Opinion
CAUSE NO. IP 01-0789-C H/G
August 28, 2001
ORDER OF REMAND
This action is hereby REMANDED to the Clinton Superior Court from which it was removed on June 1, 2001.
Plaintiffs are neighbors of an industrial facility operated by defendant Exide Corporation, which manufactures and distributes lead batteries. Plaintiffs allege that Exide and several trucking companies and a construction company have committed several torts against them by releasing and distributing lead dust in the neighborhood. Plaintiffs seek certification of a plaintiff class.
Exide removed this action on the basis of diversity jurisdiction. Plaintiffs all appear to be citizens of Indiana. Exide Corporation is a citizen of New Jersey and Delaware for purposes of diversity jurisdiction. The trucking and construction defendants, however, are Indiana citizens, thus defeating the complete diversity required for diversity jurisdiction under 28 U.S.C. § 1332.
Exide removed the action on a theory of fraudulent joinder. "Fraudulent joinder occurs either when there is no possibility that a plaintiff can state a cause of action against nondiverse defendants in state court, or there has been an outright fraud in plaintiff's pleading of jurisdictional facts." Hoosier Energy Rural Elec. Co-op, Inc. v. Amoco Tax Leasing IV Corp., 34 F.3d 1310, 1315 (7th Cir. 1994), quoting Gottlieb v. Westin Hotel Co., 990 F.2d 323, 327 (7th Cir. 1993). Exide does not suggest "outright fraud" in pleading facts relating to jurisdiction. Instead, Exide contends there is no possibility that plaintiffs could ever establish liability against any of the trucking or construction defendants.
Plaintiffs have moved to remand the action to state court. They contend that trucking companies and construction company providing services to Exide should have known that their activities on Exide's property (and travel from Exide's property) would disturb lead dust and particulates and would cause them to escape Exide's property and to reach plaintiffs' properties.
The burden of showing fraudulent joinder is one of the heaviest burdens known to civil law. The court must give the benefit of reasonable doubts as to matters of both fact and law to the parties moving for remand. The issue is not whether plaintiffs have stated claims upon which relief could be granted against the trucking and construction defendants. The issue is whether there is any reasonable possibility that a state court might rule against any one of the trucking or construction defendants on even one theory, when all fairly disputable issues of both fact and law are resolved in plaintiffs' favor. See Poulos v. Naas Foods, Inc., 959 F.2d 69, 73 (7th Cir. 1992); accord, Hoosier Energy Rural Elec. Co-op, Inc. v. Amoco Tax Leasing IV Corp., 34 F.3d at 1315; Gottlieb v. Westin Hotel Co., 990 F.2d at 327.
Thus, although the state courts might ultimately find that plaintiffs have failed even to state a claim against the trucking and construction defendants, joinder of the claims against those defendants was not "fraudulent" for purposes of this court's jurisdiction so long as the issue of state law is subject to reasonable argument on both sides. See Batoff v. State Farm Insurance Co., 977 F.2d 848, 853 (3d Cir. 1992) (if "intricate analysis of state law" is needed to dismiss claim, the claim may not be disregarded for purposes of diversity jurisdiction).
This court addressed the standards for fraudulent joinder in considerable 1 detail in Conk v. Richards O'Neil, LLP, 77 F. Supp.2d 956 (S.D.Ind. 1999). That more detailed discussion will not be repeated here.
Exide has opposed remand by trying to re-cast the issue: "Would the Indiana courts recognize any of the claims alleged by the Plaintiffs against the Nondiverse Defendants, given the facts?" That statement of the issue fails to give the plaintiffs the benefit of reasonable disputes as to matters of both fact and law, as required under Poulos v. Naas Foods, among other cases.
In opposing remand, Exide has also submitted affidavits from officers of the trucking and construction defendants. Those affiants dispute the factual basis for the plaintiffs' claims against their companies. They assert that the trucking and construction defendants did not have actual knowledge of the hazards alleged by plaintiffs. Such attempts to argue the facts are unlikely to be fruitful when arguing fraudulent joinder. If anything, the affidavits emphasize the potential for factual disputes. Also, plaintiffs have based at least some claims against the trucking and construction defendants not on allegations of actual knowledge of hazards but on what plaintiffs contend those defendants should have known about the alleged hazards.
Exide argues: "Here, Plaintiffs attempt to expand the scope of Indiana law in order to deny Exide its right to remove this matter to federal court," and Exide acknowledges that "No reported case from the Indiana courts directly addresses whether a defendant can be subject to liability in a case such as this." Exide Br. at 3-4. The court agrees with at least the latter statement, but it does not support a finding of fraudulent joinder.
In support of their motion to remand, plaintiffs have laid out their arguments for extending recognized principles and recent developments in Indiana law to support claims against the trucking and construction defendants for negligence, strict liability, and nuisance. Those arguments may or may not ultimately persuade the Indiana courts. As long as the issues are fairly debatable, though, the case must be remanded. More precisely, as long as at least one claim against at least one Indiana defendant is fairly debatable, as a matter of both fact and law, the case must be remanded.
