Honey Holdings I, Ltd v. Alfred L. Wolff, Inc., et al
Filing
78
OPINION AND ORDER OF REMAND granting 26 Motion to Remand.(Signed by Judge Melinda Harmon) Parties notified.(rhawkins, 4)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
GALVESTON DIVISION
HONEY HOLDINGS I, LTD.,
Plaintiff,
VS.
ALFRED L. WOLFF, INC., et al.,
Defendants.
§
§
§
§
§
§
§
§
§
CIVIL ACTION G-14-0240
OPINION AND ORDER OF REMAND
The
above
referenced
cause,
removed
by
Defendant
Bees
Brothers, LLC (“Bees Brothers”) from the 334th Judicial District
Court
in
Chambers
County,
Texas
on
both
federal
question
jurisdiction, 28 U.S.C. § 1331, and diversity jurisdiction, 28
U.S.C. § 1332(a)(1),
purportedly seeks a declaration of the
rights, remedies, and obligations of the parties (including the
agreements, representations, and warranties to defend, indemnify,
and hold HHI harmless)1 under various different purchase orders
(“P.O.s”) for foreign origin honey bought by Plaintiff Honey
1
HHI objects to Bees Brothers’ attempts to narrow its causes
of action against Bees Brothers to the enforceability of only the
indemnity provision in the November 2011 purchase order (“P.O.”)
between HHI and Bees Brothers. HHI claims that its request for
declaratory relief applies to the validity of the whole
agreement, not merely the indemnity provision, and includes, but
is not limited to, the duties to defend claims arising out of the
honey subsequently sold by HHI to food processors, to indemnify
HHI for claims arising out of the honey sold by HHI, and to
purchase insurance to cover Removing Defendant’s obligations
under the P.O. Ex. 1-A, paragraph labeled “Indemnification.”
The same applies to the P.O.s with the other Defendants.
-1-
Holding I, Ltd. (“HHI”)2 from each of the Defendants (“Supplying
Defendants”) other than the Burns Defendants.3 Inter alia, pending
before the Court in the instant suit is HHI’s motion to remand
(#26).
Because the Court must determine that it has subject matter
jurisdiction before it can rule on other matters, the Court
addresses HHI’s motion to remand before numerous other pending
motions.
After reviewing the record and the applicable law, for
the reasons state in this document, the Court concludes that the
motion to remand should be granted.
HHI’s Original Petition (#1-1)
HHI alleges that the Supplying Defendants made representations
and warranties about the foreign origin of honey that they supplied
to HHI, including but not limited to the following:
(1) that the
honey they supplied complied with the definition of origin in U.S.
Customs law and other applicable regulations and statues; (2) that
2
HHI buys and then resells bulk honey as a food ingredient
to food processors in the United States. Declaration of Gerald
Dale Murphy, II, Senior Vice President of HHI, #26-1.
3
According to the Original Petition (#1-1), the claims
against the Burns Defendants (Tommy Burns, LP (f/k/a Hoyt’s Honey
Farm, LLP), Tommy Burns, Anna Burns, and Tommy Burns Investments,
LLC., “Sellers”) arise out of HHI’s purchase of assets under a
Real Estate and Asset Purchase Agreement (“Agreement”) entered
into on or around September 26, 2003. Ex. 0-1 to the Original
Petition (#1-1). The Petition states that these Sellers agreed
to indemnify and defend HHI from claims arising from the sale by
HHI of honey imported from China and sold to HHI by these Sellers
before the existence of the Agreement.
-2-
the honey was not adulterated or misbranded within the meaning of
the Federal Food, Drug & Cosmetic Act and any similar state or
local
statute
or
regulation;
(3)
that
Supplying
Defendants
guaranteed, assured and indemnified HHI from all liability, loss,
damages and expenses, including attorney fees, because of the
failure of the supplied honey to conform to the promises and
warranties in the purchase order; (4) that Supplying Defendants
agreed, promised and warranted to hold HHI harmless from all loss,
liability, damages and claims for damages, suits, recoveries,
judgments or executions which may be brought or arise from the sale
of the honey they supplied; and (5) that Supplying Defendants
agreed,
promised,
warranted,
and
guaranteed
to
maintain
comprehensive liability insurance, including products liability
insurance.
HHI explains that there is a consolidated class action filed
in the United States District Court for the Northern District of
Illinois
asserting
against
claims
HHI
and
under
others
the
by
Racketeer
domestic
honey
Influenced
producers
and
Corrupt
Organizations Act (“RICO”). 18 U.S.C. §§ 1962 (c) and (d), for
false advertising and unfair competition under the Lanham Act, 15
U.S.C. § 1125(a), and common law misrepresentation and unjust
enrichment.
In re Honey Transshipping Litig., Case No. 13-cv-2905
(Honorable Judge Joan B. Gottschall, presiding); Murphy Decl., #261.
HHI contends that Defendants’ obligations with regard to these
-3-
suits arise under the common law and the contracts with HHI that
each Defendant entered, on which HHI seeks declaratory relief here.
Copies attached to the Original Petition:
Exhibits A-1, A-2, A-3
(Defendant Alfred L. Wolff, Inc.); B-1, B-2, B-3, and B-4 (Bees
Brothers,
f/k/a
Enterprizes,
MYM
LLC);
Trading,
D-1,
LLC);
D-2,
C-1,
and
D-3
C-2,
C-3
(China
(Brightmin
Industrial
Manufacturing Group, Inc. (“CIMG”)); E-1 and E-2 (China Products,
NA, Inc.); F-1, F-2, F-3. and F-4 (Eastin Wells, Inc.); G-1, G-2.
G-3 (Ecotrade International, Inc.); H-1, H-2, and H-3 (Ergogenic
Nutrition); I-1, I-2, and I-3 (Four Seasons Food Distributing,
Inc.); J-1, J-2 and J-3 (National Commodities Company); K-1, K-2,
and K-3 (Odem International, Inc.); L-1 and L-2 (Premium Food
Sales, Inc.); M-1, M-2, and M-3 (Sunland International Trading,
Inc.); N-1, N-2 and N-4 (Texas Boga, Inc.); and 0-1, Real Estate
and Asset Purchase Agreement (Burns Defendants).
The Original Petition, ¶ 17, p.5, requests
a declaration of the rights, remedies, and obligations of
the parties (including each Defendant’s obligation to
indemnify and defend HHI) under the contractual
relationship between each Defendant and HHI in the
context of loss suffered by HHI and claims asserted in
certain lawsuits filed against HHI concerning the sources
and the contents of certain honey Defendants sold to HHI.
Further, Plaintiff seeks a judgement awarding such other
relief as permitted by law under the agreements at issue,
including for the enforcement and or breach thereof.
Applicable Law
-4-
Under 28 U.S.C. § 1441(a)4 any state court action over which
federal courts would have original jurisdiction may be removed from
state to federal court.
Gasch v. Hartford Accident & Indemnity
Co., 491 F.3d 278, 282 (5th Cir. 2007; Guttierrez v. Flores, 543
F.3d
248,
251
(5th
Cir.
2008)(“A
district
court
has
removal
jurisdiction in any case where it has original jurisdiction.”).
The original jurisdiction may be federal question jurisdiction
under 28 U.S.C. § 1331 (“The district courts shall have original
jurisdiction of all civil actions arising under the Constitution,
laws, or treaties of the United States.”) or diversity jurisdiction
under 28 U.S.C. § 1332(a) (where there is complete diversity of
citizenship between the sides and the amount in controversy exceeds
the sum of $75,000.00, excluding interest and costs).5
4
Title 28 U.S.C. § 1441(a) states, “Except as otherwise
expressly provided by Act of Congress, any civil action brought
in a State court of which the district courts of the United
States have original jurisdiction, may be removed by the
defendant or the defendants, to the district court of the United
States for the district and division embracing the place where
such action is pending.”
5
Section 1332(a) and (c) provide in relevant part,
(a) The district courts shall have original
jurisdiction of all civil actions where the matter in
controversy exceeds the sum or value of $75,000,
exclusive of interest and costs, and is between
(1) citizens of different States;
(2) citizens of a State and citizens or subjects
of a foreign state, except that the district
courts shall not have original jurisdiction under
this subsection of an action between citizens of a
-5-
The right to remove depends upon the plaintiff’s pleading at
the time of the petition for removal.
