Newport Classic Homes, LP et al v. Bridgewell Resources, LLC et al

Filing 28

MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFFS MOTION TO REMAND re 9 MOTION to Remand to State Court filed by Newport Classic Homes, LP, Western Rim Investors 2014-3, LP. The clerk of court shall REMAND this case to the 199th Judicial District Court of Collin County, Texas. The Plaintiffs request for attorneys fees and costs is DENIED. Signed by Judge Richard A. Schell on 3/31/17. (cm, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
NEWPORT CLASSIC HOMES, L.P., and
WESTERN RIM INVESTORS 2014-3, L.P.,

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§
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Plaintiffs,
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§
v.
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(1) LOUISIANA-PACIFIC CORPORATION, §
(2) BRIDGEWELL RESOURCES, LLC,
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(3) RICHMOND INTERNATIONAL
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FOREST PRODUCTS, LLC,
§
(4) MARTINEZ DORA d/b/a RNJ
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FRAMING SYSTEMS, and
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(5) GENESIS WORLDWIDE
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LOGISTICS, LLC,
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Defendants.
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Case No. 4:16-CV-438

MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFFS’
MOTION TO REMAND
The following are pending before the court:
1.

Plaintiffs’ motion to remand (docket entry #9);

2.

Defendant Louisiana-Pacific Corporation’s response to Plaintiffs’ motion to remand
(docket entry #10); and

3.

Plaintiffs’ reply in support of their motion to remand (docket entry #12).

Having considered the Plaintiffs’ motion and the responsive briefing thereto, the court finds that the
motion should be GRANTED.
PROCEDURAL HISTORY AND FACTUAL BACKGROUND
On May 11, 2016, the Plaintiffs filed the instant action in the 199th Judicial District Court
of Collin County, Texas. The Plaintiffs (Texas limited partnerships) sued (1) Louisiana-Pacific
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Corporation (an Oregon corporation), (2) Bridgewell Resources, LLC (an Oregon limited liability
company), (3) Richmond International Forest Products, LLC (a Delaware limited liability company),
(4) Martinez Dora d/b/a RNJ Framing Systems (a Texas organization), and (5) Genesis Worldwide
Logistics, LLC (a Texas limited liability company). The Plaintiffs allege that the Defendants
manufactured, supplied and installed Oriented Strand Board (“OSB”) flooring in two of the
Plaintiffs’ properties.1 The Plaintiffs further allege that over 600,000 square feet of the flooring was
defective. The Plaintiffs additionally allege that the Texas Defendants who installed the flooring
knew or should have known that the flooring was defective prior to installing the same. The
Plaintiffs assert the following causes of action against all of the Defendants: violations of the Texas
Deceptive Trade Practices Act; breach of the implied warranty of fitness for a particular purpose;
breach of the implied warranty of merchantability; fraud; and fraud by non-disclosure. Additionally,
the Plaintiffs assert a breach of contract cause of action against Defendant Martinez Dora d/b/a RNJ
Framing Systems. All Defendants were served with process; however, only the diverse Defendants
filed answers.
On June 24, 2016, Defendant Louisiana-Pacific Corporation filed its notice of removal.
Defendants Bridgewell Resources, LLC and Richmond International Forest Products, LLC consented
to the removal of this case to federal court. In the notice of removal, the Defendant stated that
removal was proper because there was complete diversity among the properly joined parties and the
amount in controversy exceeded $75,000. The Defendant further stated that the non-diverse
Defendants were fraudulently joined pursuant to Rule 20 of the Federal Rules of Civil Procedure.

1

The court accepts as true the facts contained in the Plaintiffs’ original petition. See Int’l Energy
Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 198 (5th Cir. 2016).

