Todesco, et al v. Wainright, et al

Filing 26

ORDER AND REASONS: IT IS ORDERED that the 8 motion to remand is GRANTED as set forth in document. IT IS FURTHER ORDERED that the 24 motion for leave is DISMISSED AS MOOT. Signed by Judge Ivan L.R. Lemelle on 4/14/2017. (mmv) (Additional attachment(s) added on 4/17/2017: # 1 Remand Letter) (mmv).

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
JOSEPH TODESCO, ET AL.

CIVIL ACTION

VERSUS

NO. 16-16736

GLENDA WAINRIGHT, ET AL.

SECTION "B"(3)
ORDER AND REASONS

Before

the

Court

is

“Plaintiffs’

Motion

for

Remand

and

Attorney’s Fees.” Rec. Doc. 8. After an extension, Defendants
timely filed an opposition memorandum. Rec. Doc. 18. Plaintiffs
then requested, and were granted, leave to file a reply memorandum.
Rec.

Doc.

23.

Defendants

also

requested

leave

to

file

a

supplemental memorandum. Rec. Doc. 24. For the reasons discussed
below,
IT IS ORDERED that the motion to remand (Rec. Doc. 8) is
GRANTED.
IT IS FURTHER ORDERED that the motion for leave (Rec. Doc.
24) is DISMISSED AS MOOT.
I.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY
This case arises out of a family business dispute. On August

13, 1990, Plaintiff Joseph Todesco (“Todesco”) filed articles of
incorporation in Louisiana to establish Haelan Products, Inc.
(“Haelan”), a company focused on developing fermented soy products
for health purposes. Rec. Doc. 3-1 at 3, 5. In 1991, Todesco hired
his father-in-law, Walter Wainright (“Wainright”), as a salesman.

1

Id. at 3. In 2003, Wainright requested a greater role in the
company and his daughter/Todesco’s wife, Lesly Todesco, encouraged
Todesco to give her parents, Walter and Glenda Wainright, a share
in the company. Id. On November 11, 2003, the Todescos agreed to
“gift” 50% of the company’s shares to the Wainrights. Id. at 4.
Eventually, Wainright became an officer or director of the company.
Id. at 5.
When
discovered

Wainright
that

died

on

August

Wainright

20,

2013,

systematically

the

Todescos

diverted

company

products, research, and profits for his own personal gain. Rec.
Doc.

3-1

at

5.

According

to

Plaintiffs,

Wainright

created

corporations that he used to sell Haelan products to individuals
in exchange for cash and to communicate with Haelan’s distributors
and third-party researchers. Id. at 7. For example, Wainright
purportedly sold forty-three (43) cases of Haelan products to Paul
Emerson and five (5) cases to Robert Brown in exchange for cash
that was not given to Haelan. Id. at 12-13. Wainright subsequently
agreed to sell fifty (50) cases to Brown. Id. at 14. When Wainright
failed to deliver the cases, he used Haelan proceeds to repay Brown
part of his purchase price. Id.
Further, Wainright incorporated the Vienna Stress Relief
Clinic

(“VSRC”)

on

September

17,

2011

and

purportedly

hired

researchers to publish articles under VSRC’s name, using research
and product information developed by Haelen. Rec. Doc. 3-1 at 62

7.

Similarly,

Haelan

Research

Foundation

(“HRF”),

Wainright

Haelan, L.L.C., Haelan Products International, Inc., and HPA, Inc.
were companies created by Wainright to misappropriate Haelan’s
corporate funds and products. Id. at 9, 11. For example, on
September 1, 2009, through Todesco’s efforts, Dr. Anca Gocan agreed
to conduct a study using a Haelan product. Id. at 6. However, on
September 30, 2009, “unbeknownst to Haelan,” Wainright informed
Dr. Gocan that Haelan was withdrawing its support, but that HRF
would like to participate. Id. at 8. When funds and research from
Haelan were then sent to Dr. Gocan, Wainright convinced Dr. Gocan
that they were coming from HRF. Id. On December 8, 2011, Wainright,
Dr. Gocan, and Dr. Gocan’s peer, Dr. Uwe Rohr, applied for a United
States patent for a fermented soy formulation, FSWW08, which
Plaintiffs maintain is the product developed by Haelan and used in
the study conducted by Dr. Gocan. Id. at 10. On July 15, 2002,
Wainright allegedly used Haelan Products International, Inc. to
enter into an agreement with Beso Biological Research, Inc.,
Haelan’s primary manufacturer, giving Wainright the exclusive
right to sell fermented soy products. Id. at 12. Haelan discovered
this scheme and forced Wainright to assign the agreement to Haelan
on December 18, 2003. Id.1

