Summary
holding that factor was neutral where movants had not clearly demonstrated number and volume of documents and records
Summary of this case from NDC Investments LLC v. Lehman Brothers, Inc.Opinion
Civil Action No. 3:03-CV-1597-D
December 9, 2003
MEMORANDUM OPINION AND ORDER
Plaintiff moves to remand this removed action to state court, the non-diverse defendant moves to dismiss the action against him for failure to state a claim on which relief can be granted, and three defendants move to transfer this action to the Eastern District of Michigan under 28 U.S.C. § 1404(a) for the convenience of the parties and witnesses and in the interest of justice. For the reasons that follow, the court denies the motion to remand, grants the motion to dismiss the non-diverse defendant, and denies the motion to transfer.
I
Plaintiff Kim A. Wise ("Wise"), a Texas citizen, sued defendants CB Richard Ellis, Inc. ("Ellis"), Dennis Kateff ("Kateff'), A. Vincent ("Vincent"), and Gary Carr ("Carr") in Texas state court alleging entitlement to a brokerage commission, punitive damages, and attorney's fees based on claims for breach of contract, fraud, breach of fiduciary duty, constructive trust/unjust enrichment, and quantum meruit. Defendants Ellis, Kateff, and Carr removed the case based on diversity of citizenship, contending that Carr — a Texas citizen— was fraudulently joined. Wise moves to remand the case based on lack of complete diversity and on the ground that the controversy does not meet the minimum jurisdictional amount. Carr moves to dismiss the action against him under Fed.R.Civ.P. 12(b)(6) for failure to state a claim on which relief can be granted. Defendants Ellis, Kateff, and Carr move to transfer the case under § 1404(a) to the Eastern District of Michigan.
Vincent's true name is Nate A. Vincent.
Vincent had not yet been served, and it was unnecessary that he join in the notice of removal.
II
The court will consider in tandem Wise's motion to remand and Carr' s motion to dismiss because — except for the jurisdictional amount question — they present the same issue. Before deciding whether Carr is entitled to be dismissed (and, in turn, whether he has been fraudulently joined), the court must determine whether the amount in controversy exceeds $75,000, exclusive of interest and costs, as required by 28 U.S.C. § 1332(a).
A
[W]here . . . the petition does not include a specific monetary demand, [the defendant] must establish by a preponderance of the evidence that the amount in controversy exceeds $75,000. This requirement is met if (1) it is apparent from the face of the petition that the claims are likely to exceed $75,000, or, alternatively, (2) the defendant sets forth "summary judgment type evidence" of facts in controversy that support a finding of the requisite amount.Manguno v. Prudential Prop. Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002) (citations omitted). Any ambiguities regarding the amount in controversy are to be construed against removal. Id.
It is not apparent from the face of Wise's state court petition that his claims are likely to exceed the sum of $75,000. Therefore, defendants must set forth summary judgment-type evidence of facts in controversy that support a finding of the requisite amount.
Defendants first point to correspondence between their counsel and Wise's counsel.
Defendants' attorney sent a letter to Wise's attorney in which he requested that he stipulate that Wise's total damages are $75,000 or less. Defendants' counsel stated in the letter that failure to sign and return the letter would "memorialize your agreement that the amount in controversy exceeds $75,000, exclusive of interest and costs." Ds. Resp. Ex. A. Wise's counsel responded by letter that "the actual damages sought by Wise in this matter, exclusive of attorney's fees, costs, interest or punitive damages do not at this time exceed $50,000." Id. Ex. B at 1 (emphasis added). Defendants' counsel noted in a reply letter that attorney's fees and punitive damages are included in calculating the amount in controversy. He stated, in relevant part:
The court cites the exhibit number rather than an appendix page because defendants did not comply with N.D. Tex. Civ. R. 7.1(i)(1) and 7.2(e) in briefing the motion to remand. Rule 7.1(i)(1) provides that "[a] party who relies on documentary (including an affidavit, declaration, deposition, answer to interrogatory, or admission) or non-documentary evidence to support or oppose a motion must include such evidence in an appendix." Rule 7.2(e) states that "[i]f a party's motion or response is accompanied by an appendix, the party's brief must include citations to each page of the appendix that supports each assertion that the party makes concerning any documentary or non-documentary evidence on which the party relies to support or oppose the motion." Because these deficiencies did not interfere with the decisional process of the court, the court considered the exhibits and briefing that defendants submitted. This defect is not unique to this case or to this type of motion, see, e.g., Kettler v. Presstek, Inc., 2003 WL 21788870, at * 1 n. 1 (N.D. Tex. July 31, 2003) (Fitzwater, J.), but it will assist the court if parties will comply with these rules in future motions and cases.
