From Casetext: Smarter Legal Research

Hugger v. the Rutherford Institute

United States District Court, W.D. North Carolina, Statesville Division
Jan 18, 2001
5:00 CV 180-H (W.D.N.C. Jan. 18, 2001)

Opinion

5:00 CV 180-H

January 18, 2001


MEMORANDUM AND ORDER


THIS MATTER is before the Court on the Plaintiffs' "Motion to Remand" (document #5) and ". . . Brief in Support . . ." (document #6), both filed December 22, 2000, and the "Defendant's Answering Brief . . ." (document #11) filed January 10, 2000. The Plaintiffs "Reply Brief . . ." (document #13) was filed January 17, 2001.

The parties have consented to Magistrate Judge jurisdiction under 28 U.S.C. § 636 (c). and this motion is now ripe for disposition.

Having carefully considered the parties' arguments, the record, and the applicable authority, the undersigned will deny the Plaintiffs' motion.

I. FACTUAL AND PROCEDURAL BACKGROUND

This is a personal injury action seeking damages in excess of $75,000 for defamation, intentional infliction of emotional distress, and negligent infliction of emotional distress. The Plaintiffs, Vickie C. Hugger and Carolyn Settle, are, respectively, the Principal and a sixth grade teacher at C.B. Eller Elementary School in Wilkes County, North Carolina and are North Carolina citizens.

The Defendant Rutherford Institute ("RI") is a non-profit civil rights and religious liberties organization, incorporated under the laws of Virginia, and maintaining its principal place of business in Charlottesville, Virginia. The Defendant Rutherford Institute of North Carolina, Inc. ("RINC") is a non-profit corporation, incorporated on March 29, 1990, under the laws of North Carolina, with a registered address in Charlotte, North Carolina. RI utilized RINC as a "state chapter" to conduct its business in North Carolina until 1993, when RI reorganized its operations into regional offices. Although RI intended to dissolve RINC in 1993 and, in fact, instructed RINC's Board of Directors to do exactly that, RINC has not been dissolved, nor has its charter been suspended or administratively dissolved by the North Carolina Secretary of State.

North Carolina non-profit corporations are exempt from franchise taxes or any other annual state fees and therefore can remain in existence for years, despite effectively being dormant. See Southminster, Inc. v. Justus, 119 N.C. App. 669, 671, 459 S.E.2d 793, 794 (1995) (non-profit, charitable organizations exempt from state corporate income taxes and state franchise taxes).

The individual Defendants, John W. Whitehead and Steven H. Aden, both Virginia citizens, are attorneys at RI's office in Charlottesville, Virginia. Mr. Whitehead is also RI's founder and President.

At some time shortly before November 15, 1999, the RI's Charlottesville, Virginia office received a telephone call from Mrs. Joyce Damell who alleged that her daughter Hannah, a student in Ms. Settle's class, had twice been denied her constitutional rights, that is — Ms. Settle and Ms. Hugger had forced Hannah to say the word "damn" as part of a reading aloud assignment and had prevented Hannah from expressing her religious beliefs through the letters "WWJD" ("What Would Jesus Do?").

The RI receives literally thousands of similar requests for help each year. During the instant telephone call, an RI staff attorney interviewed both Mrs. Darnell and Hannah, who provided great detail in her allegations against Ms. Hugger and Ms. Settle.

As to the first incident, Hannah alleged that when she refused to say "damn" aloud, Ms. Settle sent her to Ms. Hugger's office, where, after being threatened with in-school suspension, she relented and read the word aloud. As to the second incident, Ms. Settle conducted a weekly "feature one student" activity in which one student was allowed to write a phrase describing him or herself on the classroom chalkboard. Hannah told the RI staff attorney that, during her week as the "feature one student," she had written "WWJD" on the chalkboard but Ms. Settle told her she "could not display that kind of information" and had forced her to erase it.

On November 15, 1999, Mr. Whitehead, acting within the scope and course of his employment with RI, faxed a "demand letter" to Ms. Hugger and the Superintendent of the Wilkes County Schools that detailed Hannah's allegations, as well as case law supporting Hannah's constitutional rightnot to be coerced into saying offensive words and to be allowed to express her religious beliefs. Further, Mr. Whitehead demanded an immediate response — by November 16, 1999 — consisting of a change in school policy, a written apology to Hannah and her family, and a written reprimand to Ms. Hugger and Ms. Settle. The demand letter threatened litigation in federal court but made no reference to RINC.

