Texas Brine Company, LLC v. American Arbitration Association, Inc. et al, No. 2:2018cv06610 - Document 73 (E.D. La. 2018)
Court Description: ORDER AND REASONS denying 22 Motion to Remand to State Court; denying as moot 46 Motion to Strike. Signed by Judge Sarah S. Vance on 10/11/2018. (cg)
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Texas Brine Company, LLC v. American Arbitration Association, Inc. et al Doc. 73 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA TEXAS BRINE COMPANY, LLC VERSUS CIVIL ACTION NO. 18-6610 AMERICAN ARBITRATION ASSOCIATION, INC, ET AL SECTION “R” (5) ORD ER AN D REASON S Before the Court are plaintiff Texas Brine Com pany’s m otion to rem and 1 and m otion to strike. 2 For the following reasons, the Court denies the m otion to rem and and finds that the m otion to strike is m oot. I. BACKGROU N D This case arises out of an arbitration dispute. 3 Texas Brine Com pany is the operator of brine production wells owned by Occidental Chem ical Corporation (Oxy) in Assumption Parish, Louisiana. 4 In 20 12, a large sinkhole appeared near one of the brine wells that Texas Brine had operated for several years. 5 Texas Brine and Oxy incurred substantial costs as a result 1 2 3 4 5 R. Doc. 22. R. Doc. 46. R. Doc. 1 at 5 ¶ 11. R. Doc. 1-1 at 3-4 ¶ 11. Id. at 4 ¶ 15. Dockets.Justia.com of the sinkhole, and they entered arbitration with defendant Am erican Arbitration Association (AAA) to determ ine how these costs should be allocated. 6 Their arbitration panel consisted of defendants Anthony DiLeo and Charles Minyard, as well as Denise Pilie, who is not a party to this suit. 7 On J uly 6, 20 18, Texas Brine filed suit in state court. 8 In its petition for dam ages, it alleged that DiLeo and Minyard labored under undisclosed conflicts of interest while presiding over Texas Brine’s case. 9 Specifically, it asserted that DiLeo was conflicted because he worked on another case in which he was adverse to Texas Brine’s arbitration counsel, Sher Garner. 10 That other case spurred a legal malpractice suit, in which Minyard represented DiLeo’s interests. 11 Texas Brine asserts that Minyard and DiLeo did not adequately disclose these conflicts, and that it would have objected to their serving as arbitrators if it had been aware of the conflicts. 12 Texas Brine also nam es the AAA as a defendant because it allegedly declined to enforce its ethics policies when it reaffirmed DiLeo as Texas Brine’s 6 7 8 9 10 11 12 Id. at 5 ¶¶ 16-18. Id. ¶ 18. R. Doc. 1-1. Id. at 30 ¶ 112. Id. at 12 ¶¶ 44-46. Id. at 18 ¶ 67. Id. at 20 -21 ¶ 75. 2 arbitrator. 13 Texas Brine seeks reimbursem ent of its costs arising out of the arbitration proceeding and subsequent state court litigation challenging the panel’s decision. 14 On J uly 10 , 20 18, the AAA rem oved to federal court. 15 At the tim e of rem oval, defendants DiLeo and Minyard, who are Louisiana citizens, had not been served. 16 On August 9, 20 18, Texas Brine filed a m otion to rem and, arguing that DiLeo and Minyard are properly joined as defendants and that their presence in the action precludes rem oval under 28 U.S.C. § 1441(b). 17 II. LEGAL STAN D ARD A defendant m ay generally rem ove a civil action filed in state court if the federal court has original jurisdiction over the action. See 28 U.S.C. § 1441(a). The “removing party bears the burden of establishing the facts necessary to show that federal jurisdiction exists.” See Allen v. R & H Oil & Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995). For diversity jurisdiction to exist, the am ount in controversy m ust exceed $ 75,0 0 0 , and there m ust be com plete diversity of citizenship between plaintiffs and defendants. See 28 13 14 15 16 17 Id. at 22 ¶ 81. Id. at 31 ¶¶ 117-18. R. Doc. 1. R. Doc. 1 at 3 ¶ 3. R. Doc. 22. 