SL Pathology Leasing of Texas LLC d/b/a Sightline Pathology v. Miraca Life Sciences, Inc. et al

Filing 25

MEMORANDUM AND ORDER denying as moot 5 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM. ORDERED that this case is REMANDED to the 270th Judicial District Courtof Harris County, Texas. (Signed by Judge Nancy F. Atlas) Parties notified. (wbostic, 4)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
SL PATHOLOGY LEASING OF
TEXAS LLC d/b/a SIGHTLINE
PATHOLOGY,
Plaintiff,
v.
MIRACA LIFE SCIENCES, INC.,
et al.,
Defendants.

§
§
§
§
§
§
§
§
§
§

CIVIL ACTION NO. H-14-3724

MEMORANDUM AND ORDER
This contract and tort dispute is before the Court on Plaintiff SL Pathology
Leasing of Texas LLC d/b/a Sightline Pathology’s (“Plaintiff” or “Sightline”) Motion
to Remand (“Plaintiff’s Motion”) [Doc. # 15]. Defendants Water Street Healthcare
Partners, LLC (“Water Street”), David Pauluzzi (“Pauluzzi”), Miraca Life Sciences,
Inc. (“Miraca”), and Lakewood Pathology Associates, Inc. d/b/a PLUS Diagnostics
(“PLUS”) (collectively, “Defendants”) filed a Response (“Defendants’ Response”)
[Doc. # 22], to which Plaintiff filed a Reply (“Plaintiff’s Reply”) [Doc. # 24]. Also
pending is Defendants Water Street, Pauluzzi, and Miraca’s Motion to Dismiss for
Failure to State a Claim and for Failure to Plead Fraud with Particularity
(“Defendants’ Motion”) [Doc. # 5], to which Plaintiff filed a Response (“Plaintiff’s
Response”) [Doc. # 21] only as to the claims against non-diverse defendant Miraca,
P:\ORDERS\11-2014\3724MR.wpd

150325.1154

and Miraca filed a Reply (“Miraca’s Reply”) [Doc. # 15].1 After reviewing the
parties’ briefing, the evidence in the record, and the applicable legal authorities, the
Court concludes that Miraca was not improperly joined as a non-diverse party and
grants Plaintiff’s Motion. Finding no subject matter jurisdiction, the Court remands
this case to the state court and denies as moot Defendants’ Motion.
I.

BACKGROUND
Plaintiff SL Pathology alleges that, on October 1, 2011, it entered into a five-

year lease agreement with PLUS. Plaintiff’s Original Petition (“Petition”) [Doc.
# 5-2], at ECF page 7. Paluzzi allegedly was the CEO of PLUS from April 2011 until
PLUS was acquired by Miraca on October 22, 2013. Id., at ECF pages 4-5. Water
Street allegedly is a private equity group that invested in PLUS. Id., at ECF page 6.
Plaintiff alleges that, throughout 2012 and 2013, Pauluzzi made several
misrepresentations that caused Plaintiff to agree to a decrease in the rental amount
under the lease. Plaintiff alleges that, on August 9, 2013, PLUS sent Plaintiff a letter
wrongfully terminating the lease and contending that it was “no longer economically
feasible for PLUS to operate its Texas laboratory.” Id., at ECF page 11 (emphasis in
original). Thirty days later, Miraca allegedly purchased PLUS from Water Street and

1

The Court abated the deadline for Plaintiff to otherwise respond to Defendants’
Motion until after a ruling on the jurisdictional issues raised by Plaintiff’s remand
motion. See Memorandum and Order dated Feb. 17, 2015 [Doc. # 20].

P:\ORDERS\11-2014\3724MR.wpd

150325.1154

2

Paluzzi for $81.5 million, making Miraca the largest “independent anatomic pathology
laboratory in the United States.” Id., at ECF pages 6, 12. Plaintiff alleges that the
“only obstacle to closing” this “industry lab deal” among the Defendants was to
“remove SIGHTLINE from the picture.” Id., at ECF page 12 (emphasis in original).
Plaintiff alleges that all four Defendants “conspired with each other to orchestrate a
ruse to terminate” the lease agreement. Id.
On December 1, 2014, Plaintiff sued Water Street, Paluzzi, Miraca, and PLUS
in the 270th Judicial District Court of Harris County, Texas. Plaintiff’s Original
Petition (“Petition”) [Doc. # 5-2], at ECF page 2. Plaintiff brings causes of action for
tortious interference with an existing contract and civil conspiracy against all
Defendants; a fraud claim against Pauluzzi, Water Street, and PLUS; and a breach of
contract claim against Water Street and PLUS. Id., at ECF pages 13-15. On
December 31, 2014, Defendants timely removed this case on the basis of complete
diversity of citizenship between the properly joined parties, and contending that nondiverse defendant Miraca was improperly joined. Notice of Removal Under 28 U.S.C.
§§ 1441, 1446 [Doc. # 1]. Plaintiff filed a motion to remand, which has been fully
briefed and is ripe for review.
II.