Pullman Co. v. Jenkins, 305
U.S. 534, 537-38 (1939); Cavallini v. State Farm Mutual Auto Ins.,
44 F.3d 256, 264 (5th Cir. 1995); Ford v. Property & Cas. Ins. Co.
of Hartford, No. Civ. A. H-09-1731, 2009 WL 4825222, *2 (S.D. Tex.
Dec. 9, 2009).
The removing party bears the burden of showing that subject
matter jurisdiction exists and that removal was proper. Manguno v.
Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002).
Any doubts are construed against removal because the removal
statute is strictly construed in favor of remand.
Id.
A district court has original federal question jurisdiction
over “all civil actions arising under the Constitution, laws or
State and citizens or subjects of a foreign state
who are lawfully admitted for permanent residence
in the United States and are domiciled in the same
State;
(3) citizens of different States and in which
citizens or subjects of a foreign state are
additional parties; and
(4) a foreign state, defined in section 1603(a) of
this title, as plaintiff and citizens of a State
or of different States. . . .
(c) For purposes of this section and section 1441 of
this title-–
(1) a corporation shall be deemed to be a citizen
of every State and foreign state by which it has
been incorporated and of the State or foreign
state where it has its principal place of business
. . . .
-6-
treaties of the United States.”
28 U.S.C. § 1331.
Under the well-
pleaded complaint rule, “a federal court has original or removal
jurisdiction only if a federal question appears on the face of the
plaintiff’s well-pleaded complaint” and “generally there is no
federal jurisdiction if the plaintiff properly pleads only a state
law cause of action.”
Guttierrez, 543 F.3d at 251-52.
“A federal
question exists ‘only [in those cases in which a well-pleaded
complaint established either that federal law creates the cause of
action or that the plaintiff’s right to relief necessarily depends
on resolution of a substantial question of federal law.’” Singh v.
Duane Morris, LLP, 538 F.3d 335, 337-38 (5th Cir. 2008), citing
Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1,
27-28 (1983)(construing § 1331), and Christianson v. Cold Indus.
Operating Corp., 486 U.S. 800, 809 (1988)(construing § 1338(a)).6
“[T]he fact that federal law may provide a defense to a state claim
is
insufficient
to
establish
federal
question
jurisdiction.
Bernhard v. Whitney Nat’l Bank, 253 F.3d 546, 550-51 (5th Cir.
2008).
“‘A corollary to the well-pleaded complaint doctrine is that
Congress may so completely preempt a particular area that any civil
complaint raising this select group of claims is necessarily
federal in character.”
Guttierrez, 543 F.3d at 252, quoting
6
For more detailed discussion of federal question
jurisdiction, see Singh, 538 F.3d at 337-40.
-7-
Johnson v. Baylor Univ., 214 F.3d 630, 632 (5th Cir. 2000).
Complete preemption creates federal removal jurisdiction, while
ordinary preemption, which is a federal defense and may arise by
express statutory provision or by a direct conflict between the
operation of federal and state law, but does not appear on the face
of the complaint, does not create removal jurisdiction.
Id. at
252.
The United States Constitution, Article II § 2, cl. 2, gives
to the Executive Branch the “‘[p]ower, by and with the Advice and
Consent of the Senate, to make Treaties, provided two thirds of the
Senators present concur.’”
738,
In re World Imports. Ltd., 511 B.R.
742 (Bkrtcy. E.D. Pa. 2014).
The Constitution places a
treaty “‘on the same footing, and in order of like obligation, with
an act of legislation; both are declared . . . to be the supreme
law of the land, and no superior efficacy is give to either over
the other.’”
Id., quoting Whitney v. Robertson, 124 U.S. 190, 194
(1888).
Title 28 U.S.C. § 1331 gives federal courts subject matter
jurisdiction over civil actions that inter alia “arise under” a
treaty of the United States.
Id.
“A United States treaty is a
contract with another nation which under Art. VI, Cl. 2 of the
Constitution becomes a law of the United States.”
El Paso Water
Improvement Dist. No. 1 v. International Boundary & Water Comm’n,
701 F. Supp. 121, 124 (W.D. Tex. 1988), citing United States v.
-8-
Reid, 73 F.2d 153, 155 (9th Cir. 1934), cert. denied, 299 U.S. 544
(1936).
More than the existence of a treaty, however, is required
to make a lawsuit one “arising under” a treaty of the United States
for purposes of 28 U.S.C. § 1331. Id.
jurisdiction
“arising
under”
a
treaty
For federal question
of
the
United
States,
“‘’[c]ourts have . . . held consistently that only treaties with a
specific provision permitting a private action, or one to be
clearly
inferred,
jurisdiction.
may
suffice
as
the
basis
for
federal
Otherwise, no cause of action is stated and no
federal law [is] applicable.’‘”
Baker v. Bell Helicopter/Textron,
Inc., 907 F. Supp. 1007, 1010-11 (N.D. Tex. 1995), quoting El Paso
Water Improvement Dist. No. 1, 701 F. Supp. at 124, quoting Hanoch
Tel-Oren v. Libyan Arab Republic, 517 F. Supp. 542, 546 (D.D.C.
1981)(collecting cases), aff’d, 726 F.2d 774 (D.C. Cir. 1984),
cert. denied, 470 U.S. 1003 (1985).
The honey supplied to HHI came from countries which, like the
United States, are signatories to the United Nations Convention on
Contracts for the International Sale of Goods (the “CISG”).
An
intent to preempt state law has been found in the introductory text
of the CISG, ratified by the United States Senate on December 11,
1986 and effective as of January 1, 1988,7 which states that “‘the
adoption
of
uniform
rules
which
govern
contracts
for
the
international sale of goods and take into account the different
7
In re World Imports, 511 B.R. at 743 * n.4,
-9-
social, economic and legal systems would contribute to the removal
or
legal
barriers
in
international
trade
and
promote
the
development of international trade.’” Asante Technologies, Inc. v.
PMC-Sierra,
Inc.,
164
F.
Supp.
2d
1142,
1151-52
(N.D.
Cal.
2001)(“The Court concludes that the expressly stated goal of
developing
uniform
international
contract
law
to
promote
international trade indicates the intent of the parties to the
treaty to have the treaty preempt state law causes of action.”).
The CISG governs “contracts of sale of goods between parties whose
places of business are in different States [nations]. . . .”
Art. 1(1)(a).
CISG
“The CISG is a ‘self executing treaty with the
preemptive force of federal law,’ which ‘applies to contracts for
the sale of goods between parties whose places of business are in
different States . . . when the States are contracting States.’”
In
re
World
Imports,
Ltd.,
511
B.R.
at
743,
quoting
It’s
Intoxicating, Inc. v. Marime Hotelgesellschaft mbH, No. 11-CV-2379,
2013 WL 3973975, at *16 (M.D. Pa. July 31, 2013).
private right of action in federal court.
It creates a
Id., citing BP Oil
Int’l, Ltd. v. Empresa Estatal Petroleos de Ecuador, 332 F.3d 333,
336 (5th Cir. 2003), citing Delchi Carrier v. Rotorex Corp., 71 F.3d
1024, 1027-28 (2d Cir. 1995). It preempts state common law and the
UCC.
Id. at 743-44, citing Michael P. Van Alstine, Federal Common
Law in an Age of Treaties, 89 Cornell L. Rev. 892, 959 (May
2004)(noting that the CISG “broadly displaces state law Uniform
-10-
Commercial
Code
in
the
context
of
international
sales
transaction”); William S. Dodge, Teaching the CISG in Contracts, 50
J. Legal Educ. 72, 72 (March 2000)(“As a treaty the CISG is federal
law, which preempts state common law and the UCC”); and David
Frisch, Commercial Common Law, The United Nations Convention on the
International Sale of Goods, and the Inertia of Habit, 74 Tul. L.
Rev. 495, 503 (1999).
As federal law, the treaty provides the
governing law as long as the parties have not chosen to exclude its
application.
BP Oil, 332 F.3d at 337.
To apply the domestic law
of the United States rather than the CISG, the parties must
“affirmatively opt-out of the CISG” and show a “clear intent” to do
so.
Id.
Merely designating a choice of law is insufficient,
without more, to show a clear intent to opt-out.
Id.
Title 28 U.S.C. § 1441(c) creates what is known as “arising
under” jurisdiction by permitting removal jurisdiction for “a claim
arising under the Constitution, laws, or treaties of the United
States (within the meaning of section 1331 of this title).” A case
may be removed when a well-pleaded complaint” presents a federal
cause of action on its face or when the plaintiff’s right to relief
necessarily depends on resolution of a substantial question of
federal law.
