Moreno Energy, Inc. v. Marathon Oil Company et al
Filing
28
OPINION AND ORDER OF REMAND 23 Renewed MOTION to Remand. Case terminated on May 22, 2013(Signed by Judge Melinda Harmon) Parties notified.(rvazquez)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
MORENO ENERGY, INC.,
Plaintiff,
VS.
MARATHON OIL COMPANY, MARATHON
E.G. PRODUCTION LIMITED, and
MARATHON E.G. INTERNATIONAL
LIMITED,
Defendant.
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CIVIL ACTION H-11-4518
OPINION AND ORDER OF REMAND
Pending before the Court in the above referenced declaratory
judgment action, in response to the Court’s Opinion and Order of
August 3, 2012 (instrument #211) giving Defendant Marathon Oil
Company (“Marathon”) an opportunity to cure defective allegations
of diversity jurisdiction in its removal papers and to prove
complete diversity of citizenship under 28 U.S.C. § 1332, i.e.,
that co-Defendants Marathon E.G. Production Limited (“MEGPL”) and
Marathon E.G. International Limited (“MEGIL”) are citizens of the
Cayman Islands with their principal place of business in the
Republic of Equatorial Guinea,2 are Marathon’s Amended Notice of
1
Now available at Moreno Energy, Inc. v. Marathon Oil Co.,
884 F. Supp. 2d 577 (S.D. Tex. 2012).
2
Marathon, an Ohio corporation with its principal place of
business in Texas, and thus a Texas citizen for diversity
purposes, timely removed this action before MEGPL and MEGIL were
properly served and claimed that it was improperly joined and
therefore its citizenship should be disregarded.
-1-
Removal (#22) and a renewed motion to remand (#23) filed by
Plaintiff Moreno Energy, Inc..
The Court hereby incorporates its earlier Opinion and Order
(#21), including the relevant law set out in it.
Claiming the Court has diversity jurisdiction over this case,
Marathon seeks dismissal as an improperly joined Defendant in this
action.
In its Amended Notice and its Response, Marathon points
out that although in the Original Petition Moreno makes several
factual allegations against MEGPL and others generically against
“Marathon Defendants” collectively, the only factual allegation
specifically against Marathon is that it is an owner of the ALBA
PSC.3
The Original Petition alleges breach of contract against
MEGPL,
conversion
against
“Marathon
Defendants,”
unjust
enrichment/money had and received against “Marathon Defendants,”
and a claim for declaratory judgment against MEGPL, arising out of
Defendants’ alleged efforts to deprive Plaintiff Moreno Energy,
Inc. (“Moreno”), a citizen of Texas, of substantial portions of its
overriding royalty interest in the Alba Field, a “super giant” gas
condensate
field
located
in
Equatorial
Guinea,
West
Africa.
Marathon argues that such generalized assertions cannot defeat the
diversity jurisdiction here.
As an example, Marathon points to
paragraph 4 of the Original Petitions, in which Moreno alleges that
3
Marathon points out that the allegation is that Marathon
is the owner of the Alba PSC and, in that capacity, has committed
torts against Moreno.
-2-
“Marathon Defendants have knowingly failed to comply with their
contractual obligations under the [conveyance agreement],” but
later
admitting
that
MEGPL
alone
is
responsible
under
that
agreement and the claim breach of the conveyance agreement is
solely against MEGPL.
As for the amount in controversy, which is not specified in
the Original Petition, where a defendant demonstrates that it is
“facially apparent” that the claims are likely to be more than
$75,000 or where the defendant sets forth facts in the removal
petition or by affidavit that support a finding of the requisite
amount, that defendant can remove the case immediately. Luckett v.
Delta
Airlines,
Inc.,
171
F.3d
295,
298
(5th
Cir.
1999).
Alternatively, the defendant can wait until the plaintiff expressly
pleads or serves some “other paper” indicating that the amount in
controversy exceeds $75,000.
160, 161-64 (5th Cir. 1992).
Chapman v. Powermatic, Inc., 969 F.2
Marathon maintains that here the
amount in controversy exceeds the requirement, as is facially
apparent from the Original Petition because Moreno alleges that
MEGPL underpaid it on a .15% overriding interest in a 23.45834%
interest in the Alba Field, which allegedly “has generated billions
of dollars in revenue for the Marathon Defendants and their coventurers in the Alba PSC.”