Wainright also purportedly used Haelan’s corporate credit card to take cash
advances. Rec. Doc. 3-1 at 15. At the time he died, the unpaid advances totaled
$134,500. Id. Haelan continues to pay off all of these debts. Id.
1

3

At one point, Haelan provided funds to Aoqili Cosmetics, Inc.,
a company owned by Todesco, to purchase 300,000 bars of specialty
soap. Rec. Doc. 3-1 at 14. Wainright then secretly stored the soap
in a warehouse in Washington State, sold the soap, and kept the
proceeds for himself. Id. After Wainright died, the owner of the
storage unit filed suit in Whatcom County Superior Court to
determine ownership of the remaining soap. Id. at 15.
According to Plaintiffs, by competing directly with Haelan,
using his Haelan resources, and undermining Haelan’s efforts,
Wainright

breached

his

fiduciary

duty

to

Haelan

and

its

shareholders under Louisiana Revised Statute § 12:91. Rec. Doc. 31 at 7, 16. Consequently, on June 18, 2014, the Todescos and Haelan
filed suit in the 24th Judicial District Court for Jefferson Parish
against the succession of Walter Wainright, Glenda Wainright, HRF,
Wainright Haelan, L.L.C., and VSRC. Id. at 2-3. After a hearing on
September 26, 2016, the court granted Plaintiffs’ exception of no
right of action by written judgment signed on October 27, 2016.
Rec. Doc. 3-2 at 70.
On December 9, 2016, Defendants removed the matter to this
Court by filing a lengthy notice of removal containing numerous
allegations of misconduct. Rec. Doc. 3. They claim that the “case
became removable . . . when the state court ruled that the
Wainrights

were

dispossessed

without

notice

of

their

50%

shareholder interest in Haelan by an undisclosed and never served
4

Washington State lawsuit.” Id. at ¶¶ 6-7 (emphasis in original).
According to Defendants, securities fraud and due process issues
predominate, but this Court “would have exclusive jurisdiction if
this case was filed anew pursuant to § 27 of the 1934 Exchange Act
. . . 15 U.S.C. § 78(a)aa.” Id. at ¶ 9.
The remainder of the notice of removal contains largely
unsubstantiated allegations of unethical conduct and due process
violations. Defendants explain that when the Whatcom County court
determined that the owner of the storage unit was entitled to rent
from Wainright’s estate and that Todesco owned the soap, Todesco
and the owner of the storage unit entered into an agreement whereby
the former would pay $15,000.00 to the latter in exchange for an
assignment

of

the

latter’s

judgment

creditor

rights

against

Wainright’s estate. Rec. Doc. 3 at ¶¶ 16, 19. A judgment totaling
$87,323.26 was then entered against Wainright’s estate. Id. at ¶¶
22, 28. On November 24, 2015, proceedings to execute the judgment
were started in King County, Washington. Rec. Doc. 3 at ¶ 29. The
sheriff was instructed to seize the personal property of Glenda
Wainright,

as

the

representative

of

her

husband’s

estate,

including the Haelan stock certificates issued to the Wainrights
more than a decade earlier. Id. at ¶ 31. According to Defendants,
though, the sheriff has no record of the writ, did not serve it on
any Defendant, and took no steps to execute a seizure and sale.
Id. at ¶ 34.
5

Defendants now claim that Glenda Wainright was not provided
notice of the sale of litigious rights until around September 26,
2016 (id. at ¶ 25) and that the failure to provide notice raises
“fundamental due process issues under Mennonite Board of Missions
v. Adams, 462 U.S. 791 (1983) . . .” (id. at ¶ 36).2 They maintain
that Louisiana Civil Code article 2652 prohibits the sale of
litigious rights (id. at ¶ 26) and that the assignment is void
under 15 U.S.C. § 78cc(b) (id. at ¶¶ 49-50).3 Ultimately, though,
they ask this Court to declare that Glenda Wainright can satisfy
her debt by depositing $15,000.00, the amount of the assignment,
plus interest in the Court’s registry. Id. at ¶ 81.4 They also

