Bullerwell et al v. Volkswagen Group of America, Inc. et al

Filing 12

ORDER GRANTING 5 Motion to Remand to State Court. Signed by Judge Xavier Rodriguez. (rf)

UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
DAVID LAWRENCE BULLERWELL, ET
AL.,
Plaintiffs,
v.
VOLKSWAGEN GROUP OF AMERICA,
INC., ET AL.,
Defendants.

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Civil Action No. SA-16-CV-1199-XR

ORDER
On this date, the Court considered Plaintiffs’ Motion for Remand (Docket no. 5),
Plaintiffs’ Motion for an Expedited Hearing (Docket no. 10), and Defendant Volkswagen Group
of America’s Motion to Stay (Docket no. 7). After careful consideration, the Court GRANTS the
Motion to Remand, and DISMISSES the other pending motions as moot. Accordingly, this case
is hereby remanded to the state court.
BACKGROUND
Plaintiffs David and Carol Bullerwell are Texas residents who brought suit in County
Court at Law No. 10, Bexar County, Texas on October 20, 2016 after allegedly purchasing a
2014 Volkswagen Jetta TDI. Docket no. 1-11 at 1, 4. Plaintiffs allegedly purchased this vehicle
from Defendant GPI TX-SVII, Inc. d/b/a VW of Alamo Heights, and it was allegedly designed,
manufactured, tested, marketed, and distributed by the other two defendants in this case,
Volkswagen AG and Volkswagen Group of America, Inc. Id. at 4. They alleged that part of their
decision to purchase this vehicle was its fuel efficiency and low emissions, which were
communicated to them by Defendants’ advertisements and representations. Id. Plaintiffs allege

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that these representations were false, and had they known so, they would not have purchased the
vehicle.” Id. at 8. In particular, Plaintiffs allege that Volkswagen intentionally installed a “defeat
device” in their vehicle. Id. at 5. This device, they explain, is “sophisticated software . . . whose
purpose was to detect when the vehicle was being tested for emissions and turn full emissions
control systems on only during that test. At all other times, the emission control systems were not
fully engaged.” Id. Plaintiffs assert causes of action under Texas state law for breach of contract,
violations of the Texas DTPA, fraud, and unjust enrichment.
On November 23, Defendant VW America removed the action to this Court, asserting
both diversity jurisdiction and federal question jurisdiction. Docket no. 1. VW America asserts
that diversity jurisdiction exists, despite the presence of a non-diverse defendant in VW of
Alamo Heights, because the non-diverse defendant has been improperly joined. Id. at 2–8. VW
America asserts that federal question jurisdiction exists because this case necessarily implicates
substantial questions of federal law because “Plaintiffs’ claims all arise out of, and are based
upon, the same allegations that Volkswagen Group of America, Inc. (“VWGoA”), violated the
Clean Air Act and the regulations promulgated by the EPA. This federal question gives this court
federal question jurisdiction pursuant to 28 U.S.C. §1331 and §1441(a).” Docket no. 8 at 1.
On December 22, Plaintiffs moved to remand, asserting that there is no basis for federal
jurisdiction over this case. Docket no. 5. On December 29, Defendant VW America filed a
motion to stay, arguing that this Court should stay the action pending consolidation with the
multi-district litigation pending in the Northern District of California. Docket no. 7. On January
5, 2017, Plaintiff filed a motion for an expedited hearing on its motion to remand, hoping to

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avoid the consequences of an automatic transfer of this case to the MDL forum. Docket no. 10. 1
The Court now turns to these pending motions.
DISCUSSION
I.

Plaintiffs’ Motion to Remand
Plaintiffs’ motion to remand lays out two main arguments. First, Plaintiffs argue that this

Court lacks subject matter jurisdiction. Next, they argue that removal is procedurally improper
because not all defendants have consented to it. Because the Court finds that it lacks subject
matter jurisdiction, it need not reach the issue of consent to removal.
“[A]ny 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.” 28 U.S.C. § 1441(a). On a motion to remand, the Court must consider
whether removal was proper, which thus requires that a district court have original jurisdiction
over the removed action.
a. Diversity Jurisdiction
Federal district courts have original jurisdiction over civil actions if the parties are
citizens of different states and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a).
There is no dispute regarding the amount in controversy requirement. 2 In addition, the
citizenships of the parties are also undisputed—Plaintiffs are citizens of Texas, Defendant VW
America is a citizen of New Jersey and Virginia, Defendant Volkswagen AG is a citizen of
Germany, and Defendant VW of Alamo Heights is a citizen of Texas. Docket no. 1 at 2–3. Thus,

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In lieu of granting this motion and setting this case for a hearing on all pending motions, the Court reaches
the merits of Plaintiffs’ motion to remand in this order. This motion is therefore moot.
2
Plaintiffs’ original petition seeks between $100,000 and $200,000.

