Opinion
Civil Action No. 3:04-CV-1979-B.
April 1, 2005
MEMORANDUM ORDER
Before the Court is the Motion to Remand of Plaintiff Mid-American Capital Resource Group, Inc. ("Mid American"), filed September 30, 2004. Having considered the pertinent pleadings, the Court DENIES Mid American's motion to remand for the reasons that follow.
I. BACKGROUND
This is a breach of contract case in which Plaintiff Mid-American seeks to recover an allegedly undisputed amount owed to Mid American Defendant Alcoa, Inc.("Alcoa"). (Petition ¶ 1). Mid American "purchases accounts receivable from its clients and receives payment from third parties." (G MSJ 2; S Resp. 1). Mid-American and United Container Group North Carolina, LLC ("United Container") entered into a contract ("the Agreement") on or about February 20, 2001. (Agreement ¶ 1, Petition at 2, Exh. A.). The Agreement covered Mid American's agreement to purchase certain accounts receivable from United Container. ( Id.).
A. Assignment of the Alcoa Receivables.
After the Agreement was executed, "United Container requested that Mid American purchase and accept assignment of certain account receivables (the "Assigned Receivables") payable to United Container by [Alcoa]." (Petition, Exh. B). Mid American alleges that, before it purchased the Assigned Receivables, it "requested and received written representations and warranties from [Alcoa] that [Alcoa] owed the full amount of the Assigned Receivables and did not have any disputes, claims or offsets to assert in connection with the Assigned Receivables." ( Id., Exh. C). Mid American claims that it only agreed to accept assignment of the Receivables and purchase them after receiving the aforementioned representations from Alcoa. ( Id.). Alcoa allegedly acknowledged the assignment of the Receivables from United Container to Mid American in writing. ( Id., Exh. C). As a result, Mid American claims that it "holds undisputed title to the Assigned Receivables," and that Alcoa "is required to pay the entire amount of the Assigned Receivables to Mid American." ( Id.).
B. The Dispute Surrounding the Receivable Confirmation Requests.
According to Alcoa, Mid America's allegations omit a crucial part of the transaction between Mid American and Alcoa, because "[t]hese Requests lie at the heart of the parties' dispute and frame the ultimate issue contained in this litigation." (Response at 1). Alcoa claims that Mid American contacted the company "via telephone in an effort to confirm the invoices and amount due and owing." (Response at 2). After receiving oral confirmation, Mid American sent two Receivable Confirmation Requests (the "Requests") to Alcoa via facsimile, and an Alcoa sales manager, William M. Greene ("Greene") signed and returned them via facsimile "on or about May 31, 2001 and June 4, 2001." ( Id., Exhs. A B); Petition, Exh. C).
In order to decide the whether the forum selection clause in the Requests controls the removability of this case, the Court will, in its discretion, "pierce the pleadings," and examine the affidavits and other evidentiary material supplied by both parties. See, e.g. Burden v. Gen. Dynamics Corp., et al., 60 F.2d 213 (5th Cir. 1995).
Alcoa claims that the Requests relate to "nonexistent invoices . . . that are part of a fraud and conspiracy perpetrated upon Alcoa," by Alcoa's former employee, Greene, and Kent Lessman ("Lessman"), an officer of United Container, "the company who purported to sell the accounts receivable to Mid American." (Response at 1). Alcoa maintains that "this case is the product of a conspiracy entered into between [Greene], and [Lessman], which was part of a larger criminal fraud conspiracy that involved the factoring of various accounts receivables." (Response at 2; Tasso Aff. ¶ 2, Exh. 1). Alcoa has attached a signed statement from Greene "detailing his unauthorized and fraudulent activities with [Lessman]." ( Id.).
Alcoa cites related litigation, E.S. Bankest, LLC v. United Beverage Florida, LLC et al., in which it claims Greene, and the United Container employee were part of "a massive criminal fraud conspiracy involving numerous individuals and dozens of companies."
