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Allen v. RBC Capital Markets, LLC

United States District Court, D. Maryland, Southern Division

August 8, 2019

RBC CAPITAL MARKETS, LLC et al., Defendants



         This action is brought by Plaintiff Melissa Allen against Defendants RBC Capital Markets, LLC (“RBC”), Warren Bischoff, and John Gerold alleging various violations of Maryland law. Plaintiff filed this action in the Circuit Court for Montgomery County, Maryland. ECF No. 1-7. RBC timely filed a Notice of Removal and a Motion to Dismiss. ECF Nos. 1, 12. Plaintiff filed a Motion to Remand, contending that the Court lacks subject-matter jurisdiction over her claims, and that removal was therefore improper. ECF No. 9. No hearing is necessary. See Loc. R. 105.6 (D. Md. 2018). For the following reasons, Plaintiff's Motion to Remand, ECF No. 9, is granted.

         I. BACKGROUND[1]

         Plaintiff is a Chinese-American woman who worked for Defendant RBC in Chevy Chase, Maryland. ECF No. 1-7 ¶¶ 10-11. Her first line supervisor was Defendant John Gerold, Managing Director-Financial Advisor, and her second line supervisor was Defendant Warren Bischoff, Senior Managing Director-Complex Director. Id. ¶¶ 6-7.

         In May 2018, Defendant Gerold met with a client to recommend some changes to his portfolio. Id. ¶ 17. At that meeting, the client asked for communications to be sent to his AOL email account, rather than his Gmail email account. Id. On July 25, 2018, the client sent an email from his Gmail account agreeing to the recommended changes and reiterating that future correspondence should be sent to his AOL email account. Id. ¶ 18. Defendant Gerold called the client to confirm the changes to the account-a call that Plaintiff overheard. Id. ¶ 19. The following day, Defendant Gerold forwarded an email to Plaintiff from the client's AOL email address stating that he wanted $98, 625 sent from his RBC investment account to his checking account. Id. ¶ 20. Gerold directed Plaintiff to execute this transaction. Id. He did not ask Plaintiff to contact the client to confirm the transaction. Id. Unbeknownst to any of the parties, this email actually came from a hacker posing as the client. Id. ¶ 22.

         Plaintiff and other RBC staff proceeded to begin executing the transaction. The hacker sent routing information for a new banking account at Bank of America to Plaintiff, who reported it to Gerold during a morning meeting on July 27, 2018. Id. ¶ 24. RBC's compliance department initially rejected the transfer request because the client's wife was a joint account holder and had not signed the form. Id. ¶ 25. When Plaintiff reached out to get her signature, the hacker-posing as the client-said she was unavailable. Id. The compliance department decided to approve the transfer, and Plaintiff once more informed Gerold of the proceedings involving the transfer. Id. ¶¶ 25-26. Another member of the RBC team, after realizing there were insufficient funds to complete the transfer, placed an order to sell stocks in the client's portfolio to raise the funds. Id. ¶ 27. That team member did not call the client to confirm the sale but certified on the transfer form that he had done so. Id.

         Once the account had sufficient funds to cover the transfer, Plaintiff submitted the wire transfer form and checked the box “Spoke with Client to Confirm” as, Plaintiff alleges, was standard practice when the managing team member said that they had already done so. Id. ¶ 28. Plaintiff alleges that RBC management, including Defendants Bischoff and Gerold, “frequently instructed [Plaintiff] and other employees to (1) skip confirming instructions with clients, (2) enter notations that Gerold had spoken with the client when he had not done so, (3) log into the RBC system as Gerold to expedite trades, and (4) share passwords, including with unauthorized personnel.” Id. . ¶ 21.

         In a stroke of good fortune for the client, RBC received a rejection notice from Bank of America because the name and account information for the ACH transfer did not match. Id. ¶ 29. Plaintiff called the client to determine the cause of the problem, and only then did it become clear that the client's email account had been compromised. Id. On August 2, Defendant Bischoff informed Plaintiff that her employment was being terminated. Id. ¶ 36. One day later, Bischoff texted Katherine Paguyo and offered Paguyo Plaintiffs former position; Paguyo declined and said she was angry with Bischoff about Plaintiffs termination. Id. ¶ 37. Bischoff replied, “Don't be mad at me. I didn't wire $98, 000 to a hacker. I tried to save her.” Id. RBC also disclosed on Plaintiffs U5 form, a background database for registered brokers, that Allen was terminated for “violation of the Firm's wire transfer policy.” Id. ¶ 38.