Defendants also argue that the stock certificates were never actually seized,
in violation of Washington law. Rec. Doc. 3 at ¶ 64. Apparently, Plaintiffs’
lawyers argued in the Louisiana case that the stock certificates did not have
to be physically seized; rather, they could be effectively seized by giving
notice to a corporate officer. Id. at ¶¶ 72-79.
3 Defendants fail to explain these claims. Article 2652 does not prohibit this
type of transaction; the article merely provides the obligated party a right
of redemption based on the price of the assignment.
4 In both the notice of removal and their opposition memorandum, Defendants note
that “[a]fter November 5, 2015 (when the Sale of Litigious Rights was executed)
no caption of any pleading filed in the Soap Case showed that the pleading was
filed by ‘ . . . Joesph Todesco, as assignee of LAG . . . ’, another instance
of sharp and deceptive practices. On the other hand, all captions in the November
24, 2015 King County case show the filing and moving party as ‘ . . . Joseph E.
Todesco, assignee of Louis Glass Inc. . . . .’” First, it is unclear how these
allegations relate to this Court’s subject matter jurisdiction. Second, the
caption in a case does not necessarily change—even if the parties change.
Consequently, the Court finds these baseless allegations of “deceptive
practices” without merit. Defendants also allege in the notice of removal that
the Washington State attorneys involved may be held liable because of “their
oral misrepresentations to all three district courts and . . . their active
participation in the scheme to deprive the Wainright interests of their security
rights in Haelan,” as provided in Junker v. Crory, 650 F.2d 1349, 1360 (5th
Cir. 1981). Rec. Doc. 3 at ¶¶ 40-41. Defendants do not allege that the attorneyes
violated Washington State law or otherwise circumvented Washington State
procedures, so the Court fails to see how these attorneys behaved
inappropriately or how such allegations could possibly relate to this Court’s
jurisdiction.
2

6

argue that because the Louisiana state court judgment was obtained
by “fraud and ill-practices,” it is null under Louisiana Code of
Civil Procedure article 2004 and should be declared null by this
Court. Id. at ¶¶ 37, 80.
II.

THE PARTIES’ CONTENTIONS

In their motion to remand, Plaintiffs maintain that (1)
Defendants failed to timely remove this action and (2) there is no
basis for federal question or diversity jurisdiction. Rec. Doc. 8
at 2. They also request attorney’s fees because there was no
reasonable basis for removal. Rec. Doc. 8-1 at 21.
Defendants’

opposition

memorandum

largely

reflects

the

arguments made in their notice of removal. Rec. Doc. 18.
III. LAW AND ANALYSIS
“[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 of the
United States for the district . . . embracing the place where
such action is pending.” 28 U.S.C. § 1441(a). However, “[t]he
removing party bears the burden of establishing that federal
jurisdiction exists” (De Aguilar v. Boeing Co., 47 F.3d 1404, 1408
(5th Cir. 1995) (citing Gaitor v. Peninsular & Occidental S. S.
Co., 287 F.2d 252, 253 (5th Cir. 1961))), and “[a]ny ambiguities
are construed against removal because the removal statute should
be strictly construed in favor of remand” (Manguno v. Prudential
7

Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002) (citing
Acuna v. Brown & Root Inc., 200 F.3d 335, 339 (5th Cir. 2000))).
A. WAS THE REMOVAL TIMELY?
“The notice of removal . . . shall be filed within 30 days
after the receipt by the defendant . . . of a copy of the initial
pleading . . . .” 28 U.S.C. § 1446(b)(1). However,
if 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 . . . of a copy of
an amended pleading, motion, order or other paper from
which it may be first ascertained that the case is one
which is or has become removable.
§ 1446(b)(3). Nonetheless, when the basis for removal is diversity
jurisdiction under § 1332, a case may not be removed “more than 1
year after commencement of the action, unless the district court
finds that the plaintiff has acted in bad faith in order to prevent
a defendant from removing the action.” § 1446(c)(1).
In this case, the original Louisiana state court petition was
filed on June 18, 2014. Rec. Doc. 3-1 at 2. Defendants admit that
the matter was not originally subject to removal. Rec. Doc. 3 at
¶ 3 (“Before the judgment in the Removed Case was rendered, this
case

was

not

removable

on

its

face

for

lack

of

complete

diversity”). On September 8, 2016, Plaintiffs filed an exception
of no right of action. Rec. Doc. 3-2 at 9. The memorandum in
support of the exception detailed all of the facts related to the
assignment of litigious rights that Defendants contend is null for

