Opinion
Civil Action No. 20-cv-01525-CMA-NYW
07-09-2020
TOKIO MARINE KILN SYNDICATES, LTD., Plaintiff, v. ELECTROLUX HOME PRODUCTS, INC., a Delaware corporation, USEONG INTERNATIONAL, an Illinois corporation, and USEONG ELECTRO-MECHANICS CO., LTD., a South Korean company, Defendants; USEONG INTERNATIONAL, an Illinois corporation, Third-Party Plaintiff, v. LYNN CUNNINGHAM APPLIANCE, INC., a Colorado corporation, Third-Party Defendant.
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
This matter comes before the court on the Order to Show Cause dated June 30, 2020, [#15], and Defendant Electrolux Home Products, Inc.'s ("Electrolux") Response to the Order to Show Cause dated June 17, 2020, [#17]. Upon review of the Response, the comments offered at the June 24, 2020 Status Conference, the Parties' Joint Status Report, [#34], and the applicable case law, this court respectfully RECOMMENDS that this matter be REMANDED to the District Court for Larimer County, Case No. 2020CV30294, for lack of federal subject matter jurisdiction.
BACKGROUND
On or about April 21, 2020, Plaintiff Tokio Marine Kiln Syndicates, Ltd. ("Plaintiff" or "Tokio Marine") initiated this civil action by filing its Complaint in the District Court for Larimer County (the "Larimer County District Court"), Case No. 2020CV30294. [#3]. On or about April 23, 2020, Plaintiff filed the operative Amended Complaint in the Larimer County District Court, asserting state law claims for negligence, strict liability, and breach of implied warranties of fitness for a particular purpose and merchantability against Electrolux and Defendants Useong International and Useong Electro-Mechanics Co., Ltd. (collectively, "Defendants"). See generally [#3].
Electrolux then removed this matter to this District based on diversity jurisdiction pursuant to 28 U.S.C. § 1332 on May 28, 2020. [#1]. Specifically, Electrolux asserts Plaintiff is an alien corporation, incorporated and maintaining its principal place of business in England; Defendant Useong International is an Illinois corporation with its principal place of business in Illinois; Defendant Useong Electro-Mechanics Co., Ltd. is an alien corporation, incorporated and maintaining its principal place of business in South Korea; and Electrolux is a Delaware corporation with its principal place of business in North Carolina. See [id. at ¶¶ 17-20]. According to Electrolux, "there is complete diversity of citizenship between the parties, as Plaintiff and Defendants are citizens of different states." [Id. at ¶ 21].
Given its concerns regarding complete diversity among the parties sufficient for federal subject matter jurisdiction, this court issued an Order to Show Cause directed at Electrolux on June 3, 2020. [#15]. The Order to Show Cause explained that complete diversity did not appear satisfied given the appearance of foreign entities on both sides of the dispute, i.e., Toki Marine (a United Kingdom entity) and Useong Electro-Mechanic Co., Ltd. (a South Korean entity). See [id. at 3]. Accordingly, this court ordered Electrolux to show cause in writing why this court should not recommend remand of this civil action for lack of complete diversity. [Id.].
Electrolux filed its Response to the Order to Show Cause on June 17, 2020. [#17]. In it, Electrolux raised two reasons as to why the court should not remand this matter: first, there was uncertainty as to whether a Colorado citizen, Brinkman Construction, Inc., was also a real party in interest as an additional Plaintiff (thereby satisfying diversity) depending on whether "Tokio [Marine] is fully or partially subrogated to the claims of Brinkman Construction"; and second, there was uncertainty as to whether Plaintiff could serve Useong Electro-Mechanics Co., Ltd. and maintain personal jurisdiction over this foreign entity because, if not, there would no longer be aliens on both sides of the dispute. See [id. at 2-5]. Based on the Response, this court conducted a Status Conference with the Parties on June 24, 2020, at which Plaintiff indicated it was not seeking recovery of the deductible paid by Brinkman Construction, Inc. and that it had started the service procedures under the Hague Convention for Useong Electro-Mechanics Co., Ltd. but was unsure how long that process would take given the COVID-19 pandemic. See [#29]. The undersigned ordered the Parties to confer on the issue of Brinkman Construction, Inc. and to file a Joint Status Report by July 8, 2020. See [id.].
