Opinion
CIVIL ACTION NO: 01-0897 SECTION: "R" (2)
July 16, 2001
ORDER AND REASONS
Before the Court is plaintiff's motion to remand this matter to state court pursuant to 28 U.S.C. § 1447(c). Defendants claim that McGlinchey Stafford PLC was fraudulently joined to defeat diversity jurisdiction. McGlinchey Stafford and Cross Gunter move to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Cross Gunter also moves to dismiss based on Federal Rule 12(b)(3) and 12(b)(2). Defendant Clyde Turner moves to dismiss pursuant to Federal Rule 12(b)(2). Toyota Motor Sales U.S.A. moves to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(3), 12(b)(5), and 12(b)(6). For the following reasons, the Court grants plaintiff's motion to remand because finds that McGlinchey Stafford was not fraudulently joined.
I. Background
On March 2, 2001, plaintiff Weeks, Kavanagh and Rendeiro ("Weeks") filed a petition to enforce an attorney's fee lien in Louisiana state court pursuant to La. R.S. 37:218 and Ark. Code. Ann. §§ 16-22-301 through 308. Weeks seeks payment of attorney's fees to which it claims it is entitled as a result of a settlement reached between its former client, Brenda Blake, and Toyota Motor Sales, U.S.A., Inc., and Toyota Motor Corporation ("Toyota"). Weeks represented Blake, an Arkansas resident, in various personal injury and wrongful death claims against Toyota. The claims arose out of an accident in Arkansas and resulted in litigation in Arkansas. Weeks and Blake executed a contract of employment, which was a contingent fee contract that stipulated that Weeks would be paid 40% of the Blake family's gross recovery, or in the alternative, a reasonable attorney's fee. (Compl., Ex. A.) The contract included an attorney's fee lien. Weeks claims that it was discharged without cause on January 21, 1999, after filing suit on Blake's behalf in Arkansas state court and diligently and competently pursuing Blake's claims. Weeks was replaced by Clyde Tab Turner d/b/a Turner Associates, which filed suit in federal court in Arkansas, resulting in a settlement with Toyota in May or June of 2000. Weeks claims that it is entitled to receive attorney's fees pursuant to the terms outlined in the contingent fee contract, and it has filed this suit against Blake, Toyota, McGlinchey Stafford (Toyota's counsel), Cross Gunter (also Toyota's counsel), and Turner. Defendants removed the matter to this Court based on diversity jurisdiction. Plaintiff now moves to remand this matter to state court. Defendants oppose the remand.
The contract provides: In the event that I discharge Weeks, Kavanagh Rendeiro for any reason, I shall nevertheless pay to them from the proceeds of settlement or judgment such attorney fees as might be due them for legal services rendered pursuant to this contract, and repay them for any expenses or advances which they might have already paid or personally incurred or guaranteed on my/our behalf. I acknowledge that to secure repayment of such attorney's fees, expenses or advances, Weeks, Kavanagh Rendeiro shall have a lien on the proceeds of any settlement or judgment in my/our favor. (Compl., Ex. A.)
II. Discussion
Generally, a defendant may remove a civil action filed in state court if the federal court would have had original jurisdiction. See 28 U.S.C. § 1441(a). Here, defendants assert that the Court has original jurisdiction under 28 U.S.C. § 1332.
The removing party bears the burden of establishing the existence of federal jurisdiction. See Allen v. R H Oil Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995) . The jurisdictional facts supporting removal must be examined at the time of removal, and they are strictly construed. See Id.; Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir. 1988) (citing cases) . If "at any time before final judgment" it appears that the Court lacks subject matter jurisdiction, the Court must remand the case to state court. 28 U.S.C. § 1447(c).
Defendants' assertion of this Court's diversity jurisdiction hinges on their contention that plaintiff fraudulently joined McGlinchey and that its citizenship must therefore be ignored for jurisdictional purposes. To establish that McGlinchey was fraudulently joined, defendants bear the heavy burden of showing that there is no possibility that plaintiff could establish a cause of action against McGlinchey, or that there has been outright fraud in plaintiff's recitation of the jurisdictional facts. See Burden v. General Dynamics Corp., 60 F.3d 213, 217 (5th Cir. 1995); B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir. 1981). In evaluating defendants' assertion of fraudulent joinder, the Court must consider all of the factual allegations in the light most favorable to the plaintiff and resolve all of the contested issues of fact in favor of the plaintiff. See Burden, 60 F.3d at 217. The Court may pierce the pleadings to determine fraudulent joinder, and, even though the petition may state a claim against the in-state defendant, the case may be removed if the defendant shows by evidence outside the pleadings that there is no reasonable basis to predict that plaintiff could establish a claim against the in-state defendant. Badon v. R J R Nabisco, Inc., 224 F.3d 381, 389, 394 (5th Cir.) (Badon I), op. after certified question declined, 236 F.3d 282 (5th Cir. 2000) (Badon II) (there is no controversy to be construed in favor of nonremoving party when it submits no evidence of contradictory facts in response to the evidence of the removing party). See also B., Inc., 663 F.2d at 549. Furthermore, the Court must resolve any uncertainties as to the current state of controlling substantive law in favor of the plaintiff. B., Inc., 663 F.2d at 549. Thus, defendants must show, as a matter of law, that "there is no reasonable basis for predicting that the plaintiff might establish liability on [its] claim against [McGlinchey]." Badon I, 224 F.3d at 390. See also Burden, 60 F.3d at 216 (District courts "do not determine whether the plaintiff will actually or even probably prevail on the merits of the claim, but look only for a possibility that the plaintiff might do so").