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there is not complete diversity between the parties because Plaintiffs and Defendant VW of
Alamo Heights are citizens of Texas.
Nevertheless, VW America argues that the Court should disregard the citizenship of VW
of Alamo Heights for purposes of its diversity of citizenship analysis because Plaintiffs cannot
even theoretically recover under state law for their claims against VW of Alamo Heights—
“There is no arguably reasonable basis for predicting that state law might impose liability on the
resident defendant in this lawsuit, and thus, VW of Alamo Heights was fraudulently joined.”
Docket no. 1 at 7. There are two ways to establish improper joinder of the type referenced in VW
America’s notice of removal: (1) actual fraud in the pleading of jurisdictional facts; and (2) the
inability of the plaintiff to establish a cause of action against the non-diverse party. Guillory v.
PPG Indus., Inc., 434 F.3d 303, 308 (5th Cir. 2005); McDonal v. Abbott Labs., 408 F.3d 177,
183 (5th Cir. 2005). Actual fraud is not at issue in this case; therefore, the Court must determine
whether Plaintiffs can establish a cause of action against the non-diverse defendant, VW of
Alamo Heights.
The burden of demonstrating improper joinder is a heavy one and is placed on the party
seeking removal. McDonal, 408 F.3d at 183. To meet it, a defendant must show that there is no
reasonable basis to predict that the plaintiff might be able to recover against the in-state
defendant. Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc). In
considering whether the plaintiff may recover, the Court need not determine whether the plaintiff
will actually, or even probably, prevail on the merits, but looks only for a possibility that he may
do so. Guillory, 434 F.3d at 308-09. The Court also evaluates the factual allegations in the light
most favorable to the plaintiff and resolves all ambiguities in controlling state law in the
plaintiff’s favor. Id. at 308; see Gray ex rel. Rudd v. Beverly Enters.-Miss., Inc., 390 F.3d 400,

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405 (5th Cir. 2004). And we ultimately resolve “any doubt about the propriety of removal . . . in
favor of remand.” Gasch v. Hartford Acc. & Indem. Co., 491 F.3d 278, 281-82 (5th Cir. 2007).
VW America argues that Plaintiffs have no reasonable basis to predict that they may
recover against VW of Alamo Heights because of an arbitration agreement. In its notice of
removal, VW America points out that Plaintiffs’ purchase of the vehicle from VW of Alamo
Heights is subject to an arbitration agreement permitting either party to elect arbitration for “any
claim or dispute in contract, tort, statute, or otherwise . . . that arises out of or relates to your
credit application, this Contract, or any resulting transaction or relationship.” Docket no. 1 at 3–
4. VW of Alamo Heights invoked this agreement and elected to arbitrate Plaintiffs’ claims
against it. Docket no. 1-15. Thus, VW America argues, the arbitration agreement conclusively
forecloses any theoretical possibility of recovery by Plaintiffs against VW of Alamo Heights.
“Courts have uniformly rejected this argument.” Worrix v. Medtronic, Inc., CIV. 13-111ART, 2013 WL 6834719, at *5 (E.D. Ky. Dec. 23, 2013). The most cited case on this issue,
Frank v. Am. Gen. Fin., Inc., 23 F. Supp. 2d 1346, 1348–51 (S.D. Ala. 1998), detailed five
reasons for concluding that it would be “untenable” to “extend [fraudulent joinder] to situations
in which a valid cause of action may exist against the resident defendant but plaintiff is
precluded by the arbitration clause from bringing the action in a judicial forum”:
First, the mere existence of an arbitration agreement does not divest a court, state
or federal, of jurisdiction.
....
Second, the existence of an arbitration agreement between a plaintiff and a
defendant does not necessarily mean that all of the plaintiff’s claims against that
defendant are arbitrable under the agreement.
....
Third, “[c]ourts, not arbitrators, ordinarily will decide whether or not a particular
dispute is arbitrable.”
....
Fourth, even if it were established that the arbitration agreement at issue is
otherwise valid and enforceable and that the parties have clearly and
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unmistakably agreed to submit the arbitrability question itself to arbitration, the
right to arbitrate is a waivable right which the defendant may waive intentionally
or even negligently by failing to assert it timely or some other “default in
proceeding with such arbitration.”
....
Fifth, even an order compelling arbitration does not under the FAA divest the
court, state or federal, of jurisdiction . . . [T]he court having jurisdiction over the
litigation is only expressly authorized to stay the action pending such arbitration. 3
Frank, 23 F. Supp. 2d at 1348–51 (emphasis original). These reasons have been cited with
approval numerous times, including by at least one district court in this circuit, and they justify
the same result in this case. Cure v. Toyota Motor Corp., Inc., 248 F. Supp. 2d 594, 597 (S.D.
Miss. 2003) (“This Court is persuaded by the analysis and conclusions set forth in Frank”);
Phillips v. First Tower Loan, Inc., 2:12CV123-KS-JMR, 2012 WL 5873360, at *6, n.4
(collecting cases for the proposition that “[n]umerous courts have found Frank persuasive.”)
(S.D. Miss. Nov. 20, 2012). In addition, the relatively limited (and contested) record at this point
in the case does not meet fraudulent joinder’s heavy burden of foreclosing any theoretical
possibility of Plaintiffs recovering against VW of Alamo Heights. For these reasons, VW of
Alamo Heights was not improperly joined, and its citizenship must be considered, thereby
defeating diversity jurisdiction.
b. Federal Question Jurisdiction
“The district courts shall have original jurisdiction of all civil actions arising under the
Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. “A federal court only has

