MELINDA HARMON, District Judge.
Pending before the Court in the above referenced declaratory judgment action, alleging breach of contract, conversion, and unjust enrichment/money had and received, arising out of Defendants' alleged efforts to deprive Plaintiff Moreno Energy, Inc. ("Moreno"), a citizen of Texas, of substantial portions of its overriding royalty interest in the Alba Field, a "super giant" gas condensate field located in Equatorial Guinea, West Africa, is Moreno's motion to remand (instrument # 8).
The right to remove a case from state court depends upon the plaintiff's pleading at the time of the petition for removal. Pullman Co. v. Jenkins, 305 U.S. 534, 537-38, 59 S.Ct. 347, 83 L.Ed. 334 (1939); Cavallini v. State Farm Mutual Auto Ins., 44 F.3d 256, 264 (5th Cir. 1995); Ford v. Property & Cas. Ins. Co. of Hartford, No. Civ. A. H-09-1731, 2009 WL 4825222, *2 (S.D.Tex. Dec. 9, 2009).
Under 28 U.S.C. § 1441(a)
Under 28 U.S.C. § 1332, a defendant may remove a case if there is (1)
The doctrine of improper joinder, or fraudulent joinder,
"A claim of fraudulent joinder must be pleaded with particularity and supported by clear and convincing evidence." Parks v. New York Times Co., 308 F.2d 474, 478 (5th Cir.1962), cert. denied, 376 U.S. 949, 84 S.Ct. 964, 11 L.Ed.2d 969 (1964). Improper joinder may be established by showing (1) actual fraud in the pleading of jurisdictional facts or (2) an inability to establish a cause of action against the non-diverse defendant in state court. Gasch, 491 F.3d at 281; Smallwood, 385 F.3d at 573. Defendants claiming improper joinder based on the second type bear a heavy burden of showing there is no possibility of recovery by the plaintiff against the instate defendant, i.e., in other words that there is no reasonable basis for predicting that state law would allow recovery against the in-state defendant. Travis v. Irby, 326 F.3d 644, 649 (5th Cir.2003); Smallwood, 385 F.3d at 576. A "reasonable basis" means more than a mere a hypothetical basis. Griggs v. State Farm Lloyds, 181 F.3d 694, 701 (5th Cir. 1999) ("whether the plaintiff has stated a valid state law cause of action depends upon and is tied to the factual fit between the plaintiffs' allegations and the pleaded theory of recovery").
To determine whether a plaintiff has a "reasonable basis for recovery under state law, the court may "conduct a Rule 12(b) (6)type analysis." Smallwood, 385 F.3d at 573; Anderson v. Georgia Gulf Lake Charles, 342 Fed.Appx. 911, 915 (5th Cir. 2009). First the court should look at the
The district court must resolve all contested fact issues and ambiguities of state law in favor of the plaintiff and remand. Gasch, 491 F.3d at 281. The Fifth Circuit explains, since "`the effect of removal is to deprive the state court of an action properly before it, removal raises significant federalism concerns.' The removal statute is therefore to be strictly construed, and any doubt about the propriety of removal must be resolved in favor of remand." Id. at 281-82, quoting Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 365-66 (5th Cir.1995).
Procedural defects may also defeat removal jurisdiction. "A motion to remand the case on the basis of any defect in removal procedure needs to be made within 30 days after the filing of the notice of removal." 28 U.S.C. § 1447(c).
Title 28 U.S.C. § 1446 governs the procedure for removal of a case from state to federal district court. Section 1446(a) provides,
Section 1446(b) reads,
Courts have interpreted § 1446(a) to mandate that all then served and properly joined defendants must consent to the removal and join in the removal petition. Fontenot v. Global Marine, Inc., 703 F.2d 867, 870 n. 3 (5th Cir.1983); Tri-Cities Newspapers, Inc. v. Tri-Cities Printing Pressmen and Assistants' Local 349, 427 F.2d 325, 326 (5th Cir.1970). In the Fifth Circuit, all served defendants must join in the petition for removal within thirty days of service on the first defendant, and if consent of all served defendants is not timely obtained, the removal is procedurally defective. Doe v. Kerwood, 969 F.2d 165, 167, 169 (5th Cir.1992). This "rule of unanimity" requires that there be "some timely filed written indication from each served defendant, or from some person or entity purporting to formally act on its behalf in this respect and to have the authority to do so, that it has actually consented to such action"; each defendant does not need to sign the notice of removal to effect removal. Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254, 1262 n. 11 (5th Cir.1988). There need only be some timely filed written indication from each defendant or from someone purporting to represent that defendant formally. Getty Oil, 841 F.2d at 1262 n. 11. A defendant is free to amend a notice of removal within the thirty-day period, but once that thirty-day period has expired, amendment is not available to cure a substantive defect in removal proceedings. Moody v. Commercial Ins. Co. of Newark, N.J., 753 F.Supp. 198, 201-02 (N.D.Tex.1990).
