Air-Con, Inc. v. Daikin Applied Latin Am. LLC

AIR-CON, INC., Plaintiff, v. DAIKIN APPLIED LATIN AMERICA LLC, et al., Defendant.

CIVIL NO. 15-2683 (GAG)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

September 19, 2016

OPINION AND ORDER

Presently before the Court is Plaintiff Air-Con, Inc.'s ("Air-Con") motion to remand (Docket No. 10), Daikin Applied Latin America, LLC's ("Daikin Applied") and Technical Distributors, Inc.'s ("Technical") (collectively "Defendants") oppositions thereto (Docket Nos. 13, 15 & 35), and Air-Con's reply (Docket No. 26).¹ After reviewing the filings and the applicable law, Air-Con's motion to remand is GRANTED.

I. Relevant Factual and Procedural Background

On October 21, 2015, Air-Con brought this action against Daikin Applied and Daikin North America, LLC ("Daikin NA") before the Puerto Rico Court of First Instance, seeking damages and injunctive relief for the alleged impairment of an exclusive distribution agreement in violation of the Puerto Rico Dealers' Contract Act ("Law 75), P.R. Laws Ann. tit. 10, § 278 et seq., and for breach of contract under the Puerto Rico Civil Code. (Docket No. 1-2.) Plaintiff also alleges that TechnicalDistributor, Inc. ("Technical") tortuously interfered with its contractual relations with Daikin Applied. Id.

On October 30, 2015, Defendants removed the case to this Court on the basis of diversity jurisdiction.² (Docket No. 1.) They argue that removal is proper under 28 U.S.C. § 1441(a) because Technical, the only non-diverse defendant, was "fraudulently joined to destroy complete diversity jurisdiction in this case." (Docket No. 24, p. 3.) Defendants specifically argue that there is no valid tortious interference claim because (1) Air-Con has failed to plead that Technical had knowledge of the distribution agreement between Air-Con and Daikin Applied, a necessary element of a tortious interference claim (Docket No. 13, p. 2-3), (2) Daikin Applied has no commercial relationship with Technical (Docket No. 24, p. 4-5); and (3) Daikin Applied's agreement with Air-Con is governed by a written contract that only confers non-exclusive distribution rights of Daikin branded products in Puerto Rico and the Caribbean. Id. In the alternative, they contend that the case is removable on the basis of federal question jurisdiction. (Docket No. 24, p. 5-8.)

Air-Con opposed the removal and filed a motion to remand arguing that Defendants have failed to overcome the extremely heavy burden of showing that Air-Con acted fraudulently when it joined Technical as a party to the case. (Docket No. 10.) According to Air-Con, the allegations in the complaint, read together and in the proper context, are sufficient to establish a tortious interference claim against Technical. (Id. at p. 6-7; Docket No. 26, p. 3.) Furthermore, Air-Con argues that the alleged written agreement "is not a binding agreement or contract since the same was never executed by one of its alleged signatories . . . [and that] in the year 2000 Air-Con began itsexclusive distribution relationship with Daikin Applied, not with Daikin Industries." (Docket No. 10, p. 8-9.)

II. Standard of Review

A civil action filed in state court over which the federal courts would have had original jurisdiction based on diversity of citizenship, may be removed to federal court provided that no defendant is a citizen of the State in which such action is brought. Universal Truck & Equip. Co., Inc. v. Southworth-Milton, Inc., 765 F.3d 103, 108 (1st Cir. 2014) (quoting 28 U.S.C. § 1441(b)(2)). Federal courts are courts of limited jurisdiction and, thus, removal statutes are to be narrowly construed. López-Muñoz v. Triple-S Salud, Inc., 754 F.3d 1 (1st Cir. 2014). Accordingly, the removing defendant generally bears the burden of demonstrating the federal court's jurisdiction. Id. "Because removal statutes are narrowly construed against removal, and because of the crucial federalism concerns at play, any ambiguities 'as to the source of law relied upon by the . . . plaintiffs ought to be resolved against removal.'" Bonilla-Pérez v. Citibank NA, Inc., 892 F. Supp. 2d 361, 636-64 (D.P.R. 2012) (citations omitted). Therefore, when plaintiff and defendant clash about federal jurisdiction, all doubts should be resolved in favor of remand to state court. Id. (quoting Junk v. Terminix Int'l Co., 628 F.3d 439, 446 (8th Cir. 2010)); Asoc. de Detallistas de Gasolina de P.R. v. Shell Chem. Yabucoa, Inc., 380 F. Supp. 2d 40, 43 (D.P.R. 2005) (citing Burns v. Windsor Ins. Co., 31 F.3d 1092, 1097 (11th Cir. 1994)).