Empire Healthchoice Assurance, Inc. v. McVeigh, 547
U.S. 677, 689-90 (2006); Leaumont v. City of Alexandria, 582 Fed.
Appx. 407, 409 (Sept. 18, 2014).
As noted, under 28 U.S.C. §1332, a defendant may remove a case
-11-
if there is (1) complete diversity of citizenship and (2) the
amount
in
controversy
interests and costs.
is
greater
than
$75,000,
exclusive
of
Under 28 U.S.C. § 1441(b), when original
federal jurisdiction is based on diversity, a defendant may remove
a state court civil action only “if none of the parties in interest
properly joined and served as defendants is a citizen of the State
in which such action is brought.”
The doctrine of improper
joinder, or fraudulent joinder,8 prevents defeat of federal removal
jurisdiction premised on diversity by the presence of an improperly
joined, non-diverse defendant.
F.3d 168, 171 (5th Cir. 2009).
Borden v. Allstate Ins. Co., 589
Citizenship of an improperly joined
party is totally disregarded in determining the court’s subject
matter jurisdiction.
Smallwood v. Illinois Cent. R.R. Co., 385
F.3d 568, 572 (5th Cir. 2003).
Improper joinder may be established by showing (1) actual
fraud in the pleading of jurisdictional facts or (2) an inability
to establish a cause of action against the non-diverse defendant in
state court.
Gasch, 491 F.3d at 281; Smallwood, 385 F.3d at 573.
Defendants claiming improper joinder based on the second type bear
a heavy burden of showing that there is no possibility of recovery
by the plaintiff against the in-state defendant, i.e., in other
8
The Fifth Circuit prefers the term “improper joinder” to
“fraudulent joinder” because it is more consistent with the
statutory language in 28 U.S.C. §§ 1141 and 1332. Smallwood v.
Ill. Cent. R. Co., 385 F.3d 568, 571 n.1 and 572-73 (5th Cir.
2004)(en banc), cert. denied, 544 U.S. 992 (2005).
-12-
words that there is no reasonable basis for predicting that state
law would allow recovery against the in-state defendant. Travis v.
Irby, 326 F.3d 644, 649 (5th Cir. 2003); Smallwood, 385 F.3d at 576
(“[T]here is no possibility of recovery by the plaintiff against an
in-state defendant . . . stated differently means that there is no
reasonable basis for the district court to predict that the
plaintiff might be able to recover against an in-state defendant.
To reduce possible confusion, we adopt this phrasing of the
required proof and reject all others, whether the others appear to
describe the same standard or not.”).
A “reasonable basis” means
more than a mere a hypothetical basis.
Griggs v. State Farm
Lloyds, 181 F.3d 694, 701 (5th Cir. 1999)(“whether the plaintiff has
stated a valid state law cause of action depends upon and is tied
to the factual fit between the plaintiffs’ allegations and the
pleaded theory of recovery”).
To determine whether a plaintiff has a “reasonable basis for
recovery under state law, the court may “conduct a Rule 12(b)(6)type analysis.”
Smallwood, 385 F.3d at 573; Anderson v. Georgia
Gulf Lake Charles, 342 Fed. Appx. 911, 915 (5th Cir. 2009).
First
the court should look at the pleadings to determine whether the
allegations state a claim under state law against the in-state
defendant.
Smallwood, 385 F.3d at 573.
If the “plaintiff has
stated a claim, but has misstated or omitted discrete facts that
would determine the propriety of joinder,” the court may look
-13-
beyond the pleadings and consider summary judgment-type evidence.
Georgia Gulf, 342 Fed. Appx. at 915-16.
Discovery should be
restricted and the summary inquiry should be limited to identifying
“discrete
and
undisputed
facts
that
would
bar
a
plaintiff’s
recovery against an in-state defendant; anything more risks ‘moving
the court beyond jurisdiction and into the resolution of the merits
. . . .’”
Id. at 916, quoting Smallwood, 385 F.3d at 573-74.
A
defendant may submit and the court may consider affidavits and
deposition
petition.
Cir. 1990).
transcripts
in
support
of
the
defendant’s
removal
Carriere v. Sears, Roebuck & Co., 893 F.2d 98, 100 (5th
Furthermore, where the reasons for finding that there
is no reasonable basis for recovery against the in-state defendant
would also dispose of all claims against the diverse defendants,
the entire case should be remanded because “there is no improper
joinder; there is only a lawsuit lacking merit.”
Id. at 574.
Moreover, “the existence of even a single valid cause of
action against the in-state defendants (despite the pleading of
several unavailing claims) requires remand of the entire case to
state court.”
Grey v. Beverly Enterprises-Mississippi, Inc., 390
F.3d 400, 412 & n.11 (5th Cir. 2004)(and cases cited therein).
The district court must resolve all contested fact issues and
ambiguities of state law in favor of the plaintiff and remand.
Gasch, 491 F.3d at 281. Because removal deprives the state court of
an action properly before it, removal raises significant federalism
-14-
concerns and the statute is therefore to be strictly construed,
with any doubt about the propriety of removal resolved in favor of
remand.
Gutierrez v. Flores, 543 F.3d 258,251 (5th Cir. 2008).
Furthermore, “[i]f at any time before final judgment it appears
that the district court lacks jurisdiction, the case shall be
remanded.”
18 U.S.C. § 1447(c).
In addition to satisfying jurisdictional requirements, a
removing defendant must also satisfy procedural requirements.
Under 28 U.S.C. § 1446(b),9 failure to file for removal within 30
days of being served with a copy of the pleading or summons is a
procedural defect warranting remand. In re Shell Oil Co., 932 F.2d
1518, 1522 (5th Cir. 1991).
If at first the case is not removable,
“a notice of removal may be filed within 30 days after receipt by
the
defendant,
through
service
or
otherwise,
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).
The “other paper” under § 1446(b)(3) may
be discovery responses, pleadings, deposition transcripts, and
9
Section 1446(b)(1) states in full,
The notice of removal of a civil action or proceeding
shall be filed within 30 days after the receipt by the
defendant, through service or otherwise, of a copy of
the initial pleading setting forth the claim for relief
upon which such action or proceeding is based, or
within 30 days after the service of summons upon the
defendant if such initial pleading has then been filed
in court and is not required to be served on the
defendant, whichever period is shorter.
-15-
attorney communications.
Still v. Georgia-Pacific Corp., 965 F.
Supp. 878, 881 (S.D. Miss. 1997)(and cases cited therein).
Furthermore “the information supporting removal in a copy of an
amended
pleading,
motion,
order
or
other
paper
must
be
‘unequivocally clear and certain’ to start the time limit running
for a notice of removal under the second paragraph of section
1446(b).”
Bosky v. Kroger Texas, LP, 288 F.3d 208, 211 (5th Cir.
2002).
In addition, “all defendants who have been properly joined and
served must join in or consent to the removal of the action.”
U.S.C. § 1446(b)(2)(A).
28
The removal is procedurally defective if
such consent is not timely obtained.
Doe v. Kerwood, 969 F.2d 165,
167-69 (5th Cir. 1992). Moreover there must be “some timely written
indication” of each served defendant’s consent.
Getty Oil Corp.,
a Div. of Texaco, Inc. v. Ins. Co. of N. America, 841 F.2d 1255,
1262 (5th Cir. 1998).
The Fifth Circuit used to follow the first-served defendant
rule, which required all defendants to join in a removal within
thirty days of the date on which the first defendant was served.
The now controlling 2011 amendment to 28 U.S.C. § 1446(b), adopting
the last-served defendant rule, provides that each defendant has
“30 days after receipt by or service on that defendant of the
initial pleading or summons . . . to file the notice of removal.”
28 U.S.C. § 1446(b)(2)(B). Title 28 U.S.C. § 1446(b)(2)(C) states,
-16-
“If defendants are served at different times, and a later-served
defendant files a notice of removal, any earlier-served defendant
may
consent
to
the
removal
even
though
that
earlier
served
defendant did not previously initiate or consent to removal.”
The
earlier served defendant must consent to removal within the thirty
day period of the later-served defendant’s deadline to remove the
action.
Therefore as long as the earlier-served defendant files
its consent within the removing defendant’s thirty day removal
period, the consent is timely.
See, e.g., Gibbs v. Ocwen Loan
Servicing, LLC, No. 3:14-CV-1153-M-BN, 2014 WL 2767206, at *2 (N.D.
