Opinion
EP-99-CA-282-DB.
October 29, 1999.
MEMORANDUM OPINION AND ORDER
On this day, the Court considered Plaintiffs' Motion to Remand, filed in the above-captioned cause on August 25, 1999. Defendant Gerald A. Strauss ("Defendant" or "Strauss") filed a Response to Plaintiffs' Motion to Remand on September 13, 1999. Plaintiffs filed a Reply on September 15, 1999. After due consideration, the Court is of the opinion that Plaintiffs' Motion should be granted for the reasons that follow.
BACKGROUND
On December 22, 1998, Kerry B. Caughran, Linda L. Caughran, Judith N. Mapes, Clarel B. Mapes and Jane E. Spelce (collectively, "Plaintiffs") filed an action against Defendant in the 120th Judicial District Court of El Paso County, Texas ("state court cause"), alleging that Strauss breached a partnership agreement entered into with Plaintiff Kerry Caughran. The alleged partnership was entered into for the purpose of assembling, marketing and selling interests in water rights in the State of New Mexico. Plaintiffs sought an accounting as well as declaratory and injunctive relief. Plaintiffs further alleged therein that all Plaintiffs are residents of El Paso, Texas, and Defendant Strauss is a resident of New Mexico.
Plaintiffs' state court cause initially named two additional defendants, one Jeffrey B. Thompson and one Larry G. Fields. Plaintiffs released these two defendants from the state court cause by filing a Notice of Non-Suit as to them on August 6, 1999.
Defendant removed the state court cause on August 12, 1999 ("August 12 removal") to the Western District of Texas based on diversity jurisdiction. The August 12 removal was assigned to Chief Judge Harry Lee Hudspeth in cause number EP-99-CA-272-H. Judge Hudspeth, by Order entered on August 16, 1999, remanded the action sua sponte for failure of subject matter jurisdiction. Specifically, Judge Hudspeth found that Defendant had failed to establish by a preponderance of the evidence that no defendant is a citizen of Texas and that the amount in controversy exceeds $75,000. Thus, Judge Hudspeth concluded, the court lacked jurisdiction pursuant to 28 U.S.C. § 1332 and 1441.
The case was remanded to the state court on August 17, 1999. There, Plaintiffs filed an amended Petition on August 18, 1999 (the "third Petition"). Plaintiffs' third Petition named an additional defendant, one Gerald A. Strauss Partnership (the "Strauss Partnership"), which Plaintiffs allege is a Texas partnership composed of two individuals, Plaintiff Kerry Caughran and Defendant.
This third Petition was, according to Plaintiffs, erroneously styled "Plaintiffs' Second Amended Petition."
On August 23, 1999, Defendant again removed the cause to this court based on diversity of citizenship. According to Defendant, this Notice of Removal was mailed to the District Clerk on August 19, 1999, but was not filed until August 23, 1999 because it was inadvertently separated from its attached exhibits. Defendant represents that copies of all documents served on him at the time of removal were attached to this second Notice of Removal as required by 28 U.S.C. § 1446(a). However, Defendant did not include what Plaintiffs deem their most recent Petition, the third Petition, with his Notice of Removal. Rather, Defendant included an unsigned, unfiled copy of what is styled Plaintiffs' Second Amended Petition (the "second Petition") and which names only Strauss as Defendant. The instant Motion to Remand followed.
DISCUSSION
Plaintiffs advance several arguments in support of remanding this cause to state court, as follows: diversity of citizenship is lacking because Defendant the Strauss Partnership is a Texas partnership and all Plaintiffs are citizens of Texas; Defendant has failed to show that the amount in controversy requirement is met; and Defendant cannot remove the cause a second time after once being remanded for failure of subject matter jurisdiction. In response to Plaintiff's Motion, Defendant alleges that Plaintiffs' joinder of the Strauss Partnership is fraudulent and designed to defeat the Court's jurisdiction; that the Strauss Partnership, even if properly joined, is a New Mexico partnership and, therefore, complete diversity exists; and that the amount in controversy requirement is met because Plaintiffs are seeking an amount in excess of $300,000. The Court addresses the Parties' arguments, in turn, below.
