Lang et al v. Mattison et al
Filing
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MEMORANDUM OPINION & ORDER: ORDERED that the plaintiffs' motion to remand [Record No. 5 ] is DENIED. Signed by Judge Danny C. Reeves on 5/14/2013.(RBB)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
SOUTHERN DIVISION
(at London)
MICHAEL LANG, et al.,
Plaintiffs/Counterclaim
Defendants,
V.
JAMES MATTISON, et al.,
Defendants/Counterclaim
Plaintiffs.
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Civil Action No. 6: 13-038-DCR
MEMORANDUM OPINION
AND ORDER
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This matter is pending for consideration of the motion to remand by Plaintiffs and
Counterclaim Defendants Michael Lang, Bobie Patton, and Sunrise Automotive, LLC
(collectively “plaintiffs”). [Record No. 5] For the reasons discussed below, the motion will be
denied.
I.
Plaintiffs Michael Lang and Bobie Patton restore, market and refurbish vintage Pontiac
Trans Ams through their business Sunrise Automotive, LLC (“Sunrise”). [Record No. 6, p. 1]
Sunrise is a limited liability company, incorporated and formed pursuant to Kentucky law. Lang
and Patton are both citizens and residents of Laurel County, Kentucky. [Record No. 1-2, p. 1]
Defendant James Mattison is a citizen of Michigan. He also restores and markets classic cars
through a Michigan corporation, PHS Muscle Cars, LLC (“PHS”). [Id.] Additionally, Mattison
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is involved in a separate Michigan corporation, Pontiac Historic Services, which authenticates
vintage cars by providing historical background and VIN numbers. [Id.]
This matter stems from transactions between these parties and “other car enthusiasts.”
[Record No. 6, p. 2] The Complaint alleges that, over the past two years, Sunrise “has been
operating under an oral agreement with [Pontiac] for both the purchase of automotive bodies,
parts and supplies as well as the advertising and sales of its Trans Ams.” [Record No. 1-2, p. 4]
The plaintiffs allege that Defendant Mattison interfered in a deal that Sunrise had with a Trans
Am owner to restore his vehicle. The plaintiffs assert that in December 2012, Mattison
contacted the Trans Am owner and advised him that he was being “conned” by Sunrise, which
caused the owner to cancel a contract with Sunrise without further payment. This restoration
process would have been taped, and the plaintiffs contend that there were plans to air the
restoration on a national cable channel.
On December 28, 2012, the plaintiffs filed this action, alleging breach of contract,
common law defamation, and tortious interference. And on January 7, 2013, the plaintiffs filed
a First Amended Complaint regarding additional transactions between the parties. They added
a claim for “Breach of Contract - Quantum Meruit.” [Record No. 1-3, p. 3] The defendants
answered and counterclaimed, requesting an accounting and asserting claims for: breach of
fiduciary duties; fraudulent or negligent misrepresentation; breach of contract; and conversion.
Additionally, they requested an award of punitive damages. [Record No. 1-4] Following the
filing of their answer and counterclaim, the defendants removed the action to this Court based
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on diversity of citizenship pursuant to 28 U.S.C. § 1332. After the plaintiffs filed the motion to
remand, the defendants filed an Amended Notice of Removal. [Record No. 8]
The plaintiffs seek to remand the case to state court for two reasons. First, they argue that
the defendants have failed to perfect removal in accordance with the procedural requirements
of 28 U.S.C. § 1446(a) and (d). The plaintiffs also argue that by filing the counterclaim, the
defendants waived removal and submitted to the jurisdiction of the state court.
II.
The statute authorizing removal, 28 U.S.C. § 1441, provides that an action is removable
only if it could have been brought initially in federal court. In determining the appropriateness
of remand, a court must consider whether federal jurisdiction existed at the time the removing
party filed the notice of removal. Ahearn v. Charter Twp. of Bloomfield, 100 F.3d 451, 453 (6th
Cir. 1996). Although a district court must remand a case if it lacks subject matter jurisdiction,
the court is not required to raise issues of timeliness or other procedural requirements sua sponte.
