Perrera et al v. Kymco USA, Inc. et al

Filing 22

ORDER AND REASONS: IT IS ORDERED that the above-captioned matter is REMANDED to Civil District Court for the Parish of Orleans, as set forth in document. IT IS FURTHER ORDERED that the 17 motion relative to the state court judgment is DISMISSED AS MOOT. Signed by Judge Ivan L.R. Lemelle on 2/21/2018. (Attachments: # 1 Remand Letter)(jls)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
KELLY PERRERA, ET AL.

CIVIL ACTION

VERSUS

NO. 17-5554

KYMCO USA, INC., ET AL.

SECTION “B”(2)
ORDER AND REASONS

The Court issued an Order for Defendant KYMCO USA, Inc. to
show cause why the above-captioned matter should not be remanded
to state court for lack of subject matter jurisdiction. Rec. Doc.
19. Defendant KYMCO timely filed a response. Rec. Doc. 20. There
is also a pending motion, filed by Defendant Hall’s Motorsports of
New Orleans, Inc., to recognize a Louisiana state court consent
judgment. Rec. Doc. 17. For the reasons discussed below,
IT IS ORDERED that the above-captioned matter is REMANDED to
Civil District Court for the Parish of Orleans.
IT IS FURTHER ORDERED that the motion relative to the state
court judgment (Rec. Doc. 17) is DISMISSED AS MOOT.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
This case arises out of a tragic all-terrain vehicle (ATV)
accident that left Plaintiff Kelly Perrera injured. See Rec. Doc.
3-1 at 8. Kelly Perrera and her husband, Rene Perrera, brought a
negligence claim against the ATV retailer, Hall’s Motorsports of
New Orleans, Inc., and negligence and products liability claims
against the ATV manufacturer, KYMCO USA, Inc. See Rec. Doc. 3-1 at

1

9-15.

Plaintiffs

are

citizens

of

Louisiana,

Defendant

Hall’s

Motorsports is a citizen of Louisiana, and Defendant KYMCO is a
citizen of South Carolina. See Rec. Doc. 1 at 2-3.
When Plaintiffs purchased the ATV, they signed an arbitration
agreement with Hall’s Motorsports. See id. at 4. After filing suit
in Louisiana, Plaintiffs agreed to arbitrate their claim against
Hall’s Motorsports. See Rec. Doc. 17-3. The state court entered a
consent judgment that stayed Plaintiffs’ claims against Hall’s
Motorsports

pending

the

outcome

of

arbitration,

but

retained

jurisdiction to enforce the arbitration award. See id.
Shortly before the state court entered the consent judgment,
Defendant KYMCO filed a notice of removal. See Rec. Doc. 1.
Acknowledging that there is incomplete diversity among the parties
on the face of the complaint, KYMCO argued that Hall’s Motorsports
was improperly joined and should be disregarded as a party. See
id.

at

3-5.

KYMCO

premised

its

argument

on

the

fact

that

Plaintiffs’ claim against Hall’s Motorsports is subject to an
arbitration agreement. See id.
Hall’s Motorsports, without objection from Plaintiffs or
KYMCO, then moved this Court to recognize the state court consent
judgment

and

stay

the

instant

proceedings

against

Hall’s

Motorsports in this Court. See Rec. Doc. 17. In response to this
motion, the Court ordered KYMCO to show cause why the abovecaptioned matter should not be remanded to state court for lack of
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subject matter jurisdiction. See Rec. Doc. 19. KYMCO timely filed
a response. See Rec. Doc. 20.
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 or defendants, to the district
court of the United States for the district and division embracing
the place where such action is pending.” 28 U.S.C. § 1441(a).
However, “[i]f at any time before final judgment it appears that
the district court lacks subject matter jurisdiction, the case
shall be remanded.” Id. § 1447(c). A district court “may consider
subject matter sua sponte, as subject-matter delineations must be
policed by the courts on their own initiative.” Gasch v. Hartford
Accident & Indem. Co., 491 F.3d 278, 280-81, 284 (5th Cir. 2007)
(remanding

case

jurisdiction

to

after

state
sua

court

sponte

for

lack

raising

the

of

subject

issue

of

matter
whether

non-diverse defendant was actually improperly joined).
The above-captioned matter was removed from Louisiana state
court on the basis of diversity jurisdiction. See Rec. Doc. 1 at
1 (citing 28 U.S.C. § 1332). Diversity jurisdiction is present
when “the citizenship of each plaintiff is diverse from the
citizenship of each defendant.” Caterpillar Inc. v. Lewis, 519
U.S. 61, 68 (1996). Here, Plaintiffs are citizens of Louisiana,
Defendant KYMCO is a citizen of South Carolina, and Defendant
3

