United States District Court, D. Minnesota
William Michael, Jr., MAYER BROWN LLP, and Mark J. Briol and
William G. Carpenter, BRIOL & ASSOCIATES, for plaintiff
H. Redden, FABIAN MAY & ANDERSON, PLLP, for plaintiff
Bradley Olsen and Scott Nielson, HENSON & EFRON, PA, for
Benjamin F. Langner, Craig R. Baune, Erin M. Secord, and Lola
Velazquez-Aguilu, Assistant United States Attorneys, UNITED
STATES ATTORNEY'S OFFICE, for movant.
MEMORANDUM OPINION AND ORDER
R. TUNHEIM CHIEF JUDGE
Keith Guggenberger and Julie Miller filed these two related
employment cases in state court, seeking damages arising from
their September 2015 termination by Defendant Starkey
Laboratories, Inc. (“Starkey”). In state court,
Guggenberger and Miller served Starkey with various discovery
requests. In separate proceedings, the United States indicted
a number of other former Starkey employees, who were also
terminated in September 2015, on federal conspiracy, mail
fraud, wire fraud, and money laundering charges; the
indictment alleges that those employees defrauded Starkey of
more than $20 million. The United States attempted to
permissively intervene in the civil state-court matters for
the purpose of delaying discovery pursuant to Minn. R. Civ.
P. 24.02, arguing discovery in the civil matters could
disturb the integrity of the federal criminal case. The state
court denied intervention and the United States subsequently
removed both cases to federal court pursuant to 28 U.S.C.
and Miller move for remand to state court, arguing the Court
lacks jurisdiction; they also request an award to cover costs
and fees related to the improper removal. The United States
moves for permissive intervention and a stay of discovery.
Starkey moves to stay the civil litigation, or alternatively,
to stay discovery.
Court will grant Guggenberger's and Miller's motions
for remand because it lacks jurisdiction and removal under
§ 1442(a)(1) was improper. However, because the United
States' good-faith argument for removal was objectively
reasonable, the Court will deny Guggenberger's and
Miller's requests for costs and fees. The Court will deny
as moot all other pending motions.
Federal Indictment of Former Starkey Executives
is a large hearing aid company based in Minnesota.
(GuggenbergerNotice of Removal
(“Guggenberger Removal Notice”), Ex. 1
(“Guggenberger Am. Compl.”) ¶ 1,
June 20, 2016, Docket No. 1.) Starkey terminated a number of
employees in September 2015, when an alleged large-scale
fraud scheme orchestrated by top-level executives came to
light. (Id. ¶ 14; Guggenberger Second
Decl. of Erin M. Secord (“Guggenberger Second
Secord Decl.”), Ex. M (“Indictment”) ¶
1, Oct. 4, 2016, Docket No. 37.) Guggenberger and Miller were
among those fired. On September 21, 2016, three of the
terminated employees - Scott Nelson, Larry Miller, and former
Starkey President Jerry Ruzicka - were federally indicted on
charges including mail fraud, wire fraud, money laundering,
and conspiracy. (Indictment ¶¶ 1, 17-55.) The
indictment alleges that the criminal defendants defrauded
Starkey of more than $20 million over many years.
(Id. ¶ 64.)
Termination of Guggenberger and Miller
time of his termination, Guggenberger was a twenty-nine-year
employee of Starkey who most recently served as Senior Vice
President of Operations; he reported to Ruzicka.
(Guggenberger Am. Compl. ¶¶ 2, 9.) Miller
worked at Starkey for almost forty years; at the time of her
termination she was Senior Executive Assistant to Ruzicka,
and she is married to Larry Miller. (Miller Notice
of Removal (“Miller Removal Notice”),
Ex. 1 (“Miller Compl.”) ¶¶ 3,
9, June 20, 2016, Docket No. 1; Indictment ¶ 1.)
September 30, 2015, Guggenberger filed a lawsuit against
Starkey in Minnesota state court, alleging breach of
employment contract, breach of the implied covenant of good
faith and fair dealing, defamation, unpaid wages under Minn.
