Hall v. Leisure Time Products, Inc. et al, No. 3:2014cv00465 - Document 14 (E.D. Va. 2014)
Court Description: MEMORANDUM OPINION. Signed by District Judge James R. Spencer on 10/7/2014. Copies as directed to all counsel of record.(cmcc, )
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Hall v. Leisure Time Products, Inc. et al Doc. 14 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION DARRYL A. HALL, J R., Plaintiff, Civil Action No. 3:14 CV 465 v. LEISURE TIME PRODUCTS, INC, et al, Defendant. MEMORAN D U M OPIN ION THIS MATTER is before the Court a Motion to Rem and (ECF No. 4) filed by Plaintiff Darryl A. Hall, J r. ( Plaintiff ). Defendants Backyard Leisure, LLC ( Backyard LLC ), Leisure Tim e Products, Inc. ( Leisure Tim e ), Backyard Leisure Holdings, Inc. ( BLH ), and Lowe s Hom e Centers, Inc. ( Lowes ) (collectively, Defendants ) oppose this Motion. For the reasons below, the Plaintiff s Motion to Rem and is GRANTED. I. FACTU AL AN D PROCED U RAL BACKGROU N D On March 4, 20 13, Plaintiff filed a com plaint in the Circuit Court for the City of Richm ond ( Richm ond Circuit Court ) against Defendants seeking dam ages for person al injuries related to an alleged defect in the hardware used to support a child s swing set. On March 28, 20 13, Defendants filed a joint Answer. In response to Plaintiff s allegation in paragraph five of the Com plaint that Backyard LLC was engaged in the business of designing, m anufacturing, testing, inspecting, m arketing, distributing and selling swing sets and related products and com ponent parts, Defendants responded [a]t this tim e, Defendants are without sufficient inform ation to adm it or deny the allegations contained in ¶ 5 of the Com plaint, and therefore deny them . (See Com pl. ¶ 5; Ans. ¶ 5). On April 3, 20 13, before the Honorable Robert E. Payne, Defendants tim ely filed a Notice of Rem oval ( First Notice ) on the basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332(a). On April 4, 20 13, J udge Payne issued an Order on April 4, 20 13, sua sponte, requiring Backyard 1 Dockets.Justia.com LLC to properly allege its citizenship for purposes of establishing diversity as a basis for rem oval. See Hall v. Backy ard Leisure, LLC et. al, 3:13-CV-0 0 211-REP, ECF No. 4. Defendants did not allege fraudulent joinder as a basis for rem oval in their initial Notice of Rem oval. See id. ECF No. 1. On April 15, 20 13, Backyard LLC filed an unopposed Motion to Rem and in which it adm itted that one or m ore of its m em ber entities were com prised of m em bers who were citizens of Virginia and that, thus, com plete diversity did not exist at the tim e of filing. See id., ECF Nos. 6-7. On April 16, 20 13, J udge Payne rem anded the case back to state court on Backyard LLC s unopposed m otion to rem and. See id., ECF No. 9. The parties then engaged in discovery and produced substantive discovery responses, retained experts, and conducted depositions. Backyard LLC never filed an Am ended Answer to that effect or updated its discovery responses. Defendants aver that Plaintiff engaged in the following tactics to delay discovery: ï · ï · ï · ï · ï · ï · ï · ï · Plaintiff refused to set the case for trial in state court prior to the expiration of the one-year tim e period for rem oval. (Green Aff. at ¶¶ 11-14.) Plaintiff was first inform ed that the non-diverse defendants were not proper parties on J uly 29, 20 13, and took no action despite Defendants request to conduct discovery on that issue. (Green Aff. at ¶¶ 11, 14.) Plaintiff was again inform ed that the non-diverse defendants were not proper parties on August 1, 20 13 and that Defendants would be available for a deposition in the fall of 20 13, but took no action. (Ex. D; Green Aff. at ¶¶ 14-15.) Plaintiff was again inform ed that the non-diverse defendants were not proper parties on Novem ber 21, 20 13, and that Defendants would be available for deposition on J anuary 10 , 20 14. (Ex. E; Green Aff. at ¶ 17.) Plaintiff refused to provide a Rule 4:5(b)(6) corporate representative deposition notice for the deposition on J anuary 10 , 20 14, so it was cancelled. (Ex. F; Green Aff. at ¶¶ 18-20 ; Hotz Aff. at ¶ 10 .) When inform ed, once again that Defendants needed a Rule 4:5(b)(6) corporate representative deposition notice, Plaintiff s counsel stated to Defense counsel, If I nonsuit those parties you will rem ove this m atter to federal court. (Green Aff. at ¶ 19.) When asked on J anuary 15, 20 14 for deposition dates for Defendants deposition, Plaintiff s counsel represented that his first available date was March 28. Defendants m ade arrangem ents for a deposition in Richm ond on that date, but on March 25, 20 14, Plaintiff s counsel denied ever agreeing to the March 28 date because it conflicted with the Annual Convention