Zipline Logistics, LLC v. Powers & Stinson, Inc. et al
Filing
29
REPORT AND RECOMMENDATION that 14 MOTION to Remand to State Court be granted in part and denied in part. The Court also recommends that 25 Second MOTION to Remand be denied as moot. Objections to R&R due within fourteen (14) days. Signed by Magistrate Judge Terence P. Kemp on 7/21/2015. (agm)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Zipline Logistics, LLC,
:
Plaintiff,
:
v.
:
Powers & Stinson, Inc., et al.,:
Defendants.
Case No. 2:15-cv-693
JUDGE GREGORY L. FROST
Magistrate Judge Kemp
:
REPORT AND RECOMMENDATION
This case is before the Court to consider Plaintiff’s motion
to remand (Doc. 14) and second motion to remand (Doc. 25), which
have been referred to the undersigned for a Report and
Recommendation.
For the following reasons, the Court will
recommend that Plaintiff’s motion to remand be granted in part
and denied in part.
(Doc. 14).
More specifically, the Court
will recommend that the motion to remand be granted to the extent
that it seeks remand of this case to the Franklin County Court of
Common Pleas, but it will recommend that the motion to remand be
denied to the extent that it seeks an award of attorney’s fees.
The Court will also recommend that the second motion to remand be
denied as moot.
(Doc. 25).
I. Background
Plaintiff Zipline Logistics, LLC (“Zipline”) filed this case
in the Franklin Court of Common Pleas on February 28, 2014.
Zipline filed an amended complaint on March 5, 2014 and a second
amended complaint on February 5, 2015.
In the second amended
complaint, Zipline named as defendants Powers & Stinson, Inc. of
Memphis, Tennessee, Powers & Stinson, Inc. of Southaven,
Mississippi, James Annestedt a/k/a Jim Anderson, Complexity,
Inc., Argo Logistics, Inc. LLC [sic], and Donald McKnatt.
On
February 23, 2015, Powers & Stinson, Inc. (Tennessee) and Powers
& Stinson, Inc. (Mississippi) (collectively “Powers & Stinson”)
filed a notice of removal, removing the case from the Court of
Common Pleas to this Court on the basis of diversity
jurisdiction.
(Doc. 1).
Complexity, Inc. (“Complexity”) and
Argo Logistics, Inc. LLC [sic] did not join in the notice of
removal.
The notice states the following with respect to those
defendants:
Complexity, Inc. has been served, and while currently
represented, is no longer a going concern, and cannot be
reached for consent as they have had no contact with
their counsel. Affidavit of Jack S. Gatlin, attached as
Exhibit B.
Argo Logistics Inc LLC [sic] has never answered and
cannot be reached for consent.
Affidavit of Jack S.
Gatlin, attached as Exhibit B.
Id. at ¶¶ 22-23.
On March 25, 2015, Zipline filed a motion to remand this
case to the Court of Common Pleas.
(Doc. 14).
In the motion,
Zipline argues that “28 U.S.C. §1446(b)(3) is inapplicable
because the initial complaint was removable and Defendants Powers
& Stinson, Inc. have waived their right to remove.
In addition,
Defendant Complexity, Inc. has been properly served and
participated in this action and has not consented to removal.”
Id. at 1.
Zipline also moves this Court for an award of
attorney’s fees.
On April 15, 2015, Mr. McKnatt filed a separate notice of
removal (the “second notice of removal”).
(Doc. 20).
In the
second notice of removal, Mr. McKnatt “accepts service of the
Second Amended Complaint,” and states that “Defendants Powers &
Stinson, Inc., Powers & Stinson, Inc., James Annestedt, and
Complexity, Inc., have not been served the Second Amended
2
Complaint.”
(Doc. 20 at ¶¶ 4-5).
Mr. McKnatt summarizes the
procedural history of this case as follows:
Powers & Stinson, Inc. filed a Notice of Removal on
February 23, 2015. Plaintiff responded to that by filing
a Motion to Remand.
Despite the Court’s ruling on Plaintiff’s Motion to
Remand, Donald McKnatt has an undeniable right to remove
the action to this Court, as well. He is now asserting
his independent right to do so.
Id. at ¶¶ 8-9.
The second notice of removal seeks to remove this
case based upon this Court’s diversity jurisdiction.
The second
notice of removal states the following with respect to the
consent of the other defendants:
Under 28 U.S.C. § 1446(b)(2)(c), James Annestedt aka
Jim Anderson, the other Defendant that has been served to
date, consents to this removal.
Complexity, Inc. has been served, and while
currently represented, is no longer a going concern, and
cannot be reached for consent as they have had no contact
with their counsel.
Affidavit of Jack S. Gatlin,
attached as Exhibit B. See also, Affidavit of Russell E.
Fox, attached as Exhibit A to Response to Plaintiff’s
Motion for Remand.
