Opinion
Civil Action No. 1:99CV-37(R)
June 1, 1999.
MEMORANDUM OPINION ORDER
This matter is before the Court on Plaintiff's motion to remand to the Warren Circuit Court. For the following reasons, the motion is DENIED, and Defendants Wiles and Winkenhofer are DISMISSED from this suit.
I. FACTS AND CLAIMS
Plaintiff filed this action in Warren Circuit Court against Defendants Commonwealth Life, David Wiles and David Winkenhofer for breach of contract, fraud, negligent misrepresentation, and violations of the Kentucky Consumer Protection Act regarding the sale of a life insurance policy in 1982. Defendants Commonwealth Life and Wiles filed notice of removal on March 15, 1999, asserting diversity jurisdiction. Plaintiff filed this motion to remand on April 19, 1999.
There is no dispute that Plaintiff and Defendant Wiles are Kentucky citizens, and that Defendant Winkenhofer is a Florida citizen, for purposes of the diversity statute. The parties dispute whether Commonwealth Life is a Kentucky citizen for purposes of diversity.
Defendant Winkenhofer has not answered and the time to do so has passed. The remaining parties agree that he has been properly served.
Plaintiff makes three primary arguments on motion to remand: (1) Defendant Wiles defeats diversity jurisdiction; (2) Defendant Winkenhofer did not join the notice of removal and thus removal was improper; and (3) Defendant Commonwealth Life should be considered a Kentucky citizen and defeat diversity jurisdiction.
Defendants assert that Defendants Wiles and Winkenhofer were fraudulently joined, and that Defendant Commonwealth Life is not a Kentucky resident. Defendants further assert that the motion to remand was not timely, and thus Plaintiff has waived any arguments based on procedural defects to the removal.
II. FRAUDULENT JOINDER
The Sixth Circuit has established that the burden to establish federal jurisdiction is on the removing party and that the "removing party bears the burden of demonstrating fraudulent joinder." Alexander v. Electronic Data Systems, 13 F.3d 940, 948-49 (6th Cir. 1994). The Court recognized that
[t]here can be no fraudulent joinder unless it be clear that there can be no recovery under the law of the state on the cause alleged or on the facts in view of the law. . . . One or the other at least would be required before it could be said that there was no real intention to get a joint judgment, and that there was no colorable ground for so claiming.Id. at 949 (quoting Bobby Jones Garden Apartments, Inc. v. Suleski, 391 F.2d 172, 176 (5th Cir. 1968)).
The Alexander Court established that the ambiguities should benefit the party moving for remand. "[A]ny disputed questions and fact ambiguities and ambiguities in the controlling state law [should be resolved] in favor of the nonremoving party." Id. (quoting Carriere v. Sears Roebuck Co., 893 F.2d 98, 100 (5th Cir. 1990)).
III. CLAIMS AS TO EACH DEFENDANT A. David R. Wiles
The Complaint states that Plaintiff bought the insurance policy in question in 1982, and increased the policy in 1983, but does not describe the role of the individually named defendants. None of the pleadings allege any specific conduct by Defendant Wiles pertaining to these transactions.
Defendant Wiles offers an affidavit which states that he was hired by Commonwealth Life in 1978 in the Somerset office. He worked in the Winchester office in 1982-83, the time of the events giving rise to this suit. Defendant Wiles began working in the Bowling Green office in 1984. Plaintiff does not dispute these assertions, but argues in his reply brief that "Wiles supervised agent David Winkenhofer. Furthermore, after that date there were numerous transactions that occurred between Wile's subordinate, Winkenhofer, and the Plaintiff including the sale of policies in 1989 and 1991." (Plaintiff's reply, dkt. # 13 at 1).
As discussed below, the Complaint does not specifically address the actions of Defendants Wiles or Winkenhofer. The Complaint, as it pertains to Plaintiff Strenkowski, is based on the 1982-83 transactions, and does not assert any cause of action for transactions in 1989 and 1991. Since the Complaint fails to state a claim against Defendant Wiles, and that it is undisputed that Defendant Wiles had no role in the 1982-83 transaction, it is clear that there can be no recovery under the law of the Kentucky on the cause alleged. Therefore, Defendant Wiles was fraudulently joined in this suit.
B. David Winkenhofer
Plaintiff asserts that this case must be remanded because Defendant Winkenhofer did not join in the notice of removal. The Sixth Circuit has held that later-served defendants have thirty days from which they were served to join or consent to removal. Brierly v. Alusuisse Flexible Packaging, Inc., 170 F.3d 583, 588 (6th Cir. 1999). Implicit in its reasoning is the rule that all defendants must join or consent to removal, and the Sixth Circuit has recognized in dicta that a notice of removal is defective if not joined by all defendants. Michigan Affiliated Healthcare System, Inc. v. CC Systems Corp. of Michigan, 139 F.3d 546, 548-49 (6th Cir. 1997).
The Eastern District of Kentucky has recognized the "rule of unanimity among defendants required for removal, which . . . provides that `all defendants who may properly join in the removal petition must join.'" Mitchell v. Kentucky-American Water Co., 178 F.R.D. 140, 142 (E.D. Ky. 1997) (quoting 1A James W. Moore et al., Moore's Federal Practice ¶ 0.168 [3.-2-2], at 547-48 (2d ed. 1992)). The Mitchell Court held that "if the first-served defendant abstains from seeking removal or does not effect a timely removal, subsequently served defendants cannot remove." Mitchell at 142 (quoting Moore's at ¶ 0.168[3.5-5], at 586-87).
