Soule v. LMZ, LLC

Filing 15

MEMORANDUM AND ORDER. The plaintiffs motion to remand (Dk. 9) is granted, but the plaintiffs request for fees and costs is denied. This case is immediately remanded to the District Court of Greenwood County, Kansas. The clerk of the court is directed to mail a certified copy of this order to the clerk of the District Court of Greenwood County, Kansas pursuant to § 1447(c). Signed by U.S. District Senior Judge Sam A. Crow on 4/2/2013. (bmw)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
GILBERT A. SOULE, a/k/a JERRY
SOULE, owner of JERRY’S TREE
CUTTING SERVICE,
Plaintiff,
vs.

Case No. 13-1056-SAC

LMZ, LLC,
Defendant.
MEMORANDUM AND ORDER
The case comes before the court on the plaintiff’s motion to
remand and request for attorneys’ fees for improper removal. (Dk. 9). The
plaintiff Jerry’s Tree Cutting Service (“Jerry’s”) filed this action in the District
Court of Greenwood County, Kansas, to collect $29,665.00, plus costs and
attorneys’ fees, as the balance owed on its billing for goods and cutting
services provided to the defendant LMZ, LLC (“LMZ”) from April through
June of 2012. (Dk. 1, pp. 5-7, 14-15). Before filing this action, Jerry’s filed a
mechanic’s lien on its claim of $29,665.00 in September of 2012 against real
property owned by the defendant LMZ in Greenwood County, Kansas. (Dk.
1, pp. 9-11). The state court petition seeks to foreclose on the mechanic’s
lien and, alternatively, seeks to the recover the balance in a breach of
contract claim and quantum meruit claim.

LMZ filed a notice of removal asserting it is a single-member
limited liability company and its member is a resident of Utah for purposes
of diversity jurisdiction. (Dk. 1, p. 2). LMZ also asserts the amount in
controversy exceeds $75,000 based on the following allegation:
11. Plaintiff alleges that he is owed $29,665.00 for tree cutting
services that he performed on LMZ’s real property, plus he seeks
attorneys’ fees, costs, and other unstated equitable relief the Court
deems appropriate. However, the object of the litigation is LMZ’s
property. Plaintiff claims a mechanic’s lien on the property and seeks
to foreclose it, forcing the property to be sold. The proper measure of
the amount in controversy is therefore the fair market value of the
property, which Greenwood County has appraised at $301,240.00.
(Dk. 1, p. 2).
The plaintiff moves to remand arguing first that the removal was
defective, because the notice filed in state court included an erroneous date.
The plaintiff argues second that the amount in controversy does not meet
the $75,000.00 threshold, because the plaintiff brings this action to recover
the balance owing and not to obtain declaratory or injunctive relief. The
plaintiff also seeks attorney fees under 28 U.S.C. § 1447(c), and it contends
that “[t]he intent of the statute is to reimburse a party, like Mr. Soule, who
has incurred expenses in attacking an insufficient removal.” (Dk. 10, p. 8).
LMZ responds that the error in the state court notice is so inadvertent and
trivial that it does not burden or prejudice the court or the removal process.
Proposing that the amount of controversy should be determined from the
pecuniary result to either party, LMZ characterizes the state action as having
the “predominant purpose” to foreclose on LMZ’s real property and that this

requested relief is “in the nature of a mandatory injunction” that would force
the sale of LMZ’s real property which is the object of the litigation. (Dk. 13,
p. 5). This leads LMZ to the conclusion that, “[b]ecause LMZ stands to lose
its real property if Plaintiff prevails in its foreclosure action and because the
object of Plaintiff’s foreclosure action is clearly LMZ’s property, the value of
LMZ’s property must be the measure of the amount in controversy.” Id. In
reply, the plaintiff denies seeking any declaratory or injunctive relief but
rather “is asking the court to award $29,665.00 for an unpaid bill and to be
allowed to foreclose the lien on the property if necessary in order to collect
payment from an out of state defendant.” (Dk. 14, p. 3). Finally, the plaintiff
asks for fees as “the defendant should have known that the amount in
controversy for collection of a debt of $29,665.00, based on the pleadings
was not in excess of $75,000.00.” Id. at 4.
“[A]ny civil action brought in a State court of which the district
courts of the United States have original jurisdiction may be removed by the
defendant . . . to the district court . . . embracing the place where such
action is pending.” 28 U.S.C. § 1441(a). A federal district court has original
“diversity” jurisdiction over an action between citizens of different states and
where the amount in controversy exceeds $75,000.00, exclusive of interest
and costs. 28 U.S.C. § 1332(a). “It is well-established that statutes
conferring jurisdiction upon the federal courts, and particularly removal
statutes, are to be narrowly construed in light of our constitutional role as