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On this fifth reason, the Court notes a potential inconsistency between the logic of Frank and the law of
this circuit. In a footnote, the court in Frank pointed that “[a]lthough some non-binding cases have held that a court
may, in some circumstances, dismiss a case rather than order a stay pending arbitration, the justification for ignoring
the plain language of 9 U.S.C. § 3 is not clear. Cf., 9 U.S.C. § 3 and Alford v. Dean Witter Reynolds, Inc., 975 F.2d
1161, 1164 (5th Cir. 1992).” Frank, 23 F. Supp. 2d. at 1350 n.3. To the extent that Frank implies that Fifth Circuit
law requires claims subject to arbitration to be dismissed rather than stayed, this inconsistency does not warrant a
contrary result. First, this affects only one of the Frank court’s five reasons. Second, this Court has stated that Alford
does not require but merely permits dismissal of claims subject to arbitration, leaving the choice between a
dismissal and stay to the discretion of the district court. Stross v. ZipRealty, Inc., A-13-CA-419-SS, 2013 WL
12080194, at *7 (W.D. Tex. Sept. 11, 2013) (“The Court declines to dismiss the case in lieu of issuing a stay.”).

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original or removal jurisdiction if the federal question appears on the face of the plaintiff’s wellpleaded complaint and there is generally no federal jurisdiction if the plaintiff properly pleads
only a state law cause of action. E.g., Franchise Tax Bd. v. Construction Laborers Vacation
Trust, 463 U.S. 1, 103 S. Ct. 2841, 2846–47, 77 L.Ed.2d 420 (1983). A case may ‘arise under’
federal law ‘where the vindication of a right under state law necessarily turn[s] on some
construction of federal law.’ Id. at 2846. But ‘this statement must be read with caution.’ Merrell
Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 106 S.Ct. 3229, 3232, 92 L.Ed.2d 650
(1986).” MSOF Corp. v. Exxon Corp., 295 F.3d 485, 490 (5th Cir. 2002).
This Court recently addressed this exact question in a near identical case. In Martinez v.
Volkswagen Grp. of Am., Inc., 16-CV-56-XR, 2016 WL 2894928, at *1 (W.D. Tex. May 18,
2016), a Volkswagen purchaser filed suit based on the same clean diesel and defeat device
scandal. The complaint in Martinez is nearly identical to the complaint in this case, 4 and sets
forth nearly the same causes of action based on the same conduct of similar defendants. 5 The
procedural posture of the case was essentially the same—Defendants removed the case to this
Court, and the issue was the propriety of a stay versus a remand. This Court held that federal
question jurisdiction did not provide an appropriate basis for removal:
Plaintiff’s complaint here raises only state law causes of action. In her state court
petition Plaintiff alleged Defendants falsely represented that their vehicles
complied with federal regulations. This reference, like the reference in MSOF
Corp. v. Exxon Corp., “does not suffice to render the action one arising under
federal law.”
....
This Court is bound . . . by Fifth Circuit precedent. The fact that violation of a
federal statute or regulation may be an element of a state tort claim is insufficient

