Opinion
Civ. No. 04-4695 (JNE/JGL).
November 4, 2004
ORDER OF REMAND
This case came before the Court after Ventura Foods, LLC (Ventura) and Steven D. Kretschmar (collectively, Defendants) removed this action to this Court from the District Court of Minnesota, Third Judicial District, Mower County. For the reasons set forth below, the Court remands the case to the District Court of Minnesota, Third Judicial District, Mower County and awards Hormel the reasonable expenses, including attorney's fees, it incurred as a result of Defendants' improper removal.
I. BACKGROUND
On October 13, 2004, Hormel HealthLabs, Inc. and Hormel Foods Corporation (collectively, Hormel) commenced an action in Mower County, Minnesota against Defendants, alleging claims of breach of employment agreement, misappropriation of trade secrets, tortious interference with contract, and unfair competition. Hormel also moved for a preliminary injunction. By October 25, 2004, both Ventura and Kretschmar had been served. On October 26, 2004, the Honorable Fred W. Wellmann, Judge of the District Court, Third Judicial District, Mower County, ordered the parties to engage in expedited discovery. Specifically, Judge Wellman ordered Kretschmar to produce documents by November 3, 2004, and he required Defendants to produce witnesses for depositions on November 8, 9, and 10, 2004. Judge Wellman also scheduled a hearing on Hormel's Motion for a Preliminary Injunction for November 16, 2004.
On November 1, 2004, Defendants filed a Notice of Removal in this Court pursuant to 28 U.S.C. § 1446(b) (2000), asserting that the Court has original jurisdiction pursuant to 28 U.S.C. § 1332 "based on the diverse citizenship of the parties and the amount in controversy." Notwithstanding the fact that Hormel Foods Corporation and Ventura are both Delaware corporations, Defendants removed the action, maintaining that the parties are diverse because Hormel Foods Corporation was "fraudulently joined in this action for the purpose of defeating diversity jurisdiction." According to Defendants' removal notice, "Hormel Foods Corporation can be ignored for the purposes of removal." In light of the previously scheduled depositions, Hormel filed a Motion to Remand to State Court, for Emergency Relief, for Plaintiffs' Costs, Expenses and Attorney's Fees, and for Sanctions pursuant to 28 U.S.C. § 1447 on November 2, 2004.
II. DISCUSSION
Federal courts are courts of limited jurisdiction. "They possess only that power authorized by Constitution and statute . . . which is not to be expanded by judicial decree. It is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (internal citations omitted). The requirement that jurisdiction be established as a threshold matter is inflexible and without exception. Godfrey v. Pulitzer Publ'g Co., 161 F.3d 1137, 1141 (8th Cir. 1998). A district court should sua sponte remand a case any time it determines that it lacks subject matter jurisdiction. In re Atlas Van Lines, Inc., 209 F.3d 1064, 1066 (8th Cir. 2000). An action may be removed to federal court only if the case presents a federal question, 28 U.S.C. § 1331, or the requirements for diversity jurisdiction, 28 U.S.C. § 1332, have been met. See 28 U.S.C. § 1441. To remove a case from state court to federal court, a defendant "shall file in the district court of the United States for the district and division within which such action is pending a notice of removal signed pursuant to Rule 11 of the Federal Rules of Civil Procedure and containing a short and plain statement of the grounds for removal." Id. § 1446(a).
Diversity jurisdiction is available in all civil matters where the amount in controversy exceeds $75,000 and is between citizens of different states or citizens of a state and subjects of a foreign state. Id. § 1332. Defendants removed this action, asserting that there is diversity between Hormel HealthLabs, Inc. — a Minnesota corporation with its principal place of business in Minnesota and the only plaintiff Defendants assert should be considered — and Defendants. In advancing this argument, however, Defendants fail to acknowledge that Ventura, as an LLC, takes the citizenship of its members for the purpose of diversity jurisdiction. See GMAC Commercial Credit LLC v. Dillard Dep't Stores, Inc., 357 F.3d 827, 829 (8th Cir. 2004). As revealed in Ventura's own corporate disclosure statement, one of its members is CHS, Inc., which holds a 50 percent ownership in Ventura. See Ventura's Rule 7.1 Corporate Disclosure Statement dated November 1, 2004. The Court's own research reveals that CHS, Inc. has its principal place of business in Inver Grove Heights, Minnesota. Ventura, therefore, is a citizen of Minnesota for the purposes of diversity jurisdiction. See 28 U.S.C. § 1332(c)(1) (explaining "a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business"). Because Hormel HealthLabs, Inc. and Ventura are both citizens of Minnesota, there is no diversity, and this case must be remanded to state court. See 28 U.S.C. § 1447(c).
When the Court received Defendants' Notice of Removal and Hormel's Motion to Remand, it contacted the parties and asked Defendants to submit an affidavit delineating the citizenship of Ventura's members. The next day, Defendants filed a Dismissal of Notice of Removal.
Where there has been improper removal, a court may award "just costs and any actual expenses, including attorney fees, incurred as a result of the removal." 28 U.S.C. § 1447(c). Defendants filed their Notice of Removal one day before Kretschmar was to produce documents and only a few days before Hormel was to take Defendants' depositions. In doing so, Defendants failed to make a reasonable inquiry into Ventura's own citizenship before accusing their adversaries of fraud and asserting that the parties are diverse. Defendants improperly removed this action. See 28 U.S.C. § 1441(b) (noting that if that basis of removal is diversity jurisdiction any action "shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought"). Accordingly, the Court exercises its discretionary power and awards Hormel the reasonable expenses, including attorney's fees, that it incurred as a result of the improper removal. See 28 U.S.C. § 1447(c); see also Gray v. New York Life Ins. Co., 906 F. Supp. 628, 637 (N.D. Ala. 1995) (explaining "Congress meant § 1447 (c) to be a signal "that in every removal there is risk of having to pay the plaintiff's reasonable attorneys fees"). The Court will retain jurisdiction over this matter to the extent necessary to ensure compliance with this award. See e.g., Wisconsin v. Hotline Indus., Inc., 236 F.3d 363, 365 (7th Cir. 2000) (listing cases and explaining proposition that district courts can retain jurisdiction after a remand to address collateral issues such as the award of costs and expenses).
III. CONCLUSION
Based on the files, records, and proceedings herein, and for the reasons stated above, IT IS ORDERED THAT:
1. This matter is REMANDED to the courts of the District Court of Minnesota, Third Judicial District, Mower County. The Clerk of Court shall immediately send a certified copy of this Order of Remand to the Clerk of District Court of Minnesota, Third Judicial District, Mower County. The Court maintains jurisdiction over the collateral matter of its award of reasonable expenses.
2. Hormel is entitled to its reasonable expenses, including attorney's fees, incurred as a result of Defendants' improper removal. No later than November 15, 2004, Hormel shall submit to the Court and to Defendants its statement of reasonable expenses, including attorney's fees, incurred as a result of Defendants' improper removal. Defendants shall reimburse Hormel, or file an objection as to the amount sought with the Court, no later than November 30, 2004.
3. Hormel's Motion to Remand to State Court, for Emergency Relief, for Plaintiffs' Costs, Expenses and Attorney's Fees, and for Sanctions [Docket No. 5] is DENIED AS MOOT.