Opinion
File No. 5:03-CV-26
May 19, 2003
OPINION
In this case, Plaintiff sued Defendants in state court alleging that Defendants violated Michigan's Franchise Investment Law, MICH. COMP. LAWS §§ 1501-1546, and breached the parties' contracts. Defendants were served with the state court complaint on January 13, 2003, and thereafter filed a notice of removal on February 26, 2003. According to the notice of removal, this Court has diversity jurisdiction. 28 U.S.C. § 1332. Before this Court are Plaintiff's motion to remand and Defendants' motion to transfer venue. For the following reasons, Plaintiffs motion to remand is GRANTED, and Defendants' motion to transfer venue is DENIED as moot.
I.
On September 6, 2000, Plaintiff signed an agreement to purchase ("Purchase Agreement") the Cottman Transmission Center located in East Lansing ("East Lansing Center") from Defendant Pisces Transmission, Inc. ("Pisces"). (Pl.'s Br. Supp. Mot. to Remand Ex. 1 [hereinafter "complaint"] ¶ 9; see also Defs.' Br. Supp. Mot. to Transfer Ex. 1 [hereinafter "Purchase Agreement"]). Upon execution of the Purchase Agreement, Plaintiff placed $10,000 in escrow for Pisces. (Purchase Agreement ¶ 2.1(a)). At closing, Plaintiff was obligated to pay an additional $40,000 in cash and to sign a promissory note for $75,000. (Purchase Agreement ¶ 2.1(b)-(c)). The Purchase Agreement was also conditioned on Plaintiff and Defendant Cottman Transmission Systems, Inc. ("Cottman") entering a licensing agreement for Plaintiff to operate the East Lansing Center. (Purchase Agreement ¶ 3.1(c)). Two weeks later, Plaintiff and Cottman signed a Licensing Agreement and a Promissory Note for $75,000. (Complaint ¶¶ 10-11; Def.'s Br. Supp. Mot. to Transfer Ex. 2A [hereinafter "Licensing Agreement"], 3 [hereinafter "Promissory Note"]). The Promissory Note requires Plaintiff to make 45 payments of $2,000 beginning December 1, 2000, and one payment of $301.65. (Promissory Note at 1). Pursuant to the Licensing Agreement, Plaintiff operated the East Lansing Center.In December 2002, Cottman informed Plaintiff that Plaintiff was in breach of the Licensing Agreement by failing to report receipts. (Complaint ¶¶ 47-49). As a result, Cottman "ended" the Licensing Agreement and requested that Plaintiff release his interest in the East Lansing Center and make past due payments. (Complaint ¶ 51). While acknowledging that two months of payments on the Promissory Note were past due, Plaintiff refused to release his interest in the East Lansing Center. (Complaint ¶¶ 52, 54). On January 7, 2003, Plaintiff filed this case in the 30th Judicial Circuit Court of Michigan. In his complaint, Plaintiff requests that Defendants refund the amounts paid under the Purchase Agreement, the Licensing Agreement, and the Promissory Note. (Complaint Damages (a)). Defendants were served with the complaint on January 13, 2003. (Defs.' Notice of Removal ¶ 2).
On February 25, 2003, Cottman filed a case against Plaintiff in the Court of Common Pleas for Montgomery County, Pennsylvania, (Defs,' Br. Supp. Mot. to Transfer Ex. 2 [hereinafter "Pennsylvania complaint"]). In the Pennsylvania complaint, Cottman alleges that Plaintiff engaged in a scheme to defraud Cottman and breached the Licensing Agreement. Cottman seeks damages in excess of $200,000. (Pennsylvania complaint ¶¶ 56, 60, 66, 72, 75, 81, 92-94). On February 26, 2003, Defendants filed their notice of removal in this case alleging that the thirty-day time limit in 28 U.S.C. § 1446(b) has not begun to run. (Notice of Removal ¶ 4; see also Defs.' Br. Opp'n Mot. to Remand at 5). On March 5, 2003, Plaintiff timely filed the pending motion to remand. Plaintiff argues that the thirty-day time limit for removal expired before February 26, 2003, and that as the removal was defective, remand is proper.
II.
Defendants have the burden of demonstrating that they have complied with the procedural requirements for removal. Groesbeck Invs., Inc. v. Smith, 224 F. Supp.2d 1144, 1148 (E.D. Mich. 2002); see also Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868, 871 (6th Cir. 2000) ("A defendant removing a case has the burden of proving the diversity jurisdiction requirements."). Timely filing the notice of removal is a procedural requirement. 28 U.S.C. § 1446(b).
