Garth O. Green Enterprises v. Harward et al

Filing 32

MEMORANDUM DECISION and ORDER granting 12 Motion to Remand to State Court. Case Closed. Signed by Judge Ted Stewart on 7/10/2014. (blh)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
GARTH O. GREEN ENTERPRISES, INC.,
Plaintiff,

MEMORANDUM DECISION AND
ORDER GRANTING PLAINTIFF’S
MOTION TO REMAND

v.
RANDALL HARWARD, an individual;
RICHARD HARWARD, an individual;
HARWARD IRRIGATION SYSTEMS
INC., a Utah corporation; GRASS
VALLEY HOLDINGS L.P., DOES 1-10,
and ROE CORPORATIONS I-X,

Case No. 2:14-CV-266 TS
District Judge Ted Stewart

Defendants.

This matter is before the Court on Plaintiff’s Motion to Remand. For the reasons
discussed below, the Court will grant the Motion.
I. BACKGROUND
Plaintiff initially filed this action in the Fourth Judicial Court in and for Utah County,
State of Utah, on February 1, 2013. Plaintiff alleges that the parties entered into an agreement
whereby Plaintiff would purchase certain assets belonging to Defendants. Plaintiff alleges that,
after the parties reached an agreement, Defendants backed out of the deal. It is alleged that part
of the reason for Defendants’ action was that Defendants received a substantial offer from
another company, later identified as Standard Plumbing Company (“Standard Plumbing”).
Ultimately, the agreement between Plaintiff and Defendants was never consummated.
In its state court Complaint, Plaintiff asserted claims for breach of contract, breach of the
covenant of good faith and fair dealing, and detrimental reliance. The parties engaged in

1

significant litigation before the state court, including the disposition of a motion to dismiss and a
motion to release lis pendens.
On January 3, 2014, Plaintiff filed a motion seeking to amend its Complaint. The
proposed Amended Complaint sought to add new Defendants, including Standard Plumbing, and
new claims for fraud, intentional interference with contract, intentional interference with
prospective economic relations, unfair competition, and negligent misrepresentation. With
respect to its proposed unfair competition claim, Plaintiff alleged that it had obtained exclusive
rights to certain trademarks and that Defendants were infringing on those trademarks.
In addition to the Motion to Amend, two additional motions, including a motion for
summary judgment, were pending before the state court at the time of removal. The state court
was scheduled to hear the motions on April 28, 2014. However, before the state court could rule
on the motions, Defendants filed their notice of removal.
In addition to the proceedings in state court, Standard Plumbing filed suit against Plaintiff
in this Court on March 31, 2014. Defendants are not parties to that action. Standard Plumbing
alleges that it, not Plaintiff, purchased certain assets from Defendants, including U.S. Trademark
No. 1,996,986. Standard Plumbing seeks declaratory judgment concerning: (1) non-infringement
of the ‘986 mark, (2) ownership of the ‘986 mark, (3) validity and enforceability of a purchase
agreement between Standard Plumbing and Harward, (4) non-interference with contractual
relations and prospective economic relations and no unfair competition, and (5) invalidity of the
lis pendens.

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II. DISCUSSION
Federal courts are courts of limited jurisdiction and must have a statutory basis for their
jurisdiction.1 “Removal statutes are to be strictly construed and all doubts are to be resolved
against removal.”2 The removing party bears the burden of establishing the requirements for
federal jurisdiction.3
28 U.S.C. § 1446(b) provides:
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.4
However,
if the case stated by the initial pleading is not removable, a notice of removal may
be filed within 30 days after receipt by the defendant, through service or
otherwise, of a copy 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.5
“The failure to comply with these express statutory requirements for removal can fairly be said
to render the removal ‘defective’ and justify a remand.”6
The parties appear to agree that this case was not initially removable. Thus, the Court
must consider whether this action became removable based on “a copy of an amended pleading,
1

Castaneda v. I.N.S., 23 F.3d 1576, 1580 (10th Cir. 1994).

2

Fajen v. Found. Reserve Ins. Co., 683 F.2d 331, 333 (10th Cir. 1982) (citation omitted).

3

Martin v. Franklin Capital Corp., 251 F.3d 1284, 1290 (10th Cir. 2001).

4

28 U.S.C. § 1446(b)(1).

5

Id. § 1446(b)(3).

6

Huffman v. Saul Holdings Ltd. P’ship, 194 F.3d 1072, 1077 (10th Cir. 1999) (citation and
internal quotation marks omitted).

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motion, order or other paper.” Defendants argue that two things, in combination, made this case
removable: (1) the proposed Amended Complaint in the state court case; and (2) the declaratory
judgment complaint filed in this Court by Standard Plumbing. As will be discussed below,
neither document, either singly or in combination, allows for removal.
The majority rule is “that a plaintiff’s moving papers in state court generally do not create
a right to remove under Section 1446(b); rather, the event triggering a right to remove is a statecourt order granting a plaintiff’s motion.”7 As the District Court for the District of New Mexico
recently stated,
A proposed pleading has no effect on the claims asserted in a case until the judge
approves that pleading for filing. While a proposed pleading might inform a
defendant that it will soon have a chance to remove once the state court approved
the pleading for filing, a defendant cannot properly remove a case containing no
claims over which a court has subject-matter jurisdiction.8
The Seventh Circuit Court of Appeals similarly explained the reasoning behind the
majority rule as follows. “Until the state judge granted the motion to amend, there was no basis
for removal. Until then, the complaint did not state a federal claim. It might never state a claim,
since the state judge might deny the motion.”9
Defendants correctly argue that “[s]ome courts have recognized that a motion seeking
leave to amend could trigger an obligation to remove a case.”10 However, “those cases normally
deal with situations where information in the motion indicates that the amount-in-controversy

7

Disher v. Citigroup Global Mkts., Inc., 487 F. Supp. 2d 1009, 1016 (S.D. Ill. 2007) (collecting
cases).
8

Zamora v. Wells Fargo Home Mortg., 831 F. Supp. 2d 1284, 1298 (D. N.M. 2011).

