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McAdam Properties LLC v. Dunkin Donuts Franchising LLC

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

February 21, 2018

MCADAM PROPERTIES, LLC, Plaintiff,
v.
DUNKIN' DONUTS FRANCHISING, LLC; DUNKIN' BRANDS GROUP, INC., Defendant.

          MEMORANDUM OPINION

          VIRGINIA EMERSON HOPKINS UNITED STATES DISTRICT JUDGE

         The case comes before the Court on the Motion To Remand filed by the Plaintiff (the “Motion”). (Doc. 16). Oral argument was held on the motion on February 15, 2018. For the reasons stated herein and at oral argument, the Motion will be GRANTED and this case will be REMANDED to the Circuit Court of Jefferson County, Alabama.

         I. INTRODUCTION AND PROCEDURAL HISTORY

         A. Initiation of the Lawsuit in State Court

         This civil action was filed on May 25, 2016, in the Circuit Court of Jefferson County, Alabama by the Plaintiff, McAdam Properties, LLC, against the following Defendants: Barista Food Service, LLC (“Barista”); Dunkin' Donuts; and Dunkin' Brands Group, Inc. (“Dunkin Brands”) (Doc. 1-1)(Doc. 1-1). The case arises out of a lease agreement between the Plaintiff and Barista, a potential franchisee of a “Dunkin' Donuts” franchise, which prompted the Plaintiff to construct part of its shopping center to the particular specifications required of a Dunkin' Donuts store. In October of 2014, after construction had begun, but before construction was completed, “Barista . . . informed McAdam Properties that Barista . . . would not be taking possession of the premises and that Dunkin' Donuts would take assignment of the lease agreement.” (Doc. 1-1 at 3, ¶8). The Plaintiff claims it was injured when, in May of 2015, after it completed construction, “Dunkin' Donuts informed McAdam Properties that it would not take assignment of the lease unless it could obtain a franchisee to become a substitute for Barista.” (Doc. 1-1 at 4, ¶11). The Complaint sets out a claim for fraud (Count One) against all Defendants, and a claim for suppression (Count Two) against only Dunkin' Donuts and Dunkin's Brands.

         B. The Removal

         The Defendants allege that on November 21, 2017, complete diversity of citizenship pursuant to 28 U.S.C. § 1332 was created when the state court dismissed Barista on the Plaintiff's motion. (Doc. 1-9 at 284). The remaining Defendants removed the case to this Court on December 13, 2017. (Doc. 1).

         C. Substitution of Defendants

         On January 5, 2018, based on the representation by the Defendant that “Dunkin' Donuts Franchising LLC is the franchisor of the Dunkin' Donuts system. “Dunkin' Donuts” is a trade name, not a business entity” (doc. 1 at 1), this Court Ordered that “Dunkin' Donuts Franchising LLC” be substituted as a Defendant in place of the Defendant named “Dunkin' Donuts.” (Doc. 9 at 2). The current Defendants are now Dunkin' Donuts Franchising, LLC and Dunkin' Brands Group, Inc.

         D. This Court's Order Regarding Jurisdiction

         In the Order substituting parties, this Court also wrote:

With that change, the Notice of Removal, as currently written, does not satisfactorily establish the Court's jurisdiction over the action. Accordingly, no later than January 19, 2018, the removing parties are ORDERED to file with this court a Notice establishing this Court's jurisdiction according to the standard enunciated by the Eleventh Circuit in Rolling Greens MHP, L.P. v. Comcast SCH Holdings LLC, 374 F.3d 1020 (11th Cir. 2004). Specifically, that case held that, in order to establish diversity, if a limited liability company is a party, the names and states of domicile of each member of the limited liability company must be listed.

(Doc. 9 at 2-3). Thereafter, on January 11, 2018, the Defendants filed document 11 which states, in pertinent part:

1. Plaintiff McAdam Properties, LLC is an Alabama limited liability company with its principal place of business in Alabama. The sole member of Plaintiff McAdam Properties, LLC is Kerry McAdam, a resident and citizen of Alabama.
2. Defendant Dunkin' Brands Group, Inc. is a Delaware corporation with its principal place of business in Canton, Massachusetts.
3. Defendant Dunkin' Donuts Franchising LLC is a Delaware limited liability company with its principal place of business in Canton, Massachusetts. The sole member of Defendant Dunkin' Donuts Franchising LLC is DB Franchising Holding Company LLC, which is a Delaware limited liability company with its principal place of business in Canton, Massachusetts. In turn the sole member of DB Franchising Holding Company LLC is DB Master Finance LLC. DB Master Finance LLC is a Delaware limited liability company with its principal place of business in Canton, Massachusetts. The sole member of DB Master Finance LLC is Baskin-Robbins International LLC, a Delaware limited liability company with its principal place of business in Canton, Massachusetts. The sole member of Baskin-Robbins International LLC is Baskin-Robbins Flavors LLC, a Delaware limited liability company with its principal place of business in Canton, Massachusetts. The sole member of Baskin-Robbins Flavors LLC is Baskin-Robbins USA LLC, a California limited liability company with its principal place of business in Canton, Massachusetts. The sole member of Baskin-Robbins USA LLC is Baskin-Robbins LLC, a Delaware limited liability company with its principal place of business in Canton, Massachusetts. The sole member of Baskin-Robbins LLC is Mister Donut of America LLC, a Delaware limited liability company with its principal place of business in Canton, Massachusetts. The sole member of Mister Donut of America LLC is Dunkin' Donuts USA LLC, a Delaware limited liability company with its principal place of business in Canton, Massachusetts. The sole member of Dunkin' Donuts USA LLC is Dunkin' Donuts LLC, a Delaware limited liability company with its principal place of business in Canton, Massachusetts. The sole member of Dunkin' Donuts LLC is Dunkin' Brands, Inc., a Delaware corporation with its principal place of business in Canton, Massachusetts. Dunkin' Brands, Inc. is a wholly owned subsidiary of Dunkin' Brands Holdings, Inc., a Delaware corporation with its principal place of business in Canton, Massachusetts.