Tex. June 18, 2014); Felder v. Countrywide Home Loans, No. Civ. A.
H-13-0208, 2013 WL 6805843, at *2 (S.D. Tex. Dec. 20, 2013).
The plaintiff must bring a motion to remand alleging a
procedural defect in removal within 30 days of the defendant’s
filing of the notice of the removal.
HHI
maintains
that
its
28 U.S.C. § 1447(c).
single
cause
of
action
for
a
declaration of the parties’ rights, remedies and obligations is
brought under the Texas Declaratory Judgment Action, and not
federal law. Because the Texas Declaratory Judgment Act, Tex. Civ.
Prac. & Rem. Code §§ 37.001-37.011, is a procedural statute rather
than a substantive one, it does not apply to an action removed from
Texas state court to federal district court.
Vera v. Bank of
America, N.A., 569 Fed. Appx. 349, 352 (5th Cir. Jan. 3, 2014),
citing Utica Lloyd’s of Texas v. Mitchell, 138
-17-
F.3d 208, 210 (5th
Cir. 1998).
Judgment
After removal, an action under the Texas Declaratory
Act
is
construed
as
one
brought
under
Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202.
the
federal
Bell v. Bank of
Am. Home Loan Servicing LP, No. 4:11-cv-2085, 2012 WL 568755, at *8
(S.D. Tex. Feb. 21, 2012).
The federal Declaratory Judgment Act also does not create a
substantive cause of action, but is a procedural vehicle that
permits a party to obtain an early adjudication of an actual
controversy arising under other substantive law.
Aetna Life Ins.
Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 240 (1937); Reid
v. Aransas County, 805 F. Supp. 2d 322, 339 (S.D. Tex. 2011).
It
states, “In a case of actual controversy within its jurisdiction .
. . any court of the United States, upon the filing of an
appropriate pleading, may declare the rights and other legal
relations of any interested party seeking such a declaration. . .
.”
28 U.S.C. § 2201(a).
A declaratory judgment may issue only to
resolve an actual controversy, a term identical to the requirement
in Article III of the Federal Constitution, i.e., “a dispute that
is ‘definite and concrete, touching the legal relations of parties
having
adverse
legal
interests”
and
that
“can
presently
be
litigated and decided and not hypothetic, conjectural, conditional’
or based upon the possibility of a factual situation that may never
develop.”
Val-Com Acquisitions Trust v. Chase Home Finance, LLC,
428 Fed. Appx. 364, 365 (5th Cir. 2011)(citations omitted); Orix
-18-
Credit Alliance v. Wolfe, 212 F.3d 891, 896 (5th Cir. 2000).
The
party suing for declaratory relief bears the burden to allege facts
showing the existence of an actual controversy between the parties.
Id.; Orix Credit Alliance, 212 F.3d at 896-97.
The Declaratory Judgment Act “has been understood to confer on
federal
courts
unique
and
substantial
discretion
in
deciding
whether to declare the rights of litigants.” Wilton v. Seven Falls
Co., 515 U.S. 277, 288 (1995).
The Act “confers a discretion on
the courts rather than an absolute right upon the litigant.”
Id.
at 287; see also Public Affairs Assocs. v. Rickover, 369 U.S. 111,
112 (1962)(The Act “gave federal courts competence to make a
declaration of rights; it did not impose a duty to do so.”).
The
district court possesses “broad discretion to grant (or decline to
grant) declaratory judgment.”
Wilton, 515 U.S. at 281.
“In the
declaratory judgment context, the normal principle that federal
courts should adjudicate claims within their jurisdiction yields to
consideration of practicality and wise judicial administration.”
Id. at 288.
Nevertheless, it would be “uneconomical as well as
vexatious for a federal court to proceed in a declaratory judgment
suit where another suit is pending in a state court presenting the
same issues . . . between the same parties.”
Brillhart v. Excess
Ins. Co. of America, 316 U.S. 491, 495 (1942).
HHI’s Motion to Remand (#26)
HHI argues that this case should be remanded for three reasons
-19-
(1) some defendants served prior to removal failed to file a
written
consent
to
the
removal;
(2)
the
parties’
agreements
contained a mandatory venue clause10 that constitutes a waiver of
their removal rights; and (3) there is neither federal question nor
diversity jurisdiction here.
In its motion HHI focuses on what it describes as a negotiated
P.O. in November 2011 for over $1,129,592.00 of honey11 between HHI
and Bees Brothers. Copy attached as Ex. 1-A to #26.
Although Bees
Brothers disputes the enforceability of this P.O., which is not
signed, for purposes of this motion the Court refers to it as the
10
This Court observes that “A clause that speaks in terms of
mandatory venue is treated by the Fifth Circuit as a forum
selection clause.” Durant v. Compass Bank, No. 4:13-CV-577-A,
2013 WL 4828537, at *3 (N.D. Tex. Sept. 10, 2013). The Fifth
Circuit has opined in City of New Orleans v. Mun. Admin. Servs.,
Inc., 376 F.3d 501, 504 (5th Cir. 2004)(citations omitted), cert.
denied, 543 U.S. 1187 (2005),
For a contractual clause to prevent a party from
exercising its right to removal, the clause must give a
“clear and unequivocal waiver of that right. A party
may waive its rights by explicitly stating that it is
doing so, by allowing the other party the right to
choose venue, or by establishing an exclusive venue
within the contract.
A party’s consent to jurisdiction in one forum does
not necessarily waive its right to have an action heard
in another. For a forum selection clause to be
exclusive, it must go beyond establishing that a
particular forum will have jurisdiction and must
clearly demonstrate the parties’ intent to make that
jurisdiction exclusive.
See also, Ensco Intern., Inc. v. Certain Underwriters at Lloyd’s,
579 F.3d 442, 443-44 (5th Cir. 2009).
11
Copy, #26, Ex. 1-A.
-20-
Bees Bothers’ P.O.
Regarding its first reason for remand, HHI maintains that 28
U.S.C. § 1446(b)(2)(A), codifying the “rule of unanimity,” states
that in cases with multiple defendants “all defendants who have
been properly joined and served must join in or consent to the
removal of the action.”
Venue
Clarification
Under the Federal Courts Jurisdiction and
Act
of
2011
(“JVCA”),
the
deadline
for
defendants’ consenting to removal is “30 days after receipt by or
service on [a] defendant of the initial pleading or summons . . .
.”
28 U.S.C. § 1446(b)(2)(B).
Because Defendant China Industrial
Manufacturing Group, Inc. (“CIMG”),12 the last defendant served
before removal, was served on July 8, 2014, HHI claims that written
consent to removal had to be filed by all served Defendants by
August
7,
2014,
the
30th
day
after
CIMG
Declaration of William Mayse, Ex. 2, ¶ 4.
was
served.
#26,
HHI claims that the
following Defendants did not file written consent to removal by
that date:
Alfred L. Wolff, served on 6/20/14 through the Texas
Secretary of State, #26, Ex. 2-B; China Products North America,
Inc., served on 6/20/14 through the Texas Secretary of State, id.;
Premium
Food
Sales,
Inc.,
served
6/20/14
through
the
Texas
Secretary of State, id.; Eastin Wells, Inc., served 6/20/14 through
the Texas Secretary of State, id.; Sunland Trading, Inc., served
12
CIMG was subsequently dismissed from this suit on
September 11, 2014, #57.
-21-
6/20/14 through the Texas Secretary of State, id.; Texas Boga,
Inc., served on June 25, 2014, #26, Ex. 2-C; and the Burns
Defendants, served on 6/30/14.13
Failure to join in removal is a
procedural defect that cannot be cured by untimely notice of
consent.
Moody v. Commercial Ins. Co. of Newark, New Jersey, 780
F. Supp. 424, 427-28 (N.D. Tex. 1992).
Therefore the removal is
fatally defective and remand is required.
Samuel v. Langham, 780
F. Supp. 424, 427-28 (N.D. Tex. 1992); Farias v. Bexar County Board
of Trustees for Mental Health Retardation Services, 925 F.2d 866,
871 (5th Cir.)(citing Getty Oil Corp. Div. of Texaco, Inc. v. Ins.