With regard to evidence that MEGPL and MEGIL are diverse from
Moreno contrary to allegations in the Original Complaint, Marathon
submits
a
declaration
(Ex.
I)
-3-
with
supporting
documentary
attachments from Robert Jackson, a partner in the Global Finance
and
Corporate
Group
in
the
Cayman
Islands’
office
of
the
international law firm, Walkers, in which he attests that MEGPL and
MEGIL are domiciled in the Cayman Islands and are viewed as legal
persons or juridical entities under Cayman Islands Law and that
they are equivalent entities to limited liability companies or
unincorporated associations in the United States. Mr. Jackson also
provides a summary of Cayman Islands law and his interpretation of
it.
Also submitted is a short declaration, Ex. J, from Charles
Brammeier, President of MEGIL and Vice President of MEGPL, stating
that contrary to allegations in the Original Petition, these two
entities’ principal place of business is Equatorial Guinea, not
Houston, Texas.
The Court finds that in the amended Notice of Removal (#22)
Marathon has adequately pleaded and supported its claim that MEGPL
and MEGIL are parties completely diverse to Moreno.
Moreno’s Renewed Motion to Remand (#23)
Moreno reiterates that on the face of the Original Petition
there
is
no
diversity
jurisdiction
because
both
Moreno
and
Marathon, which is an Ohio corporation with its principal place of
business in Houston, Texas, are citizens of Texas.
Furthermore it
contends that although Marathon has the burden of proof to show
that it should be dismissed as an improperly joined defendant,
because it is a non-diverse party this Court has no jurisdiction to
consider any request by Marathon.
-4-
In addition, even if the Court
did have jurisdiction, Marathon cannot meet its heavy burden of
showing that Moreno cannot establish a cause of action against
Marathon in state court.
Thus this case must be remanded.
As a non-diverse defendant, Marathon has no standing to invoke
this Court’s diversity jurisdiction and no standing to request that
the
claims
against
it
be
dismissed,
while
jurisdiction to entertain Marathon’s request.
the
Court
has
no
See Pate v. Adell
Compounding, Inc., 970 F. Supp. 542, 548 (M.D. La. 1997)(stating
that a non-diverse defendant has no standing to remove a case to
federal court)4; Jewell v. Dudley L. Moore Ins., 872 F. Supp. 1517,
1519-20 (M.D. La. 1995)(stating that “a federal court lacks power
to act upon any substantive motions submitted by a non-diverse
party
in
a
diversity
case
or
to
exercise
subject
matter
jurisdiction over that party in any fashion”)5; Bankston v. BASF
Corp., 827 F. Supp. 1239, 1241 (M.D. La. 1993)(stating that the
court had no jurisdiction to consider a non-diverse party’s motion
4
Marathon objects that this statement was dictum and that
the Pate court explicitly noted that the non-diverse defendant in
that case had not removed the case, but merely joined in the
notice of removal filed by another defendant. 970 F. Supp. at
548.
5
Marathon responds that the Jewell court did not address
removal, but held that a non-diverse party claiming to have been
improperly joined lacked standing to participate in discovery.
The court then noted that “once a matter is removed to federal
court on the basis of fraudulent joinder, the non-diverse party
is not longer a party at interest.” Id. Marathon argues that
“[t]his holding is not inconsistent with a non-diverse party’s
right to remove a case and, once the case is removed, allow the
case to proceed between the parties that are properly joined.”
#24 at p. 4 (emphasis in original).
-5-
for summary judgment and “no authority to allow [the non-diverse
defendant] to make an appearance in the action by filing such a
motion”); Augustine v. Alliance Ins. Agency Servs., Inc., No. 069062, 2007 WL 38320, *2 n.1 (E.D. La. Jan. 3, 2007)(stating that
the court lacks jurisdiction to entertain any request for relief by
a party whose presence defeats diversity); Windmill Nursery of La.,
L.L.C., No. 06-7980, 2006 WL 3388486, *2 n.2 (E.D. La. Nov. 21,
2006)(same).
Even if this Court could consider Marathon’s submissions,
Marathon cannot establish improper joinder, i.e., that there is no
possibility that Moreno can recover against Marathon.
