Raheem Jefferson Brennerman & Blacksands Pac. Energy Corp. v. Guardian News & Media Ltd.

RAHEEM JEFFERSON BRENNERMANand BLACKSANDS PACIFIC ENERGY CORPORATION, INC., Plaintiffs, v. GUARDIAN NEWS & MEDIA LIMITED, GUARDIAN NEWS & MEDIA LLC,and CENTER FOR PUBLIC INTEGRITY d/b/a International Consortium of Investigative Journalists, Defendants.

Civ. No. 1:14-cv-00188-SLR-SRF

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

December 29, 2015

REPORT AND RECOMMENDATION

I. INTRODUCTION

Plaintiffs Raheem Jefferson Brennerman ("Brennerman") and Blacksands Pacific Energy Corporation, Inc. ("Blacksands") (collectively "Plaintiffs"), filed an action for defamation against Defendants Guardian News & Media Limited d/b/a The Guardian ("Guardian Ltd. (UK)") and Center for Public Integrity d/b/a International Consortium of Investigative Journalists ("CPI") (collectively "Original Defendants"), which was removed to this court on the basis of diversity jurisdiction. Following removal, Plaintiffs filed the First Amended Complaint (the "FAC"), adding Defendant Guardian News & Media, LLC ("Guardian LLC (US)") as a defendant. Presently before the court are:

1) Plaintiffs' Motion to Remand to State Court ("Motion to Remand") (D.I. 17);

2) Original Defendants' Cross Motion to Strike Plaintiffs' FAC or, in the alternative, to Deny Joinder ("Motion to Deny Joinder") (D.I. 20); 3) Original Defendants' Motion to Dismiss¹ (D.I. 22); and

4) Guardian LLC (US)'s Motion to Dismiss. (D.I. 25)

For the following reasons, I recommend that the court DENY Plaintiffs' Motion to Remand, GRANT Original Defendants' Motion to Deny Joinder, and GRANT Original Defendants' Motion to Dismiss. Guardian LLC (US)'s Motion to Dismiss is rendered moot, and the court will not address these arguments.

II. BACKGROUND

On November 26, 2012, Guardian Ltd. (UK) published two articles in the United Kingdom (the "U.K.") to its U.K. website as part of a series based on a global investigation into offshore tax havens. (D.I. 1, Ex. 1 at ¶ 1) The articles were titled: "How Secret Offshore Firms Feed London's Property Boom" and "Revealed: The Real Identities Behind Britain's Secret Property Deals." (Id.) On the same day, CPI published an article to its website titled: "Who's Buying Britain? Probe Reveals Real Estate Speculators Hidden by Offshore Alchemy." (Id.) Three Guardian Ltd. (UK) employees wrote all three articles in London. (D.I. 27 at ¶ 4; D.I. 29 at ¶ 4) The articles state that Brennerman used bank loans to buy properties in the U.K., that he was the beneficiary of an offshore trust related to the subject real estate investments, and that he moved to New York in 2009 where he works as a trader for Blacksands. (D.I. 1, Ex. 1 at ¶ 15) Blacksands, a Delaware corporation, was not mentioned anywhere else in the articles.² Thearticles further state that property owners identified in the articles have been taking advantage of tax loopholes related to their U.K. properties. (Id. at ¶ 16)

On January 10, 2014, Plaintiffs filed a complaint in the Superior Court of the State of Delaware alleging, inter alia, that the articles were false and defamatory. (Id. at ¶ 1) On February 12, 2014, Original Defendants removed the action to this court. (D.I. 1) The parties filed three different stipulations extending the time to answer or respond, partially dependent upon whether Plaintiffs were going to file the FAC. (D.I. 5; D.I. 13; D.I. 14)

Plaintiffs filed the FAC on March 28, 2014 against Original Defendants, joining Guardian LLC (US) as a third defendant (collectively "Defendants").³ (D.I. 16) Guardian LLC (US) is a wholly owned subsidiary of Guardian Ltd. (UK). (D.I. 27 at ¶ 2) Guardian LLC (US) hires journalists to report on stories in America for publication by Guardian Ltd. (UK) in the U.K. newspaper and on the U.K. website. (Id.) The Guardian website is published by Guardian Ltd. (UK), even though Guardian LLC (US) sometimes contributes to the articles. (Id. at ¶ 5) The authors of the articles in issue were employees of Guardian Ltd. (UK), and not the American company. (Id. at ¶¶ 3-4)

On April 15, 2014, Plaintiffs filed a Motion to Remand for lack of subject matter jurisdiction, asserting that their addition of Guardian LLC (US)—a Delaware corporation—to the FAC destroyed jurisdiction based on diversity of citizenship in that both Blacksands and Guardian LLC (US) are Delaware residents. (D.I. 17 at ¶ 6) Original Defendants oppose Plaintiffs' Motion to Remand, contending that Guardian LLC (US) was joined solely for the purpose of destroying diversity jurisdiction. (D.I. 21 at 2) Therefore, on May 2, 2014, OriginalDefendants filed their Motion to Deny Joinder pursuant to 28 U.S.C. § 1447(e). (D.I. 20) They ask the court to strike the FAC—leaving the original complaint in its place—or to deny joinder of Guardian LLC (US) as a party to the FAC. (D.I. 21)

