Office Building, LLC v. Lydia Security Monitoring, Inc. et al
Filing
38
ORDER Granting 10 Plaintiff's Motion to Remand And Closing Case. Signed by Judge Joan A. Lenard on 5/3/2011. (dpv)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 10-61582-CIV-LENARD
OFFICE BUILDING, LLC,
Plaintiff,
v.
CASTLEROCK SECURITY, INC.,
LYDIA SECURITY MONITORING,
INC. d/b/a C.O.P.S. MONITORING,
and BRIAN JOHNSON,
Defendants.
________________________________/
ORDER GRANTING PLAINTIFF’S MOTION FOR REMAND (D.E. 10)
THIS CAUSE is before the Court on Plaintiff Office Building, LLC’s (“Plaintiff”)
Motion for Remand to State Court (“Motion,” D.E. 10), filed on September 27, 2010.
Defendants CastleRock Security, Inc. (“CastleRock”), Lydia Security Monitoring, Inc., d/b/a/
C.O.P.S. Monitoring (“C.O.P.S.”) and Brian Johnson (collectively “Defendants”) filed their
Opposition to the Motion (“Opposition,” D.E. 18) on October 13, 2010 to which Plaintiff
Replied (“Reply,” D.E. 20) on October 22, 2010. Having reviewed the Motion, Opposition,
Reply and the record, the Court finds as follows.
I.
Factual and Procedural Background
This case involves Plaintiff’s attempt to collect monies due under the terms of a lease
agreement between it and Defendant Security Associates International, Inc. (“SAI”). On
May 4, 2009, after SAI allegedly ceased to pay Plaintiff under the terms of the lease
agreement, Plaintiff filed suit against it in the Seventeenth Judicial District in and for
Broward County, Florida.1 SAI failed to appear and on July 6, 2009, the circuit court entered
a Default Final Judgment against it in favor of Plaintiff for the amount of $272,681.28.
On May 11, 2010, Plaintiff filed a Motion for Proceedings Supplementary and to
Implead Third Parties in circuit court. The motion, filed pursuant to Florida Statutes §§
56.29 and 726.108, indicated that Plaintiff had unsuccessfully attempted to execute against
SAI on the Default Final Judgment and alleged that a fraudulent conveyance had been made
between SAI and C.O.P.S. and/or CastleRock for the purpose of avoiding SAI’s liabilities
to Plaintiff. (See Ex. A. to Pl.’s Mot. For Remand, D.E. 10-1.) The circuit court granted
Plaintiff’s motion for impleader on July 19, 2010, deeming the Impleader Complaint filed
as of that date.
The Impleader Complaint retains SAI as a defendant, adding Impleader Defendants
CastleRock Security Inc., Lydia Security Monitoring, Inc., d/b/a C.O.P.S. Monitoring and
Brian Johnson. (See Ex. to Notice of Removal, D.E. 1-2.) Plaintiff alleges fraudulent
conveyance against Defendants (Count I) and seeks execution on and an order of attachment
against funds transferred by SAI to C.O.P.S. Monitoring and/or CastleRock. (Id.)
Defendants removed the action on August 27, 2010, alleging that this Court has
original jurisdiction pursuant to 28 U.S.C. § 1332, diversity jurisdiction, and therefore
1
Plaintiff alleges that the action commenced on April 30, 2009, however the
Default Final Judgment (D.E. 1-2) indicates that the complaint was filed on May 4 and SAI was
served on May 5.
2
removal is proper under 28 U.S.C. § 1441.
(Notice of Removal at ¶¶ 1-3, D.E. 1.)
Defendants claim that complete diversity exists between the parties and the amount in
controversy exceeds the jurisdictional threshold, $75,000.00. (Id. ¶ 3.)
Plaintiff now moves for remand to state court and for attorney’s fees and costs. (Mot.
at 1.) Plaintiff’s Motion makes four arguments in support of remand: (1) Defendant C.O.P.S.
is a Florida corporation and therefore complete diversity does not exist; (2) this action is a
continuation of the state court suit against SAI and not an independent cause of action; (3)
the Notice of Removal is procedurally defective; and (4) the Notice of Removal is further
defective because the Defendants failed to obtain consent of Defendant SAI to the removal
of this action.