(Doc. 11 at 1-2 at ¶¶1-3).

         Put more simply, the Plaintiff, as an LLC, is a citizen of Alabama, the only state in which its only member is a citizen. Defendant Dunkin' Brands Group, Inc. is a Delaware corporation with its principal place of business in Massachusetts. Therefore, it is a citizen of the states of Delaware and Massachusetts. See, Life of the S. Ins. Co. v. Carzell, 851 F.3d 1341, 1344 (11th Cir. 2017) (citing 28 U.S.C. § 1332(c)(1)) (corporation is a citizen of the state of its incorporation and its principal place of business).

         Dunkin' Donuts Franchising LLC is the last in a long chain of LLCs each of which is the sole member of the next. However, the sole member of the first LLC in the chain, Dunkin' Donuts LLC, is Dunkin' Brands Holdings, Inc., which is a citizen of both Delaware and Massachusetts. Because this citizenship is then imputed to each LLC up the chain, Dunkin' Donuts Franchising LLC is also a citizen of both Delaware and Massachusetts.

         II. STANDARD FOR REMAND

         “Federal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). For removal to be proper, the court must have subject-matter jurisdiction in the case. “Only state-court actions that originally could have been filed in federal court may be removed to federal court by the Defendant.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). In addition, the removal statute must be strictly construed against removal, and any doubts should be resolved in favor of remand. See, City of Vestavia Hills v. Gen. Fid. Ins. Co., 676 F.3d 1310, 1313 (11th Cir. 2012) (“[b]ecause removal jurisdiction raises significant federalism concerns, federal courts are directed to construe removal statutes strictly. Indeed, all doubts about jurisdiction should be resolved in favor of remand to state court.”) (citation omitted).

         “In removal cases, the burden is on the party who sought removal to demonstrate that federal jurisdiction exists.” Friedman v. New York Life Ins. Co., 410 F.3d 1350, 1353 (11th Cir. 2005) (citation omitted); Williams v. Best Buy Co., 269 F.3d 1316, 1319 (11th Cir.2001).

That burden goes not only to the issue of federal jurisdiction, but also to questions of compliance with statutes governing the exercise of the right of removal. Albonetti v. GAF Corporation-Chemical Group, 520 F.Supp. 825, 827 (S.D. Texas 1981); Jennings Clothiers of Ft. Dodge, Inc. v. U.S. Fidelity & Guaranty Co., 496 F.Supp. 1254, 1255 (D.Iowa 1980); Fort v. Ralston Purina Company, 452 F.Supp. 241, 242 (E.D.Tenn.1978).

Parker v. Brown, 570 F.Supp. 640, 642 (D.C. Ohio, 1983).

While it is undoubtedly best to include all relevant evidence in the petition for removal and motion to remand, there is no good reason to keep a district court from eliciting or reviewing evidence outside the removal petition. We align ourselves with our sister circuits in adopting a more flexible approach, allowing the district court when necessary to consider post-removal evidence in assessing removal jurisdiction. We emphasize, as did the court in Allen, that “under any manner of proof, the jurisdictional facts that support removal must be judged at the time of the removal, and any post-petition affidavits are allowable only if relevant to that period of time.” Allen, 63 F.3d at 1335.

Sierminski v. Transouth Financial Corp., 216 F.3d 945, 949 (11th Cir. 2000).

         III. ANALYSIS

         As noted above, the Defendants removed this case alleging that complete diversity of citizenship exists pursuant to 28 U.S.C. § 1332.[1] However, “[a] case may not be removed . . . on the basis of jurisdiction conferred by section 1332 more than 1 year after commencement of the action, unless the district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action.” 28 U.S.C.A. § 1446(c). The Complaint in this case was filed in state court on May 25, 2016, and the case was not removed until December 13, 2017-1 year, 6 months, and 19 days (counting the date of removal) after the case was filed.

         The Defendants argue that there is bad faith here because the Plaintiff knew that there was no basis for a fraud claim against Barista at the time it filed this case.[2] In support of this argument, in their notice of removal they cited the following testimony from the March 24, 2017, deposition of Kerry McAdams, the sole member of the Plaintiff:

Q. But the bottom line is, the shell of the building was not constructed until August or September - A. Correct.
Q. -- of 2015? And that was after those discussions in May of 2015 with Dunkin', right?
A. Correct.
Q. So there were not any things that Ramon Arias [the sole member of Barista] said that caused you to go do anything from October -- ...

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