Poplar Avalon, LLC v. Sprintcom, Inc.
Filing
16
ORDER denying 8 Motion to Remand. Signed by Judge S. Thomas Anderson on 7/5/16. (Anderson, S.)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
___________________________________________________________________________
POPLAR AVALON, LLC,
)
)
Plaintiff,
)
)
v.
)
No. 2:16-cv-2393-STA-dkv
)
SPRINTCOM, INC.,
)
)
Defendant.
)
_____________________________________________________________________________
ORDER DENYING PLAINTIFF’S MOTION TO REMAND
____________________________________________________________________________
Before the Court is Plaintiff Poplar Avalon, LLC’s Motion to Remand (ECF No. 8)
filed on June 14, 2016. Defendant Sprintcom, Inc. has responded in opposition. For the
reasons set forth below, the Motion to Remand is DENIED.
BACKGROUND
On May 17, 2016, Plaintiff filed a detainer action against Defendant in the General
Sessions Court of Shelby County, Tennessee. Defendant removed the case to this Court on
June 6, 2016. According to the Notice of Removal, this Court has original jurisdiction over
Plaintiff’s claims pursuant to 28 U.S.C. § 1332 because there is complete diversity of
citizenship between the parties and the amount in controversy exceeds $75,000.00. Defendant
alleges in the Notice of Removal that Plaintiff’s detainer warrant seeks possession of property
without monetary relief. Defendant argues that the amount in controversy is determined by
the fair market value of the property rights at issue. Defendant occupies retail pace owned by
Plaintiff and subject to a lease agreement dated March 23, 2004. The “Commencement Date”
of the lease was May 1, 2004. The lease is in its second of five renewal terms, the last of
1
which expires in April 2034. The total “Fixed Minimum Rent” for the leased property for the
remaining lease terms is $876,377.14.
Plaintiff’s detainer warrant seeks to cut off
Defendant’s use of the property. The “Fixed Minimum Rent” due under the lease is therefore
the amount in controversy.
In its Motion to Remand, Plaintiff argues that Defendant has not shown that the
amount in controversy element of the Court’s diversity jurisdiction is satisfied in this case.
Plaintiff claims that Defendant failed to pay the full rent due for the month of March 2016 and
failed to cure the default within 20 days thereafter. Plaintiff initiated the forcible entry and
detainer action for the sole purpose of taking possession of the property. Plaintiff seeks no
money damages against Defendant.
Plaintiff also points out that it served Defendant’s
assistant store manager, and not Defendant’s registered agent for service of process, so as to
avoid incurring any monetary damages and to comply with the Tennessee statutory
requirements for possession by detainer warrant. Under this process, Plaintiff cannot recover
monetary damages.
Therefore, Defendant cannot establish the requisite amount in
controversy, and the Court should remand this matter to General Sessions. Plaintiff seeks an
award of its costs and attorney’s fees associated with the removal of the case.
Defendant has responded in opposition. Defendant argues that the removal statute
itself allows a removing defendant to allege an amount in controversy when the initial
pleading seeks nonmonetary relief. The determining factor is the value of the object of the
litigation. Defendant acknowledges that there is no controlling Sixth Circuit authority on this
question but argues that the amount in controversy in this case is met under a variety of tests
used by other courts to assess the value of the object of similar litigation. The Court should
focus on the value of Defendant’s leasehold rights to possess the property, as measured by any
2
of the following: the rent due for the existing lease term, the rent for the remainder of the lease
including any renewal terms, the cost of improvements made by Defendant, and costs that
would result from dispossession. According to Defendant, the rent due under the existing
lease term (May 2014 through April 2019) is $215,797.20, and the rent remaining under the
current term is $133,074.94. The total rent due under the existing term and the remaining
renewal terms is $876,377.14.
Therefore, by any of these measures, the amount in
controversy is satisfied.
Defendant cites other approaches which analyze the value of possession by
considering both the consequences of the loss of possession to the defendant and what
regaining possession would mean for the landlord. Defendant argues that if it is forced to
vacate the premises, it would lose its right under the existing lease to occupy the property
while paying substantially less than current market rent. According to Defendant, the current
“Fixed Minimum Rent” of $3,596.62 per month ($43,159.44 annually, working out to $13.50
per square foot) provided in the lease represents current market rental. Defendant explains
that earlier this year, it notified Plaintiff that it was exercising Article 39 of the lease, which
provides that if the tenant’s gross sales for any fiscal year are less than $700,000, then the
tenant has the option to pay three percent (3%) of Gross Sales in lieu of the “Fixed Minimum
Rent.”
