Carden v. Kawasaki Motors Corp. U.S.A.

KEITH CARDEN, et al, Plaintiffs,

v.KAWASAKI MOTORS CORP USA, et al, Defendants.

CIVIL ACTION NO. H-10-2141

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

SIGNED: December 3, 2010

MEMORANDUM OPINION AND ORDER

I. INTRODUCTION

Pending before the Court is the motion to remand (Docket Entry No. 6) of the plaintiffs Keith David Carden, acting individually and as personal representative of Sofia G. Carden's estate, and Veronica Reyes. In response, Kawasaki Motors Corp. USA, Kawasaki Motors Manufacturing Corp., USA, Kawasaki Heavy Industries, LTD and Kawasaki (collectively, "Kawasaki")¹ filed a response in opposition (Docket Entry No. 10). After having carefully considered the motion, the response, the record and the applicable law, the Court grants the plaintiffs' motion.

II. FACTUAL BACKGROUND

On July 17, 2007, Sofia Carden bought a 2007 Kawasaki motorcycle from Highlands as a gift for her husband, Keith Carden. The motorcycle was designed, manufactured and marketed by Kawasaki. On September 28, 2007, while traveling the Cardens lost control of their motorcycle, killing Sofia Carden and seriously injuring Keith Carden. An investigation revealed that the motorcycle's braking system lines had failed, causing the rear wheel to lock up. Serious braking fluid contaminants put the lines into a non-reversible full braking mode.

The plaintiffs filed suit in the 113th District Court of Harris County, Texas, on August 26, 2009. The plaintiffs served Kawasaki with their original petition on or about August 28, 2009, and served Highlands on or about September 18, 2009. The parties took the deposition of Highlands' corporate representative Keith Coble on May 18, 2010, and Kawasaki subsequently filed a notice of removal on June 1, 2010, based on a Texas statute that protects non-manufacturing sellers from product liability suits.

III. CONTENTIONS OF THE PARTIES²

A. The Plaintiffs' Contentions

The plaintiffs move to remand, asserting that they adequately pleaded exceptions to the statute involving non-manufacturing sellers. The plaintiffs argue that Kawasaki's removal is procedurally defective and that the Court lacks subject matter jurisdiction over this action because diversity of citizenship is lacking. They maintain that Highlands, a Texas resident, is a properly joined defendant because they have valid common law negligence claims against Highlands. In this regard, the plaintiffs argue that Highlands is liable pursuant to TEX. CIV. PRAC & REM. CODE § 82.003(a)(3), because Highlands attached a fully-assembled brake system to the motorcycle and the alleged harm resulted from that assembly.

Further, the plaintiffs assert that Kawasaki's removal is untimely because removability was ascertainable upon the initial service of process. The plaintiffs argue that because Kawasaki is familiar with its own policies, it could have ascertained removability at the time of service. The plaintiffs claim that their original petition pled specific facts that, if true, would have prevented removability. Alternatively, they argue that removal was apparent either upon Kawasaki's amended answers filed on December 3, 2009, or upon Highlands' discovery responses served on April 22, 2010. Accordingly, they assert that Kawasaki has failed to meet its burden of proving improper joinder and that this case should be remanded.

B. The Kawasaki's Contentions

The Kawasaki argues that Highlands was improperly joined and that its citizenship should be disregarded. Kawasaki argues that removal was proper because the plaintiffs have failed to allege a reasonable basis for recovery against Highlands. Kawasaki claims that the plaintiffs' petition contains no specific factual allegations against Highlands that would support a cause of action against Highlands, the non-diverse defendant. Kawasaki alleges that the plaintiffs' failure to specify a factual basis for recovery against the non-diverse Highlands constitutes improper joinder.

Kawasaki also argues that Section 82.003(a)(3) precludes liability unless the nonmanufacturing seller has committed an error independently of the manufacturer, such as selecting the wrong component for installation. See TEX. CIV. PRAC & REM. CODE. Thus, Kawasaki argues that the Court should disregard Highlands' citizenship for purposes of determining diversity jurisdiction and should thereby deny the plaintiffs' motion to remand.

Finally, Kawasaki asserts that it timely filed its notice of removal. It contends that, to accept the plaintiffs' argument, Kawasaki would be forced to ignore the plaintiffs' clear pleadings and assume, without evidence, that Highlands was not engaged in "assembling" the rear brake system. Instead, Kawasaki believes that the removal standard is dictated by the plaintiffs' own pleadings rather than by what Kawasaki purportedly knew.

