Kennedy et al v. Croft, LLC et al

Filing 28

ORDER & REASONS re plas' 13 Motion to Remand to State Court: IT IS HEREBY ORDERED that plas' Motion to Remand to State Court is GRANTED IN PART and DENIED IN PART and this action is REMANDED for further proceedings in the Seventeenth Jud icial District Court for the Parish of Lafourche, State of Louisiana; IT IS FURTHER ORDERED that Plaintiffs request for fees and costs pursuant to 28 U.S.C. 1447(c) is DENIED. Signed by Judge Nannette Jolivette Brown on 7/3/2013. (Attachments: # 1 Remand Letter) (rll, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
BUFFY KENNEDY, et al.

CIVIL ACTION

VERSUS

NO. 13-0043

CROFT, LLC, et al.

SECTION: “G”(3)

ORDER AND REASONS
Before the Court is Plaintiffs Buffy Kennedy and Bruce Kennedy's (collectively, "Plaintiffs")
Motion to Remand to State Court,1 wherein Plaintiffs also seek an award of attorney's fees, costs,
and expenses due to the alleged improper removal. After considering the Petition for Damages, the
pending motion, the memorandum in support, the opposition, the reply, the record, and the
applicable law, the Court will grant in part and deny in part the pending motion, remanding this
action to state court, but denying Plaintiffs' request for certain fees and costs.
I. Background
A. Factual Background
In the Petition for Damages, Plaintiffs name four parties as defendants: (1) Croft, LLC
("Croft"); (2) Quality Construction of Lafourche, LLC ("Quality"); (3) Dufrene Building Materials,
Inc. ("Dufrene"); and (4) North Light Specialty Insurance Company ("North Light").2 Plaintiffs aver
that at all relevant times, they "were the owners of and contracted with Quality Construction of
Lafourche, LLC to build their family residence," and entered into a Contract of Construction with
Quality on or about November 15, 2008.3

1

Rec. Doc. 13.

2

Rec. Doc. 1-2 at ¶ 1.

3

Id. at ¶ 2.

Croft was the manufacturer of the windows that were incorporated into the home built by
Quality; Plaintiffs claim that these windows were "defective or otherwise insufficient for the
purposes intended and which product failed in its normal and anticipated use."4 Plaintiffs explain
that Dufrene was the alleged supplier and seller of the Croft manufactured windows "and as such
is liable to the purchaser pursuant to Louisiana Civil Code Articles 2520, et seq., and particularly
Louisiana Civil Code Article 2545."5 Plaintiffs specifically claim that Quality is subject to liability
under "Louisiana Revised Statute § 9:3141, et seq., namely the New Home Warranty Act," for using
the allegedly defective windows, and therefore breaching its contract with Plaintiffs.6
As a result of these alleged defects, Plaintiffs claim that their home "leaked and retained
water condensation in the walls leading to water rot and the development of mold and bacteria,
which causes respiratory difficulties and other medical problems for the plaintiffs as well as property
damage."7 Finally, Plaintiffs argue that North Light, as their homeowner's insurance carrier, is liable
under Louisiana Revised Statutes §§ 22:1892 and 22:1973 for failing to properly adjust their claim
and improperly withholding payments in connection with the damages caused at least in part by
these alleged construction defects.8

4

Id. at ¶ 3.

5

Id. at ¶ 4.

6

Id. at ¶¶ 5, 7.

7

Id. at ¶ 10.

8

Id. at ¶ 12.

2

B. Procedural Background
Plaintiffs filed a Petition for Damages in this matter in the Seventeenth Judicial District
Court for the Parish of Lafourche, State of Louisiana, on November 30, 2012.9 On January 8, 2013,
North Light filed a Notice of Removal, pursuant to 28 U.S.C. § 144110 North Light premises removal
on the basis of diversity, alleging that the two non-diverse defendants, Quality and Dufrene, were
improperly joined, and therefore do not defeat diversity jurisdiction.11 Further, North Light argues
that "the claims from the 2008 construction of the home of Plaintiffs against [Croft, Dufrene, and
Quality] do not defeat diversity. The claims have nothing to do with Plaintiffs' August 29, 2012
windstorm claim against North Light.12
On February 4, 2013, Plaintiffs filed the pending motion to remand.13 On February 14, 2013,
North Light filed an opposition.14 With leave of court, Plaintiffs filed a reply on February 25, 2013.15
II. Parties' Arguments
In support of the pending motion, Plaintiffs argue that this court does not have subject matter
jurisdiction because Quality and Dufrene are citizens of Louisiana, as are Plaintiffs, and therefore

9

10

Id.
Rec. Doc. 1 at p. 2.

