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Colormasters, LLC v. Research Solutions Group, Inc.

United States District Court, N.D. Alabama, Middle Division

August 22, 2017





         Plaintiff Colormasters, LLC (“Colormasters”) originally filed this action in the Circuit Court of Marshall County, Alabama, on February 28, 2017. (Doc.1 ¶ 1; see also Doc. 1-1 at 2).[1] Colormasters, who manufactures flexible wrap and packing for items such as bottled water, soft drinks and food products, pursues recovery for faulty ink that it was supplied. (Doc. 1 at ¶ 2; Doc. 1-1 at 4 ¶ 6).

         Defendants Flint Group North America Corporation (“Flint Group”), Flint Ink North America Corporation, [2] and American Inks & Coating Corp. (“AIC”) (collectively, the “Removing Defendants”) removed Colormasters' lawsuit to this Court on April 7, 2017, asserting diversity jurisdiction pursuant to 28 U.S.C. § 1332. (Doc. 1 at ¶ 9). In relying upon the existence of diversity jurisdiction, the Removing Defendants contend that the Court should disregard the in-state citizenship of their co-defendant, Research Solutions Group, Inc. (“Research Solutions”), on the basis that Research Solutions has been fraudulently joined. (Id. at ¶ 8).

         The Court has before it Colormasters' Motion To Remand (Doc. 22) and Motion To Strike the Affidavit of Julio Rodriquez (Doc. 23, the “Motion To Strike”), both of which were filed on April 25, 2017. The Removing Defendants filed their opposition (Doc. 27) to the Motion to Remand and response (Doc. 28) to the Motion To Strike on May 9, 2017.[3] Colormasters replied to the Motion To Remand on May 11, 2017. (Doc. 30). Because the Court concludes that it lacks subject matter jurisdiction, Colormasters' Motion To Remand is due to be granted, and the Motion To Strike is due to be termed as moot.


         A. General Jurisdictional Principles

         “It is by now axiomatic that the inferior courts are courts of limited jurisdiction. They are ‘empowered to hear only those cases within the judicial power of the United States as defined by Article III of the Constitution, ' and which have been entrusted to them by a jurisdictional grant authorized by Congress.” Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 409 (11th Cir. 1999) (quoting Taylor v. Appleton, 30 F.3d 1365, 1367 (11th Cir. 1994)). “Accordingly, ‘[w]hen a federal court acts outside its statutory subject-matter jurisdiction, it violates the fundamental constitutional precept of limited federal power.'” Univ. of S. Ala., 168 F.3d at 409 (quoting Victory Carriers, Inc. v. Law, 404 U.S. 202, 212, 92 S.Ct. 418, 425, 30 L.Ed.2d 383 (1971)). “Simply put, once a federal court determines that it is without subject matter jurisdiction, the court is powerless to continue.” Univ. of S. Ala., 168 F.3d at 410.

         “A necessary corollary to the concept that a federal court is powerless to act without jurisdiction is the equally unremarkable principle that a court should inquire into whether it has subject matter jurisdiction at the earliest possible stage in the proceedings.” Id. Moreover, “[t]he jurisdiction of a court over the subject matter of a claim involves the court's competency to consider a given type of case and cannot be waived or otherwise conferred upon the court by the parties. Otherwise, a party could work a wrongful extension of federal jurisdiction and give district courts power the Congress denied them.” Jackson v. Seaboard Coast Line R. Co., 678 F.2d 992, 1000-01 (11th Cir. 1982) (footnote and internal citations omitted). Furthermore, “[b]ecause removal jurisdiction raises significant federalism concerns, federal courts are directed to construe removal statutes strictly.” Univ. of S. Ala., 168 F.3d at 411(citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 872, 85 L.Ed. 1214 (1941)).

         Lastly, Congress has decreed and the Supreme Court has confirmed that-with the express exception of civil rights cases that have been removed- orders of remand by district courts based upon certain grounds, including in particular those premised upon lack of subject matter jurisdiction, are entirely insulated from review. More specifically, § 1447(d) provides:

[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise, except that an order remanding a case to the State court from which it was removed pursuant to section 1442 or 1443 of this title shall be reviewable by appeal or otherwise.

