Brown v. Jevic
| Decision Date | 31 July 2009 |
| Docket Number | No. 08-4789.,08-4789. |
| Citation | 575 F.3d 322 |
| Parties | William J. BROWN; Lynn D. Brown; Grisel Cairs; Noemi Camacho; Linda Anstic; Donald E. McCoy; Thomas K. Turner; Ron Wayne, Individually and on behalf of all others similarly situated, Appellees, v. JEVIC; Jevic Transportation, Inc.; Jevic Transportation Services, Inc.; Jevic Holding Corporation; David H. Gorman, President/CEO of Jevic Transportation, Inc.; Gerald Paulson, Vice President of Jevic Transportation, Inc.; Harry Muhlschlegel, President of Jevic Transportation Services, Inc.; Karen Muhlschlegel, Vice President of Jevic Transportation Services, Inc.; Michael T. Gillen, as Other Officer of Jevic Transportation, Inc.; Sun Capital Partners Inc; Michael T. Gillen, Managing Director of Sun Capital Partners, Inc.; F. Dixon McElwee, Jr., as Vice President of Sun Capital Partners, Inc.; Gary Talarico, Managing Director of Sun Capital Partners, Inc.; YRC Worldwide, Inc.; William D. Zollars, President/CEO of YRC Worldwide, Inc.; Stephen L. Bruffett, Executive Vice President/Chief Financial Officer of YRC Worldwide, Inc. Sun Capital Partners, Inc., Michael T. Gillen, F. Dixon McElwee, Jr., Gary M. Talarico, Appellants. |
| Court | U.S. Court of Appeals — Third Circuit |
Circuit Judges and POLLAK,* District Judge.
In this appeal implicating the Class Action Fairness Act of 2005, we consider whether a defendant is precluded from removing a class action to federal court because a co-defendant is in bankruptcy. We hold that it is not.
The essential facts and procedural history of the case are undisputed. Appellant Sun Capital Partners, Inc. (Sun) is the parent company of JEVIC Transportation, Inc., which filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware on May 20, 2008, following the closure of its transportation facility in Delanco, New Jersey. The day after JEVIC's bankruptcy filing, William J. Brown and several other former JEVIC employees (collectively "Brown") filed an adversary proceeding in the Bankruptcy Court, which was styled as a class action and alleged violations of the Millvale Dallas Airmotive Plant Jobs Loss Notification Act (known as the New Jersey WARN Act), N.J.S.A. § 34:21-1 et seq. See Czyzewski v. JEVIC Transp., Inc., Adv. Pro. 08-50662(BLS) (Bankr. D.Del.2008). Like its federal counterpart, the New Jersey WARN Act requires advance notice of a plant closing under certain circumstances.
One week after the JEVIC bankruptcy filing and despite the automatic stay provided for in 11 U.S.C. § 362(a)(1), Brown filed a class action against JEVIC and Sun in the Superior Court of New Jersey;1 this class action also alleging violation of the New Jersey WARN Act, replicated Brown's claim in Bankruptcy Court.
On June 27, 2008 — also in derogation of the automatic stay of § 362(a)(1) — JEVIC removed the case to the United States District Court for the District of New Jersey. In support of federal jurisdiction, JEVIC invoked the general removal statutes (28 U.S.C. §§ 1441 and 1446), the bankruptcy removal statutes (28 U.S.C. §§ 157, 1334 and 1452), and the minimal diversity provisions of the Class Action Fairness Act of 2005 (CAFA) (28 U.S.C. § 1332(d)).
On July 2, 2008, the District Court sua sponte remanded the action to state court, stating: "The law is clear that `when an action is filed post-petition, in violation of the stay, the debtor must wait until the stay is lifted before filing a petition to remove.'" Pusatere v. JEVIC Transp., Inc., No. 08-3224, 2008 WL 2676599, at *1 (D.N.J. July 1, 2008) (quoting Easley v. Pettibone Mich. Corp., 990 F.2d 905, 908 (6th Cir.1993)).