Nevertheless there are three well-recognized exceptions to the rule that all defendants must join in the removal petitions to effect removal: (1) where the defendant was not yet served with process at the time the removal petition was filed
Defendant Marathon Oil Company, which has an office in Houston, Texas, timely removed this action from the 152nd Judicial District Court of Harris County, Texas, solely on diversity jurisdiction and alleges that it was improperly joined to defeat jurisdiction and therefore its citizenship should be disregarded.
The state court petition identifies Moreno as a Texas corporation with its principal place of business in Houston, Texas, while stating that Marathon is an Ohio corporation with its principal place of business in Houston, Texas. The petition identifies MEGPL and MEGIL as organized under the laws of Grand Cayman and having their principal places of business in Houston, Texas. # 1, Ex. B, ¶¶ 6, 7, 8, 9. Marathon claims that MEGPL and MEGIL actually have their principal places of business in the Republic of Equatorial Guinea and that the amount in controversy exceeds $75,000, so the removal was proper.
Moreno insists that remand is appropriate for several reasons.
First, Moreno argues that as a nondiverse defendant, Marathon has no standing to remove this case on diversity. Pate v. Adell Compounding, Inc., 970 F.Supp. 542, 548 (M.D.La.1997) (a non-diverse defendant has no standing to remove a case to federal court),
Second, Marathon's Notice of Removal fails to allege facts sufficient to establish jurisdiction, in particular the citizenship of MEGPL and MEGIL. According to Moreno, the citizenship of a limited liability company, unlike a corporation, is not determined by where the entity was organized or has its principal place of business under 28 U.S.C. § 1332(c)(1) (deeming a corporation a citizen of both its state of incorporation and its principal place of business); instead, "like limited partnerships and other unincorporated associations or entities, the citizenship of a LLC is determined by the citizenship of all of its members." Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1080 (5th Cir.2008)
Third, the Notice of Removal, itself, alleges facts that negate this Court' jurisdiction, specifically that Plaintiff and Marathon are both citizens of Texas.
Last, Marathon's claim of improper joinder is meritless because Marathon cannot carry its heavy burden to establish that there is no possibility that Moreno could establish a cause of action against Marathon. Moreno has sued Marathon for conversion and unjust enrichment, in its taking royalty proceeds and foreign tax credits that rightfully belong to Moreno, and for money had and received. Moreno insists there is a close factual fit between Moreno's allegations and theories
Furthermore Moreno asks for an award of costs and fees under 28 U.S.C. § 1447(c) on remand.
Urging the Court to deny Moreno's motion for remand because there is diversity of citizenship among all parties that are properly joined, Marathon contends that (1) under the removal statute and case law, non-diverse defendants like Marathon may remove a case; (2) Marathon has pleaded sufficient facts to support diversity jurisdiction because MEGPL and MEGIL are citizens of a foreign state under the removal statute, 28 U.S.C. § 1446(a); and (3) Marathon was improperly joined.
Marathon highlights the fact that the removal statute, 28 U.S.C. § 1446(a), requires only that the removing party be a defendant in the state court action and does not restrict the ability of a non-diverse defendant that claims it was fraudulently joined to remove a case from state court. See Bova v. U.S. Bank, N.A., 446 F.Supp.2d 926, 932 (S.D.Ill.2006) ("Plaintiffs have not cited, and the Court's research has not disclosed, any authority indicating that this case must be remanded because the removing Defendant is also a diversity-defeating party that claims to have been fraudulently joined."). Marathon argues that only it, and not MEGPL and MEGIL, removed the case because MEGPL and MEGIL had not and still have not been properly served, while Marathon had been.
Marathon claims that MEGPL and MEGIL, foreign citizens, were both formed under the laws of the Cayman Islands and their principal places of business are the Republic of Equatorial Guinea. Marathon maintains that Moreno's reliance on Harvey, Mullins, and Eastern Airlines is misplaced because the rule that the citizenship of limited liability companies is determined by the state(s) of residence of all of their members applies only to the citizenship of unincorporated associations formed in the United States. See Colin v. Rosenfeld, 733 F.2d 625, 628 (9th Cir.1984) (opining that § 1332(a)(2) "applies to foreign legal entities of all kinds, so long as the entity is considered a juridical person under the law that created it"; finding that an "anstalt" [which resembles a limited liability company or business trust under the laws of Liechtenstein] was a juridical person under the law of Liechtenstein and thus a citizen of a foreign state under § 1332(a)(2), that diversity existed, and that the court had jurisdiction), cert. denied, 469 U.S. 932, 105 S.Ct. 329, 83 L.Ed.2d 266 (1984). The panel explained,
Id. at 630.
The Fifth Circuit followed Cohn in Stiftung v. Plains Marketing, L.P., 603 F.3d 295, 297-99 (5th Cir.2010) (only relevant factor in evaluating whether the plaintiff was a foreign citizen for purposes of the removal statute was whether the plaintiff was a citizen of Lichenstein
Marathon argues that the Cayman Islands recognize limited liability companies as having the same rights a privileges as "natural person[s] of full capacity," including the right to contract, own both real and personal property, and sue and be sued. Companies Law §§ 27, 28, 74, and 81 (2010), Cayman Islands, available at http://www.caymanlandinfo.ky/ Documents/LawsRegulations/tabid/65/ Default.aspx.