IV. STANDARD OF REVIEW

The applicable statute provides two grounds for remand: (1) a defect in removal procedure; and (2) lack of subject matter jurisdiction. See 28 U.S.C. § 1447(c); Things Remembered, Inc. v. Petarca, 516 U.S. 124, 127-28 (1995). A remand for lack of subject matter jurisdiction is permissible at any time before final judgment, with or without a motion. 28 U.S.C. § 1447(c). Here, the essential inquiry is whether removal of the state court action on the basis of diversity of citizenship was proper in light of the facts presented.

Pursuant to 28 U.S.C. § 1441(a), a defendant is permitted to remove an action from a state court to a federal court only if the action is one over which the federal court has original jurisdiction. See 28 U.S.C. 1441(a). The federal diversity jurisdiction statute provides that federal courts have original jurisdiction over all civil actions where the matter in controversy exceeds $75,000, exclusive of costs and interest, and diversity of citizenship exists. See 28 U.S.C. § 1332(a). "It is well-established that the diversity statute requires 'complete diversity' of citizenship: A district court generally cannot exercise diversity jurisdiction if one of the plaintiffs shares the same state citizenship as any one of the defendants." Corfield v. Dallas Glen Hills LP, 355 F.3d 853, 857 (5th Cir. 2003) (citing Whalen v. Carter, 954 F.2d 1087, 1094 (5th Cir. 1992)). In analyzing whether diversity jurisdiction exists, however, a court may disregard the citizenship of parties that have been improperly joined. Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 572-73 (5th Cir. 2004) (en banc) cert. denied, 544 U.S. 992 (2005). Nevertheless, the burden of establishing fraudulent or improper joinder rests on the party asserting it and is indeed a heavy burden. Travis v. Irby, 326 F.3d 644, 649 (5th Cir. 2003).

To establish fraudulent or improper joinder of a party, the defendant must demonstrate either: "(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court." Smallwood, 385 F.3d at 573. In this case, the parties do not dispute that one of the defendants is a Texas resident, thus the Court's analysis will focus only on the second prong of this test. Under the second prong, the Court is required to determine "whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant, which stated differently means 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. (citing Irby, 326 F.3d at 647-48). "Since the purpose of the improper joinder inquiry is to determine whether or not the in-state defendant was properly joined, the focus of the inquiry must be on the joinder, not the merits of the plaintiff's case." Smallwood at 573.

In deciding whether a defendant was improperly joined, the Court "must evaluate all of the factual allegations in the light most favorable to the plaintiff, resolving all contested issues of substantive fact in favor of the plaintiff." Guillory v. PPG Industries, Inc., 434 F.3d 303, 308309 (5th Cir. 2005) (quoting B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir. 1981)). It must also "resolve all ambiguities in the controlling state law in the plaintiffs favor." Guillory, 434 F.3d at 308 (internal citations omitted). In this regard, the Court is not required to "determine whether the plaintiff will actually or even probably prevail on the merits of the claim, but look only for a possibility that the plaintiff might do so." Id. at 309 (internal citations omitted).

When determining the possibility of recovery under state law, the court is permitted to conduct "a Rule 12(b)(6)-type analysis, looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law against the in-state defendant." Smallwood at 573 (internal citations omitted). "Ordinarily, if a plaintiff can survive a Rule 12(b)(6) challenge, there is no improper joinder." Id.; Guillory at 309. In cases "in which a plaintiff has stated a claim, but has misstated or omitted discrete facts that would determine the propriety of joinder... the district court may, in its discretion, pierce the pleadings and conduct a summary inquiry." Smallwood at 573 (citing Badon v. RJR Nabisco, Inc., 224 F.3d 382, 389 n.10 (5th Cir. 2000); accord Guillory at 309. This summary inquiry "is appropriate only to identify the presence of discrete and undisputed facts that would preclude plaintiff's recovery against the in-state defendant." Smallwood at 573-74 (citing Irby, 326 F.3d at 648-49). The Fifth Circuit, nevertheless, has cautioned "district courts against pretrying a case to determine removal jurisdiction." Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 263 (5th Cir. 1995) (internal citation omitted).

Further, a defendant seeking removal must do so in compliance with the time constraints set forth in 28 U.S.C. 1446(b). Therefore, a...