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Adams v. International Paper Co.

United States District Court, S.D. Alabama, Southern Division

May 5, 2017

SAMUEL ADAMS, et al., Plaintiffs,
v.
INTERNATIONAL PAPER COMPANY, et al., Defendants.

          ORDER

          WILLIAM H. STEELE UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on plaintiffs' Motion to Remand (doc. 11), and defendants' Motion to Dismiss and/or Strike Plaintiffs' Amended Complaint (doc. 16). The Motions have been extensively briefed, and are now ripe for disposition.[1]

         I. Factual and Procedural Background.

         This action was brought by 248 individuals who own or occupy residential property located in the Africatown Community in Mobile County, Alabama, to recover for alleged environmental contamination caused by certain nearby industrial activities. The Complaint, which was originally filed in Mobile County Circuit Court, named International Paper Company and Bay Area Contracting, Inc. as defendants. Plaintiffs alleged that defendants had released Dioxins, Furans and related chemicals, as well as other hazardous and harmful chemicals and pollutants, from the International Paper property into the air, soil, surface water and/or groundwater of plaintiffs' properties and/or residences. On that basis, plaintiffs asserted 23 purely state-law claims sounding in theories of negligence, wantonness, trespass, public nuisance, private nuisance, failure to warn, fraud, outrage, strict liability, battery and assault.The relief sought by plaintiffs included, inter alia, compensatory damages for personal injuries and diminution in value of their real properties, as well as punitive damages and injunctive relief.

         On March 6, 2017, International Paper filed a Notice of Removal (doc. 1) removing this action to this District Court. In doing so, International Paper predicated federal subject matter jurisdiction on the diversity provisions of 28 U.S.C. § 1332, reasoning that there was complete diversity of citizenship between plaintiffs and the only properly-joined defendant, and that the amount in controversy exceeded the sum of $75, 000, exclusive of interest and costs. In its Notice of Removal, International Paper acknowledged that defendant Bay Area Contracting is an Alabama citizen for diversity purposes (just like plaintiffs), and is therefore non-diverse; however, International Paper insisted that Bay Area Contracting's citizenship is properly omitted from the § 1332 analysis because it was fraudulently joined. International Paper's position was that there was no possibility plaintiffs could prove a cause of action against Bay Area Contracting because that entity had never done business with International Paper or on the International Paper site. Alternatively, the Notice of Removal posited that this action was properly removable pursuant to the Class Action Fairness Act of 2005 (“CAFA”) because it is a mass action, the minimal diversity requirement is satisfied, and the matter in controversy exceeds $5, 000, 000 in the aggregate, exclusive of interest and costs.

         On March 14, 2017, a mere eight days after removal to federal court, plaintiffs took two significant steps. First, they filed a Notice of Dismissal (doc. 4) as to defendant Bay Area Contracting. Pursuant to Rule 41(a)(1)(A), Fed.R.Civ.P., that Notice of Dismissal is effective as filed; therefore, plaintiffs' claims against Bay Area Contracting have been dismissed without prejudice, and that entity is no longer a party to these proceedings. Second, they filed a First Amended Complaint (doc. 6), substituting a new defendant, H.O. Weaver & Sons, Inc., for Bay Area Contracting. In conjunction with that amended pleading, plaintiffs filed a Notice (doc. 5) explaining that when the Notice of Removal was filed, plaintiffs' counsel “recognized that they had, through inadvertence or mistake, incorrectly identified Bay Area Contracting as a party defendant, ” and that H.O. Weaver was the entity they had intended to name.[2] Significantly, H.O.Weaver is an Alabama corporation with its principal place of business in Alabama (doc. 6, ¶ 3); therefore, it is an Alabama citizen for diversity purposes, and is non-diverse from plaintiffs, all or substantially all of whom are likewise Alabama citizens.

         The nature of the amended pleading's allegations concerning H.O. Weaver are of some import to the pending Motions; therefore, it is helpful to summarize them at this time. According to the First Amended Complaint, “H.O. Weaver operated a concrete and/or asphalt reclamation facility and otherwise did business on the property owned by International Paper located in or adjacent to the Africatown Community.” (Doc. 6, ¶ 3.) It is alleged that Dioxins, Furans and related chemicals were a byproduct of International Paper's manufacturing process, and that “H.O. Weaver knew that as a result of its concrete and/or asphalt reclamation activities on the International Paper property, Dioxins and Furans and related chemicals would be discharged … from the plant site.” (Id., ¶ 21.) The First Amended Complaint further alleges that H.O. Weaver breached its duty to conduct operations on the International Paper site “in a manner such as to prevent the discharge and/or emission of Dioxins and Furans and other related chemicals.” (Id., ¶ 25.) Thus, plaintiffs' theory is that H.O. Weaver is liable because it engaged in “active disturbance of the International Paper property through [its] concrete and/or asphalt reclamation activities and other conduct, ” thereby “allow[ing] these toxins to migrate to and remain in the waterways, air, soil, surface water, and/or ground water.” (Id., ¶ 53.)

