Landry et al v. Columbia Casualty Company et al
Filing
24
ORDER AND REASONS denying Plaintiffs' 9 MOTION to Remand to State Court and denying Plaintiffs' 11 MOTION for Sanctions . Plaintiffs' claims against Columbia Casualty Company and Eagle, Inc. are DISMISSED WITHOUT PREJUDICE. Signed by Judge Jane Triche Milazzo.(ecm) Modified document type on 9/18/2014 (ecm).
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
AGNES LANDRY, ET AL
CIVIL ACTION
VERSUS
NO: 14–220
COLUMBIA CASUALTY
COMPANY, ET AL
SECTION: "H"(3)
ORDER AND REASONS
Before the Court is a Motion to Remand (Doc. 9) and a Motion for
Sanctions (Doc. 11). For the following reasons, both Motions are DENIED and
Plaintiffs' claims against Columbia Casualty Company and Eagle, Inc. are
DISMISSED WITHOUT PREJUDICE.
BACKGROUND
Norman Landry was employed at the Avondale shipyards for one month
in 1948 and nearly two months in 1949. In 2012, Mr. Landry was diagnosed
with mesothelioma. He died several months later. On January 29, 2013, Mr.
1
Landry's surviving spouse and children filed this action in Louisiana state court
against Huntington Ingalls Inc. ("HII"), Columbia Casualty Company
("Columbia"), and Eagle Inc. ("Eagle"). Plaintiffs allege that Mr. Landry was
exposed to asbestos during his employment at Avondale,1 that Eagle
manufactured the asbestos, and that Columbia insured Avondale during the
period that Mr. Landry was employed there. Plaintiffs claim that Mr. Landry's
asbestos exposure in 1948 and 1949 caused his mesothelioma and his
subsequent death. On January 29, 2014, HII removed the suit to this Court,
alleging that it was completely diverse from Plaintiffs and that the remaining
defendants had been fraudulently joined in an effort to prevent removal.
Plaintiffs responded with the instant Motions.
LEGAL STANDARD
Generally, a defendant may remove a civil state court action to federal
court if the federal court has original jurisdiction over the action.2 The burden
is on the removing party to show "[t]hat federal jurisdiction exists and that
removal was proper."3 When determining whether federal jurisdiction exists,
courts consider "[t]he claims in the state court petition as they existed at the
time of removal."4 Removal statutes should be strictly construed, and any doubt
1
HII is the successor in interest to Avondale Shipyards.
2
28 U.S.C. § 1441(a).
3
Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002).
4
Id.
2
should be resolved in favor of remand.5
LAW AND ANALYSIS
Plaintiff asserts two arguments in favor of remand: (1) that this Court
lacks subject matter jurisdiction because the parties are not completely diverse
and (2) that the removal was procedurally improper. The Court begins, as it
must, with an analysis of subject matter jurisdiction.6
I. Subject Matter Jurisdiction
HII asserts that this Court has jurisdiction over this action pursuant to 28
U.S.C. § 1332.
Cases arising under § 1332 require complete diversity of
citizenship and an amount in controversy in excess of $75,000.7 The parties
agree, and the Court is convinced, that the amount in controversy in this case
exceeds $75,000. On the other hand, the question of complete diversity is hotly
disputed. HII concedes that Plaintiffs are not completely diverse from all named
defendants. Nonetheless, HII contends that it is diverse from Plaintiffs and that
Eagle and Columbia were fraudulently joined in order to prevent removal.
Plaintiffs disagree on both counts. Plaintiffs insist that Eagle and Columbia are
proper parties to this proceeding and that, in any event, HII is a citizen of
Louisiana and therefore not diverse from Plaintiffs. The Court will address each
issue separately.
Initially, the Court briefly notes a few basic principles relevant to its
5
Id.
6
See Sinochem Int'l Co. LTD v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 431 (2007).
7
28 U.S.C. § 1332; Stiftung v. Plains Mktg., L.P., 603 F.3d 295,297 (5th Cir. 2010).
3
analysis. Plaintiffs are indisputably citizens of Louisiana.8 Accordingly, the
Court may only exercise jurisdiction over this action if no defendant, properly
joined and served, is a citizen of Louisiana.9 Thus, if HII is a citizen of Louisiana
or if either Eagle or Columbia is properly joined to this action, the Court must
remand the case.10
A. Citizenship of HII
HII, as a corporation, is a citizen of every state in which it is incorporated,
as well as the state in which its principal place of business is located.11 HII is
incorporated in Virginia, and it alleges that its principal place of business is also
in Virginia. Plaintiffs admit that HII is a Virginia corporation, but insist that
HII's principal place of business is in Louisiana. In support of their argument,
Plaintiffs rely on the "total activity test." Under the total activity test, a
corporation's principal place of business is determined based on where the
corporation conducts a majority of its activities.12 Plaintiffs argue that HII has
not offered this Court any evidence of where it conducts most of its activity.