of the Virginia Trial Lawyers Association. However, Plaintiff did not attend the convention on March 28. (Green Aff. at ¶¶ 21, 23; Hotz Aff. ¶¶ 11-12.) Plaintiff never arranged to take Defendants deposition. Defendants, at their own expense, deposed Donald Hotz on April 2, 20 14. (Ex. H.) 2 (Defs. Mem . Supp. Opp n Mot. Rem and 14-15). On April 2, 20 14, Mr. Hotz Defendants corporate representative testified that Backyard LLC is an ownership structure of a group of investors that own preferred shares and com m on shares in Backyard LLC, but it had nothing to do with the design, m anufacture, sourcing, or sale of the product at issue. (Hotz Dep. 8-12). On May 20 , 20 14, reportedly satisfied that Backyard LLC and BLH were not responsible for the product at issue, Plaintiff circulated for signature an Order for Nonsuit dism issing Backyard LLC and BLH as defendants, and the Circuit Court entered the Order on J une 6, 20 14. (Notice of Rem oval, Ex. C). On J une 25, 20 14, Defendants Leisure Tim e and Lowes filed a second notice of rem oval ( Second Notice ) in this Court asserting that rem oval is proper pursuant to 28 U.S.C. § 1441, and that the Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332. Plaintiff filed a Motion to Rem and on J uly 3, 20 14. Defendants filed an opposition on J uly 17, 20 14. Plaintiff filed his reply on J uly 22, 20 14. This m atter is now ripe for review. Defendant Leisure Tim e is a Delaware corporation with its principal place of business in Kansas. Defendant Lowe s is a North Carolina corporation with its principal place of business in North Carolina. Plaintiff is a citizen of the Com m onwealth of Virginia. The am ount in controversy in this m atter exceeds $ 75,0 0 0 . II. STAN D ARD OF REVIEW Federal courts are courts of lim ited jurisdiction . . . [and] possess only that power authorized by Constitution and statute. Kokkonen v. Guardian Life Ins. Co. of Am ., 511 U.S. 375, 377 (1994). Federal district courts have original jurisdiction over civil actions that arise under the Constitution, laws, or treaties of the United States pursuant to 28 U.S.C. § 1331, and where the am ount in controversy exceeds $ 75,0 0 0 and the m atter is between citizens of different states pursuant to 28 U.S.C. § 1332. Federal diversity jurisdiction only exists under § 1332 where there is com plete diversity, that is, when no party shares com m on citizenship with any party on the other side. May es v. Rapport, 198 F.3d 457, 461 (4th Cir. 1999) (internal 3 citations om itted). A defendant m ay rem ove a case from state to federal court if the federal court has original jurisdiction over the m atter, but if a case is rem ovable based solely on diversity jurisdiction, the case m ay not be rem oved if any of the defendants is a citizen of the state where the action was brought. 28 U.S.C. §§ 1441(a), (b). Under 28 U.S.C. § 1446(a), a defendant desiring to rem ove a civil action from State court m ust file a notice of rem oval in the United States District Court and division within which the action is pending. Creed v. Virginia, 596 F. Supp. 2d 930 , 933 (E.D. Va. 20 0 9). The defendant m ust file a notice of rem oval within 30 days of the receipt of an initial pleading or within 30 days after the service of sum m ons, whichever period is shorter. § 1446(b)(1)(B). If the case, based on the initial pleading, is not rem ovable, it m ay becom e so after receipt by a defendant of an am ended pleading, m otion, order, or other paper from which it m ay first be ascertained that the case is one which is or has becom e rem ovable. § 1446(b)(3). Courts have interpreted the words other paper to include deposition transcripts. Cain v. CVS Pharm acy , Inc., No. 5:0 8CV79, 20 0 9 WL 539975, at *2 (N.D.W. Va. Mar. 4, 20 0 9) (citing S.W .S. Erectors, Inc. v. Infax, Inc., 72 F.3d 489, 494 (5th Cir. 1996); TKI, Inc. v. N ichols Research Corp., 191 F. Supp. 2d 130 7, 1310 (M.D. Ala. 20 0 2)). A case m ay not be rem oved on the basis of diversity jurisdiction m ore than one year after com m encem ent of the action, unless the Court finds that Plaintiff has acted in bad faith in order to prevent rem oval. § 1446(c)(1). Defendants can seek successive rem ovals so long as a second notice is based on different grounds. Cain, 20 0 9 WL 539975, at *2. The party seeking rem oval has the burden of establishing federal jurisdiction. Mulcahey v. Colum bia Organic Chem s. Co., 29 F.3d 148, 151 (4th Cir. 1994). Because rem oval of a case from state court im plicates significant federalism concerns, rem oval jurisdiction m ust be strictly construed, and if federal jurisdiction is doubtful, a rem and is necessary. Mulcahey , 29 F.3d. at 151. 