28 U.S.C. § 1447(d) (emphasis added); see also Kirchner v. Putnam Funds Trust, 547 U.S. 633, 642, 126 S.Ct. 2145, 2154, 165 L.Ed.2d 92 (2006) (recognizing that “[w]here the [remand] order is based on one of the grounds enumerated in 28 U.S.C. § 1447(c), review is unavailable no matter how plain the legal error in ordering the remand” (internal citation and alteration omitted)); Powerex Corp. v. Reliant Energy Servs., Inc., 551 U.S. 224, 234, 127 S.Ct. 2411, 2418, 168 L.Ed.2d 112 (2007) (holding that when “the District Court relied upon a ground that is colorably characterized as subject-matter jurisdiction, appellate review is barred by § 1447(d)”).

         B. Diversity Jurisdiction

         The Removing Defendants premise their removal upon this Court's diversity jurisdiction. “Diversity jurisdiction exists where the suit is between citizens of different states and the amount in controversy exceeds the statutorily prescribed amount, in this case $75, 000.” Williams v. Best Buy Co., 269 F.3d 1316, 1319 (11th Cir. 2001) (citing 28 U.S.C. § 1332(a)). Therefore, removal jurisdiction based upon diversity requires: (1) a complete diversity of citizenship between the plaintiff(s) and the defendant(s); and (2) satisfaction of the amount in controversy requirement.

         1. Citizenship Requirement

         Diversity jurisdiction “requires complete diversity-every plaintiff must be diverse from every defendant.” Palmer v. Hosp. Auth. of Randolph Cty., 22 F.3d 1559, 1564 (11th Cir. 1994). “Citizenship, not residence, is the key fact that must be alleged in the complaint to establish diversity for a natural person.” Taylor v. Appleton, 30 F.3d 1365, 1367 (11th Cir. 1994).

         2. Fraudulent Joinder Principles

         The dispute over satisfaction of the citizenship requirement in this case has to do with whether Colormasters has fraudulently joined the non-diverse co-defendant, Research Solutions. “[W]hen there is no possibility that the plaintiff can prove a cause of action against the resident (non-diverse) defendant[, ]” fraudulent joinder is established. Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998). Relatedly, if fraudulent joinder is established, then the resident defendant is subject to dismissal as a party and its citizenship is disregarded for diversity requirement purposes. See id.

         The Eleventh Circuit extensively addressed the issue of removal based on diversity jurisdiction when it is alleged that a non-diverse defendant has been fraudulently joined in Crowe v. Coleman, 113 F.3d 1536 (11th Cir. 1997). There, the court stated:

In a removal case alleging fraudulent joinder, the removing party has the burden of proving that either: (1) there is no possibility the plaintiff can establish a cause of action against the resident defendant; or (2) the plaintiff has fraudulently pled jurisdictional facts to bring the resident defendant into state court. Cabalceta v. Standard Fruit Co., 883 F.2d 1553, 1561 (11th Cir. 1989). The burden of the removing party is a “heavy one.” B. Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir. Unit A 1981).

Id. at 1538.[4] The Eleventh Circuit also recognizes a third type of fraudulent joinder where “a diverse defendant is joined with a nondiverse defendant as to whom there is no joint, several, or alternative liability and where the claim against the diverse defendant has no real connection to the claim against the nondiverse defendant.” Triggs, 154 F.3d at 1287.

         The standard is onerous because, absent fraudulent joinder, a plaintiff has the absolute right to choose his forum. That is, courts must keep in mind that the plaintiff is the master of his complaint and has the right to determine how and where he will fight his battle. As Crowe further recognized:

This consequence makes sense given the law that “absent fraudulent joinder, plaintiff has the right to select the forum, to elect whether to sue joint tortfeasors and to prosecute his own suit in his own way to a final determination.” Parks v. The New York Times Co., 308 F.2d 474, 478 (5th Cir. 1962).[5] The strict construction of removal statutes also prevents “exposing the plaintiff to the possibility that he will win a final judgment in federal court, only to have it determined that the court lacked jurisdiction on removal, ” see Cowart Iron Works, Inc. v. Phillips Constr. Co., Inc., 507 F.Supp. 740, 744 (S.D. Ga. 1981) (quoting 14A C. Wright, A. Miller & E. Cooper, Federal Practice and Procedures § 3721), a result that is costly not only for the plaintiff, but for all the parties and for society when the case must be re-litigated.

Crowe, 113 F.3d at 1538.

         To establish fraudulent joinder of a resident defendant, the burden of proof on the removing party is a “heavy one[, ]” Crowe, 113 F.3d at 1538 (internal quotation marks omitted), requiring clear and convincing evidence and particularity in pleading. Parks, 308 F.2d at 478 (citing Barron and Holtzoff, Federal Practice and Procedure, ยง 103, p. 478). Although affidavits and depositions may be considered, the Court must not undertake to decide the merits of the claim but must look to whether ...

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