Gray Casualty & Surety Company et al v. DRS Veteran Enterprises, LLC et al
ORDER GRANTING IN PART AND DENYING IN PART 5 Motion to Remand to State Court; DISMISSING AS MOOT 7 Motion to Dismiss for Failure to State a Claim; DISMISSING AS MOOT 15 Motion to Strike as set forth in document. Signed by Judge Ivan L.R. Lemelle on 10/20/2016. (mmv)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
GRAY CASUALTY & SURETY COMPANY
DRS VETERAN ENTERPRISES, LLC, ET AL.
SECTION “B” (2)
NATURE OF MOTION AND RELIEF SOUGHT
Company’s (“Gray”) “Motion to Remand to State Court and to Award
Costs and Attorneys’ Fees” (Rec. Doc. 5), ““Motion to Strike
Defendant Seubert & Associates’ (“Seubert”) “12(B)(6) Motion to
(Rec. Doc. 7).
For the following reasons, IT IS ORDERED that Plaintiff Gray’s
“Motion to Remand to State Court and to Award Costs and Attorneys’
Fees” (Rec. Doc. 5) is DENIED IN PART and GRANTED IN PART. IT IS
FURTHER ORDERED that Plaintiff Gray’s ““Motion to Strike Affidavit
of Defendant Ronald Hedrick” (Rec. Doc. 15) and Defendant Seubert’s
“12(B)(6) Motion to Dismiss”
(Rec. Doc. 7) be DISMISSED AS MOOT.
FACTS AND PROCEDURAL HISTORY
Gray and Seubert entered into an Agency Agreement allowing
Seubert to sell payment and performance bonds issued by Gray to
contractors. (Rec. Doc. 1-1). Seubert solicited Gray to begin
issuing bonds to DRS Veteran Enterprises, LLC (“DRS”) for bids on
various construction projects. (Rec. Doc. 1-1). Before issuing the
bonds, Gray sought a General Indemnity Agreement (“GIA”) from DRS
and its owners, (hereinafter “Indemnitors.”) (Rec. Doc. 1-1). The
management of DRS, Hedrick left the company by June 2012. (Rec.
Gray did not receive the executed GIA until July 2012. (Rec.
Doc. 1-1). After examining the GIA, Gray requested Seubert to
procure a re-executed GIA from the Indemnitors because the notarial
execution of the agreement had not been dis-interested parties.
(Rec. Doc. 1-1). Relying on Seubert’s assurances that it could
obtain a re-executed GIA, Gray began issuing bonds to DRS. (Rec.
Doc. 1-1). Meanwhile, Gray requested Seubert five additional times
between August and December of 2012 to procure a re-executed GIA.
(Rec. Doc. 1-1). However, a re-executed GIA was never procured.
(Rec. Doc. 1-1).
Both the GIA and the Agency Agreement contain forum selection
clauses. Paragraph 19 of the Agency Agreement reads:
19. Governing Law and Venue: This agreement is governed
by, and shall be interpreted in accordance with, the
laws of the State of Louisiana. All of your duties and
obligations under this Agreement are due payable, and
performable in Jefferson Parish, Louisiana and venue
for any suit, arbitration, mediation or any other form
of dispute resolution shall be in Jefferson Parish
Louisiana. (Rec. Doc. 1-1).
The GIA’s relevant provision reads:
21. Jurisdiction: In any legal proceeding brought by
or against Surety that in any way relates to this
Agreement, each Indemnitor, for itself and its property,
exclusive jurisdiction, at the sole and exclusive option
of the Surety, of any local, state, or federal court of
competent jurisdiction and waives any claim or defense
in any such action or proceeding based on any alleged
lack of personal jurisdiction, improper venue, forum
non conveniens or any lack of similar basis. The
Indemnitors further waive personal service of any and
all process. (Rec. Doc. 1-1).
On September 22, 2014, a sub-contractor filed suit against
the successor to DRS, Preferred Builders Group. (Rec-Doc 1-1). The
lawsuit alleged contractual damages against Gray for breach of
litigation, Gray sought to recoup its losses on all bonds claiming
that (1) Seubert violated the Agency Agreement in failing to
procure a GIA from the Indemnitors and (2)
required to reimburse Gray pursuant to the GIA. (Rec. Doc. 1-1).
