Custom Classic Auto. & Collision Repair, Inc. v. Axalta Coating Sys.

CUSTOM CLASSIC AUTOMOBILES & COLLISION REPAIR, INC., Plaintiff, v. AXALTA COATING SYSTEMS, LLC, STANDOX NORTH AMERICA INC., and LINDA WILLIAMS, Defendants.

No. 20 CV 5079

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

December 11, 2020

Judge Manish S. Shah

MEMORANDUM OPINION AND ORDER

Axalta Coating Systems, LLC, makes coating and refinishing products for vehicles. Together with its employee, Linda Williams, Axalta promised to pay Custom Classic Automobiles & Collision Repair, Inc. for transporting and repairing a car with a defective paint job. But they failed to pay. Custom Classic sued them in state court, alleging breach of contract, breach of express warranty, fraud, and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act. Axalta removed the case to federal court and moved to transfer or dismiss the case. Custom Classic moved to remand. For the reasons set forth below, the motion to remand and motion to transfer are denied, and the motion to dismiss is granted in part, denied in part.

I. Legal Standard

A defendant can remove a lawsuit filed in state court to federal court if the federal court has original jurisdiction over the dispute. 28 U.S.C. § 1441(a). Federal district courts have original jurisdiction over civil actions where the amount in controversy exceeds $75,000 and the parties are citizens of different states. 28 U.S.C. § 1332(a). Under the fraudulent joinder doctrine, a district court may dismiss non-diverse defendants if the plaintiff has no chance of success against them and retain jurisdiction over a case. Morris v. Nuzzo, 718 F.3d 660, 666 (7th Cir. 2013). To remove a case based on fraudulent joinder, a defendant has the "heavy" burden of proving that, after the court resolves all issues of law and fact in the plaintiff's favor, there is no possibility that the plaintiff can establish a cause of action against the non-diverse defendant in state court. Id.¹; see also Doe v. Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993) (courts should interpret the removal statute, 28 U.S.C. § 1441, narrowly and resolve doubts in favor of the states). The court must examine the allegations in the plaintiff's complaint at the time of removal. See In re Burlington Northern Santa Fe Ry. Co., 606 F.3d 379, 380-81 (7th Cir. 2010). If the non-diverse defendant is not dismissed, the federal court does not have jurisdiction and must remand the case back to state court. See Morris, 718 F.3d at 666.

A district court may transfer a civil action to another district or division "[f]or the convenience of parties and witnesses, in the interest of justice." 28 U.S.C. § 1404(a). A district court has broad discretion to assess all the relevant factors, like distance to the forum and judicial economy, on a case by case basis. See Research Automation, Inc. v. Schrader-Bridgeport Intern., Inc., 626 F.3d 973, 977-78 (7th Cir.2010). I assume the truth of the allegations in the plaintiff's complaint unless contradicted by the defendant's affidavits and may consider supplemental evidentiary materials and additional facts set forth in the briefs. See Deb v. SIRVA, Inc., 832 F.3d 800, 808-09 (7th Cir. 2016) (Unlike Federal Rule of Civil Procedure 12(b)(6), "Rule 12(b)(3) is a somewhat unique context of dismissal in that a court may look beyond the mere allegations of a complaint, and need not view the allegations of the complaint as the exclusive basis for its decision.").

To survive a motion to dismiss for failure to state a claim under Rule 12(b)(6), a complaint must contain a short and plain statement that plausibly suggests the violation of a legal right. Fed. R. Civ. P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556-58 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 677-80 (2009). I accept the plaintiff's factual allegations as true and draw all reasonable inferences in its favor. Iqbal at 678-79. I do not accept allegations that are unsupported, conclusory, or legal conclusions. Id. I may consider documents attached to the complaint and documents that are referenced in and central to its claims. Reed v. Palmer, 906 F.3d 540, 548 (7th Cir. 2018).

II. Facts

Axalta Coating Systems, LLC, filed a lawsuit in the Eastern District of Pennsylvania alleging that Custom Classic Automobiles & Collision Repair, Inc. breached an exclusive requirements contract when it switched to a competitor's paintproduct. [7-1] at 3, 10-18; [7-3] at 2.² Among its "miscellaneous" terms, the contract stated:

The Master Agreement and each Incentive Agreement shall be governed by, and construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania without regard to its conflict of laws rules that would require the application of the laws of any other jurisdiction. Each party consents and submits to the exclusive jurisdiction of, and service of process by, the United States District Court for the Eastern District of Pennsylvania and the state courts of Pennsylvania.

[7-1] at 12. Custom Classic made an offer of judgment, which Axalta accepted. [7-3] at 2. Three days later, Custom Classic filed this lawsuit in Illinois state court against Axalta, Standox North America, Inc., and Linda Williams. [1-1] at 3.

