Olga Ovodenko v. Triton Pacific Capital Partners, LLC

O [1] JS-6 [7] 8 United States District Court 9 Central District of California [10] 11 OLGA OVODENKO et al., Case № 2:23-cv-05773-ODW (Ex) 12 Plaintiffs, ORDER GRANTING PLAINTIFFS’ [13] v. MOTION TO REMAND [10] [14] TRITON PACIFIC CAPITAL 15 PARTNERS, LLC et al., 16 Defendants. [17] I. INTRODUCTION [18] 19 Plaintiffs Olga Ovodenko and Old City Securities, LLC bring this action against 20 Defendants Triton Pacific Capital Partners, LLC and Joseph Davis arising from a 21 business dispute between the parties. (Notice of Removal Ex. B (“Compl.”), ECF 22 No. 1-2.) Plaintiffs now move to remand the case to the Superior Court of California, 23 County of Los Angeles, arguing that the Court lacks federal question jurisdiction 24 under 28 U.S.C. § 1331 . (Mot. Remand (“Motion” or “Mot.”), ECF No. 10.) For the 25 following reasons, the Court GRANTS Plaintiffs’ Motion and REMANDS this action 26 to Los Angeles Superior Court.1 [27] 28 1 Having carefully considered the papers filed in connection with the Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. 1 II. BACKGROUND 2 Olga Ovodenko runs a small business focused on introducing investors to asset 3 managers. (Compl. ¶ 1.) Triton Pacific is a private equity firm with a significant 4 focus on the healthcare industry. (Id.) Joseph Davis, Triton Pacific’s managing 5 director, hired Ovodenko through her broker, Old City, to assist Triton Pacific by 6 marketing its investment opportunities and raising capital. (Id.) 7 On January 25, 2018, Triton Pacific and Old City entered into a Placement 8 Agreement under which Ovodenko was to provide her services. (Id. Ex. A 9 (“Placement Agreement”).) According to the Placement Agreement, Ovodenko was 10 the individual “primarily responsible” for the services Old City rendered to Triton 11 Pacific. (Placement Agreement § (a)(ix).) Triton Pacific specifically retained Old 12 City “to introduce investors and joint venture partners to Triton Pacific for the purpose 13 of enabling Triton Pacific to manage the assets of such investors or other joint venture 14 partners.” (Id. § (a).) In return, Triton Pacific promised to pay a “Solicitation Fee” 15 based on the amount of investments raised by Triton from investors that Ovodenko 16 introduced to Triton Pacific. (Id. § (b).) “[F]or the first $200 million of Investments,” 17 the Solicitation Fee equals “two percent (2.0%) of the amount of each such Investment 18 or portion thereof.” (Id.) 19 In January 2023, Triton Pacific issued a press release announcing a deal 20 involving Integrated Pain Associates (“IPA”). (Compl. ¶ 39.) The deal involved 21 funding from three parties—an individual, an asset management firm, and a private 22 credit fund—each of whom Ovodenko had allegedly introduced to Triton Pacific. (Id. 23 ¶¶ 37–42.) Ovodenko alleges that Triton Pacific, in total, “raised over $100 million in 24 capital for the IPA deal on introductions made by Ms. Ovodenko,” of which Triton 25 Pacific owes her two percent, or over $2 million, under the Placement Agreement. 26 (Id. ¶ 43.) Despite Ovodenko’s requests for payment, Davis informed Ovodenko that 27 Triton Pacific would only pay two percent on the equity portion of the investment, 28 rather than the total investment amount that consisted of both debt and equity. (Id. 1 ¶ 45.) Davis also informed Ovodenko that Triton Pacific would not pay her the full 2 requested amount because Triton Pacific had a prior relationship with the asset 3 management firm involved in the IPA deal, Start Mountain. (Id. ¶ 47.) 