Ashford v. Aeroframe Servs., L.L.C.

907 F.3d 385

Michael ASHFORD, Plaintiff-Appellant Cross-Appellee

v.AEROFRAME SERVICES, L.L.C., Defendant-Appellee Cross-Appellant

Aviation Technical Services, Incorporated, Defendant-Appellee

Michael Ashford, Plaintiff-Appellant

v.Aviation Technical Services, Incorporated, Defendant-Third Party Plaintiff-Appellee

v.Roger A. Porter, Third Party Defendant-Appellant

No. 17-30142

consolidated with 17-30483

United States Court of Appeals, Fifth Circuit.

FILED October 26, 2018

Somer George Brown, Attorney, Cox, Cox, Filo, Camel & Wilson, L.L.C., Lake Charles, LA, for Plaintiff-Appellant Cross-Appellee.

Lawrence Charles Billeaud, Lafayette, LA, for Defendant-Appellee Cross-Appellant.

Robert Patrick Vance, Esq., Heather Lindsey Kirk, Jones Walker, L.L.P., New Orleans, LA, Samuel Bryan Gabb, Plauche, Smith & Nieset, L.L.C., Lake Charles, LA, for Defendant-Appellee.

Thomas Allen Filo, Esq., Cox, Cox, Filo, Camel & Wilson, L.L.C., Lake Charles, LA, Richard Haik, Jr., Attorney, Morrow, Morrow, Ryan, Bassett & Haik, Opelousas, LA, Paul James Masinter, Esq., Charles Lawrence Orlansky, Nicholas John Wehlen, Esq., Stone Pigman Walther Wittmann, L.L.C., New Orleans, LA, for Third Party Defendant-Appellant.

Before DAVIS, JONES, and HIGGINSON, Circuit Judges.

STEPHEN A. HIGGINSON, Circuit Judge:

Plaintiff–Appellant Michael Ashford commenced this litigation in October 2013, bringing claims under Louisiana law in Louisiana court against Defendant–Appellee Aeroframe Services, LLC, and Defendant–Appellee Aviation Technical Services, Inc. (ATS). Both Ashford and Aeroframe are Louisiana citizens. The litigation proceeded in state court for some months until ATS removed to federal court on the theory that Ashford and Aeroframe had settled. On the contrary, Ashford’s claims remained pending against Aeroframe.

As the Supreme Court has emphasized, federal diversity-of-citizenship jurisdiction "depends upon the state of things at the time of the action brought." Grupo Dataflux v. Atlas Glob. Grp., L.P. , 541 U.S. 567, 570–71, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004) (quoting Mollan v. Torrance , 22 U.S. (9 Wheat.) 537, 539, 6 L.Ed. 154 (1824) ). "This time-of-filing rule is hornbook law (quite literally) taught to first-year law students in any basic course on federal civil procedure." Id. (footnote omitted). And the law is no different in cases removed from state court. "Consistent with general principles for determining federal jurisdiction, ... diversity of citizenship must exist both at the time of filing in state court and at the time of removal to federal court."

Coury v. Prot , 85 F.3d 244, 248–49 (5th Cir. 1996) (emphases added); see also, e.g. , Stevens v. Nichols , 130 U.S. 230, 231–32, 9 S.Ct. 518, 32 L.Ed. 914 (1889) ; 14C Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 3723 & n.16 (4th ed. updated Sept. 2018).

There was no diversity of citizenship at the time this suit was filed. At that point, two of the parties, Plaintiff Michael Ashford and Defendant Aeroframe Services, were Louisiana citizens. It is true, of course, that courts must "look beyond the pleadings, and arrange the parties according to their sides in the dispute." City of Indianapolis v. Chase Nat. Bank of City of N.Y. , 314 U.S. 63, 69, 62 S.Ct. 15, 86 L.Ed. 47 (1941). It is also true that the magistrate judge in this case found that Ashford and Aeroframe became aligned as the litigation progressed. But the magistrate judge specifically rejected the argument that the two parties were aligned from the beginning. This latter factual finding has not been appealed. So even accounting for the possibility of realignment, "the state of facts that existed at the time of filing" failed to meet the jurisdictional prerequisite of complete diversity. Grupo , 541 U.S. at 571, 124 S.Ct. 1920.

According to the dissenting opinion, we "recognized" in Zurn Industries, Inc. v. Acton Construction Co. , 847 F.2d 234 (5th Cir. 1988), that realignment of the parties "is an exception" to the time-of-filing rule. With respect, Zurn says no such thing. The cited portion of the opinion merely describes the principle, familiar from City of Indianapolis , that federal courts are not bound by the labels the parties give themselves in the pleadings. See id. at 236. Nowhere did Zurn obviate the hornbook law that diversity must exist "at the inception of the lawsuit." Id. at 238. To the contrary, Zurn ’s jurisdictional analysis refused to consider post-commencement events like "cross-claims and counterclaims filed by the defendants," and instead held that the parties' alignment for jurisdictional purposes "is to be determined by the plaintiff’s principal purpose for filing suit ." Id at 237 (emphasis added). Because the magistrate judge found that Ashford’s "principal purpose" for suing Aeroframe was legitimate (a finding that no one appeals), fidelity to Zurn requires relinquishing the case.