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The most notable difference between the two complaints is that in Martinez, the complaint expressly
references the federal Clean Air Act. Martinez v. Volkswagen Grp. of Am., Inc., 5:16-CV-56-XR, Docket no. 1-5 at
5–6. Plaintiffs’ complaint here makes no reference to the CAA.
5
The same two Volkswagen corporate entities are named as defendants in both cases; the only differences
in the parties are the identities of the plaintiff purchasers and the defendant car dealerships.

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to establish a substantial federal interest. See Singh v. Duane Morris LLP, 538
F.3d 334, 338–39 (5th Cir. 2008).
Id. at *2, n. 2. The Court lifted a stay that was previously imposed via text order and remanded
the case without deciding issues of whether all defendants consented or had waived their right to
removal. Id. at *2–3.
Martinez, which is virtually identical to the present case, applies with force. Plaintiffs’
state law causes of action are not federal ones and do not arise under federal law. Any references
that they make to federal law do not establish a substantial federal interest. Other district courts
have reached the same conclusion in similar cases. E.g., Claytor v. Volkswagen Grp. of Am., Inc.,
189 F. Supp. 3d 602, 2016 WL 3087069 at *2–6 (W.D. Va. 2016). Therefore, there is no federal
question jurisdiction over these claims.
c. Costs
In their motion to remand, Plaintiffs seek costs and expenses, including attorney’s fees,
incurred as a result of the removal of this case. “An order remanding the case may require
payment of just costs and any actual expenses, including attorney fees, incurred as a result of the
removal.” 28 U.S.C. § 1447(c). “Absent unusual circumstances, courts may award attorney’s
fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for
seeking removal. Conversely, when an objectively reasonable basis exists, fees should be
denied.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005).
Plaintiffs’ request for costs and expenses is denied. In Martinez, this Court denied a
similar request for fees, relying on LaFoy v. Volkswagen Group of Am., Inc., 2016 WL 2733161
(E.D. Mo. May 11, 2016) (“While the Court does not make a determination on whether federal
question jurisdiction is appropriate, it cannot be said federal jurisdiction is clearly absent as
Defendant is able to make a reasonable argument for jurisdiction on the basis of federal question
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jurisdiction under 28 U.S.C. § 1331.”). Martinez may have clarified this Court’s view on the
federal question issue, but VW America’s diversity jurisdiction theory was not presented or
addressed in that case. Further, other district courts, though they have not directly found that
federal question jurisdiction exists over these types of cases, have taken a different procedural
route by staying the case and leaving the remand question to the MDL court. See, e.g., Hess v.
Volkswagen Grp. of Am., Inc., 2:16-CV-00668-KOB, 2016 WL 3483166, at *6 (N.D. Ala. June
27, 2016). For these reasons, VW America’s notice of removal does not lack an objectively
reasonable basis, and Plaintiffs’ request for costs is denied.
II.

Defendant’s Motion to Stay
Having found that remand of this case is appropriate, the Court need not decide VW
America’s motion to stay the case. See Ruzich v. Volkswagen Grp. of Am., Inc, CV 16-4753
(JLL), 2016 WL 5858652, at *3 (D.N.J. Oct. 4, 2016) (finding remand appropriate and

withholding a decision on defendants’ motion to stay).
CONCLUSION
Plaintiffs’ motion to remand (Docket no. 5) is GRANTED. Defendant’s motion to stay
(Docket no. 7) and Plaintiff’s motion for an expedited hearing (Docket no. 10) are DISMISSED
as moot. This case is hereby REMANDED to the state court.

It is so ORDERED.
SIGNED this 10th day of January, 2017.

XAVIER RODRIGUEZ
UNITED STATES DISTRICT JUDGE

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