Buckeye Recyclers v. Chep Usa, Case No. C-3-01-440.

• Decision Date: 21 August 2002
• Docket Number: Case No. C-3-01-440.
• Citation: 228 F.Supp.2d 818
• Parties: BUCKEYE RECYCLERS, Plaintiff, v. CHEP USA, Defendant.
• Court: U.S. District Court — Southern District of Ohio

228 F.Supp.2d 818

BUCKEYE RECYCLERS, Plaintiff, v. CHEP USA, Defendant.

Case No. C-3-01-440.

United States District Court, S.D. Ohio, Western Division.

August 21, 2002.

James A. Wilson, Jr., Vorys, Sater, Seymour & Pease, Columbus, OH, for Plaintiff.

Bridgette Caryn Roman, John Cooper McDonald, Schottenstein, Zox & Dunn, Columbus, OH, for Defendant.

DECISION AND ENTRY OVERRULING PLAINTIFF'S MOTION TO REMAND (DOC. # 7); DEFENDANT DIRECTED TO FILE AMENDED NOTICE OF REMOVAL, WITHIN 20 DAYS OF DATE OF ENTRY, SETTING FORTH CITIZENSHIP OF ITS GENERAL PARTNERS

RICE, Chief Judge.

The parties are now before the Court on Plaintiff Buckeye Recyclers' ("Buckeye") Motion to Remand (Doc. # 7). Defendant CHEP USA ("CHEP") removed this action from the Court of Common Pleas of Clark County, Ohio, on the basis of diversity jurisdiction, 28 U.S.C. § 1332 (diversity jurisdiction) & 28 U.S.C. § 1441 (removal jurisdiction). (See Doc. # 1.) Section 1332 allows a federal district court to hear cases in which the opposing parties are citizens of different states and in which the amount in controversy exceeds $75,000. In its Motion to Remand, Buckeye argues that the amount in controversy does not exceed this statutory minimum.

I. Background Facts¹

The underlying facts, as plead in the Plaintiff's Complaint (attached to Doc. # 1), are not in dispute. Buckeye is an Ohio corporation in the business of collecting, repairing, recycling, and/or reselling wooden pallets used for the shipment of goods. CHEP, registered as a general partnership in Florida, rents pallets to any number of commercial entities. Typically, entities with the need for pallets purchase as much from pallet manufactures or pallet recyclers, or rent them from proprietors such as CHEP. Where pallet manufacturers inject pallets into the stream of commerce pursuant to their sale, they generally relinquish title thereto. A pallet's cost, and therefore its title, is generally passed along in the price of the good being shipped as it makes its way through the various trade points in the stream of commerce. On the other hand, some manufacturers require the return of pallets. However, because pallets are manufactured with uniform dimensions and typically have no distinguishing characteristics, such a requirement is typically for the return of pallets in general, not of specific pallets.

Because pallets tend to accumulate in large numbers at distribution and wholesale sites, recyclers such as Buckeye serve a key commercial role by purchasing them in bulk, carrying them away from the distributor's or wholesaler's site, and returning them to the stream of commerce by either reselling them to entities with a need for such or returning them to pallet manufacturers for a fee. In addition to purchasing pallets, Buckeye will also collect broken pallets, repair them, and return them to their owner for a fee. It charges up to $2.50 for pallet repair and return, and up to $5.40 for a pallet's resale. Buckeye does not pre-sort those pallets which it purchases in bulk, but, rather, purchases them sight unseen at the point of collection.

At any given time, about 3% of the total pool of pallets in the stream of commerce in the United States consists of proprietary pallets (i.e., pallets bearing the distinctive mark of their proprietor). CHEP is in the business of renting its proprietary pallets, and in contrast to the bulk of pallets in commerce, each of its pallets is distinctively marked. As part of its rental agreements with its various customers, be they manufacturers, distributors, wholesalers, etc., CHEP requires the return of its specially identified pallets. The exact CHEP pallet need not be returned, so long as a "CHEP" pallet in particular is returned. Failure to return a CHEP pallet may result in the imposition of a lost pallet fee. CHEP polices the flow of its pallets by requiring, pursuant to contract, that all of its customers ship goods on said pallets only to others in the stream of commerce with whom CHEP also has contractual agreements. It is inevitable, though, that a certain number of CHEP pallets get "lost" by CHEP's customers and make their way into the general accumulated mass of pallets collected and resold by recyclers such as Buckeye.