III. Applicable Law and Analysis

Generally, fraudulent joinder "occurs when a nondiverse party is added solely to deprive the federal courts of diversity jurisdiction." 16 James W. Moore et al., Moore's Federal Practice § 107.52[4][a]. "A party fraudulently joined to defeat removal need not join in a removal petition, and is disregarded in determining diversity of citizenship." Polyplastics, Inc. v. Transconex, Inc.,713 F.2d 875, 877 (1st Cir. 1983). With regard to the analysis that governs claims of fraudulent joinder, the First Circuit recently stated that "it is generally recognized that, under the doctrine of fraudulent joinder, removal is not defeated by the joinder of a non-diverse defendant where there is no reasonable possibility that the state's highest court would find that the complaint states a cause of action upon which relief may be granted against the non-diverse defendant." Universal Truck, 765 F.3d at 108 (citing Poulos v. Naas Foods, Inc., 959 F.2d 69, 73 (7th Cir. 1992) ("[T]he federal court must engage in an act of prediction: is there any reasonable possibility that a state court would rule against the non-diverse defendant?"); McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987) ("If the plaintiff fails to state a cause of action against a resident defendant and the failure is obvious according to the settled rules of the state, the joinder of the resident defendant is fraudulent.")).³

In Universal Truck, however, the First Circuit did not define the term "reasonable possibility[.]" See Rosbeck v. Corin Group, PLC, 140 F. Supp. 3d 197, 202 (D. Mass. 2015). But, as explained in Rosbeck, it is clear that "if existing state law squarely precludes a plaintiff's claim against a non-diverse defendant, and such deficiency is 'apparent from the face of the original complaint,' the nondiverse defendant is fraudulently joined. Rosbeck, 140 F. Supp. 3d at 202 (quoting Universal Truck, 765 F. 3d at 108 ("finding fraudulent joinder when existing state law barred the claim")). "The difficulty arises when no state apex court decision answers the question, notwithstanding indications (opinions in related areas, other jurisdictions' answers to the particular question, etc.) pointing in certain directions." Id.

Generally, "so long as [federal courts] have jurisdiction, [they] must 'decide questions of state law whenever necessary to the rendition of a judgment,' even when 'the answers to the questions of state law are difficult or uncertain or have not yet been given by the highest court of the state.'" Id. (quoting Meredith v. City of Winter Haven, 320 U.S. 228, 234-35 (1943)). When reviewing a fraudulent joinder claim, however, "the district court's task is limited to determining whether there is arguably a reasonable basis for predicting that the state law might impose liability based upon the facts involved. . . . [but] in its review of a fraudulent-joinder claim, the court has no responsibility to definitively settle the ambiguous question of state law." Filla v. Norfolk S. Ry. Co., 336 F.3d 806, 809 (8th Cir. 2003) (emphasis added); see also Rosbeck, 140 F. Supp. 3d at 203; Badon v. RJR Nabisco, Inc., 236 F.3d 282, 285 (5th Cir. 2000).⁴

In determining whether there is no reasonable possibility that the state's highest court would find that the complaint states a cause of action upon which relief may be granted against the non-diverse defendant, Universal Truck, 765 F.3d at 108, the Court must apply a Rule 12(b)(6)-type analysis. See Sea World, LLC v. Seafarers, Inc., Civ. No. 16-1382, 2016 WL 3258360, *4, ___ F. Supp. 3d ___ (D.P.R. 2016); Alpha Biomedical & Diagnostic Corp. v. Philips Med. Sys. Netherland BV, 828 F. Supp. 2d 425, 433 (D.P.R. 2011) (stating that "it seems simplest to treat the inquiry as a modified version of a motion to dismiss, asking whether the state complaint states a plausible claim under [Federal Rule Civil Procedure] 8(a)(2)"); see also Gray ex rel. Rudd v. Beverly Enters.-Mississippi, Inc., 390 F.3d 400, 405 (5th Cir. 2004). Under this standard, all factual and legal issues must be resolved in favor of the plaintiff and a defendant seeking removal bears a "heavy burden"to demonstrate that the joinder is fraudulent. Rosbeck, 140 F. Supp. 3d at 203 (quoting Philips v. Medtronic, Inc., 754 F. Supp. 2d 211, 217 (D. Mass. 2010); Renaissance Mktg. v. Monitronics Int'l, Inc., 606 F. Supp.2d 201, 208 (D.P.R. 2009); 6 Moore's Federal Practice- Civil, supra, § 107.52 [4][c]; see also 14B Charles Alan Wright et al., Federal Practice and Procedure: Jurisdiction and Related Matters § 3723 (4th ed).⁵ The court must also resolve "legal ambiguities in the controlling state law in favor of the non-removing party." Rosbeck, 140 F. Supp. 3d at 203; Bonilla-Pérez, 892 F. Supp. 2d at 365. "All doubts are to be resolved in favor of remand to state court." 6 Moore's Federal Practice- Civil, supra, § 107.52 [4][c].

A. The tortious interference claim

Relying on Sterling Merch., Inc. v. Nestle, S.A., 546 F. Supp. 2d 1, 3 (D.P.R. 2008), Defendants contend that there is no valid tortious interference claim because Daikin Applied has no commercial relationship with Technical. According to Defendants, Technical allegedly obtains its products from a fourth party (not privy to the contract), Goodman Distributors, Inc. (Docket No. 24, p. 4.; see also Sterling Merch., Inc., 546 F. Supp. 2d at 3.) Thus, they argue that, since Technical acquired the...