4 On June 5, 2023, Plaintiffs filed this action in Los Angeles Superior Court.2 5 (Notice of Removal (“NOR”) ¶ 6, ECF No. 1.) In their Complaint, Plaintiffs assert six 6 causes of action: (1) breach of contract, (2) breach of implied-in-fact contract, 7 (3) fraudulent inducement, (4) intentional misrepresentation, (5) negligent 8 misrepresentation, and (6) unjust enrichment. (Compl. ¶¶ 58–101.) On July 13, 2023, 9 Defendants removed this action on the basis that this Court has original jurisdiction 10 under 28 U.S.C. § 1331 because Plaintiffs’ state law claims necessarily depend on the 11 resolution of a substantial question of federal law. (NOR ¶ 15 (citing Grable & Sons 12 Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 307 , 314 (2005)).) Plaintiffs now 13 move to remand. (Mot.) 14 III. LEGAL STANDARD 15 Federal courts have subject matter jurisdiction only as authorized by the 16 Constitution and Congress. U.S. Const. art. III, § 2, cl. 1; Kokkonen v. Guardian Life 17 Ins. Co. of Am., 511 U.S. 375, 377 (1994). A suit filed in a state court may be 18 removed to federal court if the federal court would have had original jurisdiction over 19 the suit. 28 U.S.C. § 1441 (a). Federal district courts have original jurisdiction where 20 an action arises under federal law, or where each plaintiff’s citizenship is diverse from [22] 23 2 Ovodenko filed her initial complaint against Defendants in Los Angeles Superior Court on April 10, 2023, Case No. 23STCV07759. Defendants removed the action to federal court, Case [24] No. 2:23-cv-03715-ODW (Ex), but, after Defendants failed to timely answer the complaint, 25 Ovodenko dismissed the initial action without prejudice and refiled the case in state court again (this time as Case No. 23STCV12880). In her second complaint, filed on June 5, 2023, Old City joined 26 as a plaintiff in the action. Defendants again removed the case, which is the instant action before the Court here. [27] 28 Furthermore, on June 7, 2023, Defendants also filed their own action in federal court, Case No. 2:23cv-04483-ODW (Ex). That declaratory judgment action is currently pending before this Court. 1 each defendant’s citizenship and the amount in controversy exceeds $75,000. [2] 28 U.S.C. § 1331 , 1332(a). 3 There is a strong presumption that a court is without jurisdiction until 4 affirmatively proven otherwise. See Fifty Assocs. v. Prudential Ins. Co. of Am., [5] 446 F.2d 1187, 1190 (9th Cir. 1970); Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 6 1992) (“Federal jurisdiction must be rejected if there is any doubt as to the right of 7 removal in the first instance.”). The removing party “bears the burden of showing, by 8 a preponderance of the evidence, that the amount in controversy exceeds the statutory 9 amount.” Lewis v Verizon Commc’ns, Inc., 627 F.3d 395, 397 (9th Cir. 2010). 10 IV. DISCUSSION 11 “[I]n certain cases[,] federal-question jurisdiction will lie over state-law claims 12 that implicate significant federal issues.” Grable, 545 U.S. at 312 (citing Hopkins v. 13 Walker, 244 U.S. 486, 490–91 (1917)). “[F]ederal jurisdiction over a state law claim 14 will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, 15 (3) substantial, and (4) capable of resolution in federal court without disrupting the 16 federal-state balance approved by Congress.” Gunn v. Minton, 568 U.S. 251 , 258 17 (2013). However, a civil action asserting state law claims is not subject to removal 18 based solely on a federal affirmative defense. Franchise Tax Bd. of State of Cal. v. 19 Constr. Laborers Vacation Tr. for S. Cal., 463 U.S. 1, 14 (1983) (“[A] case may not 20 be removed to federal court on the basis of a federal defense . . . , even if the defense 21 is anticipated in the plaintiff’s complaint, and even if both parties admit that the 22 defense is the only question truly at issue in the case.”). 23 Here, Plaintiffs assert six causes of action, each originating in state law. 24 (Compl. ¶¶ 58–101.) Defendants argue that Plaintiffs’ claims “aris[e] under the 25 Constitution, laws, or treaties of the United States,” 28 U.S.C. § 1331 , because “the 26 state law claims necessarily depend on the resolution of a substantial question of 27 federal law,” namely that Ovodenko was noncompliant with the broker-dealer 28 registration requirements found in the Securities Exchange Act of 1934 at the time 1 that she performed her obligations under the Placement Agreement. (NOR ¶ 15.) 