Parker et al v. CFI Sales & Marketing Ltd et al

Filing 27

ORDER granting 12 Motion to Remand to State Court. Clerk's Notice: Attorneys are responsible for supplementing the State Record with all documents filed in Federal Court. Signed by Honorable R Bryan Harwell on 7/20/2011. (hcic)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
FLORENCE DIVISION

Judith A. Parker, Caroline Jordan,
Christopher J. DeCaro and Charles S.
Walker, Jr., individually and on behalf of
others similarly situated,

)
)
)
)
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Plaintiffs,
)
)
vs.
)
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CFI Sales & Marketing, Ltd., and its
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Successor in Interest by Merger,
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CFI Sales & Marketing, LLC d/b/a
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West Gate Resorts;
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CFI Resorts Management, Inc.;
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CFI Sales & Marketing, Inc.;
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David A. Siegel;
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Central Florida Investments, Inc.;
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Westgate Resorts, Ltd;
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Mark Waltrip, COO, Westgate Resorts;
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Tom Dugan, CFO, Westgate Resorts;
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Westgate Resorts, Inc.;
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Barry W. Siegel, Executive VP Sales,
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Westgate Resorts;
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Westgate Marketing, LLC; and
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Westgate Myrtle Beach, LLC,
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Defendants.
)
____________________________________)

Civil Action No.: 4:11-cv-00280-RBH

ORDER

Pending before the court is the plaintiff’s motion to remand this case to the South Carolina
Court of Common Pleas for the Fifteenth Judicial Circuit, in Horry County. The court has carefully

reviewed the motion, memoranda of counsel, and the record in the case.1 For the reasons set forth
below, the court finds that this case was improvidently removed and as such, remand is appropriate.

I. Background Facts and Procedural History
This is a class action that was removed from state court on February 1, 2011. The plaintiffs are
former employees of CFI Sales & Marketing, Ltd. who worked at Westgate Resort in Myrtle Beach and
sold timeshares. The class was certified in state court based on “reserve account balances” owed to each
employee. See Order of South Carolina Circuit Judge Baxley, Docket Entry # 12-4. The lawsuit,
initially filed in state court in 2007, alleged violation of the SC Payment of Wages Act (S.C. Code §
41-10-100 et seq), breach of contract, breach of contract accompanied by fraudulent act, and sought an
accounting and declaratory relief. The named class representatives (Parker, Jordan, DeCaro, and
Walker) are all South Carolina citizens. (Motion to Remand, Docket Entry # 12, page 5 and Response
in Opposition to Motion to Remand, Docket Entry # 18, page 4). The original defendant, CFI Sales &
Marketing, Ltd. is a citizen of Florida. (Notice of Removal, Docket Entry # 1, page 4). Shortly before
the trial began, the state court lawsuit was settled. The settlement agreement approved by state court
provided for a classwide judgment of $650,000.00 against the defendant’s successor in interest by
merger, CFI Sales & Marketing, LLC, a Florida limited liability company. The state court judge also
set forth an exact amount that each class member was entitled to recover. This amount was based on
the “highest reserve balance less payments made during the pendency of this lawsuit.” See Docket
Entry # 12-4, page 3 and Exhibit 4). The settlement agreement provided that the plaintiff class would

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Under Local Rule 7.08, “hearings on motions may be ordered by the Court in its discretion.
Unless so ordered, motions may be determined without a hearing.”
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make no effort to enforce or collect the judgment for one-hundred eighty (180) days from the date of
the order (January 29, 2010). This deadline expired on July 11, 2010. (Docket Entry # 12-4, p. 3). CFI
made one payment of $50,000.00 prior to that date, but no further payments were made. Plaintiffs filed
a motion to reopen the case to permit a claim to pierce the corporate veil of the defendant. By Order
dated October 20, 2010, Judge Baxley reopened the case and gave the plaintiffs the right to amend the
complaint “to add additional parties and a cause of action to pierce the corporate veil of Defendant.”
(Docket Entry # 1-23). An Amended Complaint was filed which added eleven additional defendants,
all of whom are citizens of Florida. (See Docket Entry # 1, p.4).
After the amended complaint was filed, the action was removed to this court on the
jurisdictional basis of diversity of citizenship pursuant to 28 U.S.C. § 1332. The original defendant’s
successor in interest, as well as all of the new defendants, consented to the removal. Plaintiffs filed a
motion to remand on the basis that no federal jurisdiction exists. They allege that the jurisdictional
amount has not been met, since they argue no class representative’s claim exceeds $75,000.
Additionally, they argue that the defendants may not remove after one year from the date it was first
filed based on 28 U.S.C. § 1446(b). Finally, they assert that this court should abstain from hearing the
case.
Defendants filed a response in which they assert that the jurisdictional amount has been met
based on the “aggregation of claims analysis” and that the amount in controversy is actually $600,000.
They assert that the one- year requirement does not apply to class actions, citing 28 U.S.C. § 1453, and
that the court should not abstain.
Plaintiffs filed a Reply in which they assert that the aggregation theory should not apply because
each of the class members’ claims have already been divided and are set out by court order. They assert

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that the one-year requirement still applies to this case and that the requirement simply does not apply
in CAFA cases. Bartnikowski v. NVR, Inc., 307 Fed. Appx. 730 (4th Cir. 2009).
The motion to remand which is currently before the court was filed on February 25, 2011.