Unfortunately, Plaintiffs argument is based on an outdated understanding of the
law.
In 2010, the Supreme Court held that a corporation's principal place of
8
Plaintiffs' petition alleges, and HII concedes, that all Plaintiffs are citizens of
Louisiana. Cf. Coury v. Prot, 85 F.3d 244, 250 (5th Cir. 1996).
9
See 28 U.S.C. § 1332 & 1441.
10
Plaintiffs argue, and the Court assumes without deciding, that Eagle and Columbia
are citizens of Louisiana.
11
28 U.S.C. § 1332(c)(1).
12
J.A. Olson Co. v. City of Winona, Miss., 818 F.2d 401, 404 (5th Cir. 1987).
4
business is "the place where a corporation's officers direct, control, and
coordinate the corporation's activities."13 In reaching this conclusion, the Court
expressly overruled all other tests previously employed by the various circuits,
including the "total activity test."14 Therefore, HII's principal place of business
is the place where its officers direct the corporation's activities. HII insists that
this occurs in Virginia, and Plaintiffs have offered no evidence to the contrary.
This Court generally accepts jurisdictional allegations as true in the absence of
evidence to the contrary.15 Accordingly, the Court finds that HII's principal
place of business is in Virginia and that it is a citizen of Virginia only.
B. Fraudulent Joinder
HII contends that both Eagle and Columbia were fraudulently joined to
this action in order to prevent removal. "Fraudulent joinder can be established
by demonstrating either '(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.'"16 Generally, the court conducts an analysis
similar to that employed in the context of Rule 12(b)(6), asking whether there is
a legal basis for recovery assuming the facts in the complaint as true.17 In
certain circumstances, however, the court may pierce the pleadings and conduct
13
Hertz Corp. v. Friend, 559 U.S. 77, 92–93 (2010). This test is often referred to as the
"nerve center test." See id.
14
Id. at 92.
15
See Panda Brandywine Corp. v. Potomac Elec. Power Co., 253 F.3d 865, 868 (5th Cir.
16
Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d 529, 532 (5th Cir. 2006).
17
Smallwood v. Ill. Cent. R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc).
2001).
5
a summary inquiry. "[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."18 Examples of such facts include "the in-state
doctor defendant did not treat the plaintiff patient, the in-state pharmacist
defendant did not fill a prescription for the plaintiff patient, a party's residence
was not as alleged, or any other fact that easily can be disproved if not true."19
The court evaluates all of the contested factual allegations in the light most
favorable to the plaintiff and resolves any uncertainties in the controlling state's
substantive law in the plaintiff's favor.20 The burden of showing fraudulent
joinder is a "heavy one."21
The issue in this case is not whether Plaintiffs have pleaded a cause of
action against Eagle or Columbia. Rather, HII claims that there is no evidence
that Eagle supplied asbestos products to Avondale or that Columbia insured
Avondale, for any purpose, while Mr. Landry was employed there.
1) Columbia Casualty Company
Plaintiffs' petition alleges that six individuals were executive officers of
Avondale in 1948 and 1949. Plaintiffs appear to contend that all six of these
officers knowingly and intentionally concealed the dangers of asbestos from Mr.
Landry.22 Plaintiffs further allege that all six individuals were insured by
18
Id.
19
Id. at n. 12.
20
Travis v. Irby, 326 F.3d 644, 648 (5th Cir. 2003).
21
Id. at 649.
22
As an aside, the Court has doubts that the allegations in Plaintiffs' petition are
sufficient to establish liability on the part of these six officers as there is a dearth of
6
American Motorists Insurance Company.23 Curiously, Plaintiffs allege that only
two of the six officers were insured by Columbia. After this suit had been
pending in state court for nearly a year, counsel for HII received a letter from
counsel for Columbia. In this letter, which was attached to the notice of
removal, counsel for Columbia represents that Columbia searched its files in
response to Plaintiffs' discovery request and that Columbia could not locate any
policy of insurance issued to Avondale in either 1948 or 1949. HII relies on this
correspondence in support of its argument that Plaintiffs are unable to establish
a cause of action against Columbia.
Plaintiffs disagree and have attached various documents to the Motion
that purportedly support a cause of action against Columbia. The documents
were obtained from the National Archives and indicate that Columbia provided
some insurance to Avondale from 1942-1945.
