Farah v. The Guardian Insurance & Annuity Company, Inc.

Filing 40

REPORT AND RECOMMENDATIONS on 11 Motion to Remand. Objections to R&R due by 8/11/2017. Signed by Magistrate Judge Jonathan Goodman on 8/1/2017. (jdo)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
CASE NO. 17-20303-CIV-MARTINEZ/GOODMAN
ELENA YAMILE FARAH, as
Personal Representative of the
ESTATE OF LUIS FARAH,
Plaintiff,
v.
THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC.,
Defendant.

_____

/

REPORT AND RECOMMENDATIONS ON MOTION TO REMAND
The remand motion before the Undersigned raises three issues. The first issue is
aptly illustrated by Fleetwood Mac’s 1979 song, Sisters of the Moon, in which iconic
singer Steve Nicks musically explained: “So we make our choices / When there is no
choice / And we listen to their voices / Ignoring our own voice.” 1 The Undersigned
must decide a similar conundrum here under the voluntary-involuntary rule to
removal: whether a case becomes removable when a plaintiff grudgingly chooses to
concede the merits of a motion to compel arbitration, rather than present a fruitless
opposition, resulting in an agreed order dismissing a nondiverse defendant. In other
FLEETWOOD MAC, Sisters of the Moon, on TUSK (Warner Bros. 1979) (emphasis
added).

1

words, the issue is whether the plaintiff’s non-opposition is a “voluntary act” (i.e., the
result of a choice) akin to a voluntary dismissal or settlement, which makes the case
removable, or an “involuntary act” akin to an involuntary dismissal following an
adverse ruling on the merits, which does not.
The second issue concerns the fraudulent-joinder exception to the voluntaryinvoluntary rule. Specifically, if plaintiff’s non-opposition was “involuntary,” which
would normally bar removal, then the question is whether removal was nonetheless
proper because plaintiff fraudulently joined the nondiverse defendant to eliminate
diversity jurisdiction.
The third issue is whether the plaintiff removed the case within the proper time
limits. The answer to this question will turn on when that deadline began to run. If it
ran from when the removing defendant was served with the initial pleading, then
removal was untimely. But if the deadline ran from the date of the agreed dismissal
order, then removal was timely.
Plaintiff Elena Yamile Farah, as personal representative of the Estate of Luis
Farah, moves to remand this case to state court. [ECF No. 11]. Defendant Guardian
Insurance & Annuity Company, Inc. (“GIAC”) removed the case to federal court after
the state court entered an agreed order dismissing other defendants, including a
nondiverse defendant, who had moved to compel arbitration before the Financial

2

Industry Regulatory Authority (“FINRA”). Plaintiff agreed to the dismissal after
concluding that she had no bona fide opposition to the motions to compel.
Plaintiff now seeks to send the case back to state court by arguing that her
agreement to a dismissal order was not a “voluntary act” under the meaning of the
voluntary-involuntary rule. [ECF No. 11]. GIAC filed an opposition response, arguing
that the agreed dismissal order was indeed a “voluntary act” under the rule, or that,
alternatively, Plaintiff fraudulently joined the dismissed defendants to eliminate
diversity jurisdiction, which is an exception to the voluntary-involuntary rule. [ECF
No. 16]. Plaintiff filed a reply. [ECF No. 17]. The parties also filed supplemental briefing
on the timing of removal based on the Undersigned’s instructions. [ECF Nos. 27; 30–31].
United States District Judge Jose E. Martinez referred the remand motion to the
Undersigned for a Report and Recommendations. [ECF No. 12].
For the reasons stated below, the Undersigned finds as follows. First, Plaintiff’s
non-opposition to the motions to compel arbitration was not a “voluntary act” under
the voluntary-involuntary rule, so the resulting agreed dismissal order did not convert
the state court dispute into a removable action. Second, the fraudulent-joinder
exception to the voluntary-involuntary rule is inapplicable where a valid cause of
action may exist against a defendant but the plaintiff is precluded by an arbitration
clause from bringing that action in state court. Third, for the sake of completeness, and

3

to the extent the District Court disagrees with the Undersigned’s first two conclusions,
removal was timely.
Therefore, the Undersigned respectfully recommends that Judge Martinez grant
the Plaintiff’s remand motion and remand this case to state court.
I.