8

various reasons. Id. at 12-16. According to Plaintiffs, Defendants
filed a response to the exception on September 21, 2016, arguing
that federal securities fraud law applied to Plaintiffs’ actions.
Rec. Doc. 8-1 at 7. Nonetheless, after a hearing, the state court
judge granted the exception on September 26, 2016. Id. The judgment
rendered on that day was reduced to writing on October 27, 2016.
Id. Defendants purportedly received a copy of this judgment on
November 2, 2016. Rec. Doc. 3 at ¶ 7. Yet, it was not until November
30, 2016 that Defendants filed the notice of removal in this Court.
Id.5
Plaintiffs argue that Defendants had to remove the case within
one year after the suit was commenced on June 18, 2014 or within
one year of receipt of the filing by which it could first be
ascertained that the case was removable. Rec. Doc. 8-1 at 8-9.
Alternatively, Plaintiffs argue that Defendants failed to remove
the case within the thirty-day deadline provided in § 1446(b)(1),
because the supposed basis for removal was revealed in Plaintiffs’
September

8,

2016

exception

and

accompanying

memorandum

and

acknowledged by Defendants in their September 21, 2016 filings.
Id. at 11-12.

Defendants originally filed a notice of removal on November 30, 2016. Rec.
Doc. 1. However, the notice was marked deficient and Defendants were given until
December 9, 2016 to cure the deficiencies. Defendants re-filed a cured notice
of removal on December 9, 2016. Rec. Doc. 3.
5

9

Defendants claim that they timely removed the case within
thirty days of their receipt of the state court’s judgment on
November 2, 2016. Rec. Doc. 3 at ¶ 7; see also Rec. Doc. 18 at 3.
Further, Defendants argue that the one-year time period should be
equitably tolled. Rec. Doc. 18 at 1 (citing Tedford v. WarnerLambert Co., 327 F.3d 423 (5th Cir. 2003); Baby Oil, Inc. v. Cedyco
Corp., 654 F. Supp. 2d 508, 517 (E.D. La. 2009)).
First, the parties misunderstand the applicable rule. There
is a one-year time limit when the basis for removal is diversity
jurisdiction under 28 U.S.C. § 1332. Here, however, Defendants
argue that this Court maintains federal question jurisdiction
under § 1331. Therefore, the one-year time limit in § 1446(c)(1)
is irrelevant.
Second, the Court agrees with Plaintiffs that the removal was
not timely filed within thirty days of receipt of some paper from
which it could first be ascertained that the case was removable.
This Court lacks subject matter jurisdiction, as is discussed in
greater detail below, but the alleged basis for this Court’s
subject matter jurisdiction was known to Defendants on September
26, 2016, when they filed a motion in the state court arguing that
the sale of litigious rights is prohibited under Louisiana law and
that the Washington State process violated Glenda Wainright’s due
process rights. Rec. Doc. 3-2 at 60-61. The state court made its
ruling on September 26, 2016 and signed a judgment on October 27,
10

2016. Id. at 70. Yet, Defendants waited until November 30, 2016 to
attempt to remove the case.
Nonetheless, Defendants now argue that the deadline should be
equitably tolled. In Tedford, the Fifth Circuit recognized that
“[s]trict

