Enserco Energy, LLC et al v. Baugues et al
ORDER granting 14 Motion to Remand. The plaintiffs shall be awarded their just costs and actual expenses, including attorneys' fees, pursuant to 28 U.S.C. § 1447(c). by Judge R. Brooke Jackson on 7/31/14.(jdyne, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge R. Brooke Jackson
Civil Action No 14-cv-01548-RBJ
ENSERCO ENERGY, LLC, a Delaware limited liability company, and
ENSERCO MIDSTREAM, LLC, a South Dakota limited liability company,
JOHN P. BAUGUES, JR., an individual,
DORCHESTER COAL COMPANY, LP, a Delaware limited partnership,
DORCHESTER LAND COMPANY, LLC, a Delaware limited partnership,
DORCHESTER MINING COMPANY, LLC, a Delaware limited partnership,
DORCHESTER COAL PROCESSING, LLC, a Delaware limited partnership,
CARBONADO COAL COMPANY, LP, a Delaware limited partnership,
COAL MOUNTAIN MINING, LP, a Delaware limited partnership, and
MARTIN COUNTY LAND COMPANY, LLC, a Delaware limited partnership,
This matter is before the Court on Plaintiffs’ Motion to Remand [ECF No. 14]. The
motion was filed on July 2, 2014 and is ripe for review as the defendants failed to file a response.
The Court finds that the defendants failed to meet their burden to remove the case, and that the
case, as pled, was not properly removable. The Court therefore remands this case to state court.
The plaintiffs filed their original Complaint in the District Court of Denver on March 10,
2014. [ECF No. 5]. The Complaint included eight causes of action, all of which arise solely
under state law. Each of the entity defendants was served with process on or about April 18,
2014. The sole individual defendant, Mr. Baugues, was served with process on May 3, 2014.
The case was removed on June 2, 2014, within thirty (30) days of Mr. Baugues’ having been
served. 1 According to the removal notice, the case was removed pursuant to diversity
jurisdiction under 28 U.S.C. § 1332(a).
The right to remove is contingent upon the existence of original jurisdiction in federal
court. See 28 U.S.C. § 1441(a). “Federal courts are courts of limited jurisdiction and, as such,
must have a statutory basis to exercise jurisdiction.” Montoya v. Chao, 296 F.3d 952, 955 (10th
Cir. 2002). The party asserting jurisdiction has the burden of establishing its existence. Id.
(citing Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)). As the defendants
are invoking the Court’s jurisdiction in this case, they “bear the burden of establishing that the
requirements for the exercise of diversity jurisdiction are present.” Martin v. Franklin Capital
Corp., 251 F.3d 1284, 1290 (10th Cir. 2001). Further, “[d]efendant’s right to remove and
plaintiff’s right to choose his forum are not on equal footing; for example, unlike the rules
applied when a plaintiff has filed suit in federal court with a claim that, on its face, satisfies the
jurisdictional amount, removal statutes are construed narrowly; where plaintiff and defendant
clash about jurisdiction, uncertainties are resolved in favor of remand.” Id. at 1289–90 (quoting
Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir. 1994)).
Diversity jurisdiction exists where there is complete diversity between the parties and the
amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a). None of the parties dispute that
Mr. Baugues serves as President of all of the entity defendants. He is also the sole member of the
limited liability companies that serve as the sole general partners of the four limited liability partnerships.
Affidavit of John P. Baugues, Jr. [ECF No. 1-11] at ¶¶ 8, 10–11, 15–16, 19–20, 23–24. According to the
plaintiffs, these facts inevitably lead to the conclusion that Mr. Baugues was aware of the pending action
and had received “constructive receipt” of it through service on the entity defendants. Plaintiffs’ Motion
to Remand [ECF No. 14] at 13. The plaintiffs argue that this constructive receipt renders removal
untimely. Because the Court decides this motion on other grounds, it does not reach the merits of this
the amount in controversy far exceeds $75,000 in this case. The question is whether the
defendants have carried their burden of proof that there is complete diversity between the parties.