Defendants oppose Plaintiff’s Motion and dispute each of Plaintiff’s four
arguments for remand. They argue that complete diversity exists, stressing that
CastleRock is a citizen of Delaware and Illinois, C.O.P.S. is a fictitious corporation and
its alias, Lydia Security is a citizen of New York and New Jersey. Defendants also
contend that this action is independent of Plaintiff’s suit against SAI and therefore
appropriate for removal to federal court. Pursuant to Defendants’ interpretation of the
state court suit, the pleadings and orders pertaining to SAI do not apply to them, nor is
SAI a defendant in the instant action for fraudulent conveyance. Accordingly,
Defendants maintain that all requirements of removal – consent of all defendants, filing
notice in removal in district court and filing of all required papers in the state court action
– are met in this case and therefore removal is proper.
3
II.
Discussion
The Court finds it necessary to first address the question of whether this case is an
independent action or supplemental proceeding to the suit against SAI. Concluding this
case to be in the latter category, essentially a continuation of the Plaintiff’s suit against
SAI, the Court finds it improperly removed. Remand is proper on this ground alone.
Therefore, the Court need not reach the disputed citizenship of the Defendants or the
alleged deficiencies in the removal process.
A.
Plaintiff’s Supplemental Proceedings Under Florida Statute §56.29 Were
Improperly Removed
Florida Statute section 56.29 provides a procedural mechanism through which a
judgment creditor may implead third parties in order to expeditiously discover assets
which may be part of the judgment and subject these assets to “a speedy and direct
proceeding in the same court in which the judgment was recovered.” ABM Fin. Servs.,
Inc. v. Express Consolidation, Inc., 2011 U.S. Dist. LEXIS 32023, *2 (S.D. Fla. Mar. 16,
2011) (citation omitted); see Allied Indus. Int’l, Inc. v. AGFA-GEVAERT, Inc., 688 F.3d
1516, 1517 (S.D. Fla. 1988). The intent of the Florida legislature in enacting § 56.29 was
to give creditors “a swift summary disposition of issues,” while “preserving the equitable
character of both proceedings and the remedies available.” Allied Indus., 688 F.3d at
1517 (citations omitted). “Proceedings supplementary are not independant causes of
action but are post-judgment proceedings that permit a judgment creditor to effectuate a
judgment lien that already exists.” ABM Fin. Servs., 2011 U.S. Dist LEXIS at *4; see
4
Zureikat v. Shaibani, 944 So. 2d 1019, 1022 (Fla. 4th DCA 2006).
Florida courts have developed two jurisdictional prerequisites for supplementary
proceedings under § 56.29: (1) an unsatisfied writ of execution and (2) an affidavit
averring that the writ is valid and unsatisfied along with a list of entities to be impleaded.
Bleidt v. Lobato, 664 So. 2d 1074, 1075 (Fla. 5th DCA 1995); Wieczoreck v. H&H
Builders, Inc., 450 So. 2d 867, 871 (Fla. 5th DCA 1984); see Fla. Stat. Ann. § 56.29(1).
The statute is then given a “liberal construction in order to afford a judgment creditor the
most complete relief possible” without having to initiate a separate action. Pollizzi v.
Paulshock, 52 So. 3d 786, 789 (Fla. 5th DCA 2010). Indeed, there is no requirement that
a judgment creditor must make a prima facie showing that a putative third-party
defendant holds the assets subject to judgment prior to impleading that defendant. See
Exceletech, Inc., v. Williams, 597 So. 2d 275 (Fla. 1992); Khobarid Holding, S.A. v.
Reizen, 2007 U.S. Dist. LEXIS 3, **8-9 (S.D. Fla. Jan. 2, 2007) (Torres, Mag.) (granting
plaintiff’s motion to commence supplementary proceedings and implead third parties
alleged to have taken part in fraudulent transfer of assets).
Impleader under § 56.29 does not establish the third party’s liability. Allied Indus.,
688 F.3d at 1518; Wieczoreck, 450 So. 2d at 871. Instead, third party defendants are
given the opportunity to protect their interests and raise any defenses, consistent with the
requirements of due process. Allied Indus., 688 F. Supp. at 1518. Once impleaded under
§ 56.29, the third party defendant must appear before the court and show cause why the
contested property should not be applied toward satisfaction of the judgment creditor’s
5
judgment. ABM Fin. Servs., 2011 U.S. Dist. LEXIS at *5.