See, e.g., May v. Johnson Controls, Inc. 440 F. Supp. 2d 879, 881 (W.D. Tenn. 2006). Instead,
the burden is on the non-removing party to raise these arguments within thirty days of the filing
of the notice of removal. 28 U.S.C. § 1447(c); see Grudzinski v. Staren, 87 F. App’x 508, 512
(6th Cir. 2004) (noting that “untimely removal is a procedural rather than a jurisdictional
defect”).
Once the non-removing party moves to remand based on a procedural defect, the statutory
procedures for removal are to be strictly construed and any doubts concerning jurisdiction should
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be resolved in favor of remand. Sygenta Crop Prot., Inc. v. Henson, 537 U.S. 28, 32 (2002); Her
Majesty the Queen in Right of Province of Ontario v. Detroit, 874 F.2d 332, 339 (6th Cir. 1989).
III.
A.
Removal Requirements
As an initial matter, the Court must address whether this action should be remanded
because the defendants failed to perfect removal in accordance with 28 U.S.C. § 1446. The
plaintiffs allege that the defendants failed to: (1) file a copy of the notice with the clerk of the
State court, as required by 28 U.S.C. 1446(d); (2) attach a copy of the summons to the notice of
removal; and (3) adequately allege diversity of citizenship, by mentioning only Mattison’s
residence.
1.
Notifying State Court of Removal
The first defect in removal is the defendant’s failure to file a notice of removal with the
Laurel County Circuit Court upon removal of the action to federal court. However, the
defendants assert that they filed a notice of removal with the state court on March 25, 2013, after
realizing that they failed to do so when the action was first removed on February 20, 2013.
Thus, they argue that any “concurrent jurisdiction” between the state court and this Court was
cured once the notice of removal was filed with the state court.
The statutory requirements of removal include that the removing party provide notice to
the adverse parties and to the state court. Specifically:
Promptly after the filing of such notice of removal of a civil action the defendant
or defendants shall give written notice thereof to all adverse parties and shall file
a copy of the notice with the clerk of such State court, which shall effect the
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removal and the State court shall proceed no further unless and until the case is
remanded.
28 U.S.C. § 1446(d). The requirement of notice to the state court “is an important part of the
removal process and has been held necessary to terminate the state court’s jurisdiction.”
Resolution Trust Corp. v. Nernberg, 3 F.3d 62, 69 (3d Cir. 1993). Before notice is given to the
state court upon removal, jurisdiction over the case is somewhat uncertain, due to the possibility
that the state and federal court have concurrent jurisdiction. See 14C Charles A. Wright, et al.,
Federal Practice & Procedure §§ 3736-3737 (1985) (explaining the different approaches in
interpreting Section 1446(d) and when state court jurisdiction terminates upon removal).
The plaintiffs argue that the case should be remanded because the defendants did not
notify the state court of the removal until a month after the Notice of Removal was filed with this
court. However, this defect was cured by the notice filed in state court on March 25, 2013.
Other courts have denied similar motions to remand on the same basis, taking into account the
“technical” nature of the defect, as long as the defendant has promptly cured the defect. See,
e.g., Fayre v. High’s of Baltimore, 541 F. Supp. 2d 752, 754 (D. Md. 2008) (denying motion to
remand where the notice of removal was not filed with the state court because of the technical
nature of the objection and the defendant’s prompt curing of the defect); see also Bohanna v.
Hartford Life & Accident Ins. Co., 848 F. Supp. 2d 1009 (W.D. Mo. 2012) (stating that remand
was not warranted due to the defendants’ 67-day delay in filing the notice of removal with the
state court). Although it would have been preferable had the defendants notified the state court
of the removal concurrently with the federal court, this defect does not require remand in this
case because removal was eventually effected on March 25, 2013. The plaintiffs concede that
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no definitive case law in the Sixth Circuit requires remand where this type of procedural defect
was eventually cured. Additionally, as the defendants point out, no activity took place in the
Laurel County Circuit Court during the delay. Therefore, any concurrent jurisdiction did not
affect the case. In addition, the plaintiffs have shown no prejudice resulting from the temporary
delay in effecting removal. Accordingly, the Court will not remand the case due to the
defendants’ delay in filing the notice of removal with the state court.
2.