Co. of N. Am., 841 F.2d 154, 1262 (5th Cir. 1988)), cert. denied,
502 U.S. 866 (1991).
The venue selection clause in the Bees Brothers’ P.O., Ex. 113
The Court observes that this case was removed not by CIMG,
but by Bees Brothers on 7/18/14. There is no indication when
Bees Brothers was served to determine the 30-day deadline for
earlier served Defendants to file their consent to removal. Even
if, in violation of the rule that the removal statute is to be
strictly construed and any concerns about the propriety of a
removal are resolved in favor of remand, one assumes that Bees
Brothers filed its notice of removal on the same day it was
served (thus providing the longest possible period for filing
consent), because the 30th day, August 17, 2014, fell on a
Sunday, the 30-day deadline for the previously served Defendants
was Monday, August 18, 2014. The docket sheet reflects that the
Burns Defendants filed a joinder in the removal on the August 18,
2014 deadline (#38), but that Sunland Trading did not file its
consent until 8/29/14 (#44). CIMG filed its joinder in #38, but
one day late, on August 19, 2014 (#41). There has been no
appearance by the following earlier served Defendants: Alfred L.
Wolff, Inc., China Products, NA, Inc., Eastin Wells, Inc., China
Products NA, Four Seasons Food Distributing, Inc., Premium Food
Sales, Inc., and Texas Boga (served on June 25, 2014 according to
#36, Ex.2-C).
-22-
A, provides, “Venue for actions pursuant to or related in any way
to this purchase order will be Chambers County, Texas.”
The
language, “will be,” insists HHI, identifies this clause as a
mandatory one.
HHI argues that Defendant waived its right to
removal when it contractually agreed to a specific mandatory venue
in a county that does not have a federal courthouse.
Orleans, 376 F.3d at 504;
City of New
TruGreen Landcare, LLC v. Telfair
Community Ass’n, Inc., No. Civ. a. H-12-514, 2013 WL 2147471, at *2
(S.D. Tex. May 14, 2013)(“”[W]hen a forum selection clause sets
exclusive venue in a county in which no federal court is located,
the clause cannot reasonably be interpreted to include a federal
district court located in another county even though the designated
county is within the district or division served by the federal
court.’”)(citation omitted); Collin County v. Siemens Bus Servs.,
250 Fed. Appx. 45, 52 (5th Cir. Oct. 3, 2007); Alliance Health Group
v.
Bridging
Health
Options,
553
F.3d
397,
401-02
(5th
Cir.
2008)(where the venue provision limits a suit to a particular
county, venue is proper in both the state and the federal district
court if both are located in that county).
HHI insists federal question jurisdiction does not exist
because
none
of
the
following
jurisdiction is present here:
three
requirements
for
such
(1) a federal right is an essential
element of the state-law claim; (2) the interpretation of a federal
right is necessary to resolve the case; and (3) the question of
-23-
federal law is substantial. Budget Prepay, Inc. v. AT&T Corp., 605
F3d. 273, 278-79 (5th Cir. 2010).
“The declaratory judgment claim
simply requests that the district court ‘constru[e] . . . the
underlying contracts and law’ and does not identify any specific
federal statute or regulation from which the declaratory judgment
claim arises.”
Id. at 278.
Similarly HHI’s prayer for relief
under state-law claims arises out of the contract and not from a
federal statute; i.e, it is for a determination of HHI’s rights to
separate and distinct duties (to defend and to indemnify) under the
P.O., not under a federal statute.14 HHI’s claim is not for damages
to any Defendant’s failure to indemnify, requiring construction of
its rights under the contract, not for damages for any defendant’s
failure to indemnify.
It does not require a resolution of federal
law and there is no substantial question of federal law in this
case.
Nor is it for breach of contract.
Its single claim arises
out of the Texas Declaratory judgment Act, codified in §§ 37.00137.011 of the Texas Civil Practice & Remedies Code.
Bees Brothers
erroneously recharacterizes HHI’s claim in its Notice of Removal as
follows:
“Plaintiff’s
request
for
indemnification
implies
Defendant breached its warranty by . . . “ and cites a federal
statute.
14
HHI calls “flawed” Bees Bothers’ argument that its
obligation to indemnify and duty to defend HHI do not arise until
a breach of warranty is proven in the underlying class action in
Illinois, and that such proof requires interpretation of federal
law. Notice of Removal, #1, ¶ 1.
-24-
Diversity jurisdiction is also lacking because HHI is a Texas
citizen, as are at least six defendants:
CIMG, Texas Boga, Tommy
Burns, LP, Tommy Burns, Anna Burns, and Tommy Burns Investments,
LLC.15
Bees
particularity16
Brothers
nor
neither
offers
any
pleads
proof
improper
that
joinder
there
diversity of citizenship between the opposing sides.
is
with
complete
Nor does it
plead the amount in controversy requirement of § 1332 (more than
“$75,000, exclusive of interest and costs”).
In sum, argues HHI, this case should be remanded because not
all
served
Defendants
timely
filed
consent
to
removal,
Bees
Brothers waived its right to remove by agreeing to a mandatory
venue in Chambers County, and the Court lacks federal question and
diversity jurisdiction.
Bees Brothers’ Response (#43)
Together with HHI’s Original Petition and Bees Brothers’
Notice of Removal and attached exhibits (#1-1 and copies of
transactions with aumber of Defendants, Exhibits A-1 through 0),
Bees Brothers’ response explains that Bees Brothers, which buys,
15
Bees Brothers adds Brightmin Enterprizes, LLC, a Texas
limited liability company, and Four Seasons Food distributors,
Inc., a Texas Corporation.
16
Fraudulent joinder “must be pleaded with particularity and
supported by clear and convincing evidence.” Parks v. New York
Times Co., 308 F.2d 474, 478 (5th Cir. 1962), cert. denied, 376
U.S. 949 (1964). Bees Brothers merely states, “Plaintiff uses
fraudulent, improper joinder to create jurisdiction in the venue
of its choice.” Notice of Removal, #1, ¶ 6.
-25-
sells, imports, and consigns raw honey from around the world, acted
as consignee in arranging for HHI to purchase honey from the port
in Nhava Sheva, India to be
shipped to the port in Houston, Texas
and delivered to HHI in Baytown, Texas.
Bees Brothers states that
as consignee, it only coordinated the transaction and was not a
seller of any good.
Bees Brothers contends that HHI failed to attach a copy of the
alleged indemnity agreement with Bees Brothers to the complaint,
but instead attached a boilerplate indemnity agreement on an
invoice to MYM Trading, LLC.
HHI endeavors to correct this
deficiency by attaching the second page of the complaint’s purchase
order to its motion to remand.
#26, Ex. 1.
requires Bees Brothers’ signature, but lacks it.
That second page
HHI includes an
invoice ordered from MYM Trading LLC, which HHI attributes to Bees
Brothers, with a provision choosing Texas law as the governing law
and the venue provision mandating venue in Chambers County.
As is
evidenced by the documents attached to the Notice of Removal, HHI
brought the instant suit based on similar clauses against its
suppliers seeking indemnity for HHI’s defense in the federal class
action brought by domestic honey producers against HHI in Illinois.
HHI filed this action in Chambers County based on this clause and
joined Texas residents as Defendants.
Bees Brothers insists that the Court has federal question
jurisdiction here.
Most of the named Defendants (the “Supplier
-26-
Defendants”) allegedly supplied honey to HHI. The indemnity clause
at issue in each P.O. is triggered only if each Supplier Defendant
breaches a warranty regarding the quality of the goods or the
origin of the goods, so the Court must determine whether each
Supplier Defendant breached the warranty in its particular P.O.
regarding the nation of origin of the honey that the particular
Defendant sold to HHI.
Presenting a very different picture of this dispute than HHI
and with supporting documentation, Bees Brothers represents that
HHI and its criminally convicted co-conspirators are defendants in
the federal class action suit, In re Honey Transshipping Litig.,
No. 13-CV-02905 (N.D. Ill. Nov. 22, 2013), grounded in claims for
false advertising under the Lanham Act, 15 U.S.C. § 1125(a)(“false
designation of origin”), and challenges to the quality and origin
of the goods (also at issue in the instant suit) under the
Racketeer Influenced Corrupt Organizations Act (“RICO”), 18 U.S.C.
§§ 1964(a)(c), and (d), and alleging that HHI conspired with
importers to avoid tariffs and antidumping duties by mislabeling
the country of origin on Chinese honey and mislabeling adulterated
honey as pure honey in violation of the Federal Food, Drug, and
Cosmetic Act.
Illinois
suit.
