Opinion
Civil Action No. SA-06-CA-0289-XR.
June 26, 2006
ORDER
On this date, the Court considered Intervenor Gary Cain's ("Cain") motion for remand and award of costs, expenses, and attorney's fees and Defendants Mark J. Harris' ("Harris") and Trinity Management Services, Inc.'s ("Trinity Management") (collectively, "Defendants") response in opposition. Defendants removed Cain's petition in intervention from state court alleging complete diversity of citizenship existed based on the intervention being an independent "civil action", or alternatively, the jurisdiction exception to the Anti-Injunction Act. After careful consideration of the motion and relevant case law, the Court GRANTS Cain's motion.
I. Factual and Procedural Background
In late-2003, Cain, a Texas resident, and Harris, a Louisiana resident, began negotiating the development of a business plan for acquiring and managing Louisiana hospitals. As part of their business plan, Cain allegedly agreed to form two corporate entities, Powerhouse Healthcare Management, LLC ("Powerhouse Healthcare") and Continuum Healthcare Management, LLC ("Continuum Healthcare"), to implement the hospital investment. Powerhouse Healthcare, a Nevada corporation with its principal place of business in Texas, would acquire the hospitals and Continuum Healthcare, a Louisiana corporation and subsidiary of Powerhouse Healthcare, would manage the hospitals. Cain allegedly promised to transfer to Harris a 50% ownership interest in Powerhouse Healthcare. In exchange for their respective ownership interests in Powerhouse Healthcare, the parties allegedly agreed that Cain would procure the financing necessary for acquiring the hospitals and Harris would locate the hospitals. Although it is not entirely clear, it appears that Cain and Harris also agreed to have Continuum Healthcare enter into a management contract with Trinity Management, a Louisiana corporation owned by Harris, under which Trinity Management would manage the hospitals' day-to-day operations.
In mid-to-late 2004, Powerhouse Healthcare acquired four hospitals in Louisiana. Shortly thereafter in early-2005, the business relationship between Cain and Harris began to sour as each party began accusing the other of making various fraudulent misrepresentations that threatened the viability of their investment. The eroded relationship eventually spawned two separate lawsuits, one in Texas state district court and one in Louisiana federal district court.
On September 23, 2005, Powerhouse Healthcare and Continuum Healthcare filed suit against Harris and Trinity Management in the 166th Judicial District Court, Bexar County, Texas, alleging breach of fiduciary duty, conversion, fraud, and violations of the Texas Securities Act. In addition to money damages, Powerhouse Healthcare and Continuum Healthcare sought a declaratory judgment that the contract between Continuum Healthcare and Trinity Management had been cancelled and/or terminated and injunctive relief that precluded Harris and Trinity Management from utilizing any proprietary information obtained during the business relationship and interfering with any hospital operations. After Powerhouse Healthcare and Continuum Healthcare obtained an ex parte temporary restraining order, Harris and Trinity Management filed a Texas Rule of Civil Procedure 120a special appearance challenging the district court's exercise of personal jurisdiction. A hearing on Harris' and Trinity Management's special appearance was held on November 20/21, 2005, but no ruling was issued.
On February 2, 2006, Harris and Trinity Management filed suit against Cain and Powerhouse Management, among others, in the United States District Court for the Western District of Louisiana alleging violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962 et. seq., breach of contract, fraud, and other Louisiana state law claims. Defendants seek specific performance of the contract allegedly requiring Cain to transfer fifty percent of the ownership interest in Powerhouse Healthcare to Harris, a declaration that Harris is the rightful owner of a fifty percent interest in Powerhouse Healthcare, and monetary damages.
In addition to Harris and Trinity Management, Paul A. Emmer is also a plaintiff in the Louisiana federal court litigation. Emmer allegedly was the sole owner of one of the hospitals acquired by Powerhouse Healthcare.
On March 1, 2006, allegedly in response to Defendant's federal lawsuit, Cain, pursuant to Texas Rule of Civil Procedure 60, filed a petition to intervene in Powerhouse Healthcare's and Continuum Healthcare's pending state court litigation. Cain's petition seeks a declaration that Harris possesses no ownership interest in Powerhouse Healthcare.
On April 3, 2006, Defendants timely removed Cain's petition in intervention on the grounds that the intervention is a separate "civil action" and Defendants, both Louisiana citizens, are completely diverse from Cain, a Texas citizen. Alternatively, Defendants claim the jurisdiction exception to the Anti-Injunction Act, 28 U.S.C. § 2283, supports the Court's subject-matter jurisdiction. For unknown reasons, Defendants also named Powerhouse Healthcare as a party to the intervention, which it clearly is not. Powerhouse Healthcare and Continuum Healthcare were the original state court plaintiffs.
II. Analysis
A. Motion to Remand.
An analysis of the federal removal statute, 28 U.S.C. § 1441, and Texas Rule of Civil Procedure 60 demonstrate that Defendants' basis for removal is inappropriate. Section 1441 allows a defendant to remove a "civil action" over which a federal district court has original subject matter jurisdiction. 28 U.S.C. §§ 1441(a), (b). "[U]nder the removal statute, in a diversity action where all claims relate to the same Constitutional case, individual claims cannot be removed, but only entire actions." Gray ex rel. Rudd v. Beverly Enterprises-Mississippi, Inc., 390 F.3d 400, 411 (5th Cir. 2004) (citing Arango v. Guzman Travel Advisors Corp., 621 F.2d 1371, 1376 (5th Cir. 1980) (stating that on removal, cases are considered in their entirety)). An Article III case consists of all claims deriving from a "common nucleus of operative fact." United Mine Workers v. Gibbs, 383 U.S. 715, 725 (1966).