limited tribunals.” Pritchett v. Office Depot, Inc., 420 F.3d 1090, 1094-95
(10th Cir. 2005) (citation omitted). “Removal statutes are to be strictly
construed, and all doubts are to be resolved against removal.” Fajen v.
Found. Reserve Ins. Co., 683 F.2d 331, 333 (10th Cir. 1982). The removing
party bears the burden of establishing that removal jurisdiction exists.
McPhail v. Deere & Co., 529 F.3d 947, 953 (10th Cir. 2008). Thus, it falls to
the defendant here to prove the jurisdictional prerequisites of § 1332(a).
Martin v. Franklin Capital Corp., 251 F.3d 1284, 1289-90 (10th Cir. 2001). It
follows that “’the courts must rigorously enforce Congress’ intent to restrict
federal jurisdiction in controversies between citizens of different states,’
Miera v. Dairyland Ins. Co., 143 F.3d 1337, 1339 (10th Cir. 1998), and that
the presumption is therefore ‘against removal jurisdiction,’ Laughlin v. Kmart
Corp., 50 F.3d 871, 873 (10th Cir. 1995).” Id. at 1289.
After filing the notice of removal in this court on February 4,
2013, (Dk. 1), LMZ complied with 28 U.S.C. § 1446(d) in filing in the District
Court of Greenwood County, Kansas on February 6, 2013, a copy of this
notice as an attachment to its pleading entitled “Notice.” (Dk. 10-1, p. 1). In
that pleading, LMZ erroneously stated that the state case was “originally
filed in this Court [state district court] on March 21, 2012.” Id. Because the
“Notice” bore the proper state case caption, was filed in the proper state
case, and was accompanied by a copy of the notice of removal filed in
federal court, the “Notice” was fully effective for purposes of § 1446(d) even

though it contained a mistaken date on when the original state action was
filed. Such a mistake has no effect on the validity of the § 1446(d) notice
and is a purely technical error that does not require remand. Cf. Christenson
Media Group, Inc. v. Lang Industries, Inc., 782 F. Supp. 2d 1213, 1221-22
(D. Kan. 2011) (§ 1446(d) notice signed by an attorney not admitted in
Kansas is a “minor procedural defect()” that “does not justify remand.”). The
court rejects the plaintiff’s first argument for remand.
In their briefing of whether the amount in controversy exceeds
$75,000.00, the parties have not discussed the recently amended
procedures for removing certain civil actions. See Federal Courts Jurisdiction
and Venue Clarification Act of 2011 (“JVCA”), Pub.L. No. 112–63, § 103(b),
125 Stat 760, 762 (amending 28 U.S.C. § 1446).1 As amended by the JVCA,
section (c) to 28 U.S.C. § 1446 now lays out the procedural requirements for
removal based on diversity of citizenship. Of specific importance to the
present case is the language appearing at § 1446(c)(2), which reads:
(2) If removal of a civil action is sought on the basis of the jurisdiction
conferred by section 1332(a), the sum demanded in good faith in the

1

The JVCA took effect on January 6, 2012. As set out in a note to 28 U.S.C.
§ 1332, “Publ.L. 112-63, Title I, § 105, Dec. 7, 2011, 125 Stat. 762,
provided that: . . . the amendments made by this title . . . shall take effect
upon the expiration of the 30-day period beginning on the date of the
enactment of this Act [Dec. 7, 2011], and shall apply to any action or
prosecution commenced on or after such effective date.” For removal
actions, the commencement date is “the date the action or prosecution was
commenced, within the meaning of State law, in State court.” Id. The
plaintiff commenced the instant action in state court after January 6, 2012.

initial pleading shall be deemed to be the amount in controversy,
except that-(A) the notice of removal may assert the amount in controversy
if the initial pleading seeks-(i) nonmonetary relief; or
(ii) a money judgment, but the State practice either does
not permit demand for a specific sum or permits recovery
of damages in excess of the amount demanded; and
(B) removal of the action is proper on the basis of an amount in
controversy asserted under subparagraph (A) if the district court
finds, by the preponderance of the evidence, that the amount in
controversy exceeds the amount specified in section 1332(a).
The parties’ briefs do not cite nor apply this provision to their arguments.
This court recently discussed this provision in Butler v. Target Corporation,
2012 WL 5362974 (D. Kan. Oct 21, 2012), finding that the notice of removal
could assert the amount in controversy based on the Kansas practice
permitting recovery of damages in excess of the amount demanded. Thus,
removal “is proper on the basis of an amount in controversy asserted” in the
notice of removal “if the district court finds, by the preponderance of the
evidence, that the amount in controversy exceeds the amount specified in
section 1332(a).” 28 U.S.C. § 1446(c)(2)(B). The issue here does not turn
on the proof of jurisdictional facts but on the proper legal characterization of
this action for purposes of valuing the amount in controversy.
The court cannot fairly read the plaintiff’s petition in the strained
manner proposed by the defendant. The “predominant purpose” of the
plaintiff’s action is not to foreclose on LMZ’s real property or to seek
declaratory or injunctive relief that affects the rights to LMZ’s real estate.
Rather, the primary purpose of the plaintiff’s action is to collect an unpaid