The use of a "demand letter" is a common first step in seeking remediation of grievances, not only by the RI, but also by the American Civil Liberties Union, the National Association for the Advancement of Colored People, and many other civil rights organizations.

Later the same day, Wilkes County School Board attorney Frederick G. Johnson faxed a letter to Mr. Whitehead at RI's Charlottesville, Virginia office stating that he was investigating the facts and would issue "an appropriate response" following his investigation.

On November 16, 1999, RI issued a press release, which was also published on its Internet web-site, that recounted Hannah's allegations as "fact" and contained an unequivocal quote by Mr. Aden that the Plaintiffs had violated Hannah's First Amendment rights of free speech and religious expression and had "forced her to go against her religious beliefs." Like the demand letter, the press release and Internet article made no mention of RINC.

On November 22, 1999, Hannah retracted her entire story and admitted she had lied. Immediately — the same day — the RI published a full retraction and apology on its web-site and in a press release to "twice as many media outlets as the original release."

On October 23, 2000, the Plaintiffs filed the instant Complaint in the Superior Court of Wilkes County, North Carolina, alleging state tort law claims for defamation, intentional infliction of emotional distress, and negligent infliction of emotional distress. The Complaint does not allege any action taken by RINC or any RINC employee or agent, stating only, with regard to RINC, "[u]pon information and belief [RI] conducts business in North Carolina by and through [RINC]."

On November 22, 2000, the Defendants removed the state court action to the United States District Court for the Western District of North Carolina, alleging diversity jurisdiction pursuant to 28 U.S.C. § 1332. The Defendants acknowledged that the Plaintiffs and RINC are non-diverse — all are North Carolina citizens — but maintained that diversity jurisdiction was still proper under the doctrine of fraudulent joinder, that is — RINC is a "sham" defendant joined in the case to defeat diversity.

On December 22, 2000, the Plaintiffs filed a Motion to Remand, alleging a lack of complete diversity between the Plaintiffs and the Defendants, which has been fully briefed as set forth above and is now ripe for determination.

II. DISCUSSION

A case falls within a federal district court's diversity jurisdiction only if the amount in issue exceeds $75,000.00 and diversity of citizenship among the parties is complete — that is, only if no plaintiff and defendant are citizens of the same State. See, e.g., 28 U.S.C. § 1332 (2000); Wisconsin Dept. of Corrections v. Schacht, 524 U.S. 381, 388 (1998); Carden v. Arkoma Associates, 494 U.S. 185, 187 (1990); and Strawbridge v. Curtiss, 3 Cranch 267 (1806). The requirements are so absolute that "[n]o party need assert [a lack of complete diversity]. No party can waive the defect, or consent to jurisdiction. No court can ignore the defect; rather a court, noticing the defect, must raise the matter on its own." Wisconsin, 524 U.S. at 389 (internal citations omitted). Accord Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982).

The citizenship of the parties is clear and undisputed: the Plaintiffs are North Carolina citizens, the individual Defendants and RI are Virginia citizens, and RINC is a North Carolina citizen. See 28 U.S.C. § 1332 (c)(1) (2000) ("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"); Athena Automotive, Inc. v. DiGregorio, 166 F.3d 288, 290 (1999) (a corporation has its principal place of business at the "nerve center" and/or `place of' its operations); and Peterson v. Cooley, 142 F.3d 181, 184 (4th Cir. 1998).

The single question presented in the subject motion is whether, despite RINC's non-diversity from Ms. Hugger and Ms. Settle, this Court may nevertheless exercise its diversity jurisdiction. More precisely, the issue is whether, on the facts alleged, RINC is a "sham" defendant under the doctrine of fraudulent joinder articulated by the Supreme Court inWilson v. Republic Iron Steel Co., 257 U.S. 92, 97-98 (1921), which provides:

A civil case . . . presenting a controversy between citizens of different states and involving the requisite jurisdictional amount, is one which may be removed from a state court into the District Court of the United States by the defendant . . . and this right of removal cannot be defeated by a fraudulent joinder of a resident defendant having no real connection with the controversy. . . . If in such a case a resident defendant is joined, the joinder, although fair upon its face, may be shown by a petition for removal to be only a sham or fraudulent device to prevent a removal but the showing must consist of a statement of facts rightly leading to that conclusion apart from the pleader's deductions.
Id. at 97 (emphasis added) (internal citations omitted).