Argo Logistics Inc LLC has never answered and cannot
be reached for consent. Affidavit of Jack S. Gatlin,
attached as Exhibit B.
Id. at ¶¶ 25-27.
Also on April 15, 2015, Powers & Stinson filed an opposition
to Zipline’s motion to remand.
(Doc. 21).
In opposing the
motion to remand, Powers & Stinson argue that the first amended
complaint was not removable.
Rather, they assert that “the
second amended complaint combined with plaintiff’s counsel’s
letter and statements gave Powers actual notice that the action
was removable.”
Id. at 5.
Powers & Stinson also argue that they
were not required to obtain Complexity’s consent for removal
3
because Complexity “cannot be found using reasonable diligence.”
Id.
On May 11, 2015, Zipline filed a reply brief in support of
its motion to remand.
(Doc. 24).
Zipline maintains that the
original complaint and first amended complaint were removable
and, thus, removal of the second amended complaint is improper
under 28 U.S.C. §1446(b)(3).
Zipline also reiterates that
removal is improper because Complexity, who had filed a motion to
dismiss the first amended complaint and answered, did not consent
to removal.
On May 14, 2015, Zipline filed a second motion to remand.
(Doc. 25).
In the second motion, Zipline argues that removal is
untimely because Mr. McKnatt’s removal “was filed more than
thirty days after knowledge that the action was removable and
more than a year after its commencement....”
Id. at 1.
In
addition, Zipline again argues that removal is improper because
Complexity has not consented to removal.
On June 2, 2015, Mr. McKnatt filed an opposition to the
second motion to remand.
(Doc. 27).
Mr. McKnatt does not
challenge Zipline’s assertion that this case was removable when
filed.
Rather, he argues that he was first named as a defendant
in this case in the second amended complaint, and Zipline failed
to serve him with that complaint.
However, Mr. McKnatt asserts
that he agreed to accept service through his attorney on April
14, 2015, and then filed a notice of removal on April 15, 2015.
These actions, he contends, demonstrate that he filed a notice of
removal within the applicable thirty-day period.
For the same
reason, he argues that his notice of removal is not barred by the
one-year limitation set forth in 28 U.S.C. §1446(b).
Finally,
Mr. McKnatt argues that the consent of Complexity is not required
because it cannot be found using reasonable diligence.
4
Finally, on June 9, 2015, Zipline filed a reply brief in
support of the second motion to remand.
(Doc. 28).
In its
reply, Zipline first argues that Mr. McKnatt’s answer, filed on
February 23, 2015, commenced the running of the thirty-day
removal period.
More generally, Zipline claims that Mr. McKnatt
fails to demonstrate that removal was made properly within the
time period specified in 28 U.S.C. §1446.
Next, Zipline argues
that Mr. McKnatt’s admission that the complaint was removable
when filed contradicts the argument set forth by Powers & Stinson
that the second amended complaint made them aware for the first
time that the action was removable.
Last, Zipline reiterates
that removal is improper because Complexity has not consented.
II. Discussion
The procedure for removal of civil actions is set forth in
28 U.S.C. §1446.
That statute first provides that the defendant
seeking to remove an action from state court to federal court
must file a signed notice of removal which sets forth the grounds
for removal, together with documents from the state court action.
28 U.S.C. §1446(a).
Next, the statute provides that the removing
defendant or defendants must satisfy several general
requirements.
First, the notice of removal must be filed:
within 30 days after the receipt by the defendants,
through service or otherwise, of a copy of the initial
pleadings setting forth the claim for relief upon which
such action or proceeding is based, or within 30 days
after the service of the summons upon the defendant if
such initial pleading has been filed in court and is not
required to be served on the defendant, whichever period
is shorter.
Id. at §1446(b)(1).
The statute further provides that “[w]hen a
civil action is removed solely under section 1441(a), all
defendants who have been properly joined and served must join in
or consent to the removal of the action.”
5
Id. at §1446(b)(2)(A).
This is referred to as the unanimity requirement.
Section
1441(a) states:
Except as otherwise expressly provided by Act of
Congress, any civil action brought in State court of
which the district courts of the United States have
original jurisdiction, may be removed by the defendant or
the 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).
Section 1446(b) sets forth the following
additional requirements:
(B) Each defendant shall have 30 days after receipt by or
service on that defendant of the initial pleading or
summons described in paragraph (1) to file the notice of
removal.
(C) If defendants are served at different times, and a
later-served defendant files a notice of removal, any
earlier-served defendant may consent to the removal even
though that earlier-served defendant did not previously
initiate or consent to removal.
(3) Except as provided in subsection (c), 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, through service or otherwise, of a copy of
an amended pleading, motion, order or other paper from
which it may be ascertained that the case is one which is
or has become removable.
