Ayres v. Sears

571 F.Supp.2d 768

Jon AYRES and Vera Ayres, Plaintiffs, v. SEARS, et al., Defendants.

No. EP-08-CV-093-PRM.

United States District Court, W.D. Texas, El Paso Division.

August 18, 2008.

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Brett Allen Duke, Brett Duke, P.C., Jason Chapman, El Paso, TX, for Plaintiffs.

Ricardo Ortiz, Delgado, Acosta, Braden & Johnes, P.C., Dallas, TX, for Defendants.

Alejandro Acosta, Jr., Bickerstaff Heath Delgado Acosta LLP, El Paso, TX, Plaintiffs/Defendants.

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION TO REMAND

PHILIP R. MARTINEZ, District Judge.

On this day, the Court considered: (1) Plaintiffs' Jon Ayres and Vera Ayres (collectively "Plaintiffs") "Motion to Remand," filed on April 10, 2008; (2) Defendants' Sears et al. (collectively "Defendants") "Response to Plaintiffs' Motion to Remand," ("Response"), filed on April 21, 2008; and (3) Plaintiffs' "Reply to Response to Motion to Remand," filed on April 30, 2008, in the above-captioned cause. After due consideration, the Court is of the opinion that Plaintiffs' Motion to Remand should be granted in part and denied in part for the reasons set forth below.

I. FACTUAL AND PROCEDURAL BACKGROUND

In March of 1987, Plaintiffs began the ten-year construction of their 4,200 square foot retirement home ("home") located in Marfa, Texas. Pls.' Am. Orig. Pet ¶ 14. During the course of construction, Plaintiffs installed a solar electrical system ("system") to provide power for heating and cooling their home. Id. The system used twelve 2-volt batteries, which "were required to be equalized." Id. In order to maintain the equalization of the batteries, Plaintiffs sought to purchase a generator from Defendant Sears. Id. ¶ 15. Plaintiffs claim that after learning of their needs, Defendant Sears recommended that they purchase a Craftsman 6300 Watt Electric Start Generator ("generator"). Id. On October 20, 2005, Plaintiffs went to pick up the generator from a Sears store located in El Paso, Texas. Id. ¶ 16. Upon picking up the generator, Plaintiff Jon Ayres alleges that he requested that Defendants Sears' El Paso, Texas Employees ("Employees") both assemble and test the generator. Id. Plaintiffs further allege that Juan Padilla ("Defendant Padilla"), as "store coach"¹ of the Sears El Paso store, and the Employees "represented to them that the Generator was properly assembled" and working correctly. Id. Plaintiffs installed the generator in their home, and after a short period of use, they allege that it "failed and caught fire," resulting in significant damage to their home. Id. ¶¶ 17-18.

On October 5, 2007, Plaintiffs filed their Original Petition in the 34th Judicial District Court of El Paso County, Texas. Pls.' Orig. Pet. 1. Therein, Plaintiffs allege breach of express and implied warranties, breach of contract, and violations of the Texas Deceptive Trade Practices Act due to the alleged malfunction of the generator. Id. ¶¶ 30-41. On November 16, 2007, Plaintiffs filed their Amended Original Petition, therein adding Defendant Padilla as a defendant. Pls.' Am. Orig. Pet. ¶ 9. On March 18, 2008, Defendants removed this action from Texas state court to the United States District Court for the Western District of Texas on the basis of diversity jurisdiction, alleging fraudulent joinder. Defs.' Notice of Removal 1.

Plaintiffs are both citizens of Texas. Id. at 3. All Defendants originally named in this action are citizens of foreign states. Id. at 3-4. Defendants contend that the Employees are a fictional entity.² Id. at 4. However, Defendant Padilla is a citizen of Texas. Defs.' Resp. 3. Thus, diversity of citizenship exists only if the Court disregards the citizenship of Defendant Padilla.

Defendants argue that the Court can ignore the citizenship of Defendant Padilla because Plaintiffs fraudulently joined him in an effort to defeat diversity.³ Defs.' Notice of Removal 5. Plaintiffs argue that in addition to untimely removing this action, Defendants have failed in their attempt to prove the alleged fraudulent joinder of Defendant Padilla. Pls.' Mot. to Remand 1. Accordingly, the issues presently before the Court are: (1) whether Defendants timely removed this action, and (2) whether Plaintiffs fraudulently joined Defendant Padilla in order to defeat diversity.