4 III. PARTIES ARGU MEN TS Defendants note that the Second Notice was filed within 30 days after receipt by Defendants of the Nonsuit Order entered by the Richm ond Circuit Court on J une 6, 20 14.1 Defendants argue that the one year lim itation on filing notices of rem oval should be tolled because Plaintiff acted in bad faith by failing to respond to their letters in which they stated that Backyard LLC and BLH were not proper parties in the action because they played no role in the design, production, or distribution of the product at issue in this m atter. Defendants note that Plaintiff never propounded any discovery on them in which he sought inform ation and/ or docum ents concerning these m atters nor did he depose a Backyard LLC corporate representative. Defendants argue that Plaintiff s failure to investigate whether the allegations in his Com plaint were accurate constitutes bad faith pursuant to 28 U.S.C. § 1446(c). In sum , Defendants allege that Plaintiff engaged in strategic gam esm anship to run out the clock on rem oval. (Notice of Rem oval 5). Defendants cite to Fuqua v. Gulf, C. & S. F. Ry . Co., 20 6 F. Supp. 814 (E.D. Okla. 1962), for the proposition that the instant case would not have been rem ovable even if they knew that Backyard LLC and BLH could not be held liable. Defendants aver that, at the tim e of the First Notice they were not aware of the possibility of rem oval on the grounds of fraudulent joinder despite their earnest efforts to ascertain the nature of the relationship between the Defendants prior to rem oval. Defendants argue that once the fraudulent joinder was uncovered, it was too late to rem ove on fraudulent joinder grounds, and Defendants had to wait for an am ended pleading, m otion, order or other paper from which it could be ascertained that the case was rem ovable. See 28 U.S.C. § 1446(b)(3). They note that the relevant Nonsuit Order was not entered until J une 6, 20 14. Defendants cite various cases in which the one-year lim itation on rem oval was extended due to active efforts on the part of a plaintiff to circum vent a defendant s 1 Because the issue of whether Defendant properly rem oved within 30 days of the Nonsuit Order is not dispositive, this m em orandum will solely address the issue of whether Plaintiff acted in bad faith. 5 right to a federal forum . See, e.g., Davis v. M erck & Co., Inc., 357 F. Supp. 2d 974, 978 (E.D. Tex. 20 0 5). Defendants contend that there is little case law, and no statutory guidance, as to what constitutes bad faith because the statutory exception to the one-year tim e lim it is relatively new. Defendants argue that Plaintiff delayed depositions in order to prevent them from establishing fraudulent joinder prior to the one-year lim itation on rem oval. Defendants aver that Plaintiff cannot be perm itted sit by and rem ain willfully ignorant of the situation at hand in order to defeat rem oval. Plaintiff contends that the Second Notice is untim ely because it was filed on J une 25, 20 14, m ore than a year after the filing of the Com plaint in the Richm ond Circuit Court on March 4, 20 13. Plaintiff argues that the bad faith exception does not apply here where Defendants failed to conduct a tim ely investigation into its own citizenship and its responsibility for the product at issue. Moreover, Plaintiff notes that Backyard LLC did not indicate in its response to interrogatories that it was not directly responsible for the design and m anufacture of the product at issue. Plaintiff contends that he had every right to assum e Backyard LLC s responses provided under oath were true. Plaintiff contends that Defendants waited until April 2, 20 14 to provide any evidence that Backyard LLC was not a proper party. Plaintiff reports that this evidence cam e in the form of Mr. Hotz s deposition. Plaintiff contends that, as a result of Mr. Hotz s deposition, he filed a Nonsuit Order on May 20 , 20 14. Plaintiff argues that nothing prevented Backyard LLC from presenting the sam e evidence to this Court in the form of an Affidavit or deposition in support of a tim ely filed notice of Rem oval. Plaintiff concludes that Defendants are attem pting to use their own lack of diligence as an exception to the strict tim e requirem ents established in 28 U.S.C. § 1446. IV. AN ALYSIS This case presents som ewhat unique facts. Here, Defendants all retained the sam e counsel on March 27, 20 13. Counsel for Defendants states that he was first able to speak with Mr. Hotz on April 1, 20 13. Defendants counsel states that he rem oved the m atter to federal 6 court on April 3, 20 13 based on the representations of his clients. Pursuant to J udge Payne s order to provide the citizenship of Backyard LLC, Defendants counsel asked Mr. Hotz to research the citizenship of the Defendants. Apparently, it was not until J uly 20 13, that Defendant s counsel learned from Mr. Hotz that neither