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applying and following Central of Georgia Ry. Co.
Summary of this case from Reno v. Anco Insulations, Inc.Opinion
Civil Action No. 02-1486 Section "K"
September 3, 2002
Before the Court is defendant, Miranda, Warwick Milazzo, a Professional Law Corporation's, Motion to Remand. (rec. doc. 3). The motion was set for hearing on June 17, 2002 and was taken on the papers without oral argument. The Court has considered the pleadings, memoranda, and relevant law and finds the Motion to Remand should be DENIED.
Background
On January 4, 2002, Johns, Pendelton Associates, Inc. ("Johns, Pendelton") filed suit on an open account for $1,300 in the First Parish Court for Jefferson Parish against Miranda, Warwick Milazzo (MWM) alleging that it was owed for various court reporting services it performed for MWM on cases in which Reliance Insurance Company ("Reliance") was a party. On January 16, 2002, MWM brought a third-party claim against Cambridge Integrated Services Group, Inc. ("Cambridge"), who was serving as the third party administrator for Reliance when it was in liquidation, alleging, that Cambridge was obligated to pay: (1) the $1,300 main demand brought by Johns Pendelton against MWM and (2) approximately $200,000 in damages to MWM arising out of the same transaction. Cambridge contended that it was not liable for either amount under the terms of its contract with Reliance. However, on May 14, 2002, Cambridge paid the original claim brought by Johns Pendleton against MWM ($1,300). Thereafter, Johns Pendelton dismissed its cause of action against MWM.On May 15, 2002, pursuant to 28 U.S.C. § 1332(a)(1), § 1441(a) and § 1446, Cambridge removed its cause of action against MWM to federal court stipulating that: (1) MWM is a Louisiana professional corporation with its principal place of business in Metairie, (2) Cambridge is a Pennsylvania corporation with its principal place of business in New Jersey, and (3) the amount in controversy exceeds $75,000.
In its Motion to Remand, MWM argued that removal to this Court was improper because: (1) pursuant to 28 U.S.C. § 1441(a), a "third party defendant" is not permitted to remove a matter to federal court and (2) Cambridge's payment to Johns Pendelton was equivalent to "forum shopping" and maintenance of the action in this Court would allow Cambridge to "buy" its way into a federal forum.
Motion to Remand, p. 2-4.
In response, Cambridge posited that: (1) the dismissal of claims between Pendelton and MWM re-aligned the parties so that MWM is the direct plaintiff and Cambridge is the direct defendant as to the claims between them and because MWM and Cambridge meet the requirements of § 1332, removal to federal court is appropriate, (2) even without re-alignment, the Fifth Circuit has permitted third-party removal where the claim asserted in the third-party demand is "separate and independent" from the main claim asserted by the plaintiff against the third party plaintiff, (3) § 1441(c) permits removal of a claim, even though not originally removable, when the dismissal of a party creates complete diversity between the remaining parties, and (4) there is no proof of impermissible forum shopping.
Analysis
Standard for Removal and Remand
When faced with a Motion for Remand, the well-established law of the Fifth Circuit is that the removing party has the burden of establishing federal jurisdiction over the controversy. Furthermore, federal courts have been directed to construe the removal statute against removal and in favor of remand to state court. This rule of strict construction is "consistent with the notion that the federal courts are courts of limited jurisdiction." Finally, all disputed questions of fact and all ambiguities in the controlling state law must be resolved in favor of the plaintiff.
Vasquez v. Alto Bonito Gravel Plant Corp., 56 F.3d 689, 692 (5th Cir. 1995); Dodson v. Spiliada Maritine Corp., 951 F.2d 40, 42 (5th Cir. 1992); Kidd v. Southwest Airlines Co., 891 F.2d 540, 543 (5th Cir. 1990). See also WRIGHT, MILLER COOPER, FEDERAL PRACTICE AND PROCEDURE: Jurisdiction 3d § 3739, at 470 (noting that it "is well-settled . . . [that] the removing party bears the burden of proof as to all elements of the removal's propriety").
Shamrock Oil Gas Corp. v. Sheets, 313 U.S. 100 (1941); City of New Orleans v. Illinois Central Railroad Company, 804 F. Supp. 873 (E.D. La. 1992).
