Jones, Sr. v. Headwaters CM Services, LLC et al

Filing 7

ORDER: The Court DIRECTS Plaintiff to file a "Jurisdictional Memorandum" addressing the fraudulent joinder issue by January 5, 2017. Defendants may file a 3 page reply brief no later than January 19, 2017. Signed by Chief Judge Michael J. Reagan on 12/15/16. (rah)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
RICHARD S. JONES, Sr.,
Plaintiff,
vs.
HEADWATERS CM SERVICES, LLC,
and CHRIS BASSO,
Defendants.

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Case No. 16-cv-1329-MJR-DGW

MEMORANDUM AND ORDER
REAGAN, Chief Judge:
On October 11, 2016, Richard S. Jones, Sr. filed a retaliatory discharge lawsuit in
the Circuit Court of Madison County, Illinois naming two Defendants -- (1) his former
employer, Headwaters CM Services, LLC (“Headwaters”); and (2) his former
supervisor, Chris Basso. The complaint alleges that Headwaters fired Jones after he
sought workers compensation for a disabling hand injury he sustained while on the job
(Complaint, Doc. 1-1, pp. 1-3). Jones alleges that his termination was a violation of
clearly mandated public policies in the State of Illinois and the Illinois Workers’
Compensation Act, 820 ILCS 305/4(h) (Id.). As a result of the termination, Jones alleges
that he has lost substantial wages and benefits, has suffered emotion distress, and has
suffered injury to his reputation (Id.).
Served on November 14, 2016, Defendant Headwaters removed the case to this
Court, where it was randomly assigned to the undersigned, who now undertakes
threshold jurisdictional review. Defendant Basso was served on December 4, 2016, and
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is represented by the same counsel as Headwaters (Doc. 1 at 1). The removal notice
indicates that subject matter jurisdiction lies under the federal diversity statute (28
U.S.C. § 1332), which confers original jurisdiction over suits in which the amount in
controversy exceeds $75,000 (exclusive of interest and costs), and the action is between
citizens of different states.
The amount in controversy appears to suffice here. If the plaintiff's complaint
demands monetary relief of a stated amount, as long as that amount was asserted in
good faith, it is deemed to be the amount in controversy.

Dart Cherokee Basin

Operating Co., LLC v. Owens, -- U.S. --, 135 S. Ct. 547, 551 (2014); Mt. Healthy City
Board of Education v. Doyle, 429 U.S. 274, 276 (1977). In Carroll v. Stryker Corp., 658
F.3d 675, 780-81 (7th Cir. 2011), the Seventh Circuit clarified the proper approach to
determining whether the amount-in-controversy requirement has been satisfied. The
party seeking the federal forum bears the initial burden of establishing by a
preponderance of the evidence facts that suggest the jurisdictional amount has been
satisfied. Once the party makes that showing, "jurisdiction will be defeated only if it
appears to a legal certainty that the stakes of the lawsuit do not exceed $75,000." Id.,
citing Oshana v. Coca-Cola Co., 472 F.3d 506, 611 (7th Cir. 2006), and Back Doctors
Ltd. v. Metro. Prop. and Cas. Co., Inc., 637 F.3d 827, 830 (7th Cir. 2011).
Here, Plaintiff (as is the practice in Illinois state court) has not specifically
quantified his damages but seeks “damages in an amount in excess of $50,000,” and
Illinois law permits a prevailing plaintiff in a retaliatory discharge case to recover not
only compensatory damages (e.g., lost back pay, lost front pay, the value of lost
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benefits, damages for emotional distress, etc.) but also punitive damages (Doc. 1-1, p.4).
Thus the amount in controversy appears to suffice.
The issue here is whether the parties are completely diverse. The named parties,
in fact, are not. Plaintiff is an Illinois citizen. Defendant Headwaters is a citizen of
Delaware (incorporated there) and Utah (maintaining its principal place of business
there). But Defendant Basso – like Plaintiff – is an Illinois citizen. That means that the
parties are not fully diverse, and jurisdiction does not lie under Section 1332, unless
Basso was fraudulently joined - which is precisely what Defendant Headwaters
contends.
As further discussed below, a removing defendant must clear a high hurdle to
demonstrate fraudulent joinder. In Schwartz v. State Farm Mutual Auto Ins. Co., 174
F.3d 875, 878 (7th Cir. 1999), the United States Court of Appeals for the Seventh Circuit
explained that although a plaintiff is normally free to choose his own forum, he may not
join an in-state defendant solely to defeat diversity jurisdiction.

