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Morningstar Holding Corp. v. G2

November 8, 2010

MORNINGSTAR HOLDING CORPORATION, A FOREIGN CORPORATION QUALIFIED TO DO BUSINESS IN IDAHO, PLAINTIFF,
v.
G2, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY, HENRY GEORGE A/K/A JOHN DOE I, AND RICH DOUGLAS A/K/A JOHN DOE II, INDIVIDUALLY, AND AS PARTNERS OR MEMBERS OF A JOINT VENTURE, DEFENDANTS.



The opinion of the court was delivered by: Honorable B. Lynn Winmill Chief U. S. District Judge

MEMORANDUM DECISION AND ORDER ON PLAINTIFF'S MOTION TO REMAND OR IN THE ALTERNATIVE EXTEND TIME FOR SERVICE

(Docket No. 16)

INTRODUCTION

Currently before the Court is Plaintiff's Motion to Remand or Alternatively, Extend Time for Service (Doc. No. 16).*fn1 Oral argument on the motion was set for October 27, 2010. After reviewing the parties' briefs and arguments, the Court determined that oral argument would not aid the Court further in its decision, and that the motion would be decided on the written briefs. For the reasons set forth below, the Court denies Plaintiff's Motion to Remand and grants Plaintiff's alternative request to extend the time to serve the remaining individual defendant.

BACKGROUND

Plaintiff Morningstar Holding Corporation is a Utah corporation registered to do business in Idaho, with an office, officers, employees and registered agent in Blaine County, Idaho. In August 2003, Plaintiff invested $2,000,000 in a High Yield Investment Program (HYIP), which was later discovered to be a fraudulent criminal scheme. Plaintiff claims it lost all but $15,000 of the investment.

During the pendency of the criminal action against the investment conspirators, Morningstar hired the defendants in this action to investigate and recover the money Plaintiff lost in the scheme. The named defendants are Henry George, a California resident, Rich Douglas, an Arizona resident, and Defendant G2, LLC ("G2"), a California LLC. Defendant George is the designated registered agent for G2. Morningstar entered into an Asset Recovery Agreement with Defendant G2 entity, and this lawsuit arises out of that arrangement.

Morningstar filed its original complaint in state court on May 4, 2010, alleging claims for fraud, intentional and negligent misrepresentation, negligence, breach of fiduciary duty, recission and breach of contract. Subsequently, Plaintiff discovered that both individual Defendants' names are aliases. Defendant Henry George's true identity is George Goldsmith (hereafter, "George/Goldsmith") and Defendant Rich Douglas's true identity is Rich Gurnett (hereafter, "Douglas/Gurnett"). Morningstar filed an Amended Complaint on June 4, 2010, adding Defendants' use of aliases as additional bases for the fraud claims.

After Plaintiff filed its Amended Complaint, the state court reissued summonses for all three defendants - G2 through Henry George as its registered agent, Henry George or John Doe I personally, and Rich Douglas or John Doe II personally.

Defendant Douglas/Gurnett has not been yet been served or appeared in this case. (See Dkt. 18, Exh. B). Whether his address is known by either of the other Defendants or Plaintiff is not clear in the record.

California Secretary of State records lists G2, LLC, as an active entity with a business address of 80 West Sierra Madre Blvd Ste 235, Sierra, Madre CA 91024, and Henry George as the registered agent for service at the same address. (Docket 16-2, p. 11). This address is a commercial post office box center. Henry George's personal address is 300 East Duarte Road, Arcadia CA 91006. (See George/Goldsmith Declaration, Doc. 1-4, p. 2).

On July 21, 2010, after having made several unsuccessful attempts to personally serve Defendant George/Goldsmith as the registered agent for Defendant G2, and presumably in his personal capacity as well,*fn2 Plaintiff's process server left a copy of both Summonses for Defendant George/Goldsmith (one directed to him as G2's agent and the other to him in his personal capacity) and the Amended Complaint with the person in charge of the commercial post office box registered as G2's registered business address. See Proof of Service of Summons and Declaration Regarding Diligence (Dkt. 18, Exh. A); George/Goldsmith Declaration, (Dkt. 1-4). The process server also, on July 28, 2010, mailed by first-class mail, postage pre-paid, a copy of the "Summons; Amended Complaint" to "Henry George Registered Agent of Defendant, G2, LLC" at the registered mailing address. Declaration of Mailing (Dkt. 18, Exh. A).

Defendants George/Goldsmith and G2 filed a Notice of Removal to this Court on August 27, 2010, claiming that service had been accomplished on either one or both of them on a date not before July 28, 2010. See Goldsmith Aff., Dkt. No. 1-4. Plaintiff filed the pending Motion to Remand on September 2, 2010. Plaintiff claims that Defendants' Notice of Removal is untimely because both Defendants were properly served on July 21, 2010, and their Notice of Removal was not filed within 30 days of service as required by the federal removal statute, 28 U.S.C. 1446(b). Plaintiff accordingly asks the Court to remand this action back to the Fifth Judicial District of Idaho. Alternatively, Plaintiff asks the Court to extend the time in which to serve the last individual defendant because of a conflict between the deadlines imposed for state and federal service of process.

LEGAL STANDARD

A. Removal Statute

The removal statute requires defendants to file a notice of removal within 30 days of service of process. 28 U.S.C. § 1446(b). The statute must be strictly construed against removal. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 61 S.Ct. 868 (1941); California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831 (9th Cir. 2004); Duncan v. Stuetzle, 76 F.3d 1480 (9th Cir. 1996). All proper defendants must unanimously agree to the removal. Emrich v. Touche Ross & Co., 846 F.2d 1190, 1193 (9th Cir. 1988). A defendant's 30-day time limit generally is triggered by formal service of process of the summons and complaint. Murphy Brothers, Inc.v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 347-48, 119 S.Ct. 1322 (1999).*fn3

ANALYSIS

Whether the notice of removal is timely in this case depends on whether G2 and individual defendant Henry George was served on or after July 28, 2010, as they contend. If service was effective as to both of these defendants on July 21, 2010, the Notice of Removal is untimely. For the reasons set forth below, this Court finds that service was not effected as to either defendant prior to July 28, 2010, and that Defendants' Notice of Removal was therefore timely filed.

A. Service of Process

The Federal Rules provide that an individual within the United ...


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