Opinion
Civil Action No: 04-1746 Section "R"(4).
September 24, 2004
ORDER AND REASONS
Before the Court are three motions to remand, one from Clarence Zahn, Robin Zahn and Five Star Premium Finance, Inc., one from Eckerd Corporation and Sal DePaula, and one from Wilf Rumball. First Union Commercial Corporation removed this proceeding to this Court on June 23, 2004. For the following reasons, the Court GRANTS the motions and remands the case to the Twenty-first Judicial District Court for the Parish of Tangipahoa.
I. BACKGROUND
In late 2000, Clarence Zahn was prescribed pain medication by his doctor. Pharmacist Sal DePaula at an Eckerd pharmacy filled the prescription. The Zahns allege that DePaula gave Mr. Zahn a higher dosage than prescribed, which had debilitating effects on his mental functioning. His impairment allegedly caused his insurance premium finance business, Five Star, to have financial difficulties. On October 16, 2001, the Zahns and Five Star sued Eckerd and DePaula under state tort law in state court in Tangipahoa Parish. All parties in the action are domiciled in Louisiana.
Meanwhile, Five Star's primary lender, First Union, sued Five Star, and the Zahns as its guarantors, in Maryland state court as a result of Five Star's default on its line of credit. First Union won a judgment against both Five Star and the Zahns. On December 14, 2001, First Union sued Five Star and the Zahns in the Eastern District of Louisiana, seeking to enforce the judgment obtained in Maryland state court.
After First Union filed its enforcement action, Five Star filed for Chapter 7 bankruptcy protection. Because First Union's claims against Five Star were before the bankruptcy court, the district court granted summary judgment for First Union against only the Zahns, in the amount of $928,701.82 plus interest. First Union sought to enforce the judgment against the Zahns by seizing the Zahns' rights and interests in the pending state court tort lawsuit, in accordance with LA.REV.STAT. ANN. 13:3864, et seq., made applicable by Federal Rule of Civil Procedure 69(a).
Earlier in the course of the state court tort litigation, two other creditors of Five Star, B-EZ, Inc. (a Louisiana Corporation) and Wilf Rumball (an individual domiciled in Canada), perfected security interests in the lawsuit. The Zahns' attorneys, Macaluso Jordan, A.P.L.C., also have a security interest in the proceeds of the tort suit as a matter of Louisiana law.
The parties to the tort litigation reached a tentative settlement in the amount of $625,000. The Zahns recorded the settlement with the state court and filed a petition with that court to approve the settlement, dismiss the defendants, and deposit funds into registry of the court. The Zahns and their attorneys also filed a petition for payment of attorney's fees and costs. Both petitions were filed under the caption of the original tort suit and named creditors, First Union, B-EZ, and Wilf Rumball, as defendants.
First Union filed a notice of removal in this Court, removing the petitions, but not the underlying tort suit, under 28 U.S.C. § 1441(a). The Zahns, Five Star, Eckerd, Sal DePaula, and Wilf Rumball filed motions to remand, arguing that removal was improper because the parties are not diverse, removal was untimely, the petitions are not separate civil actions subject to removal under section 1441(a), and all defendants did not consent to removal. First Union argues that removal to this Court is proper because this Court has subject matter jurisdiction.
II. DISCUSSION
A. Applicable Law
A defendant may remove any civil action over which the federal court has original jurisdiction under 28 U.S.C. § 1441(a). 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 are examined as of the time of removal. See Gebbia v. Walmart Stores, Inc., 233 F.3d 880, 883 (5th Cir. 2000); Asociacion Nacional de Pescadores a Pequena Escala O Artesanales de Colombia ("ANPAC") v. Dow Quimica de Colombia S.A., 988 F.2d 559, 565 (5th Cir. 1993), abrogated on other grounds by Marathon Oil Co. v. Ruhrgas, 145 F.3d 211 (5th Cir. 1998), rev'd on other grounds, 526 U.S. 574 (1999); Bonck v. Marriott Hotels, Inc., No. Civ.A. 02-2740, 2002 WL 31890932, at *1 (E.D. La. Dec. 30, 2002). The Court may remand the case to state court on the basis of a defect other than subject matter jurisdiction and must remand if the court lacks subject matter jurisdiction. 28 U.S.C. § 1447(c). Section 1441 is to be narrowly construed to restrict removal because "a defendant's use of that statute deprives a state court of a case properly before it and thereby implicates important federalism concerns." Frank v. Bear Stearns Co., 128 F.3d 919, 922 (5th Cir. 1997).
