Caribe Chem Distribs., Corp. v. S. Agric. Insecticides, Inc., CIVIL 20-1547 (ADC)

• Court: United States District Courts. 1st Circuit. District of Puerto Rico
• Parties: Caribe Chem Distributors, Corp., Plaintiff, v. Southern Agricultural Insecticides, Inc., Defendant.
• Docket Number: CIVIL 20-1547 (ADC)
• Decision Date: 30 September 2021

Caribe Chem Distributors, Corp., Plaintiff, v. Southern Agricultural Insecticides, Inc., Defendant.

CIVIL No. 20-1547 (ADC)

United States District Court, D. Puerto Rico

September 30, 2021

OPINION AND ORDER

Aida M. Delgado-Colón, United States District Judge

Before the Court is plaintiff Caribe Chem Distributors Corporation's (“Caribe Chem”) motion to remand to State Court. ECF No. 9. Defendant Southern Agricultural Insecticides, Inc. (“SAI”) responded in opposition. ECF No. 16. Caribe Chem's reply followed. ECF No. 26. For the reasons below, Caribe Chem's motion to remand is GRANTED.

I. Background^[1]

In 2012, Puerto Rico-based wholesale chemical and industrial product distributor Caribe Chem entered into an agreement with SAI, a Floridian manufacturer and distributor of agricultural chemicals, pursuant to which Caribe Chem gained distribution rights - in Puerto Rico - to SAI's “Lawn and Garden; small packages” product line (“small packages line”). ECF No. 1-1 at 2-3. The parties verbally agreed that said distributorship be exclusive. Id. at 3.

In April of 2015, Caribe Chem became aware that local distributor Superior Angran, LLC (“Superior Angran”) was also dealing SAI products in Puerto Rico. Id. at 4. Upon notification SAI informed Caribe Chem that its exclusive distribution rights were limited to the small packages line. Id. In June of 2018, SAI unilaterally divided distributorship of the small packages line between Caribe Chem and Superior Angran. Id. at 7.

Caribe Chem further alleges that Superior Angran delayed registering chemical products destined for Caribe Chem with Puerto Rico regulators, and spread rumors that SAI would be ceasing their business relationship with Caribe Chem. The complaint cites no events or damages postdating October 2018. Id. at 6-8.

Caribe Chem filed suit in State Court (“the State case”) against SAI, Superior Angran and its president, Juan Antonio Angulo-Granda (“Angulo-Granda”), ^[2] on February 20 2020. Id. Caribe Chem claimed that SAI breached the exclusivity agreement between the two parties by assigning distribution lines to Superior Angran, in contravention of The Puerto Rico Dealer's Act of 1964 (“Law 75”). Id. at 9-11; see P.R. Laws Ann. Tit. 10 § 278, et seq. Caribe Chem also affirmed that Superior Angran and Angulo-Granda (together, “diversity-defeating defendants”) violated Article 1802 of the Puerto Rico Civil Code (“Article 1802”) by intentionally interfering in the contractual relationship between Caribe Chem and SAI. Id. at 11-13; see P.R. Laws Ann. Tit. 31 § 5141.

On July 19, 2020, the diversity-defeating defendants moved to dismiss the State case, contending that Caribe Chem's claims against them were time-barred. ECF No. 1-5 at 1-2. They argued that, at the latest, Caribe Chem's claims accrued in September of 2018. Id. Thus, given Article 1802's one-year prescriptive period, the window to raise any contractual interference claims had closed by the time the February 20, 2020 state complaint was filed. Id. Caribe Chem retorted, for the first time and via motion, that the company's closure in December 2019 was the final damage in a series of continuing, escalating damages. Id. Thus, in purportedly keeping with the local continuing damages doctrine, Caribe Chem alleged its claims accrued in December 2019. Id. The State Court rejected Caribe Chem's logic, agreed with the diversitydefeating defendants' argument regarding the prescriptive term, and entered partial judgment in Superior Angran and Angulo-Granda's favor on October 2, 2020, thereby dismissing the diversity-defeating defendants from the state case.^[3] Id. at 27.

SAI filed a notice of removal on October 15, 2020, citing complete diversity pursuant to the state case partial judgment as the basis for federal jurisdiction, as per 28 U.S.C. § 1446. ECF No. 1. The state court accordingly entered an order declaring itself to be without jurisdiction in light of the notice of removal. Caribe Chem subsequently filed a motion for reconsideration, which the state court denied without more.^[4]

Now, Caribe Chem moves to remand. ECF No. 9.

II. The Arguments

Caribe Chem argues that the case should be remanded to state court because SAI filed the notice of removal prematurely, given that that the state court's partial dismissal is still subject to reconsideration and appellate review. ECF No. 9 at 5. Caribe Chem relies on what has been termed the voluntary/involuntary dismissal rule to posit that, because the dismissal of its suit against Superior Angran and Angulo-Granda was involuntary and court-imposed, the case against SAI did not become removable. Id. at 6. Finally, Caribe Chem avers that SAI waived its right to remove by filing a motion for extension of time to answer in the state case. Id. at 10.

