Williams v. Sentry Insurance A Mutual Co et al
SUA SPONTE JURISDICTIONAL BRIEFING ORDER AND ORDER LIFTING AUTOMATIC STAY FOR THE LIMITED PURPOSE OF CONSIDERING JURISDICTION AND REMAND. Signed by Magistrate Judge Joseph H L Perez-Montes on 8/17/2017. (crt,Tice, Y)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
KENGARRICA WILIAMS, et al.
CIVIL ACTION 3:17-CV-00811
SENTRY INSURANCE A
MUTUAL CO., et al.
MAGISTRATE JUDGE PEREZ-MONTES
SUA SPONTE JURISDICTIONAL BRIEFING ORDER AND ORDER LIFTING
AUTOMATIC STAY FOR THE LIMITED PURPOSE OF CONSIDERING
JURISDICTION AND REMAND
Before the Court is a Complaint removed from a Louisiana state court by
Defendants Rue 21, Inc., Cindy Hamby, Shatoria Wilson, and Sentry Insurance
Company (Doc. 1). Defendant premises federal jurisdiction on diversity of citizenship.
Plaintiffs filed their petition for damages in state court on May 9, 2017 (Doc.
1-5). Defendant Rue 21 filed for Chapter 11 bankruptcy on May 15, 2015 (Doc. 10-1).
Defendants then removed this case on June 26, 2017, without any mention of the
bankruptcy 1 (Doc. 1). Defendants alleged in their Notice of Removal that Cindy
Hamby and Shatoria Wilson were fraudulently joined as defendants. Defendant Rue
21 filed a Suggestion of Bankruptcy on July 10, 2017 (Doc. 10), invoking the automatic
stay. Plaintiffs filed a Motion to Remand and for Attorney Fees (Doc. 22).
In a telephone conference held on July 27, 2017, Plaintiffs made a verbal
Motion to Lift the Stay of this case for purposes of deciding the motion to remand
Defendants did not remove the case pursuant to 28 U.S.C. § 1452 (removal of claims related to
In response, Defendants opposed the Motion to Lift the Stay and
conditionally moved to extend the time to respond to the Motion to Remand (Doc. 27).
Law and Analysis
The stay of this case should be lifted for the limited purpose of
considering this Court’s jurisdiction, which includes considering
Plaintiff’s Motion to Remand.
There is an automatic stay in this case because Defendant Rue 21, Inc. filed
for bankruptcy (Doc. 10). Defendants removed the case to this Court on the basis of
diversity jurisdiction after Rue 21 filed for bankruptcy (Doc. 1-2), and now contend
that remand is prohibited by the automatic stay.
The stay did not prevent
Defendants from removing this case.
Section 362 of the Bankruptcy Code states that a bankruptcy petition “operates
commencement of the [bankruptcy].” See 11 U.S.C. § 362. The automatic stay takes
effect under 11 U.S.C. § 362(a)(1) upon the filing of a petition in bankruptcy and acts
to stay any judicial “proceeding against the debtor.” Its purposes are to protect the
debtor's assets, provide temporary relief from creditors, and further equity of
distribution among the creditors by forestalling a race to the courthouse. See GATX
Aircraft Corp. v. M/V Courtney Leigh, 768 F.2d 711, 716 (5th Cir. 1985); see also Hunt
v. Bankers Trust Co., 799 F.2d 1060, 1069 (5th Cir. 1986).
“The automatic stay of the bankruptcy court does not divest all other courts of
jurisdiction to hear every claim that is in any way related to the bankruptcy
proceeding. As [the Fifth Circuit has] noted, other district courts retain jurisdiction
to determine the applicability of the stay to litigation pending before them, and to
enter orders not inconsistent with the terms of the stay.” Picco v. Global Marine
Drilling Co., 900 F.2d 846, 850 (5th Cir. 1990) (citing Hunt, 799 F.2d at 1069); see
also In re Barnes, 279 Fed. Appx. 318, 320 (5th Cir. 2008); Arnold v. Garlock Inc., 288
F.3d 234, 236 (5th Cir. 2002); In re Federal-Mogul Global, Inc., 37 Fed. Appx. 88, *1
(5th Cir. 2002); Jefferson County School District v. Lead Industries Ass’n, Inc., 223
F. Supp. 2d 771, 781 (S.D. Miss. 2002). “[A] bankruptcy court does not have the power
to preclude another court from dismissing a case on its docket, or to affect the
handling of a case in a manner not inconsistent with the purpose of the automatic
stay.” Dennis v. A.H. Robins Co., Inc., 860 F.2d 871, 872 (8th Cir. 1988).