Bees Brothers is not a party to, nor named in the
Furthermore,
HHI
entered
into
a
deferred
prosecution agreement #43, Ex. 5) in a criminal action, U.S. v.
Honey Holding I, Ltd, No. 13-CR-00138 (N.D. Ill. Feb. 12, 2013),
-27-
admitting that it had knowingly mislabeled honey to avoid trade
tariffs and had imported honey adulterated with antibiotics.
5 at 14-16.
Ex.
Bees Brothers was not named in the criminal action
either.
Bees Brothers insists that HHI’s single cause of action in the
instant
suit
is
a
declaratory
action
for
contractual
indemnification based on similar clauses against its suppliers as
those in the federal class action. Notice of Removal, #1-1, at 15.
The alleged indemnity
clause provides,
Acceptance of any order shall constitute an agreement
upon Seller’s part to indemnify and hold the Buyer, its
successors, assigns and customers harmless from all
liability,
loss,
damage
and
expenses,
including
reasonable counsel fees, incurred or sustained by buyer,
or its successors, assigns, or customers by reason of the
failure of goods to conform to warranties in this order.
This shall include, but not be limited to loss, damage
and expense incurred from product recall or rejection and
any government action.
Such indemnity shall be in
addition to any other remedies provided by law and shall
survive acceptance of the goods and payment by buyer.
Seller agrees to indemnify and save Buyer harmless and
upon request defend Buyer from all loss, liability,
damages and claims for damages, suits, recoveries,
judgments, or executions which may be made, had, brought
or recovered by reason of or on account of injury to the
property of any person whomever, or to any person caused
by, arising from, incident to, connected with or growing
out of this purchase order.
Seller shall maintain
comprehensive liability insurance, including products
liability coverage, covering Seller’s obligations under
this order.
Notice of Removal, #1-2 at 4-5 (ordered from MYM Trading LLC, which
HHI attributes to Bees Brothers without any explanation).
This
agreement is in the same font, font size, and color as the rest of
-28-
the document, and is not in capital letters or emphasized by bold,
italics or underlining.
indemnity
clause
to
be
Id.
Under Texas law, for a boilerplate
accepted
by
performance,
it
must
be
sufficiently conspicuous to provide the indemnifying party with
fair notice of the obligation.
Dresser Indus. v. Page Petroleum,
853 S.W. 2d 505, 511 (Tex. 19913).
Even when a document is signed,
which it is not on Bees Brothers’ P.O., a conspicuous clause must
have a heading that sets it off from other headings in the document
and the clause must be set off from the rest of the text in the
document.
Tex. Bus. & Com. Code § 1.201(a)(1); U.S. Rentals v.
Mundy Serv. Corp., 901 S.W. 2d 789, 792-93 (Tex. App.--Houston [14th
Dis.] 1995, writ denied); Ethyl Corp. v. Daniel Constr. Co., 725
S.W. 2d 705, 708 (Tex. 1987). Furthermore this purported indemnity
agreement nowhere states that Bees Brothers sold Chinese honey to
HHI pursuant to HHI’s incorporated purchase orders.
Furthermore,
HHI permitted a federal undercover agent to acts as its Director of
Procurement, beginning June 2011, when HHI placed the orders that
are
the
basis
of
this
action.
See
Ex.
5,
HHI’s
Deferred
Prosecution Agreement.
Bees Brothers points out and lists the complex, interrelated
provisions
of
the
Untied
States
Code
and
Code
of
Federal
Regulations that control the requirements and parameters of the
designation of national origin for goods entering the United States
and United States customs law, over violations of which federal
-29-
courts have exclusive subject matter jurisdiction. The quality and
origin of the goods at issue here are already pending on federal
questions in the class action suit in federal court in Illinois.
Moreover HHI’s payer for indemnification implies that Bees Brothers
breached its warranty by engaging in a pattern of racketeering
activity in violation of RICO, 18 U.S.C. §§ 1964(a), (c), and (d).
#1-1 at 8.
The class action RICO claim against HHI rests on the
claim that HHI’s mislabeling of honey was the conspiracy’s overt
act.
Id.
Federal treaty, customs, and advertising law will
determine whether this overt act occurred.
Since the instant
suit’s cause of action arises under the Constitution, treaties, or
laws
of
the
United
States,
this
Court
has
federal
question
jurisdiction over each of the alleged overt acts.
Furthermore,
argues
Bees
Brothers,
although
HHI
seeks
indemnification under an alleged breach of contract, it must prove
that Bees Brothers breached the contract by violating federal law;
whether a federal law was violated is a federal question and
requires interpretation of a federal law by a federal court.
Even
when the complaint alleges only state law claims, there may still
be federal question jurisdiction.
Here HHI seeks indemnification
under an alleged breach of contract, which in turn is allegedly
based on numerous violations of federal law that are
also being
litigated in an Illinois federal court that claims federal subjectmatter jurisdiction over them. The question in dispute here, i.e.,
-30-
whether a violation of federal law occurred, is a question of
federal law that requires the interpretation of a federal court.
The same is true of the indemnification claim implying that Bees
Brothers breached its warranty by importing honey from other
countries in violation of customs law.
As discussed previously, 28 U.S.C. § 1331(a) provides federal
subject matter jurisdiction over civil actions that arise under a
treaty of the United States.
Bees Brothers also maintains that
this action involves issues covered by the substantive law of CISG,
Apr. 11, 1980, S. Treaty Doc. No. 98-9 (1983), a treaty ratified by
the U.S. Senate in 1986.
As indicated supra, this Court has
federal subject-matter jurisdiction over cases relating to the
CISG.
BP Oil International Ltd. v. Empresa Estatal Petroleos de
Ecuador, 332 F.3d 333, 336 (5th Cir. 2003)(CISG “creates a private
right of action in federal court” and “applies to contracts of sale
of goods between parties whose places of business are in different
states [nations] . . . [w]hen the States are Contracting states.’
CISG art. 1(1))”).
The honey in this dispute is a tangible good
and not a specifically excluded good pursuant to CISG, art. 2.
As
the documents show, an Indian seller sold it to an American buyer,
HHI, with Bees Brothers acting as consignee in the shipment from
New Delhi, India to Houston, Texas and HHI’s facility.
HHI has
alleged that the honey is transshipped and originated in China, so
the parties to the sale are citizens of two different contracting
-31-
states, thus triggering the application of the CISG.17
Ex. 1, Decl
of Juan Pablo Baggini, Managing Director of Bees Brothers; Ex. 2.
Decl. of Santiago Herrero, Sales Manager of Bees Brothers; Ex. 3
Bill of Lading; Ex. 4, Commercial Invoice.
The P.O. has choice of
Texas law provision; Bees Brothers argues that this choice of law
of Texas, a federal state of the United States, in turn a CISG
signatory, requires application of the CISG.
CISG, art. 1(1)(b).
So too does CISG govern what constitutes a material breach of
express warranty or what breaches are curable.
25, 34, 37, 47.
CISG, arts. 35(1),
Moreover Bees Brothers anticipates that HHI will
try to prove that Bees Brothers was the seller of the honey in an
international sale of goods; that issue requires applying the
CISG’s definition of a seller.
Furthermore the Illinois federal class action’s claim of false
advertising under the Lanham Act in the mismarking of Chinese honey
as
honey
of
other
countries’
origin
constituting
a
false
designation of origin under 15 U.S.C. § 1125(a)(1), invokes federal
question jurisdiction under 15 U.S.C. § 1121 and 28 U.S.C. §
1338(a), conferring original jurisdiction to federal district
courts over actions arising under the trademark laws, including the
Lanham Act. Water Technologies Corp. v. Calco, Ltd., 850 F.2d 660,
17
Bees Bothers further states that the contractual choice of
the law of Texas, a federal state of the United States, in turn a
CISG signatory, supports application of the CISG under the CISG’s
art. 1(1)(b).
-32-
669-71 (Fed. Cir. 1988), cert. denied, 488 U.S. 968 (1988).
This
Court must decide whether the purported mismarking of the origin of
the honey in dispute constituted false advertising under the Lanham
Act, 15 U.S.C. § 1125(a)(1), a determination of a federal statute.
Bee Brothers also argues that improper joinder fails to defeat
diversity of jurisdiction here because HHI’s claims against the
nondiverse Defendants are not related to its claims against the
other Defendants.
party
is
present
A case can be removed even though a nondiverse
if
the
removing
defendant
nondiverse party was not properly joined.
shows
that
the
See, e.g., Salazar v.
