Williams et al v. Bizzack Construction, LLC et al

Filing 33

OPINION. Signed by Judge James P. Jones on 8/19/2014. (lml)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
ABINGDON DIVISION
TOWN OF GRUNDY INDUSTRIAL
DEVELOPMENT AUTHORITY,

)
)
)
Plaintiff,
)
)
v.
)
)
BIZZACK CONSTRUCTION, LLC, ET AL., )
)
Defendants.
)

Case No. 1:14CV00031

DAWNEDA F. WILLIAMS, ET AL.,

)
)
Plaintiffs,
)
)
v.
)
)
BIZZACK CONSTRUCTION, LLC, ET AL., )
)
Defendants.
)

Case No. 1:14CV00032

GRUNDY NATIONAL BANK,

)
)
Plaintiff,
)
)
v.
)
)
BIZZACK CONSTRUCTION, LLC, ET AL., )
)
Defendants.
)

Case No. 1:14CV00034

OPINION
Benjamin A. Street, Pebbles D. Burgess, and Jason D. Gallagher, Street
Law Firm, Grundy, Virginia, for Plaintiffs; Linda D. Frith, Sean C. Workowski,
and Julie von Sternberg, Frith Anderson & Peake, P.C., Roanoke, Virginia, for
Defendants Bizzack, Inc., and Bizzack Construction, LLC; Timothy W. McAfee,
Timothy W. McAfee, P.L.L.C., Big Stone Gap, Virginia, for Defendant Mountain
Energy Resources, Inc.
In these three related cases removed from state court, the plaintiffs have
moved to remand on the ground that this court lacks diversity subject-matter
jurisdiction. While the defendants accept that there is not complete diversity, they
contend that the sole nondiverse defendant was fraudulently joined and thus its
citizenship may be disregarded. For the reasons that follow, I disagree and will
grant the plaintiffs’ motions to remand.
As alleged by the plaintiffs in each case, the Virginia Department of
Transportation (“VDOT”) contracted with defendant Bizzack, Inc. (“Bizzack”) to
perform excavation work for a public highway construction project called the
Route 460 By-Pass Project, located in Buchanan County, Virginia. Buchanan
County is mountainous and contains bituminous coal reserves, and the excavation
involved coal extraction on various tracts of real estate in which the plaintiffs had
ownership interests in the coal. The coal on each tract was removed, transported,
and sold by Bizzack and Bizzack Construction, LLC, (“Bizzack Construction”), a
related company, to the defendant Mountain Energy Resources, Inc., (“Mountain
Energy”), as well as to other coal buyers.
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The plaintiffs thereafter filed separate lawsuits in state court in Buchanan
County, claiming that the removal and sale of the coal owned by them had been
unlawful. While the suits allege separate ownership interests in the different tracts
of land, the allegations and causes of action are substantially similar. They claim
that Bizzack and Bizzack Construction had obtained no right to remove the coal in
the course of the highway construction and that they had engaged in a conspiracy
with others to injure the plaintiffs by taking and selling the coal. In separate
counts, they assert causes of action for trespass, conversion, assumpsit, gross
negligence, conspiracy, fraud, and constructive fraud.

They seek millions of

dollars in damages.
After the suits were filed in state court, Bizzack and Bizzack Contruction
timely filed notices of removal in this court asserting federal subject-matter
jurisdiction based upon diversity of citizenship and amount in controversy. See 28
U.S.C. §§ 1332(a), 1441(b). The plaintiffs are all citizens of Virginia. Bizzack
and Bizzack Construction are citizens of other states,1 but Mountain Energy, which
consented to the removal, is indisputably a Virginia corporation with its principal

1

Bizzack is a Kentucky corporation with its principal place of business in
Kentucky. Bizzack Construction is a Kentucky limited liability company whose
members are citizens of Kentucky or West Virginia.
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place of business in Virginia.2 The notices of removal all recited that “[i]t is the
contention of [the Bizzack Defendants] that Mountain Energy Resources, Inc. has
been fraudulently joined with the express purpose of defeating the court’s
jurisdiction and that no legal claim cognizable in the Commonwealth of Virginia
lies against Mount [sic] Energy Resources, Inc.” (Case No. 1:14CV00031, Notice
of Removal ¶ 18; Case No. 1:14CV00032, Notice of Removal

16; Case No.

1:14CV00034, Notice of Removal ¶ 18.)
Following removal, the plaintiffs moved to remand, asserting that subjectmatter jurisdiction did not exist because of the lack of complete diversity of
citizenship and denying that Mountain Energy was fraudulently joined.