Stat. § 181.13, unjust enrichment/quantum meruit, and a
federal statutory claim under 29 U.S.C. § 1132.
(Guggenberger Removal Notice ¶ 2;
Guggenberger Am. Compl. ¶¶ 24-45.)
Guggenberger demands damages in excess of $11 million.
(Guggenberger Am. Compl. ¶¶ 29, 35.)
December 22, 2015, Miller filed a lawsuit against Starkey in
Minnesota state court. Miller asserts three claims: marital
status discrimination under the Minnesota Human Rights Act,
Minn. Stat. § 363A.08, subd. 2, breach of contract, and
promissory estoppel. (Miller Compl. ¶¶
14-30.) Miller demands damages in excess of $50, 000.
(Id. ¶¶ 18, 24, 30.)
March 16, 2016, the state court granted Starkey's motion
to companion Guggenberger and Miller for
discovery pursuant to Minn. Gen. R. Prac. 113 and Minn. R.
Civ. P. 42.01 because of the substantial overlap of fact and
law between the cases. (Guggenberger Aff. of William
Carpenter (“Carpenter Aff.”), Ex. 2 at 33-34,
July 1, 2016, Docket No. 15.) The state court reasoned that
“[t]here will be identical questions of law presented
by discovery, particularly concerning Fifth Amendment
protections for witnesses while a criminal investigation is
pending.” (Id. at 33.) Starkey has not yet filed an
Answer in either case.
April 29, 2016, Guggenberger served discovery requests on
Starkey, seeking the names of all Starkey employees and
vendors who provided information about Guggenberger to law
enforcement; the names of the law enforcement officers who
received that information; a description of all such
communications between Starkey and law enforcement; and
documents related to any law enforcement investigation of
Guggenberger in Starkey's possession. (Id., Ex.
3 at 39-40, 46-47.) Guggenberger also noticed a number of
depositions, including a deposition of Starkey and
Starkey's private investigation firm. (Id. at
49-50, 58; see also Id. at 60-61.)
9, 2016, Miller served Starkey with discovery requests.
(Miller Decl. of Erin M. Secord
(“Miller Secord Decl.”), Ex. C at 37-50,
Aug. 2, 2016, Docket No. 17.) Miller requested, among other
things, documents relating to and a detailed explanation of
the reasons for Miller's and her spouse's
termination, and information regarding Miller's
employment contract and Starkey's anticipated defenses.
(Id. at 40-42.) Like Guggenberger, Miller noticed
depositions of Starkey executives. (Id. at 4.)
Unlike Guggenberger's requests, Miller's discovery
requests make no mention of the criminal investigation or
Starkey's communications with law enforcement. (See
Id. at 4-5, 37-50.)
19, 2016, the United States filed Notices of Permissive
Intervention in Guggenberger and Miller
pursuant to Minn. R. Civ. P. 24.02,  stating:
Guggenberger's publicly-filed pleadings acknowledge the
existence of a criminal investigation, and he has served
discovery requesting information that [Starkey] provided or
identified to law enforcement or “prosecutorial
The government is conducting an investigation into criminal
conduct of which Starkey may be a victim, and there are
questions of fact or law common to the investigation, this
case, and the related cases, [Miller and
The United States seeks to protect the integrity of its
criminal investigation by, among other things, preventing
circumvention of limitations on discovery pursuant to the
Federal Rules of Criminal Procedure. The government also
seeks to protect from disclosure the focus and scope of the
grand jury investigation as well as information provided to
the grand jury. See Fed. R. Crim. P. 6(e). The
discovery sought in this matter and in the related
Miller matter would undermine those interests.
(Carpenter Aff., Ex. 5 (citation omitted); see also
Miller Secord Decl., Ex. D (near-identical language).)