C. The Conspiracy.
Alcoa contends that Greene, an Alcoa employee during the time of the relevant events, was in a sales position and that he did not have the responsibility or authority to deal with accounts payable or to enter into "factoring agreements" such as the one at issue. ( Id., Affidavit of Giancarlo Tasso ("Tasso Aff.") ¶¶ 5-6). Tasso was Greene's direct supervisor at Alcoa Fujikura Limited, the Alcoa subsidiary that employed Greene. ( Id., Tasso Aff. ¶ 5). Tasso has given a sworn statement that Greene did not, at any time during his employment, possess the actual authority to enter into, or to verify, the type of factoring transactions at issue. ( Id., Tasso Aff. ¶ 7). Thus, Alcoa maintains that "the Requests are void and unenforceable and cannot provide a basis to remand this litigation."
D. Procedural History.
Mid American filed the instant lawsuit against Alcoa on August 2, 2004 in the 298th Judicial District Court, Dallas County, Texas, alleging (1) breach of contract, (2) negligent misrepresentation, (3) promissory estoppel, and (4) a request for attorneys' fees. See generally, ( Id.). Alcoa removed the action to the Federal Court for the Northern District of Texas on September 10, 2004 on the basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332. Mid American, a Texas corporation, is a Texas citizen for purposes of diversity. (Petition at 1; Notice of Removal at 1). Alcoa, a Pennsylvania corporation, is a Pennsylvania citizen for purposes of diversity. (Notice of Removal at 2; Petition at 1). Presently before the Court is Mid American's Motion to Remand, filed September 30, 2004.
II. ANALYSIS
A. Legal Standard.
In an action which has been removed from state court, the removing party bears the burden of establishing federal jurisdiction. De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir. 1995). 28 U.S.C. § 1441(a) allows for the removal of "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." 28 U.S.C. § 1441(a). Federal district courts have original jurisdiction over all civil actions between citizens of different states where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs. 28 U.S.C. § 1332(a)(1). "In support of their removal petition, [Alcoa] may submit affidavits and deposition transcript; and in support of their motion for remand, [Mid American] may submit affidavits and deposition transcripts along with the factual allegations contained in the verified complaint. The district court must then evaluate all of the factual allegations in the light most favorable to the plaintiff, resolving all contested issues of substantive fact in favor of the plaintiff." B, Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir. (Tex.) 1981). B. Waiver of Right to Removal.
The Court will not address the parties' diversity status, as it is not at issue. Rather, Mid American bases its Motion for Remand on its contention that Alcoa "waived its right of removal by its execution of the Receivable Confirmation Requests," because "[b]oth of the signed Receivable Confirmation Requests clearly state in pertinent part, "`. . . the sole venue for any action to this agreement of the above invoices shall be in a State District Court in Dallas County, Texas.'" (Motion at 2). As an initial matter, assuming, arguendo, that the Requests constituted valid contracts, Alcoa, as a party to the contract, could have legally waived its right of removal as long as the contract specified that Mid American had the "right to choose the forum' in which any dispute will be heard." Waters v. Browning-Ferris Indus., Inc., 252 F.3d 796 (5th Cir. 2001) (citing City of Rose City v. Nutmeg Ins. Co., 931 F.2d 13, 16 (5th Cir. 1991). Moreover, the Fifth Circuit does not require that the waiver include specific language, such as "`waiver of right of removal.'" Id.
Although the Fifth Circuit has not addressed the specific issue at hand, it has explicitly held that "in testing for fraudulent joinder the district court in its discretion may "pierce the pleadings." See, e.g. Burden, 60 F.2d at 213. The Court finds that the same reasoning applies to the instant situation, and likewise looks beyond the pleadings to review the issue of whether Greene had the authority to act on behalf of Alcoa in signing the Requests. As an initial matter, the Court recognizes that this is a motion for remand and not a motion for judgment on the merits of the case, and the Court's analysis of Greene's authority to sign the Requests is only for purposes of determining whether Alcoa waived its right to removal, and is not a decision on the merits. Both parties will ultimately have the opportunity to conduct full discovery and submit complete evidence as to the merits of their respective positions on the allegations in the Petition.
(1) Alcoa Maintains that Greene Lacked the Requisite Authority.
