Opinion
Case Number 12-10707
05-25-2012
DIONNE PHILLIP-STUBBS, individually and as next friend for J.S. a minor, and LEVI STUBBS, Plaintiffs, v. WALMART SUPERCENTER, MICHAEL MAYERNIK, and KAYLA PASHA, Defendants.
OPINION AND ORDER GRANTING PLAINTIFFS' MOTION TO REMAND
The plaintiffs filed the present action in state court alleging various acts of misconduct by the employees of defendant WalMart Supercenter, who apparently falsely accused the plaintiffs of attempting to make store purchases with counterfeit currency. WalMart removed the case to this Court alleging diversity jurisdiction. The plaintiffs filed an amended complaint naming certain WalMart employees as additional defendants, and they also filed a motion to remand the case to state court because the citizenship of the added defendants is non-diverse. The plaintiffs also seek attorney's fees. WalMart responds that the amended complaint should be rejected because the plaintiffs joined the additional defendants solely to defeat diversity jurisdiction, and the motion to remand should be denied. The Court heard oral argument on May 24, 2012 and concludes that the amended complaint is proper, remand is required because of lack of subject matter jurisdiction, and attorney's fees are not warranted.
The following facts are taken from the first amended complaint. On December 20, 2011, the plaintiffs were shopping at a WalMart store in Commerce Township, Michigan. Am. Compl. ¶10. The plaintiffs paid for their purchases with $100 bills at two separate registers, one of which was operated by defendant Kayla Pasha. Id. ¶ 11-15. After the plaintiffs left the store, defendant Michael Mayernick called the Oakland County Sheriff to report that the plaintiffs had used counterfeit currency; Mayernick apparently did not test the currency before he made the call. Id. ¶ 19-20. As the plaintiffs drove out of the parking lot, they were intercepted by a sheriff's deputy's vehicle. Id. ¶ 23. The deputy sheriff exited his car with his gun drawn, ordered the plaintiffs and their fourteen-year-old daughter to exit their van, searched the plaintiffs, and placed them in separate police cars. Id. ¶ 24. When the currency was examined, it was determined that it was not counterfeit. Id. ¶ 27. The plaintiffs allege that the individual defendants' actions were taken pursuant to defendant WalMart's policies and procedures, and that defendant WalMart is vicariously liable for their actions. Id. ¶ 27-28.
The plaintiffs filed their original complaint in state court naming WalMart as the only defendant. WalMart was identified in the original complaint as an Arkansas corporation, and the individuals who operated the registers were identified by their operator numbers.
WalMart filed a notice of removal on February 16, 2012. That notice was stricken on February 27, 2012 because it contained the unredacted name of a minor, which violated the e-Government Act of 2002. See Pub. L. No. 107-347, 116 Stat. 2899, § 205(c)(3) (Dec. 17, 2002); see also Fed. R. Civ. P. 5.2(a)(3). WalMart filed a properly redacted notice of removal later that same day. Also on February 27, 2012, the plaintiffs filed an amended complaint in state court, adding Michael Mayernick as a defendant. However, the state court had administratively closed its case on February 23, 2012.
On March 2, 2012, the plaintiffs filed an amended complaint in this Court. The amended complaint repeats the four counts from the original complaint, plus an additional claim under Michigan's Elliot-Larsen Civil Rights Act. On the same day, the plaintiffs filed a motion to remand. In their motion, the plaintiffs allege that the amended complaint and the addition of the individual defendants were prompted by plaintiffs' counsel's receipt and review of sheriff's department incident reports obtained from the Oakland County Sheriff after a Freedom of Information Act request.
II.