WRIGHT, MILLER COOPER, FEDERAL PRACTICE AND PROCEDURE: Jurisdiction 3d § 3721 at 348-51.
Burden v. General Dynamics Corp., 60 F.3d 213, 216 (5th Cir. 1995); B Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir. 1981).
Removal c)f a matter to federal court can be accomplished on several bases. Pursuant to 28 U.S.C. § 1441(a):
Except as otherwise expressly provided by Act of Congress, any civil action brought in the State court which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.
Under 28 U.S.C. § 1447(c), removal is permissible:
Whenever a separate and independent claim or cause of action within the jurisdiction conferred by section 1331 of this title is joined with one or more otherwise nonremovable claims or causes of action, the entire case may be removed . . .
Jurisprudeuitial Interpretation of § 1441(a) and § 1441(c)
In Shamrock Oil Gas Co. v. Sheets, the Supreme Court held that a counter-claim defendant was not a "defendant" under § 1441(a) and instructed lower courts to construe the removal statute strictly. However, lower courts have varied in their interpretation of Shamrock's holding when presented with removal actions filed by third-party defendants under § 1441(c). Unlike the wording of § 1441(a), § 1441(c) does not limit its application according to party status and several circuits, including the Fifth Circuit in Carl Heck Engineers, Inc. v. LaFourche Parish Police Jury, have permitted third-party defendants to remove an action to federal court when the third-party complaint involves a federal question under § 1331 and presents a "separate and independent claim." Since the enactment of the Judicial Improvement Act of 1990, the essential holding of Carl Heck has not changed and a third-party defendant in this Circuit may still avail itself of the right to remove an action under Section 1441(c). However, it is clear that a third party defendant may not use diversity to "[i]nvoke removal under section 1441(c)]; only the federal question claim . . . will support a [Section 1441(c)] removal."
131 U.S. 100, 108-09 (1941).
622 F.2d 133 (5th Cir. 1980).
See e.g., Lewis v. Windsor Door Co., 926 F.2d 729 (8th Cir. 1991); Metro Ford Truck Sales, Inc. v. Ford Motor Co., 145 F.3d 320 (5th Cir. 1998); Texas v. Walker, 142 F.3d 813 (5th Cir. 1998); Walk Haydel Associates, Inc. v. Coastal Power Production Co., 934 F. Supp. 209 (1996); Thomas v. Shelton, 740 F.2d 478 (7th Cir. 1984); Marsh Investment Co. v. Langford, 494 F. Supp. 344, 348; But see Easton Financial Corp. v. Allen, 846 F. Supp. 652, 653 (N.D. Ill. 1994) (noting that "[t]he substantial majority of the many judicial opinions that have dealt with the subject matter have held that a third-party defendants cannot invoke removal junsdiction at all—a view that is uniformly supported by the leading treatises on the subject") (quoting 14 A. CHARLES WRIG FIT, ARTHUR MILLER EDWARD COOPER, FEDERAL PRACTICE PROCEDURE: JURISDICTION 2d § 3731 at 502 n. 4 (2d ed. 1985)
See e.g., National American Ins. Co. v. Advantage Contract Services, Inc., 200 F. Supp.2d 620 (E.D. La. 2002) (noting "NAICO's [third-party] contends that despite the amendment to Section 1441(c), Carl Heck Engineers, Inc., still justifies removal of a claim by a third party defendant when the basis of removal is diversity jurisdiction. NAICO's interpretation of these cases is erroneous. The cases cited by NAICO do not support its contention that Carl Heck Engineers, Inc. allows removal under Section 1441(c) based on diversity jurisdiction); See also Auto Transportes Gacela S.A. DE C.V. v. Border Freight Distrib. and Warehouse Inc., 792 F. Supp. 1471 (S.D. Tex. 1992); Fiblenski v. Hirschback Motor Lines, Inc., 304 F. Supp. 283, 285 (E.D. Ark. 1969); Friddle v. Harelee's Food Sys., Inc, 534 F. Supp. 148, 149 (W.D. Ark. 1981); Knight v. Hellenic Lines, Ltd., 543 F. Supp. 915, 917 (E.D.N.Y. 1982);
Therefore, in the case at bar, Cambridge can not rely on § 1441(c) as the basis for its removal to this Court because no federal question is at issue. However, having reviewed the scarce jurisprudence addressing this particular issue, the Court finds that under existing Fifth Circuit law, Cambridge may remove the counterclaim brought agains t it by MWM under § 1441(a).