Texas Rule of Civil Procedure 60 provides that "[a]ny party may intervene by filing a pleading, subject to being stricken out by the court for sufficient cause on the motion of any party." TEX. R. CIV. P. 60. "[O]nce a plea in intervention is filed the intervenor becomes a party for all purposes, absent a ruling by the court striking the intervention." Wilson v. Wilson, 601 S.w.2d 104, 105 (Tex.App.-Dallas 1980, no writ). As there is no evidence that the state court struck Cain's petition in intervention prior to Defendants filing their notice of removal, Cain must be considered a party to the underlying state court litigation "for all purposes". In other words, Cain, whose interests are clearly aligned with Powerhouse Healthcare and Continuum Healthcare, became a party plaintiff by filing his petition in intervention and his "civil action" became one and the same with the action filed by Powerhouse Healthcare and Continuum Healthcare. Therefore, Harris and Trinity Management were required to remove the entire "civil action" for purposes of § 1441, which included Cain's, Powerhouse Healthcare's, and Continuum Healthcare's claims. Because Defendants failed to do so, their notice of removal is defective.
Furthermore, even if Defendants had removed the entire "civil action" as the federal removal statute and case law required, remand would still be appropriate. The record is clear that Continuum Healthcare, a Louisiana corporation, is not diverse from Defendants, both of which are Louisiana citizens. This lack of diversity would foreclose the Court's jurisdiction because Defendants concede that a federal question is not presented.
Defendants' reliance on the jurisdictional exception to the Anti-Injunction Act is confusing because they did not request that the Court enjoin the state court proceedings. Rather, Defendants are using the Anti-Injunction Act's jurisdiction exception as an independent ground for removal. The Anti-Injunction Act, however, does not afford independent jurisdictional grounds for the district court. Newby v. Enron Corp., 302 F.3d 295, 300 (5th Cir. 2002); Regions Bank v. Rivet, 224 F.3d 483, 493 (5th Cir. 2000). As such, remand is appropriate.
The Anti-Injunction Act provides, in relevant part, that "[a] court of the United States may not grant an injunction to stay proceedings in a State court except . . . where necessary in aid of its jurisdiction. . . ." 28 U.S.C. § 2283.
Defendants' request the Court deny remand and transfer this case to the Western District of Louisiana where it could then be consolidated with the previously filed federal litigation. Resp., at 24.
Even if the Court were to entertain Defendant's Anti-Injunction Act argument, there is no basis for enjoining the state court litigation. As Defendants candidly admit, their Rule 120a special appearance was pending in state court prior to removal. In its current posture, the state court litigation is stagnant and cannot interfere with the jurisdiction of the Western District of Louisiana. The Court agrees with Cain that should the state court deny Defendants' Rule 120a special appearance, the proper course would be to seek an injunction from the Western District of Louisiana.
B. Motion for Attorney's Fees, Costs, and Expenses.
Cain requests an award of attorney's fees, costs, and expenses associated with seeking, and ultimately obtaining, remand. A district court may award a party opposing removal attorney's fees, costs, and expenses only when the removing party lacked an "objectively reasonable" basis for seeking removal. Martin v. Franklin Cap. Corp., 126 S.Ct. 704, 711 (2005). Whether an award of attorney's fees is appropriate should "turn on the reasonableness of removal." Id. Here, Defendants failed to cite to a single case supporting either ground for removal. While recognizing the lack of authority supporting their position, Defendants' assert the removal of a petition in intervention is an "issue . . . so obvious" that there is "no reason for it to separately addressed by the [c]ourts." Defendants had no grounds for removing this case, much less "objectively reasonable" grounds. An award of attorney's fees, costs, and expenses is appropriate.
Defendants' removal is further undermined by their continual mis-characterization of the underlying state court litigation as a dormant "TRO proceeding." It is neither dormant nor a TRO proceeding. Prior to Cain's intervention, Powerhouse Healthcare and Continuum Healthcare filed suit seeking, among other things, money damages, declaratory judgment, and temporary and permanent injunctive relief.
Similarly, Defendants' argument that Cain's intervention was improperly filed as part of the original state court litigation is simply not a question for the Court. Contrary to Defendants' claims, remanding "intervention" cases such as this one will not always prevent removal of improperly filed interventions. Defendants' remedy (assuming the state court denies their Rule 120a special appearance) is to file a motion to strike Cain's petition in intervention. See Tex. R. Civ. P. 60. If the petition is stricken and re-filed as a separate cause of action, Defendants could then seek removal.
Conclusion
Defendants Mark Harris and Trinity Management Services, Inc. removed Intervenor Gary Cain's petition in intervention alleging diversity of citizenship, or alternatively, the jurisdiction exception to the Anti-Injunction Act. Despite Defendants' confusing arguments and citations to irrelevant case law, removal is entirely improper. Defendants cannot remove solely Cain's petition in intervention because upon filing it became part of the underlying state court litigation "for all purposes." As such, Defendants' notice of removal failed to remove the state court "civil action" as required by 28 U.S.C. § 1441. Likewise, the Anti-Injunction Act does not provide a independent basis for jurisdiction. Cain's motion for remand and attorney's fees, costs, and expenses (docket no. 7) is GRANTED. It is ORDERED that this case be REMANDED to the 166th Judicial District Court of Bexar County, Texas.
It is further ORDERED that Cain is entitled to recover his attorney's fees, costs, and expenses incurred in opposing Defendants' removal. Counsel for Cain is ORDERED to submit a summary of expenses and a reasonable amount of attorney's fees (in compliance with Local Rule CV-7(i)) no later than July 6, 2006, and Defendants shall pay that amount or submit written objections regarding the reasonableness of the amount no later than July 20, 2006.
Defendants' motion requesting the Court to extend the date for filing responsive pleadings and/or set deadlines (docket no. 3) is DISMISSED as moot.