application

of

the

one-year

limit

would

encourage

plaintiffs to join nondiverse defendants for 366 days simply to
avoid federal court, thereby undermining the very purpose of
diversity jurisdiction.” 327 F.3d at 427. Because the purpose of
the one-year limit was to “reduc[e] opportunity for removal after
substantial progress has been made in state court” and “forum
manipulation justifies application of an equitable exception in
the form of estoppel,” the Fifth Circuit held that “[w]here a
plaintiff has attempted to manipulate the statutory rules for
determining federal removal jurisdiction, thereby preventing the
defendant from exercising its rights, equity may require that the
one-year limit in § 1446[c] be extended.” Id. at 427, 429.
In Baby Oil, the district court recognized the exception
announced in Tedford, but noted that it must be balanced “with the
general rule that removal jurisdiction is to be strictly construed,
as its application ‘deprives a state court of a case properly
before it and thereby implicates important federalism concerns.’”
654 F. Supp. 2d at 517. In that case, substantial progress was
made in the state court (motions to compel and for summary judgment
were pending at the time of removal) and the defendant was not
11

vigilant in asserting its removal rights (after attempting to
remove in 2005, the defendant waited three years to conduct
discovery that would have revealed that the case was removable).
Id. Because “the Plaintiffs did not engage in blatant forum
manipulation, [the defendant] did not vigilantly assert is removal
rights, and [the] action ha[d] already made substantial progress
in state court, [the] case [was] not subject to the Tedford
equitable exception of estoppel.” Id.
Here, Plaintiffs argue that Defendants “have stated nothing
in their argument that amounts to any forum manipulation by the
Todescos, much less, blatant forum manipulation.” Rec. Doc. 23 at
3. Quite simply, the Court agrees with Plaintiffs. Defendants
allege that the Washington State attorneys engaged in misconduct
and various “deceptive practices,” but they fail to allege that
Plaintiffs in the instant case engaged in forum manipulation or
otherwise prevented Defendants from exercising their right to
remove the case to federal court. Rather, Defendants admit that
when the case was initially filed, there was no basis for federal
jurisdiction. Defendants are not entitled to the benefits of the
exception recognized in Tedford.6
Defendants also argue that the thirty-day clock did not begin
to run until they received a copy of the state court judgment on

For the purposes of the pending motion, the Court assumed that the Tedford
exception could be used to equitably toll the thirty-day deadline provided by
§ 1446(b).
6

12

November 2, 2016. This judgment is a one-page document that simply
provides that Plaintiffs’ exception of no right of action is
granted “for reasons orally assigned.” Rec. Doc. 3-2 at 70. Nothing
in

the

document

removable.

To

itself

the

suggests

contrary,

it

that

the

appears

to

case

was

this

suddenly

Court

that

Defendants simply did not like the outcome and were resigned to
manufacture a basis for removal in an attempt to find a court that
would reach a different conclusion. If the state court judgment
was deficient in some way, Defendants should have appealed. As it
stands, however, they failed to timely remove the case.
B. DOES THIS COURT HAVE SUBJECT MATTER JURISDICTION?
Even if the notice of removal was timely filed, there is no
basis for federal jurisdiction. “The district courts shall have
original jurisdiction of all civil actions arising under the
Constitution, laws, or treaties of the United States.” 28 U.S.C.
§ 1331. “Pursuant to the well-pleaded complaint rule, an action
‘‘arises under’ federal law ‘only when the plaintiff’s statement
of his own cause of action shows that it is based upon [federal
law].’” Hogan v. Williams, No. 17-3, 2017 WL 710414, at *2 (E.D.
La. Feb. 22, 2017) (quoting Vaden v. Discover Bank, 556 U.S. 49,
59 (2009) (quoting Louisville v. Nashville R. Co. v. Mottley, 211
U.S. 149, 152 (1908))). This rule essentially “provides that
federal

jurisdiction

presented

on

the

exists

face

of

only
the
13

when

a

federal

plaintiff’s

question

properly

is

pleaded

complaint.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987)
(citation

omitted).

This

generally

means

that

the

“plaintiff

pleads a cause of action created by federal law.” Riehm v. Wood
Res., LLC, No. 16-12747, 2016 WL 6123372, at *2 (E.D. La. Oct. 20,
2016) (citing Grable & Sons Metal Prod., Inc. v. Darue Eng’g &
Mfg., 545 U.S. 308, 312 (2005)). However, it may also mean that “a
plaintiff’s right to relief necessarily depends on the resolution
of a substantial question of federal law.” Riehm, 2016 WL 6123372,
at *2 (citing Gunn v. Minton, 133 S. Ct. 1059, 1065 (2013);
Thompson v. Hous. Auth. Of New Orleans, No. 16-11856, 2016 WL
4976446, at *3 (E.D. La. Sept. 19, 2016)). “That is, federal
jurisdiction over a state law claim will lie if a federal issue
is:

(1)

necessarily

raised,

(2)

actually

disputed,

(3)

substantial, and (4) capable of resolution in federal court without
disrupting the federal-state balance approved by Congress.” Gunn,
133 S. Ct. at 1065. “As a corollary, ‘anticipated or potential
defenses, including defenses based on federal preemption, do not
provide a basis for federal question jurisdiction.’” Google, Inc.
v. Hood, 822 F.3d 212, 221 (5th Cir. 2016) (quoting New Orleans &
Gulf Coast Ry. Co. v. Barrois, 533 F.3d 321, 328 (5th Cir. 2008))
(Emphasis added).
Nonetheless, “where the original complaint presents no
grounds for removal, a defendant may later remove the case to
federal court after receipt of ‘an amended pleading, motion, order
or other paper from which it may first be ascertained that the
14

case is one which is or has become removable.’” Eggert v. Britton,
223 F. App’x 394, 396 (5th Cir. 2007) (citing § 1446(b)) (emphasis
removed). “In most cases, when courts look to ‘other paper’ to
ascertain

removability,

jurisdiction

has

courts

been

are

clarifying

established.”

that

Id.

diversity
at

397.

“Under limited circumstances, courts have looked to ‘other paper’
to establish federal question jurisdiction, such as to clarify
that a plaintiff’s state law claim is one that would be preempted
by federal law.” Id.
Here, Defendants assert that some paper revealed that the
case was removable based on federal question jurisdiction. From
the notice of removal, it appears that Defendants claim that this
Court

maintains

federal

question

jurisdiction

because

of

allegations of security fraud and due process violations that
became apparent when the state court judge ruled against Defendants
in September or October of 2016. Rec. Doc. 3 at ¶ 9; see also Rec.
Doc. 18 at 3. Defendants also note that this Court would have
“exclusive jurisdiction if this case was filed anew pursuant to §
27 of the 1934 Exchange Act . . . .” Rec. Doc. 18 at 3 (citing 15
U.S.C. § 78aa(a)).
As to the due process argument, Defendants maintain that
because Glenda Wainright did not receive prompt notice that the
litigious

rights

were

assigned

to

Todesco,

Plaintiffs

(and

apparently Washington State) violated Glenda Wainright’s notice
15

rights under Mennonite. Id. at 9-10. Defendants thus conclude
“[u]nder the totality of the circumstances, the Jefferson Parish
judgment is a nullity pursuant to Louisiana Code of Civil Procedure
Article 2004 as having been obtained by ‘ . . . fraud and illpractices . . . ’ [and] the Soap Case . . . is subject to the right
of litigious redemption.” Id. at 10.
Plaintiffs

respond

that

Defendants

failed

to

argue

the

unconstitutionality of any Washington or Louisiana law regarding
notice—rendering

the

Supreme

Court’s

due

process

decision

in

Mennonite irrelevant. Rec. Doc. 8-1 at 20. According to Plaintiffs,
Todesco followed Washington law when he purchased the creditor
rights and subsequently pursued Defendants’ Haelan stock in a
Washington
Defendants’

court.

Id.

“arguments

Ultimately,
relate

to

Plaintiffs
nothing

more

maintain
than

that

alleged

procedural deficiencies in a state court proceeding upon which the
state court in the 24th Judicial District Court for the Parish of
Jefferson has already rendered judgment.” Id. at 21.7

Plaintiffs also argue that (1) Defendants’ requests for relief in the notice
of removal (namely seeking declarations that the state court judgment is null
and that Glenda Wainright may exercise her right of litigious redemption, as
well as for the appointment of a receiver or liquidator), are “entrenched in
state substantive law . . . ” (Rec. Doc. 8-1 at 14); and (2) none of the
pleadings filed in the state court provide a basis for federal jurisdiction
(id. at 16-17 (citing Rec. Doc. 3-1 at 2-20 (the original petition alleging
fraud, misappropriation, and breach of fiduciary duties); at 29-50 (Defendants’
reconventional demand); at 51-65 (the answer to the reconventional demand);
Rec. Doc. 3-2 at 9-20 (Plaintiffs’ exception of no right of action); at 23-50
(Defendants’ supplements to their earlier memoranda); at 60-68 (Defendants’
motion in limine arguing that the assignment of litigious rights was invalid
under Louisiana law).
7