11

Id. at p. 3 (citing Burden v. Gen Dynamics Corp., 60 F.3d 213, 217-18 (5th Cir. 1995)). In the Notice of
Removal, North Light failed to properly allege the citizenship of all parties and this Court ordered it to amend the Notice
of Removal. Rec. Doc. 23. North Light complied with this order on May 10, 2013. Rec. Doc. 24.
12

Id. at p. 4.

13

Rec. Doc. 13.

14

Rec. Doc. 15.

15

Rec. Doc. 21.

3

complete diversity does not exist.16 In addition, Plaintiffs argue that removal was defective because
North Light did not obtain the consent of Quality or Dufrene prior to filing the Notice of Removal,
in violation of 28 U.S.C. § 1446(a).17
Further, Plaintiffs contend that North Light cannot meet its burden of proof to establish that
Quality and Dufrene were fraudulently or improperly joined, as to sustain federal subject matter
jurisdiction.18 Plaintiffs acknowledge that they seek damages from Quality and Dufrene that "relate
to the 2008 construction of their home," and seek damages against North Light in regard to "the
August 29, 2012 hurricane claim," but argue that "[t]he damages related to the leaking windows
were not discovered until 2012 and the claim for damages is properly brought with the claim against
North Light."19 Plaintiffs maintain that:
In the instant case, joinder of the claims against the non-diverse defendants does not
amount to egregious misjoinder, and there is more than a palpable connection
between the claims and parties joined. The claim for damages asserted by the
plaintiffs in this suit is for the overall damage to their residence caused in part by
defective leaking windows and through faulty workmanship upon installation. While
the cause of the damage may stem from different sources, the overall damage itself
is a quantifiable singular sum which may be apportioned among the defendants
according to their individual responsibility for those damages. Further, while some
defendants may be liable in contract and others in tort, the question of how the
plaintiffs' damages are to be apportioned among the defendants is a factual question
which will be resolved by the trier of fact after presentation of evidence as to the
causation of each item of damage claimed by plaintiffs. Thus, there are overlapping
common factual and legal issues.20

16

Rec. Doc. 13-1 at p. 3. According to North Light's supplement to the Notice of Removal, Quality is a limited
liability company, whose sole member is a citizen of Louisiana, and Dufrene is a Louisiana corporation with its principal
place of business in Louisiana. Rec. Doc. 24.
17

Rec. Doc. 13-1 at p. 4.

18

Id. at p. 5.

19

Id. at p. 6.

20

Id. at p. 9.

4

Plaintiffs further argue that under state and federal law, the joinder of these claims is permissible.21
Finally, Plaintiffs request costs, expenses, and attorney fees associated with the alleged improper
removal, pursuant to 28 U.S.C. § 1447(c).22
In opposition to the pending motion, North Light argues that under Fifth Circuit precedent,
the requirement of unanimity of consent for removal by a co-defendant is not applicable where the
removing party contends the co-defendant is improperly joined.23 Further, North Light reiterates its
argument that the cause of action against it and the other defendants is not proper here because
courts have recognized that claims for insurance policy and payments and claims on construction
contracts are separate.24
In reply, Plaintiffs direct the Court to two decisions from district courts within this Circuit,
where the courts allegedly held that claims against the homeowner insurance company, like North
Light, and the construction companies, were properly brought in the same suit.25 Plaintiffs therefore
conclude that "[a]lthough Plaintiffs’ damages may have been ongoing from the time of the defective
repair, they did not become evident until Hurricane Isaac. The claims against the contractor
defendants and North Light are so intertwined that they both contributed to the sum total of the
plaintiffs’ injuries."26

21

Id. at pp. 10-11.

22

Id. at pp. 12-13.

23

Rec. Doc. 15 at p. 3 (citing Rico v. Flores, 481 F.3d 234, 239 (5th Cir. 2007)).

24

Id. at pp. 4-5.

25

See Rec. Doc. 21 at pp. 2-4 (citing Zeber v. E.L. Cretin, L.L.C., No. 10-89, 2010 WL 5856063 (W.D. La.
Nov. 30, 2010); Hospitality Enters., Inc. v. Westchester Surplus Lines Ins. Co., No. 11-234, 2011 WL 1303954 (E.D.
La. Mar. 31, 2011) (Fallon, J.)).
26

Id. at p. 4.