Background
On September 1, 2016, Plaintiff sued GIAC, Alejandro Mendieta, and LPL

Financial, LLC in state court. [ECF No. 1-2]. The claims revolve around supposedly
improper withdrawals taken from the decedent Luis Farah’s annuity contracts. [ECF
Nos. 1-2; 1-6]. The original and amended complaints included as exhibits copies of the
decedent’s LPL account agreement. [ECF Nos. 1-3, p. 7; 1-6, p. 65]. The account
agreement contained an arbitration provision, which stated, among other things: “All
parties to this agreement are giving up the right to sue each other in court, including
the right to a trial by jury, except as provided by the rules of the arbitration forum in
which a claim is filed.” [ECF Nos. 1-3, p. 18; 1-6, p. 75].
On October 27, 2016, Mendieta and LPL moved to compel arbitration and stay
the action. [ECF Nos. 1-7, pp. 28, 42; 1-13, pp. 62, 67]. In the remand motion, Plaintiff’s
counsel concedes that after analyzing the motions to compel arbitration, counsel “made
a professional judgment that contesting arbitration would be futile and thus conceded
to the relief sought and ultimately agreed to the entry of an order compelling
arbitration.” [ECF No. 11, p. 4].
4

On January 17, 2017, the state court entered an agreed order that dismissed
without prejudice the claims against Mendieta and LPL. [ECF No. 1-14, p. 68]. The
order also memorialized the parties’ agreement that FINRA’s dispute resolution forum
had jurisdiction over the dispute with Mendieta and LPL. [ECF No. 1-14, p. 69]. The
order then stated that the action would continue against the sole remaining defendant,
GIAC. [ECF No. 1-14, p. 68].
On January 24, 2017, GIAC removed the case to federal court, invoking diversity
jurisdiction under 28 U.S.C. § 1332. [ECF No. 1]. Pertinent here, GIAC alleged that when
Plaintiff voluntarily agreed to dismiss Mendieta (a nondiverse party) and LPL from the
state court action, it resulted in complete diversity between the parties. [ECF No. 1,
¶ 17]. Alternatively, GIAC alleged that if the dismissal order was deemed
“involuntary,” removal was still proper because Plaintiff fraudulently joined Mendieta
and LPL in the action to eliminate diversity jurisdiction. [ECF No. 1, ¶ 18] As the basis
for its view that a fraudulent joinder occurred, GIAC argued that Plaintiff had no viable
cause of action against Mendieta or LPL in light of the mandatory arbitration provision
in the LPL account agreement. [ECF No. 1, ¶¶ 19–24]. Finally, GIAC alleged that it
timely removed this case by filing its notice of removal within 30 days from the
dismissal order, which marked the “triggering event” for the deadline to remove under
28 U.S.C. § 1446. [ECF No. 1, ¶ 9].

5

In her remand motion, Plaintiff argues that the voluntary-involuntary rule bars
removal of this case because the state court’s dismissal resulted not from her voluntary
actions, but the nondiverse defendant’s action in moving to compel arbitration. [ECF
No. 11, p. 4]. Plaintiff admits that she conceded to the relief sought in the motion to
compel arbitration based on her professional judgment. [ECF No. 11, p. 4]. But Plaintiff
argues that, regardless of her concession, the dismissal’s catalyst was the other side’s
motions, and not her lack of opposition to them, thereby making the dismissal
involuntary. [ECF No. 11, pp. 5–6].
Plaintiff also argues that LPL and Mendieta could have waived arbitration. [ECF
No. 11, p. 6]. But after LPL and Mendieta elected to arbitrate, “negotiations with the
three defendants, independent analysis, and the Motion to Compel” made it clear to
Plaintiff that “keeping all three defendants in the same forum would be impossible.”
[ECF No. 11, p. 6].
Plaintiff also contends that she did not fraudulently join the nondiverse
defendant, Mendieta, to defeat diversity jurisdiction. [ECF No. 11, p. 8]. Plaintiff argues
that she sufficiently stated causes of action for negligence and breach of fiduciary duty
against Mendieta, and emphasizes that the order compelling arbitration did not find
otherwise -- it simply dismissed those claims without prejudice so that they could be
submitted to arbitration. [ECF No. 11, pp. 8–10]. Plaintiff also argues that pursuing
those causes of action against Mendieta would not have been a sham because, despite
6

