Opinion
CIV 04-648 KBM/LAM.
August 20, 2004
ORDER OF REMAND
This matter is before the Court on Defendants' Notice of Removal and Motion To Dismiss, and Plaintiff's Motion To Remand See Docs. 1, 2, 10. Pursuant to 28 U.S.C. § 636(c) and FED. R. CIV. P. 73(b), the parties have consented to have me serve as the presiding judge and enter final judgment. See Docs. 6, 7, 11. Because this Court lacks subject matter jurisdiction over the removed complaint, I remand this matter pursuant to 28 U.S.C. § 1447(c).
The matter before me is related to another suit pending in this district — Chatters v. Keegan, CIV 04-346 BB/LFG. While Mr. Keegan and Ms. Chatters were living together in New Mexico, Keegan purchased land in Lincoln County, intending to develop it commercially. He maintains he did so alone. Chatters maintains that they did so as partners. When their personal relationship ended, Chatters moved out of state and Keegan remained in New Mexico.
On Friday, March 26, 2004, Chatters, through her attorney Robert Beauvais, filed a notice of lis pendens against the property, reciting that Chatter was suing Keegan in federal court for damages for breach of joint venture agreement and dissolution of partnership. Doc. 1, Exh. B. On Monday, March 29, 2004, Chatter's Complaint was filed with this Court. See id., Exh. A.
On May 14, 2004, Keegan filed suit against Chatters and Beauvais in state court, seeking to have the lis pendens canceled so that he could sell the property. Keegan further asserted that the filing of the lis pendens entitles Keegan to damages for abuse of process, interference and prima facie tort. The parties are not diverse, since Keegan and Beauvais are both citizens of New Mexico. Keegan's claims are based solely on state law. See id. (attached state complaint).
On June 4, 2004, Chatters and Beauvais filed a Notice of Removal. In that Notice, they asserted as the basis for removal that: (1) the state suit "is properly a counterclaim" to the other federal action, and (2) Keegan "wrongfully sued" Beauvais "to create a sham issue to destroy diversity." Id. at 1-2.
As an initial matter here, Chatters and Beauvais want the Court to summarily deny the motion to remand for Keegan's failure to comply with the requirement of our local rule to ascertain whether a motion is opposed. See e.g., Doc. 18. I decline to do so for two reasons. First, this Court is obligated to satisfy itself that subject matter jurisdiction exists, even in the absence of the motion or agreement of the parties that jurisdiction exists. Second, the absence of the consultation works in Chatters' and Beauvais' favor, because that is the deciding factor in my decision not to award Keegan fees and costs of pursuing the remand
"In deciding whether to award costs under § 1447(c), the key factor is the propriety of defendant's removal. . . . The district court does not have to find that the state court action has been removed in bad faith as a prerequisite to awarding attorney fees and costs under § 1447(c)." Excell, Inc. v. Sterling Boiler Mechanical, Inc., 106 F.3d 318, 322 (10th Cir. 1997) (citing Daleske v. Fairfield Communities, 17 F.3d 321, 324 (10th Cir.), cert. denied, 511 U.S. 1082 (1994)). Even though I do not find a legitimate basis for believing this Court would have jurisdiction over the state complaint, I decline to award Keegan any costs or fees incurred as a result of the removal. See 28 U.S.C. § 1447(c); compare Daleske, 17 F.3d at 325 ("Fairfield had a legitimate basis for believing the case fell within the district court's bankruptcy jurisdiction. Thus, the district court did not abuse its discretion in declining to award fees and costs under either 28 U.S.C. § 1447(c) or Bankr.R. 9011."), with Excell, 106 F.3d at 322 (affirming award of costs and fees where law regarding basis for removal well-settled and "Excell's counsel asked Sterling to voluntarily remand the case, but that Sterling refused to do so even though it acknowledged the case would likely be remanded by the district court").
Chatters and Beauvais next assert that Keegan's motion to remand is untimely because it was not filed within thirty days of their Notice of Removal. See Doc. 14 at 1. However, the thirty-day deadline under 28 U.S.C. § 1447(c) only applies to motions to remand based on "any defect other than lack of subject matter jurisdiction." Id. (emphasis added). On the other hand, as Chatters and Beauvais acknowledge, see id. at 2, "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded," 28 U.S.C. § 1447(c) (emphasis added); see also International Primate Protection League v. Administrators of Tulane Educ. Fund, 500 U.S. 72, 87 (1991) ("Since the district court had no original jurisdiction over this case . . . a finding that removal was improper deprives that court of subject matter jurisdiction and obliges a remand under the terms of § 1447(c)").