9

Sullivan v. Conway, 157 F.3d 1092, 1094 (7th Cir. 1998).

10

Zamora, 831 F. Supp. 2d at 1298.

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requirement would be satisfied for diversity jurisdiction.”11 Further, “many courts have not
followed that reasoning when the state court had discretion to deny the motion to amend.”12
Defendants further rely on Caterpillar Inc. v. Lewis,13 in support of their claim that
removal is proper. In that case, there was a lack of complete diversity at the time of removal.
However, the district court erroneously failed to remand the case. Prior to trial, the non-diverse
defendant had been dismissed as a party and therefore complete diversity existed when the case
went to trial and judgment was entered. The Court of Appeals vacated the judgment based on
absence of complete diversity at the time of removal.
The Supreme Court reversed, holding “that a district court’s error in failing to remand a
case improperly removed is not fatal to the ensuing adjudication if federal jurisdictional
requirements are met at the time judgment is entered.”14 The Court found that “[o]nce a
diversity case has been tried in federal court . . . considerations of finality efficiency, and
economy become overwhelming.”15 “To wipe out the adjudication postjudgment, and return to
state court a case now satisfying all federal jurisdictional requirements, would impose an
exorbitant cost on our dual court system, a cost incompatible with the fair and unprotracted
administration of justice.”16
The “considerations of finality efficiency, and economy” at issue in Caterpillar are
simply not present in this case. This is not a case that has proceeded to trial and final judgment
11

Id.

12

Id.

13

519 U.S. 61 (1996).

14

Id. at 64.

15

Id. at 75.

16

Id. at 77.

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while a procedural defect was present. Rather, this case has been recently removed and Plaintiff
has timely filed its Motion to Remand. Thus, Defendants’ reliance on Caterpillar is inapposite.
Therefore, the Court will follow the majority rule that a proposed pleading is not enough to
invoke this Court’s jurisdiction.
Even if the rule were otherwise, Defendants’ reliance on the proposed Amended
Complaint would still be insufficient to permit removal. As stated, Plaintiff sought leave to file
its Amended Complaint on January 3, 2014. Defendants, however, waited until April 14, 2014,
to file its Notice of Removal. Section 1446(b)(3) requires a notice of removal be filed within 30
days after receipt “of a copy 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.”17 Assuming
that the proposed Amended Complaint did present a federal question—something the Court need
not decide—Defendants simply waited too long to file their Notice of Removal based upon that
document. As a result, the Court must turn to Defendants’ second basis for jurisdiction:
Standard Plumbing’s complaint for declaratory judgment.
As stated, 28 U.S.C. § 1446(b)(3) allows for removal based upon an “order or other paper
from which it may first be ascertained that the case is one which is or has become removable.”
Defendants argue that Standard Plumbing’s complaint can be considered as the “other paper”
allowing for removal. The Court disagrees.
The general rule is “that documents generated in cases separate from a case as to which
removal is sought are neither orders nor other paper within the meaning of 28 U.S.C. §

17

28 U.S.C. § 1446(b)(3).

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1446(b).”18 Rather, “an ‘other paper’ for the purposes of § 1446(b) is one that is ‘generated
within the specific state proceeding which has been removed.’”19 In certain circumstances, a
decision by a court in an unrelated case can constitute an “order” under § 1446(b).20 But there is
no such order here.
In this case, Defendants seek to rely upon an action, to which they are not a party and
which has been filed by an entity that is not a party to the instant action. While there may be
some overlap between the issues presented in the two cases, this is insufficient to permit
removal. As one court has stated, “the phrase ‘other paper’ utilized in Section 1446(b) cannot
refer to pleadings filed in a separate, distinct case, in which the parties are not the same.”21
Therefore, the Court finds that Defendants have failed to point to anything permitting removal of
this action.
In the event this matter is remanded, Plaintiff requests its attorney fees and costs. 28
U.S.C. § 1447(c) provides that “[a]n order remanding the case may require payment of just costs
and actual expenses, including attorney fees, incurred as a result of the removal.” “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.”22

18

Disher, 487 F. Supp. 2d at 1016 (collecting cases).

19

Rynearson v. Motricity, Inc., 626 F. Supp. 2d 1093, 1097 (W.D. Wash. 2009) (citing Lozano v.
GPE Controls, 859 F. Supp. 1036, 1038 (S.D. Tex. 1994)).
20

Green v. R.J. Reynolds Tobacco Co., 274 F.3d 263, 267 (5th Cir. 2001); Doe v. Am. Red
Cross, 14 F.3d 196, 198 (3d Cir. 1993).

21

Growth Realty Cos. v. Burnac Mortg. Investors, Ltd., 474 F. Supp. 991, 996 (D. P.R. 1979).

22

Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005).

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Though a close question, the Court cannot find that, under the circumstances presented
here, Defendants’ removal lacked an objectively reasonable basis. Therefore, the Court will
deny Plaintiff’s request for attorney fees and costs.
III. CONCLUSION
It is therefore
ORDERED that Plaintiff’s Motion to Remand (Docket No. 12) is GRANTED.
The Clerk of the Court is directed to transmit this matter to the Fourth Judicial District
Court in and for Utah County, State of Utah and close this case forthwith.
DATED this 10th day of July, 2014.
BY THE COURT:

Ted Stewart
United States District Judge

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