the arbitration agreement, she made a “good faith attempt” to sue all three parties in
one forum [ECF No. 11, pp. 10–11].
In its opposition response, GIAC argues that Plaintiff’s concession was a
voluntary act because Plaintiff knew that any resistance to arbitration was pointless.
[ECF No. 16, p. 3]. GIAC also argues that Plaintiff’s arguments about why she agreed to
the entry of the dismissal order are irrelevant given that she ultimately agreed to the
dismissal. [ECF No. 16, p. 5].
GIAC also argues that Plaintiff did fraudulently join Mendieta and LPL in state
court because the mandatory arbitration provisions (which Plaintiff was aware of) did
not give Plaintiff a viable cause of action in state court. [ECF No. 16, pp. 6–7]. GIAC
further argues that because of the arbitration provision, Plaintiff could not have
maintained her state court claims against Mendieta or LPL in good faith. [ECF No. 16,
pp. 7–8].
II.

Legal Standard
Under section 1332, federal district courts have “original jurisdiction of all civil

actions where the matter in controversy exceeds the sum or value of $75,000, exclusive
of interest and costs,” and that are between “citizens of different States[.]”§ 1332(a).
Section 1441 further authorizes, with certain exceptions inapplicable here, the removal
of “any civil action” in which “the district courts of the United States have original
jurisdiction[.]” 28 U.S.C. § 1441(a).
7

Removal must normally occur “within 30 days after the receipt by the defendant,
through service or otherwise, of a copy of the initial pleading setting forth the claim for
relief upon which such action or proceeding is based[.]” § 1446(b). There is an
exception, however, “if the case stated by the initial pleading is not removable[.]”
§ 1446(b)(3). In such a case, “a notice of removal may 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.” § 1446(b)(3).
As a general matter, removal statutes are strictly construed, and where the
parties clash about jurisdiction, uncertainties are to be resolved in favor of remand.
Syngenta Crop Protection, Inc. v. Henson, 537 U.S. 28, 32 (2002); Russell Corp. v. Am. Home
Assur. Co., 264 F.3d 1040, 1050 (11th Cir. 2001). The removing party bears the burden of
showing the existence of federal jurisdiction. Pacheco de Perez v. AT&T Co., 139 F.3d 1368,
1373 (11th Cir. 1998).
III.

Analysis
A. Voluntary-Involuntary Rule
The United States Supreme Court created the voluntary-involuntary rule more

than a century ago. See, e.g., Whitcomb v. Smithson, 175 U.S. 635, 638 (1900); Great N. Ry.
Co. v. Alexander, 246 U.S. 276, 281 (1918). The rule has since survived the codification of
section 1446 and is still followed by the Eleventh Circuit. Pretka v. Kolter City Plaza II,
8

Inc., 608 F.3d 744, 761 (11th Cir. 2010); Insinga v. LaBella, 845 F.2d 249, 252 (11th Cir.
1988). The rule provides that “only a voluntary act by the plaintiff may convert a nonremovable case into a removable one.” Pretka, 608 F.3d at 761. Thus, “if the resident
defendant was dismissed from the case by the voluntary act of the plaintiff, the case
became removable, but if the dismissal was the result of either the defendant’s or the
court’s action against the wish of the plaintiff, the case could not be removed.” Insinga,
845 F.2d at 252; see also Pretka, 608 F.3d at 761 (explaining “that an initially nonremovable case cannot be converted into a removable one by evidence of the defendant
or by an order of the court.”) (internal quotation marks omitted).
In Insinga, the Eleventh Circuit established that the voluntary-involuntary rule
has dual purposes: (1) ensuring the finality of state-court proceedings and (2)
promoting a plaintiff’s right to choose a litigating forum. 845 F.2d at 253. The rule’s
duality became important when analyzing a removing party’s argument that removal
was justified following a plaintiff’s failure to appeal an adverse summary judgment
order. Specifically, while the removing party conceded that the summary judgment was
not a “voluntary act” under the rule that created complete diversity, it argued that
removal was still proper because the rule’s first justification -- finality -- was not
present. Id. at 252. As support, the removing party relied on a Second Circuit decision
that stood for the proposition that a plaintiff’s failure to appeal a dispositive order
“constituted the functional equivalent of a ‘voluntary’ dismissal” given that the
9