Allstate Tex. Lloyd’s, Inc., 455 F.3d 571, 574 (5th Cir. 2006)(“In
the paradigmatic fraudulent joinder case, a plaintiff sues a
nominal nondiverse/in-state defendant along with a diverse foreign
defendant in an effort to make sure its claims against the diverse
defendant state in state court. . . . [I]n a multi-defendant case,
a nominal defendant can be disregarded in the jurisdictional
analysis.”) ; Larroquette v. Cardinal Health 200, Inc., 466 F.3d
373, 376 (5th Cir. 2006).
Joinder of parties, here of nondiverse
Defendants, is only proper where the claims arise from the same
transactions or occurrences and a common issue of law or fact
arises; otherwise parties could be joined in an effort to deprive
diverse defendants of their right to removal.
Fed. R. Civ. P.
20(a); In re Benjamin Moore & Co., 309 F.3d 296, 298 (5th Cir.
2002).
Bees Brothers contends that because HHI’s claims against
-33-
each nondiverse Defendant are unrelated to HHI’s claims against the
others and have no real connection to each other, the nondiverse
Defendants
should
be
disregarded
for
purposes
of
diversity
jurisdiction. There is no showing that each agreement is identical
to another, or under what circumstance it was accepted, or if each
nondiverse Defendant may have subsequently rejected indemnification
by its own preprinted invoice terms.
Bees Brothers identifies a
number of differences among the various agreements with different
Defendants.
#43 at p. 17.
Furthermore Bees Brothers asserts that
the amount in controversy under the indemnity agreement potentially
equals the federal class action litigation judgment, jointly and
severally against HHI and is sufficient to satisfy the amount in
controversy requirement.
As for the venue provision at issue here, “Venue for actions
pursuant to or related in any way to this purchase order will be
Chambers County, Texas,” with similar clauses in the other P.O.s in
dispute here, like HHI, Bees Brothers relies on this Court’s
opinion in TruGreen Landcare, 2013 WL 2147471, but comes to the
opposite conclusion about its holding.
In TruGreen, 2013 WL
2147471 at *2, the Court determined that the “key issue” was
whether the venue selection clause was mandatory (“exclusive”) or
permissive.
Agreeing with HHI that it is well established that
such boilerplate venue selection clauses do not waive removal to
federal court unless the waiver is “clear and unequivocal,” Bees
-34-
Brothers emphasizes this Court’s determination that the venue
selection clause in dispute in TruGreen, i.e., “parties stipulate
and agree that venue for any action brought hereunder shall
proper[ly] lie in the state and federal courts situated in Fort
Bend County, Texas,”18 was permissive, not mandatory, since the
language did not clearly indicate that the parties intended to
declare Fort Bend as the exclusive venue.
2147471 at *1.
TruGreen, 2013 WL
In TruGreen the Defendant argued that if the
selected venue county lacked a federal district court, the clause
operated as a waiver of federal venue and the case should be
dismissed for improper venue.
Siemens
Bus.
Servs.,
Inc.,
Id. at *1, citing Collin County v.
250
Fed.
Appx.
45,
52
(5th
Cir.
2007)(when exclusive forum is a county that does not have a federal
courthouse, the parties to the forum selection clause have waived
their rights to seek redress in federal courts); Yakin v. Tyler
Hill Corp., 566 F.3d 72, 76 (2d Cir. 2009)(holding that when forum
selection clause names a county without a federal court as the
exclusive forum, the parties have waived their right to federal
court).
Opining that “[a] clause is permissive if it authorizes
filing in a designated forum but does not foreclose other fora,”
TruGreen, 2013 WL 2147471 at *1, this Court cited Breakbul Transp.,
Inc. v. M/V Renata, Civ. A. No. H-07-2985, 2008 WL 1883790, at *2
18
The Court observes that the venue provision in the
disputed Bees Brothers’ P.O. does not mention federal court.
-35-
(S.D. Tex. Apr. 25, 2008), for the proposition that a “forum
selection clause providing merely that a particular court ‘shall
have jurisdiction’ over the controversy has been found to be
permissive because it does not foreclose the possibility that other
courts may also have jurisdiction.”
TruGreen, 2013 WL 2147471 at
*1, citing Caldas & Sons, Inc. v. Willingham, 17 F.3d 123, 127-28
(5th Cir. 1994)(“Even though the clause now before us uses ‘shall,’
this clause need not necessarily be classified as mandatory. . . .
The only thing certain about the clause . . . is that the parties
consented to the personal jurisdiction of the Zurich courts.
Beyond that . . . the language does not clearly indicate that the
parties intended to declare Zurich to be the exclusive forum . . .
.”); and Keaty v. Freeport Indonesia, Inc., 503 F.2d 955, 956-57
(5th Cir. 1974)(The venue provision (“This agreement shall be
construed and enforceable according to the State of New York and
the parties submit to the jurisdiction of the courts of New York”)
does not clearly limit actions under the contract to courts of a
specified locality but is subject to two opposing but reasonable
interpretations, i.e., that disputes would be litigated only in
state or federal courts in New York State or that Keaty intended to
submit to the jurisdiction of New York courts if he was sued there
but that he did not intend to waive his right to sue or be sued
elsewhere;
where
interpretations
there
of
a
are
two
contract
-36-
divergent
provision,
but
the
reasonable
preferred
interpretation is that “which operates more strongly against the
parties from whom (the words) proceed.”).19
This Court in TruGreen
additionally highlighted the fact that “[t]he forum selection
clause
contains
none
of
the
requisite
‘exclusivity
language’
[“exclusive,” “sole,” or “only”] nor provides that the state courts
in Fort Bend County are to be the exclusive venue.
Instead it
expressly contemplates that a federal venue is appropriate.”
Id.
It further reasoned that because the Southern District of Texas
includes Fort Bend County and because it is a proper venue under
the general venue statute, 28 U.S.C. § 1391(b), venue was proper in
the Southern District of Texas.
Id. at *3.
It rejected the
defendant’s arguments that the venue clause referred to a county,
not a venue, and that because the county lacked a federal district
court, the venue clause constituted a waiver.
maintains
that
under
TruGreen’s
holding,
Bees Brothers
this
Court
has
jurisdiction in the instant suit because Chambers County is in the
jurisdiction of the Southern District of Texas.
HHI’s Reply (#46)
HHI asserts four reasons why Bees Brothers’ Response fails to
defeat HHI’s motion to remand.
First HHI argues that Bees Brothers has failed to meet its
burden of pleading and proving the citizenship of all parties,
19
In accord, City of New Orleans v. Mun. Admin. Servs.,
Inc., 376 F.3d at 504-06.
-37-
including its own, to prove diversity jurisdiction exists here.
defendant
removing
on
diversity
grounds
must
distinctly
A
and
affirmatively assert the citizenship of the parties to the suit.
Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254, 1259 (5th Cir.
1988).
The citizenship of a LLC is determined by the citizenship
of all its members.
Harvey v. Grey Wolf Drilling Ci., 542 F.3d
1077, 1080 (5th Cir. 2008).
Bees Brothers fails to identify each
of its members or their citizenship, nor does it identify the
general
and
limited
partners
or
HHI
and
their
respective
citizenship.
Second, Bees Brothers fails to meet its burden of proving
improper joinder, a narrow exception to the rule of complete
diversity.
Cuevas v. BAC Home Loans Servicing, LP, 648 F.3d 242,
249 (5th Cir. 2011)(“To establish improper joinder, the removing
party must demonstrate either:
‘(1) actual fraud in the pleading
of jurisdictional facts, or (2) inability of the plaintiff to
establish a cause of action against the non-diverse party in state
court.’”), quoting Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568,
573 (5th Cir. 2004)(en banc).
Although Bees Brothers attempts to
satisfy the requirements of improper joinder by contending that the
indemnity clause in the P.O. is unenforceable because it does not
satisfy the conspicuous requirement, as discussed, more is at issue
in this case than the indemnity provision.
Bees Brothers has not
shown there is no possibility that HHI can recover against the
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Texas Defendants.
Its attack is one on the merits of the claim
rather than in inquiry into the propriety of the joinder of instate Defendants.
As for the unanimity of consent rule Bees Brothers does not
address the deadline for prior served Defendants to consent to
removal and the failure of all served Defendants to consent to
removal, timely or otherwise.
Not only did may fail to file a
written consent by the deadline, but many never filed consent.