debt for tree cutting services it performed on the defendant’s property. The
plaintiff’s objective is to recover its damages, that is, to have the defendant
pay the balance of the outstanding billing. The suit is not being brought to
recover an interest in, to settle title to, or to adjudicate respective rights to
the real property. Thus, the value of the land should not be included in the
amount in controversy. This conclusion is fully supported by the plain terms
of the complaint and by the case law revealed in the court’s research of this
issue.
In Lion Bonding & Surety Co. v. Karatz, 262 U.S. 77, 82 (1923),
Karatz was “an unsecured simple contract creditor” with a claim in the
amount of $2,100 against an insolvent insurance company with property
assets valued in excess of $20,000. Karatz filed a bill of equity that sought
to have his claim determined and declared a first lien upon the assets and to
have receivers appointed. Id. The Court held:
The only ground of jurisdiction alleged is diversity of citizenship.
The facts specifically stated show that the amount in controversy was
less than $3,000. Plaintiff’s claim against the company was $2,100. He
prayed that this debt be declared a first lien on the assets within the
state. His only interest was to have that debt paid. The amount of the
corporation’s assets, either within or without the state, is of no legal
significance in this connection. Nor is the amount of its debts to
others. The case is not of that class where the amount in controversy
is measured by the value of the property involved in the litigation.
Hunt v. New York Cotton Exchange, 205 U.S. 322, 335, 27 Sup. Ct.
529, 51 L.Ed. 821; Western & Atlantic R.R. v. Railroad Commission of
Georgia, 261 U.S. 264, 43 Sup. Ct. 252, 67 L.Ed.--, No. 195, decided
February 19, 1923.

262 U.S. at 85-86. The Supreme Court found that the amount in controversy
was set by the plaintiff’s claim which did not exceed the jurisdictional
amount. Id. at 86. This approach echoes the holding in Farmers’ Bank of
Alexandria v. Hooff, 32 U.S. 168, 170 (1833):
The bill was filed for the purpose of obtaining a decree for the sale of a
lot, on which a deed of trust had been given, to secure the payment of
a sum of money amounting with interest to less than $1000.
The appellant alleges, in support of the jurisdiction of the court,
that the real question is, whether the debtor be entitled to the lot, and
as that is worth more than $1000, this court may take jurisdiction,
though the sum claimed in the bill is less. The court is of a different
opinion. The real matter in controversy is the debt claimed in the bill;
and though the title of the lot may be inquired into incidentally, it does
not constitute the object of the suit.
Id. In the same vein as these Supreme Court decisions, the real matter in
controversy in the plaintiff Jerry’s suit is the collection of an outstanding bill
for services and goods provided. Jerry’s only interest in asserting a
mechanic’s lien and in seeking to have it enforced was to insure its recovery
from the out-of-state defendant according to this alternative remedy.
What the defendant argues in characterizing the plaintiff’s action
ignores the plain purpose of the plaintiff’s suit: the recovery of an unpaid
bill. The defendant cites no legal precedent for characterizing a simple
collection case as an action principally seeking injunctive relief or to quiet
title to real estate, simply because the plaintiff creditor seeks as an
alternative remedy the foreclosure of a mechanic’s lien. “A mechanic’s lien
action merely settles the claim of an unpaid mechanic or materialman, and