The general requirements for removal jurisdiction based on diversity are well-established. "[A]ny civil action brought in a State court of which the district courts have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the place where such action is pending." 28 U.S.C. § 1441(a). Diversity jurisdiction under 28 U.S.C. § 1332 requires that the action be between citizens of different states and that the amount in controversy exceed $75,000. See 28 U.S.C. § 1332. "Removal . . . cannot be based simply upon conclusory allegations." Allen v. R H Oil Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995). Rather, the removing party bears the burden of proving by a preponderance of the evidence the facts necessary to establish federal court jurisdiction See St. Paul Reinsurance Co., Ltd. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998); De Aguilar v. Boeing Co., 47 F.3d 1404, 1409 (5th Cir. 1995) ("De Aguilar II").
A. Complete Diversity
Where removal is based on jurisdiction other than federal question, the action "shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." 28 U.S.C. § 1441(b); see also McKay By and Through McKay v. Boyd Const. Co., Inc., 769 F.2d 1084, 1087 (5th Cir. 1985).
Here, without including the Strauss Partnership named in Plaintiffs' third Petition, diversity among the Parties exists. Defendant avers in his Notice of Removal that all Plaintiffs are citizens of Texas, and that Defendant Strauss is a citizen of New Mexico. Plaintiffs do not contend otherwise. Thus, the Court finds that Defendant's allegations of citizenship with respect to the Parties named in Plaintiffs' second Petition satisfy the diversity of citizenship requirement.
The Court, however, finds that analyzing Plaintiffs third Petition is a more appropriate approach to determining the diversity issue. In the third Petition, Plaintiffs allege that the Strauss Partnership is a Texas partnership, destroying diversity. Defendant, to the contrary, argues that, even if the alleged partnership named as a defendant is considered in the diversity analysis, the Strauss Partnership is a New Mexico partnership, resulting in complete diversity. For purposes of determining diversity, however, the citizenship of unincorporated associations, such as partnerships, is the citizenship of each of their individual members. See United Steelworkers of Am. v. R.H. Bouligny, Inc., 382 U.S. 145, 153, 86 S.Ct. 272, 275, 15 L. Ed.2d 217 (1965); Bankston v. Burch, 27 F.3d 164, 168-69 (5th Cir. 1994); Getty Oil Corp. v. Insurance Co. of N. Am., 841 F.2d 1254, 1258 (5th Cir. 1988).
Here, the state in which the alleged partnership exists is irrelevant. Rather, for diversity purposes, the partnership has two citizenships, Texas and New Mexico, based on the citizenship of its individual partners, Kerry Caughran and Strauss, respectively. Thus, the Court finds that diversity of citizenship does not exist because Defendant Strauss Partnership is in part a citizen of Texas, and the requirement of 28 U.S.C. § 1441(b) that no defendant be a citizen of the same state as any plaintiff is not met.
Finally, Defendant alleges that joinder of the Strauss Partnership as a Defendant was a fraudulent attempt to avoid federal court jurisdiction. "In removal cases involving allegations of fraudulent joinder, the removing party also has the burden of proving the alleged fraud." Getty Oil, 841 F.2d at 1259. Under a theory of fraudulent joinder, a defendant must show by clear and convincing evidence that either there is no possibility that the plaintiff can establish a claim against that defendant which was allegedly fraudulently joined, or that there was outright fraud with respect to the plaintiff's pleading of jurisdictional facts. See Sid Richardson Carbon Gasoline Co. v. Interenergy Resources, Ltd., 99 F.3d 746, 751-52 (5th Cir. 1995); Burden v. General Dynamics Corp., 60 F.3d 213, 217 (5th Cir. 1995).
Here, Defendant claims that joinder of the Strauss Partnership is fraudulent because asserting a claim against that partnership would effectively assert a claim against Plaintiff Kerry Caughran, who Plaintiffs allege was a partner of the Strauss Partnership. While possibly true, this allegation falls far short of the clear and convincing evidence Defendant must show to prove fraudulent joinder. Moreover, Defendant's fraudulent joinder argument is defeated by his own argument attempting to establish that the amount in controversy is met. Defendant admits that he entered into a partnership agreement in May 1994 with Kerry Caughran, as evidenced by a copy of a written, signed agreement between them attached as an exhibit to Defendant's Response to Plaintiffs' Motion to Remand. Although Defendant speculates that the agreement was possibly dissolved, illegal and/or against public policy, the Court is of the opinion that this speculation falls short of clear and convincing evidence required to establish that, as a matter of law, Plaintiffs cannot state a cause of action against the Strauss Partnership. Thus, the Court finds that Defendant's fraudulent joinder argument fails.