The plaintiffs state that the addition of the new defendants, who are citizens of the same state as the plaintiffs, destroys complete diversity between the parties, and therefore the case must be remanded to state court for want of subject matter jurisdiction. In addition, the plaintiffs argue that 28 U.S.C. § 1447(c) entitles them to costs and attorney's fees resulting from the removal of the action. The defendants argue that the plaintiffs should not be permitted to join non-diverse parties for the sole purpose of defeating removal. The defendants observe that there is no dispute that complete diversity existed at the time of removal. The defendants contend that the addition of the non-diverse defendants requires the Court to consider 28 U.S.C. § 1447(e), which permits the Court either to allow joinder and remand or deny joinder of non-diverse defendants. They maintain that the primary purpose of the amendment is to defeat diversity jurisdiction and deny defendant WalMart a federal forum, and therefore the Court should exercise its discretion to deny the amendment.
The parties agree to this basic point: federal district courts are courts of limited jurisdiction, and the burden of establishing jurisdiction rests with the defendant, as the party removing the case and asserting federal jurisdiction. See, e.g., Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). "'[A]ll doubts as to the propriety of removal are resolved in favor of remand.'" Jacada (Europe), Ltd. v. Int'l Mktg. Strategies, Inc., 401 F.3d 701, 704 (6th Cir. 2005) (quoting Coyne v. Am. Tobacco Co. 183 F.3d 488, 493 (6th Cir. 1999)), abrogated on other grounds by Hall St. Assocs., L.L.C. v. Mattel, Inc. 552 U.S. 576 (2008).
Title 28, section 1441(a) of the United States Code permits defendants in civil actions to remove cases originally filed in state courts to federal district courts where the district court would have had original jurisdiction. Cases may be removed under federal question jurisdiction or on the basis of diversity of citizenship. See 28 U.S.C. § 1441(b). The plaintiffs have not alleged a federal cause of action in their complaint, so the defendants here seek removal based only on diversity of citizenship.
It is axiomatic that federal diversity jurisdiction "exists only when no plaintiff and no defendant are citizens of the same state." Jerome-Duncan, Inc. v. Auto-By-Tel, L.L.C., 176 F.3d 904, 907 (6th Cir. 1999) (citing United States Fidelity & Guar. Co. v. Thomas Solvent Co., 955 F.2d 1085, 1089 (6th Cir. 1992)). Therefore, complete diversity of citizenship must exist "both at the time that the case is commenced and at the time that the notice of removal is filed." Ibid. (citing Easley v. Pettibone Mich. Corp., 990 F.2d 905, 908 (6th Cir. 1993)). For the purpose of ascertaining jurisdiction, a corporate entity "shall be deemed to be a citizen of every State and foreign state by which it has incorporated and of the State or foreign state where it has its principal place of business." 28 U.S.C. § 1332(c) (defining corporate citizenship for "this section and section 1441 of this title"). The parties agree that defendant WalMart is not a Michigan citizen and that the plaintiffs and defendants Mayernick and Pasha are Michigan citizens.
When the defendants originally removed the action, there was complete diversity between the parties; the original removal was proper. As noted above, the amended complaint, filed after removal, added two additional Michigan defendants, which destroyed complete diversity. The defendants do not argue that the plaintiffs have no viable claim against the non-diverse defendants, and they do not invoke the concept of fraudulent joinder. See Jerome-Duncan, Inc., 176 F.3d at 907. Instead, they argue that the plaintiffs' purpose in amending the complaint to add these parties was to defeat federal jurisdiction. And they insist that the Court has discretion to bar the addition of the non-diverse defendants under the authority of 28 U.S.C. § 1447(e), which states that "[i]f after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court."