The process just described is precisely what occurred in this action. Plaintiff
obtained a final judgement against SAI in circuit court on July 6, 2009. Unable to receive
satisfaction of the final judgment, Plaintiff moved that court for supplementary
proceedings and impleader against Defendants pursuant to § 56.29. The motion alleges
that (1) prior to Plaintiff’s suit against SAI, SAI sold its assets to C.O.P.S. and/or
CastleRock; (2) SAI changed its name to CastleRock and continued to conduct the same
business; (3) SAI and CastleRock share the same office, employees, officers, directors
and president, Brian Johnson, who was the “catalyst” behind SAI’s asset transfer. The
motion attached an affidavit by Plaintiff’s attorney, which stated that Plaintiff’s efforts to
execute on the judgment against SAI failed, and the proposed Impleader Complaint. On
July 19, 2010, the circuit court, apparently finding that all necessary jurisdictional
requirements and averments were met, granted Plaintiff’s motion and deemed the
Impleader Complaint, naming SAI, CastleRock, C.O.P.S. and Johnson as Defendants,
filed as of that date.
Defendants, however, treat the Impleader Complaint as a separate action and
ignore the previous suit against SAI. Their Notice of Removal does not mention the suit
against SAI, nor does it attach, as part of the state court record, any papers filed in the suit
prior to the Impleader Complaint on July 19, 2010. In Opposition to the Motion for
Remand, Defendants downplay SAI’s presence in the suit (“SAI is not named as a
defendant in this action”) and dispute that this is a supplemental proceeding that may not
6
be removed.
Beginning with the Supreme Court’s decisions in Bank v. Turnbull, 83 U.S. 190
(1872), and Barrow v. Hunton, 99 U.S. 80 (1878), a line of cases have held that a federal
court may not exercise jurisdiction over ancillary proceedings, or a case that is “a
supplementary proceeding so connected with the original suit as to form an incident to it,
and substantially a continuation of it.” Barrow, 99 U.S. at 82. Removal of such cases is
not proper.
Barrow involved an action to nullify a judgment of a prior action, brought by the
judgment debtor in Louisiana state court. Id. The judgment creditor, one of the
defendants in the action of nullity, removed the suit. Id. Examining the Louisiana Code
of Practice, the Supreme Court found that “the action of nullity must be brought in the
same court which rendered the judgment” and therefore the federal circuit court could not
take jurisdiction over the suit. Id. at 84-85 (reversing judgment and remitting the case
with instructions to remand to state court).
Likewise, in Turnbull, the Supreme Court remanded an action removed by a third
party intervenor, finding that “it was only auxiliary and incidental to the original suit.”
Turnbull, 83 U.S. at 195. There, a bank recovered judgment against a debtor and
attempted to execute against his personal property. Id. at 193. Turnbull & Co., claiming
that property was theirs, intervened in state court and was granted an order to try the right
of the property. Id. Turnbull & Co. subsequently removed the action to federal district
court. The proceeding by which Turnbull & Co. intervened prior to the writ of execution
7
“was intended to enable the court, the plaintiff in the original action, and the claimaint, to
reach the final and proper result by a process at once speedy, informal, and inexpensive.”
Id. at 195. The Supreme Court ultimately remanded, noting that “[t]he contest could not
have arisen but for the judgment and execution, and the satisfaction of the former would
at once have extinguished the controversy between the parties.” Id.
To be removable, an action must be “independent,” not “supplementary or
incidental to another action.” Int’l Org. Masters, Mates and Pilots of America, Local No.
2 v. Int’l Org. Masters, Mates and Pilots of America, Inc., 342 F. Supp. 212, 214 (E.D.
Pa. 1972) (citing Barrow) (granting plaintiffs’ motion for remand where second action
was so closely intertwined that its removal would “do practical violence to the entire
action.”). For a federal court to take jurisdiction over such a supplemental proceeding
would be tantamount to it serving as an appellate tribunal, reviewing errors allegedly
committed by state courts. McKay v. Pfeil, 827 F.2d 540, 543 (9th Cir. 1987) (dismissing
diversity action where plaintiff sought injunctive and declaratory relief that would
invalidate state court judgment). Although such actions are scarce, and this Court is not
aware of instances where supplementary proceedings under § 56.29 have been removed,
the federal bar to exercising jurisdiction over ancillary or satellite actions of state suits
remains intact and a sensible judicial rule. See Armistead v. C&M Transport, Inc., 49
F.3d 43, 46 (1st Cir. 1995).
The instant action is clearly a supplemental proceeding to the original suit.