Diversity of Citizenship
The plaintiffs also argue that the defendants have failed to properly allege diversity of
citizenship because they only mention the residency of Defendant Mattison. The defendants
respond that their amended notice of removal cured this defect by confirming that Mattison is
not only a permanent resident of the state of Michigan, but also a citizen of the state of Michigan.
[Record No. 8, p. 1]
Allegations of residency alone are generally insufficient to establish “citizenship” for the
purposes of diversity jurisdiction. Deasy v. Louisville & Jefferson Cty. Metro. Sewer Dist., 47
F. App’x 726, 728 (6th Cir. 2002). However, an amended pleading may cure defective
allegations of jurisdiction outside of the 30-day time period prescribed by 28 U.S.C. § 1446(b)(1)
where the amendment “corrects only a defective allegation and does not provide a new
jurisdictional ground.” Jackson v. Met. Life Ins. Co., 433 F. Supp. 707 (E.D. Ky. 1977); see also
28 U.S.C. 1653 (“Defective allegations of jurisdiction may be amended, upon terms, in the trial
or appellate courts.”).
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In this case, the plaintiffs do not maintain that the Court lacks subject matter jurisdiction
over the matter. Instead, they simply find fault with the defendant’s allegations of citizenship.1
Accordingly, the Court concludes that the amendment to the Notice of Removal adequately
cured the defective pleading. Thus, the matter will not be remanded on this basis.
3.
Failure to Attach Summons
The plaintiffs also argue that the defendants’ failure to attach the summons from the state
court is a deficiency requiring remand. They argue that “[t]his is particularly true where
Defendants raise questions within that same notice as to whether this Court has personal
jurisdiction over the parties.” [Record No. 6, p. 5] The defendants again respond that this
“inadvertent omission” was cured by the Amended Notice of Removal, which attached the
missing summons. Although the defendants were required to file a copy of all process pleadings
and orders, 28 U.S.C. § 1446(a), the Amended Notice of Removal attaches the missing
summons. The plaintiffs’ concern that the Court “would [] be unable to judge the validity of
Defendant’s newly raised defense where the service of summons could not be verified” is now
moot. [Record No. 11, p. 3] In addition, the plaintiffs have not alleged that the amended notice
fails to cure the original defect. Accordingly, this is no longer an appropriate basis for remand.
B.
Counterclaim
The plaintiffs also contend that the defendants waived their right of removal be filing a
counterclaim in state court. They argue that the counterclaims arose out of “a discrete
transaction that is distinct from the subject of Plaintiffs’ complaint and amended complaint.”
1
The plaintiffs allege in the complaint that “Defendant James A. Mattison is, and was at all
times relevant, a citizen and resident of the state of Michigan.” [Record No. 1-2, p. 2]
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[Record No. 11, pp. 5-6] And in particular, they argue that the counterclaims go beyond the
scope of the Complaint and First Amended Complaint. The defendants counter that remanding
because of the asserted counterclaims would be improper because there is no Sixth Circuit
precedent regarding this issue. [Record No. 9, p. 3] Alternatively, the defendants argue that
their counterclaims were compulsory counterclaims, not permissive, and that they had no intent
to waive their right of removal by asserting the claims.
Although the Sixth Circuit has not addressed the issue, other courts have held that a party
who voluntarily submits to the jurisdiction of a state court by filing a permissive counterclaim
waives its right to removal. Sood v. Advanced Computer Techniques Corp., 308 F. Supp. 239,
240 (E.D. Va. 1969) (holding that the filing of a voluntary counterclaim in state court constituted
waiver of the right to removal because the defendant had “invoked the jurisdiction of the court
in the same action, and by invoking, submitted to it”). Courts following this approach make
clear that, if the counterclaim in question is compulsory rather than permissive, the filing does
not waive a party’s right to remove the action to federal court. Cal. Republican Party v. Mercier,
652 F. Supp. 928, 931 (C.D. Cal. 1986).
Under the Federal Rules of Civil Procedure, a counterclaim is compulsory where it
“arises out of the transaction or occurrence that is the subject matter of the opposing party’s
claim” and “does not require adding another party over whom the court cannot acquire
jurisdiction.” Fed. R. Civ. P. 13(a). An opposing party’s failure to plead a compulsory
counterclaim “forever bars that party from raising the claim in another action.” Sanders v. First
Nat. Bank & Trust Co., 936 F.2d 273, 277 (6th Cir. 1991) (internal citation omitted). A
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permissive counterclaim is simply any claim against an opposing party that is not compulsory.