5

III. Law and Analysis
A. Consent to Removal
As an initial matter, Plaintiffs seek remand claiming that North Light's Notice of Removal
was defective because it did not receive the consent of Quality or Dufrene, who had been served at
the time of removal.27 Pursuant to 28 U.S.C. § 1446(b)(2)(A), "[w]hen a civil action is removed
solely under section 1441(a), all defendants who have been properly joined and served must join
in or consent to the removal of the action."28 However, as North Light notes, the Fifth Circuit has
expressly held that "a removing party need not obtain the consent of a co-defendant that the
removing party contends is improperly joined."29 As North Light claims that Quality and Dufrene
were improperly joined, and they were the only properly served defendants at the time of removal,
North Light's failure to receive their consent does not create a defect in removal.
B. Improper or Fraudulent Joinder
Even though North Light's Notice of Removal was not defective for failure to receive the
consent of Quality and Dufrene, unless these parties were improperly joined, this Court does not
have subject matter jurisdiction. The Fifth Circuit has acknowledged two ways to establish
fraudulent or improper joinder: "(1) actual fraud in the pleading of jurisdictional facts, or (2)
inability of the plaintiff to establish a cause of action against the non-diverse party in state court."30
North Light has not argued actual fraud, so the second option is the only theory before the Court.

27

See Rec. Doc. 13-1 at p. 4

28

28 U.S.C. § 1446(b)(2)(A) (emphasis added).

29

Rico, 481 F.3d at 239 (citing Jerrigan v. Ashland Oil Inc., 989 F.3d 812, 815 (5th Cir. 1993)).

30

Smallwood v. Illinois Cent. R. Co., 385 F.3d 568, 573 (5th Cir. 2004).

6

For a defendant to prevail on this theory, it must prove “that there is no possibility of
recovery by the plaintiff against an in-state [or non-diverse] defendant[. S]tated differently [this]
means that there is no reasonable basis for the district court to predict that the plaintiff might be able
to recover against an in-state [or non-diverse] defendant.”31
A district court may resolve this inquiry in two manners. First, the court may conduct a Rule
12(b)(6) inquiry by looking at the allegations in the pleading.32 Second, in rare cases where a
plaintiff has "misstated or omitted discrete facts that would determine the propriety of joinder," the
district court "may, in its discretion, pierce the pleadings and conduct a summary inquiry."33 The
Fifth Circuit has been clear that such a "summary inquiry," while within the discretion of the district
court, is not favored:
While the decision regarding the procedure necessary in a given case must lie within
the discretion of the trial court, we caution that a summary inquiry is appropriate
only to identify the presence of discrete and undisputed facts that would preclude
plaintiff's recovery against the in-state defendant. In this inquiry the motive or
purpose of the joinder of in-state defendants is not relevant. We emphasize that any
piercing of the pleadings should not entail substantial hearings. Discovery by the
parties should not be allowed except on a tight judicial tether, sharply tailored to the
question at hand, and only after a showing of its necessity. Attempting to proceed
beyond this summary process carries a heavy risk of moving the court beyond
jurisdiction and into a resolution of the merits, as distinguished from an analysis of
the court's diversity jurisdiction by a simple and quick exposure of the chances of the
claim against the in-state defendant alleged to be improperly joined. Indeed, the
inability to make the requisite decision in a summary manner itself points to an
inability of the removing party to carry its burden.34

31

Id.

32

Id.

33

Id. (emphasis added).

34

Id. at 573-74

7

1. Fraudulent Misjoinder
Here, North Light does not dispute that Plaintiffs have stated a claim upon which relief can
be granted against it. Rather, North Light argues that its claims have been wrongly coupled with
those against the other defendants, mainly Quality and Dufrene – non-diverse defendants that would
destroy diversity. Therefore, North Light argues that Plaintiffs have "fraudulently misjoined" the
claims against it with the other defendants.
The theory of "fraudulent misjoinder" was first adopted by the United States Court of
Appeals for the Eleventh Circuit in Tapscott v. MS Dealer Serv. Corp.35 In Tapscott, the Eleventh
Circuit noted that under Federal Rule of Civil Procedure 20, joinder of defendants is proper when
"(1) a claim for relief assert[s] joint, several, or alternative liability and aris[es] from the same
transaction, occurrence, or series of transactions or occurrences, and (2) [contains] a common
question of law or fact."36 The Eleventh Circuit then concluded that:
Misjoinder may be just as fraudulent as the joinder of a resident defendant against
whom a plaintiff has no possibility of a cause of action. A defendant's "right of
removal cannot be defeated by a fraudulent joinder of a resident defendant having
no real connection with the controversy." Wilson v. Republic Iron & Steel Co., 257
U.S. 92, 97, 42 S.Ct. 35, 37, 66 L.Ed. 144 (1921) .... We hold that the district court
did not err in finding an attempt to defeat diversity jurisdiction by fraudulent joinder.
We do not hold that mere misjoinder is fraudulent joinder, but we do agree with the
district court that Appellants' attempt to join these parties is so egregious as to
constitute fraudulent joinder.37
The Fifth Circuit has yet to adopt the theory of "fraudulent misjoinder," but has mentioned
the theory in several cases, and "many district courts within the Fifth Circuit have applied the theory

