EVEMeta, LLC v. Siemens Convergence Creators Holding GmbH
2:17-cv-06246
C.D. Cal.Sep 28, 2017Background
- Plaintiff (California citizen) alleges Defendants induced non-party Synacor to breach a reseller/transcoding services agreement so Synacor could contract directly with CVC U.S. for live-stream software rights.
- The dispute arises from “back-to-back” agreements: CVC U.S. owned/licensed the software to Plaintiff, and Plaintiff contracted with Synacor to resell and provide services.
- Defendant Michael Quan (California citizen) is named only on the tortious-interference-with-contract claim; Defendants removed the case to federal court asserting fraudulent joinder to defeat diversity.
- Court issued an Order to Show Cause questioning Defendants’ fraudulent-joinder claim; parties briefed whether Quan was properly joined.
- Under New York law (assumed for the claim), tortious interference requires a valid contract, defendant’s knowledge, intentional procuring of breach, and damages, including a ‘‘but for’’ causal showing.
- Court found Defendants failed to prove by clear and convincing evidence that Quan was fraudulently joined and remanded the case to Los Angeles County Superior Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Quan was fraudulently joined (i.e., no possibility plaintiff could prevail on tortious interference) | Quan is plausibly alleged to have participated in and facilitated Synacor’s breach (contracting on behalf of CVC U.S.; arranging financing for Synacor’s license), so there is a possibility of liability | Quan’s involvement unnecessary; Synacor was predisposed to breach and could have done so without Quan, so Quan is not a ‘‘but for’’ cause | Quan was not fraudulently joined; allegations plausibly tie Quan to essential acts enabling the breach and leave open the possibility plaintiff could amend with additional facts |
| Whether plaintiff can show damages from Synacor’s breach under the back-to-back contract structure | Even if Plaintiff only became profitable after a sales threshold, Synacor’s breach left Plaintiff obligated to pay CVC U.S. without the parallel revenue—causing damages | Plaintiff cannot show it surpassed the sales threshold, so no damages flowed from Synacor’s breach | Defendants failed to show by clear and convincing evidence that Plaintiff cannot demonstrate damages; their contrary theory was not dispositive |
| Standard and burden for proving fraudulent joinder | N/A (Plaintiff argues removal fails) | Removal requires clear and convincing evidence that no possibility of recovery exists against the non-diverse defendant | Applied Ninth Circuit standard: removing party must prove fraudulent joinder by clear and convincing evidence; Defendants did not meet it |
| Entitlement to attorney’s fees for remand under 28 U.S.C. § 1447(c) | Plaintiff sought fees for time spent opposing removal | Defendants argued removal was reasonable | Fees denied: Plaintiff failed to show reasonable hourly rate and did not prove Defendants lacked objectively reasonable basis for removal |
Key Cases Cited
- Morris v. Princess Cruises, Inc., 236 F.3d 1061 (9th Cir. 2001) (fraudulently joined defendants ignored for diversity purposes)
- Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203 (9th Cir. 2007) (removing party must show fraudulent joinder by clear and convincing evidence)
- Padilla v. AT&T Corp., 697 F. Supp. 2d 1156 (C.D. Cal. 2009) (fraudulent-joinder test requires showing no possibility plaintiff could prevail and that amendment would not cure defect)
- Antonios A. Alevizopoulos & Assocs., Inc. v. Comcast Int’l Holdings, Inc., 100 F. Supp. 2d 178 (S.D.N.Y. 2000) (elements of tortious interference and ‘‘but for’’ causation where collusion exists)
- Riddell Sports Inc. v. Brooks, 872 F. Supp. 73 (S.D.N.Y. 1995) (elements of tortious interference with contract)
- Martin v. Franklin Capital Corp., 546 U.S. 132 (2005) (standard for awarding fees after remand: defendant lacked objectively reasonable basis for removal)
- Marlin Bus. Bank v. The Halland Cos., LLC, 18 F. Supp. 3d 239 (E.D.N.Y. 2014) (need for evidence supporting reasonable attorney fee rate when seeking fee awards)