I find that they have not.
The notice of removal begins by asserting that there is complete diversity of citizenship.
Notice of Removal [ECF No. 1] at Part II. In particular, Mr. Baugues states that all of the
defendants are citizens of Tennessee, and that “[u]pon information and belief, the Plaintiffs are
most likely citizens of the State of Colorado.” Id. at ¶¶ 13, 15 (emphasis added). Mr. Baugues
bases this hypothesis on the fact that Enserco Energy, LLC and Enserco Midstream, LLC have
offices located in Denver, Colorado. However, “a limited liability company is a citizen of the
states of which its members are citizens . . . .” Hale v. MasterSoft Int’l Pty. Ltd., 93 F. Supp. 2d
1108, 1112 (D. Colo. 2000) (collecting cases). Only a corporation is deemed a citizen of the
State in which it has its principal place of business. See 28 U.S.C. § 1332(c). Mr. Baugues also
acknowledges that “it is possible that either (or both) of the Plaintiffs is a citizen of the State of
Texas.” Notice of Removal [ECF No. 1] at ¶ 14. Mr. Baugues once again incorrectly bases his
theory of the plaintiffs’ citizenship on the location of a limited liability company’s principal
place of business. In particular, Mr. Baugues notes that that Enserco Energy is a subsidiary of
Twin Eagle Resource Management, LLC, which has its principal office in Houston, Texas. Id.
Notably, Mr. Baugues fails to discuss the citizenship of the members of the plaintiff limited
liability companies at any point in the notice of removal. The Court therefore has no information
whatsoever with which to determine the citizenship of the plaintiffs.
Moving along, Mr. Baugues states that in the case of the four limited partnership
defendants, “several of the limited partners are believed to be citizens of Texas.” Id. at ¶ 16
(emphasis added). 2 Mr. Baugues postulates the citizenship of the limited partners based on tax
returns and other records. Affidavit of John P. Baugues, Jr. [ECF No. 1-11] ¶¶ 12, 17, 21, 25.
However, there are a number of problems with this method for determining citizenship. First, it
is unclear whether these addresses indicate individual residences or business addresses. Second,
even if the addresses were residential, residence and citizenship are not coterminous. See Sun
Printing & Publ’g Ass’n v. Edwards, 194 U.S. 377, 382 (1904). Simply being a resident of a
State does not render an individual a citizen of it. Instead, to become a citizen of a State an
individual must both set up a domicile in that State and intend to stay there. Id. at 383. “Either
without the other is insufficient.” Id. In this case, no information has been provided, nor a
declaration made, that these limited partners not only reside in Texas, but also intend to remain
in Texas. Furthermore, there has been no discussion of the citizenship of the other limited
partners, though addresses for them have also been provided in Exhibit A to Mr. Baugues’
affidavit [ECF No. 1-11 ay 6–7]. As such, the Court has no information whatsoever with which
to determine the citizenship of the limited partners of the limited partnership defendants.
Each of the four limited partnership defendants also has one general partner, a limited
liability company of which Mr. Baugues is the sole member. Affidavit of John P. Baugues, Jr.
[ECF No. 1-11] at ¶¶ 10–11, 15–16, 19–20, 23–24. Though Mr. Baugues has not asserted that he
is a citizen of any state, he has declared that he resides primarily within Tennessee and that he
resides part-time in Montana. See id. at ¶¶ 6–7. Because residence and citizenship are not
coterminous, the Court can only assume, without deciding, that Mr. Baugues is likely a citizen of
Tennessee or Montana. However, without more information the Court cannot determine Mr.
Baugues’ State of citizenship.
For purposes of diversity citizenship, the Court must look to the citizenship of all of a limited
partnership’s members, including both the limited and general partners. See Carden v. Arkoma
Associates, 494 U.S. 185, 195 (1990).