         Now, both sides have submitted dueling motions, with federal jurisdiction hanging in the balance. For their part, plaintiffs filed a Motion to Remand this action to Mobile County Circuit Court, reasoning that H.O. Weaver's presence destroys complete diversity, thereby precluding diversity jurisdiction, that this action does not qualify as a “mass action” for CAFA purposes, and that even if it did, CAFA jurisdiction should be declined under the “local controversy” exclusion. Meanwhile, International Paper filed a Motion to Dismiss and/or Strike Plaintiffs' Amended Complaint, arguing that the amendment should be disallowed (and the Alabama resident defendant excised from this case) pursuant to 28 U.S.C. § 1447(e). At the center of both motions is the status of H.O. Weaver.

         II. Analysis.

         A. Diversity Jurisdiction and Section 1447(e).

         Under the diversity provisions of 28 U.S.C. § 1332, federal courts have original jurisdiction over civil actions between citizens of different states where the amount in controversy exceeds $75, 000, exclusive of interest and costs. See, e.g., Underwriters at Lloyd's, London v. Osting-Schwinn, 613 F.3d 1079, 1085 (11th Cir. 2010) (“For federal diversity jurisdiction to attach, all parties must be completely diverse … and the amount in controversy must exceed $75, 000.”) (citations omitted). The Eleventh Circuit has instructed that “[i]n light of the federalism and separation of powers concerns implicated by diversity jurisdiction, federal courts are obligated … to scrupulously confine their own jurisdiction to the precise limits which the statute has defined.” Morrison v. Allstate Indem. Co., 228 F.3d 1255, 1268 (11th Cir. 2000) (citations omitted).

         Of course, as a general proposition, “[d]iversity jurisdiction requires complete diversity between named plaintiffs and defendants.” Sweet Pea Marine, Ltd. v. AJP Marine, Inc., 411 F.3d 1242, 1247 (11th Cir. 2005). If H.O. Weaver is properly joined as a defendant, then complete diversity is lacking because both H.O. Weaver and substantially all plaintiffs are Alabama citizens for diversity purposes. International Paper's position, however, is that the First Amended Complaint improperly effectuates the post-removal joinder of a non-diverse defendant. On that basis, International Paper seeks to have the First Amended Complaint stricken or dismissed, with the result being that H.O. Weaver is out of the case, there is no diversity-destroying defendant, and federal diversity jurisdiction remains intact.

         International Paper's argument is rooted in 28 U.S.C. § 1447(e), which provides as follows: “If after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the state court.” Id. Where, as here, a plaintiff seeks leave to amend a complaint to add a non-diverse defendant following removal to federal court on diversity grounds, the analysis is informed not by the liberal amendment principles of Rule 15(a)(2), but instead by the provisions of § 1447(e). See Ingram v. CSX Transp., Inc., 146 F.3d 858, 862 (11th Cir. 1998) (where plaintiff sought to amend complaint post-removal to join a defendant that would destroy complete diversity, “in determining whether to grant [plaintiff]'s motion, the district court should have considered 28 U.S.C. § 1447(e)”); Churchey v. Safeco Ins. Co. of Ill., 2017 WL 887188, *1 (S.D. Fla. Feb. 2, 2017) (“The potential loss of complete diversity means that it is 28 U.S.C. § 1447(e) - and not Rule 15(a), Fed.R.Civ.P. - that governs the decision whether to give the Plaintiff leave to amend.”). This section confers discretion upon the district court to decide whether to allow a diversity-destroying amendment in a particular case.[3] The factors governing the exercise of that discretion include the following: (1) the extent to which the amendment's purpose is to defeat federal jurisdiction; (2) whether the plaintiff was dilatory in seeking the amendment; (3) whether the plaintiff would be significantly injured if the amendment were disallowed; and (4) other equitable considerations. See, e.g., Thomas v. Eight Mile Nursing & Rehab Center LLC, 2015 WL 1778359, *2 (S.D. Ala. Apr. 20, 2015). “This framework is designed to facilitate the balancing of the defendant's interest in maintaining a federal forum with the competing interest disfavoring parallel lawsuits in federal and state courts.” Starnes Davis Florie, LLP v. GOS Operator, LLC, 2012 WL 3870413, *3 (S.D. Ala. Sept. 5, 2012) (citation omitted).