16

Defendants spend a great deal of time in both their notice of
removal and opposition memorandum detailing the sale of litigious
rights in Washington State. See Rec. Doc. 3 at ¶¶ 10-28; Rec. Doc.
18 at 4-7. Under Louisiana law, “[w]hen a litigious right is
assigned, the debtor may extinguish his obligation by paying to
the assignee the price the assignee paid for the assignment, with
interest from the time of the assignment.” LA. CIV. CODE ANN. art.
2652. Defendants have pointed to no law that prohibits the sale of
litigious rights. Instead, they appear to argue that they should
be able to extinguish their obligation to Plaintiffs by paying the
price of the assignment. First, it is entirely unclear to the Court
how any argument about the validity and consequences of this
assignment is related to the issue of federal jurisdiction. As far
as this Court can tell from the documents filed in the Louisiana
state

court,

Plaintiffs

followed

proper

procedures

under

Washington State law to obtain the storage unit owner’s judgment
creditor’s

rights

and

subsequently

enforce

those

rights.

Defendants allege due process violations in a conclusory manner,
failing to cite the supposedly unconstitutional procedure. At
best, Defendants’ due process argument and any other argument
regarding the validity of the sale of litigious rights are defenses
to Plaintiffs’ claims and therefore would not confer subject matter
jurisdiction under the well-pleaded complaint rule. Second, the
assignment was made in Washington State and thus is presumably
17

subject to Washington, not Louisiana, law. Defendants fail to
explain why article 2652 should apply to this transaction or why
the application of article 2652 must be sought in federal court.
Third, prior to removal, Defendants apparently made this argument
in the state court—where it was dismissed. See Rec. Doc. 23 at 4;
See also Google, Inc. v. Hood, supra,(Removal unavailing for
purposes of asserting defenses).
As to Defendants’ assertion that this Court maintains
jurisdiction by virtue of the 1934 Exchange Act, Plaintiffs respond
that if these claims are raised in a state court and then sought
to

be

removed,

the

federal

court

cannot

exercise

removal

jurisdiction because the state court never had jurisdiction. Rec.
Doc. 8-1 at 18-19 (citing Shorty v. Top Rank of La., Inc., 876 F.
Supp. 838, 840 (E.D. La. 1995) (“The jurisdiction of the federal
court on removal is, in a limited sense, a derivative jurisdiction.
If the state court lacks jurisdiction . . . the federal court
acquires none, although it might in a like suit originally brought
there

have

had

jurisdiction.

There

being

no

state

court

jurisdiction over the 1934 Act claim, this Court has no removal
jurisdiction over that claim”) (citations and quotation marks
omitted); Weeks v. Fid. & Cas. Co. of N.Y., 218 F.2d 503, 504 (5th
Cir. 1955) (“The case removed must be one within the jurisdiction
of both the court from which, and the court to which, it is removed.
If the state court has no jurisdiction, the federal court acquires
none”) (citation omitted); Lambert Run Coal Co. v. Baltimore &

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O.R. Co., 258 U.S. 377, 382 (1922); Bee Mach. Co. v. Freeman, 131
F.2d 190, 194 (1st Cir. 1942), aff’d, 319 U.S. 448 (1943).
However, Congress amended the removal statute in 1986 and
2002. Section 1441(f) now provides that “[t]he court to which a
civil action is removed under this section is not precluded from
hearing and determining any claim in such civil action because the
State court from which such civil action is removed did not have
jurisdiction over that claim.” See also Budget Prepay Inc. v. Qwest
Commc’ns Co. L.L.C., No. 09-149, 2009 WL 1604995, at *1 n.3 (W.D.
La. June 8, 2009).
Nonetheless, Defendants did not address this argument in
their

opposition

memorandum.