35

77 F.3d 1353, 1360 (11th Cir. 1996).

36

Id.

37

Id. (emphasis added).

8

of fraudulent misjoinder reasoning that the Fifth Circuit has indicated its willingness to adopt the
theory."38 In Zeber v. E.L. Cretin, L.L.C., the Middle District of Louisiana addressed this theory.
There, the plaintiffs had originally filed suit is state court against several construction companies
and installers, some of whom were non-diverse, for allegedly using Chinese drywall in the
construction of plaintiffs' home.39 In addition, the plaintiffs brought claims against their own
homeowner's insurer, Safeco, a party diverse to the plaintiffs.40 Safeco removed, claiming that its
claims were "egregiously misjoined" with the other defendants because "no overlapping or common
questions of fact or related issues of law between plaintiffs' contract-based claims against their
homeowner's insurer and their tort-based claims against the builder/supplier defendants [existed]."41
The Zeber court recognized that under the Tapscott analysis even if a court finds joinder was
improper, it should still remand unless "the misjoinder was so egregious as to warrant a finding of
fraudulent misjoinder."42 Moreover, the Zeber court acknowledged that district courts within this
Circuit have split on whether the federal or state rules of joinder should apply.43 The court rejected
Safeco's arguments and remanded the action to state court, reasoning:
Plaintiffs' claims against the builder/supplier defendants arise out of the same factual
circumstances as their claims against Safeco and their claim for damages is against
all defendants for the repair to their home as a result of the alleged use of Chinese
Drywall in the construction of their home. Although plaintiffs' claims against the
builder/supplier defendants arise in tort and their claims against Safeco arise in

38

Zeber, 2010 WL 5856063, at *2 (citing cases).

39

Id. at *1.

40

Id.

41

Id.

42

Id. at *3.

43

Id. (citing cases for both propositions).

9

contract, and the defendants will have different and unique defenses to plaintiffs'
claims, the claims present numerous common factual and legal issues that must be
resolved. For example, as explained by plaintiffs, common issues that must be
resolve[d] in order to determine who, if anyone, is liable to plaintiffs for their
damages include: (1) does the home have Chinese Drywall; (2) what types of
damages were sustained; (3) were the damages sustained caused by the use of
Chinese Drywall; (4) are the damages sustained types that implicate coverage.
Although the court is not aware of the exact provisions of the homeowner's insurance
policy issued by Safeco to plaintiffs, it is reasonable to assume that the “cause” of
plaintiffs' damages will directly impact the coverage provided by the policy. If this
matter were to proceed in two separate forums, there would be a risk of inconsistent
findings on various factual and legal issues, including causation. Thus, even if
plaintiffs' claims were improperly joined, the misjoinder is not so egregious as to
warrant a finding of fraudulent misjoinder.44
Here, the Court finds that the allegations and parties in this suit present an analogous
situation to that presented in Zeber. While Zeber is not binding authority, this Court finds its analysis
persuasive and consistent with binding Fifth Circuit precedent which instructs district courts to
strictly construe removal statutes and resolve any doubts as to the propriety of removal in favor of
remand.45 In this matter, Plaintiffs have alleged that the three other defendants, Croft, Quality, and
Dufrene, are liable for faulty construction of their home. As a result of this, Plaintiffs claim their
home sustained damages in 2012, which North Light, as their homeowner's insurer, is liable to them
for policy proceeds. Therefore, accepting all allegations in the complaint as true, Plaintiff has
alleged causes of action against all defendants, including North Light, that may impose alternative
liability among the parties and presents a "question of law or fact common to all defendants [that]
will arise in th[is] action," thereby satisfying Federal Rule of Civil Procedure 20.46

44

Id.

