NPD Mgmt. & Bldg. Servs. v. Geismar N. Am., Inc.

SECTION I

ORDER & REASONS

LANCE M. AFRICK UNITED STATES DISTRICT JUDGE

Before the Court is plaintiff NPD Management and Building Services, Inc.'s motion^[1] to remand and request for attorney's fees and costs, which defendant Geismar North America, Inc. opposes.^[2] The Court denies the motion to remand, and it also declines to award attorney's fees or costs.

I. BACKGROUND

The instant action is the second iteration of this litigation. In 2020, Geismar North America, Inc. (“Geismar”), a Delaware corporation, first commenced a breach of contract action in South Carolina state court against NPD Resources, Inc. (“NPD I”).^[3] NPD I is a Texas corporation that “has only been authorized to do business in Texas, Louisiana, Alabama, and Mississippi.”^[4] The parties' underlying dispute arose from a 2016 agreement (“the Contract”) that required Geismar to manufacture a motor trolley car that NPD I would furnish to the United States Army

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Corps of Engineers for use at the Bonnet Carre Spillway in St. Charles Parish, Louisiana.^[5] NPD I, as defendant, removed the South Carolina state court action to the United States District Court for the District of South Carolina.^[6] NPD I moved to dismiss the action, arguing lack of personal jurisdiction, and the United States District Court in South Carolina granted that motion on August 19, 2020. See Geismar N. Am., Inc. v. NPD Res., Inc., No. 20-2190, 2020 WL 4820336 (D.S.C. Aug. 19, 2020). The formal judgment dismissing the action against NPD I was entered on August 25, 2020.^[7]

The next day, on Wednesday, August 26, 2020, a new entity named NPD Management and Building Services, Inc. (“NPD II”) was incorporated in the State of Delaware.^[8] N. Paul Dardar (“Dardar”) is the president of both NPD I and NPD II.^[9]That same day, Dardar executed a document captioned “Amended Assignment of Contract” (“the Assignment”) on behalf of NPD I and NPD II.^[10] The Assignment states that NPD I transferred to NPD II “all of [NPD I's] right, title, and interest in and under the Contract along with any and all rights and claims of [NPD I] may hold

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[sic] against Geismar.”^[11] Additionally, the Assignment provides that NPD II owes to NPD I “the total amount recovered less its costs” and a $5, 000.00 fee due upon collection.^[12] NPD I also agrees to indemnify NPD II “for any all of costs incurred by [NPD II] to perform any obligation owed by [NPD I] under the Contract.”^[13] NPD II did not make any monetary payment, or provide other consideration, to NPD I upon the execution of this Assignment.^[14]

On Monday, August 31, 2020, NPD II filed the instant civil action against Geismar in Louisiana state court demanding, inter alia, specific performance and damages arising from the Contract.^[15] Geismar removed the action to this Court from the Twenty-Ninth Judicial District Court for the Parish of St. Charles.^[16] NPD II moved to remand.^[17]

NPD II contends that both NPD II and Geismar are corporations organized in

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the State of Delaware and, therefore, the parties are not diverse.^[18] Without diversity, NPD II insists, this Court lacks subject matter jurisdiction, and the case must be remanded.^[19]

Geismar argues that NPD II's Louisiana state court petition and motion to remand are “slight of hand performances” designed to destroy diversity jurisdiction.^[20]Specifically, Geismar maintains that because NPD I assigned its interests in this litigation to NPD II to defeat diversity, this Court may ignore that assignment as “collusive” and retain jurisdiction, citing Grassi v. Ciba-Geigy, Ltd., 894 F.2d 181 (5th Cir. 1990).^[21] Following a period of jurisdictional discovery, ^[22] the parties submitted supplemental briefing to clarify the circumstances of the Assignment.^[23]

II. LAW AND ANALYSIS

A. Standard for remand

“[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending, ” unless Congress provides otherwise. 28 U.S.C. § 1441(a). Jurisdictional facts supporting removal are assessed at the time of removal. Louisiana v. American Nat'l Prop. Cas. Co., 746 F.3d 633, 636-37 (5th Cir. 2014).

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However, “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, 249 (5th Cir. 1996) (citing Kanzelberger v. Kanzelberger, 782 F.2d 774, 776 (7th Cir. 1986)). “In making a jurisdictional assessment, a federal court is not limited to the pleadings; it may look to any record evidence, and may receive affidavits, deposition testimony or live testimony concerning the facts underlying the citizenship of the parties.” Id. (citing Jones v. Landry, 387 F.2d 102 (5th Cir. 1967)).