28 U.S.C. §1446(b)(2)(B)-(C), (3).
The statute also sets forth
certain requirements applicable when removal is based on
diversity of citizenship.
These include a prohibition on
removing an action based on diversity jurisdiction “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).
Id. at
The remaining provisions in 28 U.S.C. §1446 are not
at issue in the pending motions to remand.
6
The Court now turns to Zipline’s original motion to remand.
In doing so, the Court will first examine Zipline’s argument that
this removal was improper because the notice of removal failed to
satisfy the unanimity requirement.
Simply stated, “when a civil
action is removed from state court, and the basis for that
removal is entirely predicated upon the district court’s original
jurisdiction over the action, all properly served defendants must
consent to the removal.”
Penson Fin. Servs., Inc. v. Golden
Summit Investors Grp., Ltd., 2012 WL 2680667, at *4 (N.D. Tex.
July 5, 2012).
In their notice of removal, Powers & Stinson
indicate that removal is based on this Court’s diversity
jurisdiction set forth in 28 U.S.C. §1332.
Thus, there is no
dispute that the unanimity requirement in §1446(b)(2)(A) applies.
In opposing Zipline’s motion to remand, Powers & Stinson argue
that they were excused from the unanimity requirement and did not
need to obtain Complexity’s consent for removal because, at the
time the notice was filed, Complexity could not be found using
reasonable diligence.
The Court of Appeals has noted that, although courts
strictly construe the unanimity requirement, there are
exceptions.
For example,
The exceptions to the general rule that all defendants
join or consent to the petition for removal exist when:
(1) the non-joining defendant has not been served with
service of process at the time the removal petition is
filed; (2) the non-joining defendant is merely a nominal
or formal party; and, (3) the removed claim is a separate
and independent claim as defined by 28 U.S.C. §1441(c).
Klein v. Manor Healthcare Corp., 1994 WL 91786, at *9, n.8 (6th
Cir. Mar. 22, 1994), quoting Courtney v. Benedetto, 627 F. Supp.
523, 525-26 (M.D. La. 1986) (footnotes omitted); see also NYCB
Mortg. Co. v. Capital Fin. Mortg. Corp., 2014 WL 535706, at *2,
n.3 (N.D. Ohio Feb. 6, 2014)(noting that the third exception does
7
not apply in diversity cases).
The inability to locate a
defendant despite reasonable diligence is not among the
enumerated exceptions to the consent requirement.
In addition,
Powers & Stinson fail to direct this Court to any case law in
support of their position that such an exception should be made.
The removing defendants raised a similar argument in NYCB
Mortg. Co. v. Capital Fin. Mortg. Corp., 2014 WL 535706, at *3
(N.D. Ohio Feb. 6, 2014), asserting that “special circumstances”
warranted an exception to the unanimity requirement because a
corporate defendant was “no longer conducting business and ha[d]
been appointed a receiver....”
There, the removing defendants
argued that, under the circumstances, obtaining the corporate
defendant’s consent to removal was “impossible.”
Id.
The Court
found this argument to be unpersuasive because the removing
defendant could have made a timely request to the receiver for
consent to remove.
Id. at *4.
Although Powers & Stinson could argue that Hicks v. Emery
Worldwide,Inc., 254 F. Supp.2d 968 (S.D. Ohio 2003) stands for
the proposition that the consent of a purportedly defunct
corporate defendant is not always required, that case is
distinguishable.
As the Court observed in NYCB Mortg. Co., 2014
WL 535706, at *4, in the Hicks case, “the non-removing
corporation had been dissolved, its assets sold to another
corporation, and service has been made on another unrelated
corporation.”
Thus, the Hicks Court excused the unanimity
requirement only after the removing defendants set forth
“undisputed evidence” demonstrating that the defendant at issue
was “currently a nonexistent entity that has not been properly
served.”
Hicks, 254 F. Supp.2d at 975.
Here, there is no dispute that, in the state court action,
Zipline served Complexity with a summons and complaint.
Afterwards, Complexity filed a motion to dismiss for lack of
8
personal jurisdiction and an answer in the Franklin County Court
of Common Pleas.
In their opposition to Zipline’s motion to
remand, Powers & Stinson minimize Complexity’s role in the
litigation, arguing that “Complexity has not participated in this
litigation in any meaningful way” and stating that they agreed to
indemnify it.
(Doc. 21 at 5).
They add that the Illinois
Secretary of State’s website reflects that Complexity was
involuntarily dissolved on January 10, 2015.
On this basis,
Powers & Stinson argue that “Complexity’s inability to consent is
excused.”
Id.
As noted above, Powers & Stinson fail to set forth any case
law to support their argument that a “reasonable diligence”
exception to the consent requirement exists.
Even if the Court
were to find that such an exception exists, the Court would still
find that Powers & Stinson have not shown that it applies in this
case.