voluntary-involuntary rule was simply meant ensure the finality of state court
proceedings. Id. (citing Quinn v. Aetna Life & Cas. Co., 616 F.2d 38, 40 n. 2 (2d Cir. 1980)).
The Eleventh Circuit rejected that argument and declined to follow Quinn’s
reasoning. The Court explained that “finality” was not synonymous to “voluntariness.”
Id. at 252–53. Moreover, the Court noted that apart from the

issue of

finality/appealability, “[t]here also appears to be a policy favoring a plaintiff’s right,
absent fraudulent joinder, to determine the removability of his case.” Id. at 253.
Decisions in this District have recognized this second policy behind the
voluntary-involuntary rule. See Chusid v. Swire Pac. Holdings, Inc., No. 09-23368-CIV,
2010 WL 11505092, at *2 (S.D. Fla. July 16, 2010) (explaining that “[t]he second policy
consideration behind the voluntary/involuntary rule is the right of the Plaintiff to
determine whether the case should be removed.”); Katz v. Costa Armatori, S.p.A., 718 F.
Supp. 1508, 1509–10 (S.D. Fla. 1989) (same).
But the parties have not presented, and the Undersigned did not find, any
decisions from this District applying the voluntary-involuntary rule under the present
circumstances -- where a plaintiff conceded that a dispositive motion had merit and
agreed to an order dismissing a nondiverse defendant. 2

Marsicano v. Home Depot USA, Inc., No. 09-60208-CIV-ALTONAGA, 2009 WL
899968 (S.D. Fla. Mar. 30, 2009), which GIAC relies on, does not address that issue. The
case’s procedural history does show that the defendant removed the matter following
an agreed order that dismissed a nondiverse defendant. Id. at *1. But that was not the
issue on remand; rather, the plaintiff’s sole argument for remand was that he intended

2

10

Several district courts outside this state, however, have addressed the same issue
or similar issues. Specifically, many cases have found that when a plaintiff does not
oppose a dispositive motion, that inaction is not functionally equivalent to a “voluntary
act” under the voluntary-involuntary rule. See Sanders v. Arctic Cat, Inc., No. 5:15-CV2286, 2016 WL 1409212, at *3 (N.D. Ohio Apr. 11, 2016) (collecting cases explaining that
“[a] voluntary act to abandon a claim must be an affirmative act, not a failure to act.”);
Brown v. Caterpillar, Inc., No. CIV. 15-02687 WHW, 2015 WL 4598778, at *2 (D.N.J. July
28, 2015) (finding that failure to oppose summary judgment motions was not the same
as voluntary dismissal); Mumfrey v. Anco Insulations, Inc., No. CIV.A. 11-2284, 2011 WL
4745626, at *3 (E.D. La. Oct. 7, 2011) (finding that failure to oppose summary judgment
did not constitute voluntary act); Shemp v. Yamaha Corp. of Am., 206CV00565KJD-GWF,
2006 WL 2669185, at *4 (D. Nev. Sept. 18, 2006) (finding that failure to file an opposition
to motion to dismiss was not an affirmative act sufficient to satisfy the voluntaryinvoluntary rule); Pender v. Bell Asbestos Mines, Ltd., 46 F. Supp. 2d 937, 941 (E.D. Mo.
1999) (finding that “plaintiff did not consent to the dismissal here merely because her
counsel stated he would not appear to oppose the motion [to dismiss].”); Machinsky v.
Johnson & Johnson Med., Inc., 868 F. Supp. 269, 270 (E.D. Mo. 1994) (finding that failure to
oppose motion to dismiss and suggestion of language in the dismissal order was not
functionally equivalent of voluntary dismissal); Cook v. Pep Boys-Mannie, Moe & Jack,
to join additional nondiverse defendants in the future, so removal was premature. Id. at
*1. Judge Altonaga rejected that argument. Id.
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Inc., 641 F. Supp. 43, 45–46 (E.D. Pa. 1985) (finding that plaintiff’s failure to oppose a
judgment on the pleadings was not functionally equivalent to a voluntarily dismissal).
Furthermore, at least one district court has found that a plaintiff yielding to a
winning position on a dispositive motion is akin to a plaintiff simply doing nothing,
and thus is not a “voluntary act” per the voluntary-involuntary rule. See Harrell v.
Clarke Power Prod., Inc., No. 2:10 CV 70 DDN, 2011 WL 749681, at *4 (E.D. Mo. Feb. 24,
2011). In Harrell, the defendant removed the case after the plaintiffs consented to
dismissing a nondiverse defendant. The plaintiffs’ counsel explained that he “sought to
oppose [the] dismissal, but after reviewing the motion, he found no good faith basis for
opposing it.” Id. at *5. The court found that “plaintiffs’ counsel’s actions might be more
appropriately classified as ‘not opposing’ rather than actually ‘consenting,’ which
would resolve any doubt as to the voluntary/involuntary nature of [the] dismissal.” Id.
The court also reasoned that since the defendant initiated the dismissal, it suggested
that the dismissal was not voluntary. Id.
Where courts have found that plaintiffs crossed the line into the “voluntary” side
of the voluntary-involuntary rule, the plaintiff undertook some affirmative act that was
analytically similar to abandoning the claims against the defendant. For instance, in
Hammons v. Ohio Cas. Ins. Co., No. Civ. A. 09–30–KS, 2009 WL 997098 (E.D. Ky. Apr. 14,
2009), a case GIAC relies on, after the plaintiff reached a settlement with a nondiverse
defendant, the only claim pending against that defendant was one of subrogation by a
12

