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Woolslayer v. Lee C. Moore, Inc.

United States District Court, N.D. Texas, Dallas Division

December 27, 2019

JEANNIE WOOLSLAYER, Plaintiff,
v.
LEE C. MOORE, INC., a/k/a WOOLSLAYER COMPANIES, INC; RANDY WOLF, IN HIS CAPACITIES AS VOTING TRUSTEE FOR THE ROBERT T. WOOLSLAYER GST TRUST, VOTING TRUSTEE FOR THE HOMER WOOLSLAYER GST TRUST, VOTING TRUSTEE FOR THE JOHN WOOLSLAYER GST TRUST, and VOTING TRUSTEE OF THE JOSEPH WOOLSLAYER GST TRUST; ROBERT T. WOOLSLAYER; HOMER WOOLSLAYER; JOHN WOOLSLAYER; and JOSEPH WOOLSLAYER, INDIVIDUALLY, AND IN THEIR CAPACITIES AS CO-TRUSTEES OF THE WOOLSLAYER GST TRUSTS, Defendants.

          MEMORANDUM OPINION AND ORDER

          Sam A. Lindsay United States District Judge.

         Before the court is Plaintiff Jeannie Woolslayer's Motion to Remand and Motion for Attorneys' Fees (Doc. 5), filed October 23, 2019; Defendant Robert T. Woolslayer, John Woolslayer, Homer Woolslayer, and Joseph Woolslayer's Motion to Dismiss or, Alternatively, to Transfer Venue (Doc. 6), filed October 24, 2019; and Plaintiff's Motion to Dismiss Certain Defendants Under Rule 41 (Doc. 19), filed November 21, 2019. After careful consideration of the motions, response, reply, record in this action, and the applicable law, the court grants Plaintiff's Motion to Remand and Motion for Attorneys' Fees (Doc. 5); and declines to address the merits of Defendants' Motion to Dismiss or, Alternatively, to Transfer Venue (Doc. 6) and Plaintiff's Motion to Dismiss Certain Defendants Under Rule 41 (Doc. 19).

         I. Background

         On July 30, 2019, Plaintiff Jeannie Woolslayer (“Plaintiff” or “Ms. Woolslayer”) filed this action against Defendants Lee C. Moore, Inc. a/k/a Woolslayer Companies, Inc. (“WCI”), Randy Wolf (“Mr. Wolf”), [1] Robert T. Woolslayer, Homer Woolslayer, John Woolslayer, and Joseph Woolslayer, asserting claims for (1) breach of contract against WCI; and (2) tortious interference with an existing contract against Robert, Homer, John, and Joseph Woolslayer (collectively, the “Woolslayer Brothers”). These claims arise out of Ms. Woolslayer's attempt to redeem her shares of WCI at the fair market value, as established in the Redemption Agreement at issue.

         On October 3, 2019, Defendants Joseph Woolslayer (“Joe”) and John Woolslayer (“John”)[2] removed this action on the basis of diversity of citizenship, asserting that Mr. Wolf, a Texas citizen, was a “sham defendant” and fraudulently joined to this action.[3] Specifically, Joe and John contend that Ms. Woolslayer (1) added Mr. Wolf for the purpose of defeating diversity jurisdiction; and (2) is in collusion with Mr. Wolf, as evidenced by their similar motions to dismiss that were filed in the Oklahoma District Court trust action (“Oklahoma Trust Action”).[4] Additionally, Joe and John contend that Ms. Woolslayer does not assert any cause of action against Mr. Wolf, and, thus, no case or controversy exists between the two. On October 23, 2019, Ms. Woolslayer filed her Motion to Remand and Motion for Attorneys' Fees, in which she asserts that Mr. Wolf is a proper party and that the removal of this action is untimely.

         Since the filing of Ms. Woolslayer's Motion to Remand (Doc. 5), Defendants have filed a Motion to Dismiss or, Alternatively, to Transfer Venue (Doc. 6), and Ms. Woolslayer has filed a Motion to Dismiss Certain Defendants Under Rule 41 (Doc. 19). Before considering the latter two motions, the court must first determine whether it has subject matter jurisdiction over this action.

         II. Motion for Remand

         Joe and John seek removal of this action based on the alleged fraudulent joinder of Mr. Wolf. Based on the allegations in the Notice of Removal, they assert removal is proper based on alleged collusion between Ms. Woolslayer and Mr. Wolf; and Ms. Woolslayer's inability to establish a cause of action against Mr. Wolf. The court will address each assertion in turn.

         A. Improper Joinder

         1. Legal Standard - Improper Joinder

         A party seeking to remove an action to federal court on the basis of fraudulent or improper joinder bears a heavy burden. Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568, 574 (5th Cir. 2004) (en banc). In Smallwood, the court “adopt[ed] the term ‘improper joinder' as being more consistent with the statutory language than the term ‘fraudulent joinder,' which has been used in the past. Although there is no substantive difference between the two terms, ‘improper joinder' is preferred.” Id. at 571 n.1. Accordingly, the court uses the term “improper joinder” in this opinion. As the party wishing to invoke federal jurisdiction by alleging improper joinder, Joe and John have the burden to establish that Mr. Wolf was joined by Ms. Woolslayer to defeat federal jurisdiction. Id. at 575. The court is to resolve “any doubt as to the propriety of removal” in favor of remand. Gutierrez v. Flores, 543 F.3d 248, 251 (5th Cir. 2008) (citation and quotation marks omitted).