Either you are or are not seeking damages in excess of $75,000.00, exclusive of interest and costs. The caselaw is clear that punitive damages and attorneys' fees are included along with compensatory damages in making the "amount in controversy" determination. I would appreciate a response to my original question — Are you seeking damages in excess of $75,000.00 exclusive of interest and costs?Id. Ex. C. Wise's counsel did not respond to the letter and did not answer the question whether Wise was seeking damages in excess of $75,000.00, exclusive of interest and costs.
The law is clear, and Wise admits in his motion, that punitive damages and attorney's fees are combined with compensatory damages in determining the amount in controversy. See, e.g., Dow Agrosciences, LLC v. Bates, 332 F.3d 323, 324 (5th Cir. 2003). Defendants argue from the letters that, using Wise's estimate of $50,000 in compensatory damages, "it would be impossible to try this case and incur attorneys' fees of less than $25,000." Ds. Resp. at 2. In support of this statement, defendants cite two cases — one decided by the Fifth Circuit and another by a Texas court of appeals — that included attorney's fee awards in "simple" breach of contract cases in excess of $25,000. See id. He also relies on his own declaration. See id. Ex. D. Defendants also maintain that "if [Wise's] claim for punitive damages has any merit, the caselaw illustrates that the value of this claim is at least comparable to [his] compensatory damages claim." Id at 2. Defendants therefore contend that the amount in controversy exceeded the minimum jurisdictional amount at the time they removed the case.
Wise relies, inter alia, on Caballero v. Ecology and Environment, Inc., 2003 WL 21350361 (N.D. Tex. June 6, 2003) (Means, J.), in which the parties agreed that there was $52,000 in compensatory damages. Judge Means reasoned that "defendant's arguments that the plaintiffs' attorney will incur over $23,000 in attorney's fees are not persuasive" in light of the relatively simple contract dispute. Id. at *3. Wise argues that the instant case "is not legally or factually complex and, unless defendants are permitted to improperly run up the costs of litigation, the total amount in controversy will not exceed $75,000." P. Rep. at 2. His counsel avers that he has stated to defendants' counsel that "Wise has not and does not seek to recover in excess of $70,000 from the Defendants." P. App., David W. Elrod, Esq. Aff. at 2, ¶ 6. He also states that Wise's claim is "primarily, but not exclusively, based on the enforcement of a verbal commission-splitting agreement (i.e. one-third of the $120,000 commission received — $40,000)." Id. at 2, ¶ 5.
Wise submitted an appendix, but he did not number the pages in the manner that Rule 7.1(i)(4) requires. See supra note 3.
The court finds that defendants have met their burden of establishing that the facts in controversy support a finding of the requisite jurisdictional amount. Even if the court concludes that this case is somewhat like Caballero, and that defendants have failed to show that Wise's attorney's fees award will not exceed $25,000 in a case in which the plaintiff seeks no more than $50,000 in actual damages, the fact remains that Wise is suing for punitive damages, something the plaintiff in Caballero did not request. Wise's counsel states that his client's primary, but not exclusive, claim is for $40,000 arising from a commission-splitting agreement. As defendants point out, even if Wise seeks only punitive damages that are comparable to his compensatory damages claim, the $75,000 threshold is crossed (i.e., $40,000 + $40,000 = $80,000). But plaintiffs almost always seek punitive damages in multiples of what they sue for in actual damages, and Wise has given the court no clear indication that he does not seek multiple damages or even that he seeks less in punitive damages than he seeks in actual damages.
Accordingly, defendants have shown by a preponderance of the evidence that the jurisdictional minimum is met in this lawsuit.
B
Because Wise and defendant Carr are both Texas citizens, the court must next decide whether Carr was fraudulently joined and is entitled to dismissal of the claims against him under Rule 12(b)(6).
1
The jurisprudence of, and procedure for determining, fraudulent joinder are well settled.
The removing party carries a heavy burden when attempting to prove fraudulent joinder. See Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 259 (5th Cir. 1995). "The removing party must prove that there is absolutely no possibility that the plaintiff will be able to establish a cause of action against the in-state defendant in state court, or that there has been outright fraud in the plaintiff's pleading of jurisdictional facts." Id. (quoting Green v. Amerada Hess Corp., 707 F.2d 201, 205 (5th Cir. 1983)). "After all disputed questions of fact and all ambiguities in the controlling state law are resolved in favor of the nonremoving party, the court determines whether that party has any possibility of recovery against the party whose joinder is questioned." Carriere v. Sears, Roebuck Co., 893 F.2d 98, 100 (5th Cir. 1990). "If there is `arguably a reasonable basis for predicting that the state law might impose liability on the facts involved,' then there is no fraudulent joinder." Badon v. RJR Nabisco Inc., 236 F.3d 282, 286 (5th Cir. 2001) (quoting Jernigan v. Ashland Oil Inc., 989 F.2d 812, 816 (5th Cir. 1993)) This possibility, however, must be reasonable, not merely theoretical. See id. at 286 n. 4.Great Plains Trust Co. v. Morgan Stanley Dean Witter Co., 313 F.3d 305, 312 (5th Cir. 2002) (Fitzwater, J.). "[T]he district court can employ a summary judgment-like procedure that allows it to pierce the pleadings and examine affidavits and deposition testimony for evidence of fraud or the possibility that the plaintiff can state a claim under state law against a nondiverse defendant." Id. at 311. Because the court concludes that the pleadings demonstrate that there is no possibility that Wise can state a claim under Texas law, the court need not examine evidence.
