N.D. Cal. Mar. 1, 2000) (Judge Martin J. Jenkins)). “This list is non-exclusive, and 11 courts may consider other factors, or only those factors which are pertinent to the case at 12 hand.” Martin v. Glob. Tel*Link Corp., No. 15-CV-00449-YGR, 2015 WL 2124379, at *2 13 (N.D. Cal. May 6, 2015) (Judge Yvonne Gonzalez Rogers) (citations omitted). Whether 14 transfer is appropriate is a decision well within the broad discretion of the district court. See 15 Ventress v. Japan Airlines, 486 F.3d 1111, 1118 (9th Cir. 2007) (quoting Commodity Futures 16 Trading Comm’n v. Savage, 611 F.2d 270, 279 (9th Cir. 1979)). 17 There can be no reasonable dispute that venue would be proper in Nevada. Our 18 complaint alleges that defendant is a Nevada corporation, and defendant asserts that the 19 accounting services at issue in this action were “performed by employees physically located in 20 the State of Nevada” (Dismiss & Transfer Mot. 5). Plaintiffs contest transfer, but do not 21 otherwise argue that Nevada would be an improper venue. As such, this order finds that venue 22 is proper in the District of Nevada. 23 “[T]here is ordinarily a strong presumption in favor of the plaintiff’s choice of forum, 24 which may be overcome only when the private and public interest factors clearly point towards 25 trial in the alternative forum.” Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255 (1981). “For 26 purposes of a section 1404(a) analysis, the plaintiff’s choice of forum always weighs against 27 transfer. Thus, the question for the Court is how much weight to give this choice relative to the 1 other factors.” Martin, 2015 WL 2124379, at *4 (collecting cases). Both plaintiffs here are 2 California residents. “[A] plaintiff’s choice of forum is entitled to greater deference when the 3 plaintiff has chosen the home forum.” Piper Aircraft Co. 454 U.S. at 255 (citing Koster v. 4 (Am.) Lumbermens Mut. Cas. Co., 330 U.S. 518, 524 (1947)). Nevertheless, a plaintiff’s 5 choice of forum is not always weighed heavily: “Circumstances in which a plaintiff’s chosen 6 forum will be accorded little deference include cases of anticipatory suits and forum 7 shopping.” Royal Queentex Enterprises, 2000 WL 246599, at *3 (citation omitted). There are 8 no allegations of such gamesmanship here. As such, this order defers to California plaintiffs’ 9 choice to sue in California. 10 Given the foregoing, “defendant must make a strong showing of inconvenience to 11 warrant upsetting the plaintiff’s choice of forum.” Decker Coal Co. v. Commonwealth Edison 12 Co., 805 F.2d 834, 843 (9th Cir. 1986). Defendant has not done so. Defendant’s arguments 13 favoring transfer are, in essence, that defendant is located in Nevada. That the relationship was 14 initially engaged, work was performed, and records and witnesses are available all in Nevada is 15 nothing more than the practical reality of defendant being located there. The convenience 16 factors are illustrative: Transfer to Nevada would convenience defendant and defendant’s 17 witnesses but create the same, countervailing inconveniences to plaintiffs that defendant now 18 faces. Defendant does not assert that a choice-of-law provision applies, and instead argues 19 only that California choice-of-law principles would lead to application of Nevada law for what 20 are breach-of-contract and common law fraud claims asserted under California law. It is 21 unnecessary to speculate that far, and this order finds that this forum’s interest in the 22 grievances of California residents outweighs in any event. Defendant has not provided reasons 23 sufficient to overcome the deference owed to California plaintiffs’ choice to sue in California. 24 Defendant’s motion to transfer venue is DENIED. 25 3. MOTION TO DISMISS FRAUD CLAIMS. 26 Defendant also moves to dismiss both plaintiffs’ fraud claims pursuant to Rule 12(b)(6) 27 because they fail to meet the heightened pleading requirements of Rule 9(b). Indeed, 1 Bank, N.A., No. C-12-5799 JSC, 2013 WL 791494, at *4 (N.D. Cal. Mar. 4, 2013) (Judge 2 Jacqueline Scott Corley) (citing Sanford v. MemberWorks, Inc., 625 F.3d 550, 557 (9th Cir. 3 2010)). Our court of appeals has read Rule 9(b)’s requirement that a pleading “state with 4 particularity the circumstances constituting fraud” to mean it must be “specific enough to give 5 defendants notice of the particular misconduct . . . so that they can defend against the charge 6 and not just deny that they have done anything wrong.” Kearns v. Ford Motor Co., 567 F.3d 7 1120, 1124 (9th Cir. 2009) (quoting Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 8 2001)). To that end, “[a]verments of fraud must be accompanied by ‘the who, what, when, 9 where, and how’ of the misconduct charged.