STANDARD FOR REMAND
“‘Federal courts are courts of limited jurisdiction.’” Rasul v. Bush, 542 U.S.

P:\ORDERS\11-2014\3724MR.wpd

150325.1154

3

466, 489 (2004) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375,
377 (1994)); Davoodi v. Austin Indep. Sch. Dist., 755 F.3d 307, 309 (5th. Cir. 2014);
McKee v. Kansas City S. Ry. Co., 358 F.3d 329, 337 (5th Cir. 2004). “‘They possess
only that power authorized by Constitution and statute, which is not to be expanded
by judicial decree.’” Rasul, 542 U.S. at 489 (quoting Kokkonen, 511 U.S. at 377
(citations omitted)). The Court “must presume that a suit lies outside this limited
jurisdiction.” Howery, 243 F.3d at 916 (citing Kokkonen, 511 U.S. at 377). “‘[T]he
burden of establishing federal jurisdiction rests on the party seeking the federal
forum.’” Clayton v. ConocoPhillips Co., 722 F.3d 279, 290 (5th Cir. 2013) (quoting
Howery, 243 F.3d at 916)).
Defendants removed this case on the grounds that non-diverse defendant Miraca
is not a proper party to this suit, and there is complete diversity of citizenship between
the proper parties. As the party seeking removal, Defendants “bear[] a heavy burden
of proving that the joinder of the in-state party was improper.” Smallwood v. Ill. Cent.
R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc); Akerblom v. Ezra Holdings
Ltd., 509 F. App’x 340, 344 (5th Cir. 2013). “[A]ny doubt about the propriety of
removal must be resolved in favor of remand.” Gasch v. Hartford Acc. & Indem. Co.,
491 F.3d 278, 281-82 (5th Cir. 2007). “Any contested issues of fact and any
ambiguities of state law must be resolved in [plaintiff’s] favor.” Travis v. Irby, 326

P:\ORDERS\11-2014\3724MR.wpd

150325.1154

4

F.3d 644, 649 (5th Cir. 2003) (citing Griggs, 181 F.3d at 699); accord B., Inc. v.
Miller Brewing Co., 663 F.2d 545, 549 (5th Cir. 1981).
A non-diverse defendant may be found to be improperly joined if either there
is “actual fraud in the [plaintiff’s] pleading of jurisdictional facts” or if the removing
defendant demonstrates that the plaintiff cannot establish a cause of action against the
non-diverse defendant. Mumfrey v. CVS Pharm. Inc., 719 F.3d 392, 401 (5th Cir.
2013); Kling Realty Co., Inc. v. Chevron USA, Inc., 575 F.3d 510, 513 (5th Cir. 2009)
(citing Campbell v. Stone Ins., Inc., 509 F.3d 665, 669 (5th Cir. 2007)). There is no
allegation of actual fraud in Plaintiff’s pleading of the jurisdictional facts in this case.2
For the second prong, whether plaintiff has established a cause of action against
the non-diverse defendant, the test “is whether the defendant has demonstrated that
there is no possibility of recovery by the plaintiff against an in-state defendant, which
stated differently means that there is no reasonable basis for the district court to
predict that the plaintiff might be able to recover against an in-state defendant.”
Kling, 575 F.3d at 513. (quoting Smallwood, 385 F.3d at 573); accord Mumfrey, 719
F.3d at 401. Courts may resolve the improper joinder issue by conducting “a Rule
12(b)(6)-type analysis, looking initially at the allegations of the complaint to

2

Defendants assert Plaintiff’s allegations are “demonstrably false,” but do not contend
that the pleadings rise to the level of actual fraud.