This court need not opine on the current condition of Indiana tort law as it applies to plaintiffs' theories. It is enough to note that the briefing by the parties in this case shows that, at the very least, the court could not dismiss plaintiffs' claims against the trucking and construction defendants without undertaking "an intricate analysis of state law." Even that analysis would have to allow room for reasonable and good faith efforts to ask the state courts to modify or even overturn established principles of state tort law. As the Third Circuit has written: "A claim which can be dismissed only after an intricate analysis of state law is not so wholly insubstantial and frivolous that it may be disregarded for purposes of diversity jurisdiction." Batoff v. State Farm Insurance Co., 977 F.2d at 853 (reversing judgment in favor of defendant and ordering remand to state courts for consideration of novel theories of state law against non-diverse defendant).
This is not a case in which a plaintiff is asking the federal courts to extend or innovate in state law. Cf. Lilly Industries, Inc. v. Health-Chem Corp., 974 F. Supp. 702, 705 (S.D.Ind. 1997) (dismissing novel state law claims based on pollution of industrial site). This is instead a case in which plaintiffs want to ask the state courts to extend state law. Plaintiffs are entitled to do that.
The Seventh Circuit has repeatedly cautioned parties who seek extensions of state law to stay away from federal courts, at least where they have a choice. See, e.g., Haynes v. Alfred A. Knopf, Inc., 8 F.3d 1222, 1234 (7th Cir. 1993) ("The plaintiffs are asking us to innovate boldly in the name of the Illinois courts, and such a request is better addressed to those courts than to a federal court."); Chang v. Michiana Telecasting Corp., 900 F.2d 1085, 1087-88 (7th Cir. 1991) ("a litigant whose case depends on a change in state law had best start in state court"); Afram Export Corp. v. Metallurgiki Halyps, S.A., 772 F.2d 1358, 1370 (7th Cir. 1985) (declining to adopt "innovative rule of state law" argued by litigant who chose federal court forum), overruled on other grounds, Salve Regina College v. Russell, 499 U.S. 225, 236 (1991).
The plaintiffs in this case have taken that oft-repeated advice. Having done so, they should not be barred from asking the state courts to extend some established principles of law to new factual situations or to reconsider other principles of state law. The common law evolves through just such efforts. An opponent has no entitlement to an unchanging common law or to a federal forum where such attempts to extend state law would receive a cold welcome. See generally Insolia v. Philip Morris Inc., 216 F.3d 596, 607 (7th Cir. 2000) (declining to recognize innovative theory of state law; recognizing that state law in claims against tobacco companies "is stunted by the ability of tobacco companies to remove cases under diversity jurisdiction," but also that some tobacco litigation has nevertheless taken place in state courts). Assuming that one of plaintiffs' motives for pursuing the trucking and construction defendants is to keep their claims against Exide in state court, that fact would not affect the propriety of remand so long as plaintiffs pursue those defendants in good faith and with a reasonable factual and legal basis for doing so.
Plaintiffs have asked for an award of fees and costs under 28 U.S.C. § 1447(c). After the 1988 amendment to § 1447(c), the provision became a standard "fee-shifting statute, entitling the district court to make whole the victorious party." Garbie v. DaimlerChrysler Corp., 211 F.3d 407, 410 (7th Cir. 2000); accord, Tenner v. Zurek, 168 F.3d 328, 329-30 (7th Cir. 1999). Fees and costs may be awarded without a showing or finding that the removal was in bad faith. Plaintiffs as prevailing parties are "presumptively entitled to recover the attorneys' fees incurred" as a result of the removal. Garbie, 211 F.3d at 411.
The court has some discretion to deny such an award. See, e.g., Pauley v. Ford Electronics Refrigeration Corp., 941 F. Supp. 794, 804 (S.D.Ind. 1996) (denying fees where removal had been "a reasonable and cautious response" to a problematic complaint, and remand was based on difficult issue of federal preemption). In this case, however, the court sees no reasons weighing persuasively against such an award. Removals based on a theory of fraudulent joinder are high risk tactics. In addition, Exide has tried to defend its removal by arguing the wrong legal standard, trying to apply a standard under Rule 12(b)(6) rather than the even tougher standard that applies to fraudulent joinder.
In its surreply brief, Exide has argued that fees should not be awarded because the removal issue is "extremely complex." The court disagrees. Perhaps the merits of the issues — the issues that may be presented to the state court in a motion to dismiss — could be considered "extremely complex." But the issue of fraudulent joinder is not difficult here, at least when the proper standard is applied. Exide's removal has won it nearly a three-month delay in this litigation, but it was not entitled to that delay.
The case is being remanded immediately by this entry, but this court retains jurisdiction sufficient to deal with a fee and cost award. See Wisconsin v. Hotline Industries, Inc., 236 F.3d 363, 367 (7th Cir. 2000) (collecting cases; district court may retain jurisdiction over such collateral matters after remand); Citizens for a Better Environment v. Steel Co., 230 F.3d 923, 927 (7th Cir. 2000) (despite dismissal of underlying action, district court retained jurisdiction to award fees and costs). No later than September 12, 2001, plaintiffs may submit an application for fees and costs "incurred as a result of the removal." See 28 U.S.C. § 1447(c). Exide may file a response no later than 14 days later, and plaintiffs may file a reply no later than seven days later. If either side requests an evidentiary hearing on the matter, that side must file a separate written request to that effect. Otherwise the court will decide the matter on the papers. Plaintiffs may include in their fee request the time they devote to the fee request itself. If the parties are able to agree on an appropriate amount before time and expense are devoted to the amount of any fees and costs, so much the better.
So ordered.