45

See Gasch v. Hartford Acc. & Indem. Co., 491 F.3d 278, 281 (5th Cir. 2007).

46

See Fed. R. Civ. P. 20(a)(2)(A)-(B)/

10

Likewise, if Louisiana's law on joinder applies, all parties would also be properly included
in this matter. Louisiana Code of Civil Procedure article 463 states:
Two or more parties may be joined in the same suit, either as plaintiffs or as
defendants, if:
(1) There is a community of interest between the parties joined;
(2) Each of the actions cumulated is within the jurisdiction of the court and
is brought in the proper venue; and
(3) All of the actions cumulated are mutually consistent and employ the same
form of procedure.
For the reasons stated above, the Court finds that Plaintiffs' allegations satisfy this standard as well.
As North Light has not met its burden to establish fraudulent joinder, and because complete diversity
does not exist, the Court must remand this action to state court.47
2. Costs and Expenses
In addition to remand, the pending motion requests "costs, expenses and attorney fees
incurred in opposing North Light's improper attempt to remove this case."48 "An order remanding
the case may require payment of just costs and any actual expenses, including attorney fees, incurred
as a result of the removal."49 The Fifth Circuit has explicitly stated that even when a court
determines that removal was improper, "[t]here is no automatic entitlement to an award of attorney's
fees."50 Instead, the Fifth Circuit has noted that the language of Section 1447(c), which allows for

47

Further, the Court notes that "[a]n order remanding a case to the State court from which it was removed is
not reviewable on appeal or otherwise," except under certain circumstances which are not applicable here. 28 U.S.C. §
1447(d). This provision does not apply when cases are removed from state court pursuant to 28 U.S.C. § 1442, federal
officer removal, or 28 U.S.C. § 1443, which allows the removal of certain civil rights cases. See id. Neither of those
provisions is applicable here, as North Light has only sought removal pursuant to 28 U.S.C. § 1441 on the basis of
alleged diversity. See Rec. Doc. 1 at p. 2.
48

Rec. Doc. 13-1 at p. 12.

49

28 U.S.C. § 1447(c).

50

Valdes v. Wal-Mart Stores, Inc., 199 F.3d 290, 292 (5th Cir. 2000).

11

such costs when a case is remanded, "makes such an award discretionary."51 The Fifth Circuit has
further explained that:
The application of § 1447(c) requires consideration of the propriety of the removing
party's actions based on an objective view of the legal and factual elements in each
particular case. We evaluate the objective merits of removal at the time of removal,
irrespective of the fact that it might ultimately be determined that removal was
improper.... In other words, the question we consider in applying § 1447(c) is
whether the defendant had objectively reasonable grounds to believe the removal was
legally proper.52
The Fifth Circuit has found uncertainty in relevant legal areas as sufficient grounds to create an
"objectively reasonable" belief that removal was proper.53
Here, the Court finds that while removal was improper, North Light had an objectively
reasonable ground to believe that it was proper, and therefore such fees and costs should not be
imposed. As the Zeber court acknowledged, the law of fraudulent misjoinder is "unsettled" within
the Fifth Circuit, and only district courts, which do not bind this Court, have directly applied this
theory.54 Therefore, North Light's contention that its claims arising out of its insurance contract with
Plaintiffs were misjoined with Plaintiffs' claims against the other defendants arising from alleged
faulty construction was not unreasonable.
IV. Conclusion
For the reasons outlined above, North Light has not carried its burden to establish that this
court has subject matter jurisdiction, or that Quality and Dufrene have been improperly joined.

51

Id.

52

Id. at 293.

53

Id. at 293-94.

54

See 2010 WL 5856063, at *2-*3.

12

Nonetheless, this Court finds that the imposition of attorney fees and costs related with this removal
should not be assessed to North Light. Accordingly,
IT IS HEREBY ORDERED that Plaintiffs' Motion to Remand to State Court55 is
GRANTED IN PART and DENIED IN PART and this action is REMANDED for further
proceedings in the Seventeenth Judicial District Court for the Parish of Lafourche, State of
Louisiana;
IT IS FURTHER ORDERED that Plaintiffs request for fees and costs pursuant to 28
U.S.C. § 1447(c) is DENIED.
NEW ORLEANS, LOUISIANA, this ____ day of July, 2013.

_________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE

55

Rec. Doc. 13.

13