         Upon careful consideration of the § 1447(e) factors and balancing the equities, the Court finds that the amendment is allowable. For starters, the record convincingly rebuts any notion that plaintiffs sought to add H.O. Weaver for the purpose of defeating federal jurisdiction. Since the inception of this action in state court, plaintiffs have consistently pleaded that the alleged contamination was caused not only by International Paper's emission of harmful chemicals from its facility near the Africatown Community, but also by another entity's active disturbance of the International Paper site during asphalt or concrete reclamation activities at that location. Plaintiffs' theory has always been that the environmental and health injuries of which they complain were caused both by International Paper discharging the toxins in the first place and by a third party's further release and dispersal of those substances during on-site reclamation activities. This is not a half-baked notion cooked up by plaintiffs' counsel in the aftermath of removal as a desperate scheme to get the case sent back to state court; to the contrary, the essence of plaintiffs' claims has always been as described. Moreover, plaintiffs have submitted an expert affidavit opining that the activities ascribed to H.O. Weaver in the First Amended Complaint “would have, to a reasonable degree of scientific certainty, significantly caused and contributed to the continued release and dispersal of these toxic substances through the air and into the neighboring community.” (Parette Aff. (doc. 19-4), at 2.) These circumstances simply do not support any reasonable inference that plaintiffs were motivated by nefarious, forum-shopping objectives in crafting their First Amended Complaint. Rather, that amended pleading simply presented the claims that plaintiffs had always intended to bring, under theories that plaintiffs had always intended to raise, against defendants that plaintiffs had always intended to sue.

         To be sure, the timing of plaintiffs' attempt to add H.O. Weaver, a non-diverse defendant, barely a week after International Paper removed the action to federal court on diversity grounds, may appear suspect. But closer inspection dissipates any cloud of inequity. Throughout this litigation, plaintiffs always sought to sue two entities whose conduct had combined to cause their alleged injuries, to-wit: International Paper and the entity that engaged in the concrete/asphalt reclamation activities on the International Paper site. In the original Complaint, plaintiffs identified that entity as Bay Area Contracting, Inc. Plaintiffs' counsel now acknowledge that they misidentified the concrete/asphalt reclamation entity as a result of mistake or inadvertence, and explain that their error did not become apparent until the Notice of Removal was filed. At that point, counsel acted promptly and decisively to dismiss Bay Area Contracting as a defendant, identify H.O. Weaver as the correct defendant, and file an amended pleading naming the properly identified party. Based on the information before the Court, all appearances are that the misidentification of Bay Area Contracting was a good-faith error, and that H.O. Weaver was the entity that plaintiffs had intended to name as a defendant all along. Under the circumstances, the Court cannot and does not conclude that the purpose of plaintiffs' First Amended Complaint was to defeat federal jurisdiction; rather, it was to correct a mistaken identification by plaintiffs' counsel and to join the second defendant that plaintiffs had always sought to join.[4]

         The other § 1447(e) factors all point in the same direction as the “purpose of the amendment” factor. As noted, the second factor is whether the plaintiffs have been dilatory in seeking amendment. They have not. To the contrary, within days after learning of their mistaken identification of the entity involved in the asphalt/concrete reclamation activities, plaintiffs dismissed their claims against Bay Area Contracting and amended their Complaint to name H.O. Weaver as an additional defendant. Such prompt corrective action cannot reasonably be characterized as “dilatory” for § 1447(e) purposes. The third factor is whether plaintiffs would be significantly injured if the amendment were disallowed. If plaintiffs were not allowed to proceed against H.O. Weaver in this action, they would be placed in the unenviable position of having to maintain parallel proceedings against H.O. Weaver in state court and against International Paper in federal court, with the attendant inefficiencies and additional expense that entails. It is, of course, debatable how “significant” that injury to plaintiffs would be, but it would be an injury nonetheless. See Starnes, 2012 WL 3870413, at *4 (“Through such a two-headed litigation approach, Starnes could indeed obtain complete relief. But at what cost? The redundancy, duplication of effort and expense, and multiplication of proceedings inherent in such parallel litigation is an injury to plaintiff that certain courts have deemed sufficient to satisfy this factor.”). For the fourth § 1447(e) factor, International Paper has identified no other equitable considerations that might favor disallowing the amendment in this case. (Doc. 16, at 12.)

         For all of these reasons, the Court exercises its discretion under 28 U.S.C. § 1447(e) to allow plaintiffs' First Amended Complaint (doc. 6) to stand as filed. Defendant International ...


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