Bates v. Laminack, Civil Action No. 2:12–CV–00387.

Decision Date01 April 2013
Docket NumberCivil Action No. 2:12–CV–00387.
PartiesFrank BATES, et al., Plaintiffs, v. Richard N. LAMINACK, et al., Defendants.
CourtU.S. District Court — Southern District of Texas

OPINION TEXT STARTS HERE

Lance C. Kassab, Attorney at Law, David Eric Kassab, The Kassab Law Firm, Houston, TX, for Plaintiffs.

Darrell Lee Barger, Hartline Dacus et al., Corpus Christi, TX, Kenneth R. Breitbeil, McFall Breitbeil et al., Dale Jefferson, Raul Herman Suazo, Martin Disiere et al., Houston, TX, for Defendants.

ORDER

NELVA GONZALES RAMOS, District Judge.

All of the Defendants, through four essentially identical motions and two joinders in previously filed motions, seek dismissal, abstention, or abatement of this action. D.E. 20, 21, 22, 30, 35, 38. Plaintiffs have responded. D.E. 32, 34, 36, 40. And one set of Defendants has replied. D.E. 37. Because the motions are the same or similar and have overlapping issues, and in the interest of judicial efficiency and economy, the motions will be addressed jointly and the arguments will be considered globally.

As set out in detail below, the Court rules as follows on Defendants' challenges:

1. The Court DENIES the Fed.R.Civ.P. 12(b)(1) request to dismiss for lack of jurisdiction;

2. The Court ORDERS Plaintiffs to amend their Complaint and DENIES without prejudice the Fed.R.Civ.P. 12(b)(7) request to dismiss for failure to join indispensable parties;

3. The Court DENIES the Fed.R.Civ.P. 12(b)(1) request to abstain;

4. The Court DENIES the Fed.R.Civ.P. 9(b) request to dismiss for inadequate pleading of fraud;

5. The Court DENIES the Fed.R.Civ.P. 12(e) request for more definite statement;

6. The Court DENIES the Fed.R.Civ.P. 12(f) request to strike immaterial and scandalous allegations; and

7. The Court GRANTS the requested stay of proceedings pursuant to the Defendants' plea in abatement based upon Tex. Bus. & Comm.Code § 17.505.

I. Rule 12(b)(1) Jurisdiction

Plaintiffs filed this case directly in the United States District Court and have predicated federal jurisdiction on diversity of citizenship under 28 U.S.C. § 1332. Diversity jurisdiction requires both diversity of citizenship among plaintiffs and defendants and an amount in controversy exceeding $75,000, exclusive of interest and costs. In Defendants' challenges to this Court's subject matter jurisdiction, they argue both: (1) lack of diversity at the time the Complaint was filed and the impropriety of dismissals to cure diversity of citizenship; and (2) an insufficient amount in controversy.

A. Diversity of Citizenship Exists

According to the Plaintiffs' Complaint, Stacie Taylor, a citizen of Alabama, was sued as a Defendant. D.E. 1, p. 7. As an Alabama citizen, Ms. Taylor is not diverse in citizenship from at least nine of the Plaintiffs. Summons was issued to Ms. Taylor, but the docket does not reflect service on her or a voluntary appearance. D.E. at 01/17/2013. Pursuant to Fed.R.Civ.P. 41(a)(1)(i), Plaintiffs sought and obtained an Order 1 allowing them to dismiss Ms. Taylor. D.E. 18, 19.

Defendants now argue that the dismissal of Ms. Taylor is ineffective to cure jurisdiction because jurisdiction must be evaluated only at the time the case is filed, citing Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 571, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004) and Capron v. Van Noorden, 2 Cranch 126, 6 U.S. 126, 2 L.Ed. 229 (1804). As a corollary, Defendants contend that amending a complaint to drop a non-diverse defendant is improper. ConnectU LLC v. Zuckerberg, 482 F.Supp.2d 3, 19 (D.Mass.2007), rev'd on other grounds,522 F.3d 82 (1st Cir.2008).

Defendants' jurisdictional challenge is incorrect. First, Capron, is inapposite in that it addresses whether parties have the power to consent to jurisdiction where it does not otherwise exist. That issue is not before the Court. Both Grupo Dataflux and ConnectU recite the time-of-filing rule as the general rule for evaluating diversity jurisdiction. Both cases, however, recognize that a well-established exception to that general rule exists with respect to the dismissal of a non-diverse, dispensable party:

“Exceptions to the general rule are extremely limited as, for example, the ability of a court to dismiss a nondiverse, dispensable party in order to cure a jurisdictional defect. See, e.g., Grupo, 541 U.S. at 572, 124 S.Ct. 1920, 158 L.Ed.2d 866;Newman–Green, [Inc. v. Alfonzo–Larrain, 490 U.S. 826,] 832, 109 S.Ct. 2218, 104 L.Ed.2d 893 [ (1989) ].” ConnectU, supra at 15.