The Court in White v. Bombardier Corp., 313 F. Supp.2d
1295 (N.D. Fla. 2004) was willing to recognize such an exception
may exist as to a defaulted defendant, but it found that the
removing defendant failed to state with specificity the steps it
undertook to obtain the consent of the defendant at issue.
The
Court stated:
in order to excuse such consent, the removing defendant
must allege in its petition for removal, and prove upon
challenge by a timely motion to remand, that the removing
defendant has unsuccessfully exhausted all reasonable
efforts to locate the defaulted defendant to obtain its
consent.
Conclusory allegations in an affidavit are
insufficient. Instead, to sustain its burden on removal,
the removing defendant must describe what efforts it took
and those efforts must be consistent with the exercise of
reasonable diligence, similar to that necessary for a
plaintiff to establish a basis for substitute service.
Id. at 1303-1304 (footnote omitted).
Here, too, Powers & Stinson fail to state with specificity
the steps they took to obtain Complexity’s consent.
9
Rather, they
merely attach an affidavit of their general counsel which states
in a conclusory fashion that Complexity is unreachable.
Further,
although Powers & Stinson assert that Complexity was
involuntarily dissolved on January 10, 2015, they do not present
any evidence to establish that fact.
Thus, Powers & Stinson do
not set forth any evidence to demonstrate that their efforts were
consistent with the exercise of reasonable diligence, nor do they
provide this Court with any evidence that Complexity was
involuntarily dissolved.
Powers & Stinson have likewise failed
to demonstrate that any other exception to the unanimity
requirement applies.
As the removing defendants, Powers & Stinson bear the burden
of demonstrating that all procedural requirements set forth in
§1446 have been satisfied.
Thomas v. Columbia Sussex Corp.,
2008 WL 2303046, at *2 (S.D. Ohio May 30, 2008) (“The law places
the burden on the defendant to show that removal is in compliance
with the procedural requirements”).
Further, “[a]ll doubts as to
the propriety of removal are resolved in favor of remand.”
Mortg. Co., LLC, 2014 WL 535706, at *2.
NYCB
Because “[f]ailure to
obtain unanimous consent forecloses the opportunity for removal
under Section 1446,” Loftis v. United Parcel Serv., Inc., 342
F.3d 509, 516 (6th Cir. 2003), and Powers & Stinson have failed
to demonstrate that they have satisfied the unanimity
requirement, the Court will recommend that Zipline’s motion to
remand this matter to the Franklin County Court of Common Pleas
be granted.
(Doc. 14).
Based upon that recommendation, the
Court also will recommend that Zipline’s second motion to remand
be denied as moot.
(Doc. 25).
The Court now turns to Zipline’s request for attorney’s fees
under 28 U.S.C. §1447(c).
A remand of the case “may require the
payment of just costs and any actual expenses, including attorney
fees, incurred as a result of removal.” 28 U.S.C. §1447(c).
10
The
decision to award such fees “turns on the reasonableness of the
removal.”
(2005).
Martin v. Franklin Capital Corp., 546 U.S. 132, 141
That is, “[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.”
Id.
Because the Court finds that no unusual
circumstances exist in this case and Powers & Stinson had an
objectively reasonable basis for removing the case to federal
court, the Court will recommend that Zipline’s motion be denied
to the extent that it seeks an award of attorney’s fees. (Doc.
14).
III. Conclusion
Based upon the foregoing, the Court recommends that
Zipline’s motion to remand be granted in part and denied in part.
(Doc. 14).
More specifically, the Court recommends that the
motion to remand be granted to the extent that it seeks remand of
this case to the Franklin County Court of Common Pleas, but it
recommends that the motion to remand be denied to the extent that
it seeks an award of attorney’s fees.
The Court also recommends
that the second motion to remand be denied as moot.
(Doc. 25).
IV. Procedure on Objections
If any party objects to this Report and Recommendation, that
party may, within fourteen days of the date of this Report, file
and serve on all parties written objections to those specific
proposed findings or recommendations to which objection is made,
together with supporting authority for the objection(s).
A judge
of this Court shall make a de novo determination of those
portions of the report or specified proposed findings or
recommendations to which objection is made.
Upon proper
objections, a judge of this Court may accept, reject, or modify,
in whole or in part, the findings or recommendations made herein,
11
may receive further evidence or may recommit this matter to the
magistrate judge with instructions.
28 U.S.C. §636(b)(1).
The parties are specifically advised that failure to object
to the Report and Recommendation will result in a waiver of the
right to have the district judge review the Report and
Recommendation de novo, and also operates as a waiver of the
right to appeal the decision of the District Court adopting the
Report and Recommendation.
See Thomas v. Arn, 474 U.S. 140
(1985); United States v. Walters, 638 F.2d 947 (6th Cir. 1981).
/s/Terence P. Kemp
United States Magistrate Judge
12
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?