3 U.S.C. § 1332(a); Ow en Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373 (1978). A case m ay not be rem oved, even if diversity of citizenship exists, “if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.” 28 U.S.C. § 1441(b)(2). III. D ISCU SSION A. Mo tio n to Re m an d The parties agree that the AAA is a citizen of New York and Texas Brine is a citizen of Texas and North Carolina. 18 The am ount in controversy requirement is satisfied and is not in dispute. 19 And DiLeo and Minyard are undisputedly citizens of Louisiana. 20 There is thus complete diversity am ong the parties. See 28 U.S.C. § 1332(a). But because DiLeo and Minyard are citizens of the forum state, the case is not rem ovable under 28 U.S.C. § 1441(b)(2) if they are “properly joined and served,” a rule com m only referred to as the forum defendant rule. 21 DiLeo and Minyard had not yet been served 18 R. Doc. 1 at 2-3 ¶ 3; R. Doc. 38; R. Doc. 1-1 at 2 ¶¶ 1-2. R. Doc. 1 at 3 ¶ 4. 20 R. Doc. 1-1 at 2 ¶¶ 3-4. 21 The petition for dam ages also names “ABC Insurance Com pany,” “DEF Insurance Com pany,” and “GHI Insurance Company” as defendants in its petition for dam ages. R. Doc. 1-1 at 2 ¶¶ 5-7. In determ ining whether a civil action is rem ovable, courts m ust not consider the citizenship of defendants sued under fictitious nam es. 28 U.S.C. § 1441(b)(1). Accordingly, the Court 4 19 when the AAA removed the case. 22 Texas Brine nevertheless argues that rem oval was im proper because the AAA purposefully removed the case as quickly as possible in an attem pt to unfairly circum vent the forum defendant rule. 23 The Fifth Circuit has not directly ruled on whether unserved resident defendants prevent rem oval under 28 U.S.C. § 1441(b)(2). 24 See Leech v. 3M Co., 278 F. Supp. 3d 933, 942 (E.D. La. 20 17); Groves v. Farthing, No. 15722, 20 15 WL 3646724, at *3 (E.D. La. J une 10 , 20 15). But the Third and Sixth Circuits have held that defendants m ay rem ove despite unserved resident defendants. See Encom pass Ins. Co. v. Stone Mansion Restaurant, Inc., 90 2 F.3d 147, 153 (3d Cir. 20 18) (holding that reading § 1441(b)(2) literally is the correct interpretation because it “(1) abides by the plain m eaning of the text; (2) it envisions a broader right of rem oval only in the narrow circum stances where a defendant is aware of an action prior to disregards the citizenship of the insurance com panies in determ ining whether this action is rem ovable. 22 R. Doc. 1 at 3 ¶ 3. 23 R. Doc. 22-1 at 4-5. 24 Fifth Circuit law prevents defendants from rem oving if the unserved defendant destroys com plete diversity. See N ew York Life Ins. Co. v. Deshotel, 142 F.3d 873, 883 (5th Cir. 1998). But the forum defendant rule is treated differently because it is considered m erely procedural rather than jurisdictional. See 14C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3723 (4th ed. 20 18). 5 service of process with sufficient tim e to initiate rem oval; and (3) it protects the statute’s goal without rending any of the language unnecessary”); McCall v. Scott, 239 F.3d 80 8, 813 n. 2 (6th Cir. 20 0 1) (“Where there is com plete diversity of citizenship . . . the inclusion of an unserved resident defendant in the action does not defeat rem oval under 28 U.S.C. § 1441(b).”). No exception for gamesm anship exists. See Encom pass, 90 2 F.3d at 153-54 (“[T]his result m ay be peculiar in that it allows [a defendant] to use preservice m achinations to rem ove a case that it otherwise could not; however, the outcom e is not so outlandish as to constitute an absurd or bizarre result.”). In addition, courts in this district have uniform ly held that resident defendants who are unserved at the tim e of rem oval do not trigger the forum defendant rule. See Leech, 278 F. Supp. 3d at 943 (“[C]ourts in the Eastern District of Louisiana have roundly rejected [the] argum ent that under the current text of the rem