Plaintiffs insist that these
documents prove that Columbia insured Avondale at one time, and therefore
support their assertion that Avondale insured two specific officers in 1948 and
1949. These documents, however, offer no support to Plaintiffs' position.
First, many of the documents reflect insurance policies that, by their very
nature, could not possibly provide coverage for Plaintiffs' claims.24 Additionally,
allegations supporting the assertion that these particular individuals knew or should have
known anything about the dangers of asbestos. Indeed, the petition is silent even as to the role
of these individuals within Avondale. However, given the lack of evidence that Columbia
issued any policy of insurance to Avondale in 1948 or 1949, it is not necessary for the Court to
reach a conclusion regarding the sufficiency of these allegations at this time.
23
American Motorists Insurance Company was not named as a defendant to this action.
24
Approximately half of the documents reflect automobile liability coverage and several
others reflect insurance covering steam boilers.
7
none of the proffered documents indicate coverage for the years at issue. Indeed
the latest date of coverage reflected in the documents is December 31, 1945, well
over two years prior to Mr. Landry's first day of work at Avondale. Finally,
Plaintiffs offer no support whatsoever for their assertion that Columbia insured
two specific officers in 1948 and 1949.
Indeed, Plaintiffs have not even
articulated to the Court why they believe that Columbia insured these two
officers to the exclusion of the other four named in the petition. At best,
Plaintiffs argument is that, because Columbia insured Avondale in the past, it
is hypothetically possible that Columbia insured two specific officers in 1948 and
1949. "[M]etaphysical doubt" regarding whether Columbia insured Avondale in
1948 and 1949 is not sufficient to defeat HII's arguments.25
Given Columbia's representation that it has no record of providing
relevant insurance to Avondale and the fact that Plaintiffs lack even a scintilla
of evidence to support their allegation that Columbia insured Avondale's officers,
this Court finds that Plaintiffs are not able to establish a cause of action against
Columbia. Therefore, the Court holds that Columbia was fraudulently joined to
this action, and Plaintiffs' claims against Columbia are dismissed without
prejudice.26
2) Eagle, Inc.
Plaintiffs allege that Eagle was a manufacturer and distributor of
25
Badon v. R J R Nabisco Inc., 224 F.3d 382, 393 (5th Cir. 2000).
26
The Court does not intend to imply, nor is there any evidence which shows, that
Plaintiffs engaged in a deliberate attempt to deceive the Court or opposing counsel. Instead,
the Court uses the term fraudulent joinder because that is the term used by the jurisprudence.
8
asbestos-containing products while Mr. Landry was employed at Avondale. They
claim that Eagle sold asbestos-containing products to and did contracting work
at Avondale while Mr. Landry was employed there. HII contends that Eagle did
not begin selling products to or working at Avondale until the 1950s. HII's
contention is supported by a letter from counsel for Eagle advising that Eagle,
after a search of its records, could not locate any record of sales to Avondale prior
to the 1950s. Additionally, HII has submitted deposition transcripts from prior
asbestos litigation in which Eagle representatives deny having any business
with Avondale prior to the 1950s.27
In response, Plaintiffs have submitted their own deposition excerpts, many
of which are from the same deponents as HII's. Plaintiffs contend that these
deposition transcripts establish that Eagle did work at Avondale in the 1940s.
This is not correct. All of the deposition transcripts relied on by Plaintiffs
establish that Eagle did, in fact, provide asbestos-containing products to
Avondale at some time. This is not a disputed fact. The depositions do not,
however, establish that Eagle did business with Avondale prior to the 1950s.
Indeed, Plaintiff has not been able to submit any evidence whatsoever that
indicates that Eagle did any business with Avondale in 1948 or 1949 or, for that
matter, at anytime prior to 1950. In the absence of such evidence, the Court
finds that Plaintiffs are not able to establish a cause of action against Eagle.
Accordingly, the Court finds that Eagle was fraudulently joined to this action,
27
In one of the deposition excerpts, an Eagle representative specifically denies any sales
to Avondale in 1946.
9
and Plaintiffs' claims against Eagle are dismissed without prejudice.
As a result of the Court's holdings, HII is the only remaining defendant in
this action. HHI is completely diverse from Plaintiffs. Therefore, the Court
finds that it has subject matter jurisdiction over this matter pursuant to 28
U.S.C. § 1332. Having determined that the parties are diverse, the Court
proceeds to Plaintiffs' procedural objections to the removal.
II. Removal Procedure
Plaintiffs present two arguments in support of their assertion that the
removal was procedurally improper. The first is that Eagle and Columbia did
not consent to the removal as required by 28 U.S.C. § 1446(b)(2)(A).28 While it
is true that Eagle and Columbia did not consent to the removal, the Fifth Circuit
has consistently held that fraudulently joined defendants need not consent to the
removal of a case.29 The Court has already held that Eagle and Columbia were
fraudulently joined to this action. Therefore, their consent to the removal was
unnecessary, and the Court rejects Plaintiffs' first procedural objection.