Moreno
argues that this Court must apply the more relaxed Texas “fair
notice” pleading standard, i.e., a petition is sufficiently pleaded
if one can reasonably infer a cause of action from what is stated,6
since
the
Original
Petition
was
filed
in
Texas
state
court
according to that state pleading standard. Centro Cristiano Coseha
Final, Inc. v. Ohio Cas. Ins. Co., No. H-10-1846, 2011 WL 240335,
*3 (S.D. Tex. Jan. 20, 2011); Jimenez v. Travelers Indem. Co., No.
H-09-1308, 2010 WL 1257802, *3 (S.D. Tex. Mar. 25, 2010).
Moreno
insists that it has adequately pleaded claims against Marathon for
conversion and unjust enrichment/money had and received, on the
grounds that Marathon has profited at Moreno’s expense by taking
royalty proceeds and tax credits that rightfully belong to Moreno.
6
Boyles v. Kerr, 855 S.W.2d 593, 601 (Tex. 1993).
-6-
Orig.
Petition
at
¶¶
56-64
(#1-3).
As
for
those
factual
allegations directed at all three “Marathon Defendants,” they
satisfy the fair notice standard of providing sufficient detail to
allow Marathon’s attorney to ascertain the nature and basic issues
of the claims against it and the testimony likely to be relevant.
Horizon/CMS Healthcare Corp. v. Auld, 34 S.W. 3d 887, 896 (Tex.
2000); Tex. R. Civ. Proc. 47(a)(pleading “shall contain . . . a
short statement of the cause of action sufficient to give fair
notice of the claims involved . . . . “).
Finally, Moreno seeks an award of its costs and expenses under
28 U.S.C. § 1447(c) because Marathon in removing this cases lacked
“objectively reasonable grounds to believe that removal was legally
proper.”
Hornbuckle v. State Farm Lloyds, 385 F.3d 528, 541 (5th
Cir. 2004).
Attached to the motion is an affidavit from Moreno’s
attorney, Allen H. Rustay, stating that Moreno has reasonably
incurred at least $8,500 (20 hours billed at $425 per hour) in
attorney’s fees relating to the removal.
Marathon’s Response in Opposition (#24)
Marathon maintains that (1) under the removal statute, 28
U.S.C. § 1446(a), which requires only that the removing party be a
defendant,7 and under the case law, non-diverse defendants may
7
Marathon points out that § 1446(a) clearly bars plaintiffs
from removing even if they are defending a counterclaim and
prohibits third-party defendants from removing, but there is no
restriction on the ability of a non-diverse party who was
improperly joined to remove to federal court. Bova, 446 F. Supp.
2d at 931. Moreno is asking this Court to read into the statute
-7-
remove a case and (2) Marathon was improperly joined in an effort
to defeat the Court’s diversity jurisdiction.
See Bova v. U.S.
Bank, N.A., 446 F. Supp. 2d 926, 931 (S.D. Ill. 2006)(“Plaintiffs
have not cited, and the Court’s research has not disclosed any
authority indicating that this case must be remanded because the
removing Defendant is also a diversity-defeating party that claims
to have been fraudulently joined.”).
Therefore the Court should
deny Moreno’s motion.
Moreno has argued that if Marathon was improperly joined, this
Court
cannot
consider
a
motion
for
Marathon
to
dismiss
it.
According to Marathon, such a situation “would render meaningless
the entire history of American jurisprudence on improper joinder.
If an improperly joined party cannot be dismissed from a case, then
what is the point of the improper joinder theory?”
#24 at p. 5.8
Marathon emphasizes that the entirety of Moreno’s allegations
against Marathon as a distinct entity from the other Defendants
consist
of
the
following
in
¶
50
of
the
Original
Petition:
“Defendants Marathon Oil and MEGIL are also owners of the Alba PSC
and, in that capacity, have (1) directed, assisted, aided and/or
a restriction that is not there, maintains Marathon.
8
This Court finds that Marathon is erroneously confusing two
distinct issues: the existence of subject matter jurisdiction
and the appropriate remedy for improper joinder. Cases cited by
Marathon were not removed by the allegedly fraudulently joined
defendant, but by a diverse defendant who subsequently argued
that another, non-diverse party was fraudulently joined. Thus
they are inapposite to the issue before this Court.