oval statute, the mere presence of a forum state defendant in a lawsuit, whether served or unserved, bars rem oval by a nonforum defendant.”); Groves, 20 15 WL 3646724, at *4 (“So long as rem oval is effected before service, the forum defendant rule will not preclude rem oval.”); Stew art v. Auguillard Constr. Co., Inc., No. 0 9-6455, 20 0 9 WL 5175217, at *4 (E.D. La. Dec. 18, 20 0 9) (holding that removal was proper 6 when com plete diversity existed between parties and the resident defendant had not yet been served). DiLeo and Minyard therefore did not render rem oval im proper because they had not been “properly joined and served” at the tim e of rem oval. Texas Brine argues that the Court should rem and the case because the AAA’s initial notice of rem oval om itted any reference to its principal place of business. 25 As a corporation, the AAA is a citizen of its state of incorporation and the state of its principal place of business. 28 U.S.C. § 1332(c)(1). In its notice of rem oval, the AAA stated it “is a not-for-profit corporation organized under the law of New York . . .”, but it did not allege any facts about its principal place of business. 26 Texas Brine raised this issue before Magistrate J udge Michael North, who allowed the AAA to file an am ended notice of rem oval. 27 The amended notice properly states the AAA’s principal place of business. 28 Fifth Circuit law allows defendants to am end a notice of rem oval to rem edy technical defects, such as om issions of party citizenship, even outside of the 30 -day window for the initial notice of rem oval. See W hitm ire v. Victus Ltd., 212 F.3d 885, 887-88 (5th Cir. 20 0 0 ) (“[T]echnical defects or 25 26 27 28 R. Doc. 22-1 at 10 . R. Doc. 1 at 3 ¶ 3. R. Doc. 37. R. Doc. 38 at 1. 7 failure to specifically allege the citizenship of a party can be cured even in the appellate courts.”) (citing D. J. McDuffie Inc. v. Old Reliable Fire Ins. Co., 60 8 F.2d 145, 146 (5th Cir. 1979); see also Labeaud v. Knight, No. 11-1834, 20 11 WL 4625386, at *2 (E.D. La. Oct. 3, 20 11) (holding that rem and was im proper when defendant’s notice of rem oval inadequately described a party’s citizenship, but an am ended notice, although filed m ore than 30 days after the initial suit, corrected the defect). The AAA also argued in its notice of rem oval that, even if the Court found that unserved resident defendants prevented removal under 28 U.S.C. § 1441(b), DiLeo and Minyard cannot prevent rem oval because they are im properly joined as defendants in this case. 29 The Court need not reach this argument because the forum defendant rule does not apply to DiLeo and Minyard. In addition, the Court need not discuss the attorney’s fees requested by Texas Brine 30 because removal was proper. B. Mo tio n to Strike Texas Brine has filed a m otion to strike Exhibit 1 of the AAA’s Mem orandum in Opposition to Texas Brine’s Motion to Rem and. 31 Exhibit 1 is an em ail from Texas Brine’s counsel to the AAA’s legal department that 29 30 31 R. Doc. 1 at 6-8. R. Doc. 22-1 at 19. R. Doc. 46. 8 the AAA has cited to show that it was not m onitoring state court dockets to quickly file a notice of rem oval before DiLeo and Minyard could be served. 32 The issue of m onitoring dockets was only briefly mentioned in the parties’ briefs. The Court did not rely on Exhibit 1 in ruling on the m otion to rem and because whether the AAA was m onitoring state court dockets has no legal significance. The m otion to strike is therefore m oot. IV. CON CLU SION For the foregoing reasons, the Court DENIES Texas Brine’s m otion to rem and. It also DENIES Texas Brine’s m otion to strike as m oot. New Orleans, Louisiana, this _ 11th _ _ _ _ day of October, 20 18. _____________________ SARAH S. VANCE UNITED STATES DISTRICT J UDGE 32 R. Doc. 39-1. 9
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