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applying doctrine to federal question context to determine whether unanimous consent necessary to remove, but finding no fraudulent joinder because possible claim against all joined defendants
Summary of this case from International Union of Operating Engineers, Local No. 68 Welfare Fund v. AstraZeneca PLCOpinion
Civil Action No: 01-3745 Section: "R" (1)
March 7, 2002
ORDER AND REASONS
Before the Court are plaintiff Michelle H. Hesni and co-defendant Kevin Boshea's motions to remand this case to state court. For the following reasons, plaintiff and co-defendant's motions are granted.
I. Background
On November 14, 2001, Michelle H. Hesni, an attorney, brought suit in Louisiana state court against Williams Boshea, L.L.C., James A. Williams, president of Williams Boshea, and Kevin Boshea, vice-president of Williams Boshea. Hesni alleged that defendants failed to compensate her as they agreed. In addition, plaintiff asserted a right to penalty wages, attorney fees and court costs under La. Rev. Stat. 23:631 and 23:632, as well as liquidated damages under the Fair Labor Standard Act ("FLSA"), 29 U.S.C. § 201, et. seq.
Williams Boshea, L.L.C. and Williams ("Williams defendants") removed the case to federal district court, asserting federal question jurisdiction under the FLSA. Boshea did not join in this petition. In their removal petition, the Williams defendants asserted that Boshea's consent was not required because Boshea was fraudulently joined. (Pet. for Removal, VII.)
Hesni now moves to have the case remanded to state court, arguing that removal was defective because Boshea had not consented to removal. Boshea has also filed a motion to remand based on his non-consent to removal. (Rec. Doc. 6.) The Williams defendants oppose the motion on the grounds that Boshea was fraudulently joined and therefore his consent was not a prerequisite to removal.
II. Analysis
A. Whether FLSA is a proper basis for removal
As an initial matter, the Court notes that neither the Supreme Court nor the Fifth Circuit has decided whether FLSA suits may be removed. See Baldwin v. Sears, Roebuck and Co., 667 F.2d 458, 461 (5th Cir. 1982) ("The question of removability of FLSA actions is not before us, and we do not attempt to address that issue.") While plaintiff has not asserted this argument in her motion to remand, the Court will nonetheless decide this issue since the parties cannot, by consent, confer jurisdiction on a court. See, e.g., Sosna v. Iowa, 419 U.S. 393, 398, 95 S. Ct. 553. 556 (1975).
The central issue here is whether section 216(b) of the FLSA constitutes an express bar to removal because it provides that a party has the option to "maintain" a FLSA action in state court or federal court. Section 216(b) provides in pertinent part:
An action to recover the liability prescribed in either of the preceding sentences may be maintained against any employer (including a public agency) in any Federal or State court of competent jurisdiction . . .
28 U.S.C. § 216(b). The question is whether when Congress gave plaintiffs the option to "maintain" a FLSA action in state court, it expressly prohibited removal for the purposes of Section 1441(a). Section 1441(a) states:
Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant to the district court . . .28 U.S.C. § 1441 (a).
In Cosme Nieves v. Deshler, 786 F.2d 445, 451 (1st Cir. 1986), the First Circuit found that cases brought under the FLSA were removable. The court found that the plain language of 28 U.S.C. § 1441 (a), as amended in 1948, permitted removal under the FLSA. The court interpreted the term "expressly provided" as meaning that an "explicit statutory directive by Congress" was required in order to abrogate the right to remove. Id. Finding that the "may be maintained" in "state court" language did not constitute such an express provision, the Court held that FLSA suits were removable. Id. ("But Congress has made it plain that the right of removal is to stand absent an express provision to the contrary, and it is the responsibility of Congress, not the courts, to speak on the matter if it wishes to foreclose removal of FLSA cases."). See also Emrich v. Touche Ross Co, 846 F.2d 1190, 1196 (9th Cir. 1988) (in dicta); Roseman v. Best Buy, 140 F. Supp.2d 1332 (S.D. Ga. 2001) (providing a thorough analysis of the circuit and district court opinions as well as the legislative history); Winebarger v. Logan Aluminum, Inc., 839 F. Supp. 17, 18 (W.D. Ky. 1993); Ramos v. H.E. Butt Grocery Co., 632 F. Supp. 342 (S.D. Tex. 1986).
Other courts have disagreed with that interpretation and have found that Congress intended to bar the removal of cases arising under the FLSA. See, e.g., Johnson v. Butler Bros., 162 F.2d 87 (8th Cir. 1947) (interpreting the pre-1948 removal statute which did not contain the language "[e]xcept as otherwise expressly provided by Act of Congress. . . ."); Lopez v. Wal-Mart Stores, Inc., 111 F. Supp.2d 865, 866 (S.D. Tex. 2000) (citing cases); Esquival v. St. Andrews Construction, 999 F. Supp. 863, 865 (N.D. Tex. 1998); Pauly v. Eagle Point Software Co., Inc., 958 F. Supp. 437, 439 (N.D. Iowa 1997). In Lopez, the court interpreted the phrase "may be maintained" to mean that plaintiff had "the right to both institute a suit in state court, and also carry that suit to its conclusion." Lopez, 111 F. Supp.2d at 866 ("If Congress merely meant that a plaintiff may institute a suit in state court, there is far more apt language available to express that intention."). Accordingly, the court found that the section 216(b) constituted the type of "express bar" required by section 1441 to preclude removal and remanded the case to state court. Id.