The plaintiffs insist that 28 U.S.C. § 1447(e) has no application here because they do not "seek[] to join additional defendants." Instead, they point out, they have already joined the new defendants by filing an amended complaint under Federal Rule of Civil Procedure 15(a)(1)(B), which allows them under the circumstances to "amend [their] pleading once as a matter of course." The Sixth Circuit has not addressed that issue, but several other courts have concluded that Rule 15(a)(1) does not insulate a plaintiff's attempt to join non-diverse defendants from the command of section 1447(e). See Essex Homes Southeast, Inc. v. CommunityOne Bank, N.A., No. 0:12-426-CMC, 2012 WL 1565294, at *3 (D. S.C. May 2, 2012); De Long v. Bank of America, N.A., No. 11-CV-06388-LHK, 2012 WL 1498868, at *4 (N.D. Cal. Apr. 27, 2012); Hauerwaus v. Allied Waste Services of North America, L.L.C., No. CV 12-22-M-DLC-JCL, 2012 WL 1378460, at *2 (D. Mont. Mar. 26, 2012); Adey/Vandling, Ltd. v. America First Ins. Co., No. A-11-CV-1007-LY, 2012 WL 534838, at *1-2 (W.D. Tex. Feb. 17, 2012); Brown v. Entrust Admin. Services, No. H-10-5220, 2011 WL 1230275, at *1-2 (S.D. Tex. Mar. 30, 2011); Collins ex rel. Collins v. National General Ins. Co., No. 10-13344, 2010 WL 4259949, at *1 (E.D. Mich. Oct. 25, 2010).
The Fourth Circuit has set out a persuasive explanation based on the statutory texts in Mayes v. Rapoport, 198 F.3d 457 (4th Cir. 1999). There, the court dispensed with the idea that Rule 15(a) conflicts with section 1447(e) by noting that an amended complaint that adds defendants is an attempt to join additional defendants "after removal." When that occurs, the district court has but two options: "the court may deny joinder, or permit joinder." Id. at 462 n.11 (quoting 28 U.S.C. § 1447(e)). The court found support for its pronouncement that "a district court has the authority to reject a post-removal joinder that implicates 28 U.S.C. § 1447(e), even if the joinder was without leave of court," ibid., in Rule 19(a) ("A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party . . .") (emphasis added) and Rule 21 ("Parties may be dropped or added by order of the court on motion of any party or of its own initiative at any stage of the action and on such terms as are just."). Ibid.
The Court agrees with that analysis. A post-removal attempt to add non-diverse parties, whether by right or by leave, implicates section 1447(e) and requires the court to exercise discretion and adopt one of the two options available to it.
There are four factors that inform such discretion: "(1) the extent to which the purpose of the amendment is to defeat jurisdiction; (2) whether the plaintiff was dilatory in seeking the amendment; (3) whether the plaintiff will be injured significantly if the amendment is not allowed; and (4) any other factors bearing on the equities." Siedlik v. Stanley Works, Inc., 205 F. Supp. 2d 762, 765 (E.D. Mich. 2002). The court also must consider the diverse defendant's interest in selecting a federal forum. See Wells v. Certainteed Corp., 950 F. Supp. 200, 201 (E.D. Mich. 1997) (Duggan, J.) (citing Hensgens v. Deere & Co. 833 F.2d 1179, 1182 (5th Cir. 1987)).
The out-of-state defendant has a right to a federal forum that finds its roots in the Constitution, see Const. Art. III § 2, as periodically expanded and contracted by Congress. However, the plaintiffs also have a right to fashion their lawsuit, select their causes of action, and advance theories against the parties of their choosing. This Court has suggested that where the joinder of non-diverse parties does not appear primarily motivated by the desire to defeat jurisdiction, the plaintiffs' right to manage their case hangs heavier in the balance. J. Lewis Cooper Co. v. Diageo N. Am., Inc., 370 F. Supp. 2d 613, 618-19 (E.D. Mich. 2005). Here, the defendants argue persuasively — although not conclusively — that the individual defendants were added with an eye to defeating jurisdiction. The plaintiffs attempted to file an amended complaint in state court on the day that the Court struck the notice of removal from the docket in this case, which suggests that the plaintiffs were attempting to forestall a renewed notice of removal. The plaintiffs also filed their amended complaint concurrently with their motion to remand.
