Bajaba, LLC v. General Steel Domestic Sales, LLC et al
ORDER granting in part and denying in part 10 Motion to Remand; granting 14 Motion to Adopt and Join Response to Plaintiff's Motion to Remand. Signed by Honorable Susan O. Hickey on October 21, 2014. (mll)
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
BAJABA, LLC d/b/a NEW HAVEN
CASE NO. 14-CV-4057
GENERAL STEEL DOMESTIC
SALES, LLC d/b/a GENERAL STEEL
CORP.; BUILDING SERVICES GROUP,
Before the Court is the Motion to Remand and for Costs filed by Bajaba, LLC d/b/a New Haven
Golf Club (“Bajaba”). (ECF No. 10). Defendant General Steel Domestic Sales, LLC (“General Steel”)
has responded and filed a supplement to its response. (ECF No. 13, 17). Bajaba filed a reply to
Defendant’s Response. (ECF No. 19). Additionally, Defendant Building Services Group, LLC
(“Building Services”) has moved to Adopt and Join the Response to Plaintiff’s Motion to Remand and
for Costs. (ECF No. 14). No party has objected to Building Services’ Motion.
For the reasons stated herein, Bajaba’s Motion to Remand and for Costs (ECF No. 10) is
GRANTED in part and DENIED in part. Building Services’ Motion to Adopt and Join the Response
of General Steel (ECF No. 14) is GRANTED.
Bajaba alleges that it bought a steel building from General Steel, using General Steel’s
authorized dealer and builder, Jared Branscum and Branscum Construction & Erecting, Inc.
(collectively, “Branscum Defendants”) to erect the building. Bajaba paid $385,000 prior to delivery
of the building. The Branscum Defendants abandoned the job before the building was erected and
Bajaba was forced to complete the project with other contractors. Bajaba sued General Steel, Building
Services Group, and the Branscum Defendants in Arkansas state court for breach of contract, violation
of the Arkansas Deceptive Trade Practices Act, fraud, and negligence. General Steel and Building
Services are both Colorado limited liability companies, Jared Branscum is an Arkansas resident, and
Branscum Construction and Erecting, Inc. is an Arkansas corporation.
Bajaba alleges that it attempted unsuccessfully to serve the Branscum Defendants. The lawsuit
proceeded in state court for two years until, during the final pretrial hearing Bajaba orally moved to
nonsuit its claims against the Branscum defendants for lack of service. Because the Branscum
Defendants were the only nondiverse defendants, General Steel and Building Services thereafter
removed the case to this court. (ECF No. 1).
Bajaba argues the case should be remanded because (1) it is procedurally defective, (2) the
joinder of the Branscum defendants was not done in bad faith, and (3) the Defendants have waived any
right to remove. Defendants respond that Plaintiff included the nondiverse Branscum Defendants in
bad faith, and such bad faith forum manipulation tolls the one year limitation in 28 U.S.C. 1446 (c)(1).
The burden of establishing that a case is within the federal court’s removal jurisdiction is on
the removing defendant. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108 (1941)). In light of
the congressional intent to restrict federal court jurisdiction, as well as the importance of preserving the
independence of state governments, federal courts construe the removal statute[s] narrowly, resolving
any doubts against removability. Id. at 108-09.
A. Procedural Defects
Bajaba first argues that the state court has not entered a written order on its oral motion for
nonsuit of its claims against the Branscum Defendants and therefore the Defendants’ notice of removal
is procedurally defective under 28 U.S.C. § 1446(b)(3).
The requirements of 28 U.S.C. § 1446(b)(3) allows a notice of removal to be filed “within 30
days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading,
motion, order or other paper from which it may first be ascertained that the case is one which is or has
become removable.” Bajaba argues that, because the motion to nonsuit was oral, there has been no
“order or other paper” from which the Defendants can ascertain the removability of the case.
However, many courts have permitted consideration of oral statements which allow certain
narrow exceptions to the general writing requirements. First Nat’l Bank in Little Rock v. Johnson &
Johnson, 455 F.Supp. 361, 362 & n. 1 (E.D.Ark. 1978); see also King v. Kayak Mfg. Corp., 688
F.Supp. 227, 230 (N.D. W.Va. 1988); Mike Silverman & Assocs. v. Drai, 659 F.Supp. 741, 745-47
(C.D. Cal. 1987); Heniford v. Am. Motors Sales Corp., 471 F.Supp. 328, 332-37 (D.S.C. 1979),
dismissed, 622 F.2d 584 (4th Cir. 1980) (unpublished table decision). Because the statement here was
made in open court, recorded, and transcribed, it is available for examination without necessitating any
complex and potentially troubling dispute over what was actually said. See 14C Fed. Prac. & Proc.
