United States District Court, W.D. Texas, Austin Division
REPORT AND RECOMMENDATION OF THE UNITED STATES
W. AUSTIN UNITED STATES MAGISTRATE JUDGE.
HONORABLE LEE YEAKEL UNITED STATES DISTRICT JUDGE
the Court are Plaintiffs' Opposed Motion to Remand to
State Court (Dkt. No. 12); Defendant Amazon.com Services
Inc.'s Response (Dkt. No. 13); and Plaintiff's Reply
(Dkt. No. 16). The District Judge referred the above-motions
to the undersigned for report and recommendation pursuant to
28 U.S.C. §636(b)(1)(B), Fed.R.Civ.P. 72, and Rule 1(d)
of Appendix C of the Local Court Rules.
America, Inc. distributes cosmetics and skincare products,
and offers its product lines directly to retailers such as
Defendant Amazon.com Services, Inc., via bulk shipments. To
facilitate and finance the increasing volume of orders from
Amazon, Mainspring entered into factoring and guaranty
agreements with Capital Credit Inc. To secure
Mainspring's debts to CCI, Mainspring granted CCI a
security interest in all of Mainspring's property
(referred to as “the Collateral”). Under these
agreements, Mainspring would invoice Amazon for the products
shipped to Amazon, and then assign those invoices to CCI,
which would advance the sums to Mainspring, give Amazon
notice of the assignment of the invoice, and receive the
payments from Amazon.
December 2017, Amazon stopped placing future orders with
Mainspring. Because Mainspring was still committed to ship
product to Amazon under previous orders, Mainspring continued
to ship products to Amazon into 2018, which Amazon received
and accepted, and for which Amazon continued to approve
invoices for payment. In April 2018, however, Amazon froze
all payments to Mainspring without notice, even though it had
previously approved payment of nearly $850, 000 in invoices.
CCI, which claims to have a lien on the Mainspring product in
Amazon's possession under the Factoring Agreements, made
a demand on Amazon for return of the Collateral. Amazon
refused to return the Collateral to CCI, and CCI alleges that
Amazon has refused to make the Collateral available to CCI,
though it has continued to sell the Mainspring
products-despite having made no payments to either Mainspring
or CCI since December 2017.
December 2018, Mainspring and CCI filed for arbitration
against Amazon, pursuant to an arbitration clause in the
agreement between Mainspring and Amazon. Dkt. No. 1-1. While
Mainspring and CCI filed a joint demand for arbitration, they
were represented by separate counsel. CCI was subsequently
dismissed from the arbitration due to a lack of contractual
privity with Mainspring and Amazon. Dkt. No. 1-3. CCI thus
filed a state lawsuit in Travis County, Texas against
Mainspring and Amazon, asserting claims under the Factoring
Agreement against Mainspring, and for return of the
Collateral against Amazon.
Amazon then removed the case to this court. In the motion
before the Court, CCI asks that the Court remand the case to
state court. It makes two arguments: (1) removal was
defective because Amazon failed to obtain the consent of
Mainspring prior to removal; and (2) Amazon was not excused
from obtaining Mainspring's consent, because Mainspring
is improperly joined as a party. Amazon responds that
Mainspring's consent to the removal was not required
because Mainspring was not properly served before removal,
and, regardless, Mainspring's interests are identical to
those of CCI, and CCI sued Mainspring in an attempt to thwart
defendant may remove an action from state court to federal
court if the federal court possesses subject matter
jurisdiction. 28 U.S.C. § 1441(a v. Prudential Prop.
& Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002).
Federal courts, however, “must presume that a suit lies
outside their limited jurisdiction.” Howery v.
Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001).
The removing party bears the burden of showing that the
removal was proper. Frank v. Bear Stearsns &
Co., 128 F.3d 919, 921-22 (5th Cir. 1997).
case no one questions the existence of subject matter
jurisdiction (based on the parties' diverse citizenship).
Rather, CCI seeks remand based on a procedural defect in the
removal. Removal raises significant federal concerns, and
thus, “the removal statute is strictly construed
‘and any doubt as to the propriety of removal should be
resolved in favor of remand.'” Gutierrez v.
Flores, 543 F.3d 248, 251 (5th Cir. 2008). This means
that a district court must remand a case to state court if
the defendant has not satisfied the statutory requirements
for removal. Section 1446 of the removal statute sets forth
the procedures for removal. In addition, § 1447(c)
authorizes remand for procedural noncompliance with the
removal statute, where the noncompliance is timely raised by
the opposing party. 28 U.S.C. 1447(c) (“A motion to
remand the case on the basis of any defect other than lack of
subject matter jurisdiction must be made within 30 days after
the filing of the notice of removal under section
1446(a).”). Here, Amazon removed this action on August
9, 2019, and CCI filed the motion to remand on September 6,
2019. CCI has thus timely raised this issue.
1446(b) articulates several procedural requirements to make a
proper removal, including that when a civil action is removed
solely under section 1441, all defendants who have been
properly joined and served must join in or consent to the
removal of the action. To remove a state case, all defendants
properly joined and served at the time of removal must
consent to the removal. Getty Oil Corp. v. Ins. Co. of N.
Am., 841 F.2d 1254, 1262 (5th Cir. 1988). The notice of
removal here makes no mention of Mainspring consenting to the
removal, nor was any independent notice of consent filed by
Mainspring. There are circumstances, however, when all
defendants need not join in the petition for removal within
the thirty-day time period: (1) when the non-joining
defendant has not been served with process at the time the
removal petition is filed; (2) when the non-joining defendant
is merely a nominal or formal party; or (3) when the removed
claim is a separate and independent claim under 28 U.S.C.
§ 1441(c). Penson Fin. Serv., Inc. v. Golden Summit
Investors Group, Ltd., 2012 WL 2680667, at *6 (N.D. Tex.
July 5, 2012). If there is a procedural defect, it is
independently sufficient to remand. Gutierrez v. La Joya
Indep. Sch. Dist., 2012 WL 5464957, at *2 (S.D. Tex.
Nov. 8, 2012).
mentioned, CCI asserts that removal in this case was
defective because Amazon failed to obtain Mainspring's
consent to the removal of the case. Amazon does not dispute
that it failed to obtain Mainspring's consent. Instead,
it argues it was excused from obtaining Mainspring's
consent because Mainspring was not properly served at the