According to the complaint, Custom Classic used Standox paint on a 1970 Chevrolet Camaro. [1-1] at 6, ¶ 8. Standox provided a lifetime warranty for the paintwork. [1-1] at 6, ¶ 8. Under the warranty, a Standox technician needed to inspect any defect, and the Standox-authorized body shop that performed the original work had to repair it. [1-1] at 6, ¶ 8. If the consumer had moved away, the vehicle could be taken to any Standox-authorized body shop. [1-1] at 7, ¶ 8. The body shop would contact Standox to settle the car owner's claim. [1-1] at 7, ¶ 8.

Years after the paint job, the paint on the Camaro blistered and peeled. [1-1] at 7, ¶¶ 9-10. Custom Classic called Williams, its longtime representative for automobile paint products, about the defect. [1-1] at 6-7, ¶¶ 4, 10. Williams workedfor Axalta, which owns Standox. [1-1] at 7, ¶ 10.³ Because the car had moved from Illinois to Florida, an Axalta representative in Florida inspected the car, obtained samples from the defective product, and found that every panel had blistering except one door. [1-1] at 7, ¶ 11. The representative asked Williams for instructions about how to proceed. [1-1] at 7, ¶ 11. An Axalta representative told Custom Classic's customer to take the Camaro to a repair shop in Florida pursuant to the warranty. [1-1] at 7, ¶ 12. After the customer could not find an authorized body shop, an Axalta representative told the customer and Custom Classic to transport the car to Custom Classic's shop in Illinois for repair. [1-1] at 7, ¶ 13. Williams met with Custom Classic's owner in Illinois and said that Axalta would compensate Custom Classic for repairing the defect, saying that Axalta would "take care" of the situation. [1-1] at 8, ¶ 14. Custom Classic transported the Camaro to its body shop in Illinois and began repairs. [1-1] at 8, ¶¶ 15-16. An Axalta representative visited to obtain more samples of the defective product. [1-1] at 8, ¶ 16. Custom Classic reconfirmed with its customer the representations made by Williams and Axalta that they "are paying to skim coat the whole body, prep, prime, prep, and paint" the Camaro. [1-1] at 8, ¶ 17. An Axalta representative also said Axalta would pay the cost of transportation. [1-1]at 8, ¶ 13. Custom Classic alleges that Williams and Axalta made the same or similar promises about repairing defective Standox products on other automobiles in the past and had compensated Custom Classic for these repairs. [1-1] at 11, ¶ 35.

Custom Classic spent $45,445.77 transporting and repairing the Camaro. [1-1] at 8, ¶¶ 15-16, 18-19. After Custom Classic sent the invoice to an Axalta representative, Axalta and Williams refused to pay. [1-1] at 9, ¶ 20. Axalta first claimed that Williams's statements about compensation may have been unauthorized. [1-1] at 9, ¶ 21. Axalta then claimed Williams's representations were untrue and that the company never agreed to compensate Custom Classic for the repair work. [1-1] at 9, ¶ 22.

Custom Classic filed this lawsuit in state court for breach of contract, breach of express warranty, fraudulent misrepresentation, and violating the Illinois Consumer Fraud and Deceptive Business Practices Act. [1-1] at 9-13. Axalta removed the case to federal court. [1]. Axalta's sole member is Axalta Coating Systems U.S. Holdings, Inc., which is a citizen of Delaware and Pennsylvania. [1-1] at 5, ¶ 2; [1] ¶ 10. Williams is a resident of Illinois. [1-1] at 6, ¶ 4; [1] ¶ 12.⁴ Custom Classic is a citizen of Illinois. [1-1] at 6, ¶ 5; [1] ¶ 9. Axalta then filed a motion to transfer or dismiss the complaint, [5], and Williams filed a motion to join. [14]. Custom Classic filed a motion to remand. [15].

III. Analysis

Axalta argues that its motion to transfer should be resolved first. However, it is not in the interest of convenience, fairness, or judicial economy to transfer a case that should not be in federal court. See Sinochem Intern. Co. Ltd. v. Malaysia Intern. Shipping Corp., 549 U.S. 422, 431-32 (2007) (there is no mandatory sequencing of non-merits issues). I address removal first.

A. Removal and Motion to Remand

Williams is not alleged to be a citizen of a different state than Custom Classic, but her citizenship can be disregarded (and removal was proper) if there is no reasonable possibility that Custom Classic could prevail against her in state court. See Morris, 718 F.3d at 666. The analysis is limited to the allegations in the complaint filed in state court. See Poulos v. Naas Foods, Inc., 959 F.2d 69, 74 (7th Cir. 1992) (analyzing fraudulent joinder based on the allegations in the original complaint, irrespective of whether the defects were curable).

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