The Parties filed their Joint Status Report on July 8, 2020. See [#34]. The Joint Status Report indicates that, based on documents exchanged between the Parties, "[Plaintiff's] claims against Electrolux and the other defendant do not include any claims for the amount of Brinkman Construction's deductible." [Id. at 2 (emphasis added)]. Given these representations, this Recommendation to remand follows.
LEGAL STANDARDS
A federal court must satisfy itself as to its own jurisdiction and may take sua sponte action to do so. See Citizens Concerned for Separation of Church & State v. City & Cnty. of Denver, 628 F.2d 1289, 1297 (10th Cir. 1980). "The party invoking federal jurisdiction bears the burden of establishing such jurisdiction as a threshold matter." Radil v. Sanborn W. Camps, Inc., 384 F.3d 1220, 1224 (10th Cir. 2004). A court should not proceed having not first assured itself that jurisdiction exists. See Cunningham v. BHP Petroleum Great Britain PLC, 427 F.3d 1238, 1245 (10th Cir. 2005)..
One avenue for federal subject matter jurisdiction is diversity jurisdiction pursuant to 28 U.S.C. § 1332(a). Section 1332(a) states,
(a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000 exclusive of interest and costs, and is between—
28 U.S.C. § 1332(a)(1)-(4). "Diversity jurisdiction requires complete diversity—no plaintiff may be a citizen of the same state as any defendant." See Grynberg v. Kinder Morgan Energy Partners, L.P., 805 F.3d 901, 905 (10th Cir. 2015). Relevant here, complete diversity does not exist where there are only foreign entities on both sides of th[e] dispute," Mgmt. Nominees, Inc. v. Alderney Investments, LLC, 813 F.3d 1321, 1325 (10th Cir. 2016), "or where on one side there are citizens and aliens and on the opposite side there are only aliens," Bayerische Landesbank, New York Branch v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 49 (2d Cir. 2012) (ellipsis omitted) (quoting Univ. Licensing Corp. v. Paola del Lungo S.p.A., 293 F.3d 579, 581 (2d Cir. 2002)).(1) citizens of different States;
(2) citizens of a State and citizens or subjects of a foreign state, except that the district courts shall not have original jurisdiction under this subsection of an action between citizens of a State and citizens or subjects of a foreign state who are lawfully admitted for permanent residence in the United States and are domiciled in the same State;
(3) citizens of different States and in which citizens or subjects of a foreign state are additional parties; and
(4) a foreign state, defined in section 1603(a) of this title, as plaintiff and citizens of a State or of different States.
"The burden of establishing subject-matter jurisdiction is on the party asserting jurisdiction." Montoya v. Chao, 296 F.3d 952, 955 (10th Cir. 2002). When a civil action is removed, courts strictly construe removal statutes, and federal courts will "presume no jurisdiction exists absent an adequate showing by the party invoking federal jurisdiction." Karnes v. Boeing Co., 335 F.3d 1189, 1193, 1194 (10th Cir. 2003). Indeed, the removal statute provides that a case "shall" be remanded "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction." 28 U.S.C. § 1447(c).
ANALYSIS
As discussed, Electrolux removed this civil action based on complete diversity of the Parties on May 28, 2020. The Notice of Removal indicated that Plaintiff was a United Kingdom entity and therefore a citizen of the United Kingdom; that Defendant Useong International was a citizen of Illinois; that Defendant Useong Electro-Mechanics Co., Ltd. was a South Korean entity and therefore a citizen of South Korea; and Electrolux was a citizen of Delaware and North Carolina. See [id. at ¶¶ 17-20]. Based on this information, there is only an alien on one side of the dispute (i.e., Plaintiff) and aliens (i.e., Useong Electro-Mechanics Co., Ltd.) and citizens of the United States (i.e., Useong International and Eletrolux) on the other side of the dispute. Under such circumstances, federal courts lack subject matter jurisdiction because complete diversity is not satisfied. See Gschwind v. Cessna Aircraft Co., 232 F.3d 1342, 1345 (10th Cir. 2000) (noting that "the circuits that have considered the issue read § 1332(a)(2) to require United States citizens on both sides of an action between foreign citizens."); Air Century SA v. Atlantique Air Assistance, 447 F. App'x 879, 881 (10th Cir. 2011) (concluding there was no subject matter jurisdiction where a foreign plaintiff sued a United States citizen and foreign entity, "[b]ecause Air Century and Atlantique are undisputedly both foreign citizens, complete diversity never existed.").