II. STANDARD

When plaintiffs choose to file suit in state court, defendants may remove the case to federal court if there is complete diversity of citizenship among the parties involved and the amount in controversy exceeds $75,000. 28 U.S.C. §§ 1332, 1441(a). Removal of a case from state to federal court is timely if notice of removal is filed either within (1) thirty days of receipt by defendants of the initial pleading stating a claim for relief, or (2) "thirty days after the service of summons upon the defendant[s] if such initial pleading has then been filed in court and is not required to be served on the defendant[s], whichever period is shorter." Id. at § 1446(b). If the initial pleading does not state a claim justifying removal, defendants may file a notice of removal within thirty days after receipt of "a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable." Id. (emphasis added).

While the language of § 1446(b) does not expressly mention fraudulent joinder, courts have held that defendants have thirty days to remove a case once they discover the existence of fraudulent joinder. See e.g., Jernigan v. Ashland Oil Inc., 989 F.2d 812, 814-15 (5th Cir.1993) (finding removal timely where defendants removed within thirty days of discovering fraudulent joinder); Delaney v. Viking Freight Inc., 41 F.Supp.2d 672, 674 (E.D.Tex.1999) (stating that "[i]n the fraudulent joinder context, a defendant has 30 days from the date that the fraudulent joinder could first be ascertained in which to file a notice of removal.").

To establish fraudulent joinder, a removing party must show either "(1) actual fraud in a plaintiff's pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse defendants in state court." Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir.2004) (en banc) (quoting Travis v. Irby, 326 F.3d 644, 647 (5th Cir.2003)). Because Defendants have not alleged actual fraud in Plaintiffs' pleading of jurisdictional facts, only the latter method of establishing fraudulent joinder is before the Court.

If the court is satisfied that the defendants timely removed their case from state to federal court, it must then determine whether the defendants have demonstrated that "there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant." Id. at 573. "The party seeking removal bears a heavy burden of proving that the joinder of the instate party was improper." Id. at 574. Moreover, the removing party must prove fraudulent joinder by clear and convincing evidence. Grassi v. Ciba-Geigy, Ltd., 894 F.2d 181, 186 (5th Cir.1990).

The Fifth Circuit recognizes an exception in the fraudulent joinder context regarding the traditional voluntary-involuntary rule, which is a judicially created rule "whereby `an action nonremovable when commenced may become removable thereafter only by the voluntary act of the plaintiff.'" Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d 529, 532 (5th Cir.2006) (quoting Weems v. Louis Dreyfus Corp., 380 F.2d 545, 547 (5th Cir.1967)). In Crockett, the Fifth Circuit went on to state that "[c]ourts have long recognized an exception to the voluntary-involuntary rule where a claim against a nondiverse or in-state defendant is dismissed on account of fraudulent joinder." Id. In a removal action, it is the removing party that "bear[s] the burden of establishing jurisdiction." Boone v. Citigroup, Inc., 416 F.3d 382, 388 (5th Cir.2005). Additionally, "[a]ny ambiguities are construed against removal because the removal statute should be strictly construed in favor of remand." Manguno v. Prudential Prop. and Cas. Ins., 276 F.3d 720, 723 (5th Cir. 2002).

III. ANALYSIS

In their Notice of Removal filed on March 18, 2008, Defendants failed to indicate when they first learned of Plaintiffs' alleged fraudulent joinder of Defendant Padilla.⁴ Defendants' only reference to the time of when they learned of the alleged fraudulent joinder was in their Response filed on April 21, 2008. Even then, Defendants still did not indicate the specific date when they learned of the alleged fraudulent joinder, instead stating that they "removed the matter immediately after it was learned that Plaintiffs had no possibility of recovering against Defendant Juan Padilla, Individually." Defs.' Resp. 2-3.

The Court finds the statement "immediately after it was learned" to be conclusory, as it points to neither a date nor an event where Defendants discovered the alleged fraudulent joinder. The Court could end its analysis at this point, and hold that Defendants failed to meet their burden of establishing removal jurisdiction by failing to adequately state when they learned of the alleged fraudulent joinder. Boone, 416 F.3d at 388.

Alternatively, by considering the pleadings in this case, the Court may try to ascertain on its own whether Defendants timely removed this action after learning of Plaintiffs' alleged fraudulent joinder.⁵ In doing so, however, the Court finds that it can reasonably look to more than one date as the time when Defendants should have learned of the alleged fraudulent joinder.

A. Amended Original Petition

The Court can first look to Plaintiffs' Amended Original Petition, filed on November 16, 2007, and served on Defendant Padilla on December 10, 2007, as the date that Defendants should have learned of the alleged fraudulent joinder. This petition triggered the thirty day removal period if it unequivocally...