B. Analysis
First Union argues that removal of this proceeding to federal court was proper for three reasons. First, First Union asserts that the Court has exclusive jurisdiction because it has inherent authority to execute its own judgment, a judgment that First Union argues is endangered by the petitions. Second, First Union argues that the Court has jurisdiction under 28 U.S.C. § 1332 because the parties are diverse, once B-EZ is properly realigned as a plaintiff. Finally, First Union argues that the Court has jurisdiction under 28 U.S.C. § 1335 "to the extent that the petition seeks to deposit sums into the registry of court, and to determine the rights of certain parties thereto." For the following reasons, the Court grants the motions to remand
Section 1441(a) allows a defendant to remove "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). But proceedings that are merely supplemental, ancillary, or incidental to an original state court action are not removable to federal court. Coeur D'Alene Ry. Nav. Co. v. Spalding, 93 F. 280, 286 (9th Cir. 1899); Int'l Org. Masters, Mates and Pilots of America, Local No. 2 v. Int'l Org. Masters, Mates and Pilots of America, Inc., 342 F. Supp. 212, 214 (E.D. Pa. 1972); Charles Alan Wright, et al., 14B Federal Practice and Procedure § 3721 (3d ed. 1998). Although the Fifth Circuit has not addressed the removability of a state court petition to apportion deposited settlement funds among creditors, the Seventh Circuit has held that such a petition invokes the ancillary jurisdiction of the state court and is therefore not a removable civil action. Blackburn v. Sundstrand Corp., 115 F.3d 493, 494 (7th Cir. 1997). Other courts have similarly held that proceedings to execute a judgment obtained in an original state lawsuit are "entirely ancillary to, and dependent upon, the original suit" and are, therefore, not removable to federal court. Coeur D'Alene Ry. Nav. Co., 93 F. at 285; Int'l Org. Masters, 342 F. Supp. at 214.
The Court finds that the petitions in this case are ancillary to the nonremovable tort litigation because they merely assist in the resolution of the state court proceeding. See Blackburn, 115 F.3d at 494. These petitions seek to approve a settlement of the lawsuit and to apportion the funds among creditors, including the plaintiffs' attorneys. As such, they are inseparably connected with the original state court proceeding and therefore are not separate civil actions that are removable to federal court. Rather, they are part of the original, nonremovable state law tort action, which is still pending in state court.
First Union argues that the Court's authority to enforce its judgment in favor of First Union against the Zahns gives the Court exclusive jurisdiction over proceedings to approve the settlement of the state court lawsuit and to apportion the settlement funds. First Union's argument is unpersuasive. The Court's inherent authority to enforce its judgment is simply not a basis for removal jurisdiction. See Syngenta Crop Protection, Inc. v. Henson, 537 U.S. 28, 32 (2002) (rejecting the argument that a federal court's power to enforce its orders under the All Writs Act and ancillary enforcement jurisdiction provides an independent jurisdictional ground for removal of a state court action that frustrates a previously issued federal court order). In any event, there is no indication that the adjudication of First Union's rights to the settlement fund in state court will thwart the enforcement of its federal judgment. The priority to be assigned to First Union's judgment is determined by state law, which the state court is perfectly capable of applying.
Furthermore, even if the Court's power to enforce its judgment were a basis for removal jurisdiction, the petitions are not civil actions removable under section 1441 because they are ancillary to the state court tort litigation. That First Union's rights derive from a federal judgment does not transform the petitions into separate, removable civil actions. First Union's reliance on Princess Lida v. Thompson, 305 U.S. 456, 466 (1939), is misplaced. That case holds that a state court's in rem jurisdiction over a trust deprives a federal court of jurisdiction over a separate suit that involves claims to the same trust. Id. at 467-68. The case involved dual proceedings, and did not address a proceeding removed from state court to federal court. Id. at 459. It simply has no application here.
First Union also argues that the petitions are actions independent from the state court tort litigation because they involve different parties. Although the petitions appear to add parties who are not parties to the original state court litigation, the Court finds that the naming of these "defendants" does not convert the petitions into actions independent of the original state court tort lawsuit. In McConville v. Libbey-Owens-Ford Co. Health Care Plan, No. 99-C-7002, 2000 WL 122617, at *3 (N.D. Ill. 2000), plaintiffs filed a similar petition to adjudicate liens on funds to be received under a pending settlement offer. The court held that petition was ancillary to the still-pending state court personal injury action and that removal was therefore improper. Id. That plaintiffs named the lienholder in the petition and the lienholder was not a party to the underlying action did not alter the court's conclusion that the petition was not a removable civil action. Id.; cf. Varco v. Lapsis, 172 F. Supp. 2d 985, 990 n. 6 (N.D. Ill. 2001) (holding that a motion to adjudicate liens on settlement fund was not sufficiently separate and independent from original claim to be removed under section 1441(c), even though three lienholders were named in the motion); Int'l Org. Masters, 342 F. Supp. at 215 (holding that a complaint seeking to require a pension plan's trustees to pay pensions to plaintiffs pursuant to a settlement was ancillary to the original proceeding even though the parties to the two causes of action were different). Here, plaintiffs similarly seek to disburse funds obtained through the settlement of an underlying state lawsuit that is still pending. First Union's argument that the petitions are separate civil actions because they add lienholders that have claims to the funds elevates form over substance. The fact remains that the petitions are requests to approve and apportion funds received from the settlement of an underlying state court lawsuit, and the petitions are thus inseparably tied to the original state court action.
Because the Court finds that the petitions are ancillary to the state court litigation and are not removable civil actions under 28 U.S.C. § 1441(a), the Court need not reach the parties' other arguments.
III. CONCLUSION
For the foregoing reasons, the Court GRANTS the motions to remand and remands this proceeding to the Twenty First Judicial District Court, Parish of Tangipahoa, State of Louisiana.