Several other federal courts have also recognized the requirement of unanimity among defendants for effective removal. See 14C Wright Miller § 3731 at 258; Getty Oil Corporation v. Insurance Co. of North America, 841 F.2d 1254, 1262 (5th Cir. 1988); Winners Corporation v. LaFayette Life Insurance Co., 734 F. Supp. 812, 814 (M.D. Tn 1989); Bradley v. Miller, 733 F. Supp. 54, 55 (E.D. Mich, 1990).
Defendants assert that since Plaintiff filed his motion to remand 35 days after the notice of removal was filed, the motion remand was filed late and Plaintiff waived any procedural arguments. Section 1447(c) of 28 U.S.C. requires a motion to remand be "made within thirty days after the filing of the notice of removal under section 1446(a)." (emphasis added). Both parties cite authority for whether Plaintiff should be afforded three days for mailing.
The clear language of the statute clearly requires a motion to remand to be made within thirty days after the "filing" of a notice of removal, and Plaintiff's motion was not timely in this case. Plaintiff would have waived any procedural arguments, such as if a defendant had joined in the notice of removal late. However, in this case, Defendant Winkenhofer has never joined in the removal of this case which rises above a mere procedural violation of the unanimity requirement.
However, the Court can find no cases where the unanimity requirement has been applied in a case, such as this one, where a defendant has failed to answer and the time to do so has passed. It would be inherently unfair to require the unanimity requirement where one defendant has taken no steps toward participating in the suit, and the removing defendants are unable to contact him. Therefore, the failure of Defendant Winkenhofer to join or consent to the removal of this case does not render the removal petition improper.
In the alternative, the unanimity requirement is moot in this case because Defendant Winkenhofer was fraudulently joined. The Complaint does not assert a single action taken by him. The Complaint only asserts that he was an "agent" of Defendant Commonwealth and that "agents" of Defendant Commonwealth perpetrated fraud against Plaintiff. Again, Plaintiff states in his reply brief that "there were numerous transactions" between Winkenhofer and Plaintiff, but it does not state that the 1982-83 transactions are included. Since the Complaint fails to state a claim against Defendant Winkenhofer it is clear that there can be no recovery under the law of the Kentucky on the cause alleged, and Defendant Winkenhofer was fraudulently joined in this suit. Therefore, it is irrelevant whether Defendant Winkenhofer joined or consented to the removal of this case.
C. Commonwealth Life Insurance Company
Plaintiff asserts that Defendant Commonwealth Life must be considered a Kentucky resident for purposes of diversity jurisdiction. Commonwealth Life, a former Kentucky corporation, was merged with Monumental Life Insurance Co. in 1998. Monumental is a Maryland corporation with its principal place of business in Maryland.
Plaintiff relies on K.R.S. 271B.11-070(2) and section 200 of the Kentucky Constitution, which give Kentucky courts jurisdiction over the "corporate property" remaining in the state of a Kentucky corporation that is merged or consolidated with an out of state corporation.
Plaintiff overstates the applicability of the statute and constitution. The issue of citizenship for purposes of diversity jurisdiction under 28 U.S.C. § 1332 is a separate issue from whether Kentucky courts retain personal jurisdiction over certain entities. The diversity statute states that "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." 28 U.S.C. § 1332 (c)(1).
Plaintiff also relies on Ripalda v. American Operations Corp., 977 F.2d 1464 (D.C. Cir. 1992), in which the court found that a Delaware statute expressly authorized Delaware courts to continue to treat an otherwise dissolved corporation as an existing corporate body for three years following dissolution; and Johnson v. Colonial Pipeline Co., 830 F. Supp. 309 (E.D.Va. 1993), in which the court held that a state statute that required a corporation to be incorporated in that state did not defeat citizenship for diversity purposes merely because the incorporation was not voluntary.
Johnson and Ripalda are distinguishable from the case at hand because the statutes in question are not similar in any way to the K.R.S. 271B.11-070(2) and section 200 of the Kentucky Constitution. The statutes in those cases addressed actual incorporation within that state, not merely personal jurisdiction over the corporate entities.
Defendant relies on Eaton Asphalt Paving Co. v. CSX Transportation, Inc., 1999 WL 179466 (submitted for publication pending plaintiff's petition for discretionary review). The Eaton Court reasoned that section 200 of the Kentucky Constitution does not "confer any benefit or privileges on a foreign corporation that had consolidated by sale or otherwise with a domestic corporation. Id. at *5. The Eaton Court held that "a foreign corporation which is the result of a merger with a domestic corporation is a foreign corporation for all purposes other than the limited purpose of conferring jurisdiction in the courts of [Kentucky] to litigate issues concerning corporate property located in this state." Id.
Despite the lack of finality of this opinion, it is a strong indication that Kentucky courts would not consider the corporation in this case to be incorporated in Kentucky or be a Kentucky citizen.
Since the corporate defendant in this case is not currently incorporated in Kentucky, does not have its principal place of business in Kentucky, and there are no Kentucky statutes recognizing the existence of the former corporate entity that had been incorporated in Kentucky, it is not a citizen of Kentucky for diversity purposes. Therefore, the Court has diversity jurisdiction over the remaining two parties in this case and remand would not be appropriate.
THEREFORE, IT IS ORDERED:
(1) Plaintiff's motion to remand (dkt. # 7) is DENIED.
Defendants Wiles and Winkenhofer are DISMISSED from this suit.
(3) Plaintiff's motion to stay proceedings and to extend time to respond to Defendants' motion to dismiss (dkt. # 9-1 and 9-2) is MOOT consistent with the scheduling order filed May 26, 1999.