does not purport to settle or clear title to the property carrying the lien.”
Brooks v. United States, 833 F. 2d 1136, 1143 (4th Cir. 1987).
The case of Sapphire Beach Resort and Marina Condominium
Ass’n Revocable Trust v. Martin, 2008 WL 2074111 (D.V.I. May 13, 2008),
demonstrates how these debt actions are properly characterized. The
plaintiff trust, as the assignee of the association’s receivables that included
delinquent accounts of marina slip owners, sued for the recovery of
delinquent dues and charges and for the foreclosure of a statutory lien on
the marina slip owned by the defendant debtor. The defendant opposed
federal jurisdiction arguing the amount in controversy was the $13,930.76 in
delinquent payments or the amount of the lien, but the plaintiff insisted the
jurisdictional amount was met because the slip was valued over $75,000.
The court dismissed the case for lack of jurisdiction and offered this sound
reasoning:
The Trust argues that in debt and foreclosure actions, the jurisdictional
amount is determined by the value of the property to be foreclosed
rather than by the alleged amount due. To support this theory, the
Trust cites Black v. Jackson, 177 U.S. 349, 356, 20 S.Ct. 648, 44 L.Ed.
801 (1900), which held that “in determining the value of the matter in
dispute we should look at the value of the land, not simply at the value
of the right of present possession.”
The Trust's reliance on Black is misplaced. First, Black dealt with
title to real property as opposed to foreclosure of a lien on real
property. It is true that in actions for declaratory relief or to quiet title
to property, the value of the property is determinative of the amount
in controversy. See Hunt v. Washington State Apple Adver. Comm'n,
432 U.S. 333, 347, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977) (“In actions
seeking declaratory . . . relief, it is well established that the amountin-controversy is measured by the value of the object of the
litigation.”).

However, this is an action for debt and foreclosure. In an action
for debt and foreclosure, the amount in controversy is determined by
the debt claimed. See, e.g., Farmer's Bank of Alexandria v. Hooff, 32
U.S. 168, 170, 7 Pet. 168, 8 L.Ed. 646 (1833) (dismissing appeal for
lack of jurisdiction where the amount in controversy, the money owed
under the deed of trust, was less than the jurisdictional amount
although the value of the property exceeded the jurisdictional
amount).
In Farmer's Bank, an action was filed to foreclose on a deed of
trust on a lot, which was given to secure the payment of a sum of
money. Id. The sum secured by the deed of trust was less than
$1,000, which was the jurisdictional amount at the time. The appellant
argued that there was jurisdiction because the value of the lot was in
excess of $1,000. Id. The Court held that “[t]he real matter in
controversy is the debt claimed in the bill; and though the title of the
lot may be inquired into incidentally, it does not constitute the object
of the suit.” Id.
Although the Trust's complaint alleges that the good faith value
of the slip exceeds $75,000, title to the slip is not in dispute, nor is the
Trust seeking a superior title to the slip. Rather, the Trust seeks to
foreclose on a lien against the slip. The amount in controversy,
therefore, is the debt of $13,930.76. See id. As such, it appears to a
legal certainty that the Trust's claim is less than the required minimum
jurisdictional amount. Accordingly, the Court lacks subject matter
jurisdiction over this action.
2008 WL 2074111 at *2-*3. The same reasoning applies with equal force on
the facts here. The amount in controversy is not the value of the defendant’s
real property that is the subject of a mechanic’s lien, but it is the unpaid bills
and associated costs and fees allegedly owed by the defendant. Thus, the
court finds that the defendant LMZ has not met its burden of establishing the
jurisdictional prerequisites of § 1332(a), as the amount in controversy does
not exceed $75,000. Lacking subject matter jurisdiction of this action, the
court grants the plaintiff’s motion to remand.

The plaintiff summarily requests fees and costs pursuant to 28
U.S.C. § 1447(c) arguing that the present case fits the intended scope of the
statute and that the defendant should have known the amount in
controversy as pleaded did not meet the jurisdictional requirement. “’Absent
unusual circumstances, courts may award attorney’s fees under § 1447(c)
only where the removing party lacked an objectively reasonable basis for
seeking removal. Conversely, when an objectively reasonable basis exists,
fees should be denied.’” Porter Trust v. Rural Water Sewer and Solid Waste
Management Dist. No. 1, 607 F.3d 1251, 1253 (10th Cir. 2010) (quoting
Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005)). The plaintiff’s
cursory request and briefing fail to show the lack of any objective reasonable
basis in the defendant’s asserted grounds for seeking removal. The plaintiff’s
request for fees and costs is denied.
IT IS THEREFORE ORDERED the plaintiff’s motion to remand
(Dk. 9) is granted, but the plaintiff’s request for fees and costs is denied;
IT IS FURTHER ORDERED that this case is immediately
remanded to the District Court of Greenwood County, Kansas. The clerk of
the court is directed to mail a certified copy of this order to the clerk of the
District Court of Greenwood County, Kansas pursuant to § 1447(c).
Dated this 2nd day of April, 2013, Topeka, Kansas.

s/ Sam A. Crow
Sam A. Crow, U.S. District Senior Judge