Backyard LLC nor BLH were proper defendants in this m atter. Specifically, Defendants learned that neither Backyard LLC nor BLH were involved in the m anufacture or production of the product at issue and, thus, could not be liable under the Com plaint. Defendants argum ent that the instant case would not have been rem ovable at the tim e of the First Notice even if they knew that Backyard LLC and BLH could not be held liable is specious and speculative. It is clear that, under Virginia law, entities that have no relation to the product at issue cannot be held liable for its use because no causation would be present. See Cooper Indus., Inc. v. Melendez, 537 S.E.2d 580 , 587 (Va. 20 0 0 ). There is little question that Defendants counsel s failure to raise the argum ent of fraudulent joinder in the First Notice was the result of either inadequate investigation of his own clients or the fact that he was retained so close to the 30 day deadline to file a notice of rem oval. In any event, Defendants are at fault for failing to allege fraudulent joinder in the First Notice. Defendants are also at least partly to blam e for failing to file the Second Notice within a year. Defendants could have rem oved the case after receipt of an am ended pleading, m otion, order, or other paper from which they could ascertain that the case was one which is or had becom e rem ovable. Cain, 20 0 9 WL 539975, at *2. Other paper has been interpreted to include deposition transcripts. Id. Defendants had am ple opportunity to rem ove this case pursuant to a deposition of Mr. Hotz or another corporate representative of Backyard LLC or BLH, as evidenced by Defendants ability to self-notice the deposition of Mr. Hotz on April 2, 20 14. Defendants inexplicably chose not to take advantage of this option, perhaps intending to wait for Plaintiff to nonsuit the case as to Backyard LLC and BLH. 7 While not conclusive, Defendants m ay have been able to show that Plaintiff engaged in delaying tactics while before the Virginia Circuit Court including: refusing to set the m atter for trial within a year, failing to take action despite m ultiple letters stating that Backyard LLC and BLH were not proper defendants, refusing to tim ely depose Mr. Hotz, and failing to attend the Defendants deposition of Mr. Hotz. Defendants note that Plaintiff acted in this m anner with the knowledge that Defendants intended to rem ove the case to federal court as soon as Plaintiffs nonsuited the case against Backyard LLC and BLH. Plaintiff denies Defendants allegations that he im properly m ade him self unavailable for trial or depositions. Plaintiff counters that he was not required to attend the deposition of Mr. Hotz because he did not notice the deposition him self. Plaintiff contends that he was entitled to rely on Defendants statem ents in their answer and response to interrogatories as opposed to Defendant s unsworn statem ents in letters that Backyard LLC and BLH were not proper parties. Plaintiff avers that they circulated a Nonsuit order soon after the deposition of Mr. Hotz because that represented the first sworn evidence confirm ing that Backyard LLC and BLH had nothing to do with the product at issue. The vast m ajority of cases that find that plaintiffs acted in strategic ways to deprive defendants of the ability to rem ove involve refusal to engage in discovery. See, e.g., Brow n v. W al-Mart Stores, Inc., No. 5:13CV0 0 0 81, 20 14 WL 60 0 44, at *2 (W.D. Va. J an. 7, 20 14) (Plaintiff failing to respond to a settlem ent inquiry or provide answers to discovery aim ed at determ ining the am ount in controversy until after the one year anniversary of filing suit); see id. (collecting sim ilar cases). While Plaintiff m ay have been unhelpful to Defendants, it m ay be a stretch to say that Plaintiff acted strategically to deprive Defendants of their right to rem ove in light of the fact that Defendants were in possession of the inform ation necessary to do so. As noted by Plaintiff, Defendants had m ultiple options to bring this inform ation to light. Leisure Tim e and/ or Lowes could have (1) issued discovery requests to Backyard LLC and BLH noticed depositions of Backyard LLC and BLH, or (2) sent Backyard LLC and BLH requests for 8 adm issions. Further, as they later did, Defendants could have noticed the deposition of Mr. Hotz within the one year lim it to rem ove. V. CON CLU SION For the aforem entioned reasons, the Court GRANTS Plaintiffs Motion to Rem and. Let the Clerk send a copy of this Mem orandum Opinion to all counsel of record and to Plaintiff. An appropriate Order shall issue. ENTERED this 7th_ _ _____________________/s/_________________ James R. Spencer Senior U. S. District Judge day of October 20 14. 9
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