The

motions to remand have now been briefed and argued and are ripe for
determination.3
A civil action brought in a state court “of which the district courts of the
United States have original jurisdiction” may be removed to this court. 28 U.S.C.
§ 1441(a). Federal district courts have “original jurisdiction of all civil actions
where the matter in controversy exceeds the sum or value of $75,000, exclusive of
2

Brett Cool, an individual alleged to be a citizen of Kentucky, is also named a
defendant in each case, but no appearance has been entered for him and it is asserted that
he has not been properly served.
3

Counsel for Bizzack and Bizzack Construction filed a surreply brief in letter
form without first seeking leave of court, which I refused. Counsel then filed a motion
for reconsideration in each case. I will grant the motions and I have considered the
surreply, although it is not persuasive.
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interests and costs, and is between . . . citizens of different States . . . .” 28 U.S.C.
1332(a)(1). Such “diversity jurisdiction does not exist unless each defendant is a
citizen of a different State from each plaintiff.” Owen Equip. & Erection Co. v.
Kroger, 437 U.S. 365, 373 (1978). The burden of establishing federal jurisdiction
rests with the party seeking removal. McNutt v. Gen. Motors Acceptance Corp. of
Indiana, 298 U.S. 178, 189 (1936).
The doctrine of fraudulent joinder “effectively permits a district court to
disregard, for jurisdictional purposes, the citizenship of certain nondiverse
defendants, assume jurisdiction over a case, dismiss the nondiverse defendants, and
thereby retain jurisdiction.” Mayes v. Rapoport, 198 F.3d 457, 461 (4th Cir. 1999).
Fraudulent joinder exists if “there is no possibility that the plaintiff would be able
to establish a cause of action against the in-state defendant in state court.” Hartley
v. CSX Transp., Inc., 187 F.3d 422, 424 (4th Cir. 1999) (internal quotation marks
and citation omitted). Because jurisdictional rules are intended to “direct judicial
traffic” and “steer litigation to the proper forum with a minimum of preliminary
fuss . . . , [t]o permit extensive litigation of the merits of a case while determining
jurisdiction thwarts the purpose of jurisdictional rules.” Id. at 425.
For these reasons, the standard for evaluating claims of fraudulent joinder
“is even more favorable to the plaintiff than the standard for ruling on a motion to
dismiss under Fed. R. Civ. P. 12(b)(6).” Id. at 424. “Once the court identifies [a]
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glimmer of hope for the plaintiff, the jurisdictional inquiry ends.” Id. at 426. As
such, “fraudulent joinder is typically only found in cases of legal impossibility . . .
.” Flores v. Ethicon, Inc., 563 F. App’x 266, 269 (4th Cir. 2014) (unpublished).
As relevant here, the plaintiffs bring a claim for conversion against
Mountain Energy. They contend that, “[w]ithout any right, title, or interest to the
coal so removed, and without any notice to the [plaintiffs], Bizzack and Bizzack
LLC willfully and wantonly carried away and sold the coal to Mountain Energy
and other unknown buyers.” (Case No. 1:14CV00031, Am. Compl. ¶ 31; Case No.
1:14CV00032, Am. Compl. ¶ 31; Case No. 1:14CV00034, Compl. ¶ 30.) The
defendants assert that the plaintiffs cannot maintain a cause of action for
conversion against Mountain Energy because certificates of take recorded by
VDOT extinguished the plaintiffs’ rights to possession and title to the coal
removed. However, this argument goes “‘to the merits of the action as an entirety,
and not to the joinder; that is to say, it indicate[s] that the plaintiff[s’] case was ill
founded as to all the defendants.’” Ritchey v. Upjohn Drug Co., 139 F.3d 1313,
1318 (9th Cir. 1998) (quoting Chesapeake & Ohio Ry. Co. v. Cockrell, 232 U.S.
146, 153 (1914)). The proper inquiry is not “whether those defendants could
propound defenses to an otherwise valid cause of action,” but instead “whether the
plaintiff truly had a cause of action against the alleged sham defendants.” Ritchey,
139 F.3d at 1318.
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The defendants present an alternative argument that attacks the joinder of the
nondiverse defendant but it is without merit. It is argued that Mountain Energy
cannot be liable for conversion because there has been no allegation of facts
showing that Mountain Energy acted other than in good faith in purchasing the
coal from the Bizzack defendants and did so without notice of any dispute as to
ownership. However,
except for recovery of exemplary damages, [a] defendant’s
knowledge, intent, motive, mistake, and good faith are generally
irrelevant [to the tort of conversion]. If one takes property which
turns out to belong to another, his innocent intent will not shield him
from making restitution or indemnity, for his well-meaning may not
be allowed to deprive another of his own.
Morissette v. United States, 342 U.S. 246, 253-54 (1952) (comparing common law
conversion to statutory “knowing” conversion); see also Universal C.I.T. Credit
Corp. v. Kaplan, 92 S.E.2d 359, 365 (Va. 1956) (“A person who purchases
personal property from one not authorized to sell the same may be held liable for
conversion thereof, regardless of the fact that the purchaser was honestly mistaken,
or acted innocently, in good faith, and without knowledge of the seller’s right to
make the sale.”) (internal quotation marks and citation omitted). If the plaintiffs
successfully prove the elements of conversion, Mountain Energy may be held

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liable even as a good faith purchaser for value. Therefore, there is at least a
possibility of recovery against the nondiverse defendant.4
For these reasons, the defendants have not demonstrated that Mountain
Energy was fraudulently joined. Accordingly, its nondiverse citizenship cannot be
disregarded and diversity jurisdiction is not established.

These cases will be

remanded to state court by separate orders.

DATED: August 19, 2014
/s/ James P. Jones
United States District Judge

4

Of course, I make no judgment on the merits of the plaintiffs’ claims or the
validity of the defenses to those claims. That determination is for the state court.
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