Esparza v. Paragon Shipping, Inc. et al
Filing
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ORDER denying 9 Motion to Remand; granting in part and denying in part 11 Motion to Dismiss.(Signed by Judge Nelva Gonzales Ramos) Parties notified.(sscotch, 2)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
DANIEL ESPARZA,
Plaintiff,
VS.
PARAGON SHIPPING, INC., et al,
Defendants.
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§ CIVIL ACTION NO. 2:13-CV-289
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ORDER
Before the Court is Plaintiff, Daniel Esparza’s (Esparza’s), Motion to Remand
(D.E. 9) and Defendant Paragon Shipping, Inc.’s Rule 12(b)(2), (4) and (5) Motion to
Dismiss (D.E. 11). Esparza sues for personal injuries sustained while working to unload
cargo on a ship docked at the Port of Corpus Christi. Defendant Paragon Shipping, Inc.
(Paragon) removed the case to this Court pursuant to admiralty jurisdiction under 28
U.S.C. § 1333 together with diversity jurisdiction under 28 U.S.C. § 1332, claiming
improper joinder of the non-diverse Defendant, Port of Corpus Christi Authority (Port).
Esparza challenges the removal based on (1) the Port’s immunity from suit in
federal court under the Eleventh Amendment, (2) an alleged procedural deficiency
regarding untimely consent to removal by co-defendants, and (3) a failure to demonstrate
complete diversity. Paragon defends removal and further seeks dismissal, arguing (1)
lack of personal jurisdiction and (2) insufficient service of process. While Paragon
invokes both Rule 12(b)(4) and 12(b)(5), it is clear from the briefing that it is the manner
of service and not the documentation allegedly served that is challenged. Thus the Rule
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12(b)(4) “insufficient process” claim is moot and this Court will consider the challenge to
service under Rule 12(b)(5).
The motions for remand and dismissal are decided together because the
sufficiency of service of summons is integral to the determination of the propriety of the
removal, and proper jurisdiction by way of removal is required to rule on the merits of
the motion to dismiss, including its challenge to the sufficiency of service. For the
reasons set out below, the Motion to Remand is DENIED and the Motion to Dismiss is
GRANTED IN PART and DENIED IN PART WITHOUT PREJUDICE.
DISCUSSION
A. Procedural Sufficiency of Removal
Esparza has alleged a procedural defect in Paragon’s removal of this case.
Esparza filed this action in the County Court at Law No. 3, Nueces County, Texas, on
August 5, 2013. D.E. 1-1, p. 14. While Paragon denies that it has been served with
summons according to law, it alleges that attempted service was made by which it first
received a copy of the state court petition on August 20, 2013. Paragon thus contends
that it timely filed its Notice of Removal in this Court on September 16, 2013, within 30
days of the attempted service and actual receipt. 28 U.S.C. § 1446(b). Plaintiff does not
dispute this timing.
Under 28 U.S.C. § 1446(b)(2)(A), all defendants are required to timely consent to
removal under the “unanimity rule.” See generally, Acosta v. Master Maintenance &
Const. Inc., 452 F.3d 373, 379 (5th Cir. 2006) (citing Tri-Cities Newspapers, Inc. v. TriCities P.P. & A. Local 349, 427 F.2d 325, 327 (5th Cir. 1970)). At the time of filing the
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Notice of Removal, Paragon attached the consent of the Port (D.E. 1-2), but not the
consent of Research Fumigation Company, LLC (Research Fumigation), the third
Defendant that had been joined and served. Return of Service (D.E. 1-1, p. 10) and
Plaintiff’s Original Petition (D.E. 1-1, pp. 14-19).
In its Notice of Removal, Paragon asserted that the consent of Research
Fumigation was not necessary because, while served, it had not yet made its appearance
in the case. D.E. 1, p. 10. This assertion is contrary to the language of 28 U.S.C. §
1446(b)(2)(A), which requires the consent of all defendants who have been “properly
joined and served.” The deadline for parties’ responsive pleadings has no impact on the
duty to obtain consent of all defendants joined and served. Paragon’s explanation (D.E.
1) did not excuse the requirement of Research Fumigation’s consent.
Defendant Research Fumigation was served on August 29, 2013. D.E. 1-1, p. 10.
The confirming Affidavit of Service was filed in the state court action on September 6,
2013. Id. These were matters of record prior to the filing of the Notice of Removal on
September 16, 2013, and Paragon acknowledged that service had been accomplished.