Alcoa does not argue that the Requests were facially inadequate to constitute a waiver of its removal rights. Rather, Alcoa contends that "[t]he Requests are void, and the venue clause contained therein is unenforceable, because [Greene] lacked the actual authority to enter into, or to verify, the type of factoring transaction that was the subject matter of the Requests." (Response at 4). Under Texas law, an agent's conduct is not binding on the principal when the agent exceeds the scope of his authority. See, e.g., Remenchik v. Whittington, et al., 757 S.W.2d 836, 840 (Tex.App.-Houston [14th Dist.] 1988, no writ). Actual authority includes both express authority intentionally conferred by the principal upon the agent as well as implied authority, defined as that which is "proper, usual and necessary to exercise any authority granted to a person." Polland Cook v. Lehmann, 832 S.W.2d 729, 738 (Tex.App. — Houston [1st Dist.] 1992, writ denied).
In the instant case, Alcoa avers that the company had not conferred either express or implied authority upon Greene to sign the Requests. (Response at 4). As a sales manager, Greene's "primary responsibility included selling product to Ford Motor Company's purchasing division," ( Id., Tasso Aff. ¶ 4), and "[h]is duties did not involve purchasing or accounts receivables, rather, his position involved sales. . . . [t]he scope of [Greene]'s duties at Alcoa did not include, and never included, negotiating, verifying or entering into factoring agreements." ( Id., Tasso Aff. ¶ 6-7). Moreover, Alcoa claims that it "had no knowledge during the relevant time frame that he was fraudulently engaging in such alleged transactions." ( Id., Tasso Aff. ¶ 7 and 8). Finally, Alcoa contends that it "is not a proper or necessary course of conduct" for a person working in Greene's position to negotiate or verify factoring agreements such as the one at issue in this case. ( Id., Tasso Aff. ¶ 6) (citing the standard set out in Polland Cook v. Lehmann, 832 S.W.2d at 738).
(2) Mid American Insists that Greene had Apparent Authority.
In response to Alcoa's argument that Greene lacked the authority to sign the Requests and bind Alcoa, Mid American argues that Greene had apparent authority. See generally, (Reply). According to Mid American, Greene's job title, "Manager, Ford Components/Core Purchasing," bestowed implied authority upon him, in fact "is probably sufficient to support a summary judgment for Plaintiff on the issue of Mr. Greene's apparent authority to sign the Receivable Confirmation Requests and acknowledge Defendant's unpaid obligations to a third party vendor." (Reply at 2). Mid American does not, however, cite any authority to support this bald assertion.
Mid American also includes the additional argument that even if Greene lacked the authority to "acknowledge [Alcoa's] outstanding payables," he still had the authority to agree to the forum selection clause. (Reply at 3). This distinction, however, is unavailing, because Alcoa contends that Greene lacked the authority to even sign the Requests containing the forum selection clauses. (Response at 5).
"One seeking to charge a principal through the apparent authority of its agent must establish conduct by the principal that would lead a reasonably prudent person to believe that the agent has the authority that it purports to exercise." Nationsbank, N.A. v. Dilling, 922 S.W.2d 950, 953 (Tex. 1996); Coffey v. Fort Wayne Pools, Inc., 24 F. Supp. 2d 671, 680 (N.D. Tex. 1998) (Boyle, Mag. J.). In making this determination, only Alcoa's conduct, not the conduct of Greene, may be considered. S.W. Title Ins. Co. v. Northland Bldg. Corp., 552 S.W.2d 425, 428 (Tex. 1977). Mid American, the party dealing with Greene, the agent, "is bound, at [its] peril, to ascertain not only the fact of the agency, but also the extent of the agent's power, and in case either is controverted, the burden of proof is on [Mid American] to establish it.". Verna Drilling v. Parks-Davis Auctioneers, 659 S.W.2d 877, 881 (Tex.App.-El Paso 1983, writ ref'd n.r.e.). The Court finds that, for the purposes of its motion for remand only, Mid American has not met its burden.