Thus,

this

Court

is

left

with

Defendants’ conclusory statement that if this case were filed
today, it would be filed pursuant to the 1934 Exchange Act and
this Court would have exclusive jurisdiction. However, the Act is
not included in the original petition and Defendants fail to argue
that the petition necessarily raises a federal issue governed by
the Act that is actually disputed, substantial, and capable of
resolution

in

federal

court

without

disrupting

the

delicate

federal-state balance. The petition asserts fraud and breach of
fiduciary duties, both state law actions. Further, Defendants do
not explain how the filing of this petition today would necessarily
raise claims under the Act. Granted, the petition was originally
filed in state court before the allegedly offensive proceedings in
19

Washington

took

place—but

that

merely

suggests

that

the

allegations made in the petition have nothing to do with the
Washington litigation. Because the Act was not part of the wellpleaded complaint, we find that the 1934 Exchange Act does not
confer subject matter jurisdiction over the instant dispute.
It

was

Defendants’

burden

to

establish

that

federal

jurisdiction exists (De Aguilar, 47 F.3d at 1408) and they failed
to satisfy that burden. Instead, the Court agrees with Plaintiffs’
assessment of the instant removal: after Defendants’ arguments
were made and rejected in the state court, they “intentionally
misused this removal procedure in an attempt ‘to take another bite
at the apple.’” Rec. Doc. 23 at 2.
C. ARE PLAINTIFFS ENTITLED TO ATTORNEY’S FEES?
“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.” 28 U.S.C. § 1447(c). It is within the
court’s discretion to award fees, but the court should “recognize
the desire to deter removals sought for the purpose of prolonging
litigation and imposing costs on the opposing party, while not
undermining Congress’ basic decision to afford defendants a right
to remove as a general matter, when the statutory criteria are
satisfied.” Darville v. Tidewater Marine Serv., Inc., No. 15-6441,
2016 WL 1402837, at *9 (E.D. La. Apr. 11, 2016) (quoting Martin v.
Franklin Capital Corp., 546 U.S. 132, 140 (2005)). Thus, “the
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standard for awarding fees should turn on the reasonableness of
the removal” and “[a]bsent unusual circumstances, courts may award
attorney’s fees under § 1447(c) only where the removing party
lacked

an

objectively

reasonable

basis

for

seeking

removal.”

Martin, 546 U.S. at 141. See also Daigle v. Assumption Par. Policy
Jury, No. 14-1437, 2014 WL 6836130, at *1 (E.D. La. Dec. 2, 2014)
(awarding fees where the plaintiff/counterclaim defendant removed
the case, even though “decades of jurisprudence have established
that a counterclaim defendant may not remove a case” and the
counterclaim defendant cited no case law to support his position);
Tubre v. Auto. Club of Mo., No. 14-771, 2014 WL 2979379, at *4
(E.D. La. June 30, 2014) (awarding fees where the removing party
“disregarded the appropriate standard for improper joinder and
instead relied upon inapplicable case law”); Brennan v. Brennan’s,
Inc., No. 13-4848, 2013 WL 4547141, at *4 (E.D. La. Aug. 27, 2013)
(awarding fees given “the corporation’s blatant disregard for
controlling

precedent

and

its

intentionally

vague

arguments

regarding issues that were not pending in state court before the
case was removed, but which the corporation feared could come up
if the case remained in state court”).
There was no objectively reasonable basis to seek removal in
this case. Defendants offered conclusory allegations of securities
fraud and due process violations—arguments that were previously
made before and rejected by the state court. Defendants did not
21

even explain that they sought removal under § 1331 or recite any
of the case law regarding the appropriate standard for removal or
finding subject matter jurisdiction. Consequently, Plaintiffs are
entitled to payment of costs and fees under § 1447(c).
IV.

CONCLUSION

For the reasons given above,
IT IS ORDERED that the motion to remand (Rec. Doc. 8) is
GRANTED;
IT IS FURTHER ORDERED that because Defendants failed to
respond to Plaintiffs’ detailed motion for attorney’s fees and
costs, Defendants effectively waived defenses to that part of the
motion. Further, considering the reasonableness of the fees and
costs expended and now sought, along with the basis for awarding
fees under 28 U.S.C. § 1447(c), that part of the motion seeking
payment of fees and costs is GRANTED; and
IT IS FURTHER ORDERED that the motion for leave (Rec. Doc.
24) is DISMISSED AS MOOT.
New Orleans, Louisiana, this 14th day of April, 2017.

___________________________________
SENIOR UNITED STATES DISTRICT JUDGE

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