Dutchmaid Logistics, Inc. et al v. Navistar, Inc.
REPORT AND RECOMMENDATION: Magistrate Judge RECOMMENDS that 7 Plaintiff's MOTION to Remand to State Court be GRANTED. Objections to R&R due by 4/25/2017. Signed by Magistrate Judge Elizabeth Preston Deavers on 4/11/2017. (ew)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
DUTCHMAID LOGISTICS, INC., et al.,
Civil Action 2:16-cv-857
Judge Michael H. Watson
Magistrate Judge Elizabeth P. Deavers
REPORT AND RECOMMENDATION
This matter is before the Court for consideration of Plaintiffs’ Motion to Remand to State
Court. (ECF No. 7.) Defendant filed its Response in Opposition to Plaintiff’s Motion on
October 6, 2016. (ECF No. 8.) Plaintiffs filed their Reply to the Opposition on October 20,
2016. (ECF No. 13.) For the reasons that follow, it is RECOMMENDED that Plaintiffs’
Motion be GRANTED.
Plaintiffs Dutchmaid Logistics, Inc., PCM Transport, LLC, and Mark R. Lewis, LLC
(collectively, “Plaintiffs”) are logistic companies and owners of commercial trucking fleets.
(ECF No. 2; the “Complaint” or “Compl.” ¶¶ 7-12.) All Plaintiffs are citizens of the State of
Ohio. (Id. ¶¶ 1-3.) Plaintiffs initiated this action on February 12, 2015 by filing an original
complaint in the Licking County, Ohio Court of Common Pleas. (Id.) Plaintiffs brought claims
against Navistar, Inc. (“Defendant” or “Navistar”), a Delaware-based manufacturer of trucks and
other equipment, including International brand heavy-duty commercial trucks and Maxxforce
brand diesel engines, and Truck Sales & Service, Inc. (“Truck Sales”), an Ohio corporation that
sells and services Navistar trucks and equipment, including International trucks and Maxxforce
diesel engines. (Id. ¶¶ 10-12.) Plaintiffs brought the following claims against Navistar and
Truck Sales: (1) breach of express warranty; (2) breach of implied warranty; (3) breach of
contract; (4) fraudulent misrepresentation; and (5) fraud. Plaintiffs’ action is based on
Defendants’ alleged misconduct based on knowledge of the flawed MaxxForce engines, and
failure to fulfill warranty obligations. (Id. ¶¶ 77-126.)
After months of discovery, Truck Sales filed a motion to dismiss under Ohio Rule of
Civil Procedure 12(b)(6) on August 19, 2016. (ECF No. 7-4.) On September 2, 2016, Plaintiffs
voluntarily dismissed Truck Sales from the State Court action. On September 7, 2016, Navistar
filed a Notice of Removal from State court on the grounds that Plaintiffs acted in “bad faith,”
pursuant to 28 U.S.C. §1446(c)(1), for failure to actually litigate against Truck Sales. (ECF No.
1.) In the alternative, Navistar claims that Truck Sales was fraudulently joined to destroy
diversity. Plaintiffs subsequently filed a Motion to Remand to State Court on September 12,
2016, asserting that neither bad faith nor fraudulent joinder exist such that removal was proper.
(ECF No. 7.) The Motion to Remand is now ripe for review.
STANDARD OF REVIEW
Generally, a civil case brought in a state court may be removed by a defendant to federal
court if it could have been brought there originally. 28 U.S.C. § 1441(a); Rogers v. Wal-Mart
Stores, Inc., 230 F.3d 868, 871 (6th Cir. 2000). A federal court has original “diversity”
jurisdiction where the suit is between citizens of different states and the amount in controversy
exceeds $75,000.00, exclusive of costs and interests. 28 U.S.C. § 1332(a). Rogers, 239 F.3d at
When an action is removed based on diversity, a federal court must determine whether
complete diversity exists at the time of removal. Coyne v. American Tobacco Co., 183 F.3d 488,
492 (6th Cir. 1999). “Diversity jurisdiction attaches only when all parties on one side of the
litigation are of a different citizenship from all parties on the other side of the litigation.” Id.