Defendant’s rent under Article 39 currently averages $1,425.86, a difference of
$2,170.76 per month or $5.35 per square foot under the Fixed Minimum Rent. Over the 37
months remaining on the current lease term, Defendant’s rent is $80,318.12 below current
market rent. In other words, this figure represents the value of Defendant’s possible loss of
possession of its leasehold and before the Court accounts for improvements Defendant has
recently made to the property and Defendant’s loss of the unique right to occupy the property.
3
Similar calculations show that the value of repossession of the property from
Plaintiff’s perspective also satisfies the amount in controversy requirement. If Plaintiff could
take possession of the property and rent it to another tenant at the full fair market value of
$3,596.62 per month, Plaintiff would collect $2,170.76 more per month for the 37 months left
on the current term of the lease. Plaintiff would realize $80,318.12 more in rents through
April 2019 than it will at Defendant’s current rent under Article 39. Under any of the
applicable tests, Defendant argues that the value of the object of this case exceeds the $75,000
amount in controversy required to establish the Court’s subject matter jurisdiction. Therefore,
the Court should deny Plaintiff’s Motion to Remand.
STANDARD OF REVIEW
“When a plaintiff files a case in state court that could have been brought in a federal
district court, a defendant may invoke the removal statute, 28 U.S.C. § 1441, to secure a federal
forum.”1 “Only state-court actions that originally could have been filed in federal court may be
removed to federal court by the defendant.”2 Pursuant to 28 U.S.C. § 1332(a), federal diversity
jurisdiction exists over “civil actions where the matter in controversy exceeds the sum or value
of $75,000” and the parties are citizens of different states.3
Diversity of citizenship must be
complete, meaning “no plaintiff can be the citizen of the same State as any defendant.” 4 “In
actions seeking declaratory or injunctive relief, it is well established that the amount in
1
Jarrett-Cooper v. United Airlines, Inc., 586 F. App’x 214, 215 (6th Cir. 2014)
(quoting Lincoln Prop. Co. v. Roche, 546 U.S. 81, 83 (2005)).
2
Paul v. Kaiser Found. Health Plan of Ohio, 701 F.3d 514, 518 (6th Cir. 2012)
(quoting Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987)).
3
28 U.S.C. § 1332(a); Fritz Dairy Farm, LLC v. Chesapeake Exploration, LLC, 567 F.
App’x 396, 398 (6th Cir. 2014).
4
Exact Software N. Am., Inc. v. DeMoisey, 718 F.3d 535, 541 (6th Cir. 2013).
4
controversy is measured by the value of the object of the litigation.”5 The burden to establish
the existence of federal jurisdiction by a preponderance of the evidence rests with the removing
party.6
ANALYSIS
The issue presented is whether Defendant has discharged its burden to show that the
amount in controversy in this case exceeds $75,000.00. The Court holds that it has. The Sixth
Circuit has not specifically addressed the precise scenario presented, which is how to determine
the value of an action for forcible entry and detainer. The Court of Appeals has adopted a
number of rules in removal cases involving nonmonetary relief, which the Court finds
instructive. In cases involving a prayer for declaratory relief, “the amount in controversy is not
necessarily the money judgment sought or recovered, but rather the value of the consequences
which may result from the litigation.”7 In cases involving a prayer for injunctive relief, the
“costs of complying with an injunction . . . may establish the amount-in-controversy.”8 A
circuit split exists on the question of whether the value of the litigation should be assessed from
the perspective of the plaintiff only or from the perspective of either the plaintiff or the
5
Hunt v. Wash. State Apple Advertising Com’n, 432 U.S. 333, 347 (1977); see also
Freeland v. Liberty Mut. Fire Ins. Co., 632 F.3d 250, 253 (6th Cir. 2011).
6
Nowicki-Hockey v. Bank of Am., N.A., 593 F. App’x 420, 421 (6th Cir. 2014);
Cleveland Housing Renewal Project v. Deutsche Bank Trust Co., 621 F.3d 554, 560 (6th Cir.
2010) (“[The removing party] has the burden of showing that the requirement ‘more likely than
not’ is satisfied.”).