Gray filed suit on June 8, 2016 in the 24th Judicial District for
the Parish of Jefferson. (Rec. Doc. 1-1). This matter was then
removed on the basis of diversity jurisdiction on July 29, 2016.
(Rec. Doc. 1-1).
III. CONTENTIONS OF MOVANT
Gray moves to remand on the basis that the forum selection
clauses in the Agency Agreement and GIA waives Indemnitors and
Seubert’s right to remove to federal court. (Rec. Doc. 5) Gray
contends the Indemnitors agreed to the terms of the GIA upon
defective execution shall not affect the obligations of any other
Indemnitor. (Rec. Doc. 5). Additionally, Gray notes that any
modification or termination of the agreement required a written
release from Gray. (Rec. Doc. 5). Thus, Gray contends the forum
constituting a waiver of removal rights. (Rec. Doc. 5).
CONTENTIONS OF OPPONENTS
Defendant Hedrick contends the GIA is an invalid contract and
that his departure from DRS left him no notice of the forum
selection clause. (Rec. Doc. 9). Hedrick claims the whited out
marks and defective witnesses on the GIA resulted in an invalid
contract. (Rec. Doc. 9). Further, Hedrick relies on Gray’s request
for a re-executed GIA as a rejection of the initial GIA. (Rec.
Doc. 9). Hedrick claims Gray’s own suspicions about the validity
of the GIA support his contentions. (Rec. Doc. 9). Thus, Hedrick
points to the invalidity of the GIA as the basis for finding no
waiver of removal rights. (Rec. Doc. 9).
STANDARD OF LAW
A district court must remand a case to state court if “at any
time before final judgement it appears that the district court
lacks subject matter jurisdiction.” 28 U.S.C. 1447(c); Preston v.
Tenet Healthsys. Mem’l Med. Ctr., Inc., 485 F.3d 804, 813 n.3 (5th
Cir. 2007). The burden of establishing that federal jurisdiction
exists in a case “rests on the party seeking the federal forum.”
Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001).
The removal statute is to be strictly construed. Gasch v. Hartford
Accident & Indem. Co., 491 F.3d 278, 281 (5th Cir. 2007). Any
“doubts regarding whether removal jurisdiction is proper should be
resolved against federal jurisdiction.” Acuna v. Brown & Root Inc.,
200 F.3d 335, 339 (5th Cir. 2000). In order to determine whether
jurisdiction is present, a court must “consider the claims in the
state court petition as they existed at the time of removal.”
Maguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th
District courts “need not and should not conduct a full scale
evidentiary hearing on questions of fact affecting the ultimate
issues of substantive liability in a case in order to make a
preliminary determination as to the existence of subject matter
jurisdiction.” Green v. Amerada Hess Corp., 707 F.2d 201, 204 (5th
consent, object and lawful cause. J. Caldarera & Co. v. Louisiana
Stadium Exposition Dist. 750 So.2d 284, 288 (La. App. 5th Cir.
1999). Defendant Hedrick contests the validity of the contract
because he alleges never gave consent. (Rec. Doc. 5). However,
Hedrick executed the GIA in February of 2012. (Rec. Doc. 1-1).
Absent fraud, Hedrick is presumed to have had notice of the GIA’s
provisions. Georgia-Pacific Corp. v. Haynes, 432 So.2d 563, 565
(La. App. 1st Cir. 1973). Though Hedrick ended his relationship
with DRS formally in June 2012, Gray did not request any party to
submit a re-executed GIA until August. (Rec. Doc. 1-1). Since there
was no indication of the contract’s invalidity during Hedrick’s
tenure at DRS, he is presumed to have had notice of its terms.
WAIVER OF REMOVAL RIGHTS
A contractual forum selection clause can prevent a party from
removing a case when the clause is a “clear and unequivocal” waiver
for the right to remove. City of New Orleans v. Mun. Admin. Servs.,
Inc., 376 F.3d 501, 504 (5th Cir. 2004)(citing McDermott Int’l,
Inc. v. Lloyds Underwriters, 944 F.2d 1199 (5th Cir. 1991)). A
party waives its removal rights when the other party is allowed to
choose venue or the clause exclusively establishes a venue. Id.
Clauses reflecting a party’s consent to jurisdiction, without
more, does not validly waive the right to remove. Id.