However, the plaintiffs have asserted that they could not join the individual defendants in their original complaint because they did not know their identities until the receipt of information after a Freedom of Information Act request. The defendants protest that there is no indication this information was received after the original complaint was filed. But there is no evidence that the plaintiffs did know the identities of the individual defendants prior to filing the complaint. And although the original complaint did not name John Doe defendants, it did identify the individual employees involved in the transaction by operator numbers, suggesting that the names of these individuals were not available to the plaintiffs at the time the original complaint was filed. One of these operators has now been named in the amended complaint. See Pietrowsky v. Sam's Club, No. 11-10999, 2011 WL 2433466, at *2 (E.D. Mich. June 13, 2011)) (finding it relevant that the initial complaint had alleged that an unknown employee had acted negligently and caused the plaintiff's injuries). Moreover, the amended complaint contains a new theory of liability based on discrimination that appears to focus on the individual defendants.
The Court cannot conclude that the plaintiffs' sole purpose in joining the individual defendants was to defeat diversity. Nor did the plaintiffs delay in filing their amended complaint. Therefore, the first two factors favor the plaintiffs.
The third factor also tends to favor the plaintiffs, albeit only slightly. The plaintiffs would be able to obtain complete relief in the absence of the individual defendants under the rule of Michigan law that an employer is liable for actionable conduct by its employees undertaken in the course and scope of their employment. Wells, 950 F. Supp. at 201; Pietrowsky, 2011 WL 2433466, at *3; see also Am. Compl. ¶ 28; Hamed v. Wayne County, 490 Mich. 1, 10-11, 803 N.W.2d 237, 244 (2011) ("The doctrine of respondeat superior is well established in this state: An employer is generally liable for the torts its employees commit within the scope of their employment."). However, the issue is not wholly one-sided because, unlike the defendants in those cases, WalMart has not conceded that it would be liable for the actions of the individual defendants. See Wells, 950 F. Supp. at 201 ("[D]efendant has acknowledged that it will be liable for those retaliatory and/or discriminatory acts by [an individual defendant] arising out of the scope of his employment . . . ." (internal quotation omitted)); Pietrowsky, 2011 WL 2433466, at *3. And although the plaintiffs maintain that WalMart should be held accountable for the conduct of its employees, there is nothing to prevent defendant WalMart from arguing down the road that the individual defendants were not acting within the scope of their employment, thereby distancing itself from their conduct. If that contingency eventuates, the refusal to permit joinder of the individual employees would prejudice the plaintiffs.
The factors tend to favor allowing joinder. Even if the case were closer, the Court must resolve all doubts in favor of remand. Jacada (Europe), Ltd., 401 F.3d at 704. And once the joinder is permitted, remand necessarily follows.
The plaintiffs' request for costs and attorney's fees from the defendants is based on 28 U.S.C. § 1447(c), which states that "[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." An award of costs is discretionary with the Court and often turns on whether the removal lacked merit. Morris v. Bridgestone/Firestone, Inc., 985 F.2d 238, 240 (6th Cir. 1993). The Sixth Circuit has explained that section 1447(c) "gives district courts discretion to grant fees to the opposing party — they 'may' grant fees — if 'the removing party lacked an objectively reasonable basis for seeking removal.'" Ohio ex rel. Skaggs v. Brunner, 629 F.3d 527, 530 (6th Cir. 2010) (quoting Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005)). That court also has stated that an award of fees or costs "is inappropriate where the defendant's attempt to remove the action was 'fairly supportable,' or where there has not been at least some finding of fault with the defendant's decision to remove." Warthman v. Genoa Twp. Bd. of Trs., 549 F.3d 1055, 1059-60 (6th Cir. 2008) (citation omitted). Here, there is no question that removal was entirely proper at the time. Remand was required only after the plaintiffs destroyed complete diversity with their joinder of new defendants. Therefore, there is no basis for awarding attorney's fees and costs to the plaintiffs.
III.
The Court finds that the plaintiffs may add additional defendants. Because the new defendants destroy complete diversity, remand is required. Costs and attorney's fees are not warranted.
Accordingly, it is ORDERED that the plaintiffs' motion to remand [dkt. #13] is GRANTED.
It is further ORDERED that the case is REMANDED to the Oakland County, Michigan circuit court.
s/David M. Lawson
DAVID M. LAWSON
United States District Judge Dated: May 25, 2012
PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 25, 2012.
s/Deborah R. Tofil
DEBORAH R. TOFIL