II. Standard of Review
The party seeking to remove a case to federal court has the burden of establishing federal
jurisdiction. Mulcahey v. Columbia Organic Chem. Co., Inc, 29 F.3d 148, 151 (4th Cir. 1994).
Therefore, the defendants bear the burden in this instance. “Because removal jurisdiction raises
significant federalism concerns, [the court] must strictly construe removal jurisdiction.” Id., citing
Shamrock Oil & Gas Corp v. Sheets, 313 U.S. 100 (1941). “If federal jurisdiction is doubtful, a
remand is necessary.” Mulcahey, 29 F.3d at 151.

III. Discussion
Amount in Controversy
Defendants removed this case from state court pursuant to 28 U.S.C. §§ 1332(a), 1441(a), 1446,
and 1453(b). Under § 1441(a), a defendant is permitted to remove a case to federal court if the court
would have had original jurisdiction over the matter. Section 1446(b) provides that, if the case stated
by the original pleading is not removable, then a notice of removal may be filed within thirty (30) days
after the receipt by the defendant of an amended pleading from which it may be first ascertained that
the case is removable, except that a case may not be removed on the basis of jurisdiction conferred by
section 1332 more than one (1) year after the commencement of the action. Section 1453 provides that
class actions may be removed in accordance with section 1446 “except that the 1-year limitation under

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section 1446(b) shall not apply.”2 Defendants base federal jurisdiction upon diversity of citizenship
pursuant to 28 U.S.C. § 1332, as the named class representatives are citizens of South Carolina and the
defendants are citizens of Florida. Under § 1332, federal district courts generally have original
jurisdiction over a case if there is complete diversity between the parties and the amount in controversy
exceeds $75,000, exclusive of interest and costs.3
The parties agree that diverse citizenship is present. However, they disagree on whether the
amount in controversy is satisfied. The law is clear that at least one class member must have a claim
in excess of $75,000 for federal court jurisdiction to attach, and normally the claims of all class
members cannot be aggregated to confer jurisdiction. See Exxon Mobile v. Allapattah Serv. Inc, 545
U.S. 546 (2005).4 The defendants acknowledge that none of the class representatives currently have
claims in excess of the jurisdictional amount. However, the defendants contend that the common fund
exception to the non-aggregation rule applies to the case. Under that doctrine, aggregation is permitted
where “two or more plaintiffs unite to enforce a single title or right in which they have a common and
undivided interest.” Besse v. General Motors Corp., 317 F. Supp.2d 646 (D.S.C. 2004). “[T]he
Supreme Court has evinced a desire to give a strict construction to allegations of the jurisdictional
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In light of the fact that the court is remanding the case for other reasons, it is not necessary to
resolve the issue of whether the one year limitation applies to this case or whether it just applies to a
class action brought under the Class Action Fairness Act. However, it appears that 28 U.S.C. Section
1453 was enacted as part of CAFA. See Bartnikowski v. NVR, Inc., 307 Fed. Appx. 730, n.15 (4th Cir.
2009).
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The parties now agree that 28 U.S.C. Section 1332(d), the CAFA jurisdictional statute, does
not apply, and that, if jurisdiction exists, it is under Section 1332(a).
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“[W]here the other elements of jurisdiction are present and at least one named plaintiff in the
action satisfies the amount-in-controversy requirement, Section 1367 authorizes supplemental
jurisdiction over the claims of other plaintiffs in the same Article III case or controversy even if those
claims are for less than the jurisdictional amount specified in the statute setting forth the requirements
for diversity jurisdiction.” Exxon Mobile, 545 U.S. at 549.
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amount in controversy, so as to allow aggregation only in those situations where there is not only a
common fund from which the plaintiffs seek relief, but where the plaintiffs also have a joint interest
in that fund, such that if plaintiffs’ rights are not affected by the rights of co-plaintiffs, then there can
be no aggregation. . . In other words, the obligation to the plaintiffs must be a joint one.”Eagle Star Ins.
Co. v. Maltes, 313 F.2d 778 (5th Cir. 1963), cited by Snyder v. Harris, 394 U.S. 332 (1969). Here, each
of the plaintiff’s claims are now divided and separately set out by final state court order. The amount
that each plaintiff is to receive has been established. See Docket Entry # 12-4, state court order
authorizing disbursement of class settlement proceeds. Therefore, the aggregation theory does not
apply, and this Court lacks subject matter jurisdiction over the case.
Timeliness of Removal
Recently, around the time the parties were briefing this case, the Fourth Circuit rendered a
published decision, Barbour v. International Union, 640 F.3d 599 (4th Cir. 2011). In Barbour, the
Fourth Circuit construed 28 U.S.C. § 1446(b) in the context of a multi-defendant case and held that
“Congress intended for the first-served defendant to decide within his thirty-day window whether to
remove the case to federal court or allow the case to remain in state court . . . [O]nce the first-served
defendant elects to proceed in state court, the issue concerning removal is decided under the rule of
unanimity. Alternatively, if the first-served defendant does file a notice of removal, the later-served
defendants dictate whether the case remains in federal court, either by joining the notice or declining
to do so.” Barbour, 640 F.3d at 611. In the case at bar, the first-served defendant, CFI Sales &
Marketing, Ltd., did not remove the case to federal court within the thirty-day time frame required by
28 U.S.C. § 1446. CFI could have removed the case because the named class plaintiffs were South
Carolina citizens, CFI was a Florida corporation, and the claims by at least one named class member