The notice of removal of a civil action or proceeding shall be filed within thirty 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. . . .
If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty 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. . . .28 U.S.C. § 1446(b).
Defendants argue that the thirty-day time limit has not begun to run because the complaint "did not explicitly disclose . . . damages in excess of the federal jurisdictional amount." (Defs.' Br. Opp'n Mot. to Remand at 2). To support this argument, Defendants rely principally on In re Willis, 228 F.3d 896 (8th Cir. 2000), and Chapman v. Powermatic, Inc., 969 F.2d 160 (5th Cir. 1992). In both of these cases, the defendant was not certain whether the amount in controversy requirement was met because the complaint did not plead a specific amount of damages. In re Willis, 228 F.3d at 897; Chapman, 969 F.2d at 161. The defendant conducted discovery in state court, and this discovery indicated that the plaintiff was seeking damages in excess of the amount in controversy. In re Willis, 228 F.3d at 897 (indicating that the plaintiff refused an offer of judgment for $75,001); Chapman, 969 F.2d at 161 (noting that the plaintiffs answer to interrogatories indicated that the plaintiffs damages were in excess of $800,000). Based on this discovery, the case was removed to federal court. A motion to remand was filed arguing that removal was untimely because although the complaint was indeterminate as to whether removal was proper, the notice of removal should have been filed within thirty days of service of the complaint. Perry v. Willis, 110 F. Supp.2d 1197, 1198 (E.D. Mo. 2000) overruled by In re Willis, 228 F.3d 896 (8th Cir. 2000) (describing the complaint as "indeterminate"); Chapman, 969 F.2d at 162 (explaining that the complaint was "indeterminate as to removability"). Both the Eighth Circuit in In re Willis and the Fifth Circuit in Chapman explicitly rejected this argument. Instead, these courts indicated that to preserve the right to file a timely notice of removal under the second paragraph of section 1446(b), a defendant is not required to remove when the complaint is indeterminate. In re Willis, 228 F.3d at 897; Chapman, 969 F.2d at 163; see also Nguyen v. Kautz, 125 F. Supp.2d 364, 364-65 (S.D. Iowa 2000) (applying In re Willis).
This rule is not applicable in this case because the complaint was not indeterminate as to removability. 28 U.S.C. § 1446(b) (stating that the second paragraph of section 1446(b) is only applicable when "the case stated by the initial pleading is not removable."). In their notice of removal, Defendants explain how they know that the amount in controversy is met in this case.
Despite the fact that the Complaint does not explicitly disclose that the Plaintiff is seeking damages in excess of the Federal jurisdictional amount, the Agreement of Sale and Purchase which is the subject matter of the Complaint is in the amount of $125,000 (Exhibit C) [(Exhibit A to Plaintiff's complaint)] and therefore the true amount in controversy, even though not explicitly disclosed in the Complaint, exceeds the sum of $75,000, exclusive of interest and costs.
(Notice of Removal ¶ 6). This language indicates that Defendants are relying only on the complaint to show the amount in controversy. Unlike In re Willis and Chapman, Defendants were not required to conduct any discovery to ascertain that this case was removable. They knew after reading only the complaint that this case satisfied the amount in controversy requirement. Consequently, "the case stated by the initial pleading" was removable, and Defendants cannot file a notice of removal under the second paragraph of section 1446(b). Groesbeck, 224 F. Supp.2d at 1148 ("[T]he plain language of Section 1446 makes it clear that a defendant may only rely upon an amended pleading to trigger the 30-day removal period `if the case stated by the initial pleading is not removable.'")
The only means for Defendants to file a timely notice of removal is under the first paragraph of section 1446(b). As previously noted, Defendants were served with the complaint on January 13, 2003, and they filed their notice of removal on February 26, 2003. Thus, Defendants filed their notice of removal more than thirty days after they were served. As a result, the notice of removal is untimely, and remand is proper.
III.
As explained, Plaintiffs motion to remand is GRANTED, Defendants' motion to transfer venue is DENIED as moot, and this case is REMANDED to the 30th Judicial Circuit Court of Michigan. Accordingly, an order consistent with this opinion will be entered.ORDER
In accordance with the opinion entered this date,
IT IS HEREBY ORDERED that Plaintiffs motion to remand (Docket #6) is GRANTED. IT IS FURTHER ORDERED that Defendants' motion to transfer venue (Docket #4) is DENIED as moot.
IT IS FURTHER ORDERED that this case is REMANDED to the 30th Judicial Circuit Court of Michigan.