Spillers et al v. Chevron U S A Inc et al

Filing 58

SUPPLEMENTAL MEMORANDUM RULING re 19 MOTION to Remand filed by Lindsay Marie Spillers, Nicholas Wade Spillers, Carney W Potter, Teresa Delaine Woodard Spiller, Lyle Thomas Lewis, P D S Lands L L C, Charles M Spillers L L C, Bobbie June Staples, Janet Sue Lewis, Charles Milton Spillers. Signed by Magistrate Judge Karen L Hayes on 8/6/013. (crt,Crawford, A)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
MONROE DIVISION
NICHOLAS WADE SPILLERS, ET
AL.

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CIVIL ACTION NO. 11-2163

VERSUS

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JUDGE S. MAURICE HICKS

CHEVRON U.S.A. INC., ET AL.

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MAG. JUDGE KAREN L. HAYES

SUPPLEMENTAL MEMORANDUM RULING
Before the undersigned magistrate judge, on reference for reconsideration from the
District Court, is a Motion to Remand [doc. # 19] filed by Plaintiffs Nicholas Wade Spillers, et
al.1 Removing Defendants Chevron U.S.A., Inc., et al., oppose the motion. For reasons stated
below, the motion to remand is GRANTED.
BACKGROUND AND PROCEDURAL HISTORY
The statement of the case and the procedural history have already been set forth by the
Court in its August 2, 2012, ruling [doc. # 40] and are adopted herein by reference.
On August 17, 2012, removing Defendants appealed the undersigned’s decision to the
District Court, and on March 6, 2013. The District Court remanded the case to the undersigned,
finding that
[D]efendants should be given the opportunity to conduct very limited discovery
regarding Mr. Spillers’ affidavit, namely the circumstances surrounding the creation
of PDS Lands, PDS Lands’ acquisition of a five percent interest in eight of the

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As this motion is not one of the motions excepted in 28 U.S.C. § 636(b)(1)(A), nor
dispositive of any claim on the merits within the meaning of Rule 72 of the Federal Rules of
Civil Procedure, this ruling is issued under the authority thereof, and in accordance with the
standing order of this court. Any appeal must be made to the district judge in accordance with
Rule 72(a) and LR 74.1(W).

twenty-three tracts at issue in this suit, Mr. Spillers’ motive in assigning a five
percent interest to his children, and the timing of the assignment and donation.
[doc. # 49, P. 6-7]. On March 15, 2013, Defendants were granted 60 days – ultimately extended
to June 24, 2013 – to complete discovery. See [docs. # 50-54].
After the completion of discovery and supplemental briefing on the issue, the matter is
now before the court.
LAW AND ANALYSIS
This Court has “both the authority and the responsibility, under 28 U.S.C. §§ 1332 and
1441, to examine the motives underlying a partial assignment which destroys diversity and to
disregard the assignment in determining jurisdiction if it be found to have been made principally
to defeat removal.” Grassi v. Ciba-Geigy, Ltd., 894 F.2d 181, 185 (5th Cir. 1990). But unlike
the higher burden that applies to improper joinder, “the issue of whether the assignment was
improperly or collusively made is to be resolved as a simple question of fact.” Id. at 186 (citing
Bass v. Tex. Power & Light Co., 432 F.2d 763, 766-67 (5th Cir. 1970)). Because Defendants are
the party seeking the federal forum they bear the burden of demonstrating that PDS Lands’
acquisition of an interest in the property at issue and the subsequent donation to Ryan Spillers
were done for the principal purpose of defeating diversity jurisdiction.
Defendants argue in their supplemental brief that the evidence demonstrates “[t]here is no
plausible explanation for the August 9, 2011, transfer to PDS Lands, LLC and the subsequent
donation of an interest in the business to Ryan Spillers . . . other than an intent to defeat diversity
jurisdiction.” [doc. # 55, P. 22]. Defendants concede that Plaintiffs have not admitted to making
a collusive transfer, but argue that the deposition testimony of plaintiffs Paul Spillers, Nicholas
Spillers, and Bobbie Staples contains circumstantial evidence which establishes that the transfer

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and the subsequent donation were principally made to defeat diversity, specifically pointing to
the timing of the transactions, their claim that PDS Lands has subsequently ignored its interest in
the property, PDS Lands’ lack of ownership in other property, and the transferee plaintiffs’ lack
of knowledge and inability to explain the details of the transactions.
Because the transactions at issue here do not involve mere assignments of claims, as in
Grassi, Defendants must persuade the Court that the transferor plaintiffs were motivated to
change their ownership interests principally to defeat diversity jurisdiction in this lawsuit,
however, as is more fully explained below, the evidence presented does not adequately
demonstrate same. Moreover, Defendants have not introduced evidence of a specific motive that
Plaintiffs had for avoiding federal court, such as instances in which Plaintiffs received a
favorable ruling in state court or adverse rulings in federal court.2
Plaintiffs Nicholas Spillers and Bobbie Staples plainly testified that the principal reason
for the transfer and assignment to PDS Lands was to ensure the management of the case by their
relative and life long attorney, Paul Spillers, who had handled numerous matters for them over
many years.3 See [doc. # 55-3, pp. 21-22]; [doc. # 57-9, p. 37]. Paul Spillers himself explained
that he has handled many legal matters for family throughout the years, mostly free of charge, or
for de minimis compensation. [doc. #57-1, pp.119-120] They explained that they knew he would
not accept legal fees from them, but that he was always interested in acquisition of land. They
therefore made the transfer and assignment to compensate him both for his past work and for the