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would have arguably exceeded the sum of $75,000. See Complaint filed in state court on September
4, 2007 seeking, inter alia, actual and punitive damages, treble damages, attorney’s fees, prejudgment
interest, and costs (Docket Entry # 1-6). See also Motion for Remand (Docket Entry # 12-1), page 10,
“Defendants should not be allowed to remove this case because the original Defendant (CFI) failed to
do so four years ago. . .”See also, Plaintiff’s Reply (Docket Entry # 20), page 3, “Defendants chose to
litigate this case in state court.” While Defendants seem to argue now that they could not have initially
removed in 2007 because no class member’s claim was more than $75,000 (pp. 9 and 10 of Docket
Entry # 18), one could argue that the defendant’s aggregation theory was stronger then than it is now.
At the time the action was first filed in state court, arguably the claim was still “undivided” as opposed
to now, where a state court judge has entered an order approving disbursement of proceeds to the 351
class members in different specific amounts. Therefore, under Barbour, the initial defendant did not
remove within thirty (30) days of service, so the defendants cannot now remove the case.

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IV. Conclusion
For the reasons stated above5, this court concludes that this action was removed improvidently
and it is without jurisdiction. Therefore, the plaintiff’s motion to remand is GRANTED. This case is
hereby REMANDED to the South Carolina Court of Common Pleas for the Fifteenth Judicial Circuit,
in Horry County. A certified copy of this Order of remand shall be mailed by the Clerk of this Court
to the Clerk of the Court of Common Pleas, Horry County, Fifteenth Judicial Circuit of South Carolina.

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The case at bar has been litigated in state court for three and one half to four years and an order
has already been entered for disbursement of funds to class members. The issues which remain deal
with state law and involve whether the plaintiffs will be allowed to pierce the corporate veil in order
to seek to collect their judgment. Defendant states: “The only question involving an issue of state law
before this Court is who, of the newly added additional defendants, can be made to pay the judgment
entered against the original defendant, CFI Sales & Marketing, LLC.” (Docket Entry # 18, p. 14).
Defendant also states: “The only unresolved question of state law is . . . whether Plaintiffs can pierce
the corporate veil of the original defendant, CFI Sales & Marketing, LLC, to enforce the already
existing partly unpaid final judgment against newly named Defendants.” Id., p. 15. Even if federal
jurisdiction was found to exist, principles of judicial comity and the orderly administration of justice
would suggest that jurisdiction should not be retained. See Ulmet v. United States, 888 F.2d 1028 (4th
Cir. 1989); Feller v. Brock, 802 F.2d 722 (4th Cir. 1986); Gray v. Petoseed Co., 985 F.Supp. 625
(D.S.C. 1996)[“While the doctrine of comity is ‘invoked in an infinite variety of contexts to justify one
governmental body’s deference to another,’ the Court here refers to the form ‘whereby judges decline
to exercise jurisdiction over matters more appropriately adjudged elsewhere.” [G]enerally, principles
of comity and judicial economy make courts reluctant to exercise jurisdiction over claims involving
the orders of coordinate courts. This form of comity-i.e., ‘judicial comity or comity among courts’operates to ‘assure judicial efficiency and to reflect abiding respect for other courts.”(Internal citations
omitted)]. Id., 985 F.Supp.at 632. “Concerns of comity are particularly significant in diversity cases,
since state courts should be allowed to decide state cases unless the action falls squarely within the
bounds Congress has created.” Bristol-Myers Squibb Co.v. Safety National Casualty Corp., 43
F.Supp.2d 734 (E.D. Tex. 1999), citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S.100,108109(1941). Under the circumstances, judicial comity would justify this Court deferring to the state court
in this case.
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IT IS SO ORDERED.
Florence, South Carolina
July 20, 2011

s/ R. Bryan Harwell
R. Bryan Harwell
United States District Court Judge

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