This Court's conclusion is consistent with the rationale adopted by the Fifth Circuit in Central of Georgia Railway Co. v. Reigel Textile Corp. Therein, the Fifth Circuit upheld the district court's decision to allow a third-party defendant to remove its complaint to federal court, on the basis of diversity, after the state trial court severed the third-party claim from the main demand. The court acknowledged the policy considerations articulated in Shamrock for the prohibition of third-party removal, but concluded that those concerns were not implicated in the facts before it. Specifically, the Court explained:
426 F.2d 935 (5th Cir. 1970).
Where removal would not have the effect of defeating plaintiffs choice of forum, the federal courts should recognize that a party in [the third-party defendant's] position is as much a defendant as if an original action had been brought against him. This is fully in accord with the policy behind the removal statute of providing a federal forum to an out-of-stater sued in state court.
Ironically . . . discrimination in another forum is the consequence of Shamrock. While that decision forbids removal by plaintiffs defending counterclaims, however they may be characterized, it allows removal by defendants in separate actions which would have been brought as counterclaims had the procedure of the forum state allowed it. Therefore, removability after Shamrock may turn on the forum state's choice of the most expeditious way to handle multiple claims. Our decision has the same consequences.
Id. at 938 (internal citations omitted). See also the court's rational in National Fishing Tools, Inc. v. Galaxy Wireline, Inc. 1989 WL 132802, at *2 (ED. La. 1989) (noting, in part, that "[a]lthough these cases involved a third-party defendant's right to remove under section 1441(c), it is hard to imagine that the prevailing jurisprudence in the Fifth Circuit would prohibit a third-party defendant from removing an action under 1441(a)").
Other courts, however, have adopted a "once a third-party defendant, always a third-party defendant" rationale and prohibited all attempts by third-party defendants to remove a matter to federal court. For example in Reiter Oldsmobile, Inc. v. General Motors Corp., the district court held a counterclaim defendant (original plaintiff) could not remove the third-party action to federal court even after the main demand had been resolved and the state court clerk had "restyled" the remainder of a case so that the original plaintiff appeared as the defendant to the remaining counterclaim. Because the court reasoned that "restyling" the parties did not make the original plaintiff a "defendant" for removal purposes, removal under § 1441 or § 1446 was impermissible.
477 F. Supp. 125 (D. Mass. 1979).
See also Johnston v. St. Paul Fire Marine Ins. Co., 134 F. Supp.2d 879 (ED. Mich. 2001) and BJB Co. v. Comp. Air Lerol, 148 F. Supp.2d 751, 753 (N.D. Tex. 2001) (explaining that third-party removal was not permissible because removal by a third-party defendant brings into federal court a suit between the original parties which has no independent basis for federal jurisdiction . . . Thus, permitting third party removal allows a party unconnected with the original action to force the plaintiff into the federal forum despite any possible efforts to plead out of federal court) (internal citations omitted).
The Court finds that the circumstances of this case are analogous to those presented to the Fifth Circuit in Reigel. In both cases, the main demand was resolved separate and apart from the third-party complaint. While the main demand in the instant case was not "severed" from the third-party complaint, it was dismissed with prejudice upon payment of the claim by the third-party. Further, allowing third-party removal after the severance or dismissal of the plaintiffs cause of action does not run afoul of the policy concern announced in Shamrock--that a third-party defendant should not be permitted to destroy an original plaintiffs choice of forum. Allowing Cambridge to remove the third-party cause of action between it and MWM does not threaten Johns, Pendleton's forum selection—as it no longer has any interest in the matter.
Finally, the Court notes that this decision is consistent with the Fifth Circuit's rationale in Reigel, that permitting third-party removal under § 1441(a) when the original plaintiffs choice of forum is not at issue, permits a third-party defendant to do what he could have, had the third-party complaint been filed as a separate lawsuit—remove the matter based on diversity.
According,
Defendant, MWM's, Motion to Remand is DENIED.