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Thereafter, on July 22, 2016, the Plaintiffs filed their motion to remand. In their motion to
remand, the Plaintiffs contend that the Texas Defendants were not fraudulently joined. Accordingly,
the Plaintiffs argue that the case should be remanded to state court, and they are entitled to their
reasonable and necessary attorneys’ fees.
On August 5, 2016, Defendant Louisiana-Pacific Corporation (“LP”) filed its response,
arguing that the Plaintiffs’ claims against the Texas Defendants are barred by TEX. CIV. PRAC. &
REM. CODE §82.003. Further, the Defendants contend that Defendant Martinez Dora d/b/a RNJ
Framing Systems was misjoined. On August 15, 2016, the Plaintiffs filed a reply.
LEGAL STANDARD
“Under the federal removal statute, a civil action may be removed from a state court to a
federal court on the basis of diversity.” Int’l Energy Ventures Mgmt., L.L.C. v. United Energy Grp.,
Ltd., 818 F.3d 193, 199 (5th Cir. 2016). “This is so because the federal court has original subject
matter jurisdiction over such cases.” Id. “The only caveat is that, when a properly joined defendant
is a resident of the same state as the plaintiff, removal is improper.” Id.
“A defendant is improperly joined if the moving party establishes that (1) the plaintiff has
stated a claim against a diverse defendant that he fraudulently alleges is nondiverse, or (2) the
plaintiff has not stated a claim against a defendant that he properly alleges is nondiverse.” Id.
Because Martinez Dora d/b/a RNJ Framing Systems and Genesis Worldwide Logistics, LLC are, in
fact, nondiverse, only the latter option is relevant. See id. As the parties attempting to remove the
Plaintiffs’ action, the Defendants have the burden of establishing that the Plaintiffs have failed to
state a claim against Martinez Dora d/b/a RNJ Framing Systems and Genesis Worldwide Logistics,
Inc. See id. In doing so, the Defendants must demonstrate “‘that there is no possibility of recovery
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by the plaintiff against [a nondiverse] defendant, which stated differently means that there is no
reasonable basis for the district court to predict that the plaintiff might be able to recover against [a
nondiverse] defendant.’” Id. at 199-200 (citations omitted).
“When deciding whether a nondiverse defendant has been improperly joined because the
plaintiff has failed to state a claim against him, the court must apply the analysis articulated in our
en banc opinion in Smallwood v. Illinois Central Railroad Co.: ‘[W]hether the defendant has
demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant....’”
Id. at 200, quoting Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004)(en banc). “In
Smallwood, [the Fifth Circuit] recognized that ‘[t]here ha[d] been some uncertainty over the proper
means for predicting whether a plaintiff ha[d] a reasonable basis of recovery under state law.’” Id.,
quoting Smallwood, supra. “The Smallwood opinion declared that ‘[a] court may resolve the issue
in one of two ways,’ the first of which is at issue here: ‘The court may conduct a Rule 12(b)(6) – type
analysis, looking initially at the allegations of the complaint to determine whether the complaint
states a claim under state law against the in-state defendant,’ elaborating that ‘if a plaintiff can
survive a Rule 12(b)(6) challenge, there is no improper joinder.’” Id., quoting Smallwood, supra.
“‘[T]he focus of the inquiry must be on the joinder, not the merits of the plaintiff's case.’” Id.,
quoting Smallwood, supra.
“It is well-established, of course, that the Rule 12(b)(6) analysis necessarily incorporates the
federal pleading standard articulated in Bell Atlantic Corp. v. Twombly: ‘To pass muster under Rule
12(b)(6), [a] complaint must have contained enough facts to state a claim to relief that is plausible
on its face.’” Id., quoting Reece v. U.S. Bank Nat’l Ass’n, 762 F.3d 422, 424 (5th Cir. 2014) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547, 127 S.Ct. 1955, 167 L. Ed. 2d 929 (2007) (internal
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quotation marks omitted).
“Thus, in this context, defining the test for improper joinder must begin with the scope of
diversity jurisdiction itself, to wit: If there is at least one nondiverse defendant, there is no federal
diversity jurisdiction; if there is no nondiverse defendant, there is federal diversity jurisdiction.” Id.
at 202. “So, in a case that has been removed to federal court on the basis of diversity, the
determinative question is whether – under federal law – a nondiverse defendant was improperly
joined.” Id.
“For the specific purposes of improper joinder, a nondiverse defendant has been improperly
joined if the plaintiff has failed to state a claim against that defendant on which relief may be
granted.” Id. “Conversely, if the plaintiff has stated a claim against a nondiverse defendant on
which relief may be granted, a federal court is without jurisdiction – more precisely, without
diversity jurisdiction – over that claim and, by extension, over any claims.” Id. “It follows, then,
that if the plaintiff has proffered a claim against a nondiverse defendant on which the federal court
may not grant relief, that court only has jurisdiction over claims asserted against the diverse
defendants.” Id. (citation omitted). “The federal court may not resolve the claim against a
nondiverse defendant on the merits.” Id.
DISCUSSION AND ANALYSIS
A.

Genesis Worldwide Logistics, LLC

In the Plaintiffs’ original petition, the Plaintiffs only refer to Defendant Genesis Worldwide
Logistics, LLC once, substantively. That reference is contained in the following single sentence:
“Newport also believes that Genesis and R and J [sic] knew or should have known that some of LP’s
products were defective prior to installing them on its project.” PL. ORIG. PET., pp. 5-6, ¶ 15. As
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noted by the Defendant, the Plaintiffs’ state court petition cannot pass muster under FED. R. CIV. P.
12(b)(6) and Twombly because the petition does not contain enough facts to state a claim for relief
that is plausible on its face with respect to Defendant Genesis Worldwide Logistics, LLC.
Accordingly, the court finds that Defendant Genesis Worldwide Logistics, LLC was improperly
joined because the Plaintiffs failed to state a claim against Defendant Genesis Worldwide Logistics,
LLC on which relief may be granted.
B.

Martinez Dora d/b/a RNJ Framing Systems

In the Plaintiffs’ original petition, the Plaintiffs only refer to Defendant Martinez Dora d/b/a
RNJ Framing Systems (“RNJ”) once, substantively, in the factual portion of the petition. That
reference is contained in the following single sentence: “Newport also believes that Genesis and R
and J [sic] knew or should have known that some of LP’s products were defective prior to installing
them on its project.” PL. ORIG. PET., pp. 5-6, ¶ 15. Additionally, the Plaintiffs included Defendant
RNJ, collectively, in all causes of action. Finally, the Plaintiffs solely sued Defendant RNJ in a
breach of contract claim, providing the following:
53.