C. Ark. Code. Ann. § 16-22-301 through 308
Weeks contends that it has a claim against McGlinchey Stafford under the attorney's lien statutes of Arkansas. SEE ARK. CODE ANN. §§ 16-22-301 through 308 (West 1999). The Attorney's Lien Law, Ark. Code Ann. §§ 16-22-301 though 308 was amended by 1989 Ark. Acts 293. The Arkansas Supreme Court has interpreted the 1989 amendments to the attorney's lien law as allowing an attorney who has initiated action on his client's behalf and then been discharged, to rely on his contract and recover a contingent fee from not only the client, but also from third-parties. Lockley v. Easley, 786 S.W.2d 573, 576 (1990). The Arkansas provisions relevant to this case are Ark. Code. Ann. §§ 16-22-303 and 304.
Section 16-22-304 provides for the creation of the attorney's fee lien by written notice or the filing of the suit on behalf of the client by the attorney:
(a)(1) From and after service upon the adverse party of a written notice signed by the client and by the attorney at law, solicitor, or counselor representing the client, which notice is to be served by certified mail, a return receipt being required to establish actual delivery of the notice, the attorney at law, solicitor, or counselor serving the notice upon the adversary party shall have a lien upon his client's cause of action, claim, or counterclaim, which attaches to any settlement, verdict, report, decision, judgment, or final order in his client's favor, and the proceeds thereof in whosoever's hands they may come.
(2) The lien cannot be defeated and impaired by any subsequent negotiation or compromise by any parties litigant.
(3) However, the lien shall apply only to the cause or causes of action specifically enumerated in the notice.
(b) In the event that the notice is not served upon the adverse party by an attorney at law, solicitor, or counselor representing his client, the same lien created in this section shall attach in favor of the attorney at law, solicitor, or counselor from and after the commencement of an action or special proceeding or the service upon an answer containing a counterclaim, in favor of the attorney at law, solicitor, or counselor who appears for and signs a pleading for his client in the action, claim, or counterclaim in which the attorney at law, solicitor, or counselor has been employed to represent the client.
Ark. Code Ann. § 16-22-303 provides for the recovery of fees in the event of settlements without the attorney's consent:
(b)(1) In case a compromise or settlement is made by the parties litigant to the action after service of the notice by certified mail and before filing of suit, or if made after suit is filed upon the action and such compromise or settlement is made without the consent of such attorney at law, solicitor, or counselor, the court of proper jurisdiction shall, upon motion, enter judgment for a reasonable fee or compensation against all of the parties to the compromise or settlement so made without the consent of the attorney at law, solicitor, or counselor, and the amount of the fee or compensation shall not be necessarily limited to the amount, if any, of the compromise or settlement between the parties litigant.
The Arkansas General Assembly defined the "court of proper jurisdiction" for this statute in § 16-22-304(d):
(d) The court or commission before which an action was instituted or in which an action may be pending at the time of settlement, compromise, or verdict, or in any chancery court of proper venue, upon the petition of the client or attorney at law, shall determine and enforce the liens created by this section.
Defendants argue that § 16-22-304(d) exclusively limits jurisdiction for the enforcement of attorney's liens under § 16-22-303 to the "court or commission before which an action was instituted," the court "in which an action may be pending at the time of settlement, compromise, or verdict," and "any chancery court of proper venue." Defendants point out that the Louisiana state court does not fit into those three categories. Defendants therefore contend that McGlinchey Stafford is fraudulently joined because the Louisiana state court lacks the authority to enforce the lien against McGlinchey. Plaintiff does not respond to this argument at all.