Mid American cites Butler v. Polk, 592 F.2d 1293, 1296 (5th Cir. 1979) and Blackmore v. Rock-Tenn Co., Mill Div., Inc., 756 F. Supp. 288, 289 (N.D. Tex. 1991) (McBryde, J.) for the proposition that "in all cases where jurisdiction is doubtful, all doubts should be resolved in favor of remand." Mid American's reliance on this point of law, however, is misplaced. If this Court were to remand this case, it would not be for lack of subject matter jurisdiction, as there is no disagreement between the parties regarding the requisite diversity of citizenship or amount in controversy. 28 U.S.C. § 1447(c). The true standard is that the removal statute and its conferral of subject matter jurisdiction should be construed in favor of remand. Maguna v. Prudential Property and Casu. Co., Inc., 276 F.3d 720, 723 (5th Cir. 2002); Acuna v. Brown Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000). As the Fifth Circuit noted in Waters, "[w]hen a district court remands a suit relying on a contractual forum selection clause, that decision is not based on a lack of subject matter jurisdiction and is therefore outside of the statutory prohibition on our appellate review . . . [c]ontractual remand orders are reviewable by direct appeal." Waters, 252 F.3d at 797 (citing McDermott Int'l, Inc. v. Lloyds Underwriters, 944 F.2d 1190, 1201, 1204 (5th Cir. 1991).
(3) Greene's Actions Were Antagonistic to Alcoa.
Alcoa makes the final (valid) point that the agency relationship between Alcoa and Greene, if it ever in fact existed at all, "terminated when Mr. Greene began conspiring with Mr. Lessman of United [Container] to engage in the fraudulent factoring transaction," because the acts within the conspiracy were antagonistic to Alcoa's interests. (Response at 7); Remenchik, 757 S.W.2d at 839 ("It is long-standing law in Texas that where an agent binds himself to a course of conduct antagonistic to the interests of his principal, such a breach of duty, ipso facto, terminates the agency unless condoned by the principal with full knowledge of the facts.") (citations omitted); McNeil Pacific Investors Fund 72, Ltd. v. Ernst Young, et al., 1995 WL 447557, at *12 n. 5 (Tex.App.-Dallas 1995, pet. denied). Alcoa claims that the invoices at issue were "nonexistent accounts," and because "Alcoa never purchased nor received any products from United," or even ever "conducted business" with United Container. (Response at 7, Tasso Aff. ¶ 8). Mid American offers no rebuttal this point. See generally, (Reply).
(4) The Forum Selection Clause Was not Freely Entered Into.
The Court acknowledges that forum selection clauses, such as the one in the Requests are "presumptively valid." M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12-13 (1972). This is only true, however, in cases where the clauses have been "freely negotiated." Id.; see also Afram Carriers, Inc. v. Moeykens, 145 F.3d 298, 301 (5th Cir. 1998); Quick Erectors, Inc. v. Seattle Bronze Corp., 524 F. Supp. 351, 356 (1981) (noting that the "[T]he general rule is to uphold freely negotiated forum selection clauses."). As discussed, supra, Mid American has not met its burden to establish either the existence of the agency agreement between Alcoa and Greene, nor the extent of Greene's agency power.The Court finds that the clause at issue, was thus, not, under the circumstances, freely negotiated between the two parties because it does not appear that Alcoa was a party bound to the contract through a valid agency relationship with Greene. Bremen, 407 U.S. at 12-13; Afram Carriers, Inc., 145 F.3d at 301. Regardless of whether Alcoa may ultimately be responsible for the damages claimed by Mid American, to enforce the forum selection clause in the Requests would not be giving "effect to the legitimate expectations of the parties, manifested in their freely negotiated agreement," because the affidavits and evidence submitted with the parties' pleadings do not show that Alcoa knew of or ratified the contract, especially where, as alleged, the accounts the Requests related to were "nonexistent."
The Court stresses that these findings are for purposes of deciding the instant motion only, and do not constitute a ruling on the underlying merits of this case. Again, both parties will have full opportunity to conduct discovery and present evidence regarding the allegations in Mid American's Petition. Finally, it is undisputed that the Court has diversity subject matter jurisdiction over this case. For these reasons, the Court DENIES Mid American's Motion to Remand.
III. CONCLUSION
For the reasons given above, the Court finds that it has diversity jurisdiction over this case and that Alcoa has not waived its right of removal. Mid America's motion for remand is therefore DENIED.