This court found a contract clause reading “any and all
Judicial District for the Parish of Jefferson...which court shall
constituting a “clear and unequivocal” waiver of removal rights.
Jefferson Parish Consol. Garbage Dist. No. 1 v. Waste Mgmt. of
Louisiana, L.L.C., Case No. 09-6270, 2010 WL 1731204 at *3 (E.D.
jurisdiction, at the sole and exclusive option of the Surety.”
(Rec. Doc. 1-1). This provision in the GIA is a clear waiver of
removal rights because it clearly “demonstrate[s] the parties’
intent to make that jurisdiction exclusive” and the Indemnitors
have allowed Gray to choose venue. City of New Orleans, 376 F.3d
at 504. Thus, the GIA contains a clause waiving the Indemnitors’
right of removal.
Since Gray has joined claims under two agreements (the GIA
and the Agency Agreement), the forum selection clause contained in
the Agency Agreement also merits analysis. Jefferson Parish, 2010
WL 1731204, at *2. The Agency Agreement forum selection clause
Louisiana.” (Rec. Doc. 1-1). Clauses specifying a county and not
“courts of that county” permit venue in either federal or state
court so long as the court is located within that county. Alliance
Health Group, LLC v. Bridging Health Options, LLC, 553 F.3d 397,
400 (5th Cir. 2008)(emphasis in original) citing Global Satellite
Communication Co. v. Starmill U.K., Ltd., 378 F.3d 1269, 1272 (11th
Cir. 2004). Since there is no federal courthouse in Jefferson
Parish, the only proper venue according to the Agency Agreement is
the state courts in Jefferson Parish. Argyll Equities LLC v.
Paolino, 211 Fed.Appx. 317, 318(5th Cir. 2006)(per curiam)(noting
that the United States District Court for the Western District of
Texas encompassed, but was not located in the specified venue of
Kendall County, Texas.)
The Fifth Circuit has also settled the relationship of such
a clause to waiving removal rights. Collin County v. Siemens Bus.
Servs., Inc., 250 Fed.Appx. 45, 52 (5th Cir. 2007). In Collin
County v. Siemens Bus. Servs., Inc., the Fifth Circuit found that
Siemens waived removal rights when the forum selection clause read,
“venue for all actions...shall lie exclusively in Collin County,
Texas.” Id. at 46. The court reasoned “Collin County’s lack of a
federal courthouse renders the clause at issue such a waiver [of
removal rights.] Id. at 52. Since Jefferson Parish lacks a federal
courthouse, the venue provision constitutes a waiver of removal
Among the Indemnitors, Mr. Hedrick contends that he is not
bound by the GIA and has not waived his right to remove. (Rec.
Doc. 9). Hedrick and other Indemnitors executed the GIA in February
2012. (Rec. Doc. 1-1). Hedrick, by his own admission, had no
involvement with DRS after June 2012. (Rec. Doc. 9-1.) Since the
clauses waiving removal are clear and unequivocal, substantive
issues of contract validity and peremption are properly reserved
for the state court.
Courts may award attorney fees under the removal statue “only
where the removing party lacked an objectively reasonable basis
for seeking removal.” Martin v. Franklin Capital Corp., 546 U.S.
132, 141 (2005). Courts must evaluate the “objective merits” and
grounds to believe the removal was legally proper.” Valdes v. WalMart Stores, Inc., 199 F.3d 290, 293 (5th Cir. 2000). Hedricks’s
grounds for removal was rooted in the validity of the underlying
GIA. (Rec. Doc. 5). Given that the substantive issue of the GIA’s
validity remains to be resolved, Hedrick had an objective basis
for removal and thus Plaintiff’s requests for fees should be
For the foregoing reasons, IT IS ORDERED that Plaintiff
Gray’s “Motion to Remand to State Court and to Award Costs and
Attorneys’ Fees” (Rec. Doc. 5) is DENIED IN PART and GRANTED IN
PART. IT IS FURTHER ORDERED that Plaintiff Gray’s ““Motion to
Strike Affidavit of Defendant Ronald Hedrick” (Rec. Doc. 15) and
Defendant Seubert’s “12(B)(6) Motion to Dismiss”
(Rec. Doc. 7)
be DISMISSED AS MOOT.
New Orleans, Louisiana, this 20th day of October, 2016.
SENIOR UNITED STATES DISTRICT JUDGE
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?