Even if the Court finds that Marathon should have alleged more than just the place of formation and the principal place of business of MEGPL and MEGIL, remand is not appropriate, and under 28 U.S.C. § 1653 defective jurisdictional allegations may be amended. A number of appellate courts in cases based on diversity between domestic citizens under 28 U.S.C. § 1332(a)(1) agree that where a notice of removal fails to identify the citizenship of
Marathon contends that Moreno's pleading contains only one factual allegation that does not even present actionable conduct against Marathon (that Marathon is the purported owner of the Alba PSC, and that it otherwise levels generic allegations against all "Marathon Defendants" or specifically against MEGPL and MEGIL). "`[W]hen plaintiffs make general allegations and fail to support them with specific, underlying facts, they have not established a reasonable basis for the Court to predict that relief may be granted.'" Cantor v. Wachovia Mortg., 641 F.Supp.2d 602, 612 (N.D.Tex.2009), quoting Staples v. Merck & Co., 270 F.Supp.2d 833, 837 (N.D.Tex. 2003). In Griggs v. State Farm Lloyds, 181 F.3d at 699-701, the Fifth Circuit opined that vague and generic allegations against all defendants and a failure to plead facts specific to a non-diverse, fraudulently joined insurance agent warranted dismissal of claims against the agent for failure to state a claim.
Moreno contends that (1) multiple federal courts in this district have followed Fifth Circuit precedent in holding that the court has no jurisdiction to consider any pleadings or requests made by a non-diverse defendants; (2) Marathon did not allege that its co-defendants are citizens or subjects of a foreign state and offers no evidence to show that they are; and (3) Marathon fails to demonstrate that it was improperly joined. Moreno's supplement attaches a copy of a recent opinion issued by the Honorable Kenneth Hoyt in a similar case remanding the action to state court on the grounds that Marathon failed to satisfy its burden to show fraudulent joinder. Cowden Walter Limited Partnership v. Marathon Oil Co., et al., Civil Action No. 4:11-CV-4516 (March 13, 2012).
Regarding the first argument in the Reply, the Court would point out that Moreno cites cases standing for the proposition that an improperly joined defendant does not need to consent to removal, not that it cannot remove a case. Other cases cited by Moreno hold that the court may not consider a non-diverse party's motion for summary judgment or any other request by a non-diverse party. As noted earlier, the threshold issue of subject matter
Nevertheless, as to Moreno's second point, the Court agrees with Moreno that Marathon failed to assert in the Notice of Removal that MEGPL and MEGIL are citizens of a foreign state because they are organized in the Cayman Islands nor has it offered any evidence of that foreign citizenship.
"`A failure to allege facts establishing jurisdiction need not prove fatal to a complaint.'" Whitmire v. Victus Ltd., 212 F.3d 885, 887 (5th Cir.2000), quoting Canedy v. Liberty Mutual Ins. Co., 126 F.3d 100, 103 (2d Cir.1997). Title 28 U.S.C. § 1653 provides, "Defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts." This statute, which grants courts the authority and discretion to allow parties to cure defective allegations of jurisdiction, "should be liberally construed to allow a party to cure technical defects, including the failure to specifically allege the citizenship of parties." Menendez v. Wal-Mart Stores, Inc., 364 Fed.Appx. 62, 66 (5th Cir.2010), citing Getty Oil Corp. v. Ins. Co. of North America, 841 F.2d 1254, 1258 n. 5 (5th Cir.1988), and Victus Ltd., 212 F.3d at 887-88. "`Unless the record clearly indicates that complaint could not be saved by any truthful amendment, we generally afford opportunity for amendment.'" Victus Ltd., 212 F.3d at 888, citing Canedy, 126 F.3d at 103, and Scattergood v. Perelman, 945 F.2d 618, 626 (3d Cir.1991) (§ 1653 "`permits amendments broadly so as to avoid dismissal of diversity suits on technical grounds'"). Here both sides agree that MEGPL and MEGIL are entities formed under the laws of the Cayman Islands.
Accordingly, the Court
ORDERS Marathon to file within thirty days of entry of this Opinion and Order an amended notice of removal and to provide evidence of the citizenship of MEGPL and MEGIL. The Court further
ORDERS that Moreno's motion for remand (#8) is currently DENIED, but may be reurged after Marathon's submission, if appropriate.
Defendants MEGPL and MEGIL's partial motion to dismiss for failure to state a claim (instrument # 12), filed on February 9, 2012, is also pending. On February 29, 2012 the Court granted Moreno's unopposed motion for an extension of time for Moreno to respond to the motion to dismiss until twenty-one days after the Court ruled on the motion to remand. After considering the matter, the Court
ORDERS that the motion to dismiss (# 12) is DENIED without prejudice as premature, but grants leave to MEGPL and MEGIL to summarily move to reinstate it if the Court finds that it has jurisdiction over them. Such a motion will relate back to the first to satisfy Rule 12(b)'s requirement that a motion raising a Rule 12(b)(6) defense be made "before pleading."
Smallwood, 385 F.3d at 573-74, cited for that proposition, Guillory v. PPG Industries, Inc., 434 F.3d 303, 311 (5th Cir.2005).