(quoting SHR Ltd. Partnership v. Braun, 888 F.2d 455, 456 (6th Cir. 1989)).
If the case initially is not removable under the above standards, a notice of removal may
be filed within thirty 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 first be ascertained that
the case is one which is or has become removable. 28 U.S.C. § 1446(b)(3). Removal based
upon diversity jurisdiction may not be sought, however, more than one-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. 28 U.S.C. § 1446(c)(1).
The Sixth Circuit has not clearly defined the meaning of “bad faith” in the statute.
Federal courts that have examined the statutory language, however, agree that the issue is
whether the plaintiff engaged in intentional conduct to deny the defendant the chance to remove
the case to federal court. See Hiser v. Seay, No. 5:14-CV-170, 2014 WL 6885433, at *4 (W.D.
Ky. Dec. 5, 2014); Taylor v. King, No. 5:12–CV–1, 2012 WL 3257528 at *4 (W.D. Ky. Aug. 8,
2012); Ehrenreich v. Black, 994 F. Supp. 2d 284 (E.D. N.Y. 2014) (discussing the statutory
language and finding that the “bad faith” exception was not met because the plaintiff did not take
any actions intended to prevent removal).
Navistar’s notice of removal was timely under § 1446(b)(3)
Under §1446(b)(3), a notice of removal must 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 first be ascertained that the case is one which is or has become
removable. It is not disputed that Plaintiff’s voluntary dismissal of Truck Sales on September 7,
2016 constitutes “other paper.” (ECF No. 7, at 3.) It is also not disputed that Navistar filed its
Notice of Removal within 30 days after receipt of that dismissal. Therefore, diversity of parties
did exist at the time of removal.
Plaintiffs did not act in bad faith by keeping Truck Sales in the state case
Plaintiffs first assert that the case should be remanded back to state court because it was
removed nineteen months after it was filed. (ECF No. 7, at 4.) Under 28 U.S.C. §1446(c)(1), a
case is only removable if the notice of removal is filed within one-year of the commencement of
the suit. The suit commenced on February 11, 2015 and it was removed nearly nineteen months
later on September 9, 2016, beyond the one year limitation.
Defendant Navistar argues that the exception in §1446(c)(1) exists in this case because
Plaintiffs acted in bad faith to avoid removal. Plaintiffs’ conduct here, however, does not equate
to that of bad faith under the requisite statutory meaning. Defendant relies heavily on Comer v.
Schmitt, No. 2:15-cv-2599, 2015 WL 5954589 (S.D. Ohio Oct. 14, 2015), and Hiser, 2014 WL
6885433, at *4. This case is, however, demonstrably distinguishable from that of the plaintiffs in
Comer and Hiser. In both of those cases, the diverse defendants could point specifically to
action or inaction on the part of the plaintiffs to hold the non-diverse defendants in the suit,
conduct that is absent in this case.
Navistar’s position would necessitate that the Court to delve into semantics of the
Complaint, as well as their legal strategy—a level of scrutiny that is not contemplated by the
burden of showing required by the exception in §1446(c)(1). Navistar argues that the
Complaint’s allegations were directed against Navistar, yet this contention overlooks the
allegations involving Truck Sales. For example, the Complaint alleges that Truck Sales acted as
agents of the original Defendants, relaying representations regarding Maxxforce trucks directly
to Plaintiffs on the Defendants’ behalf. (Compl. ¶¶ 49-51.) These representations, Plaintiffs
alleged, were made to induce them into purchasing said trucks. (Compl. ¶ 51.) The Complaint,
therefore, belies Navistar’s assertion that no substantive allegations were made against Truck
Sales, such that claims against it were brought in bad faith.
Navistar further argues that Truck Sales was named as a defendant in place of two other
non-diverse dealers that could have been included in the suit, solely to destroy diversity between
parties. (ECF No. 8, at 13.) As additional purported evidence that Plaintiffs joined Truck Sales
in bad faith, Navistar emphasizes that, despite production being six months late, Plaintiffs never
moved to compel production of discovery requests made to Truck Sales. Id. Lastly, Navistar
faults Plaintiffs because they deposed six Navistar Employees, but no Truck Sales employees.