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 10 1106 (9th Cir. 2003). 11 Plaintiffs’ lack of specificity in their complaint proves fatal to their fraud claims as pled. 12 Plaintiffs’ fraud claims simply state that defendant falsely represented it “had reasonably and 13 actually expended the hours it stated it had expended in providing services” (Compl. ¶¶ 26, 14 40). It does not specify where and how these representations were made, for example whether 15 it is via the invoices received or some other correspondence, or both. Our complaint does not 16 specify whether the fraudulent representation is for all of the hours defendant ever said it 17 expended, or just some subset of those hours. Identifying specific bills or invoices at issue — 18 even if it is all of them — would provide “more specificity including an account of the ‘time, 19 place, and specific content of the false representations as well as the identities of the parties to 20 the misrepresentations’” that Rule 9(b) requires. Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th 21 Cir. 2007) (quoting Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir.2004)). 22 To explain the dearth of information, plaintiffs assert that defendant has refused to 23 provide “documentation necessary to evaluate whether and in what amounts Defendant has 24 overcharged” (Dismiss & Transfer Opp. 4). Our court of appeals “has held that the general 25 rule that allegations of fraud based on information and belief do not satisfy Rule 9(b) may be 26 relaxed with respect to matters within the opposing party’s knowledge.” Neubronner v. 27 Milken, 6 F.3d 666, 672 (9th Cir. 1993). Applied here, it means that plaintiffs are not required 1 billings, for example. That is because “[i]n such situations, plaintiffs can not be expected to 2 have personal knowledge of the relevant facts.” Ibid. (citations omitted). 3 What plaintiffs are nevertheless required to do however, is “set forth what is false or 4 misleading about a statement, and why it is false.” Vess, 317 F.3d at 1106 (emphasis added) 5 (quoting In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994)). Here, it is not 6 unreasonable to expect plaintiffs who dealt directly with defendant “to have personal 7 knowledge of the relevant facts” regarding why they believe the invoices they received reflect 8 fraudulent charges. Sanford, 625 F.3d at 558 (citing Neubronner, 6 F.3d at 672). Excusing 9 plaintiffs from pleading pertinent facts held solely by the opposing party “does not nullify Rule 10 9(b); a plaintiff who makes allegations on information and belief must state the factual basis 11 for the belief.” Neubronner, 6 F.3d at 672. Merely stating that plaintiffs believe they have 12 been overcharged is an insufficient pleading for fraud. 13 The complaint’s assertion that defendant falsely represents its CEO as a Certified Public 14 Accountant does not rescue the deficient fraud pleadings. The actual claims themselves 15 mention only that the hours expended were false. There is no specification for where or how 16 that representation was made on defendant’s website, nor when or what the CEO represented 17 to plaintiffs directly. Moreover, our complaint has not pled how or why the CPA qualification 18 factors into the fraud claim at all. “To state a claim for common law fraud under California 19 law, plaintiff must allege ‘misrepresentation, knowledge of its falsity, intent to defraud, 20 justifiable reliance and resulting damage.’” Helm v. Alderwoods Grp., Inc., No. C 08-01184 21 SI, 2011 WL 5573837, at *4 (N.D. Cal. Nov. 15, 2011) (Judge Susan Illston) (quoting Gil v. 22 Bank of Am., N.A., 42 Cal. Rptr. 3d 310, 317 (Cal. Ct. App. 2006)). This order will not 23 speculate as to how that alleged falsehood fits into plaintiffs’ fraud theories. Defendant’s 24 motion to dismiss plaintiffs’ fraud claims is GRANTED. 25 CONCLUSION 26 For the foregoing reasons, plaintiffs’ motion to remand is DENIED. Defendant’s motion 27 to transfer venue is DENIED, and defendant’s motion to dismiss is GRANTED. Plaintiffs may 1 of this order to file a motion, noticed on the normal 35-day track, for leave to file an amended 2 complaint. A proposed amended complaint must be appended to the motion. The motion 3 should explain how the amendments to the complaint cure the deficiencies identified herein, as 4 well as any others raised in defendant’s briefs. 5 6 IT IS SO ORDERED. 7 8 Dated: July 17, 2023. 9 10 L WILLIAM ALSUP I UNITED STATES DISTRICT JUDGE 12 13 © 15 16 = 17 Z 18 19 20 21 22 23 24 25 26 27 28