Finally, the three limited liability company defendants—Dorchester Land Company,
LLC; Dorchester Mining Company, LLC; and Dorchester Coal Processing, LLC—are all wholly
owned subsidiaries of Dorchester Coal Company, LP. 3 Affidavit of John P. Baugues, Jr. [ECF
No. 1-11] at ¶ 13. At no point does Mr. Baugues discuss the members of these limited liability
companies or their citizenship. Instead, he only notes that for each of them their principal office
is located in Knoxville, Tennessee. As discussed earlier, this information is irrelevant to the
Court’s citizenship analysis. Once again, the Court has no information whatsoever with which to
determine the citizenship of the members of the limited liability company defendants.
It is troubling, to say the least, that Mr. Baugues did not fully investigate the citizenship
of the partners of the limited partnership defendants and also completely failed to investigate the
citizenship of the members of the limited liability company parties before filing this notice of
removal. Even more confusing is his failure to declare his own citizenship. The Court cannot
assert diversity jurisdiction over an action based on mere presumptions of citizenship. Further,
the Complaint itself is of no assistance. It does not list the citizenship of the members and
partners of any of the entity parties or of Mr. Baugues. See Complaint [ECF No. 5] at ¶¶ 2–12.
Of course, the pleading is perfectly sufficient without this information, as the plaintiffs did not
file this lawsuit in federal court and, as such, did not assert diversity jurisdiction over the action.
Suffice to say, the defendants have far from carried their burden in filing this notice of
removal. From what has been filed, including the Complaint, the Court has absolutely no
“[W]hen an entity consists of multiple tiers of ownership and control, the entire structure must be
considered for diversity purposes. In other words, when an entity is composed of multiple layers of
constituent entities, the citizenship determination requires an exploration of the citizenship of the
constituent entities as far down as necessary to unravel fully the citizenship of the entity before the court.”
Burge v. Sunrise Med. (US) LLC, No. 13-CV-02215-PAB-MEH, 2013 WL 6467994, at *2 (D. Colo. Dec.
information with which to determine the citizenship of any of the parties to this action and
therefore must remand the case for lack of subject matter jurisdiction.
The plaintiffs ask this Court to award them their costs and expenses, including attorneys’
fees, incurred in responding to the defendants’ notice of removal. Under 28 U.S.C. § 1447(c),
“[a]n order remanding the case may require payment of just costs and any actual expenses,
including attorney fees, incurred as a result of the removal.” In deciding whether to award costs,
the Court must ask whether there was an “objectively reasonable basis” for removal. See Martin
v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). The Court finds that there was no
objectively reasonable basis for removal on the face of the notice. The defendants appear to
have been quite aware that there might not be diversity at the time of removal, even going so far
as to ask the Court to dismiss four of the “non-essential” defendants in order to manufacture
diversity. See Notice of Removal [ECF No. 1] at ¶¶ 18–20. More importantly, the defendants
conducted no investigation into the citizenship of any of the parties to the action before filing
their notice of removal. As such, the plaintiffs’ request for costs and expenses, including
attorney’s fees, is granted.
The parties are to confer in good faith as to the reasonable costs and expenses. Should
the parties be unable to come to an agreement as to the amount owed, the determination of the
reasonableness of the costs and fees will be reserved to the state court. See Hodach v. Caremark
RX, Inc., 374 F. Supp. 2d 1222, 1226 (N.D. Ga. 2005) (exercising its discretion in holding that
the determination as to reasonableness of cost and fees would be reserved to the state court
because “litigating this case on dual tracks—the substantive issues in the Superior Court, and the
ancillary costs and expenses issue in this Court—would be inefficient and would further delay
the processing of the case”).
For the foregoing reasons, Plaintiffs’ Motion to Remand [ECF No. 14] is GRANTED.
This case is hereby REMANDED to the state court. The plaintiffs shall be awarded their just
costs and actual expenses, including attorneys’ fees, pursuant to 28 U.S.C. § 1447(c).
DATED this 31st day of July, 2014.
BY THE COURT:
R. Brooke Jackson
United States District Judge
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