Caterpillar [Inc. v. Lewis, 519 U.S. 61, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996) ], broke no new ground, because the jurisdictional defect it addressed had been cured by the dismissal of the party that had destroyed diversity. That method of curing a jurisdictional defect had long been an exception to the time-of-filing rule. [T]he question always is, or should be, when objection is taken to the jurisdiction of the court by reason of the citizenship of some of the parties, whether ... they are indispensable parties, for if their interests are severable and a decree without prejudice to their rights may be made, the jurisdiction of the court should be retained and the suit dismissed as to them.’ Horn v. Lockhart, 17 Wall. 570, 579, 21 L.Ed. 657 (1873).” Grupo Dataflux, 541 U.S. at 572, 124 S.Ct. 1920.

The reason that the post-filing changes in Grupo Dataflux and ConnectU did not cure diversity jurisdiction was because they were changes within a party—not the wholesale dismissal of a non-diverse party. In Grupo Dataflux, the plaintiff was a partnership suing a Mexico corporation. The citizenship of the partnership depended upon the citizenship of its partners. A withdrawal of the non-diverse partners from the partnership during the course of the proceeding, however, was not permitted to cure diversity jurisdiction just as an individual's change of citizenship during the pendency of a proceeding will not alter the jurisdiction that attached at the time of filing. Grupo Dataflux, 541 U.S. at 571, 124 S.Ct. 1920. In other words, jurisdiction that depends upon the condition of a party at the time of filing does not change simply because that condition later changes. Id. at 571–72, 124 S.Ct. 1920. Otherwise, parties could continually destroy jurisdiction throughout the pendency of a case by simply moving around the country.

The relevant issue in ConnectU was the citizenship of the parties, including a limited liability company whose membership changed and an individual whose citizenship as a college student on the move was difficult to pin down. Both of those issues involved the “condition” on which citizenship is determined. There was no dismissal of either party. Thus ConnectU is only helpful insofar as it does acknowledge that there is an exception to the time-of-filing rule for dismissals of parties.

The Court may dismiss a non-diverse party in order to cure a jurisdictional defect. Grupo Dataflux, 541 U.S. at 567, 124 S.Ct. 1920;Newman–Green, 490 U.S. at 836–37, 109 S.Ct. 2218. “The time-of-filing rule has one well-established exception. A district court can dismiss a dispensable nondiverse party pursuant to Fed.R.Civ.P. 21 to cure a jurisdictional defect at any point in the litigation, including after judgment has entered.” Ravenswood Investment Co. v. Avalon Correctional Services, 651 F.3d 1219, 1223 (10th Cir.2011). The Defendants' motions are DENIED with respect to their argument that diversity jurisdiction does not exist based on the citizenship of the parties.

B. The Amount in Controversy is Sufficient
1. The Standard of Review and Applicable Law

Defendants challenge Plaintiffs' satisfaction of the amount in controversy requirement. D.E. 20, pp. 12–17. Defendants are correct that Plaintiffs must satisfy the $75,000 threshold individually and not as a group or class.2E.g., Rangel v. Leviton Mfg. Co., 2012 WL 884909 (W.D.Tex. March 14, 2012) (citing Snyder v. Harris, 394 U.S. 332, 335, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1969)). If Plaintiffs' good faith allegations of injury support the required amount, then Defendants must show—to a legal certainty—that Plaintiffs cannot actually meet the threshold with their causes of action. St. Paul Reinsurance Co. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir.1998) (citing St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288, 58 S.Ct. 586, 590, 82 L.Ed. 845 (1938)).

The “good faith” requirement goes to the claims made and does not require that Plaintiffs plead a particular sum certain. See generally, Huber v. Taylor, 532 F.3d 237, 246 (3d Cir.2008). The standard by which the Court reviews the complaint for indication of the necessary amount in controversy is whether the amount is “likely” to exceed $75,000 based on the types of claims alleged and the nature of the damages sought. Allen v. R & H Oil & Gas Co., 63 F.3d 1326, 1335–36 (5th Cir.1995).

Defendants identify one statement in Plaintiffs' jurisdictional statement as the only statement on the amount of damages claimed. That statement is, [T]he amount in controversy exceeds $100,000.” D.E. 1, p. 8. However, in a much later reference to “each Plaintiff,” they recite that each seeks “the maximum allowable amount of actual damages that exceed the jurisdictional limits of this court.” D.E. 1, p. 49. In addition, they request a 40% contingency fee on any recovery, exemplary damages without regard to statutory cap, and treble damages under the DTPA. Id. at 49–50. Last, they seek disgorgementof fees and expenses paid to the Defendants. Id. at 50.

As a preliminary matter, the Defendants do not dispute that the Plaintiffs' causes of action, if proven to be factually correct, do support the categories of damages claimed. Compensatory damages are a natural remedy for each claim. Their claims also carry the potential of exemplary or additional damages. Internat'l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 584 (Tex.1963) (fraud and civil conspiracy); Brosseau v. Ranzau, 81 S.W.3d 381, 396–97 (Te...

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