Further, a district court has the power to dismiss a case for failure to comply
with its rules, regardless of a bankruptcy stay, in the interest of advancing a crowded
docket and preserving respect for the integrity of its internal procedures. See Dennis,
860 F.2d at 872; see also O’Donnell v. Vencor Inc., 466 F.3d 1104, 1108-09 (9th Cir.
2006); Tomlin v. Health Assurance, LLC, 2017 WL 3090270, *2 (S.D. Miss. 2017)
(dismissal of all claims pursuant to Fed. R. Civ. P. rule 41 for failure to prosecute did
not violate the automatic stay); Villareal v. City of Laredo, 2007 WL 2900572 (S.D.
Tex. 2007), aff’d in part, 354 Fed. Appx. 177 (5th Cir. 2009); Main v. Kaspar, 2004
WL 2792128 (W.D. Tex. 2004) (holding that a denial of defendant’s motion to dismiss
was not inconsistent with the terms of the automatic stay); MTGLQ Investors, L.P.
v. Guire, 286 F.Supp.2d 561, 563 (D. Md. 2003) (automatic stay did not preclude
district court from ruling on motion to transfer venue, since granting that motion
would merely change forum and not shift priority of creditors or disrupt debtors’
statutory breathing spell). And, critically here, a bankruptcy stay does not preclude
a remand. See Henry v. Cooper/T. Smith Stevedoring Co., 2016 WL 6080992, *2 (E.D.
La. 2016) (a remand on equitable grounds pursuant to 28 U.S.C. § 1452(b) is not
precluded by a bankruptcy stay) (citing Hudgens v. Deer Valley Home Builders, Inc.,
2009 WL 2878052, *2 (W.D. La. 2009) (Drell, J.) (§ 362(a) does not explicitly preclude
a remand on the parties’ joint motion for remand)). 2
A fortiori, a district court’s remand to the state court for lack of jurisdiction is
not a prohibited “continuation” of the action under § 362. Where subject matter
jurisdiction is lacking and the district court does not reach the merits of the claims,
the court need not retain jurisdiction over a party in bankruptcy pursuant to the
automatic stay provision of § 362. See Lindley Contours, LLC v. AABB Fitness
Holdings, Inc., 414 Fed. Appx. 62, 63 at n. 1 (9th Cir. 2011); see also Independent
Union of Flight Attendants v. Pan American World Airways, Inc., 966 F.2d 457, 459
(9th Cir. 1992). “Section 362 does not prevent remand of an improperly removed
action because remand is not a prohibited continuation of the action under § 362.”
Sanders v. Farina, 197 F. Supp. 3d 892, 894 n. 3 (E.D. Va. 2016), aff’d, 671 Fed. Appx.
183 (4th Cir. 2016); see also ComUnity Collectors LLC v. Mortgage Electronic
Registration Services, Inc., 2012 WL 3249509, *5 (N.D. Ca. 2012) (considering a
motion to dismiss for lack of subject matter jurisdiction does not implicate the
underlying issues or merits of the action, so the automatic stay does not apply);
Declining to follow Liljeberg Enters. Int’s, LLC v. Vista Hospital of Baton Rouge, Inc., 2004 WL
2725965 (E.D. La. 2004) (holding the stay applies to a motion for abstention and remand).
Schaffer v. Atlantic Broadcasting of Lindwood NJ Ltd. Liab. Co., 2011 WL 1884734
at *4 (D.N.J. May 17, 2011) (a district court may remand a lawsuit to state court for
lack of subject matter jurisdiction or improper venue notwithstanding a pending
petition for bankruptcy filed by one of the defendant-debtors); Evans v. Anderson,
2010 WL 118398 at *1 (N.D. Cal. Jan. 7, 2010) (“[W]here the district court lacks
jurisdiction over the action filed before it the court is not without power to remand
the action and the stay does not deprive it of that power.”); MTGLQ Investors, L.P.
386 F. Supp. 2d at 563 (dismissing or transferring the case on jurisdictional grounds
does not constitute a prohibited “continuation” of the action under § 362); County of
Cook v. Mellon Stuart Co., 812 F. Supp. 793, 798 n. 3 (N.D. Ill.1992) (a § 362 stay
does not prevent a district court from remanding an improperly removed action).
In this case, consideration of issues as to this Court’s subject matter
jurisdiction will not affect either the debtor’s assets or the creditors’ standing in the
bankruptcy case. Therefore, this Court can consider whether this case was properly
removed without violating the automatic stay.
Diversity jurisdiction is not clear from the pleadings.