“For the purposes of diversity jurisdiction, a corporation is a citizen of the state in which it was incorporated and the state in which it has its principal place of business.” Tewari De-Ox Systems, Inc. v. Mountain States/Rosen, Ltd. Liability Corp., 757 F.3d 481, 483 (5th Cir. 2014) (citing Texaco, Inc. v. Insur. Co. of N.A., 841 F.2d 1254, 1258 (5th Cir.1988)). See also 28 U.S.C. § 1332(c)(1) (“[A] corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business.”).

“The removing party bears the burden of establishing that federal jurisdiction exists.” De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir. 1995) (citing Gaitor v. Peninsular & Occidental S.S. Co., 287 F.2d 252, 253-54 (5th Cir. 1961)). “[A]ny ambiguities are construed against removal because the removal statute should be strictly construed in favor of remand.” Smith v. Bank of America Corp., 605 Fed.Appx. 311, 314 (5th Cir. 2015) (quoting Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002)).

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Pursuant to 28 U.S.C. § 1332, a district court has original jurisdiction over cases in which the amount in controversy exceeds $75, 000, exclusive of interest and costs, and “all persons on one side of the controversy [are] citizens of different states than all persons on the other side at the time the complaint was filed.” Soaring Wind Energy, L.L.C. v. Catic USA Inc., 946 F.3d 742, 750 (5th Cir. 2020) (internal quotation marks and citation omitted).

Neither party disputes that Geismar is a citizen of Delaware as it is incorporated there.^[24] Further, Geismar does not dispute that NPD II is also a Delaware corporation.^[25] Accordingly, NPD II and Geismar are both citizens of the same state.^[26]

Ordinarily, this posture would necessitate remand. However, despite this congruity of citizenship, Geismar contends that removal is proper because the Assignment from NPD I to NPD II was collusive to thwart diversity jurisdiction.^[27]The Court turns to this issue next.

B. Partial versus complete assignments

The “assignment of a complete cause of action to defeat removal, ” can be “effective to give the state court exclusive jurisdiction.” Grassi v. Ciba-Geigy, Ltd.,

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894 F.2d 181, 183 (5th Cir. 1990) (citing Provident Service Life Assurance Society v. Ford, 114 U.S. 635, 641 (1885)). “Once it is determined that the assignment was a complete assignment, the Court's inquiry ends, and the Court does not examine whether the assignment was “‘improperly or collusively made.'” Amalgamated Gadget, L.P. v. Mack, No. 03-952, 2004 WL 549483, at *4 (N.D. Tex. Feb. 10, 2004). An assignment is complete “where the transfer of a claim is absolute, with the transferor retaining no interest in the subject matter[.]” Id. (quoting Kramer v. Caribbean Mills, 394 U.S. 823, 828 n.9 (1963)) (emphasis added).

Conversely, a plaintiff may not make a “collusive” partial assignment of its interests in the subject matter of litigation to destroy valid diversity jurisdiction and to prevent the removal of an action to federal court. Grassi, 894 F.2d at 184-86. With a partial assignment “an actual transfer of a fractional interest is made[.]” Id. at 185. (emphasis in original); see also Smilgin v. New York Life Ins. Co., 854 F.Supp. 464, 466 (S.D. Tex. 1994) (finding an assignment was partial where the plaintiff assigned 1% of a claim to a nondiverse party); JMTR Enterprises, L.L.C. v. Duchin, 42 F.Supp.2d 87, 92 (D. Mass. 1999) (finding an assignment was partial where the plaintiffs assigned 25% of their claim to a nondiverse corporation). A district court has “both the authority and the responsibility, under 28 U.S.C. §§ 1332 and 1441, to examine the motives underlying a partial assignment which destroys diversity and to disregard the assignment in determining jurisdiction if it be found to have been made principally to defeat removal.” Grassi, 894 F.2d at 185.

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Geismar maintains that the Assignment between NPD I and NPD II is “nothing more than a veiled attempt to disguise a fractional collection fee arrangement with a shell corporation.”^[28] Geismar further argues that “[s]uch disguised assignments are practically always viewed as collusive by courts.”^[29]NPD II maintains that NPD I “fully assigned” the claims at issue here, and “that is the end of the inquiry.”^[30] Further, NPD II argues that Geismar “misrepresents the nature of the assignment.”^[31]

The Court first examines the Assignment, which states in the third paragraph

[NPD I] wishes to and does assign, transfer, set over and deliver unto [NPD II], its successors and assigns, all of his right, title, and interest in and under the Contract along with any and all rights and claims of [NPD I] may hold against Geismar, and [NPD II] wishes to and does