2
Wise alleges that Carr is liable for making personal representations to him that were fraudulent, breached Carr' s fiduciary duty, and injured him. As a factual basis for these charges, Wise avers in his state court petition:
Wise contacted Carr of [Ellis] in Dallas, Texas. Wise through his affiliates had numerous prior business relationships with both [Ellis] and Carr. Because of this extensive relationship, Wise had absolute trust and confidence in Carr and [Ellis]. Wise asked Carr to identify a suitable [Ellis] broker in Michigan who would act as the local cooperating broker for the sale of the Property. Wise emphasized that he would personally assist with the transaction because of his relationship with Spear. Carr agreed to identify the most qualified local [Ellis] broker and provide that information to Wise. Subsequently, Carr contacted Wise and requested that Wise contact Kateff, the managing director of [Ellis'] office in Southfield, Michigan.
P. Pet. at 3, ¶ 13. Wise predicates Carr's liability based solely on these facts, although he does assert several times that he trusted Carr.
When considered in the light most favorable to Wise, the facts he alleges do not support any cause of action against Carr. Wise "allege[s] no actionable facts specific to [Carr]. . . . The remainder of [Carr's] pleadings refer to conduct by the `Defendants' that can in no way be attributed to [Carr]." Griggs v. State Farm Lloyds, 181 F.3d 694, 699 (5th Cir. 1999). "Failure to specify a factual basis for recovery against a non-diverse party constitutes a failure to state a claim and fraudulent joinder of that party." Waters v. State Farm Mut. Auto Ins. Co., 158 F.R.D. 107, 109 (S.D. Tex. 1994).
Wise further posits that "even if all Carr' s actions are as an employee or manager of [Ellis], Texas law recognizes that an individual may be personally liable for a corporation's tortious conduct if the individual knowingly aids, abets or participates in the wrongdoing." P. Mot. Remand at 7 (citing Portluck v. Perry, 852 S.W.2d 578, 582 (Tex.App. 1993, pet. denied)). Wise has alleged no facts, however, that support the theory that Carr aided, abetted, or participated in the alleged wrongdoing.
Accordingly, the court grants Carr's motion to dismiss for failure to state a claim on which relief can be granted, and it concludes that Wise fraudulently joined him as a defendant. Because Carr' s citizenship is to be disregarded for purposes of determining complete diversity, and the remaining defendants are diverse from Wise, his motion to remand is denied.
IV
Defendants Ellis, Kateff, and Carr move the court to transfer this case to the Eastern District of Michigan under 28 U.S.C. § 1404(a).
Because Carr has been dismissed, the court need only consider the motion presented by Ellis and Kateff.
A
Section 1404(a) provides that "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." "The decision to transfer is made to prevent waste of time, energy, and money and to protect litigants, witnesses, and the public against unnecessary inconvenience and expense." Bank One, N.A. v. Euro-Alamo Invs., Inc., 211 F. Supp.2d 808, 811 (N.D. Tex. 2002) (Fitzwater, J.) (citing Stabler v. N.Y. Times Co., 569 F. Supp. 1131, 1137 (S.D. Tex. 1983)). To decide whether a case should be transferred under § 1404(a)
[t]he court considers several factors in their totality, including (1) plaintiff's choice of forum; (2) the availability of compulsory process for the attendance of unwilling witnesses; (3) the cost of obtaining the attendance of willing witnesses; (4) the accessibility and location of sources of proof; (5) the relative congestion of the courts' dockets; (6) the accessibility of the premises to jury view; (7) the relation of the community in which courts and the jurors are required to serve to the occurrence giving rise to the suit; and (8) the time, cost, and ease with which the trial can be conducted, and all other practical considerations relative to the trial and determination of the case.Id at 811-12 (citing Fletcher v. S. Pac. Tramp. Co., 648 F. Supp. 1400, 1401 (E.D. Tex. 1986); Greiner v. Am. Motor Sales Corp., 645 F. Supp. 277, 278 (E.D. Tex. 1986)). Defendants bear the burden of proving that transfer is appropriate. See Time, Inc. v. Manning, 366 F.2d 690, 698 (5th Cir. 1966).