The diversity statute – 28 U.S.C. § 1332 – is satisfied upon a showing of: (1)
diversity of citizenship between the parties; and (2) an amount in controversy in
excess of $75,000, exclusive of interest and costs. “Complete diversity requires that
all persons on one side of the controversy be citizens of different states than all
persons on the other side.” Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1079
(5th Cir. 2008) (internal citation and quotation omitted). Further, “when jurisdiction
depends on citizenship, citizenship must be distinctly and affirmatively alleged.”
Getty Oil Corp., a Div. of Texaco, Inc. v. Ins. Co. of N. Am., 841 F.2d 1254, 1259 (5th
Cir. 1988). The Court has “an independent obligation to determine whether subjectmatter jurisdiction exists, even in the absence of a challenge from any party.”
Arbaugh v. Y&H Corp., 546 U.S. 500, 514 (2006). This duty persists throughout all
phases of the litigation, even after trial and the entry of final judgment. See id. at
The citizenship of an individual is his or her domicile, meaning the place where
an individual resides and intends to remain. See Acridge v. Evangelical Lutheran
Good Samaritan Soc., 334 F.3d 444, 448 (5th Cir. 2003). A corporation shall be
deemed to be a citizen of every State and foreign state by which it has been
incorporated and of the State or foreign state where it has its principal place of
business. See Tewari De-Ox Systems, Inc. v. Mountain States/Rosen, L.L.C., 757
F.3d 481, 483 (5th Cir. 2014). The citizenship of a general partnership depends on
that of all partners. See Int'l Paper Co. v. Denkmann Associates, 116 F.3d 134, 135,
137 (5th Cir. 1997). The citizenship of a limited liability company (“L.L.C.”), a limited
partnership, or other unincorporated association or entity is determined by the
citizenship of all its members. See Harvey, 542 F.3d at 1079-80.
Defendants show that Plaintiff Kengarrica Williams is a citizen of Louisiana
(Doc. 1-2). Kengarrica Williams appears both individually and as tutrix of her minor
child, A.L. The citizenship of A.L. is not alleged.
Defendants allege that Sentry Insurance A Mutual Company is a “foreign
mutual insurance company” organized under the laws of Wisconsin, with its principal
place of business in Wisconsin. Since Defendants have not alleged what type of
business entity Sentry Insurance is, the Court cannot determine whether Defendants
have properly alleged its citizenship.
Defendants allege that Burlington Sand Realty, L.L.C. is a limited liability
company whose members are all “residents of states other than Louisiana” (Doc. 12). Defendants have not specifically identified the members of Burlington Sand
Realty, L.L.C. and their citizenships.
Defendants allege Rue 21, Inc. is a Delaware corporation with its principal
place of business in Pennsylvania (Doc. 1-2).
Therefore, it is a citizen of both
Delaware and Pennsylvania.
Defendants contend Cindy Hamby and Shatoria Wilson are citizens of
Defendants allege they are improperly joined to defeat diversity
jurisdiction. That issue is argued in Plaintiffs’ Motion to Remand (Doc. 22).
Diversity of citizenship is not clear from the pleadings.
existence of federal jurisdiction is in question, even notwithstanding the issues raised
in the Motion to Remand.
IT IS ORDERED that the stay of this case is LIFTED FOR THE LIMITED
PURPOSE of considering this Court’s diversity jurisdiction, including the Motion to
Remand (Doc. 22).
The Clerk of Court is DIRECTED to serve a copy of this order upon all parties
to this action IMMEDIATELY.
IT IS ORDERED that the parties have 45 days from the date of this Order to
conduct discovery limited to the issue of jurisdiction only.
IT IS FURTHER ORDERED that, no later than 60 days from the date of this
Order, Defendants Rue 21, Inc., Cindy Hamby, Shatoria Wilson, and Sentry
Insurance Company shall file:
a Jurisdictional Memorandum setting forth:
the citizenship of the minor child, A.L.;
the citizenship of Sentry Insurance, specifically including its
place of incorporation and principal place of business or, if it is
not incorporated, the citizenship of each of its members; and
the names of the members of Burlington Sand Realty, L.L.C. and
a motion for leave to amend the jurisdictional allegations of the Notice
of Removal, to adequately allege diversity jurisdiction; and
a response to Plaintiff’s Motion to Remand (Doc. 22).
IT IS FURTHER ORDERED that Plaintiff will be allowed 7 days from receipt
of Defendants’ memorandum regarding jurisdiction and response to the Motion to
Remand to file a Reply.
THUS DONE AND SIGNED in chambers in Alexandria, Louisiana, this _____
day of August, 2017.
Joseph H.L. Perez-Montes
United States Magistrate Judge
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