A defendant may remove to federal court any civil action brought in a State court of which the district courts of the United States have original jurisdiction. 28 U.S.C. § 1441(a). Clearly the face of the state complaint provides no basis for removal on the basis of diversity jurisdiction, and there is no assertion that Plaintiff Keegan and Defendant Beauvais are both New Mexico citizens. Thus,
original jurisdiction is present in this case only if the suit is an action arising under the Constitution, laws, or treaties of the United States. 28 U.S.C. § 1331. Under the well-pleaded complaint rule, an action arises under federal law only when a federal question is presented on the face of the plaintiff's properly pleaded complaint. Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987) (citing Gully v. First Nat'l Bank, 299 U.S. 109, 112-13 (1936)). Thus, as master of the claim, a plaintiff may prevent removal by choosing not to plead a federal claim even if one is available. Schmeling v. NORDAM, 97 F.3d 1336, 1339 (10th Cir. 1996) (quoting Caterpillar, 482 U.S. at 392).Cisneros v. ABC Rail Corp., 217 F.3d 1299, 1302 (10th Cir. 2000) (internal quotations omitted).
As earlier noted, Keegan's complaint raises only state law claims and no federal question seems to be presented. Defendants maintain that any claims arising out of the lis pendens incident should be the subject of a counterclaim in the other federal suit and thereby provide a basis for removal. To the best of my knowledge, the ability to assert a "counterclaim" is not one of the statutory grounds for removal, even assuming that a third-party complaint which destroys diversity could have been pursued by Keegan in the other federal action. See FED. R. CIV. P. 13(a)-(b), 14(a), 19(a). No authorities to the contrary have been cited by Defendants.
Therefore, I must address the assertion that Beauvais was fraudulently joined as a defendant in the state proceeding to defeat federal diversity jurisdiction. Defendants' argument that Beauvais was "wrongfully sued" has been raised in the context of the response to the motion to remand (as fraudulent joinder) and likewise in Defendants' motion to dismiss (as failure to state a claim).
As District Judge Bruce Black observed:
It has long been held that the right of removal cannot be defeated by "a fraudulent joinder of a resident defendant having no real connection with the controversy." Wilson v. Republic Iron Steel Co., 257 U.S. 92, 97 (1921). A non-diverse defendant is fraudulently joined when no cause of action is pleaded against him or her, when the cause of action pleaded is defective as a matter of law, or when the pleaded cause of action does not exist in fact. Roe v. Gen. Am. Life Ins. Co., 712 F.2d 450, 452 (10th Cir. 1983).Wise v. Allstate, CIV 03-1419 BB/ACT ( Doc. 32 filed 4/30/04). To successfully remove a case on the basis of fraudulent joinder, however, Defendants bear a heavy burden. They must prove that there is " no possibility " that Keegan would be able to establish a cause of action against Beauvais in state court. See Cooper v. Zimmer Holdings, Inc., 320 F. Supp. 2d 1154, 1157 (D. Kan. 2004) (quoting Montano v. Allstate Indem., 2000 WL 525592 at *1-2 (10th Cir. 2000)). Thus, if any claim against Beauvais is "potentially viable," I must remand the matter to the state court. Montano, supra, at *2.
Defendants assert that as an attorney for Chatters in the dispute between Chatters and Keegan, there is no privity between Beauvais and Keegan and Beauvais owes no duty to Keegan. Therefore, they argue, any claim against Beauvais associated with the filing of the lis pendens would be dismissed under New Mexico law. In support of this proposition, their motion to dismiss cites Garcia v. Rodey, Dickason, Sloan, Akin Robb, P.A., 106 N.M. 757, 750 P.2d 118 (1988) and Leyba v. Whitley, 118 N.M. 435, 882 P.2d 26 (N.M.App. 1995).
As Defendants correctly note, the New Mexico Court of Appeals in the Leyba case declined to impose a "duty" on an attorney under the circumstances of that case, holding that a "lawyer for a trustee is [not] liable to the beneficiary of the trust solely on the ground that the lawyer did not protect the beneficiary against misconduct by the trustee." Leyba, 118 N.M. at 441, 882 P.2d at 32. However, that holding was reversed by the New Mexico Supreme Court, a fact that Defendants neglect to mention in their brief. See Doc. 16 at 1 (erroneously indicating that certiorari was granted and then denied). "Even if an intended third-party beneficiary is not strictly in privity, we join those jurisdictions that have rejected any stringent privity test as the touchstone of an attorney's duty to a nonclient." Leyba v. Whitley, 120 N.M. 768, 774, 907 P.2d 172, 178 (N.M. 1995).
