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Pan v. Sumitomo Rubber Industries, Ltd.

United States District Court, S.D. Texas, Houston Division

June 20, 2018



          Lee H. Rosenthal Chief United States District Judge.

         I. Background

         Yan Pan and Michael Ciccone filed suit in Texas state court after a single-vehicle accident damaged Ciccone's car and injured Pan, the driver. (Docket Entry No. 1-1 at 26, ¶ 15). Pan and Ciccone allege that the accident occurred because a tire manufactured by Sumitomo Rubber Industries and Sumimoto Rubber North America blew out. They sued Sumimoto for strict products liability, negligence, and negligent representation. Id. at 27-31, ¶¶ 18-31. They also sued Discount Tire Company of Texas, the company that sold, installed, inspected, and serviced the tire, for negligence in installing, inspecting, and maintaining it. Id. at 31-32, ¶¶ 39- 41. Sumimoto removed on the basis of diversity jurisdiction, alleging that Discount Tire of Texas, the in-state defendant, was improperly joined. 28 U.S.C. §§ 1332, 1441(b). Sumimoto based its removal on a Texas statute that protects nonmanufacturing sellers from product-liability suits, arguing that Pan and Ciccone have no reasonable basis to recover against Discount Tire Company of Texas under Texas law. See Tex. Civ. Prac. & Rem. Code § 82.003; (Docket Entry No. 1 at 6, ¶17). Pan and Ciccone moved to remand, arguing that they adequately pleaded an exception to that statute. (Docket Entry No. 5 at 2-3, ¶ 7).

         Based on the pleadings, the motions and responses, the parties' arguments and submissions, and the applicable law, this court denies the motion to remand and dismisses Discount Tire Company of Texas from this lawsuit as an improperly joined party. The reasons are explained below.

         II. The Legal Standard

         A defendant may remove a case to federal court when federal subject-matter jurisdiction exists and the removal procedure has been properly followed. See 28 U.S.C. § 1441; 28 U.S.C. § 1332(a). Although there is complete diversity between Pan and Ciccone (Texas citizens) and the Sumimoto defendants (citizens of Japan and California), Discount Tire Company of Texas is a citizen of Texas. If properly joined, Discount Tire Company of Texas's presence in the suit as an in-state defendant precludes federal removal jurisdiction. The issue is whether Pan and Ciccone have stated a valid state-law cause of action against Discount Tire Company of Texas.

         “[A] removing defendant [need not] demonstrate an absence of any possibility of recovery . . . the defendant must demonstrate only that there is no reasonable basis for predicting that the plaintiff will recover in state court.” Gray ex rel. Rudd v. Beverly Enters.-Miss., Inc., 390 F.3d 400, 405 (5th Cir. 2004) (emphasis in original). A “mere theoretical possibility of recovery under local law” is not enough. See Badon v. RJR Nabisco, Inc., 236 F.3d 282, 286 n. 4 (5th Cir.2000); accord Ross v. Citifinancial, Inc., 344 F.3d 458, 462 (5th Cir. 2003).

         In Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc), cert. denied, 544 U.S. 992, 125 S.Ct. 1825, 161 L.Ed.2d 755 (2005), the Fifth Circuit clarified the procedure for determining whether there is a reasonable basis for recovery against the in-state defendant. A court may conduct a Rule 12(b)(6) analysis, examining the allegations in the complaint to determine whether they state a claim under state law against the in-state defendant, or, after examining the pleadings, decide to conduct a summary inquiry. Smallwood, 385 F.3d at 573-74. Generally, if a plaintiff's pleading survives the Rule 12(b)(6) analysis, then there is no improper joinder. Guillory v. PPG Indus., Inc., 434 F.3d 303, 309 (5th Cir. 2005). The state-court petition filed when the case is removed controls the analysis. Bell v. Thornburg, 743 F.3d 84, 85-86 (5th Cir. 2014) (per curiam) (citing Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir. 1995) (“Limiting the removal jurisdiction question to the claims in the state court complaint . . . permits early resolution of which court has jurisdiction, so that the parties and the court can proceed with, and expeditiously conclude, the litigation.”)).

         In determining whether a plaintiff has a reasonable basis for recovery on at least one claim under state law, the district court is limited to the causes of action and allegations asserted in the complaint. Campbell v. Stone Ins., Inc., 509 F.3d 665, 668-69 n. 2 (5th Cir. 2007); see Freeport-McMoRan, Inc. v. K N Energy, Inc., 498 U.S. 426, 428, 111 S.Ct. 858, 112 L.Ed.2d 951 (1991) (per curiam). The district court must resolve all factual disputes and ambiguities in state law in favor of the plaintiff. Travis, 326 F.3d at 649; McKee v. Kan. City S. Ry. Co., 358 F.3d 329. 333 (5th Cir. 2004). If the record reveals a reasonable basis of recovery on any cause of action, a court must remand the entire suit to state court. Gray, 390 F.3d at 412 (presence of unavailing claims does not defeat remand); Rainwater v. Lamar Life Ins. Co., 391 F.3d 636, 638 (5th Cir. 2004).

         III. Analysis

         A. Whether State or Federal Pleading Standards Govern the Improper Joinder Inquiry

         In deciding a motion to remand based on jurisdiction when an in-state defendant is a party, federal district courts must evaluate whether there is a claim against that party using the federal pleading standards instead of the more lenient “fair notice standard” of Texas state courts. Peña v. City of Rio Grande City, 879 F.3d 613, 617 (5th Cir. 2018) (“Pleadings must be reviewed under the federal pleading standard because the question of improper joinder ‘[a]t bottom . . . is solely about determining the federal court's jurisdiction.”' (citation omitted)). This court evaluates Pan's and Ciccone's claims under Rule 12(b)(6), which allows dismissal if a plaintiff fails “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). Rule 12(b)(6) must be read in conjunction with Rule 8(a), which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a) (2). A complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 570 (2007). Rule 8 “does not require ‘detailed factual allegations, ' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.”' Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555).

         B. Whether the Petition Alleges a Reasonable Basis for the Plaintiffs to Recover Against Direct Tire Company of Texas

         The state-court petition asserts only state-law negligence claims against Discount Tire Company of Texas. Chapter 82 of the Texas Civil Practice and Remedies Code governs product liability actions. A “products liability action” is:

any action against a manufacturer or seller for recovery of damages arising out of personal injury, death, or property damage allegedly caused by a defective product whether the action is based in strict tort liability, strict products liability, negligence, misrepresentation, breach of express or implied warranty, or any other theory or combination of theories.

Tex. Civ. Prac. & Rem. Code § 82.001. In 2003, the legislature added § 82.003, limiting a plaintiff's ability to recover against nonmanufacturing sellers in a products-liability action. Section 82.003 states that a nonmanufacturing seller “is not liable for harm caused to the claimant by that product unless the claimant proves” that at least one of seven exceptions ...

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