-8-
abetted
MEGPL’s
wrongful
conduct
as
alleged
herein;
and
(2)
received and/or converted monies, properties, and other valuable
assets and/or rights that properly belong to Moreno.”
reference9
and
the
Original
Petition
actionable conduct against Marathon.
do
not
This
articulate
any
The Petition’s allegations
are either against all three defendants collectivley or against
MEGPL and MEGIL. Marathon insists that the vague, generic pleading
against
all
three
Defendants
fails
to
identify
what
conduct
Marathon engaged in and thus to state a claim against it. “‘[W]hen
plaintiffs make general allegations and fail to support them with
specific underlying facts, they have not established a reasonable
basis for the court to predict that relief may be granted.’”
Cantor v. Wachovia Mortg., FSB, 641 F. Supp. 2d 602, 612 (N.D. Tex.
2009), quoting Staples v. Merck & Co., Inc., 270 F. Supp. 2d 833,
837 (N.D. Tex. 2003).
See also Griggs v. State Farm Lloyds, 181
F.3d 694, 701 (5th Cir. 1999)(“[W]hether the plaintiff has stated
a valid state law cause of action depends upon and is tied to the
factual fit between the plaintiff’s allegations and the pleaded
theory of recovery.”).
In sum, Marathon insists that Moreno has
failed to state facts supporting the elements of any of the pleaded
state law claims against Marathon.
9
Marathon further states that the allegation that it is an
owner of the Alba PSC is false and that MEGPL and MEGIL are the
owners of the Alba PSC.
-9-
Moreno’s Reply (#25)
Moreno insists that “[t]he removal statute does not provide,
and no court has ever held, that a non-diverse defendant, acting
alone, has standing to remove a case to federal court based solely
on diversity, but multiple courts in this circuit have held that
federal courts lack jurisdiction to consider any request by a nondiverse defendant, such as Marathon’s request that this Court
dismiss all claims against it and maintain jurisdiction over the
rest of this case.”
#25 at p. 1.
Court’s Decision
“‘Without jurisdiction the court cannot proceed at all in any
cause. Jurisdiction is power to declare law, and when it ceases to
exist,
the
only
function
remaining
to
the
court
announcing the fact and dismissing the cause.’”
is
that
of
Steel Co. v.
Citizens for a Better Environment, 523 U.S. 83, 94 (1998), quoting
Ex parte McCardle, 7 Wall. 506, 514 (1968).
“The requirement that
jurisdiction be established as a threshold matter ‘springs from the
nature and limits of the judicial power of the United States’ and
is ‘inflexible and without exception.’”
Id. at 94-95, quoting
Mansfield, C. & L.M.R. Co. v. Swan, 111 U.S. 379, 382 (1884).10
10
An exception was recognized by the Supreme Court in
Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 588 (1999) after
removal but not relevant here, “Where . . . a district court has
before it a straightforward personal jurisdiction issue
presenting no complex question of state law, and the alleged
defect in subject-matter jurisdiction raises a difficult and
novel question, the court does not abuse its discretion by
turning directly to personal jurisdiction.”
-10-
The Fifth Circuit has opined that since “‘the effect of
removal is to deprive the state court of an action properly before
it, removal raises significant federalism concerns.’
The removal
statute is therefore to be strictly construed, and any doubt about
the propriety of removal must be resolved in favor of remand.”
Gasch v. Hartford Accident & Indemnity Co., 491 F.3d 278, 281-82
(5th Cir. 2007), quoting Carpenter v. Wichita Falls Indep. Sch.
Dist., 44 F.3d 362, 365-66 (5th Cir. 1995).
The Court concludes that there are both jurisdictional and
procedural defects apparent in the removal of this action.
Marathon, which undisputably is not diverse from Moreno,
removed the case before the two diverse Defendants MEGPL and MEGIL)
were served.
afterward,
Thus at the time of removal and for some weeks
this
Court
had
no
jurisdiction
over
the
unserved
Defendants. Nor had the state court. Logically, for this Court to
have
diversity
jurisdiction,
Moreno
and
Marathon
had
to
be
completely diverse; only once jurisdiction exists could the Court
determine if there is improper joinder, and even then, only
improper joinder of what necessarily must be a third party because
the existence of diversity jurisdiction depends on the removing
party being a proper defendant.11
11
Because at the time of removal
The Court also questions what purpose a non-diverse party
would have in removing a case and then have itself dismissed,
leaving the suit pending in federal court, because it can
challenge its inclusion among named defendants as improper in
state court.
-11-
of this case, and even several weeks later as reflected by the
record, this Court had no jurisdiction because Marathon was not
diverse, the removal was improper.