B
Generally, the plaintiff's choice of forum is given great weight and should rarely be disturbed. Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947); see also Emerch Int'l Exploration, Inc. v. Attock Oil Co., 656 F. Supp. 1162, 1167 n. 15 (N.D. Tex. 1987) (Fitzwater, J.) (holding that plaintiff's choice of forum is entitled to substantial weight and should be highly esteemed). In the Fifth Circuit, "the plaintiff's choice of forum is clearly a factor to be considered but in and of itself it is neither conclusive nor determinative." In re Horseshoe Entm't, 337 F.3d 429, 434 (5th Cir. 2003). "The trial court must consider `all relevant factors to determine whether or not on balance the litigation would more conveniently proceed and the interests of justice be better served by transfer to a different forum.'" Peteet v. Dow Chem. Co., 868 F.2d 1428, 1436 (5th Cir. 1989) (citing 15 Charles Alan Wright et al., Federal Practice and Procedure § 3847, at 370 (2d ed. 1986)). Accordingly, the court gives substantial weight to Wise's choice of this court as the forum for the litigation.C
The court next considers the availability of compulsory process for the attendance of unwilling witnesses. Defendants assert that because "[t]he persons involved in the underlying transaction (who will necessarily be fact witnesses) work and live in Michigan and are outside this Court's subpoena power," Ds. Mot. Trans, at 2-3, this factor militates in favor of transfer. Although the parties cannot subpoena witnesses who work and live in Michigan and are outside the 100-mile subpoena range, defendants fail to identify any unwilling witnesses who fall within this group. Accordingly, the court finds that this factor is neutral.
D
The court now turns to the cost of obtaining the attendance of willing witnesses. The key witnesses are likely to be Kateff, Vincent, and Wise. Carr may also testify, although he has now been dismissed as a defendant. Wise and Carr are located in this district, while Kateff and Vincent are located in Michigan. The court will not grant a motion to transfer where the result will be merely to shift the burden of trial from one party to the other. See Enserch, 656 F. Supp. at 1167 n. 15. Given that willing witnesses are absent from both fora, one side will be inconvenienced in comparable degrees. This factor favors denying defendants' motion.E
The court next addresses the accessibility and location of sources of proof. Defendants maintain that "[i]t is reasonable to predict that the documents relevant to this action will include the records relating to the negotiation and closing of the underlying real estate transaction. The bulk of, and likely all, such documents are located in Michigan." Ds. Mot. Trans, at 3. Defendants have introduced evidence that the closing took place in Michigan and that the relevant parties' principal place of business is Michigan, see Ds. Mot. Trans. App. 5,6 they have adduced no evidence, however, concerning the volume of documents or the difficulty in transporting them to this district for pretrial discovery or for trial, see id. This factor is therefore neutral. See, e.g., Kettler v. Presstek, Inc., 2003 WL 21788870, at *3 (N.D. Tex. July 31, 2003) (Fitzwater, J.) (holding that this factor was neutral where movants had not clearly demonstrated the number and volume of documents and records). Defendants did comply with Rule 7.1(i)(1) and (4) in briefing their motion to transfer.
F
The factors that take into account the relative congestion of the courts' dockets, the accessibility of the premises to jury view, the time, cost, and ease with which the trial can be conducted, and all other practical considerations relative to the trial and determination of this case do not weigh in favor of either forum, and neither side has adequately addressed these elements.G
The court now considers the relation of the community in which the courts and the jurors required to serve to the occurrence giving rise to the suit. This factor favors transfer because a Texas defendant is no longer a party and, although Wise is a Texas citizen, he is suing based on a real estate transaction that occurred in Michigan and for services that he rendered in connection with that transaction.
H
Both parties address the location of counsel. This court has consistently cited Judge Sanders' opinion in Young v. Armstrong World Industries, Inc., 601 F. Supp. 399, 402 (N.D. Tex. 1984) (Sanders, J.) ("convenience of counsel is not an appropriate consideration"), to hold that the location of counsel is not significant in the § 1404(a) equation. Accordingly, this factor is neutral.
I
After considering all the factors, the court concludes that defendants have failed to carry their burden of demonstrating that a transfer is appropriate. Accordingly, their motion to transfer is denied.
For the reasons set out, Wise's August 4, 2003 motion to remand is denied, Carr's July 29, 2003 motion to dismiss is granted, and defendants Ellis, Kateff, and Carr's August 4, 2003 motion to transfer venue is denied.