D.E. 1, p. 10. Research Fumigation did not consent to removal until it filed its responsive
pleading1 on October 7, 2013, which was after the removal, more than 30 days after the
Port and Research Fumigation were served, and more than 30 days after Paragon was
allegedly served. D.E. 7.
1
A consent to removal in a responsive pleading is effective. E.g., Mitchell v. Paws Up Ranch, LLC, 597 F.Supp.2d
1132, 1142 (D. Mont. 2009). No specific form is required. E.g., Pietrangelo, infra; Christiansen, infra.
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Esparza argues that Research Fumigation’s consent was not timely. Consequently,
there is a fatal defect in the removal of this action.2 E.g., Pietrangelo v. Alvas Corp., 686
F.3d 62, 66 (2nd Cir. 2012) (the “rule of unanimity” requires that all defendants consent
within the 30-day removal period); Christiansen v. West Branch Community School Dist.,
674 F.3d 927, 933 (8th Cir. 2012) (same); Ortiz v. Young, 431 Fed.Appx. 306, 308, 2011
WL 2555720, *1 (5th Cir. 2011) (rejecting party’s claim that 30-day deadline should be
excused for “exceptional circumstances” that were not evidenced). However, this defect
in Research Fumigation’s consent is only fatal to this removal if Paragon’s 30-day
removal deadline had, in fact, passed before the consent was filed. A defendant may
amend and cure a notice of removal freely at any time before the expiration of the
removal deadline. E.g., Moody v. Commercial Ins. Co. of Newark, New Jersey, 753
F.Supp. 198, 201 (N.D. Tex. 1990).
Paragon’s removal deadline has been placed in issue because of its assertion in its
Notice of Removal (D.E. 1), Answer (D.E. 3), and Motion to Dismiss (D.E. 11) that the
attempted service of August 20, 2013, was not proper or effective. There is no question
that Esparza must first properly serve Paragon with summons and a copy of the complaint
before Paragon’s 30-day removal deadline begins to run. Murphy Bros. v. Michetti Pipe
Stringing, 526 U.S. 344, 348, 119 S.Ct. 1322, 1325 143 L.Ed.2d 448 (1999).
This case, having been originally filed in a Texas state court, was served under
Texas rules. In particular, Tex. R. Civ. P. 106 and 108a govern service of process on a
2
Paragon argues that Research Fumigation was improperly joined and thus its consent was not necessary. This
Court does not find it necessary to address the issue of Research Fumigation’s improper joinder.
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defendant in a foreign country, such as Paragon. Esparza, instead, chose to serve the
Texas Secretary of State as Paragon’s agent, treating Paragon as a “nonresident” under
the Texas long-arm statute, TEX. CIV. PRAC. & REM. CODE § 17.041 et seq.
Whether service of process was proper under a state’s long-arm statute in a case
removed to federal court under diversity jurisdiction is determined under state law.
Dawkins v. White Products Corp., 443 F.2d 589, 591 (5th Cir. 1971); Eyerly Aircraft Co.
v. Killian, 414 F.2d 591, 599 n.9 (5th Cir. 1969). Esparza asserts that it properly served
Paragon according to the Texas long-arm statute by serving the Texas Secretary of State,
with instructions to mail process to Paragon’s agent registered with the Securities and
Exchange Commission (SEC). See TEX. R. CIV. P. 103, 106; TEX. CIV. PRAC. & REM.
CODE §§ 17.026, 17.041, et seq.; D.E. 14-3. The Texas Secretary of State did so,
resulting in service upon an attorney for Paragon at the attorney’s office.
Assuming that service through the Secretary of State is a proper manner of service
on a corporation formed and existing in another country,3 that service requires that the
Secretary of State be directed to, and actually, mail process to the person in charge of the
defendant’s business or to the defendant at the corporation’s home office. TEX. CIV.
PRAC. & REM. CODE §§ 17.043, 17.045.
See generally, Smith v. Nederlandsche
Stoomvaart MIJ. ""Oceaan'' N.V., 255 F.Supp. 548, 549 (S.D.Tex. 1965) (strictly
3
Duarte v. Michelin North America, Inc., No. 2:13–CV–00050, 2013 WL 2289942 (S.D.Tex. May
23, 2013) (Ramos, J., holding that service on a defendant that is a corporation organized and
existing in a foreign country requires, even when utilizing the Secretary of State’s long-arm
procedure, compliance with an internationally agreed means of service that is reasonably
calculated to give notice, such as those authorized by the Hague Convention). Plaintiff has not
demonstrated compliance with any such internationally agreed means.