Hall’s Motorsports is a citizen of Louisiana. See Rec. Doc. 1 at
2-3. Plaintiffs have the same citizenship as Defendant Hall’s
Motorsports. Therefore, on the face of the complaint, there is
incomplete diversity. See Caterpillar, 519 U.S. at 68.
KYMCO argues that Hall’s Motorsports was improperly joined
and should be disregarded as a defendant, curing the jurisdictional
defect. See Rec. Docs. 1 at 3-5; 20 at 4-9. “To demonstrate
improper joinder of resident defendants, the removing defendants
must demonstrate 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.” Gasch, 491 F.3d at 281. When, as here, a removing defendant
“rel[ies] on the second prong, . . . the threshold question . . .
is whether there is no reasonable basis for the district court to
predict that the plaintiff might be able to recover against an instate defendant.” Id. (citing Smallwood v. Ill. Cent. R.R. Co.,
385 F.3d 568, 573 (5th Cir. 2004) (en banc)). In answering this
question, a “court may conduct a Rule 12(b)(6)-type analysis,
looking at the allegations of the complaint” or, when “a plaintiff
has stated a claim, but has misstated or omitted discrete facts
that would determine the propriety of joinder[,]” a court “may
. . .

pierce

the

pleadings

and

Smallwood, 385 F.3d at 573.

4

conduct

a

summary

inquiry.”

The removing defendant confronts a challenging task when
arguing that another defendant has been improperly joined.
The burden of proof is on the removing party. In deciding
whether a party was improperly joined, we resolve all
contested issues and ambiguities of state law in favor
of the plaintiff. As the effect of removal is to deprive
the state court of an action properly before it, removal
raises significant federalism concerns. The removal
statute is therefore to be strictly construed, and any
doubt about the propriety of removal must be resolved in
favor of remand.
Gasch, 491 F.3d at 281-82.
Plaintiffs

plead

a

negligence

claim

against

Hall’s

Motorsports in their petition for damages, see Rec. Doc. 3-1, which
means that it is necessary to pierce the pleadings and conduct a
summary inquiry to determine whether other information indicates
that Hall’s Motorsports was improperly joined. See Smallwood, 385
F.3d at 573. KYMCO argues that piercing the pleadings reveals that
Plaintiffs cannot recover against Hall’s Motorsports in state
court because Plaintiffs’ claims are being arbitrated. Rec. Docs.
1 at 3-5; 20 at 4-9.
But KYMCO does not cite a single case in support of its
argument

that

Plaintiffs’

compliance

with

the

arbitration

agreement is a basis for finding that Hall’s Motorsports was
improperly joined. In fact, multiple cases addressing the issue
have reached the opposite conclusion. See Cure v. Toyota Motor
Corp., 248 F. Supp. 2d 594, 596-97 (S.D. Miss. 2003); Ret. Program
for Emps. of Fairfield v. NEPC, LLC, 642 F. Supp. 2d 92, 95-96 (D.
5

Conn. 2009); Cobalt Mining, LLC v. Bank of America, No. 07-CV-598S, 2008 WL 695887, at *2-5 (W.D. Ky. Mar. 12, 2008); Frank v.
American Gen. Fin., Inc., 23 F. Supp. 2d 1346, 1348-51 (S.D. Ala.
1998). KYMCO’s attempts to distinguish those cases are unavailing.
As

is

situations

relevant
have

here,

recognized

courts
that

confronted

“even

an

with

order

similar

compelling

arbitration does not under the [Federal Arbitration Act (FAA)]
divest the court, state or federal, of jurisdiction.” Cure, 248 F.
Supp. 2d at 597 (citing Frank, 23 F. Supp. 2d at 1350). “[E]ven
assuming an enforceable arbitration agreement exists, the FAA
gives courts the express right only to stay the action until such
arbitration has been had in accordance with the terms of the
agreement, and nothing in the FAA states that a court should
dismiss the action.” Cobalt Mining, 2008 WL 695887, at *3. The
state

court

here

stayed

Plaintiffs’

claims

against

Hall’s

Motorsports pending the outcome of arbitration and, importantly,
“maintain[ed]

jurisdiction

in

this

matter

for

the

entry

and

enforcement of such arbitration award as may be rendered by the
arbitration forum.” Rec. Doc. 17-3. No court has since issued an
order with respect to Hall’s Motorsports’ status in this case.
Therefore, Hall’s Motorsports remained a party to the action
when KYMCO filed its notice of removal, and remains a party today.
Further confirming that Hall’s Motorsports is still a party, Hall’s
Motorsports recently filed a motion to stay its participation in
6

the

instant

arbitration.

federal
See

Rec.

proceedings
Doc.

17.

pending

Neither

the

outcome

Plaintiffs

nor

of

KYMCO

objected to that motion. See id. The parties appear to agree that
Hall’s

Motorsports

remains

a

party

to

this

action,

which

necessarily defeats diversity jurisdiction. KYMCO has therefore
not met its weighty burden of demonstrating that Hall’s Motorsports
was improperly joined. See Cobalt Mining, 2008 WL 695887, at *4-5.
New Orleans, Louisiana, this 21st day of February, 2018.
___________________________________
SENIOR UNITED STATES DISTRICT JUDGE

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