Procedurally, § 56.29 allows for an expeditious and informal resolution to the Plaintiff’s
8
outstanding judgment against SAI. See Turnbull, 83 U.S. at 195. It is clear from the
discussion of this statute by Florida courts and the courts of this District, supra, that this
suit is nothing more than a continuation of Plaintiff’s action against SAI. Substantively,
no new controversy has arisen; and the relationship between the cause of action against
SAI and that against the Impleader Defendants is closely intertwined. See IOMMPA, 342
F. Supp. at 215 (cautioning that substance, rather than form, must govern the analysis). It
is especially telling that Plaintiff’s cause of action against the Impleader Defendants
arises out of and cannot exist independently of Plaintiff’s judgment against SAI. Id at
215, n.14.
Defendants’ arguments to the contrary are unavailing. SAI remains in the style of
the suit. No additional claims are asserted against SAI in the Impleader Complaint
because a judgment has been awarded against it and, most importantly, Plaintiff alleges
that C.O.P.S. and/or CastleRock has assumed all of SAI assets, personnel and business
functions. Defendant implies that Plaintiff’s failure to beat a dead horse by re-alleging its
cause of action against SAI in the Impleader Complaint somehow creates a new,
independent action. This argument belies both common sense and the purpose of § 56.29.
See Allied Indus., 688 F.3d at 1517.
Defendants claim that their acceptance of the validity of the default judgment
against SAI does not prevent removal under Barrow. See Xtria, LLC v. Int’l Ins. Alliance,
Inc., 2009 WL 4756365, *4 (N.D. Tex. Dec. 11, 2009). This argument requires the Court
to ignore Plaintiff’s application of § 56.29 and its substantive claim, fraudulent
9
conveyance, against Defendants. Here, Florida courts have been endowed with a
mechanism, § 56.29, through which to control the process of execution on judgments. As
a result, Impleader Defendants are being asked to account for their role in divesting
judgment debtor SAI of its assets prior to final judgment. Although procedurally
distinguished from Barrow, the Court finds that the circumstances fall in line with the
spirit of Barrow, Turnbull and their progeny.
In light of the foregoing and the well-established principle that the removal statute
is to be narrowly construed and uncertainties are to be resolved in favor of remand,2 the
Court finds that Defendants’ removal of this supplemental proceeding was improper.
B.
Miscellaneous
Because the Court has found that defaulted Defendant SAI remains part of the
action, the failure of the Impleader Defendants to obtain its consent renders the Notice of
Removal defective. See Lazo v. US Airways, Inc., 2008 U.S. Dist. LEXIS 66814, *4
(S.D. Fla. Aug. 28, 2008) (Ryskamp, J.) (discussing rule of unanimity); but see White v.
Bombardier Corp., 313 F. Supp. 2d 1295, 1303-04 (N.D. Fla. 2004) (discussing four
exceptions to the rule of unanimity and potentially creating an exception for a defaulted
defendant); see also First Independence Bank v. Trendventures, L.L.C., 2008 U.S. Dist.
LEXIS 6577, ** 22-23 (E.D. Mich. Jan. 30, 2008) (declining to follow the “exception”
created by White and remanding case for failure to obtain consent of defaulted defendant).
2
See Miedema v. Maytag Corp., 450 F.3d 1322, 1329 (11th Cir. 2006).
10
However, because the Court has found that it lacks jurisdiction to consider this
supplemental proceeding and removal was improper on this basis, it declines to address
the parties’ remaining arguments.
III.
Attorney’s Fees
“Absent unusual circumstances, courts may award attorneys fees under 28 U.S.C.
§ 1447(c) only where the removing party lacked an objectively reasonable basis for
seeking removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). Given
the lack of case law in the Eleventh Circuit interpreting the Barrow and Turnbull line of
cases or dealing with removal of supplemental proceedings, the Court cannot conclude
that Defendants lacked an objectively reasonable basis for seeking removal. Thus, the
Court denies Plaintiff’s request for attorney’s fees and costs.
IV. Conclusion
Accordingly, it is ORDERED AND ADJUDGED that:
1.
Consistent with this Order, Plaintiff’s Motion for Remand (D.E. 10), filed
on September 27, 2010 is GRANTED;
3.
This case is REMANDED to the Circuit Court for the Seventeenth
Judicial District in and for Broward County, Florida, pursuant to 28 U.S.C.
§ 1447(c), and the Clerk is directed to take all necessary steps and
procedures to effect remand of the above-captioned action;
4.
All pending motions are DENIED AS MOOT;
5.
This case is now CLOSED.
11
DONE AND ORDERED in Chambers at Miami, Florida, this 3rd day of May,
2011.
_________________________________
JOAN A. LENARD
UNITED STATES DISTRICT JUDGE
12
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?