7
Freeland v. Liberty Mut. Fire Ins. Co., 632 F.3d 250, 253 (6th Cir. 2011) (quoting
Lodal, Inc. v. Home Ins. Co. of Ill., No. 95–2187, 1998 WL 393766, at *2 (6th Cir. June 12,
1998) & Beacon Constr. Co. v. Matco Elec. Co., 521 F.2d 392, 399 (2d Cir. 1975)).
8
Cleveland Housing Renewal Project, 621 F.3d at 560 (quoting Everett v. Verizon
Wireless, Inc., 460 F.3d 818, 829 (6th Cir. 2006)).
5
defendant.9
The Sixth Circuit has never reached the question, describing the issue as a
“jurisdictional morass.”10
Based on these general principles, Defendant has shown by a preponderance of the
evidence that the value of the object of Plaintiff’s detainer warrant exceeds $75,000.00. From
Plaintiff’s perspective, the economic value of the rights Plaintiff seeks to protect in this case is
at the very least the difference in the Fixed Minimum Rent owed under the lease agreement
between the parties and the lower rent under Article 39, representing 3% of Defendant’s gross
sales.
The Fixed Rent Payment due under the lease is currently $3,596.62 per month.
Defendant has adduced evidence that this is the current market rental for similar property in the
same area of Memphis, Tennessee.11 The current term of the lease expires in April 2019, a
matter of 37 months from the time Defendant invoked its option to reduce its rent. If Plaintiff
prevails on its detainer warrant, Plaintiff will receive the right to repossess its property and the
opportunity to lease it to another tenant at the current market rental. Defendant has shown then
9
Everett v. Verizon Wireless, Inc., 460 F.3d 818, 829 (6th Cir. 2006) (citing Olden v.
Lafarge Corp., 383 F.3d 495, 503 n. 1 (6th Cir.2004) (“[T]here is a circuit split as to
whether a court may determine the amount in controversy from the perspective of either
party (the ‘either viewpoint rule’) or whether a court may only consider the plaintiff's
viewpoint.”).
10
Id.; see also Woodmen of the World/Omaha Woodmen Life Ins. Soc. v. Scarbro, 129
F. App’x 194, 195-96 (6th Cir. 2005) (“[T]he amount in controversy should be determined
from the perspective of the plaintiff, with a focus on the economic value of the rights he
seeks to protect.”) (collecting cases and citing Wright, Miller & Cooper, Federal Practice
and Procedure: Jurisdiction § 3708 (3d ed. 1998)); but cf. Northup Properties, Inc. v.
Chesapeake Appalachia, L.L.C., 567 F.3d 767, 770 (6th Cir. 2009) (considering the value of
a possessory interest in the property as well as the underlying mineral interest to the lessee).
11
Steffner Aff. ¶ 5 (ECF No. 14-2). Defendant cites for support the affidavit of
Joseph L. Steffner, According to the affidavit, Steffner is the senior vice president and
regional managing director for Newmark Grubb Knight Frank, an international commercial
real estate. Id. ¶ 1. Steffner holds principal real estate broker licenses in multiple states and
certification as a certified property manager and certified commercial investment member.
Id. ¶ 2.
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that the market value of the total monthly rents Plaintiff could expect to receive over this term is
$133,074.94.
Moreover, Defendant has shown that it invoked Article 39 of the lease and reduced its
monthly rent payment to a percentage of its gross sales in March 2016.
According to
Defendant, Article 39 of the lease grants it as the tenant the option to pay 3% of its gross sales
as its rent instead of the Fixed Minimum Rent if its gross sales for any fiscal year are less than
$700,000. Defendant exercised its option under Article 39 and paid and tendered to Plaintiff
$1,667.47 as its monthly rent for March 2016, $1,358.29 in rent for April 2016, and $1,252.83
in rent for May 2016. The average rent for the three months was $1,425.86. Projecting the
average rent over the 37 months of the current lease term between March 2016 and April 2019,
Defendant will pay Plaintiff approximately $52,756.82 in total rent. The difference between the
Fixed Rent Payments representing the market rent for the property and Defendant’s reduced
rent payments under Article 39 is $80,318.12.
Therefore, the Court concludes that the
economic value of the rights Plaintiff’s detainer warrant seeks to protect exceeds $75,000.00,
the amount in controversy required to establish this Court’s jurisdiction under 28 U.S.C. § 1332.