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construing predecessor statute regarding service on Secretary of State to be forwarded to
proper agent for the defendant corporation). Esparza’s proof does not touch on these
requirements.
Instead, he relies on the fact that the attorney served was listed as
Paragon’s “agent for service” in its SEC filing. D.E. 14-3.
According to applicable regulations, “agent for service” on a Form F-1 filed with
the SEC “means the person authorized in the registration statement to receive notices and
communications from the Commission.” 17 C.F.R. § 230.100(a)(5) (emphasis added).
The Petition and summons served on the attorney who was registered as the agent for
service on Paragon’s Form F-1 (D.E. 14-3) was not a notice or communication “from the
commission”. Under Texas law, a corporation’s registered agent for service of process is
one who is registered as “an agent of the entity on whom may be served any process,
notice, or demand required or permitted by law to be served on the entity.” TEX. BUS.
ORG. CODE § 5.201(b)(1) (emphasis added).
No such general registered agency is
reflected by the Form F-1 and its specific agency does not include the specific purpose of
the service of process attempted here.
Plaintiff’s proof shows that the principal executive offices of Paragon are in
Athens, Greece. D.E. 14-3. Nothing in Plaintiff’s Response to the Motion to Dismiss
supports a conclusion that the SEC agent for service was also “the person in charge of the
nonresident’s business” or a “corporate officer” as required by TEX. CIV. PRAC. & REM.
CODE § 17.045. Furthermore, Paragon has demonstrated that it does not have offices in
the United States and contends that it does not do business in the United States. D.E. 11.
The Court finds that service on the attorney identified in Paragon’s Form F-1 was not
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proper service under the Texas long-arm statute (noting the requirement of agreed
international means of service for a corporation of a foreign country).4 Neither did
Esparza show that the attempted service satisfied any other method permitted under Rules
106 and 108a. The purported service on Paragon is therefore ineffective.
According to Texas law, a challenge to the effectiveness of service of process is
made pursuant to a motion to quash under TEX. R. CIV. P. 122. Under that procedure, the
case is not dismissed. Instead, defendant is deemed to appear the Monday next following
the expiration of 20 days after the order quashing service. Likewise, in federal court,
dismissal is not required. Under Rule 12(b)(5), it is a matter entrusted to the trial court’s
discretion. E.g., Lindsey v. U.S. R.R. Ret. Bd., 101 F.3d 444, 448 (5th Cir. 1996). In
particular, Rule 12(b)(5) does not mandate dismissal when it is possible for the defendant
to be served. E.g., Ellibe v. Leonard, No. 05–50637, 226 Fed.Appx. 351 (5th Cir. March
15, 2007) (per curiam, reversing dismissal for insufficient service of process and
remanding for order to properly serve defendants); Grant-Brooks v. Nationscredit Home
Equity Services Corp., No. 3:01–CV–2327, 2002 WL 424566, *4 (N.D. Tex. March 15,
2002) (citing Stanga v. McCormick Shipping Corp., 268 F.2d 544, 554 (5th Cir. 1959))
(noting that dismissal is not appropriate where there has been only one attempt at service
of process) and 5A WRIGHT & MILLER, FEDERAL PRACTICE AND PROCEDURE § 1354, at
289 (West 1990)).
Plaintiff has requested additional time to effectuate proper service on Paragon
pursuant to TEX. R. CIV. P. 108a (D.E. 14, p. 8), and the Court notes that this request was
4
See Duarte, supra (footnote 4 herein).
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made on November 27, 2013, within the 120 days permitted for service under FED. R.
CIV. P. 4(m). The Court further notes that the previous attempt was calculated to, and did
in fact, provide Paragon with actual notice of the suit and a timely opportunity to defend
as intended by the rules governing service. See TEX. R. CIV. P. 108a. Under the
circumstances, the Court finds good cause to permit Esparza additional time to properly
effectuate service. To proceed in federal court, Esparza is required to serve Paragon
pursuant to FED. R. CIV. P. 4(h) or obtain Paragon’s waiver under FED. R. CIV. P. 4(d).
For these reasons, the Court GRANTS IN PART Paragon’s Motion to Dismiss
(D.E. 11) with respect to the Rule 12(b)(5) challenge to sufficiency of service of process,
and QUASHES the purported service on Gary J. Wolfe, at the firm of Seward & Kissel
LLP., and GRANTS ADDITIONAL TIME to Plaintiff to effectuate proper service on
Paragon on or before February 24, 2014.
