Opinion
No. 04-1335-WEB.
December 17, 2004
Memorandum and Order
Plaintiffs filed this action in the District Court of the Thirteenth Judicial District of Kansas in Kingman County. The named defendant was "Kansas Gas Service Company, a division of Oneok." According to the Petition, the claims related to two natural gas purchase contracts entered into by plaintiffs' predecessor-in-interest and by "Defendant's predecessor in interest, The Kansas Power and Light Company." A Notice of Removal was subsequently filed by "ONEOK, Inc. d/b/a Kansas Gas Service," removing the action to federal court based upon diversity jurisdiction. The Notice asserted that plaintiffs had mistakenly identified the defendant as "Kansas Gas Service Company," which although apparently affiliated with ONEOK, was in fact a legally separate corporation from ONEOK with no connection to the contract claims asserted by plaintiffs. The Notice stated that "Kansas Gas Service," on the other hand, was an unincorporated division of ONEOK, Inc. and was the successor to Kansas Power and Light with responsibility for the contracts at issue. The Notice asserted that because Kansas Gas Service was an unincorporated division, ONEOK, Inc. was the proper party defendant and, as such, ONEOK, Inc. had accepted service and would proceed as the named defendant.
The matter is now before the court on the plaintiffs' motion to remand the action to state court. Plaintiffs also seek costs, attorney's fees, and sanctions against the defendant. The court finds that oral argument would not assist in deciding the issues presented.
I. Facts.
Plaintiffs filed their Petition in the Thirteenth Judicial District Court, Kingman County, Kansas, on September 30, 2004. The caption of the Petition and the summons issued with it identify the defendant as "Kansas Gas Service Company, a division of Oneok." Doc. 4, Exhs. 2 4. Paragraph 2 of the Petition alleges that the defendant is a Kansas for-profit corporation, with its principal place of business at 100 W. 5th Street, Tulsa, Oklahoma. The defendant's resident agent for service of process is alleged to be Corporation Service Company, 200 SW 30th Street, Topeka, Kansas 74103.
The address alleged in the Petition to be the principal place of business of the defendant — 100 W. 5th Street, Tulsa, Oklahoma — is the address for ONEOK, Inc. Doc. 8, Exh. A. Plaintiffs served ONEOK, Inc.'s registered agent in Kansas. Id.
The two contracts attached to the Petition (as Exhibits A and B) were entered into by Kansas Power and Light Company, the predecessor to Kansas Gas Service, a division of ONEOK, Inc. Id. The negotiations relating to these contracts involved personnel for Kansas Gas Service, a division of ONEOK, Inc. Id.
"Kansas Gas Service Company" is the name of a Kansas corporation that was incorporated on June 30, 1997. According to affidavits provided by ONEOK, Kansas Gas Service Company exists only to license the name "Kansas Gas Service" (as well as other trademarks) to ONEOK, Inc.; it does not engage in any aspect of sale or distribution of natural gas or any other activity. Doc. 8, Exh. A. It is a separate and distinct entity from ONEOK, Inc. and from ONEOK's division known as Kansas Gas Service. The Contracts at issue are not with Kansas Gas Service Company. It is not a party to the contracts, nor are any of its predecessors.
Believing that plaintiffs' naming of "Kansas Gas Service Company" was a mere misnomer, ONEOK, Inc. accepted service of process on behalf of what it believed to be the proper party, ONEOK, Inc., d/b/a Kansas Gas Service.
On October 22, 2004, ONEOK, Inc. d/b/a Kansas Gas Service filed a Notice of Removal to federal court. Doc. 1. Among other things, the Notice alleged that original federal jurisdiction existed by virtue of diversity of citizenship. It explained ONEOK's belief that it was the party plaintiffs had attempted to name in the Petition. It further asserted that because Kansas Gas Service was merely an unincorporated division within the company, the citizenship of ONEOK, Inc., an Oklahoma corporation, was controlling for purposes of determining diversity and removal jurisdiction. See Schwartz v. Electronic Data Systems, Inc., 913 F.2d 279, 284 (6th Cir. 1990) ("A division of a corporation does not possess the formal separateness upon which the general rule is based, and thus is not an independent entity for jurisdictional purposes.").
The plaintiffs allege that they are foreign limited partnerships. Pioneer Exploration, Ltd. is a Texas limited partnership. See Doc. 8, Exh. B. Its general partner is Peco, Energy, Inc., a Texas corporation with its principal place of business in Texas. Its limited partner is Peco-Texas, Inc., a Delaware corporation with its principal place of business in Texas. Plaintiff Blue Star Resources, Ltd. is a Texas limited partnership. Its general partner is Peco Operating Company, a Texas corporation with its principal place of business in Texas. Its limited partner is Blue Star Resources Delaware, Inc., a Delaware corporation with its principal place of business in Texas.
ONEOK, Inc. d/b/a Kansas Gas Service filed its Answer on October 22, 2004. Plaintiffs filed their motion to remand on November 17, 2004.
II. Summary of Arguments.
Plaintiffs argue the removal was improper because Kansas Gas Service Company is a Kansas resident, and they maintain that a diversity action is removable only if none of the defendants is a citizen of the state in which the action is brought. See 28 U.S.C. § 1441(b). Plaintiffs further contend they did not name ONEOK, Inc. as a defendant and that paragraph 2 of the Petition "makes it unquestionably clear that Kansas Gas Service Company, a Kansas corporation, is the properly named Defendant." According to plaintiffs, "[w]ith no explanation, and with what appears to be a complete disregard of this Court's rules, ONEOK, Inc. has attempted to insert itself in this case as a substitute defendant." Plaintiffs contend the action should be remanded, and that costs, attorney's fees, and other sanctions should be assessed against ONEOK "given the egregious nature of ONEOK, Inc.'s conduct in attempting to insert itself into this action without prior approval of the Court, . . ."