Id. The Court, however, does not find that any of these litigation-strategy decisions rises to the
level of intentional action or inaction that prevented Navistar from otherwise properly filing for
removal before the expiration of the one year period. Cf. Hiser, 2014 WL 6885433, at *4
(plaintiffs intentionally delayed acceptance of settlement offers from non-diverse defendants
until after one year removal date passed). With respect to the discovery requests, Plaintiffs’
counsel communicated with Truck Sales on multiple occasions in order to seek responses.
Ultimately, Truck Sales provided them, copying Navistar’s counsel on the emails. (ECF Nos. 76. 7-7.) Both a decision to litigate against certain dealers but not others, as well as a decision to
pursue extrajudicial methods to resolve discovery disputes do not constitute action or inaction
within the requisite meaning of bad faith. As a matter of policy, the Court notes that, holding
Plaintiffs’ conduct to be bad faith under these circumstances, could encourage further litigation
and open up the door for removal against plaintiffs who choose to negotiate and discuss
discovery diputes with opposing counsel rather than file motions to compel simply to fight a
potential removal action. The Court, therefore, rejects Navistar’s claim that Plaintiffs’ conduct
was done in bad faith.
Lastly, Navistar urges the Court to adopt the standard for bad faith used in Aguayo v.
AMCO Ins. Co., 59 F. Supp. 3d 1225, 1228 (D. N. Mex. 2014). The standard is as follows:
First, the Court assesses whether the plaintiff actively litigated its case against the
removal spoiler in state court. A finding that the plaintiff did not actively litigate
against the removal spoiler constitutes bad faith, and the Court will retain
jurisdiction over the case. If, on the other hand, the Court finds that the plaintiff
actively litigated against the removal spoiler, that finding creates a rebuttable
presumption that the plaintiff acted in good faith. Second, the defendant may
rebut the good-faith presumption, with evidence already in the defendant's
possession, that the plaintiff kept the removal spoiler in the case to defeat
Id at 1228-1229.
Navistar asserts that the test creates a “workable standard that district courts can readily
apply without the need for a full-fledged evidentiary hearing.” (ECF No. 8, at 5.) Additionally,
Navistar contends that the current analysis of bad faith is subjective and is both “over-inclusive
and under-inclusive,” and the Aguayo test limits the inquiry to an objective standard of
determining “whether a plaintiff actively litigated against the non-diverse defendant.” (Id. at 6.)
As Plaintiffs point out, the Sixth Court has ruled on cases regarding the bad faith
exception after Aguayo was decided, and has not relied on this test. As a result, the Court finds it
inappropriate to adopt the test now. Aguayo expressed concern with the consequences of the bad
faith exception, including consequences resulting from its own test. 59 F. Supp. 3d at 1277.
Specifically, the Aguayo test has the potential to deter plaintiffs from dismissing defendants they
realize are not necessary, as well as force plaintiffs to request meaningless discovery to avoid the
exception being exercised. Both risks increase the cost of litigation and could prolong and
complicate the litigation process. Limiting the availability of the exception, rather than
expanding it, would alleviate these concerns. The exception should only be afforded to those
defendants who were helplessly stuck in state court because of the demonstrable bad faith
conduct of the plaintiffs.
In an abundance of caution, the Court finds that, even if the Aguayo test were adopted,
this Court would still remand it back to state court.
Navistar cannot to show Plaintiffs did not Actively Litigate Truck Sales
Active litigation can be proven by “discovery taken against different parties, the hours
spent negotiating settlements, and any motion practice in which the parties engaged in state
court.” Aguayo, 59 F. Supp. 3d at 1275. To receive the rebuttable presumption of good faith, the
litigation or discovery must not be “non-token.” Id. In making a determination whether the
litigation or discovery is non-token, courts must examine: “(i) the amount of time the spoiler
spent joined to the case, . . . (ii) the size and money value of the case.” Id.
