Summary
noting that, even though jurisdiction cannot be waived, plaintiffs' stipulation did not constitute a waiver of jurisdiction but rather resolved an underlying issue of fact that contributed to existence of federal diversity jurisdiction
Summary of this case from Lamke v. Sunstate Equipment Co., LLCOpinion
Civil Action No., 3:99-CV-2355-R
October 24, 2002
FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Pursuant to the District Court's Order of Reference, entered June 3, 2002, "Plaintiffs' Motion to Remand for Lack of Subject Matter Jurisdiction," filed May 22, 2002, is before this Court for hearing, if necessary, and for recommendation. For the following reasons, the Court RECOMMENDS that Plaintiffs' motion be DENIED.
The instant suit involves a contract dispute between former and current partners of a limited partnership, ART Midwest LP ("the Partnership"). On October 14, 1999, Defendants removed the suit from the 14th Judicial District Court of Dallas County, Texas, to the United States District Court for the Northern District of Texas on the grounds of diversity jurisdiction. On December 20, 1999, Plaintiffs moved to remand the case to state court, contending in part that one of the defendants — the Partnership — constituted an indispensable party with non-diverse citizenship. However, before the District Court had ruled on the motion to remand, the parties stipulated: (1) that the Partnership would be dismissed from the suit without prejudice, (2) that the motion to remand would be withdrawn, and (3) that Defendants would not "assert any claim or position that the Partnership is a necessary or indispensable party to this action." On April 11, 2000, the District Court entered an Order that adopted the stipulations of the parties and dismissed the Partnership from the suit without prejudice. Now, more than two years later, Plaintiffs have filed the instant motion to remand for lack of subject matter jurisdiction, in which they assert that the Partnership is an indispensable party with non-diverse citizenship. (P.s' Br. at 1-7.)
At the time of removal, the parties were as follows: Plaintiff ART Midwest, Inc., a Nevada and Texas corporation; Plaintiff American Realty Trust, Inc., a Georgia and Texas corporation; Defendant David M. Clapper, a Michigan citizen; Defendant Atlantic Midwest LLC, a Michigan limited liability company; Defendant Atlantic XIII LLC, a Michigan limited liability company; and the defendant Partnership, a limited partnership whose citizenship and indispensability were in dispute. In their Notice of Removal, Defendants contended that the Partnership did not defeat diversity jurisdiction because: (1) it held Michigan citizenship only, (2) it constituted a nominal party, and (3) it had been fraudulently joined to defeat diversity jurisdiction.
Plaintiffs' motion to remand fails on at least two grounds. First, Plaintiffs have stipulated that the Partnership did not constitute an indispensable party. Such stipulation occurred when Plaintiffs signed a stipulation of dismissal that withdrew their first motion to remand and that allowed the Partnership to be dismissed from the suit. Although Plaintiffs now correctly argue that a party cannot waive subject matter jurisdiction, Hospitality House, Inc. v. Gilbert, 298 F.3d 424, 429 (5th Cir. 2002), Plaintiffs' stipulation did not constitute a waiver of subject matter jurisdiction. Rather, Plaintiffs' stipulation resolved an underlying issue of fact that contributed to the existence of federal diversity jurisdiction.
Second, the District Court has implicitly ruled that the Partnership did not constitute an indispensable party. At the time of the District Court's dismissal of the Partnership on April 11, 2000, the issue of the Partnership's indispensability was squarely before the District Court in two separate pleadings, i.e., in Plaintiffs' first motion to remand and in the parties' stipulation of dismissal. Because "indispensable parties cannot be dispensed with in diversity cases even though their presence [might] defeat federal jurisdiction," Calcote v. Texas Pac. Coal Oil Co., 157 F.2d 216, 225 (5th Cir. 1946), the District Court, in dismissing the Partnership from the suit, must have found that the Partnership did not constitute an indispensable party.
As a final matter, Defendants have moved for sanctions against Plaintiffs for filing the instant motion to remand. (D.s' Resp. at 21-22.) "[A] federal court may . . . resort to its inherent power to impose attorney's fees as a sanction for bad-faith conduct." Chambers v. NASCO, Inc., 501 U.S. 32, 50 (1991). Plaintiffs filed the instant motion to remand only twelve days before the trial setting in this case, despite: (1) the passage of more than two years since the District Court had dismissed the Partnership from the suit, (2) the passage of more than two years since Plaintiffs had withdrawn their first motion to remand on similar grounds, (3) Plaintiffs' stipulation that the Partnership did not constitute an indispensable party, and (4) the District Court's implicit ruling that the Partnership did not constitute an indispensable party. As such, the Court concludes that Plaintiffs filed the instant motion to remand in bad faith for the purpose of delaying the trial in this case. The Court further concludes that Plaintiffs should pay Defendants' reasonable attorneys' fees relating to the instant motion to remand.
For the foregoing reasons, the Court RECOMMENDS that "Plaintiffs' Motion to Remand for Lack of Subject Matter Jurisdiction" be DENIED, that Plaintiffs be ORDERED to pay Defendants' reasonable attorneys' fees relating to the instant motion to remand, and that Defendants be ORDERED to submit to the Court evidence of their reasonable attorneys' fees within fourteen (14) days of the District Court's adoption of these Findings, Conclusions, and Recommendation.