Smith et al v. Willis Insurance Services of Georgia, Inc. et al
Filing
21
ORDER granting 7 Motion to Remand to State Court, denying 7 Motion for Attorney Fees. Signed by Judge Thomas W. Thrash, Jr on 7/13/11. (dr)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
ERIC B. SMITH, et al.,
Plaintiffs,
v.
CIVIL ACTION FILE
NO. 1:11-CV-756-TWT
WILLIS INSURANCE SERVICES
OF GEORGIA, INC., et al.,
Defendants.
ORDER
This is a breach of contract action. It is before the Court on the Plaintiffs’
Motion to Remand [Doc. 7]. For the reasons set forth below, the Court GRANTS the
Plaintiffs’ motion.
I. Background
This litigation arises from several restrictive covenants signed by William
Moody and Eric Smith. Until January 17, 2011, Moody and Smith were employed by
Willis Insurance Services of Georgia, Inc. (“Willis GA”), a Georgia corporation.
After leaving Willis GA, Moody and Smith began working for Marsh USA, Inc.
(“Marsh”), a Delaware corporation. Both Smith and Moody are residents of Georgia.
Willis GA is a subsidiary of Willis Group Holdings Public Limited Company
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(“WGH”), a corporation organized under the laws of Ireland with its principal place
of business in London, England.
While employed by Willis GA, Moody and Smith signed several agreements,
including a 1994 Employment Agreement, a 2009 Employment Agreement, and
several Option Agreements. (See Murphy Aff., Ex. 1; Doc. 1-4.) These agreements
included restrictive covenants that prohibited Moody and Smith from soliciting or
performing services for clients with whom they did business while working for Willis
GA. Further, the agreements prohibited Mood and Smith from disclosing Willis GA’s
confidential information. In January 2011, WGH sued the Plaintiffs in New York
state court (the “New York Action”). (See Compl., Ex. A.) The New York Action
alleges that Moody and Smith have violated the restrictive covenants in the Option
Agreements and that Marsh has tortiously interfered with those agreements.
On February 14, 2011, Moody, Smith, and Marsh filed this declaratory
judgment action against Willis GA and WGH in the Superior Court of Fulton County
[Doc. 1-1]. The Plaintiffs seek a declaration that the restrictive covenants in the
Option Agreements and 1994 and 2009 Employment Agreements are unenforceable.
Id. In letters dated February 28, 2011 and March 9, 2011, Willis GA promised that
it would not enforce the restrictive covenants in the Option or Employment
Agreements [See Doc. 1-4]. Also, Brian Morgan, the President and CEO of Willis
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GA, represented that Willis GA would not seek to enforce the restrictive covenants.
(See Morgan Aff., Ex. 3; Doc. 1-4.) On March 10, 2011, the Defendants removed the
action to this Court [Doc. 1]. The Plaintiffs have filed a Motion to Remand [Doc. 7],
contending that the parties are not diverse and that the Defendants have not
established more than $75,000 in controversy.
II. Motion to Remand Standard
In a removal case alleging fraudulent joinder, the removing party has the burden
of proving that either: (1) there is no possibility the plaintiff can establish a cause of
action against the resident defendant; or (2) the plaintiff has fraudulently pled
jurisdictional facts to bring the resident defendant into state court. Pacheco de Perez
v. AT&T Co., 139 F.3d 1368, 1380 (11th Cir. 1999) (quoting Crowe v. Coleman, 113
F.3d 1536, 1538 (11th Cir. 1997)). The burden of establishing fraudulent joinder is
a heavy one. Id. Where a plaintiff states even a colorable claim against the resident
defendant, joinder is proper, and the case should be remanded to state court. Id.
Indeed, if there is even a possibility that a state court would find that the complaint
states a cause of action against any one of the resident defendants, the federal court
must find that joinder was proper and remand the case to state court. Crowe, 113 F.3d
at 1538. In making its determination, the district court must evaluate factual
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allegations in the light most favorable to the plaintiff and resolve any uncertainties
about the applicable law in the plaintiff's favor. Pacheco de Perez, 139 F.3d at 1380.
III. Discussion
A.
Jurisdiction
The Plaintiffs argue that diversity of citizenship is lacking because Willis GA
is a Georgia corporation. “The district courts shall 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 is between . . . citizens of different States.” 28
U.S.C. § 1332. Here, Willis GA, Moody, and Smith are residents of Georgia.
Nevertheless, the Defendants claim that diversity exists because Willis GA was
fraudulently joined. “In a removal case alleging fraudulent joinder, the removing
party has the burden of proving that either: (1) there is no possibility the plaintiff can
establish a cause of action against the resident defendant; or (2) the plaintiff has
fraudulently pled jurisdictional facts to bring the resident defendant into state court.”
Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir. 1997). “When considering a
motion for remand, federal courts are not to weigh the merits of a plaintiff's claim
beyond determining whether it is an arguable one under state law.” Id. “The federal
court makes these determinations based on the plaintiff's pleadings at the time of
removal.” Id.; see also Powers v. Chesapeake & O. Ry. Co., 169 U.S. 92, 101-102
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(1898) (allowing removal where parties were not diverse at time of filing, but were
diverse at time of removal).
The Defendants argue that Willis GA is not a signatory or third-party
beneficiary to the Option Agreements. Thus, the Defendants contend, there is no
possibility that the Plaintiffs can maintain a declaratory judgment action because
Willis GA does not have standing to enforce the restrictive covenants. Willis GA is,
however, party to the 1994 and 2009 Employment Agreements. (See Murphy Aff.,
Ex. 1; Doc. 1-4.) These agreements contain nonsolicitation and nondisclosure clauses.
Further, unlike the New York Action, the Employment Agreements are at issue in this
lawsuit. (See id.; Compl. ¶¶ 26-29; 31-35.) Thus, for purposes of this motion, the
Court need not decide whether Willis GA is a third-party beneficiary to the Option
Agreements.
The Defendants, however, argue that there is no justiciable dispute because
Willis GA has promised that it will not enforce the restrictive covenants in the 1994
and 2009 Employment Agreements [See Doc. 1-4]. In Chattahoochee Bancorp, Inc.
v. Roberts, 203 Ga. App. 405 (1992), the plaintiff employer filed suit seeking a
declaration that an employment contract was invalid. The employer, however, had
already repudiated the employment contract in response to the defendant employee’s
demand. The court held that a declaratory judgment action was improper, reasoning
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that “the rights and obligations of the parties pursuant to the agreement have accrued,
[the plaintiff] is seeking confirmation of actions it has already taken and declaratory
relief is improper.” Id. at 406.
Here, unlike Chattahoochee, the Defendants have promised not to enforce the
restrictive covenants. Whereas the plaintiff in Chattahoochee had already selected a
course of conduct by repudiating the employment contract, the Plaintiffs here still face
uncertainty.1 Although Willis GA has promised not to enforce the restrictive
covenants, this promise may not be enforceable under state law. Indeed, the
representations made by Willis GA’s counsel are not supported by consideration. See
O.C.G.A. § 13-3-40(a) (“A consideration is essential to a contract which the law will
enforce.”). In any event, the enforceability of Willis GA’s representations is at least
arguable. See Crowe, 113 F.3d at 1538 (“When considering a motion for remand,
federal courts are not to weigh the merits of a plaintiff's claim beyond determining
whether it is an arguable one under state law.”). Although the Plaintiffs’ claim against
Willis GA may ultimately fail, there is at least “a possibility that a [Georgia] court
[will] find that the complaint states a cause of action.” Id. Thus, Willis GA was not
1
To the extent that the Defendants claim that the Plaintiffs’ declaratory
judgment action should be dismissed because Moody and Smith have already violated
the restrictive covenants, this argument addresses the merits of the Plaintiffs’ claim.
See Crowe, 113 F.3d at 1538 (“When considering a motion for remand, federal courts
are not to weigh the merits of a plaintiff's claim.”).
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fraudulently joined.2 Further, because Smith, Moody, and Willis GA are all citizens
of Georgia, diversity does not exist. For this reason, the action is remanded to the
Superior Court of Fulton County.
B.
Attorney’s Fees
The Plaintiffs request attorney’s fees and costs related to the Defendants’
improper removal. “Absent unusual circumstances, courts may award attorney's 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). Here, as discussed above, there is “a possibility that a state court
[will] find that the complaint states a cause of action against” Willis GA. Crowe, 113
F.3d at 1538 (quoting Coker v. Amoco Oil Co., 709 F.2d 1433, 1440-41 (11th Cir.
1983)). Nevertheless, after having promised not to enforce the 1994 and 2009 Option
Agreements, the Defendants had a reasonable, if mistaken, basis for removing the
action to this Court. For this reason, the Plaintiffs’ request for attorney’s fees and
costs is denied.
2
Having found that diversity does not exist, the Court need not decide whether
the Defendants have established $75,000 in controversy.
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IV. Conclusion
For the reasons set forth above, the Court GRANTS the Plaintiffs’ Motion to
Remand [Doc. 7].
SO ORDERED, this 13 day of July, 2011.
/s/Thomas W. Thrash
THOMAS W. THRASH, JR.
United States District Judge
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