The Court finds this approach consistent with the analysis adopted by the Sixth Circuit
in Freeland v. Liberty Mutual. In that case the Court of Appeals had to assess the value of a
declaration concerning uninsured motorist insurance coverage to the policyholder who had filed
the declaratory judgment action. The Sixth Circuit measured the value of the declaratory relief
as the difference between the $100,000 of uninsured motorist coverage sought by the plaintiffpolicyholder, and the $25,000 in liability coverage to which the policyholder was entitled in any
event.12 Likewise, in the case at bar, the difference between the Fixed Rents Payments, which
12
Id.
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represent the market rent for the leased property, and the rents Defendant would actually pay if
Plaintiff does not prevail on its claims, exceeds $75,000.00.
In its Motion to Remand, Plaintiff relies principally on two cases, neither of which the
Court finds persuasive. Plaintiff cites the Middle District of Tennessee’s ruling in Currie v.
Citimortgage, where the court granted a motion to remand a forcible entry and detainer action to
the General Sessions Court of Davidson County over the objection of a pro se party who had
removed the detainer warrant to federal court. The court explained
In order for diversity jurisdiction to exist, the matter in controversy must exceed
$75,000. Here, it is clear that the detainer warrant seeks no rent, damages, or any
other monetary award from Mr. Currie. The detainer warrant states clearly that the
claim is for “Possession Only.” (Docket No. 16–1 at 1) As such, diversity
jurisdiction does not exist.13
The Court finds Currie distinguishable on its facts. Currie involved the simple repossession of
residential property. The removing party in Currie, the homeowner and mortgagor, adduced no
evidence to show what value of the object of the forcible entry and detainer was. In fact,
nothing in Currie suggests that the removing party in that case made any attempt to discharge
his burden to show that the federal court had subject matter jurisdiction. Unlike the removing
pro se party in Currie, Defendant has carried its burden to show by a preponderance of the
evidence that the amount in controversy is met and that the value of the object of Plaintiff’s
detainer warrant exceeds $75,000.00. Therefore, Currie is not persuasive.
Plaintiff also cites for support the Eastern District of Kentucky’s reported decision in YA
Landholdings, LLC v. Sunshine Energy, KY I, LLC, another case involving the value of the
13
Currie v. CitiMortgage, Inc., No. 3:13-1139, 2014 WL 4628523, at *1 (M.D.Tenn.
Sept. 15, 2014).
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object of a forcible entry and detainer warrant. The court in YA Landholdings collected and
analyzed a number of cases from district courts around the country, all representing a variety of
methods for assessing the amount in controversy where a defendant removed a forcible entry
and detain action to federal court. The court noted that one measure of the value of the relief in
such a case would be “the marginal change in plaintiff's economic position if it obtains
possession,” if “for example, the plaintiff could re-lease the premises to a new tenant at a higher
rental than the defendant paid, then the amount in controversy would be the difference between
the rent paid by the new tenant and that paid by the defendant.”14 The YA Landholdings court
found, however, that the removing defendant had adduced no evidence to show the plaintiff’s
“change in economic position if it obtains possession of the premises” or proof “that the leases
at issue are below market value.”15
But the method discussed in YA Landholdings is much the same method adopted by the
Court here to assess the value of possession from Plaintiff’s perspective, i.e. “the marginal
change in plaintiff's economic position if it obtains possession.” Unlike the removing defendant
in YA Landholdings, Defendant in this case has adduced proof to show that the rents under
Article 39 are below the market rent for the property at issue. If the Court grants Plaintiff
possession of the property and Defendant loses its leasehold, then Plaintiff stands to gain
$80,318.12 in additional rent over the course of the current lease term. Obviously, this figure
does not include rents from subsequent renewal terms of the lease, which would far exceed the
minimum amount in controversy. The Court finds then that YA Landholdings actually supports
the result in this case.
14
YA Landholdings, LLC v. Sunshine Energy, KY I, LLC, 871 F. Supp. 2d 650, 654
(E.D. Ky. 2012) (citing A. Levet Props. P’ship v. Bank One, No. 03–1708, 2003 WL 21715010,
at *3 (E.D. La. 2003).
15
Id. at 655.
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CONCLUSION
Defendant has carried its burden to show that from Plaintiff’s perspective the value of
the object of this litigation exceeds the minimum amount in controversy under 28 U.S.C. §1332.
Therefore, Plaintiff’s Motion to Remand and request for attorney’s fees and costs must be
DENIED.
IT IS SO ORDERED.
s/ S. Thomas Anderson
S. THOMAS ANDERSON
UNITED STATES DISTRICT JUDGE
Date: July 5, 2016.
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