SAI, in turn, holds that the voluntariness of the diversity-defeating defendants' dismissal is irrelevant because:

The law clearly states that a case that was originally not removable may be removed after notice of an “order” making the case removable. There is no distinction in [the removal statute] between an “order” entered voluntarily on motion by any party or involuntarily by the court. It is inconsequential for the right to remove whether the “order” creating jurisdiction is voluntary or involuntary because [the removal statute] neither codifies an exception nor defines any kind of order.

ECF No. 16 at 5. In the alternative, SAI urges this Court to determine that the inclusion of the diversity-defeating defendants in the state case supports a finding of fraudulent joinder. Id. at 10. SAI further argues that filing a motion for extension of time did not operate to waive its removal right because SAI did not act offensively or invoke state court jurisdiction. Id. at 12. SAI also notes the state court denied Caribe Chem's motion for reconsideration before the instant motion to remand was filed. Id. at 13.

In its reply, Caribe Chem defended the applicability of the voluntary-involuntary dismissal doctrine. ECF No. 26 at 2-5. It argued, as well, that SAI waived fraudulent joinder as a basis for federal jurisdiction by omitting mention of the same in its notice of removal. Id. at 5.

III. Legal Standard

“Defendants may remove an action on the basis of diversity of citizenship if there is complete diversity between all named plaintiffs and all named defendants, and no defendant is a citizen of the forum State.” Lincoln Prop. Co. v. Roche, 546 U.S. 81, 84 (2005). When a case is not removable at the outset, “a notice of removal may be filed within 30 days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.” 28 U.S.C.A. § 1446 (b)(3). An improperly removed case may subsequently be again remanded to state court, on timely motion for any defect or otherwise at any time for lack of subject matter jurisdiction. See generally 28 U.S.C.A. § 1447.

IV. Discussion

Caribe Chem, rightly, urges this Court to apply the so-called voluntary/involuntary dismissal rule here. While SAI and some courts find the same to be at odds with a plain reading of the removal statute, this Court disagrees. Nunc incipimus:

i. The Voluntariness Distinction

Per the voluntary/involuntary dismissal rule (“the rule”), “when a case is not removable at the time it is filed, but becomes facially removable at a later date because of the dismissal of a non-diverse defendant, removal is authorized only if diversity results from a voluntary act of the plaintiff.” Irabor v. Lufthansa Airlines, 427 F.Supp.3d 222, 229 (D. Mass. 2019) (citations omitted). “In other words, if the non-diverse defendant was dismissed from the case by the voluntary act of the plaintiff, the case is removable, but if not, then the case is not removable because the dismissal is still subject to review on appeal.” Id. (internal quotations omitted). A dismissal becomes voluntary if an appeal is not filed within the prescribed time, or if the appeal process comes to an end. See Maine Emps. Mut. Ins. Co. v. Yates Ins. Agency, 52 F.Supp.2d 135, 136 (D. Me. 1999); Longden v. Philip Morris, Inc., 2003 WL 21975365, at *2 (D.N.H. Aug. 19, 2003) (“Because plaintiffs objected to dismissing TBI from the case, and because the time for appealing Judge Smukler's summary judgment order has not yet run, there has been no qualifying event, in the form of a voluntary act by plaintiffs, that would allow removal under § 1446(b).”)

While seemingly simple, the rule has been the object of some scrutiny, mainly because it is judge-made and purportedly finds little or no direct support in § 1446(b)(3).^[5] Nevertheless, sister Courts in Massachusetts, New Hampshire and Maine have favored the same. See DaSilva v. Germany, 2021 WL 210788, at *3 (D. Mass. Jan. 21, 2021); Irabor, 427 F.Supp.3d at 229; Longden, 2003 WL 21975365, at *2; Maine Emps. Mut. Ins. Co., 52 F.Supp.2d at 136-137. On the flip side, at least one District Court outside the First Circuit has rejected to apply it. See Bolger v. Utermohlen, 485 F.Supp.3d 588, 593-94 (E.D. Pa. 2020). See also Lyon v. Illinois Cent. R. Co., 228 F.Supp. 810, 811 (S.D.Miss. 1964); Parkhill Produce Co. v. Pecos Val. Southern Ry. Co., 196 F.Supp. 404 (S.D. Tex. 1961).

The First Circuit of Appeals has never rejected, applied, or otherwise upheld the application of the rule.^[6] Still, the Second, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth and Eleventh Circuit Courts of Appeals have. See Quinn v. Aetna Life & Cas. Co., 616 F.2d 38 (2d Cir. 1980); Higgins v. E.I. DuPont de Nemours & Co., 863 F.2d 1162 (4th Cir. 1988); Weems v. Louis Dreyfus Corp., 380 F.2d 545 (5th Cir. 1967); Davis...