2 Therefore, the issue before the Court is whether Ovodenko’s potential violation of the 3 Securities Exchange Act of 1934 is a substantial issue imbedded within Plaintiffs’ 4 state law claims, or rather an affirmative defense raised by Defendants to excuse their 5 noncompliance with the Placement Agreement. 6 Defendants argue that Plaintiffs cannot recover under the Placement Agreement 7 because Section 15 of the Exchange Act states that “[i]t shall be unlawful for any 8 broker or dealer . . . to make use of the mails or any means or instrumentality of 9 interstate commerce to effect any transactions in, or to induce or attempt to induce the 10 purchase or sale of, any security . . . unless such broker or dealer is registered.” 11 (Opp’n 9 (quoting 15 U.S.C. § 78o(a)(1)), ECF No. 12.) Defendants argue they 12 therefore need not comply with the Placement Agreement because Section 29(b) of 13 the Exchange Act renders “[e]very contract made in violation of any provision of this 14 title . . . void.” (Id. at 10 (quoting 15 U.S.C. § 78cc(b)).) In other words, Defendants 15 argue that, because Ovodenko is not registered as a broker-dealer in accordance with 16 Section 15 of the Exchange Act, the Placement Agreement is void for illegality. 17 However, California law is clear that illegality is a defense, not an element of a 18 claim. For an action under breach of contract, a plaintiff must prove “(1) the existence 19 of the contract, (2) plaintiff’s performance or excuse for nonperformance, 20 (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” Oasis W. 21 Realty, LLC v. Goldman, 51 Cal. 4th 811, 821 (2011) (citing Reichert v. Gen. Ins. Co., [22] 68 Cal. 2d 822, 830 (1968)). To establish these elements, none require Plaintiffs to 23 affirmatively establish “they were properly licensed and/or registered under the 24 federal securities laws to perform the services alleged in the Complaint and promised 25 in the Placement Agreement.” (NOR ¶ 28.) Rather, illegality is an affirmative 26 defense that can be raised by the defendant. See Kashani v. Tsann Kuen China Enter. 27 Co., 118 Cal. App. 4th 531, 537 (2004) (discussing defendant’s ability to “prevail on 28 their affirmative defense of illegality”); Yoo v. Robi, 126 Cal. App. 4th 1089 , 1103 1 || (2005) (referring to the “defense of illegality” as an “affirmative defense”). As discussed above, an affirmative defense is insufficient to trigger federal question 3 || jurisdiction. 4 Defendants argue that “just as a contractor must prove that s/he is licensed to 5 || sue a client for construction fees, so to[o] must Plaintiffs prove that they are properly 6 || registered with the SEC as a condition to enforcement of their contract.” (Opp’n 12.) 7 || This analogy, however, is inapposite. Although it is true that a contractor must “plead 8 | licensure” as a requirement to recover under contract, see Advantec Grp., Inc. v. 9 || Edwin’s Plumbing Co., 153 Cal. App. 4th 621, 626 (2007) (citing a California statute 10 || that prohibits unlicensed contractors from bringing or maintaining action to recover 11 || compensation), the same is not true for the claims that Plaintiffs bring in this action. 12 | In other words, Grable’s requirement that a federal issue is “necessarily raised” does 13 || not apply in this case because Plaintiffs need not prove compliance with the Exchange Act’s broker-dealer registration requirements in order to succeed in any of the state 15 || claims they bring against Defendants. 16 The Court finds it has no jurisdiction over this case. 17 Vv. CONCLUSION 18 For the reasons discussed above, the Court GRANTS Plaintiffs’ Motion to 19 | Remand, (ECF No. 10), and REMANDS the case to the Superior Court of California, 20 |} County of Los Angeles, 111 North Hill Street, Los Angeles, CA 90012, Case 21 | No. 23STCV12280. [22] 23 IT IS SO ORDERED. [24] 25 January 29, 2024 i ; 26 DE eR tied 28 OTIS Scrmicn II UNITED STATES,DISTRICT JUDGE