Juris. § 3731 (4th ed.). Thus, the Court finds that the action became removable by action of the
Plaintiff in open court even without the service of “order or other paper,” and the removal is not
improper on procedural grounds.
B. Joinder of Branscum Defendants
Bajaba next argues that the removal is not appropriate because the joinder of the Branscum
Defendants was in good faith. Under 28 U.S.C. § 1446(c), a case may not be removed on the basis of
diversity jurisdiction “more than 1 year after commencement of the action, unless the district court finds
that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action.”
Defendants respond that the standard is not bad faith in joining the defendant, instead the proper
standard is whether the plaintiff acted in bad faith to prevent a defendant from removing the action.
As an initial matter, the court emphasizes that it is far from clear that the “bad faith” and
“fraudulent joinder” standards are one and the same. The “bad faith” exception under § 1446 governs
the timing of removal. By contrast, “fraudulent joinder” is a court-created doctrine that pertains to a
federal court’s subject matter jurisdiction to hear a case in the first place. Although the purpose of both
doctrines is to thwart gamesmanship by plaintiffs in diversity cases, courts generally address these
grounds separately and independently of each other.
Under the bad faith standard as enumerated in 28 U.S.C. § 1446(c), the Court is not persuaded
that Bajaba joined the Branscum Defendants as a nondiverse defendants in “bad faith” in order to
prevent removal. First, the Branscum Defendants were the persons allegedly responsible for doing the
construction requested on the steel building at issue. They were not belatedly added in response to an
attempted removal; rather they were included in the initial Complaint from the beginning. Defendants
do not allege that the Complaint was in any way changed or amended over time in a way that suggests
gamesmanship by the Plaintiff. It appears that the Complaint stood unchanged for the entirety of the
one-year removal period, and in fact remained unchanged for nearly another year while the parties were
preparing for trial. Nor did Plaintiff dismiss the nondiverse Defendants as soon as the one-year
deadline had passed. On the contrary, Plaintiff attempted to find and serve the Branscum Defendants,
and the other Defendants even filed a third-party complaint against them. Plaintiff does not appear to
have taken any actions specifically to defeat removal except for nonsuiting their claims against the
Defendants that they could not locate. Moreover, there is evidence that Bajaba intends to continue to
prosecute the Branscum Defendants after a remand to state court, since the Defendants have been
located subsequent to the removal of this action. While the court notes that this fact has little effect on
the basis of diversity jurisdiction, it does weigh in Bajaba’s favor with respect to the bad faith
allegations against it. Absent a showing of such bad faith, the one-year limit on removal of diversity
cases requires remand.
To ensure that federal courts do not overstep constitutional bounds, courts are admonished to
construe federal removal statutes strictly. Sheets, 313 U.S. 100, 108-09 (1941). Nonetheless, even
considering that removal statutes must be interpreted strictly, the court agrees with those courts that
have held that Congress did not intend to permit a Plaintiff to fraudulently manipulate federal
jurisdiction when it enacted § 1446(b). The Court finds that the Defendants have not met their burden
in this case to show that the Plaintiff’s actions were taken in bad faith to defeat federal jurisdiction.
C. Waiver of Right to Remove
Finally, Bajaba argues that Defendants have waived their right to removed because they have
proceeded to defend the suit in state court. However, a defendant cannot waive his/her right to remove
by defending the action in state court before the right of removal existed. Therefore, the Defendants
did not waive their right to remove by proceeding to defend the suit in state court before the nonsuit
of the nondiverse Defendants.
In light of the one-year limit on removal of actions premised on diversity jurisdiction and the
lack of evidence of bad faith or fraudulent joinder, this case must be remanded pursuant to 28 U.S.C.
§ 1446(c)(1). Accordingly, Plaintiff’s Motion to Remand is GRANTED; this action is hereby
remanded to the state Circuit Court of Miller County, Arkansas for proper adjudication of the issues
in this case. Plaintiffs’ request for costs and expenses should be and hereby is DENIED.
IT IS SO ORDERED, this 21st day of October, 2014.
/s/ Susan O. Hickey
Susan O. Hickey
United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?