ONEOK argues that the plaintiffs incorrectly identified the proper defendant by referring to "Kansas Gas Service Company." It contends the proper party to the contracts is clearly ONEOK, Inc. d/b/a Kansas Gas Service. It argues that removal was proper in light of this misnomer. It further argues that if plaintiffs are in fact arguing (as they seem to be) that they intended to sue Kansas Gas Service Company, the court should disregard the citizenship of that company for purposes of removal because it had nothing to do with the contract claims asserted by the plaintiffs.
III. Discussion.
Insofar as civil actions brought in State court are concerned, any such action of which the district courts of the United States have original jurisdiction may be removed by the defendant or defendants to the U.S. District Court for the district where such action is pending. 28 U.S.C. § 1441(a). This court has original jurisdiction of all civil actions where the matter in controversy exceeds $75,000 and is between citizens of different states. 28 U.S.C. § 1332(a). Where federal jurisdiction is premised on diversity, however, the action is 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. § 1441(b).
The Notice of Removal in this case alleges that plaintiffs' action was commenced against ONEOK, Inc. and that ONEOK was served with a copy of the summons and Petition. See Doc. 1. It avers that the court has original jurisdiction of the action pursuant to 28 U.S.C. § 1332, because the amount in controversy exceeds $75,000, and the plaintiffs are foreign limited partnerships with their principal places of business in Texas. It further alleges that ONEOK, Inc. is a citizen of Oklahoma. The Notice contains ONEOK's explanation of why it concluded that plaintiffs had intended to sue it rather than the Kansas corporation known as Kansas Gas Service Company.
The court rejects plaintiffs' assertion that ONEOK, Inc. has acted improperly by appearing and seeking removal of this action. As ONEOK points out, it did not respond to the summons out of some misguided desire to meddle in the affairs of others. It was brought in by plaintiffs' identification of the defendant as "a division of Oneok," by plaintiffs' service of process upon ONEOK, Inc.'s registered agent in Kansas, by plaintiffs' specification that the defendant's principal place of business was the address of ONEOK, Inc., and by plaintiffs' allegations that the successor to Kansas Power and Light — which according to the uncontroverted affidavits now before the court is ONEOK, Inc. d/b/a Kansas Gas Service — was the party against whom judgment was sought. Notwithstanding some contrary indications in the Petition — including the inclusion of "Company" in the defendant's name and the allegation that the defendant is a Kansas corporation — the most reasonable interpretation of the Petition is that ONEOK, Inc. d/b/a Kansas Gas Service is the entity identified by plaintiffs as the defendant against whom judgment is sought. As such, ONEOK had a very good reason to "insert itself" into the action. Cf. Tremps v. Ascot Oils, Inc., 561 F.2d 41, 44 (7th Cir. 1977) ("A defendant who is clearly identified by a summons and complaint and who has been served with those documents may not avoid the jurisdiction of the district court merely because he is incorrectly named in them."); United States v. A.H. Fischer Co., Inc., 162 F.2d 872, 873 (8th Cir. 1947) ("A suit at law is not a children's game but a serious effort on the part of adult human beings to administer justice; and the purpose of process is to bring parties into court. If it names them in such terms that every intelligent person understands who is meant, as is the case here, it has fulfilled its purpose; and courts should not put themselves in the position of failing to recognize what is apparent to everyone else.").
It is true that removal jurisdiction, as a statutory creature, is strictly construed, and all doubts are to be resolved against removal. See Shamrock Oil Gas Corp. v. Sheets, 313 U.S. 100, 108-09, (1941); Fajen v. Found. Reserve Ins. Co., 683 F.2d 331, 333 (10th Cir. 1982). In this instance, however, ONEOK has met its burden of showing that it was the defendant identified in the Petition, that removal of the action under the circumstances was proper, and that this court has original jurisdiction of the action based upon diversity of citizenship. See McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189 (1936) (burden is upon party asserting federal jurisdiction to allege and show that jurisdiction is proper).
Plaintiffs argue that even if ONEOK's appearance in the action is appropriate, removal would still be improper because Kansas Gas Service Company, a Kansas resident, "would still be a Defendant." This assertion is unavailing. Plaintiffs have not shown that Kansas Gas Service Company has been properly joined and served in this action. Cf. 28 U.S.C. § 1441(b) (action is 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) (emphasis added). The record now before the court, including uncontroverted affidavits, indicates that Kansas Gas Service Company had nothing to do with the contracts at issue and that plaintiffs have no reasonable basis in fact to assert a claim against that particular corporation. Without some showing by plaintiffs of the basis of a colorable claim against Kansas Gas Service Company, any attempt to join that corporation on this record would have to be considered improper and its Kansas citizenship would be disregarded for purposes of determining the propriety of removal. Cf. Wilson v. Republic Iron Steel Co., 257 U.S. 92, 97 (1921) (the right of removal cannot be defeated by "a fraudulent joinder of a resident defendant having no real connection with the controversy."); Abels v. State Farm Fire Cas. Co., 770 F.2d 26, 32 (3d Cir. 1985) (courts have found joinder to be fraudulent where there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendant or seek a joint judgment). See also Barger v. Bristol-Myers Squibb Co., No. 93-2485-JWL, 1994 WL 69508, at *3 (D.Kan. Feb. 25, 1994) (citation omitted) (Fraudulent joinder is a term of art, it does not reflect on the integrity of plaintiff or counsel, but rather exists regardless of the plaintiff's motives when the circumstances do not offer any other justifiable reason for joining the defendant).
IV. Conclusion.
Plaintiffs' Motion to Remand (Doc. 6), and all relief requested therein, is DENIED. IT IS SO ORDERED.