“Such joinder is

considered fraudulent, and is therefore disregarded, if the out-of-state defendant can
show there exists no ‘reasonable possibility that a state court would rule against the [instate] defendant.’” Id., quoting Poulos v. Naas Foods, Inc., 959 F.2d 69, 73 (7th Cir.
1992).
The Seventh Circuit reiterated this principle in Morris v. Nuzzo, 718 F.3d 660, 666
(7th Cir. 2013):
Under the fraudulent joinder doctrine …, an out-of-state defendant's right
of removal premised on diversity cannot be defeated by joinder of a
nondiverse defendant against whom the plaintiff's claim has “no chance of
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success.” Poulos v. Naas Foods, Inc., 959 F.2d 69, 73 (7th Cir.1992); see also
Walton v. Bayer Corp., 643 F.3d 994 (7th Cir. 2011); Schur v. L.A. Weight Loss
Centers, Inc., 577 F.3d 752 (7th Cir. 2009); Schwartz v. State Farm Mut. Auto.
Ins. Co., 174 F.3d 875 (7th Cir. 1999); Gottlieb v. Westin Hotel Company, 990
F.2d 323 (7th Cir. 1993). The doctrine is designed to “strike a reasonable
balance among the policies to permit plaintiffs the tactical prerogatives to
select the forum and the defendants they wish to sue, but not to reward
abusive pleading by plaintiffs, and to protect the defendants' statutory
right to remove.”1
Demonstrating fraudulent joinder in federal court is not easy.

To establish

fraudulent joinder, the removing defendant must show that, after resolving all issues of
fact and law in favor of the plaintiff, the plaintiff cannot establish any cause of action
against the in-state defendant. Morris, 718 F.3d at 666, citing Poulos, 959 F.2d at 73.
If the removing defendant can meet this “heavy burden,” … the federal
district court considering removal may “disregard, for jurisdictional
purposes, the citizenship of certain nondiverse defendants, assume
jurisdiction over a case, dismiss the nondiverse defendants, and thereby
retain jurisdiction.” Schur, 577 F.3d at 763. Because the district court may
“disregard” the nondiverse defendant, we have described the fraudulent
joinder doctrine as an “exception” to the requirement of complete
diversity. See Walton, 643 F.3d at 999.
Morris, 718 F.3d at 666.2

In Morris, 718 F3d at 665, the Court further declared: “A defendant
removing a case on diversity grounds must not only demonstrate that the
case satisfies the requirements of 28 U.S.C. § 1332(a), but must also clear
the ‘additional hurdle’ of 28 U.S.C. § 1441(b)(2), or the ‘forum defendant
rule.’ Hurley v. Motor Coach Industries, Inc., 222 F.3d 377, 378 (7th Cir.
2000).” That rule (nonjurisdictional in nature) provides that a civil action
otherwise removable solely on the basis of jurisdiction under section
1332(a) may not be removed if any party “properly joined and served” as
defendants is a citizen of the state in which the action is brought. Id.
1

An alternative test for fraudulent joinder looks for outright fraud in
plaintiff’s pleading of jurisdictional facts. Gottlieb v. Westin Hotel Co.,
990 F.2d 323, 327 (7th Cir. 1993).
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In the case at bar, the question is whether, after resolving all factual and legal
issues in Plaintiff’s favor, Plaintiff can establish any cause of action against Defendant
Basso (i.e., whether there exists “no reasonable possibility” that a state court would rule
against Basso on Plaintiff’s claims). Defendants (both represented by the same counsel)
have articulated their position – Illinois law allows a retaliatory discharge action only
against an employer, not against individual agents or employees -- in the removal
notice.

The Court DIRECTS Plaintiff to file a “Jurisdictional Memorandum”

addressing the fraudulent joinder issue by January 5, 2017.3 Defendants may file a 3page reply brief no later than January 19, 2017.
If the undersigned determines that Basso was fraudulently joined (i.e., diversity is
complete and subject matter jurisdiction lies), the case will be tracked and assigned a
firm trial date, which will trigger the entry of a Scheduling Order by Magistrate Judge
Donald Wilkerson. If the undersigned determines that Basso was not fraudulently
joined (i.e., federal subject matter jurisdiction is lacking), remand or dismissal for lack of
subject matter jurisdiction will be in order.
IT IS SO ORDERED.
DATED: December 15, 2016
s/ Michael J. Reagan
Michael J. Reagan
United States District Judge
The Jurisdictional Memorandum deadline does not toll the deadline
for filing a remand motion on any other ground. See, e.g., 28 U.S.C. §
1447(c) (a motion to remand based on procedural defects, i.e., defects
other than lack of subject matter jurisdiction, must be made within 30
days of filing of removal notice).
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