Newport incorporates and re-alleges the allegations set forth above.

54.

There is a valid, enforceable contract.

55.

Newport is a proper party to sue for breach of the contract.

56.
Newport performed, tendered performance of, or was excused from
performing its contractual obligations. Defendant had a duty to install OSB on the
project in a good and workman like manner and unfortunately, Defendant was
negligent and knew or should have known that some if not all of LP’s OSB was
defective prior to installation.
57.

The Defendant breached the contract.

58.

The Defendant’s breach caused Newport injury.
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PL. ORIG. PET., p. 10, ¶¶ 53-58.
The Defendant argues that the Plaintiffs’ claims against RNJ, with the exception of the
breach of contract claim, are barred by TEX. CIV. PRAC. & REM. CODE §82.003. It is clear that the
Plaintiffs’ claims for violations of the Texas Deceptive Trade Practices Act, breach of the implied
warranty of fitness for a particular purpose, breach of the implied warranty of merchantability, fraud,
and fraud by non-disclosure constitute a products liability action which is defined as “any action
against a manufacturer or seller for recovery of damages arising out of personal injury, death, or
property damage allegedly caused by a defective product whether the action is based in strict tort
liability, strict products liability, negligence, misrepresentation, breach of express or implied
warranty, or any other theory or combination of theories.” TEX. CIV. PRAC. & REM. CODE
§82.001(2); see Casas v. Tire Corral, Inc., 2005 WL 6773889, *2 (S.D. Tex. 2005).
Section 82.003(a) of the Texas Civil Practice and Remedies Code provides that “[a] seller
that did not manufacture a product is not liable for harm caused to the claimant by that product
unless the claimant proves . . .” one of seven exceptions. TEX. CIV. PRAC. & REM. CODE §82.003(a);
see Casas, 2005 WL 6773889, at *3. Since the facts alleged in the petition are sparse, it is unclear
to the court if any of the exceptions apply to RNJ. However, the court need not resolve this issue
in light of the Plaintiffs’ breach of contract claim against RNJ.
The Defendant next argues that the Plaintiffs misjoined RNJ. See Crockett v. R.J. Reynolds
Tobacco Co., 436 F.3d 529, 533 (5th Cir. 2006). “A party . . . can be improperly joined without
being fraudulently joined.” Id. “Under federal law, defendants are properly joined if (1) ‘there is
asserted against them jointly, severally, or in the alternative, any right to relief in respect of or arising
out of the same transaction, occurrence, or series of transactions or occurrences’ and (2) ‘any
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question of law or fact common to all defendants will arise in the action.’” Id., quoting FED. R. CIV.
P. 20(a). “If these requirements are not met, joinder is improper even if there is no fraud in the
pleadings and the plaintiff does have the ability to recover against each of the defendants.” Id.
(citation omitted).
The Defendant contends that the Plaintiffs failed to allege in their petition any specific
allegations that RNJ manufactured, sold, or altered the OSB, or made any misrepresentations
regarding the OSB. Further, the Defendant argues that whether RNJ negligently performed its
contractual duties in installing the OSB is separate and distinct from the Plaintiffs’ products liability
action against LP. As such, the Defendant contends that the Plaintiffs included the breach of contract
claim against RNJ to defeat diversity jurisdiction.
In response, the Plaintiffs argue that the breach of contract claim against RNJ directly
involves and arises from the same set of facts that is the basis of this lawsuit, to wit, the condition
of the OSB flooring. The Plaintiffs pled that RNJ was negligent and knew or should have known
that some if not all of LP’s OSB was defective prior to installation. The Plaintiffs contend that (1)
RNJ had a contractual duty not to install defective flooring, (2) RNJ knew or should have known the
flooring was defective, and (3) RNJ installed the defective flooring with knowledge of the defect.
The court finds that the Plaintiffs’ state court petition passes muster under FED. R. CIV. P.
12(b)(6) and Twombly because the petition contains sufficient facts to state a claim for breach of
contract against RNJ that is plausible on its face. The court further finds that the Plaintiffs’ breach
of contract claim against RNJ and the remaining products liability claims arise out of the same
transaction or occurrence. Crockett, 436 F.3d at 533. Additionally, there are common questions of
law and fact with respect to the Plaintiffs’ breach of contract claim against RNJ and the remaining
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products liability claims. Id. Accordingly, the court finds that Defendant RNJ was properly joined,
thereby defeating diversity jurisdiction.
CONCLUSION
Based on the foregoing, the Plaintiffs’ motion to remand (docket entry #9) is hereby
GRANTED. The clerk of court shall REMAND this case to the 199th Judicial District Court of
Collin County, Texas. The Plaintiffs request for attorneys’ fees and costs is DENIED.
IT IS SO ORDERED.

.

SIGNED this the 31st day of March, 2017.

_______________________________
RICHARD A. SCHELL
UNITED STATES DISTRICT JUDGE

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