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Waste Management, Inc. v. Arnoni

November 7, 2006


The opinion of the court was delivered by: Arthur J. Schwab United States District Judge



These related cases arise from the 1996 acquisition of the M.C. Arnoni Company by USA Waste Services, Inc., now known as Waste Management, Inc. ("WMI"). The operative facts that are pertinent to the two pending motions are not in dispute.

WMI filed its complaint for a declaratory judgment against Robert M. Arnoni on October 10, 2006, claiming diversity of citizenship jurisdiction under 28 U.S.C. § 1332: WMI alleges it is a citizen of Delaware, its place of incorporation, and of Texas, where it maintains its principal place of business, and that Mr. Arnoni is a citizen of Pennsylvania.

WMI seeks only declaratory relief pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201(a) ("DJA") regarding its rights and liabilities under a Stock Option Agreement. Specifically, WMI requests this Court to declare that Arnoni's right to exercise 66,000 stock options expired prior to his attempt to exercise said options on May 16, 2006. The value of exercising the options as of that date would be about $619,000.

The DJA complaint alleges that in 1996, Arnoni conveyed his interests as a principle in the M.C. Arnoni Company (a Pennsylvania business now known as USA South Hills Landfill, Inc.) to WMI's predecessor in exchange for, inter alia, a three year Employment Agreement. That Employment Agreement was subsequently extended until August 31, 2001 in order to allow Arnoni's rights under the Stock Option Agreement, which the Employment Agreement incorporated, to fully vest. Under these agreements, Arnoni's options for 110,000 shares of stock vested in stages from August 1999 through August 30, 2001. WMI alleges that Arnoni could exercise these vested options only within three months of termination of employment with it or its subsidiaries which occurred on August 31, 2001, that he in fact exercised 44,000 options before that time, but that he left 66,000 options on the table which expired long before he attempted to exercise the stock options in May 2006.

Motion to Dismiss (doc. no. 4)

Arnoni has filed a motion to dismiss the complaint arguing that this Court should decline to exercise its discretionary jurisdiction under the DJA in light of his previously filed state court complaint. When settlement discussions broke down, the parties rushed to file their respective suits: WMI's was filed with this Court at 4:59 pm, October 10, 2006, according to the docket; Mr. Arnoni's was filed at 1:26 pm, according to the motion to dismiss, in the Court of Common Pleas of Allegheny County, Pennsylvania, against WMI as well as two officers of WMI, David P. Steiner and James E. Trevathan, all of whom are alleged to be statutory "employers" under Pennsylvania's Wage Payment and Collection Law ("WPCL"), 43 P.S. § 206.2a. Arnoni's state court complaint states five claims against WMI only, and one, Count 6, against WMI, David P. Steiner and James E. Trevathan jointly: Count I - Breach of the Stock Option Agreement; Count II - Reformation of the Contract (Mutual Mistake); Count III - Fraud in the Execution; Count IV*fn1

- Unjust Enrichment; Count V - Modification by Practice of the Parties; Count VI - Wage Payment and Collection Law.

WMI responds that it is within the Court's jurisdiction and its discretion to entertain and resolve the DJA action, and that it should do so, despite the existence of parallel but broader state court proceedings.

Civil Action No. 06-1389 - Arnoni v. WMI, Steiner and Trevathan

On October 18, 2006, defendants in the state court action, WMI, Steiner and Trevathan, filed a Notice of Removal of that action to this Court pursuant to the removal statute, 28 U.S.C. §§ 1441 and 1446, addressed to this Court's diversity jurisdiction, 28 U.S.C. § 1332. In support of this Court's diversity jurisdiction, defendants assert that neither WMI nor Steiner are citizens of Pennsylvania, as is plaintiff, and that while Trevathan is a citizen of Pennsylvania, this Court should disregard Trevathan's citizenship because he has been fraudulently joined in order to defeat diversity jurisdiction.

Motion to Remand (doc. no. 7)

Mr. Arnoni has filed a motion to remand this case to the Court of Common Pleas of Allegheny County because defendants Trevathan and WMI are citizens of Pennsylvania and therefore, there is no diversity jurisdiction to sustain the removed state court action. Plaintiff asserts that his claim against Mr. Trevathan is a bona fide claim under Pennsylvania's WPCL, and not a claim injected solely to defeat diversity, Motion to Remand (doc. no. 7) at ¶¶ 28-43, and that WMI is a citizen of Pennsylvania because its website and SEC filings indicate it does business in and has "a principal place of business" in Pennsylvania. Motion to Remand (doc. no. 7) at ¶¶ 15-20, 45-48.

Defendants filed a response and brief in opposition (doc. nos. 11-12), and plaintiff has filed a reply thereto (doc. no. 15). After careful consideration of the dueling complaints, the motion to dismiss and response, the motion to remand, response and reply, and the respective memoranda of law, this Court will grant the motion to remand Civil Action No. 06-1389, because Arnoni has stated a bona fide claim against Trevathan under the WPCL and ...

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