Therein lies the rub of this dispute. Because CHEP asserts that at all times it retains ownership rights in its distinctively marked pallets, it asserts the correlative right to demand their return by any party which comes into possession of such, and its right to sue the possessing party for conversion to protect such right. Buckeye, which does in fact segregate and safeguard CHEP pallets after it makes a bulk purchase, argues that it (as with other recyclers) contributes value and efficiency to the pallet market; that in purchasing pallets in bulk as it does, it becomes the rightful owner of all such pallets; and that, quite the opposite from having a legal obligation to return CHEP pallets to CHEP at its own cost, it has a right either to resell CHEP pallets to others, or to extract a fee from CHEP for its service, as it would with any other manufacturer to whom it returns pallets. Indeed, the typical return fee collected from other proprietary pallet companies is $5 per pallet. Because of legal threats from CHEP, Buckeye alleges that it has lost, and continues to lose, revenue due to lost sales, and has been forced to store excess CHEP pallets at its facility.

Buckeye has asserted five counts in its Complaint. Count One is for a declaratory judgment that CHEP, by insisting that it retains ownership rights in all CHEP pallets, is in violation the Deceptive Trade Practices Act, as codified in Ohio at Chapter 4165 of the Ohio Revised Code. Count Two is for a declaratory judgment that the CHEP pallets which come into Buckeye's possession, through the ordinary course of business, have either been lost or abandoned by CHEP on account of its inability to regulate the flow of such in the stream of commerce, such that it no longer can claim legal title to said pallets. Count Three is for a declaratory judgment that, to the extent CHEP retains an ownership interest in CHEP pallets within Buckeye's possession, Buckeye has a common law lien in such on account of its acts of sorting and safeguarding them, and returning them to the stream of commerce. Count Four is for unspecified money damages and a declaratory judgment that CHEP has been unjustly enriched by Buckeye's acts of sorting and safeguarding its pallets, and returning them to the stream of commerce. Count Five is a claim for tortious interference with Buckeye's business relationships, stemming from CHEP's alleged communications to various entities with whom Buckeye does business, that it (CHEP), as opposed to Buckeye, has the legal right to its distinctively marked pallets. On this final count, Buckeye is seeking damages of approximately $20,000. In addition to money damages and its claims for declaratory judgment, Buckeye is seeking interest, costs, and attorney fees.

In moving for remand, Buckeye contends that it is not seeking an amount in excess of $75,000. In opposing the Motion, CHEP asserts alternative theories for why the Court should deny such action: it argues, first, that Buckeye's unspecified money damages may very well exceed $75,000 on their own; second, that the Court should consider the cost CHEP would bear if Buckeye prevails on its declaratory judgment claims, which it contends would easily exceed the statutory minimum; and third, that even if the Court only considers the economic value of the rights which Buckeye stands to safeguard, should it prevail in this litigation, this aggregate value would also exceed $75,000.

For the reasons set forth herein, the Court finds that CHEP has met its burden of demonstrating that the amount in controversy is likely to exceed $75,000, and that, therefore, the Court may assume subject matter jurisdiction of the case. Buckeye's Motion to Remand (Doc. # 7) is, therefore, OVERRULED.

II. Analysis

A party can remove an action from state to local court if the federal court to which the action is removed would otherwise have had original jurisdiction. 28 U.S.C. § 1441(a). Generally, where the respective state citizenship of the parties is diverse and the amount in controversy exceeds $75,000, a federal district court has jurisdiction to hear the case. 28 U.S.C. § 1332(a). Herein, as the party removing this action, CHEP has the burden of showing by a preponderance of the evidence that the amount in controversy requirement has been met. See Hayes v. Equitable Energy Res. Co., 266 F.3d 560, 572 (6th Cir.2001). The analysis must center on the facts as they existed at the time the action was removed. See id. at 573. Buckeye is seeking both monetary and declaratory relief. The amount attributable to the requests for declaratory relief is the economic value of the legal rights put into issue by the assertion of these claims. See Hunt v. Washington Apple Adver. Comm'n, 432 U.S. 333, 347, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977); Goldsmith v. Sutherland, 426 F.2d 1395, 1398 (6th Cir. 1970). In order to avoid remand, CHEP must be able to demonstrate that it is more likely than not that the aggregate value of Buckeye's claims exceeds $75,000. See Gafford v. General Elec. Co., 997 F.2d 150, 158 (6th Cir.1993).²

Just last year, in McIntire v. Ford Motor Co., 142 F.Supp.2d 911, 920 (S.D.Ohio 2001), this Court discussed the split among the district courts of the Sixth Circuit on the question of whether the amount in controversy attributable to claims for declaratory or injunctive relief should be calculated on the basis of the economic benefit the plaintiff is trying to protect, the economic cost the defendant stands to incur as a result of having to comply with a judgment favorable to the plaintiff, or either, depending on the context. After considering the existing cases and the reasoning underlying the competing theories, as well as...