The day after the District Court remanded the case to state court, Sun — which was not in bankruptcy — removed the case to federal court, invoking the general removal statutes and CAFA. The District Court, after ordering Sun to show cause why the action should not be remanded, once again remanded the case to state court, stating: "[w]hen an action is initiated after the filing of a Chapter 11 petition, in violation of the accompanying stay, removal is not available." Brown v. JEVIC, No. 08-3341, Remand Order (Sept 12, 2008) (emphasis added) (citations omitted).
Sun then filed a petition for leave to appeal the District Court's remand order, which we granted. Thus, we exercise jurisdiction pursuant to 28 U.S.C. § 1453(c).
Our review of "issues of subject matter jurisdiction, including cases arising under CAFA, is plenary." Frederico v. Home Depot, 507 F.3d 188, 193 (3d Cir. 2007) (citation omitted). The removing party — in this case, Sun — carries a heavy burden of showing that at all stages of the litigation the case is properly before the federal court. See Packard v. Provident Nat'l Bank, 994 F.2d 1039, 1045 (3d Cir. 1993). Removal statutes are to be strictly construed, with all doubts to be resolved in favor of remand. See Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 (3d Cir.1992).
In finding removal improper, the District Court (1) characterized Sun's claim as one for partial removal, and (2) relied solely on cases dealing with debtor defendants who attempted to remove actions. This was problematic because Sun is neither a debtor in bankruptcy nor did it seek partial removal. As we shall explain, Sun's removal was proper because: (1) JEVIC was a fraudulently joined party; and (2) JEVIC was never served with legal process, so its status as a defendant was of no effect and could not destroy federal jurisdiction.
Brown sued JEVIC in state court on May 27, 2008, just one week after JEVIC had filed for bankruptcy protection. This was plainly improper under the automatic stay, 11 U.S.C. § 362(a)(1). Because Brown improperly joined JEVIC in the action, that joinder cannot prevent Sun from removing the action.
As the Supreme Court stated long ago: "Federal courts should not sanction devices intended to prevent a removal to a Federal court where one has that right." Wecker v. Nat'l Enameling & Stamping Co., 204 U.S. 176, 186, 27 S.Ct. 184, 51 L.Ed. 430 (1907). We have adhered to this principle in the context of fraudulent joinder used to defeat diversity jurisdiction. See In re Briscoe, 448 F.3d 201, 216 (3d Cir.2006) () (citation omitted).
"Joinder is fraudulent where there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendants or seek a joint judgment." Id. at 217. In the diversity context, we have stated: "The doctrine of fraudulent joinder represents an exception to the requirement that removal be predicated solely upon complete diversity." Id. at 215-16.
[I]f there is even a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants, the federal court must find that joinder was proper and remand the case to state court....
In evaluating the alleged fraud, the district court must focus on the plaintiff's complaint at the time the petition for removal was filed. In so ruling, the district court must assume as true all factual allegations of the complaint. It also must resolve any uncertainties as to the current state of controlling substantive law in favor of the plaintiff.
Id. at 217 (quoting Batoff, 977 F.2d at 851-52 (punctuation and citations omitted)).
Although this appeal does not involve a plaintiff that fraudulently named a nondiverse party to defeat diversity jurisdiction, the principle enunciated in In re Briscoe applies with equal force to the facts of this case. It was plainly improper for Brown to sue JEVIC in state court after JEVIC had filed for bankruptcy protection. To the extent JEVIC's status as a debtor not subject to removal deprived Sun and the other Defendants of a federal forum to which they were otherwise entitled, Brown's joinder of JEVIC was fraudulent.
This case is akin to the situation where the statute of limitations bars an action against a defendant who is joined in the action to defeat diversity jurisdiction. We, along with our sister circuits, have recognized that a statute of limitations defense is properly considered in connection with a fraudulent joinder inquiry. See In re Briscoe, 448 F.3d at 219 .
In sum, because Brown had no reasonable basis to believe that JEVIC was amenable to suit, we hold that JEVIC was a fraudulently joined party and its status as a Defendant could not be used to defeat otherwise proper federal jurisdiction.
A second, independent reason leads us to conclude that the District Court erred in remanding the case to state court: JEVIC was not before the District Court because it was never served with legal process.
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