The Court finds that, because Paragon was not properly served, its removal
deadline had not expired before Research Fumigation filed its consent to removal.
Paragon’s Notice of Removal is still effective. Delgado v. Shell Oil Co., 231 F.3d 165,
177 (5th Cir. 2000). Therefore, Esparza’s Motion to Remand (D.E. 9) with respect to his
objection based on Paragon’s failure to timely obtain all of the necessary consents is
DENIED.
B. Immunities and Improper Joinder of the Port
Finding no procedural bar to removal, the next question is whether the causes of
action asserted are removable. Esparza has alleged an in personam action based on
common law causes of action for negligence and negligence per se against each
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Defendant in a scenario involving a ship docked in a port in navigable waters in the
course of maritime commerce. D.E. 1-1, pp. 16-18. The federal district courts are
granted exclusive original jurisdiction over admiralty and maritime in rem actions
pursuant to 28 U.S.C. § 1333. Under the saving-to-suitors clause of 28 U.S.C. § 1333(1),
however, the exclusive nature of that jurisdiction is eliminated for in personam actions
seeking remedies under general common law.
See generally, WRIGHT, MILLER &
COOPER, FEDERAL PRACTICE & PROCEDURE, § 3674 (Thomson Reuters 2013 & Supp.
2013) (addressing removal of admiralty cases and the saving-to-suitors clause).5
Federal jurisdiction here must be based on diversity of citizenship with its
requisite amount in controversy. 28 U.S.C. § 1332(a); see also WRIGHT, MILLER &
COOPER, FEDERAL PRACTICE & PROCEDURE, § 3674, supra. The parties do not dispute
that the amount in controversy requirement is satisfied.
With respect to diversity of citizenship, Esparza is a citizen of Texas. D.E. 1-1, p.
14. Paragon and Research Fumigation are not citizens of Texas, but the Port, a political
subdivision of the State of Texas, is a citizen of Texas. Id., p. 15. Thus, because the
presence of the Port as a party would destroy diversity, this Court is asked to determine
whether the Port was improperly joined. If it was improperly joined, its citizenship may
be disregarded for purposes of satisfying 28 U.S.C. § 1332.
The removal statute is strictly construed against federal jurisdiction and in favor of
remand. Acuna v. Brown & Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000). The burden of
5
The law regarding removal based purely on admiralty jurisdiction is complex. Because the Court finds that the
Port was improperly joined and diversity of citizenship exists, it is not necessary for the Court to determine whether
removal based purely on admiralty jurisdiction is proper.
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proof to demonstrate removal jurisdiction as well as fraudulent joinder is on the
defendants. Manguno v. Prudential Property & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir.
2002); McKee v. Kansas City Southern Ry. Co., 358 F.3d 329, 333 (5th Cir. 2004). That
burden is a heavy one. McKee, supra at 334. In this endeavor, the Court resolves all
contested fact issues and all ambiguities of state law in favor of the plaintiffs. Guillory v.
PPG Indus., Inc., 434 F.3d 303, 308 (5th Cir. 2005); Burden v. General Dynamics Corp.,
60 F.3d 213, 216 (5th Cir. 1995).
The removing party proves improper joinder by demonstrating: (1) actual fraud in
the pleading of jurisdictional facts; or (2) the inability of the plaintiff to establish a cause
of action against the non-diverse defendant in state court. See Crockett v. R.J. Reynolds
Tobacco Co., 436 F.3d 529, 532 (5th Cir. 2006) (citing Travis v. Irby, 326 F.3d 644, 646–
47 (5th Cir. 2003)); see also Boone v. Citigroup, Inc., 416 F.3d 382, 388 (5th Cir. 2005).
Only the second method is at issue here.
Paragon claims that Esparza cannot recover against the Port because the Port
enjoys governmental immunity. See, Guillory v. Port of Houston Authority, 845 S.W.2d
812, 816 (Tex. 1993); Texas Tort Claims Act (TTCA), TEX. CIV. PRAC. & REM. CODE §
101.001(3)(B) (defining political subdivisions as governmental units entitled to
immunity). This is a defense that the Port has pled, thus allegedly defeating subject
matter jurisdiction and shielding it from suit. D.E. 1-1, p. 21; Dallas Area Rapid Transit
v. Whitley, 104 S.W.3d 540, 542 (Tex. 2003).