         Unless Congress expressly provides otherwise, a defendant may remove a state court civil action to a federal district court if the district court has original jurisdiction over the action. 28 U.S.C. § 1441(a). A federal court has original jurisdiction over civil actions in which there is diversity of citizenship between the parties and the amount in controversy exceeds $75, 000, exclusive of interest and costs. 28 U.S.C. § 1332(a). Otherwise stated, the statute requires complete diversity of citizenship; that is, a district court cannot exercise subject matter jurisdiction if any plaintiff shares the same citizenship as any defendant. See Corfield v. Dallas Glen Hills LP, 355 F.3d 853, 857 (5th Cir. 2003) (citing Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806)). In considering citizenship, however, the court considers only the citizenship of real and substantial parties to the litigation; it does not take into account nominal or formal parties that have no real interest in the litigation. Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 460-61 (1980). The citizenship of a party that is improperly joined must be disregarded in determining whether diversity of citizenship exists. Johnson v. Heublein, 227 F.3d 236, 240 (5th Cir. 2000).

         To establish improper joinder, Joe and John must prove: “(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.” Travis v. Irby, 326 F.3d 644, 647 (5th Cir. 2003) (citing Griggs v. State Farm Lloyds, 181 F.3d 694, 698 (5th Cir. 1999)). Joe and John do not assert that Ms. Woolslayer committed actual fraud in the pleading of jurisdictional facts. Instead, they contend that “[t]he law is well-established that a plaintiff may not collude with a defendant for the purpose of invoking the jurisdiction of a federal court, ” pursuant to 28 U.S.C. § 1359, and that the improper joinder standard is a corollary of this rule. Defs.' Resp. 9-10. Thus, they assert that “[f]raudulent joinder . . . provid[es] that a plaintiff may not collude with a defendant for the purpose of defeating the removal of jurisdiction of a federal court.”[5] Id. at 10. Accordingly, Joe and John assert that Ms. Woolslayer and Mr. Wolf are conspiring and colluding to allow Ms. Woolslayer to gain control over WCI; and that Ms. Woolslayer added Mr. Wolf, a Texas citizen, as a defendant to this lawsuit for the purpose of defeating diversity. Thus, on this basis, they contend that Mr. Wolf is improperly joined.

         Joe and John also allege that Ms. Woolslayer does not state any cause of action against Mr. Wolf and does not have any intent to prosecute a case against him. Thus, according to Joe and John, Mr. Wolf is improperly joined on this basis as well. Under this test for improper joinder, the court must consider “whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state 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 an in-state defendant.” Smallwood, 385 F.3d at 573 (citing Travis, 326 F.3d at 648).

         In addressing this issue, the district court must determine whether a plaintiff has “any possibility of recovery against the party whose joinder is questioned.” Travis, 326 F.3d at 648 (quoting Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 312 (5th Cir. 2002)). “If there is arguably a reasonable basis for predicting that state law might impose liability on the facts involved, then there is no [improper] joinder.” Great Plains Trust, 313 F.3d at 312 (internal quotations and citations omitted). “This possibility, however, must be reasonable, not merely theoretical.” Id. If there is a reasonable possibility that a plaintiff can recover on any of his or her claims, there is no improper joinder, and the case must be remanded. Smallwood, 385 F.3d at 575. In making this determination regarding improper joinder, a court does not “decide whether the plaintiff will actually or even probably prevail on the merits, but look[s] only for a [reasonable] possibility that [the plaintiff] may do so.” Dodson v. Spiliada Mar. Corp., 951 F.2d 40, 42 (5th Cir. 1992) (citations omitted). To determine whether a party was improperly joined, the court “must evaluate all of the factual allegations in the light most favorable to the plaintiff, resolving all contested issues of substantive fact in favor of the plaintiff.” Guillory v. PPG Industries, Inc., 434 F.3d 303, 308 (5th Cir. 2005) (quoting B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir. 1981)). On the other hand, if there is no reasonable possibility for predicting liability against the nondiverse defendant, improper joinder exists, and the action remains in federal court.

         In deciding the question of improper joinder, the court may either (1) “conduct a Rule 12(b)(6)-type analysis, looking initially at the allegations of the complaint to determine whether [it] states a claim under state law against the in-state defendant”; or (2) in limited circumstances, conduct a summary inquiry “to identify the presence of discrete and undisputed facts that would preclude plaintiff's recovery against the in-state defendant.” Smallwood, 385 F.3d at 573-74. “When a defendant seeks to remove a case, the question of whether jurisdiction exists is resolved by looking at the complaint at the time the [notice of] removal is filed.” Brown v. Southwestern Bell Tel. Co., 901 F.2d 1250, 1254 (5th Cir. 1990). A court may not look to postremoval filings or pleadings to determine the issue of improper joinder. Griggs v. State Farm Lloyds, 181 F.3d at 700 (citation omitted). Limiting the determination of questions regarding removal jurisdiction to the claims set forth in the state pleadings at the time of removal ensures finality and early resolution of the jurisdictional issue, both of which reduce expense and delay to the parties and court. Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir. 1995).

         In International Energy Ventures Management, L.L.C. v. United Energy Group, Limited, the Fifth Circuit addressed whether the state or federal pleadings standard applies to the issue of improper joinder, holding that a federal court must apply the federal pleading standard. 818 F.3d 193, 208 (5th Cir. 2016). The federal pleading ...


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