Original Defendants also filed a Motion to Dismiss in part for lack of personal jurisdiction. (D.I. 22) The same day, Guardian LLC (US) filed a separate Motion to Dismiss. (D.I. 25) The court will first turn to Plaintiffs' Motion to Remand. (D.I. 17)

III. STANDARDS OF REVIEW

A. Motion to Remand

A party may remove a case from state court to federal court under 28 U.S.C. § 1441 if the matter is one over which the federal court has original jurisdiction. If jurisdiction is based on diversity of citizenship, complete diversity must exist and the amount in controversy must exceed $75,000. 28 U.S.C. § 1332(a). If jurisdiction no longer exists at any time after a case has been removed, the federal court shall remand the case back to state court. 28 U.S.C. § 1447(c).

When the addition of a non-diverse defendant destroys diversity jurisdiction, the district court will remand the case back to state court unless the removing defendant can show that the non-diverse party was fraudulently joined. Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 (3d Cir. 1992). The defendant bears a "heavy burden of persuasion" in asserting this allegation. Id. (quoting Steel Valley Author v. Union Switch & Signal Div., 809 F.2d 1006, 1012 n. 6 (3d Cir. 1987)).

Fraudulent joinder occurs "'where there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant....'" Id. (quoting Boyer v. Snap-On Tools, Corp., 913 F.2d 108, 111 (3d Cir. 1990), cert. denied, 498 U.S. 1085 (1991)). This entails afinding that claims against the non-diverse defendant are "'wholly insubstantial and frivolous,'" and recovery is a legally impossibility. In re Briscoe, 448 F.3d 201, 218 (3d Cir. 2006) (quoting Batoff, 977 F.2d at 852); see also Kallman v. Aronchick, 981 F. Supp. 2d 372, 380 (E.D. Pa. 2013) (the court will only find fraudulent joinder where the plaintiff's clams are "wholly insubstantial and frivolous").

In making this determination, the district court must consider the plaintiff's complaint at the time of removal, assuming all factual allegations as true. Batoff, 977 F.2d at 851-2 (quoting Steel Valley, 809 F.2d at 1010). If a state court could find that the plaintiff's allegation is plausible, the district court must remand the case to state court. Id. On the other hand, if the district court does make a finding of fraudulent joinder, the court may deny joinder and retain jurisdiction. See, e.g., Roggio v. McElroy, Deutsch, Mulvaney & Carpenter, 415 F. App'x 432, 433 (3d Cir. 2011) (denying a motion to remand where the court made a finding of fraudulent joinder).

The initial jurisdictional inquiry should be evaluated separately from a motion to dismiss. Batoff, 977 F.2d at 851. The court may not base the remand analysis on the merits of a claim asserted against a non-diverse defendant. See id. at 852 (finding that the district court "erred in converting its jurisdictional inquiry into a motion to dismiss"). Therefore, sufficient allegations concerning the defendant, which are supported by recent authority, will defeat diversity jurisdiction. In re Briscoe, 448 F.3d 201, 218-19 (3d Cir. 2006).

Courts in the Third Circuit have also recognized an equitable standard to determine whether a case should be remanded following joinder of a non-diverse defendant. See, e.g., Stewart v. Wal-Mart Distrib. Ctr., Civil Action No. 12-4958, 2013 WL 1482217, at *2 (E.D. Pa. Apr. 11, 2010); Cnty. of Northampton v. RAM Const. Servs. of Cleveland, LLC, Civil Action No.12-5958, 2013 WL 878887, at *3 (E.D. Pa. Mar.11, 2013). Under this flexible approach, the court conducts an inquiry into the Hensgens factors, a test arising from the Fifth Circuit. See Hensgens v. Deere & Co., 833 F.2d 1179, 1182 (5th Cir. 1987). The Hensgens factors include:

1) Whether plaintiff's purpose in seeking to add a new, non-diverse defendant is solely to defeat federal jurisdiction;

2) Whether the plaintiff was dilatory in seeking to add the new defendant;

3) Whether the plaintiff will be injured if the motion is not allowed; and

4) Any other equitable factors.

Id.

The parties disagree as to whether fraudulent joinder or the Hensgens test is the correct standard to apply in analyzing Plaintiffs' Motion to Remand. Original Defendants urge this court to consider the Hensgens factors, while Plaintiffs argue for a more stringent fraudulent joinder analysis. (D.I. 21 at 10; D.I. 41 at 5) The Third Circuit has not yet resolved this dispute, although it has recognized the Hensgens factors when ruling on a motion to permit joinder of non-diverse defendants. See Hayden v. Westfield Ins. Co., 586 F. App'x 835, 840 (3d Cir. 2014). District courts within the Third Circuit have distinguished between situations where the court has discretion to permit joinder, and those like this, wherein the complaint is amended as a matter of right. See, e.g., O'Keefe v. Hess Corp., Civil Action No. 10-2598 (WJM), 2010 WL 3522088, at *8 (D.N.J. Sept. 1, 2010), report and recommendation adopted, 2010 WL 4102848 (D.N.J. Oct. 15, 2010) (finding that defendants properly focused their argument on fraudulent joinder wherethe complaint was amended as a matter of right).⁴ Those courts have...