Here, Plaintiffs served Truck Sales with ten interrogatories and 34 requests for
production. (ECF No. 8, at 8.) Navistar contends that is relatively very little in contradistinction
to the hundreds of requests for production that it received from Plaintiffs. In addition to the
numbers discrepancy, Navistar argues, the discovery requests to Truck Sales were generic initial
requests that were not particularized to the parties or the facts at issue in this case. Id. The Court
is not persuaded though, that Plaintiffs’ discovery efforts towards Truck Sales qualify as “token.”
First, Navistar is the primary Defendant in this case, and therefore, a difference in number and
specificity with respect to discovery requests is to be expected. Second, the documents requested
from Truck Sales were pertinent to Plaintiffs’ claims against it; it is not relevant if the same
discovery requests have been used against similar defendants in other cases. Navistar also points
out that Plaintiffs deposed six of its employees and zero of Truck Sales’ employees. Plaintiffs,
however, are entitled to choose how they wish to litigate. One non-token rationale, for example,
for the deposition schedule could be that Plaintiffs chose to work their way down in order of
deponent priority from higher-up employees of Navistar.
Navistar also argues that the fact that Plaintiffs chose to voluntary dismiss Truck Sales,
rather than prepare a response to its motion to dismiss, is indicative of only token litigation
efforts. (ECF No. 8, at 10.) Again, as a matter of policy, the Court will not fault a party’s choice
to change its mind about pursuing certain claims in the course of litigation, as doing so would
promote continuing to litigate even where a party reevaluates and is convinced it should not.
“The Court does not want to open the plaintiff up to intrusions into its attorneys’ strategy, their
opinions about what avenues of discovery are likely to be fruitful, and their impressions
regarding likely recovery from various defendants. . . .” Aguayo, 59 F. Supp. 3d at 1275. Thus,
the Court finds that the record reflects Plaintiffs did actively litigate against Truck Sales, creating
a rebuttable presumption of good faith.
Navistar cannot point to direct evidence of bad faith
“If the plaintiff can establish that he or she actively litigated against the removal spoiler,
the plaintiff is entitled to a rebuttable presumption of good faith.” Id. at 1275. To rebut the good
faith presumption, a defendant may offer “direct evidence of bad faith” that the defendant has on
hand. Id. The defendant should show either “(i) that the plaintiff did not litigate at all, or
engaged in a mere scintilla of litigation against the removal spoiler; or (ii) that the defendant has
strong, unambiguous evidence of the plaintiff’s subjective intent, for which the plaintiff cannot
offer any plausible alternative explanation.” Id at 1277. All reasonable inferences will be drawn
in the plaintiff’s favor because there is a “general presumption against removal.” Id at 1276; see,
e.g., Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir. 1995).
The Court finds insufficient evidence to rebut a presumption of good faith. Plaintiffs
served Truck Sales with discovery, and participated in multiple court hearings with Truck Sales,
including resisting Truck Sales’ motion to have the case classified as complex under Ohio law.
Navistar points to the timing of dismissal, arguing that it came “conveniently” after one year of
commencement of the action. (ECF No 8, at 10.) “The timing of the events at issue, while
unfortunate for the [remaining] Defendant, are insufficient to show bad faith on the part of the
Plaintiff.” WBCMT 2007-C33 Office 7870, LLC v. Breakwater Equity Partners LLC, No. 1:14CV-588, 2014 WL 6673712, at *7 (S.D. Ohio Nov. 24, 2014).
Navistar does not have any direct evidence showing that Plaintiffs did not litigate at all,
or that they had a subjective intent which could not be rebutted with a plausible explanation. As
a result, even if the Court were to adopt the Aguayo test, Navistar’s argument would still fail.
Plaintiff did not fraudulently join Truck Sales to defeat diversity
“To prove fraudulent joinder, the removing party must present sufficient evidence that a
plaintiff could not have established a cause of action against non-diverse defendants under state
law.” Kent State Univ. Bd. Of Trs. v. Lexington Ins. Co., 512 Fed. Appx. 485, 489 (6th Cir.
2013). “If there is a colorable basis for predicting that a plaintiff may recover against nondiverse defendants, this Court must remand the action to state court.” Coyne ex rel. Ohio v.
American Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999). “The burden is on Defendants to
show joinder was fraudulent, and that burden is a heavy one.” Little v. Purdue Pharma, L.P.,
227 F. Supp. 2d 838, 845 (S.D. Ohio 2002).
Navistar argues that removability was triggered at the point of Plaintiffs’ voluntary
dismissal of Truck Sales. Navistar posits that Plaintiffs originally pled a colorable claim, but
later uncovered facts which revealed that Plaintiffs did not have a good faith basis to support the
allegations and thus fraudulently joined Truck Sales. Here, the original complaint was filed on
February 11, 2015, Plaintiffs’ discovery requests were served on Truck Sales on August 26,
2015, and the First Amended Complaint was filed on July 20, 2016. According to Navistar, facts
demonstrating that Plaintiffs did not have a good faith basis to support their allegations against
Truck Sales were uncovered in through the discovery requests. The Court does not agree. Here,
Plaintiffs asserted claims for breach of contract and fraud by nondisclosure against Truck Sales;
Navistar has not offered evidence proving that Plaintiffs did not have a colorable claim against
Truck Sales. Navistar does not provide any evidentiary support for its argument that lateruncovered facts would discredit the claims against Truck Sales. As a result, its assertion that
Truck Sales was fraudulently joined is unavailing.
Plaintiff is not entitled to an award of costs, fees, expenses, or sanctions
When remanding an action to state court, a district court may require defendants to pay
just costs and actual expenses that a plaintiff has incurred as a result of improper removal. 28
U.S.C. §1447(c). An award of costs and fees under §1447(c) is appropriate where the removing
party lacked an “objectively basis for seeking removal.” Martin v. Franklin Capital Corp., 546
U.S. 132, 141 (2005). Here, the Court finds Navistar’s attempt to remove this action pursuant to
§1446(c)’s bad faith exception was not objectively unreasonable. The law regarding the issue is
unsettled in the circuit. Navistar’s attempt to persuade the Court to join other circuits in adopting
the Aguayo test demonstrates a reasonable attempt to remove the case. For the same reasons, the
Court declines to impose sanctions under Rule 11.
Because the Plaintiffs did not engage in bad faith conduct during its litigation with Truck
Sales, the exception in 28 U.S.C. §1446(c)(1) does not apply. In addition, Navistar’s fraudulent
joinder claim fails because it did not meet its burden of showing that Plaintiffs had no colorable
claim against Truck Sales. As a result, it is RECOMMENDED that Plaintiffs Motion to
Remand be GRANTED and that this case be REMANDED back to the Licking County Court
of Common Pleas. (ECF No. 7.)
PROCEDURE ON OBJECTIONS
If any party seeks review by the District Judge of this Report and Recommendation, it
may, within fourteen (14) days, file and serve on all parties objections to the Report and
Recommendation, specifically designating this Report and Recommendation, and the part in
question, as well as the basis for objection. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b).
Response to objections must be filed within fourteen (14) days after being served with a copy.
Fed. R. Civ. P. 72(b).
The parties are specifically advised that the failure to object to the Report and
Recommendation will result in a waiver of the right to de novo review by the District Judge and
waiver of the right to appeal the judgment of the District Court. See, e.g., Pfahler v. Nat’l Latex
Prod. Co., 517 F.3d 816, 829 (6th Cir. 2007) (holding that “failure to object to the magistrate
judge’s recommendations constituted a waiver of [the defendant’s] ability to appeal the district
court’s ruling”); United States v. Sullivan, 431 F.3d 976, 984 (6th Cir. 2005) (holding that
defendant waived appeal of district court’s denial of pretrial motion by failing to timely object to
magistrate judge’s report and recommendation). Even when timely objections are filed,
appellate review of issues not raised in those objections is waived. Robert v. Tesson, 507 F.3d
981, 994 (6th Cir. 2007) (“[A] general objection to a magistrate judge’s report, which fails to
specify the issues of contention, does not suffice to preserve an issue for appeal . . . .”) (citation
Date: April 11, 2017
/s/ Elizabeth A. Preston Deavers
ELIZABETH A. PRESTON DEAVERS
UNITED STATES MAGISTRATE JUDGE
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