co-defendant. The co-defendant, however, waived subrogation and moved to dismiss
the nondiverse defendant, resulting in an agreed order. Under those circumstances, the
court found that “[a]n agreed order constitutes voluntary dismissal,” explaining that
“Plaintiffs’ desire to object to that dismissal simply to prevent the dismissal from being
‘voluntary’ is insincere because Plaintiffs have no claim against [the nondiverse
defendant] remaining.” Id. at *1–2.
It should also be noted that the Hammons Court relied solely on the “finality”
rationale of the voluntary-involuntary rule, id. at *1, and the Eleventh Circuit has
already established that “finality” is not synonymous to “voluntariness.” Insinga, 845
F.2d at 252–53. Therefore, whether Hammons is even good law in this Circuit is
questionable.
Turning to this case, the Undersigned finds that the agreed order dismissing
Mendieta, the nondiverse defendant, was not the functional equivalent of a voluntary
dismissal or any other “voluntary act” within the meaning of the voluntary-involuntary
rule. As Insinga instructs, the voluntary-involuntary rule is meant to promote a
plaintiff’s right to choose a litigating forum. Id. at 253. Indeed, there is a “policy
favoring a plaintiff’s right, absent fraudulent joinder, to determine the removability of
his case.” Id. at 253. Therefore, “if the dismissal was the result of either the defendant’s
or the court’s action against the wish of the plaintiff, the case could not be removed.”
Insinga, 845 F.2d at 252.
13

As the parties recognize, Mendieta had the choice to waive arbitration. Krinsk v.
SunTrust Banks, Inc., 654 F.3d 1194, 1200 (11th Cir. 2011) (“courts will not compel
arbitration when the party who seeks to arbitrate has waived its right to do so”). But he
did not waive arbitration -- he filed a motion to compel arbitration. Thus, the dismissal
resulted from Mendieta’s action in seeking to compel arbitration, rather than the
Plaintiff’s decision to not stand in the way. See Harrell, 2011 WL 749681, at *5. The
Undersigned is persuaded by the authorities holding that Plaintiff’s lack of opposition
was not the same as a voluntary act of dismissal. See, e.g., Sanders, 2016 WL 1409212, at
*3. And the Undersigned is further convinced by Harrell, which persuasively shows that
a plaintiff who concedes a meritorious point does not turn an otherwise involuntary
dismissal into a “voluntary act” creating complete diversity.
To find otherwise would send a wrong message to litigants facing meritorious
motions in state court. Courts should encourage parties to concede well-taken points.
But if such a concession were to be deemed a “voluntary act” that created diversity
jurisdiction, then parties would feel pressured to fruitlessly oppose meritorious
motions just to avoid removal.
Of course, one may play devil’s advocate and say that parties would also be
encouraged to bring meritless claims with the knowledge that once the inevitable
dispositive motion comes along, they could gracefully concede and avoid removal. But
there is already a doctrine designed to prevent such a practice: the fraudulent-joinder
14