Finally HHI reiterates that the mandatory venue provision is
a waiver of Bees Brothers’ right to remove. In TruGreen, the venue
provisions stated that “any action hereunder shall proper[ly] lie
in the state and federal courts situated in Fort Bend County,” and
it concluded that this language identified Fort Bend County as a
proper venue, but did not limit other proper venues.
2147471 at *2.
2013 WL
In contrast, the provision in Bees Brothers’ P.O.
states that venue “will be” (not may be, might be, or could be) in
Chambers County and the word “proper” is not used. “Will” does not
leave open the possibility of another venue.
When the exclusive
forum is a county without a federal courthouse, the parties to the
forum selection clause waive their rights to seek relief in federal
court.
Collin County v. Siemens Bus. Servs., Inc., 250 Fed. Appx.
45, 52 (5th Cir. 2007).
Court’s Decision
This case is problematic in numerous ways, many of which do
-39-
not relate to the removal issues. As a threshold matter, the Court
finds that many of Bees Brothers’ arguments go to the merits of
claims against HHI, which are pending in the Illinois class action
and not in this litigation. The Court’s only focus here is whether
Bees Brothers’ removal was proper and thus whether this Court has
subject matter jurisdiction to construe and declare the parties’
the rights, remedies, and obligations under their respective P.O.s,
all of which select Texas law and contain a provision for venue in
Chambers County.
The
Court
emphasizes
the
long
established
precept
that
“[b]ecause removal raises significant federalism concerns, the
removal statute is strictly construed ‘and any doubt as to the
propriety of removal should be resolved in favor of remand.’”
Gutierrez v. Flores, 543 F.3d 258,251 (5th Cir. 2008), quoting In
re Hot-Hed, Inc., 477 F.3d 320, 323 (5th Cir. 2007).
As the
removing Defendant, Bees Brothers bears the burden to show that the
subject matter jurisdiction exists and that removal was proper.
Manguno, 276 F.3d at 723.
Because Bees Brothers has failed to do
so in the following ways, the Court concludes that remand is
required.
With regard to procedural deficiencies in the removal, the
Court agrees that Bees Brothers has failed to show that all
previously served Defendants who have appeared in this action filed
timely written consents to the removal; specifically the record
-40-
demonstrates that CIMG and Sunland Trading filed late consents.
See footnote 13 of this Opinion and Order.
Regarding diversity jurisdiction, HHI perfunctorily states in
a footnote in its motion to remand that “it is a Texas citizen and
there are at least six Texas citizens named and served as of the
date of removal--China Industrial Manufacturing Group, Inc., Texas
Boga, Inc., Tommy Burns LP, Tommy Burns, Anna Burns and Tommy Burns
Investments, LLC.”
#26 at p. 23, n.1. The original Petition
identifies “[u]pon information and belief” Brightmin Enterprizes,
LLC as a “Texas limited liability company’ with “one or more of its
members a citizen of the State of Texas.”
A limited liability
company’s citizenship is determined by the citizenship of all of
its members.
Alsobrook v. GMAC Mortg., LLC, 541 Fed. appx. 340,
342 (5th Cir. July 31, 2013), citing Harvey v. Grey Wolf Drilling
Co., 542 F.23d 1077, 1080 (5th Cir. 2008).
As noted earlier, a
corporation is a citizen of either the state in which it is
incorporated and the state where it has its principal place of
business.
28 U.S.C. § 1332(c)(1).
Tewari De-Os Systems, Inc. v.
Mountain States/Rosen, Ltd. Liability Corp., 757 F.3d 481 (5th Cir.
2014).
About HHI and BBC, both limited liability companies, there
is no evidence in the record of the citizenship of their members
other that HII’s conclusory claim in that footnote.
Original
Petition,
at
p.1,
asserts,
“Plaintiff
Instead, the
is
a
limited
partnership organized under the laws of the State of Texas;” that
-41-
a jumbled statement does not demonstrate that it is properly a
Texas citizen.
The Original Petition does not show, nor does Bees
Brothers provide any evidence regarding essential information
about, the citizenship of most Defendants, and thus it fails to
evidence that the citizenship of HHI is completely diverse.
The
Petition does claim that National Honey, Inc. d/b/a National
Commodities and Four Seasons Food Distributors are citizens of
Texas, but merely asserts that other Defendants “do business” in
Texas.
If any of the defendants is a Texas citizen, since HHI
claims that one of its members is a citizen of Texas, and Bees
Brothers has not shown otherwise, the removal was improper under 28
U.S.C. § 1441(b)(2)(“A civil action otherwise removable solely on
the basis of jurisdiction under section 1332(a) of this title may
not be removed if any of the parties in interest properly joined
and served as defendants is a citizen of the State in which such
action is brought.”).
The Court agrees with HHI that Bees Brothers has also not
pleaded particular facts establishing improper joinder of any
alleged
in-state
Defendants
by
showing
that
in
its
Original
Petition HHI did not and cannot state a claim under Texas state law
against them.
Regarding Bees Brothers’ contention that federal question
jurisdiction exists here, the Court finds that there is no federal
right asserted on the face of the Original Petition, which seeks
-42-
only a declaration requiring the Court to construe a contract.
Construction of a purchase order between private parties is a
matter of state law, and the various P.O.s state that construction
“will be in accordance with the laws of the state of Texas.”
Ex. 1-A.
#26,
Where the case deals with a contract negotiated and
performed in several states and involves parties from different
states, “‘a federal court adjudicating a state law matter must
apply the law of the forum, including that state’s choice-of-law
rules.’”
Austin Elcon Corp. v. Avco Corp., 590 F. Supp. 507, 511-
12 (W.D. Tex. 1984), quoting Systems Operations, Inc. v. Scientific
Games Development Corp., 555 F.2d 1131, 1136 (3d Cir. 1977).
Contract construction is a matter of state law.
Restatement
(Second) Conflict of Laws § 187 is applied by Texas to determine
the
enforceability
of
choice-of-law
provisions.
DeSantis
v.
Wackenhut Corp., 793 S.W. 2d 670, 677 (Tex. 1990)(citing § 187 and
UCC, Tex. Bus. & Com. Code Ann. § 1.105(a); Aboussie v. Aboussie,
441 F.2d 150, 155 n.6 (5th Cir. 1971)(“[T]he Texas conflict of laws
rule is that it will apply the law of the state expressly or by
implication agreed upon by the contracting parties to govern . . .
.”).
Section 187 provides,
(1) The law of the state chosen by the parties to govern
their contractual rights and duties will be applied if
the particular issue is one which the parties could have
resolved by an explicit provision in their agreement
directed to that issue.
(2) The law of the state chosen by the parties to govern
their contractual rights and duties will be applied, even
-43-
if the particular issue is one which the parties could
not have resolved by an explicit provision in their
agreement directed to that issue, unless either
(a) the chosen state law has no substantial
relationship to the parties or the transaction and
there is no other reasonable basis for the parties’
choice, or
(b) application of the law of the chosen state
would be contrary to a fundamental policy of a
state which has materially greater interest than
the chosen state in the determination of the
particular issue and which, under the rule of §
187, would be the state of the applicable law in
the absence of an effective choice of law by the
parties.
Here the various P.O.s. expressly state that Texas law will apply,
HHI claims Texas citizenship, the honey in the P.O.s is to be
delivered to and paid for in Texas, and none of the parties has
objected to the choice of Texas law.
The Court disagrees with Bees Brothers’ claim that the federal
causes of action in the federal class action suit are at issue
here.
The P.O.s can be construed without any reference to the
legal issues in the class action.
At most, it could reasonably be
argued that to have an actual controversy as defined under Article
III of the Constitution for this action’s declaratory action, HHI
would first have to be found liable on at least one of the claims
in the class action. Then res judicata would not bar a declaration
of the rights, remedies, and obligations of the Defendants in this
suit.
Since no federal claim is stated, the Court examines that
-44-
argument that the CISG preempts the state law claims.
Here, too,
the CISG, if applicable, would apply to the state claims for
damages in the federal class action, not to the declaration of
rights under the P.O.s at issue here.
In sum, because “any doubt about the propriety of removal must
be resolved in favor of remand,” Gasch, 491 F.3d at 281-82, the
Court
ORDERS that HHI’s motion to remand (#26) is GRANTED and this
case is REMANDED to the 334th Judicial District Court of Chambers
SIGNED at Houston, Texas, this
23rd
day of
January , 2015.
___________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE
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