P:\ORDERS\11-2014\3724MR.wpd

150325.1154

5

determine whether the complaint states a claim under state law” by the non-diverse
plaintiff against the defendant. Smallwood, 385 F.3d at 573. “The focus is on
plaintiff’s pleadings at the time of removal.” Akerblom, 509 F. App’x at 344 (citing
Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir. 1995)). In the
appropriate case, a court has discretion to “pierce the pleadings” and conduct a
summary inquiry to “identify the presence of discrete and undisputed facts that would
preclude plaintiff’s recovery against the in-state defendant.” Smallwood, 385 F.3d at
573-74; accord Guillory v. PPG Industries, Inc., 434 F.3d 303, 311 (5th Cir. 2005).
III.

ANALYSIS
Defendants’ improper joinder arguments challenge the legal sufficiency of

Plaintiff’s pleadings. For purposes of the improper joinder analysis, traditionally,
courts have stated that the adequacy of the allegations in a petition filed in Texas state
court are evaluated under the Texas “fair notice” pleading standard.3 Defendants
argue that Plaintiff’s “sparse and conclusory” allegations fail to state a claim because
adoption of Texas Rule of Civil Procedure 91a, effective on March 1, 2013, imposes

3

See Michels v. Safeco Ins. Co. of Ind., 544 F. App’x 535, 538 (5th Cir. 2013); TSC
Offshore Corp. v. Triumph Drilling (Sing.) Pte Ltd., Civ. No. H-14-1599, 2014 WL
4064012, at *2 (S.D. Tex. Aug. 15, 2014) (Atlas, J.); Stevenson v. Allstate Tex.
Lloyd’s, No. 11-CV-3308, 2012 WL 360089, at *3 (S.D. Tex. Feb. 1, 2012) (Ellison,
J.); Edwea, Inc. v. Allstate Ins. Co., Civ. No. H-10-2970, 2010 WL 5099607, at *3-6
(S.D. Tex. Dec. 8, 2010) (Rosenthal, J.); see also Smallwood, 385 F.3d at 573; De La
Hoya v. Coldwell Banker Mex., Inc., 125 F. App’x 533, 537 (5th Cir. 2005).

P:\ORDERS\11-2014\3724MR.wpd

150325.1154

6

a new and stricter pleading standard in Texas “akin to Rule 12(b)(6).” Response, at
10, 13. This argument is unavailing. Similar to dismissal in federal court under
Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, Texas Rule 91a
states that a cause of action may be dismissed, upon motion, if the claim “has no basis
in law or fact.”4 To determine whether a claim should be dismissed as “baseless”
under Rule 91a, Texas courts apply the fair notice pleading standard to evaluate the
sufficiency of the pleadings.5 The Texas fair notice standard is satisfied if Defendants
“can ascertain from the pleading the nature and basic issues of the controversy and
what testimony will be relevant.”6

4

TEX. R. CIV. P. 91a; see GoDaddy.com, LLC v. Toups, 429 S.W.3d 752, 754-55 (Tex.
App.–Beaumont 2014, pet. denied) (“Just as a motion to dismiss for failure to state
a claim under Rule 12(b)(6) is a proper vehicle to assert a claim of immunity under
the federal rules, a motion to dismiss under Rule 91a is a proper vehicle to assert an
affirmative defense of immunity under section 230 in the state court.”); City of Dallas
v. Sanchez, 449 S.W.3d 645, 647 (Tex. App.–Dallas 2014, no pet.) (“Rule 91a permits
a party to move to dismiss a cause of action ‘on the grounds that it has no basis in law
or fact.’”).

5

Wooley v. Schaffer, 447 S.W.3d 71, 76 (Tex. App.–Houston [14th Dist.] 2014, no
pet). Cf. Kopplow Dev., Inc. v. City of San Antonio, 399 S.W.3d 532, 536 (Tex.
2013); Gutierrez v. Portfolio Recovery Assocs., LLC, No. 03-13-00311-CV, 2015 WL
869178, at *3 (Tex. App.–Austin Feb. 26, 2015 no pet. h.); Compass Bank v. Nacim,
— S.W.3d — , No. 08-12-00318-CV, 2015 WL 181721, at *13 (Tex. App–El Paso,
Jan. 14, 2015 no pet.); McLeod v. Gyr, 439 S.W.3d 639, 651 (Tex. App.–Dallas 2014,
pet. denied); Holmes v. Acceptance Cas. Ins. Co., 942 F. Supp. 2d 637, 646 (E.D.
Tex. 2013) (all applying the fair notice pleading standard to assess the legal
sufficiency of the pleadings in cases filed after Rule 91a went into effect).