Guggenberger stipulated to the United States' permissive
intervention for the sole purpose of allowing the United
States to argue for a stay of discovery and reserved the
right to object to the motion to stay discovery. (Carpenter
Aff., Ex. 6.) Miller objected to the United States'
intervention, and the United States moved to intervene as
required by Minn. R. Civ. P. 24.03. (Miller Secord
Decl., Exs. E-F.) The United States argued that it sought
intervention to “protect the integrity of its criminal
investigation” by (1) “preventing circumvention
of limitations on discovery pursuant to the Federal Rules of
Criminal Procedure” and (2) “protect[ing] from
disclosure the focus and scope of the grand jury
investigation as well as information provided to the grand
jury.” (Id., Ex. A ¶ 8.)
days before the state-court hearing on the United States'
motion for permissive intervention, the United States filed
briefing indicating, for the first time, its intent to remove
the case to federal court after intervention in order to
“submit its Motion to Stay Discovery to a federal judge
authorized to receive and evaluate federal grand jury
materials that are subject to [Fed. R. Crim. P.] 6(e)
protection.” (Carpenter Aff., Ex. 7; id., Ex.
8 at 82.) Guggenberger responded that his prior
“stipulation to intervention [was] not valid for
intervening for the purpose of removal, ” and objecting
to the United States' intervention for that purpose.
(Id., Ex. 9 at 85.)
before the state-court hearing began, the court issued a
written order granting the United States permissive
intervention in Guggenberger based on the
parties' joint stipulation, apparently unaware of the
United States' plan to remove the case immediately after
intervening and Guggenberger's opposition.
(Guggenberger Decl. of Erin M. Secord
(“Guggenberger Secord Decl.”), Ex. K,
July 21, 2016, Docket No. 23.) At the hearing, the judge
stated that he was inclined to grant permissive intervention
in Miller to allow the United States to argue for a
stay of discovery. (Carpenter Aff., Ex. 10 (“State
Tr.”) at 91.)
the parties explained that the United States planned to
immediately remove the case after intervening, the court
changed course, denying the United States' motion for
permissive intervention in Miller and revoking
intervention in Guggenberger. (Id. at
91-94.) The state court expressed irritation with the United
States' strategy to first portray intervention as a path
to argue for staying discovery in state court, then later
seeking intervention solely in order to generate removal
jurisdiction. (Id. at 95-97; see also
Guggenberger Removal Notice, Ex. 2 at 3.) In a
subsequent written order, the court explained that “the
court is aware of no authority - nor was any cited by [the
United States] - that mandates a permissive intervention so
that a case may be removed to federal court.”
(Guggenberger Removal Notice, Ex. 2 at 3.) Despite
denying intervention, the state court instructed the parties
to propose language for a protective order and an order
partially staying discovery. (State Tr. at 105-06.)
20, 2016, after the state court denied permissive
intervention, the United States removed Guggenberger
and Miller pursuant to 28 U.S.C. § 1442(a)(1).
In the Notices of Removal, the United States explained:
This notice of removal is filed pursuant to 28 U.S.C. §
1442(a)(1) because the Hennepin County District Court's
Order Dated June 20, 2016 is “against or directed
to” the United States. See, e.g.,
People's Nat'l Bank of Mora v. BWHC, LLC,
No. 08-408 (PJS/JJG), 2008 WL 10973336 (D. Minn. Oct. 10,
2008). Further, the United States has raised issues in
response to the Plaintiff's requested discovery that . .
. arise out of its obligations to enforce federal law.
See Fed. R. Crim. P. 6(e).
(Guggenberger Removal Notice at 2; Miller
Removal Notice at 2.)
and Miller filed motions to remand pursuant to 28 U.S.C.
§ 1447(c). (Guggenberger Mot. for Remand, July
1, 2016, Docket No. 11; Miller Mot. for Remand, July
12, 2016, Docket No. 9.) Guggenberger and Miller argue that
§ 1442(a)(1) does not provide a basis for removal in
this case. They seek an award of costs and fees pursuant to
removal, the United States filed a letter with the Court
under D. Minn. LR 7.1(j) requesting leave to file a motion to
reconsider the state court's denial of permissive
intervention. The Court denied the United States' request
and, instead, directed that the Court would consider new
motions for intervention and a stay. Subsequently, the United
States filed motions to stay discovery and motions for
permissive intervention. On the same date, Starkey filed
motions to stay litigation, or alternatively, to stay
discovery in both cases.