Thus it had no jurisdiction
when Moreno filed its motion to remand on January 20, 2012.
Neither it nor the state court had jurisdiction over the
unserved MEGPL and MEGIL.
According to the docket sheet in this
case, after the improper removal, summons was issued for MEGPL and
MEGIL on January 27, 2012.
The Amended Notice of Removal (#22)
states that they were properly served on February 1, 2012, but
there is no evidence of service filed nor any written consent to
the removal from MEGPL and MEGIL.
The attorney for Marathon
subsequently did make an appearance for Marathon, MEGPL, and MEGIL
in filing an answer to the complaint (#11) and a motion to dismiss
for failure to state a claim (#12) on February 16, 2012.
Title 28 U.S.C. § 1446(b) has been interpreted to require that
all defendants timely join the petition for removal either by
signing the original petition removal or by filing written consent
before the expiration of the thirty-day deadline for filing.
Louisiana v. Aspect Energy, LLC, 2011 WL 5238666, *1 (W.D. La. Oct.
1, 2011), citing Getty Oil Corp. Div. of Texaco, Inc. v. Ins. Co.
of North America, 841 F.2d 1254, 1262 & n.11 (5th Cir. 1988).
“A
mere statement by the removing defendant that other defendants
consent to the removal is insufficient.”
Id. citing id.
Although
Marathon claimed that MEGPL and MEGIL consented to the removal,
there is no writing evidencing such consent and the motion to
-12-
dismiss for insufficient service of process that MEGPL and MEGIL
filed on December 28, 2011 undermines Marathon’s claim that the
Court had jurisdiction over them.
The face of the Original
Petition asserted that MEGPL and MEGIL’s principal places of
business were in Texas, so there was nothing in the record that
would warrant diversity jurisdiction even if they had filed a
consent.
The Court granted leave to Marathon to amend its notice
of removal regarding the citizenship of MEGPL and MEGIL under 28
U.S.C. § 1653 (“Defective allegations of jurisdiction may be
amended, upon terms, in the trial or appellate courts,”), but the
statute does not apply to curing procedural defects such as failure
of all defendants to timely join in the removal.
Aspect Energy,
2011 WL 5238666 at *2, citing Aucoin v. Gulf South Pipeline Co.,
L.P., No. 4-824, 2004 WL 1196980, *2 (E.D. La. May 26, 2004).
After
expiration
amendment
is
28
of
the
U.S.C.
30-day
§
jurisdictional allegations.
1653,
Id.
period,
which
the
also
only
avenue
applies
only
for
to
at *2 n.6 and *3.
Accordingly, since no one contends that there is federal
question jurisdiction here, the Court concludes that as a matter of
law
where
there
was
no
service
the
two
diverse
Defendants,
Marathon, as a non-diverse Defendant, could not remove this action
and ask the Court to dismiss it as an improperly joined defendant
because there was no diversity subject matter jurisdiction.
Title 28 U.S.C. § 1447(c) permits a district court to award
“just costs and any actual expenses including attorney’s fees”
-13-
resulting from the removal if the Court finds that it is improper.
Miranti v. Lee, 3 F.3d 925, 927-29 (5th Cir. 1993).
The Court has
the discretion to determine whether to impose a fee award against
any or all Defendants under § 1447(c).
Howard v. St. Germain, 599
F.3d 455, 457 (5th Cir. 2010), cert. denied, 131 S. Ct. 595 (2010).
In Martin v. Franklin Capital Corp., 546 U.S. 132 (2005), the
United States Supreme Court held that courts may award attorney’s
fees when the removing party lacks an objectively reasonable basis
for removal.
In accord, Hornbuckle, 385 F.3d at 541; Howard v. St.
Germain, 599 F.3d at 457.
The C o u r t f i n d s t h a t u n d e r t h e
circumstances here Marathon had an objectively reasonable basis for
removal and Moreno is not entitled to an award of fees and costs
under 28 U.S.C. § 1447(c).
Accordingly, for the reasons cited above, the Court
ORDERS that Moreno’s renewed motion to remand (#23) is GRANTED
for lack of subject matter jurisdiction and that this action is
REMANDED to the 152nd Judicial District Court of Harris County,
Texas.
SIGNED at Houston, Texas, this 22nd day of May, 2013.
___________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE
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