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In fact, Paul Spillers testified that he does not “practice a lot in federal court,” and that
diversity jurisdiction issues have not “come up in his practice over the years.” [doc. # 57-1, P.
46].
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Plaintiffs provide a list of legal and business matters Paul Spillers has handled for
Plaintiffs Nicholas Spillers and Bobbie Staples. See [doc. # 57, P. 9-11].
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work they anticipated would be needed in the future. [doc. #55-3, pp. 23,32; doc #’s 57-11, 5712]. Finally, as was pointed out in the original report and recommendation in this case, it was
not the transfer to PDS Lands which destroys diversity in this case, it was the donation to Ryan
Spillers.
As to PDS Lands’ donation of a membership interest to Ryan and Sarah Spillers, Paul
Spillers testified that it is his goal to get his children actively involved in the management of his
timberland, stating “when you actually bring [your children] into ownership, it . . . encourages
them to get involved and to develop an interest in what’s going on in the family business.” [doc.
# 57-1, P. 158]. Additionally, this is not the first time Paul Spillers has donated a small
ownership interest to his children in one of his business entities; in fact, in 2006, Spillers donated
a 1% membership interest to his children in Paul D. Spillers, LLC. Id. at 161. According to
Spillers, “there’s a well recognized body of knowledge that encourages and recognizes that it’s
very important to bring children into ownership, give them a say, give them input, give them
ownership.” Id. at 160. Furthermore, Spillers explained the tax benefits and estate planning
reasons for the donation:
If you own land – let’s say you have 100 acres of land that you individually own and
you die, that asset . . . must be valued at fair market value on the date of death, and
you pay an estate tax based on the value of that land as of the date of death.
Now, if you take that land prior to your date of death and put it into an LLC, and then
you die, after having donated some interest to children so that you don’t own 100
percent . . . the asset that must be included in your estate for estate tax purposes is
that interest that you own in the LLC; not the land, but it’s the interest in the LLC.
And due to my experience, the value of that interest can be significantly discounted.
For tax purposes, it’s discounted substantially. That results in estate tax savings.
Id. at 122-23. The undersigned agrees and accepts the premise that a partial interest in an asset is

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subject to a substantial discount for tax purposes because it is less attractive to potential
purchasers and therefore its fair market value is less. When asked why he waited until August
2011 to donate the 5% ownership interest in PDS Lands, Spillers testified that he “simply
overlooked it” and it came to his attention “when [he] took the assignment . . . and that
precipitated [his] desire to make the donation.” Id. at 124-25. It should also be noted that the
property at issue herein was not PDS Lands’ only asset at the time of the donation. The
undisputed testimony of Paul Spillers was that he created PDS Lands, LLC, in 2000 in order to
prevent commingling of his separate property from his former community assets and to purchase
and manage land holdings following his divorce, and that the entity acquired at least one other
tract, located in West Carroll Parish, prior to the 2011 donation to his children.[doc. # 57-1 at pp.
72-73 and76-78] In addition, although it sold the surface property in 2012, PDS Lands still
retains mineral rights in the West Carroll Parish property. [doc.# 57-1 at p.56] Defendants have
failed to produce any evidence to controvert this testimony.
Given the fact that Paul Spillers’ donations to his children were in keeping with his prior
donations to them of interests in Paul D. Spillers, LLC, and without stronger circumstantial
evidence of motive, or proof of a more specific motive for avoiding federal court, Defendants
have not met their burden of establishing that Plaintiffs’ principal purpose in the PDS Lands
transactions was to destroy diversity jurisdiction in this case. Although the circumstantial
evidence permits the inference that the PDS Lands transactions could have been motivated in
part by Plaintiffs’ desire to litigate in state court, Defendants have not shown that the transactions
were made “principally to defeat [diversity].” Grassi, 894 F.2d at 185 (emphasis added). For
these reasons, Defendants have not met their burden to establish that removal jurisdiction exists
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on the basis of diversity, and the motion to remand is therefore GRANTED.
CONCLUSION
Accordingly,
The motion to remand [doc. # 19] filed by Plaintiffs Nicholas Spillers, et. al., is hereby
GRANTED; the case shall be REMANDED to the Fourth Judicial District Court for the Parish
of Ouachita, State of Louisiana.
THUS DONE AND SIGNED at Monroe, Louisiana, this 6th day of August, 2013.

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