Esparza argues that this Court is barred from considering the claim against the
Port because of the Port’s Eleventh Amendment immunity from suit in federal courts.
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D.E. 9, p. 3. The Port’s Eleventh Amendment immunity does not preclude this Court
from examining the nature of the allegations to determine whether the state agency is a
proper party to this case. See generally, Williams v. Dallas Area Rapid Transit, 242 F.3d
315, 319 (5th Cir. 2001) (analyzing both Eleventh Amendment and governmental
immunity). Setting aside the Eleventh Amendment, the question is whether Esparza can
penetrate the Port’s governmental immunity, a matter that requires focus on the TTCA.
Esparza asserts that the Port waived its governmental immunity when it engaged
in a “joint enterprise” with Paragon. D.E. 9, p. 5. The essential elements for a joint
enterprise are: (1) an agreement, express or implied, among the members of the group;
(2) a common purpose to be carried out by the group; (3) a community of pecuniary
interest in that purpose, among the members; and (4) an equal right to a voice in the
direction of the enterprise, which gives an equal right of control. St. Joseph Hospital v.
Wolff, 94 S.W.3d 513, 526 (Tex. 2002). While Esparza did not plead any of these
elements, he argues that all of the elements obviously exist by looking at the readily
apparent business relationship between Paragon and the Port.
Esparza does not suggest any relationship between the two that is not an armslength, symbiotic relationship between the Port and a ship in the conduct of commerce.
Esparza does not address the difference in the respective business functions of Paragon
and the vessel’s charterers as applied to the selection of the ports of call, docking,
maintenance of the ship or its cargo, or any other interaction between the ship, the Port,
and Esparza. There is nothing in Esparza’s discussion to suggest that the Port can control
Paragon’s internal business activities (and vice versa) or share in the corporate profits and
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losses of the business other than the terms on which they interact (if, in fact, they do
directly interact) as separate organizations.
According to Wolff, a symbiotic business relationship is not enough to find a joint
enterprise. Wolff, supra at 526-29 (holding that common relationships such as franchisor/
franchisee, wholesaler/retailer, and baker and hot dog seller are insufficient, alone, to
support a “joint enterprise” finding).
Thus, there are insufficient facts under a
Twombly/Iqbal analysis to permit an allegation of joint enterprise to move forward in this
action. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1966 (2007);
Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937 (2009).
With respect to the Port, Esparza’s factual allegations are limited to the Port
having “an agent on the dock who allowed the crew of the Pearl Seas and the supervisor
for Research Fumigation Company to recklessly discard boxes and crates over the side of
the Pear [sic] Seas, which caused and/or contributed to Plaintiff’s injuries.” D.E. 1-1, p.
16. In describing the conduct deemed negligent or negligent per se, Esparza speaks in
terms of supervision, training, providing safety equipment, vicarious liability, regulations,
and “other acts.” D.E. 1-1, p. 17. Nothing in these allegations describe the Port’s
operation or use of a motor-driven vehicle, motor-driven equipment, or the condition or
use of tangible personal or real property such as would be actionable under Texas law
and therefore fall within the waiver of immunity permitted under the TTCA. TEX. CIV.
PRAC. & REM. CODE § 101.021. Esparza has failed to allege sufficient facts to show that
he could defeat the Port’s governmental immunity.
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The Court FINDS that the Port is improperly joined and its Texas citizenship is
disregarded in the diversity analysis.
Paragon has demonstrated that diversity of
citizenship jurisdiction applies to support the removal of this case to federal court. The
Motion to Remand (D.E. 9) is DENIED.
CONCLUSION
For the foregoing reasons, the Court DENIES Esparza’s Motion to Remand (D.E.
9) and GRANTS IN PART Paragon’s Motion to Dismiss (D.E. 11) insofar as it
QUASHES service on Paragon under Rule 12(b)(5) for insufficient service of process. In
all other respects, the Motion to Dismiss (D.E. 11) is DENIED IN PART without
prejudice to re-urge the Rule 12(b)(2) personal jurisdiction issue after proper service.
The Court GRANTS additional time for service and ORDERS Esparza to effectuate
service of process or gain a waiver of service on or before February 24, 2014.
ORDERED this 23rd day of December, 2013.
___________________________________
NELVA GONZALES RAMOS
UNITED STATES DISTRICT JUDGE
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