doctrine. As the Eleventh Circuit explained, the plaintiff has a “right, absent fraudulent
joinder, to determine the removability of his case.” Insinga, 845 F.2d at 253 (emphasis
added). A lack of merit does not necessarily mean fraudulent joinder. See Pacheco de
Perez, 139 F.3d at 1380–81 (“In a fraudulent joinder inquiry, federal courts are not to
weigh the merits of a plaintiff’s claim beyond determining whether it is an arguable one
under state law.”). Therefore, absent fraudulent joinder, a plaintiff should be able to
concede defeat without inviting removal. The Undersigned will address the fraudulentjoinder issue next.
In sum, the Undersigned finds that Plaintiff’s non-opposition to the motion to
compel arbitration was not a “voluntary act” under the voluntary-involuntary rule, and
therefore, the agreed dismissal order did not convert the state court dispute into a
removable action.
B. Fraudulent Joinder
The fraudulent-joinder doctrine is an exception to the voluntary-involuntary
rule. Insinga, 845 F.2d at 254. Fraudulent joinder normally exists in two situations: (1)
where “there was no possibility that the plaintiff could prove a cause of action against
the resident defendant[,]” and (2) where “the plaintiff fraudulently pled jurisdictional
facts in order to subject that resident defendant to the jurisdiction of the state court.” Id.
A third type of fraudulent joinder -- fraudulent misjoinder -- also exists, and this type
occurs “where a diverse defendant is joined with a nondiverse defendant as to whom
15

there is no joint, several or alternative liability and where the claim against the diverse
defendant has no real connection to the claim against the nondiverse defendant.” Triggs
v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998).
Arbitration agreements, however, do not constitute a fourth category of
fraudulent joinder. See, e.g., Frank v. Am. Gen. Fin., Inc., 23 F. Supp. 2d 1346, 1349 (S.D.
Ala. 1998). The Frank Court, which looked at that issue from the lens of Eleventh Circuit
jurisprudence, rejected the argument that an arbitration provision alone could make a
joinder fraudulent and gave five persuasive reasons why:
“First, the mere existence of an arbitration agreement does not divest a court,
state or federal, of jurisdiction.” Id. at 1349. “Second, the existence of an arbitration
agreement between a plaintiff and a defendant does not necessarily mean that all of the
plaintiff’s claims against that defendant are arbitrable under the agreement.” Id. “Third,
[c]ourts, not arbitrators, ordinarily will decide whether or not a particular dispute is
arbitrable.” Id. (quotation marks omitted). “Fourth, even if it were established that the
arbitration agreement at issue is otherwise valid and enforceable and that the parties
have clearly and unmistakably agreed to submit the arbitrability question itself to
arbitration, the right to arbitrate is a waivable right which the defendant may waive
intentionally or even negligently[.]” Id. at 1350. “Fifth, even an order compelling
arbitration does not under the FAA divest the court, state or federal, of jurisdiction.” Id.

16

Several district courts have found Frank and similar cases to be persuasive on this
issue. See Bullerwell v. Volkswagen Group of Am., Inc., No. SA-16-CV-1199-XR, 2017 WL
87065, at *3 (W.D. Tex. Jan. 10, 2017) (relying on Frank’s rationale and stating, “These
reasons have been cited with approval numerous times [] and they justify the same
result in this case.”); Cobalt Mining, LLC. v. Bank of Am. N.A., No. CIV.A. 3:07-CV-598S,
2008 WL 695887, at *3 (W.D. Ky. Mar. 12, 2008) (citing to Frank, among other cases, and
stating, “Courts that have considered the issue of whether an arbitration agreement
between a plaintiff and a non-diverse defendant renders the joinder of the non-diverse
defendant fraudulent have uniformly concluded that the existence of an arbitration
agreement does not yield the conclusion that Plaintiff has failed to state a colorable basis
for a claim.”) (quotation marks omitted); Koetters v. Ernst & Young LLP, No. CIV.A. 3:0519-JMH, 2005 WL 1475533, at *5 (E.D. Ky. June 21, 2005) (citing to Frank, among other
cases, and stating, “This Court agrees that the existence of an arbitration agreement
does not of itself render joinder fraudulent.”); Cure v. Toyota Motor Corp., Inc., 248 F.
Supp. 2d 594, 596–97 (S.D. Miss. 2003) (explaining that court was “persuaded by the
analysis and conclusions set forth in Frank” in rejecting argument that nondiverse
defendant’s citizenship should be ignored because plaintiffs signed binding arbitration
agreement with defendant); Briarpatch Ltd., L.P. v. Pate, 81 F. Supp. 2d 509, 517 (S.D.N.Y.
2000) (“While Frank, of course, is not binding on this Court, its logic is persuasive.”).