Fed. R. Civ. P. 13(b). “The Sixth Circuit applies the ‘logical relationship’ test for determining
whether a claim arises out of the same transaction or occurrence.” Sanders, 936 F.2d at 277.
Under that test, the Court determines “whether the issues of law and fact raised by the claims are
largely the same and whether substantially the same evidence would support or refute both
claims.” Id.
The plaintiffs argue that the defendants “have gone beyond the original and first amended
complaints to seek recovery for a supposed loan that occurred between the parties” and that the
claims asserted “arose at different times and purportedly involve different vehicles.” [Record
No. 6, p. 7] They further argue that the defendants want to “have their cake and eat it too” and
that this “does not comport with the intent of the removal statutes.” [Id.]
The plaintiffs’ claims of breach of contract, common law defamation, tortious
interference, and breach of contract – quantum meruit arise out of a two-year oral agreement
with Defendant PHS “for the purchase of automotive bodies, parts and supplies as well as the
advertising and sales of its Trans Am.” [Record No. 1-2, p. 4] The business relationship
apparently began sometime in 2010. In addition, the factual allegations relied upon in the
Complaint include a June 2012 agreement to restore a 1969 Trans Am, as well as defamatory
statements allegedly made by Defendant Mattison on December 21, 2012. The facts added by
the First Amended Complaint include two transactions, beginning in December 2011, regarding
restorations of two Pontiac Trans Ams.2 The counterclaims — demand for accounting, breach
2
The Trans Ams had VIN Numbers of 2W87K9N114662 and 2W87Z9N113741.
Presumably, these are the vehicles identified in Defendants’ counterclaim as Stock #4 and Stock
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of fiduciary duties, fraudulent or negligent misrepresentation, breach of contract, and conversion
— rely on facts regarding the same two vehicles, the restoration of which began in 2011, and
factual allegations regarding loans involving several transactions between the parties occurring
in 2011 and 2012.3 [Record No. 1-4]
The Court is persuaded by the defendants’ argument that “the waiver of Defendants’ right
to remove should not be so lightly inferred [where there is a razor-thin call regarding the nature
of the counterclaims], particularly in the absence of any controlling authority in this circuit
regarding the legal arguments” supporting remand. [Record No. 9, p. 7] First, at least a portion
of the claims and counterclaims arise out of the same transaction or occurrence, specifically
regarding the invoices for $46,000 that are relied upon by each of the parties.4 Both the plaintiffs
and the defendants have alleged that the opposing parties breached their contracts regarding the
restoration of these two vehicles. Thus, at the very least, a portion of the defendants’
counterclaim was compulsory. In addition, in defending the plaintiff’s defamation claim, the
defendants will rely upon evidence from their business relationship, including the alleged
contracts that make up the basis of the plaintiff’s claims.5 Thus, the defendants have shown that
#11. [Record No. 1-4, p. 11]
3
The defendants’ counterclaim more specifically addresses the parties’ business dealings over
the last several years, including conversations between the parties.
4
The Court has found no authority regarding waiver of right to remove where there are
“mixed” counterclaims, i.e., both compulsory and mandatory claims together in a counterclaim.
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The defendants have stated that the parties’ business relationship “is certainly relevant in
demonstrating that the statements in question made by Defendant Mattison to a third party were
entirely privileged and therefore immune from suit for defamation.” [Record No. 9, p. 5 n.3] In
addition, the defendants’ argument that the allegedly defamatory statements were true will require
further exploration of the parties’ business relationship.
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“substantially the same evidence would support or refute both claims.” Sanders, 936 F.2d at
277.
IV.
The majority of the plaintiffs’ arguments supporting remand were procedural defects that
were cured by the defendants’ Amended Notice of Removal. Additionally, the plaintiffs
argument regarding the defendants’ counterclaim does not necessitate remand in this case.
Accordingly, it is hereby
ORDERED that the plaintiffs’ motion to remand [Record No. 5] is DENIED.
This 14th day of May, 2013.
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