         Plaintiff filed her first complaint in state court against RBC on November 13, 2018, alleging discrimination on the basis of race and gender, wage and hour claims, and defamation in violation of Maryland state law. ECF No. 1-3. On December 26, 2018, she filed an amended complaint adding defamation claims against Warren Bischoff and John Gerold. ECF No. 1-7. On the same day, before Bischoff and Gerold had been served, RBC filed a notice of removal to this Court. ECF No. 1. Plaintiff has moved to remand, ECF No. 9, and Defendant has moved to dismiss, ECF No. 12.


         A defendant may remove any civil action from state court to a federal district court if the district court has original jurisdiction over the action. 28 U.S.C. § 1441(a). The burden is on the defendant to prove that the district court may exercise jurisdiction. Strawn v. AT&T Mobility, LLC, 530 F.3d 293, 296-97 (4th Cir. 2008). “Because removal jurisdiction raises significant federalism concerns, ” it must be strictly construed. Mulcahey v. Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th Cir. 1994). “If federal jurisdiction is doubtful, a remand is necessary.” Id. Defendant contends that this action was properly removed because 28 U.S.C. § 1441(b)(2) only bars removal where “any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought” (emphasis added). Neither Maryland defendant had been served at the time of removal.

         But the plain text of Section 1441(b)(2) makes clear that the statute is not itself a source of jurisdiction; rather, it governs the proper removal of a case where diversity jurisdiction has already been established. Id. (“A civil action otherwise removable solely on the basis of the jurisdiction under section 1332(a) . . .”). The Court must still have jurisdiction over the case. Thus, the lack of service on the Maryland defendants does not permit removal if the Maryland defendants destroy diversity jurisdiction. Defendants' citation to Clawson to argue that the lack of service is dispositive is misleading, as the passage quoted addresses the treatment of unserved defendants for the purpose of determining unanimous consent to removal, not establishing diversity jurisdiction. See Clawson v. FedEx Ground Package Sys., 451 F.Supp.2d 731, 736 (D. Md. 2006). Indeed, Clawson explicitly states that “[i]f [defendant] had destroyed complete diversity, then his presence would have precluded removal whether or not he had been served.” Id.

         Section 1332(a) gives a federal court jurisdiction over an action where there is complete diversity of citizenship of the parties and an amount in controversy in excess of $75, 000, exclusive of interest and costs.[2] All three of Plaintiff Allen and Defendants Bischoff and Gerold are citizens of Maryland. ECF No. 1-7 ¶¶ 4, 6, 7. But RBC, a Minnesota corporation with its principal place of business located in Minneapolis, Minnesota, contends that Bischoff and Gerold have been fraudulently joined, and therefore the diversity of citizenship between it and Plaintiff establish subject-matter jurisdiction.

         “The doctrine of fraudulent joinder permits a federal court to disregard, for jurisdictional purposes, the citizenship of non-diverse defendants.” McFadden v. Fed. Nat'l Mortg. Ass'n, 525 Fed.Appx. 223, 227 (4th Cir. 2013). To establish fraudulent joinder, a defendant “must show either that: (1) ‘there is no possibility that the plaintiff would be able to establish a cause of action' against the non-diverse party, or (2) there has been ‘outright fraud in the plaintiff's pleading of jurisdictional facts.'” Id. (quoting Hartley v. CSX Transp., Inc., 187 F.3d 422, 424 (4th Cir. 1999)). RBC seeks to establish the former, contending that the defamation allegations against Bischoff and Gerold do not state a claim. “The party alleging fraudulent joinder bears a heavy burden-it must show that the plaintiff cannot establish a claim even after resolving all issues of law and fact in the plaintiff's favor.” Hartley, 187 F.3d at 424. Furthermore, this standard is “even more favorable to the plaintiff than ...

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