Litigation over employment dispute must be heard in federal court, judge rules

A U.S. District judge in Philadelphia has denied a motion by a plaintiff in an employment dispute lawsuit to remand the matter back to state court, ruling that the litigation should be heard in the federal venue.

In an April 13 order, U.S. District Judge Cynthia M. Rufe denied a motion by McKee Management Associates, which manages residential and commercial properties, to remand the litigation to the Delaware County Court of Common Pleas.

Rufe wrote that remand is not appropriate because the case requires interpretation of federal law and the various issues would not be able to be settled in state court.

McKee Management Associates, and its president, Frank McKee, is suing the company’s former chief financial officer, Joseph A. Santangelo, over alleged financial mismanagement.

According to background information on the case accompanying the judge’s ruling, MMA began experiencing financial hardship in late 2010. While both parties conceded that the economic recession was at least partially responsible for the money woes, the plaintiffs allege that the company’s economic troubles were a result of Santangelo’s mismanagement of company funds during his time as chief financial officer.

Santangelo counter-argues that McKee incurred substantial company debt to finance his personal expenses.

The disagreement over the cause of the financial hardship led to Santangelo’s firing in late September 2011, the background information states.

McKee and his company filed suit in Delaware County’s Common Pleas Court on Oct. 12, 2011. They sought declaratory judgment that Santangelo was terminated for cause and was therefore not entitled to retirement benefits.

Santangelo’s attorneys filed a removal notice with the federal court in Philadelphia in early November of last year, seeking to transfer the matter to the U.S. District Court, asserting diversity of citizenship as the basis for the federal court’s jurisdiction.

The plaintiffs filed the motion to remand to state court about two weeks later.

Both sides have also since filed respective motions to dismiss; those motions are pending.

As for the plaintiffs’ remand motion, McKee argued that while the federal court has diversity of citizenship jurisdiction, since the parties involved are citizens of different states, he urged the federal court to exercise its discretion under the Declaratory Judgment Act and remand the case to state court.

In her ruling, Rufe wrote that a district court’s discretion to decline jurisdiction is not open-ended.

“A court should not decline jurisdiction when the issues in the action include ‘federal statutory interpretation, the government’s choice of a federal forum, an issue of sovereign immunity, or inadequacy of the state proceeding,’” the ruling states.

In this case, Santangelo, in his counterclaim, alleges not only state violations of Pennsylvania’s Wage Payment and Collection Law, but also violations of the federal Employee Retirement Income Security Act, “therefore requiring federal statutory interpretation, and directly relate to Plaintiffs’ request for a declaration that MMA is not obligated to pay Santangelo retirement benefits,” Rufe wrote.

“To the extent the Court has the discretion to remand the declaratory claim contained in the Complaint and retain the federal coercive counterclaims, the Court finds no justification for bifurcating the claims in this way,” the ruling states. “The declaratory and coercive claims are so interrelated so as to require that they be tried in the same action. Judicial economy and the policy of avoiding duplicative and piecemeal litigation do not support bifurcation in this case.”