Second, Plaintiffs contend that the removal was untimely. A defendant
generally must remove an action within 30 days of being served with the initial
pleading in the case.30 HII was served with the petition in this case on February
1, 2013, but did not remove the matter until January 29, 2014. On its face, the
28
28 U.S.C. § 1446(b)(2)(A) provides that "all defendants who have been properly joined
and served must join in or consent to the removal of the action."
29
See, e.g., Jernigan v. Ashland Oil Inc., 989 F.2d 812, 815 (5th Cir. 1993); Rico v.
Flores, 481 F.3d 234, 239 (5th Cir. 2007).
30
28 U.S.C. § 1446(b)(1).
10
removal would appear to be untimely. Nonetheless, HII argues that the "other
paper" exception to the initial removal period applies. This exception provides:
[I]f the case stated by the initial pleading is not
removable, a notice of removal may be filed within 30
days after receipt by the defendant, through service or
otherwise, of a copy of an amended pleading, motion,
order or other paper from which it may first be
ascertained that the case is one which is or has become
removable.31
HII alleges that, in January of 2014, it received an "other paper" that revealed
that the case was removable based on the fraudulent joinder of Eagle and
Columbia.
The term "other paper" has been interpreted broadly.32 "Other paper"
includes discovery responses and correspondence between counsel.33 In this
case, HII's counsel received letters from counsel for Eagle and Columbia
indicating that they had searched their respective records and could not find any
evidence that they had a relationship with Avondale during Mr. Landry's
employment. These letters revealed to HII that Plaintiffs had no arguable basis
for recovery against Eagle or Columbia. As a result, HII became aware, for the
first time, that the case was removable based on the fraudulent joinder of these
31
28 U.S.C. § 1446(b)(3) (emphasis added). The statute also provides that a case in
which jurisdiction is premised on diversity cannot be removed more than one year after the
action is commenced unless the plaintiff acted in bad faith in order to prevent removal. Since
this action was removed precisely one year from the date on which it was commenced, the one
year rule does not apply.
32
14C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3731
(4th ed. 2014).
33
Addo v. Globe Life & Acc. Ins. Co., 230 F.3d 759, 762 (5th Cir. 2000).
11
non-diverse defendants.
HII responded by promptly removing the case.
Defendants argue that the facts of this case satisfy the "other paper" exception
to the removal period.
Plaintiffs disagree. Plaintiffs argue that the letters from defense counsel
do not render the case removable because they were not the result of a voluntary
act of Plaintiffs. Plaintiffs correctly argue that the general rule is that "other
paper" does not render a case removable unless it is generated by the voluntary
act of a plaintiff. Plaintiffs' argument fails because the Fifth Circuit has
explicitly held that the voluntary act rule does not apply in cases of fraudulent
joinder.34
Plaintiffs also argue that the "other paper" exception should not apply
because HII should have been aware that Eagle was fraudulently joined prior
to January of 2014. To be sure, it appears that the evidence relied on by HII to
support its argument regarding the fraudulent joinder of Eagle was in HII's
possession before January of 2014. But, even assuming arguendo, that HII
should have realized that Eagle was improperly joined earlier, there is no
evidence that HII should have been aware that Columbia was fraudulently
joined before it received the letter from Columbia's counsel. Plaintiffs allege that
both Columbia and Eagle are Louisiana citizens. Therefore the case did not
become removable until HII realized that both Eagle and Columbia were
fraudulently joined. This did not occur until January of 2014, less than 30 days
34
Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d 529, 532 (5th Cir. 2006) ("Courts
have long recognized an exception to the voluntary-involuntary rule where a claim against a
nondiverse or in-state defendant is dismissed on account of fraudulent joinder").
12
prior to removal.
Accordingly, because HII removed this case within 30 days of receiving an
"other paper" from which it first ascertained that the case was removable, the
removal was timely. The Court, additionally, having rejected both of Plaintiffs'
procedural objections, finds that the removal of this matter was procedurally
proper.
CONCLUSION
For the foregoing reasons, Plaintiffs' Motion to Remand is DENIED and
Plaintiffs' claims against Columbia Casualty Company and Eagle, Inc. are
DISMISSED WITHOUT PREJUDICE. Additionally, because the Court has
found that removal was proper, Plaintiffs' Motion for Sanctions is also DENIED.
New Orleans, Louisiana, this 18th day of September, 2014.
_________________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE
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