The dissenting opinion also relies on a provision of the removal statute, which contemplates that a suit may "become removable" after it is filed. 28 U.S.C. § 1446(b)(3). No doubt, that is sometimes true. For example, a suit may "become removable" when a plaintiff amends the complaint to add a federal cause of action. See § 1331. It may become removable when a defendant discovers that he qualifies as a federal officer. See § 1442(a)(1); Morgan v. Huntington Ingalls, Inc. , 879 F.3d 602, 607 (5th Cir. 2018). And it may even become removable when the only nondiverse defendant is formally dropped from the suit. See § 1332(a); Grupo , 541 U.S. at 572–73, 124 S.Ct. 1920 ; Caterpillar Inc. v. Lewis , 519 U.S. 61, 68–69, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996). But none of these circumstances obtains here.

Finally, the dissenting opinion cites Peters v. Standard Oil Co. of Texas for the proposition that "any realignment of parties should take place before jurisdiction is decided." That assertion seems undoubtedly correct. In Peters , for example, our court examined the facts in existence at the time of filing and concluded that the "real interest" of one defendant aligned him with the plaintiffs. 174 F.2d 162, 163 (5th Cir. 1949). We therefore treated him as a plaintiff in the diversity analysis. See id. Likewise, a proper jurisdictional analysis in this case would begin by looking for potential realignment. But again, unlike in Peters , the magistrate judge here found that Ashford and Aeroframe were (at least initially) adverse. And because that plaintiff and that defendant are both citizens of Louisiana, it cannot be said that diversity of citizenship existed "at the time of filing in state court." Coury , 85 F.3d at 248–49.

Accordingly, the district court’s judgment is VACATED, and the matter is REMANDED with instructions to remand to state court.¹

I would conclude that diversity jurisdiction is lacking in this matter because the record does not contain a sufficient basis to find that Ashford and Aeroframe are not adverse parties. Although our precedent provides that a case can become removable under federal diversity jurisdiction if the plaintiff and the nondiverse defendant enter into an irrevocable settlement agreement, Vasquez v. Alto Bonito Gravel Plant Corp. , 56 F.3d 689, 693 (5th Cir. 1995), no such agreement was ever produced in this case. "[A]bsent such an irrevocable settlement, the nondiverse defendant remain[s] a party to the case." Id. at 690.

Furthermore, assuming that realignment is permitted to establish diversity jurisdiction upon removal, it was improper to realign Aeroframe as a plaintiff in this matter based on an email generated by Ashford’s counsel. I acknowledge that diversity jurisdiction cannot be manufactured "by the parties' own determination of who are plaintiffs and who defendants." City of Indianapolis v. Chase Nat'l Bank , 314 U.S. 63, 69, 62 S.Ct. 15, 86 L.Ed. 47 (1941). However, we cannot cast aside the rule that the alignment of parties "must be ascertained from the ‘principal purpose of the suit’ and the ‘primary and controlling matter in dispute.’ " Id. at 69–70, 62 S.Ct. 15 (citations omitted).¹

In his petition, Ashford sued Aeroframe, his former employer, under the Louisiana Last Paycheck Law, La. R.S. 23:631, for unpaid wages and related damages. Ashford also sued ATS for negligence, interference with contract, and unfair trade practices and again sought as damages unpaid wages and other lost benefits, as well as future wages. Thus, the principal purpose for the filing of Ashford’s suit was to recover his unpaid wages and related damages resulting from the termination of his employment by Aeroframe. In its answer, Aeroframe denied the allegations in Ashford’s petition and further prayed for judgment in its favor and against Ashford. The record shows that since the filing of its answer, Aeroframe itself has made no assertions, admissions, and/or stipulations inconsistent with its answer.² Moreover, in its appellate brief, Aeroframe specifically asserts that it "has never agreed that statutory penalties are owed to Mr. Ashford, even if he can establish he is owed any back owed wages (which Aeroframe has disputed and continues to dispute)." Consequently, the necessary "collision of interest," City of Indianapolis , 314 U.S. at 69, 62 S.Ct. 15, exists between Ashford and Aeroframe such that no realignment is warranted.³

Judge Jones takes the position that an email, which was drafted by Ashford’s counsel to Ashford and other former employees of Aeroframe whom counsel is representing, reflects "Aeroframe’s promise to pay Ashford" and "states that all of Ashford’s requested relief (‘wages, penalties, and attorney’s fees’) would be stipulated to by Aeroframe." Judge Jones posits that the email constitutes "proof that Aeroframe and Ashford had the same ‘ultimate interests’ in the outcome of the action."

My problem with such "proof" is that the email was drafted by Ashford’s counsel. We have nothing from Aeroframe confirming a promise to pay and/or to stipulate to...