This Court is more persuaded by the reasoning of First Circuit in Cosme Nieve. The Court agrees with the First Circuit that the statement that a FLSA action may be "maintained" in state court is too ambiguous to constitute an express provision barring removal under section 1441(a). The Court also notes that the Fifth Circuit has found that section 1441(a) "creates a broad right of removal." Baldwin, 667 F.2d at 459 (5th Cir. 1982). Further, the Court points to the Fifth Circuit's decision in Baldwin, in which the Fifth Circuit found that similar language found in the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 626 (c) (1), did not constitute an express bar against removal. Id. at 461 (finding ADEA's statement that parties "may bring a civil action in any court of competent jurisdiction" does not permit plaintiff to prosecute the suit to final judgment in state court). See also Ramos, 632 F. Supp. at 343. Accordingly, the Court finds that FLSA suits are removable under section 1441(b).
B. Fraudulent Joinder
Plaintiff asserts that removal in this case was procedurally defective because Boshea did not consent to removal. In general, consent of all defendants is required to remove a case from state to federal court. Doe v. Kerwood, 969 F.2d 165, 167-68 (5th Cir. 1992). A defendant alleging fraudulent joinder, however, is not required to obtain consent of co-defendants before removing a case. See Jernigan v. Ashland Oil, Inc., 989 F.3d 812, 815 (5th Cir. 1993) ("In a case involving alleged improper or fraudulent joinder of parties, however, application of this requirement [of consent of all parties] would be nonsensical, as removal "in those cases is based on the contention that no other proper defendant exists.").
Once a case has been removed, the party seeking to invoke the Court's jurisdiction bears the burden of establishing its appropriateness. Stafford v. Mobile Oil Corp., 945 F.2d 803, 804 (5th Cir. 1991). To establish that Boshea was fraudulently joined, the Williams defendants bear the heavy burden of showing that there is no possibility that plaintiff could establish a cause of action against Boshea, or that there has been outright fraud in plaintiff's recitation of the jurisdictional facts. See Burden v. General Dynamics Corp., 60 F.3d 213, 217 (5th Cir. 1995); B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir. 1981). In evaluating defendants' assertion of fraudulent joinder, the Court must consider all of the factual allegations in the light most favorable to the plaintiff and resolve all of the contested issues of fact in favor of the plaintiff. See Burden, 60 F.3d at 217. The Court may pierce the pleadings to determine fraudulent joinder, and, even though the petition may state a claim against the disputed defendant, the case may be removed if the defendant shows by evidence outside the pleadings that there is no reasonable basis to predict that plaintiff could establish a claim against the disputed defendant. Badon v. R J R Nabisco, Inc., 224 F.3d 382, 389, 394 (5th Cir.) (Badon I), op. after certified question declined, 236 F.3d 282 (5th Cir. 2000) (Badon II) (there is no controversy to be construed in favor of nonremoving party when it submits no evidence of contradictory facts in response to the evidence of the removing party). See also B., Inc., 663 F.2d at 549. Furthermore, the Court must resolve any uncertainties as to the current state of controlling substantive law in favor of the plaintiff. B., Inc., 663 F.2d at 549. Thus, defendants must show, as a matter of law, that "there is no reasonable basis for predicting that the plaintiff might establish liability on [his] claim against [Boshea]." Badon I, 224 F.3d at 390. See also Burden, 60 F.3d at 216 (explaining that district courts "do not determine whether the plaintiff will actually or even probably prevail on the merits of the claim, but look only for a possibility that the plaintiff might do so").
1. State Law Claim
The Court finds that defendants have not shown that Hesni is not able, under any of the stated facts and applicable law, to assert a claim against Boshea. Specifically, defendants have not negated the possibility that personal liability attaches to Boshea under La. Rev. Stat. 23:631 and 23:632. The Williams defendants assert that Hesni's claims against Boshea as an individual are barred by La. Rev. Stat. 1320(B), which provides that "no member, manager, employee, or agent or a limited liability company is liable in such capacity for a debt, obligation, or liability of the limited liability company." La. Rev. Stat. § 1320(B). They assert that because Boshea was a member of Williams Boshea, L.L.C., he is protected from personal liability.