17

The Undersigned is also persuaded by Frank and the numerous cases adopting
its reasoning. GIAC cannot prevail on a fraudulent-joinder theory based solely on the
existence of an arbitration provision. See, e.g., Bullerwell, 2017 WL 87065, at *3. Yet
GIAC’s fraudulent-joinder argument is solely based on the arbitration provisions in the
LPL account agreement. [ECF Nos. 1, ¶¶ 19–24; 16, pp. 6–8]. At no point does GIAC
argue that, notwithstanding the arbitration provision, Plaintiff could not state a cause of
action against Mendieta or that Plaintiff maintaining such an action against Mendieta
would be a sham. Therefore, GIAC has failed to show that the fraudulent-joinder
doctrine justifies its removal of this case.
Notably, GIAC itself finds Frank to be persuasive since it relies heavily on that
case to argue that removal was timely. [ECF No. 30, pp. 4–5]. GIAC maintains that the
five reasons set forth in Frank were “contingencies” requiring resolution (and that were
resolved by the agreed dismissal order) before removability could be ascertained. [ECF
No. 30, p. 5]. But then GIAC goes on to distinguish Frank from this case by arguing that
“Plaintiff has not and cannot assert a viable cause of action against Mendieta in light of
not only the subject arbitration agreement but also the language of the Agreed Order
granting the FINRA Dispute Resolution exclusive jurisdiction[.]” [ECF No. 30, p. 4 n. 4].
GIAC’s argument fails to persuade for several reasons. First, its premise is
wrong. The dismissal order states only that the parties agreed that FINRA has
“jurisdiction” over the matter; it did not imbue FINRA with “exclusive jurisdiction”
18

over the matter. [ECF No. 1-14, pp. 68–69 (“The Parties are in agreement that FINRA
Dispute Resolution has jurisdiction over this matter as to [Mendieta and LPL].”)].
Second, the dismissal order was based on the arbitration provision itself, and
thus cannot constitute a separate basis for finding that Plaintiff fraudulently joined
Mendieta to defeat diversity jurisdiction.
Third, parties cannot consent to subject matter jurisdiction in the first place.
Eagerton v. Valuations, Inc., 698 F.2d 1115, 1118 (11th Cir. 1983) (“subject matter
jurisdiction cannot be waived or conferred on a court by consent of the parties”).
Fourth, the jurisdiction rationale is but one of the persuasive reasons set forth in
Frank and other similar cases for why the existence of arbitration provisions does not
necessarily mean that a party was fraudulently joined. Mendieta could have waived
arbitration, for example. Krinsk, 654 F.3d at 1200.
To summarize, the Undersigned finds that the fraudulent-joinder exception to
the voluntary-involuntary rule does not apply here.
C. Timing of Removal
In Taylor Newman Cabinetry, Inc. v. Classic Soft Trim, Inc., the Eleventh Circuit held
that a notice of removal was untimely when it was filed almost six months after the case
commenced, but within 30 days from the deposition of a nondiverse defendant. 436 F.
App’x 888, 893 (11th Cir. 2011). The defendants argued that it was during the
deposition that they first learned of facts contradicting the allegations in the complaint
19