It is also true that in the Garcia case, the New Mexico Supreme Court refused to impose on counsel a duty to the opposing party. It did where defense counsel's seemingly confusing conduct during trial over whether sovereign immunity was being invoked ultimately rendered the plaintiff unable to collect on an award by the jury. The court reasoned:
An attorney has no duty however to protect the interests of a non-client adverse party for the obvious reasons that the adverse party is not the intended beneficiary of the attorney's services and that the attorney's undivided loyalty belongs to the client. Negligence is not a standard on which to base liability of an attorney to an adverse party. An adverse party cannot justifiably rely on the opposing lawyer to protect him from harm; negligence contemplates a legal duty owing from one party to another and the violation of that duty by the person owing it. In the present context, this duty is owed by the lawyer to his client and to the legal system. Negligence does not form a basis for suit by an opposing party. . . . As a matter of public policy in order to maintain and enforce the fidelity and duty of the attorney toward the client, we cannot jeopardize the integrity of the adversarial system by imposing a professional duty on an attorney toward an adverse party.106 N.M. at 761, 750 P.2d at 122 (emphasis added, internal quotations and citations omitted).
However, Garcia did not hold that attorneys never have a duty to a third-party under any circumstance. To the contrary, as the Garcia and later decisions explain, there are exceptions, albeit limited exceptions, to the general rule that professionals such as doctors and attorneys owe duties only to their clients.
Garcia and this case are a recognition of the realities of practice in these two fields and the long-standing proposition that these professionals owe a duty to their clients and that only under particularly limited circumstances are exceptions created for expanding the duty beyond those clients. Leyba and Wilschinsky are exceptions to the general rule articulated in Garcia and the present case. In Garcia, we stated:
A majority of jurisdictions do not hold attorneys liable for professional negligence to third party non-clients. . . . A duty of care toward non-clients has been found to exist only in those situations where the non-client was an intended beneficiary of the attorney's services, or where it was reasonably foreseeable that negligent service or advice to or on behalf of the client could cause harm to others.Lester ex rel. Mavrogenis v. Hall, 126 N.M. 404, 409, 970 P.2d 590, 595 (1998).
The determination of whether an attorney owes a duty to a nonclient "is a question of law and is based upon [New Mexico public] policy considerations." Id. at 407, 970 P.2d at 593. The ultimate decision involves balancing a number of factors including "reference to existing statutes, rules of court, judicial precedent, and other principles comprising the law." Id.
Here, Keegan contends that "there is no basis in law or in fact" for the filing of the lis pendens, and that Beauvais' refusal to "cancel it" was a "wrongful abuse of process" for the purpose of "extort[ing] concessions" from Keegan "for the partial releases of the notice." See Doc. 9. Defendants point to no decisions, binding or otherwise, that address whether an exception to the general rule of attorney duty lies under such circumstances.
Moreover, it is beyond the purview of this Court to engage in the intensive balancing necessary to resolve the issue at this juncture. "A claim which can be dismissed only after an intricate analysis of state law is not so wholly insubstantial and frivolous that it may be disregarded for purposes of diversity jurisdiction." Montano, supra, at *1 (quoting Batoff v. State Farm Ins., Co., 977 F.3d 848 (3rd Cir. 1992)). On the record before me, these "ambiguities in the controlling law" must be resolved in favor of Keegan, and the remand granted. Id.
Indeed, such policy questions should be left to the state courts in the first instance. In Lester, for example, District Judge James Parker certified the question of whether a doctor owed a duty to a thirdparty under the circumstances of that case.
Having no subject matter jurisdiction over the removed complaint, this Court consequently has no jurisdiction to entertain Chatters' and Beauvais' motion to dismiss the state claims against Beauvais. Any such decision would be void. E.g., Mitchell v. Maurer, 293 U.S. 237 (1934) (where diversity did not exist, order of District Court void); United States v. 51 Pieces of Real Property, 17 F.3d 1306, 1309 (10th Cir. 1994) ("a judgment is void if the court that enters it lacks jurisdiction over either the subject matter of the action or the parties to the action").
Wherefore,
IT IS HEREBY ORDERED that Keegan's motion to remand (Doc. 10) is GRANTED. This matter is remanded to the Twelfth Judicial District Court, County of Lincoln, State of New Mexico. Pursuant to 28 U.S.C. § 1447(c), the Clerk shall certify a copy of this order of remand and mail it to the clerk of the state court, whereupon the state court may proceed with the case.