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Newport Classic Homes, L.P. v. Louisiana-Pacific Corp.

United States District Court, E.D. Texas, Sherman Division

March 31, 2017

NEWPORT CLASSIC HOMES, L.P., and WESTERN RIM INVESTORS 2014-3, L.P., Plaintiffs,
v.
(1) LOUISIANA-PACIFIC CORPORATION, (2) BRIDGEWELL RESOURCES, LLC, (3) RICHMOND INTERNATIONAL FOREST PRODUCTS, LLC, (4) MARTINEZ DORA d/b/a RNJ FRAMING SYSTEMS, and (5) GENESIS WORLDWIDE LOGISTICS, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFFS' MOTION TO REMAND

          RICHARD A. SCHELL UNITED STATES DISTRICT JUDGE.

         The following are pending before the court:

         1. Plaintiffs' motion to remand (docket entry #9);

         2. Defendant Louisiana-Pacific Corporation's response to Plaintiffs' motion to remand (docket entry #10); and

         3. Plaintiffs' reply in support of their motion to remand (docket entry #12). Having considered the Plaintiffs' motion and the responsive briefing thereto, the court finds that the motion should be GRANTED.

         PROCEDURAL HISTORY AND FACTUAL BACKGROUND

         On May 11, 2016, the Plaintiffs filed the instant action in the 199th Judicial District Court of Collin County, Texas. The Plaintiffs (Texas limited partnerships) sued (1) Louisiana-Pacific Corporation (an Oregon corporation), (2) Bridgewell Resources, LLC (an Oregon limited liability company), (3) Richmond International Forest Products, LLC (a Delaware limited liability company), (4) Martinez Dora d/b/a RNJ Framing Systems (a Texas organization), and (5) Genesis Worldwide Logistics, LLC (a Texas limited liability company). The Plaintiffs allege that the Defendants manufactured, supplied and installed Oriented Strand Board (“OSB”) flooring in two of the Plaintiffs' properties.[1] The Plaintiffs further allege that over 600, 000 square feet of the flooring was defective. The Plaintiffs additionally allege that the Texas Defendants who installed the flooring knew or should have known that the flooring was defective prior to installing the same. The Plaintiffs assert the following causes of action against all of the Defendants: violations of the Texas Deceptive Trade Practices Act; breach of the implied warranty of fitness for a particular purpose; breach of the implied warranty of merchantability; fraud; and fraud by non-disclosure. Additionally, the Plaintiffs assert a breach of contract cause of action against Defendant Martinez Dora d/b/a RNJ Framing Systems. All Defendants were served with process; however, only the diverse Defendants filed answers.

         On June 24, 2016, Defendant Louisiana-Pacific Corporation filed its notice of removal. Defendants Bridgewell Resources, LLC and Richmond International Forest Products, LLC consented to the removal of this case to federal court. In the notice of removal, the Defendant stated that removal was proper because there was complete diversity among the properly joined parties and the amount in controversy exceeded $75, 000. The Defendant further stated that the non-diverse Defendants were fraudulently joined pursuant to Rule 20 of the Federal Rules of Civil Procedure.

         Thereafter, on July 22, 2016, the Plaintiffs filed their motion to remand. In their motion to remand, the Plaintiffs contend that the Texas Defendants were not fraudulently joined. Accordingly, the Plaintiffs argue that the case should be remanded to state court, and they are entitled to their reasonable and necessary attorneys' fees.

         On August 5, 2016, Defendant Louisiana-Pacific Corporation (“LP”) filed its response, arguing that the Plaintiffs' claims against the Texas Defendants are barred by Tex. Civ. Prac. & Rem. Code §82.003. Further, the Defendants contend that Defendant Martinez Dora d/b/a RNJ Framing Systems was misjoined. On August 15, 2016, the Plaintiffs filed a reply.

         LEGAL STANDARD

         “Under the federal removal statute, a civil action may be removed from a state court to a federal court on the basis of diversity.” Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 199 (5th Cir. 2016). “This is so because the federal court has original subject matter jurisdiction over such cases.” Id. “The only caveat is that, when a properly joined defendant is a resident of the same state as the plaintiff, removal is improper.” Id.

         “A defendant is improperly joined if the moving party establishes that (1) the plaintiff has stated a claim against a diverse defendant that he fraudulently alleges is nondiverse, or (2) the plaintiff has not stated a claim against a defendant that he properly alleges is nondiverse.” Id. Because Martinez Dora d/b/a RNJ Framing Systems and Genesis Worldwide Logistics, LLC are, in fact, nondiverse, only the latter option is relevant. See id. As the parties attempting to remove the Plaintiffs' action, the Defendants have the burden of establishing that the Plaintiffs have failed to state a claim against Martinez Dora d/b/a RNJ Framing Systems and Genesis Worldwide Logistics, Inc. See id. In doing so, the Defendants must demonstrate “‘that there is no possibility of recovery by the plaintiff against [a nondiverse] defendant, which stated differently means that there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against [a nondiverse] defendant.'” Id. at 199-200 (citations omitted).

         “When deciding whether a nondiverse defendant has been improperly joined because the plaintiff has failed to state a claim against him, the court must apply the analysis articulated in our en banc opinion in Smallwood v. Illinois Central Railroad Co.: ‘[W]hether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant....'” Id. at 200, quoting Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004)(en banc). “In Smallwood, [the Fifth Circuit] recognized that ‘[t]here ha[d] been some uncertainty over the proper means for predicting whether a plaintiff ha[d] a reasonable basis of recovery under state law.'” Id., quoting Smallwood, supra. “The Smallwood opinion declared that ‘[a] court may resolve the issue in one of two ways, ' the first of which is at issue here: ‘The court may conduct a Rule 12(b)(6) - type analysis, looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law against the in-state defendant, ' elaborating ...


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