While neither plaintiff nor defendants discuss this point in any great detail, the Court finds that the relevant inquiry is whether the attorney's fee claim is a local or a transitory action. Defendants are essentially claiming that the Louisiana state court has no jurisdiction to enforce this claim against McGlinchey because the cause of action created by the Arkansas statute was a "local" cause of action, to be brought only in the forum courts specified by § 16-22-304(d), rather than a "transitory" cause of action, which could be brought in any court in which personal jurisdiction over the defendant could be obtained. See Tennessee Coal, Iron R. Co. v. George, 233 U.S. 354, 359, 34 S.Ct. 587, 588 (1914); Atchison, T. S.F.R. Co. v. Sowers, 213 U.S. 55, 70, 29 S. Ct. 397, 403 (1909). If the action is transitory, courts are not required to adhere to the statutory forum restrictions. See Tennessee Coal, 233 U.S. at 360, 34 S. Ct. at 589. It is undisputed that the Louisiana state court has personal jurisdiction over McGlinchey Stafford, a Louisiana-based law firm.
Therefore, the central question is whether the statutorily created cause of action for attorney's fees is local or, transitory. While federal law, not state law, usually controls the outcome of subject matter jurisdiction and venue disputes in federal court, the Fifth Circuit has held that "the law of the forum state" — not federal law — determines whether the local action doctrine applies. See Trust Company Bank v. United States Gypsum Co., 950 F.2d 1144, 1149 (5th Cir. 1992); See Hayes v. Gulf Oil Corp., 821 F.2d 285, 287 (5th Cir. 1987). Louisiana courts do not regard themselves as bound by the characterization of the action used by courts where the action arose. See Holmes v. Barclay 1849 WL 3662, *1 (La. 1849); Trizec Properties, Inc. v. United States Mineral Products Co., 974 F.2d 602, 604 (5th Cir. 1992). In Holmes, the Louisiana supreme court held that a Louisiana state court had subject matter jurisdiction over an action for damages for trespass to out-of-state property. The property damage occurred in Illinois, and under Illinois law, the action was considered a local action. The Louisiana Supreme Court held that the laws of Louisiana, which held that the action was a personal action, should apply. As a personal or transitory action, the action could be brought in any court in which personal jurisdiction existed.
The Court therefore must determine whether actions for attorney's fees are local or transitory actions under Louisiana law. Louisiana classifies actions as "real," "personal," or "mixed." La. Code Civ. Proc. art. 422. Real actions involve enforcing rights in, to, or upon immovable property. Real actions are the equivalent of local actions because real actions must be brought where the property is. See Moreland v. Rucker Pharmaceutical Co., Inc., 59 F.R.D. 537, 540 (W.D. La. 1973). There is no "real" action to recover movables. See id.; Security First National Bank v. Tattersall, 311 So.2d 218, 222 (La. 1975). In Security, the Louisiana Supreme Court held that an action to enforce a pledge of certificates on racehorses was a personal action since the right did not involve immovable property. Security, 311 So.2d at 222. It was therefore transitory in nature. Id.
Under Louisiana law, this action is likewise a personal or transitory action because attorney's fees are corporeal movables. See Terrell v. Terrell, 655 So.2d 600, 603 (La.App. 2d 1995) (money is a corporeal movable); Succession of Amos, 422 So.2d 605, 608 (La.App. 3d 1982) (funds used to purchase a certificate of deposit are corporeal movables) (citation omitted); Yiannopoulos, Civil law of Property, § 146. Since the object of this action is either the recovery of movable property, or the enforcement of a lien on movable property, the action is transitory. See Security, 311 So.2d at 222 (holding that actions not involving immovables are personal actions); compare, Chateau Lafayette Apartments v. Meadowbrook National Bank, 416 F.2d 301, 304 (5th Cir. 1969) (holding that an action to assert an interest in immovable property was a local action); Thompson v. Calcasieu Trust Savings Bank, 72 So. 958, 959 (La. 1916) ("only those actions which have for their object immovable property or property in custodia legis are included among local actions").
Defendants additionally argue that § 16-22-303 does not apply to McGlinchey because it does not create a cause of action against the opposing party's counsel. They cite no Arkansas case law on this point. The Arkansas Supreme Court has broadly defined the reach of the attorney's lien statute. In Lockley, the Arkansas Supreme Court stated:
The Attorney's Lien Law also provides that, under appropriate circumstances, the lien may be enforced not only against the client but against anyone, including another attorney, who knowingly settles with an opposing litigant without the consent of the attorney.786 S.W.2d at 576 (emphasis added). In light of such a broad holding, this Court cannot say that there is no reasonable basis to predict that plaintiff might establish a claim against McGlinchey Stafford under § 16-22-303. In a motion to remand, the Court must resolve any uncertainties as to the current state of controlling substantive law in favor of the plaintiff. See B., Inc., 663 F.2d at 549. Therefore, the Court is required to remand this case for lack of subject matter jurisdiction.
III. CONCLUSION
For the foregoing reasons, the Court grants plaintiff's motion to remand and remands the case to the Civil District Court for the Parish of Orleans, Louisiana.