against the nondiverse defendant. Id. at 892. But the Taylor Court did not “agree that the
deposition was the first time that Defendants could ascertain that the case was
removable on the basis of fraudulent joinder.” Id. (emphasis added). The Court reasoned
that since the nondiverse defendant was an employee of the diverse defendant, all
could have ascertained the facts adduced at deposition before then -- at the time the
action commenced. Id.
Other Florida district courts have also found removals untimely where the
removing party could have ascertained that a joinder was fraudulent from the initial
complaint but failed to remove within 30 days of being served with the complaint. See
Mincey by & through Sims v. Am. Honda Motor Co., No. 3:15-CV-847-J-39MCR, 2015 WL
12844400, at *6 n. 11 (M.D. Fla. Aug. 25, 2015) (finding removal untimely when filed
within 30 days from amended complaint, but not within 30 days from initial complaint,
because nothing changed between the two pleadings, and fraudulent joinder could be
ascertained from the first pleading even absent certain details); Noyes v. Universal
Underwriters Ins. Co., No. 8:13-CV-3077-T-30TGW, 2014 WL 2111695, at *1 (M.D. Fla.
Apr. 30, 2014) (relying on Taylor, finding removal untimely when not filed within 30
days from service of process since the fraudulently joined defendant was never a bar to
removal at that time); Layton v. SmithKline Beecham Corp., No. 8:05CV2107T27EAJ, 2006
WL 2194498, at *3 (M.D. Fla. Aug. 2, 2006) (finding that because the removing defendant
could have ascertained from the complaint that a former co-defendant was fraudulently
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joined, the removal notice was untimely since it was not filed within 30 days after
service of the complaint). This position is consistent with the greater weight of authority
throughout the country. See 14C Charles A. Wright, Arthur R. Miller & Edward H.
Cooper, Federal Practice and Procedure § 3732 (4th ed.) (collecting cases).
Here, “if the case stated by the initial pleading [was] not removable,” then GIAC
could have filed the notice of removal “within 30 days after receipt [], 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.” § 1446(b)(3). GIAC maintains that it timely removed this case by filing its
removal notice within 30 days of the state court dismissing a non-diverse defendant
based on the existence of a mandatory arbitration provision. But the Undersigned has
already found that the agreed dismissal order was “involuntary” per the voluntaryinvoluntary rule, and therefore does not create diversity jurisdiction.
In anticipation of this ruling, GIAC maintains that Plaintiff fraudulently joined
Mendieta to defeat diversity jurisdiction. At first blush, it would seem that the first time
GIAC could have ascertained that the case was removable on the basis of fraudulent
joinder was when it was served with Plaintiff’s complaint. GIAC’s fraudulent joinder
argument is based solely on the arbitration provisions in the LPL account agreement.
[ECF Nos. 1, ¶¶ 19–24; 16, pp. 6–8]. And Plaintiff attached the account agreement to its
initial and amended pleadings. [ECF Nos. 1-3, p. 7; 1-6, p. 65].
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But as shown in Frank and other similar cases, just because an arbitration
provision exists, does not mean that the case is removable. For instance, Mendieta could
have purposely or accidently waived the right to arbitrate, even after moving to compel
arbitration. So the initial or amended pleadings would not have made the case
removable. Neither would the motions to compel arbitration themselves. Had GIAC
removed the case at those times, the District Court would likely deem the removal
improper because the arbitration provision, standing alone, would not provide a valid
reason to disregard Mendieta’s citizenship on the basis that he was fraudulently joined.
See, e.g., Bullerwell, 2017 WL 87065, at *3.
Rather, absent some other facts showing that Mendieta was fraudulently joined,
which the record does not reveal, GIAC would need some “voluntary act” from
Plaintiff that created complete diversity, like Plaintiff settling the case against Mendieta
or voluntarily dismissing him from the case. Thus, if the District Court disagrees with
the Undersigned and finds that the agreed dismissal order constituted such “a
voluntary act,” then removal was timely because it was made within 30 days from that
order.
IV.

Objections
The parties will have 10 days from the date of being served with a copy of this

Report and Recommendations within which to file written objections, if any, with the
District Judge. Each party may file a response to the other party’s objection within 10
22

days of the objection. 3 Failure to file objections timely shall bar the parties from a de
novo determination by the District Judge of an issue covered in the Report and shall bar
the parties from attacking on appeal unobjected-to factual and legal conclusions
contained in this Report except upon grounds of plain error if necessary in the interest
of justice. See 28 U.S.C. § 636(b)(1); Henley v. Johnson, 885 F.2d 790, 794 (1989); Thomas v.
Arn, 474 U.S. 140, 149 (1985); 11th Cir. R. 3-1 (2016).
RESPECTFULLY RECOMMENDED in Chambers, in Miami, Florida, on August
1, 2017.

Copies furnished to:
The Honorable Jose E. Martinez
All counsel of record

The deadline for objections and responses are being shortened because the issues
are fully briefed.
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