B. Amount in Controversy
Even if complete diversity exists, Defendant has not established that the $75,000 amount in controversy requirement is met. "When the plaintiff's complaint does not allege a specific amount of damages, the removing defendant must prove by a preponderance of the evidence that the amount in controversy exceeds $[75],000." De Aguilar II, 47 F.3d at 1409 (quoting De Aguilar v. Boeing, 11 F.3d 55, 58 (5th Cir. 1993) ("De Aguilar I")). Following De Aguilar II, the Fifth Circuit in R H Oil addressed the applicable inquiry, as follows:
[A] court can determine that removal was proper if it is facially apparent that the claims are likely above $[75],000. If not, a removing attorney may support federal jurisdiction by setting forth the facts in controversy — preferably in the removal petition, but sometimes by affidavit — that support a finding of the requisite amount.63 F.3d at 1335 (internal citation removed).
Here, the amount in controversy is not facially apparent from Plaintiffs' Petitions filed in the state court action. Plaintiffs do not seek a sum certain. Rather, they seek only an accounting and declaratory and injunctive relief. Moreover, Plaintiffs allege that there is no legal remedy because it is nearly impossible to calculate any loss. Notwithstanding, Defendant attempts to demonstrate, through numerous exhibits attached to his Reply to Plaintiff's Motion to Remand, "that Plaintiffs [a]re claiming an amount in excess of $300,000 in attorneys fees, billed by Plaintiff Kerry Caughran." The Court, however, finds Defendant's exhibits deficient. Simply put, Defendant's exhibits do not demonstrate the amount of money involved in this case. Thus, the Court is of the opinion that Defendant has failed to demonstrate by a preponderance of the evidence that the amount in controversy requirement has been met.
C. Second Removal
Plaintiffs finally argue that, even if Defendant now could demonstrate that subject matter jurisdiction exists, Defendant cannot remove this cause a second time after once having had the cause remanded for lack of subject matter jurisdiction. The Court agrees. "[O]nce a case is remanded to state court, a defendant is precluded . . . from seeking a second removal on the same ground." S.W.S. Erectors, Inc. v. Infax, 72 F.3d 489, 493 (5th Cir. 1996) (citing St. Paul C. Ry. Co. v. McLean, 108 U.S. 212, 216-17, 2 S.Ct. 498, 500, 27 L.Ed. 703 (1883)). "The prohibition against removal 'on the same ground' does not concern the theory on which federal jurisdiction exists (i.e., federal question or diversity jurisdiction), but rather the pleading or event that made the case removable." Infax, 72 F.3d at 493.
Here, Defendant has not demonstrated any basis for removal different than that forming the basis of the August 12 removal remanded by Judge Hudspeth. There is no new pleading or event demonstrated by Defendant's Notice of Removal which makes the cause newly removable. There are no new parties, claims or facts. Thus, the Court is of the opinion that Defendant's second removal of this cause is precluded.
Although Plaintiffs' third Petition joined the Strauss Partnership as a Defendant, the Court does not consider the Strauss Partnership a Defendant for this purpose because the pleading Defendant attached to his Notice of Removal herein contains no claim against the partnership. Moreover, as discussed above, if the Strauss Partnership is a proper defendant, diversity is destroyed.
Because neither the complete diversity requirement nor the amount in controversy requirement have been met for the Court to have subject matter jurisdiction under 28 U.S.C. § 1441, and because Defendant is precluded from removing the same cause twice on the same ground, the Court is of the opinion that Plaintiff's Motion should be granted.
Accordingly, IT IS HEREBY ORDERED that Plaintiffs' Motion for Remand is GRANTED.
IT IS FURTHER ORDERED that the above-captioned cause be REMANDED to the 120th Judicial District Court of El Paso County, Texas, from whence it came.