Nor does this court find convincing Electrolux's two arguments for why remand is not warranted. First, Electrolux directed this court to no case law, authoritative or otherwise, that would permit limited jurisdictional discovery to determine whether Brinkman Construction, Inc. was a real party in interest as an additional plaintiff. To be sure, limited jurisdictional discovery may be appropriate to resolve issues of sovereign immunity, see Breakthrough Mgmt. Grp., Inc. v. Chukchansi Gold Casino & Resort, 629 F.3d 1173, 1189 (10th Cir. 2010), or to resolve issues of personal jurisdiction, see Health Grades, Inc. v. Decatur Mem'l Hosp., 190 F. App'x 586, 589 (10th Cir. 2006), or to resolve issues of the citizenship of an unincorporated entity's members for purposes of complete diversity, see Lincoln Ben. Life Co. v. AEI Life, LLC, 800 F.3d 99, 108-09 (3d Cir. 2015). But the limited discovery suggested by Electrolux does not involve any of these issues. Moreover, after conferring further on the issue, and indeed exchanging relevant documents, it has been established that Brinkman Construction, Inc. is not an additional real party in interest as a co-plaintiff.
Second, this court is not persuaded that complete diversity may exist at some point, such that remand is not warranted, based on whether Plaintiff effectuates service on Useong Electro-Mechanics Co., Ltd. At this point, Useong Electro-Mechanics Co. Ltd. is a named Defendants and is a foreign entity like Plaintiff. Thus, complete diversity does not exist. See Oteng v. Golden Star Res., Ltd., 615 F. Supp. 2d 1228, 1234 (D. Colo. 2009) ("Where aliens from foreign states are on both sides of the case, the requirement of complete diversity is lacking.").
Indeed, taken to its logical conclusion, Electrolux's argument would mean that a defendant could simply remove an action to federal court on an unproven assumption that a foreign-entity defendant will never be served based on the challenges presented by international service, or have a case proceed in federal court until that foreign-entity defendant is served due to the protracted time required for service in some cases. Such a conclusion is at odds with the principle that federal courts are of limited jurisdiction. While complete diversity is lacking currently, Electrolux may be able to remove this civil action should Useong Electro-Mechanics Co., Ltd. be dismissed from this civil action and if Electrolux removes within 30 days of that dismissal so long as it occurs within 1 year of the commencement of this civil action, unless Electrolux can prove bad faith on the part of Tokio Marine. 28 U.S.C. §§ 1446(b)(3)-(c).
CONCLUSION
Based on the foregoing, this court respectfully RECOMMENDS that:
(1) This matter be REMANDED to the District Court for Larimer County, Case No. 2020CV30294.DATED: July 9, 2020
Within fourteen days after service of a copy of this Recommendation, any party may serve and file written objections to the magistrate judge's proposed findings of fact, legal conclusions, and recommendations with the Clerk of the United States District Court for the District of Colorado. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b); Griego v. Padilla (In re Griego), 64 F.3d 580, 583 (10th Cir. 1995). A general objection that does not put the district court on notice of the basis for the objection will not preserve the objection for de novo review. "[A] party's objections to the magistrate judge's report and recommendation must be both timely and specific to preserve an issue for de novo review by the district court or for appellate review." United States v. 2121 East 30th Street, 73 F.3d 1057, 1060 (10th Cir. 1996). Failure to make timely objections may bar de novo review by the district judge of the magistrate judge's proposed findings of fact, legal conclusions, and recommendations and will result in a waiver of the right to appeal from a judgment of the district court based on the proposed findings of fact, legal conclusions, and recommendations of the magistrate judge. See Vega v. Suthers, 195 F.3d 573, 579-80 (10th Cir. 1999) (holding that the district court's decision to review magistrate judge's recommendation de novo despite lack of an objection does not preclude application of "firm waiver rule"); Int'l Surplus Lines Ins. Co. v. Wyo. Coal Refining Sys., Inc., 52 F.3d 901, 904 (10th Cir. 1995) (finding that cross-claimant waived right to appeal certain portions of magistrate judge's order by failing to object to those portions); Ayala v. United States, 980 F.2d 1342, 1352 (10th Cir. 1992) (finding that plaintiffs waived their right to appeal the magistrate judge's ruling by failing to file objections). But see Morales-Fernandez v. INS, 418 F.3d 1116, 1122 (10th Cir. 2005) (holding that firm waiver rule does not apply when the interests of justice require review).
BY THE COURT:
/s/_________
Nina Y. Wang
United States Magistrate Judge