There are, however, limited exceptions to this general rule, whereby the court may ignore the corporate fiction, and hold the individual members or member liable. See Riggins v. Dixie Shoring Co., Inc., 590 So.2d 1164, 1167 (La. 1991). Louisiana courts have indicated that the corporate veil should be pierced when adherence to the corporate fiction would clearly result in inequity. See Watson v. Big T Timber Co., Inc., 382 So.2d 258, 262 (La.Ct.App. 1980); Giuffria Realty Co., Inc. v. Kathman-Landry, Inc., 173 So.2d 329, 334 (La.Ct.App. 1965). In determining whether to pierce the corporate veil, Louisiana courts must consider the totality of the circumstances. Under the "alter ego" theory, the following specific factors are usually considered relevant: (1) commingling of corporate and shareholder funds; (2) failure to follow statutory formalities for incorporating and transacting corporate affairs; (3) undercapitalization; (4) failure to provide separate bank accounts and bookkeeping records; and (5) failure to hold regular shareholder and director meetings. See Riggins, 590 So.2d at 1168 (citations omitted). Louisiana courts have noted that the above five factors are not an exclusive list of considerations. See Hollowell v. Orleans Regional Hospital, L.L.C., 217 F.3d 379, 387 (5th Cir.) rehearing en banc denied (2000); Huard, 147 F.3d at 409; see also Pine Tree Associates v. Doctors' Associates, Inc., 654 So.2d 735, 738-39 (La.Ct.App. 1995) (courts consider five factors, but are not limited to those factors); Green v. Champion Ins. Co., 577 So.2d 249, 257-58 (La.Ct.App. 1991) (listing eighteen factors which courts consider in determining whether a corporation is the alter ego of another, and noting that list is "illustrative and is not intended as an exhaustive list of relevant factors.").
In this case, the Court finds that Hesni presents evidence of both commingling of funds and a failure to follow statutory formalities for incorporation. In her affidavit, Hesni states that in April 2000, she met with Williams to discuss a position and negotiate compensation with the firm of "Williams, Boshea Ehle, L.L.C." (Suppl. Mem. Supp. Mot. to Remand, Ex. A, Aff. Hesni, at ¶ II.) Hesni asserts that she was employed by "Williams, Boshea Ehle, L.L.C." In support, she submits her W-2 Wage and Tax Statement form from 2000 which shows that she was employed by "Williams Boshea Ehle, L.L.C." Her miscellaneous income form from 2000 also shows that she received payment from "Williams, Boshea Ehle, L.L.C." and "James A. Williams, L.L.C." ( Id., Ex. B.) Hesni testifies that she was never employed by "Williams Boshea, L.L.C." and has never been paid by "Williams Boshea, L.L.C." ( Id., Ex. A., Aff. Hesni, at ¶¶ III and IV.)
The Williams defendants assert that plaintiff's "piercing the corporate veil" argument is barred because she did not plead it in her complaint. The Court disagrees. Piercing the corporate veil is not an independent cause of action, but rather is a means of imposing liability on an underlying cause of action. See Peacock v. Thomas, 516 U.S. 349, 354, 116 S.Ct. 862, 866-867 (1996) (citing 1 C. Keating G. O'Gradney,Fletcher Cyclopedia of Law of Private Corporations § 41, p. 603 (perm. ed. 1990)).
Hesni presents evidence that "Williams, Boshea Ehle, L.L.C.," however, was never registered as a limited liability company with the State of Louisiana. ( Id., Ex. C.) Under Louisiana law, a limited liability company is formed when the articles of organization are signed and filed with the secretary of state. See La. Rev. Stat. § 12:1304. Section 12:1304 provides:
A. Two or more persons capable of contracting may form a limited liability company by filing the articles of organization, or a multiple original thereof, and the initial report with the secretary of state . . .
B. Upon the issuance of the certificate of organization, the limited liability company shall be duly organized, and its separate existence shall begin as of the time of filing of the articles of organization, or multiple original thereof, with the secretary of state . . .
La. Rev. Stat. § 12:1304(A) and (D). In support of her assertion, Hesni submits a list of businesses listed with the Louisiana Secretary of State and "Williams, Boshea Ehle, L.L.C." is not listed as a business registered with the state. (Supp. Mem. Supp. Mot. to Remand, Ex. C.)
In addition, Hesni presents evidence of commingling of funds. In her affidavit, Hesni states that she saw Williams write a check from the "Williams, Boshea Ehle, L.L.C." account to pay for his personal American Express bill. ( Id., Ex. A, Aff. Hesni, at VI.)
The Court notes that in a motion to remand, the Court must consider all of the factual allegations in the light most favorable to the plaintiff and resolve all of the contested issues of fact in favor of the plaintiff. See Burden, 60 F.3d at 217. Under these circumstances, the Court cannot say that there is no possibility that Hesni will be unable to pierce the corporate veil. Accordingly, the defendants have not shown that Hesni would be unable to state a claim against Boshea under Louisiana state law. Accordingly, because Boshea did not consent to removal, the Court finds that the removal petition is defective and remands the case to state court.
III. Conclusion
For the foregoing reasons, the Court grants the motions to remand filed by plaintiff and co-defendant.