6

Low v. Henry, 221 S.W.3d 609, 612 (Tex. 2007); Horizon/CMS Healthcare Corp. v.
(continued...)

P:\ORDERS\11-2014\3724MR.wpd

150325.1154

7

Applying this fair notice pleading standard, in the context of the issue of
fraudulent joinder, which incorporates the Rule 12(b)(6) and arguably Texas Rule 91a
analysis, the Court concludes that Plaintiff has stated a claim against Miraca. Plaintiff
sues Miraca for tortious interference with an existing contract and civil conspiracy.
Petition, at ECF page 15. Plaintiff’s allegations include the following statements
regarding Miraca:
During the majority of PLUS’s dealing with SIGHTLINE and at all
material times, WATER STREET, PAULUZZI, and MIRACA had
been secretly engaging in ongoing negotiations for the sale of PLUS to
MIRACA. The only obstacle to closing this “industry lab deal” was to
remove SIGHTLINE from the picture. MIRACA already had a
pathology lab in Irving, Texas and therefore did not need to duplicate the
cost and expense of operating another one in Houston, Texas. MIRACA
knew that PLUS had a valid and existing lease agreement with
SIGHTLINE, the terms of which would be effective through September,
2016. Despite this fact, MIRACA, WATER STREET, and
PAULUZZI conspired with each other to orchestrate a ruse to terminate
the contract, thus paving the way for the sale of PLUS to MIRACA.
Within thirty days of PLUS’ breach of the lease agreement, MIRACA
purchased PLUS DIAGNOSTICS from WATER STREET for $81.5
million with a handsome portion of the proceeds going directly to
WATER STREET and PAULUZZI. In this regard, MIRACA
intentionally and wrongfully interfered with SIGHTLINE’s contractual
relationship with PLUS in order to consummate the deal.
Petition, at ECF page 12 (emphasis in original). Plaintiff’s allegations are sufficient

6

(...continued)
Auld, 34 S.W.3d 887, 896 (Tex. 2000); Boyles v. Kerr, 855 S.W.2d 593, 601 (Tex.
1993).

P:\ORDERS\11-2014\3724MR.wpd

150325.1154

8

under the fair notice pleading standard, see Low, 221 S.W.3d at 612, to demonstrate
that Defendants have failed to establish that there is “no possibility of recovery” by
Plaintiff against Miraca, the in-state Defendant. Further, regarding the Fifth Circuit’s
alternative formulation, the Court cannot conclude that there is “no reasonable basis
for the court to predict that the plaintiff might be able to recover against an in-state
defendant.” See Kling, 575 F.3d at 512 (quoting Smallwood, 385 F.3d at 573).
Defendants argue Plaintiff’s allegations have no basis in fact and are
“demonstrably false.” Defendants ask the Court to conduct a summary inquiry, see
Response, at 17-18, and submit an Affidavit in which Russell O. Farr, the senior vice
president and general counsel of Miraca, denies the allegations against Miraca, see
Affidavit of Russell O. Farr [Doc. # 22-4]. While Farr’s Affidavit presents several
factual matters that contradict Plaintiff’s allegations, the Court must resolve “all
contested issues of substantive fact in favor of the plaintiff.” See B., Inc., 663 F.2d at
549. Defendants have not directed the Court to discrete and undisputed facts that
would preclude Plaintiff’s recovery against Miraca.
IV.

CONCLUSION AND ORDER
Based on the foregoing, Defendants have failed to meet their heavy burden to

show that non-diverse defendant Miraca was improperly joined in this suit.
Accordingly, the Court lacks subject matter jurisdiction, and it is hereby

P:\ORDERS\11-2014\3724MR.wpd

150325.1154

9

ORDERED that Plaintiff’s Motion to Remand [Doc. # 15] is GRANTED. It
is further
ORDERED that this case is REMANDED to the 270th Judicial District Court
of Harris County, Texas. Finally, it is
ORDERED that Defendants Water Street, Pauluzzi, and Miraca’s Motion to
Dismiss for Failure to State a Claim and for Failure to Plead Fraud with Particularity
[Doc. # 5] is DENIED as moot.
A separate remand order will issue.
SIGNED at Houston, Texas, this _____ day of March, 2015.
25th

P:\ORDERS\11-2014\3724MR.wpd

150325.1154

10