In Wilson, the Supreme Court held that the "rational conclusion" from the facts alleged was that "the joinder [of the resident defendant] was a sham and fraudulent — that is, without any reasonable basis in fact and without any purpose to prosecute the cause in good faith against the [resident defendant]." Id. at 98. Accord Beasley v. Goodyear Tire and Rubber Co., 835 F. Supp. 269, 273 (D.S.C. 1993) (resident defendant a "sham" where, on facts alleged, the resident defendant did not sell plaintiff the tire which was the subject of the product liability case).

In the Fourth Circuit, "to show fraudulent joinder, the removing party must demonstrate either outright fraud in the plaintiffs pleading of jurisdictional facts or that there is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court." Hartley v. CSX Transp., Inc., 187 F.3d 422, 424 (4th Cir. 1999) (emphasis added), citing, Marshall v. Manville Sales Corp., 6 F.3d 229, 232 (4th Cir. 1993). Accord Martin v. Norfolk W. Ry. Co., 43 F.2d 293, 296 (4th Cir. 1930).

As there is no claim of actual fraudulent pleading by the Plaintiffs, the Defendants must show that the Plaintiffs "cannot establish a claim against [RINC] even after resolving all issues of fact and law [as to state law claims] in the [Plaintiffs'] favor." Mayes v. Rapoport, 198 F.3d 457, 464 (4th Cir. 1999). Accord Newman v. Motorola, Inc., ___ F. Supp. 2d ___, ___, 2000 WL 1875537, 1 (D.Md. December 21, 2000).

"This standard is even more favorable to the plaintiff than the standard for ruling on a motion to dismiss under Fed.R.Civ.P. 12(b)(6)."Hartley, 187 F.3d at 424. However, when confronted by factual allegations in the Notice of Removal, the plaintiff must respond with specific factual allegations sufficient to state a claim against the resident defendant or else the defendants' statement of facts will be deemed admitted. See Wilson, 257 U.S. at 98. (The plaintiff could dispute the defendant's factual allegations only on a "showing . . . consist[ing] of a statement of facts . . . apart from [mere] deductions" but because "the [defendant's] petition was properly verified, and the plaintiff, although free to take issue with its statements, did not do so . . . [the plaintiff] was [therefore] taken as assenting to their truth.")

Even when resolving all issues of fact and law in favor of the Plaintiffs, there is "no reasonable basis in fact" to believe that the Plaintiffs could maintain any state law claim against RINC. The instant Complaint, which incorporated the demand letter, the school board attorney's response, and the first press release, clearly alleges that the Plaintiffs, all other school officials, and Hannah Darnell and her mother dealt only with RI and its agents and employees and had no contact of any kind with RINC. The only mention of the resident Defendant is an unsupported allegation that "[u]pon information and belief, [RI] conducts business in North Carolina by and through [RINC]." It is, however, uncontroverted — indeed, deemed admitted by the Plaintiffs — that since 1993, RINC has been totally dormant, abandoned, and, if not dissolved legally, then certainly defunct as a "state chapter" of RI.

In short, RINC has no "real connection" with the instant case, which leads to the "rational conclusion" that RINC is a "sham" defendant.Accord Wilson, 257 U.S. at 97-98. Therefore, notwithstanding the non-diversity between the Plaintiffs and RINC, federal diversity jurisdiction is proper and the Plaintiffs' Motion to Remand must and shall be denied.

III. ORDER

NOW, THEREFORE, IT IS ORDERED:

1. The Plaintiffs' "Motion to Remand" (document #5) is DENIED.

2. The Initial Pretrial Conference, originally scheduled for January 17, 2001, has been rescheduled for 2:30 p.m. on March 14, 2001, however, the parties are permitted and encouraged to begin initial discovery.

3. The Clerk is directed to send copies of this Memorandum and Order to counsel for the parties.

SO ORDERED, this 18th day of January, 2001.


Summaries of

Hugger v. the Rutherford Institute

United States District Court, W.D. North Carolina, Statesville Division
Jan 18, 2001
5:00 CV 180-H (W.D.N.C. Jan. 18, 2001)
Case details for

Hugger v. the Rutherford Institute

Case Details

Full title:VICKIE C. HUGGER and CAROLYN SETTLE, Plaintiffs, v. THE RUTHERFORD…

Court:United States District Court, W.D. North Carolina, Statesville Division

Date published: Jan 18, 2001

Citations

5:00 CV 180-H (W.D.N.C. Jan. 18, 2001)