Cms North America v. De Lorenzo Marble & Tile

Citation521 F.Supp.2d 619
Decision Date09 October 2007
Docket NumberNo. 1:07-cv-824.,1:07-cv-824.
PartiesCMS NORTH AMERICA, INC., a Michigan corporation, Plaintiff, v. DE LORENZO MARBLE & TILE, INC., a California corporation, Defendant.
CourtU.S. District Court — Western District of Michigan

Robert H. Gillette, Wheeler Upham PC, Grand Rapids, MI, for Plaintiff.

Kenneth J. Poole, Law Offices of Kenneth J. Poole, Torrance, CA, for Defendant.

Opinion and Order

PAUL L. MALONEY, District Judge.

Granting Plaintiff's Motion to Remand the Case to State Court Denying Plaintiff's Request for Attorney Fees Terminating the Case

On July 23, 2007, plaintiff CMS North America, Inc. ("CMS") filed the instant complaint defendant DeLorenzo Marble & Tile, Inc. ("DeLorenzo") in the Circuit Court of Kent County, Michigan ("the state court"), alleging that DeLorenzo has failed and refused to pay $33,245.84 that is due on the sale of machinery, see Comp. ¶¶ 6-10. CMS seeks $33,245.84 plus 18% interest per annum (from April 19, 2006 to the present) and attorney fees and costs, see Comp. ¶ 10. DeLorenzo was served on July 25, see Pl.'s Br. at 1. On August 23, DeLorenzo timely filed a notice of removal that invoked diversity jurisdiction, as well as a counterclaim seeking over $75,000 in damages. On September 10, CMS filed an answer to DeLorenzo's counterclaim.

On August 28, CMS moved to remand this case to the state court and requested an award of attorney's fees and costs for improper removal; DeLorenzo filed an opposition brief on September 10, and CMS filed a reply brief in support of its motion on September 14. For the reasons that follow, the court will grant CMS's motion to remand but will deny its request for fees and costs.

LEGAL STANDARD: Removal to Federal Court

Title 28 U.S.C. § 1441 authorizes defendants to remove cases to federal district court if there exists diversity or federal-question jurisdiction. Section 1441 provides, in its entirety:

(a) Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court for the United States for the district and division embracing the place where the action is pending. For purposes of removal under this chapter, the citizenship of defendants sued under fictitious names shall be disregarded.

(b) Any civil action of which the district courts have original jurisdiction founded on a claim of right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the state in which such action is brought.

Removal is proper only if federal jurisdiction existed at the time of removal, without considering subsequent events, whether caused by the plaintiff or beyond his control. Williamson v. Aetna Life Ins. Co., 481 F.3d 369, 375 (6th Cir.2007) (Griffin, J.) (citing St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 293, 58 S.Ct. 586, 82 L.Ed. 845 (1938) and Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868, 872 (6th Cir.2000)); see also Harnden v. Jayco, Inc., 496 F.3d 579, 581 (6th Cir. 2007) ("The existence of subject matter jurisdiction is determined by examining the complaint as it existed at the time of removal.'") (quoting Harper v. AutoAlliance Int'l, Inc., 392 F.3d 195, 210 (6th Cir.2004)).

The removing party bears the burden of establishing federal jurisdiction. Harnden, 496 F.3d at 581 (citing Eastman v. Marine Mech. Corp., 438 F.3d 544, 549-50 (6th Cir.2006)); see also Province of Ontario v. City of Detroit, 874 F.2d 332, 339 (6th Cir.1989) ("The party seeking removal bears the burden of establishing its right thereto.") (citing Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97-98, 42 S.Ct. 35, 66 L.Ed. 144 (1921)). This means that a defendant seeking removal must establish by a preponderance of the evidence that the amount in controversy is sufficient. Everett v. Verizon Wireless, Inc., 460 F.3d 818, 822 (6th Cir.2006) ("A defendant wishing to remove a case bears the burden of satisfying the amount-incontroversy requirement.") (citation omittedly Hayes v. Equitable Energy Resources Co., 266 F.3d 560, 572 (6th Cir. 2001.).

Significantly, "all doubts should be resolved against removal." Harnden, 496 F.3d at 581 (citing Eastman, 438 F.3d at 549-50); see also Province of Ontario, 874 F.2d at 339 ("The removal petition is to be strictly construed, with all doubts resolved against removal.") (citing Wilson v. USDA, 584 F.2d 137, 142 (6th Cir.1978)). The United States Supreme Court has explained the rationale for this latter rule as follows:

The power reserved to the [S]tates under the Constitution to provide for the determination of controversies in their courts, may be restricted only by the action of Congress in conformity to the Judiciary Articles of the Constitution. "Due regard for the rightful independence of state governments, which should actuate federal courts, requires that they scrupulously confine their own jurisdiction to the precise limits which the statute has defined." Healy v. Ratta, 292 U.S. 263, 270, 54 S.Ct. 700, 78 L.Ed. 1248 ... Emphasis Added

Shamrock Oil & Gas Corp. v. Sheets,

313 U.S. 100, 108-09, 61 S.Ct. 868, 85 L.Ed. 1214 (1941). In other words, removal statutes are strictly construed "to promote comity and preserve jurisdictional boundaries between state and federal courts." Sheridan v. New Vista, LLC, 406 F.Supp.2d 789, 792 (W.D.Mich.2005) (Quist, J.) (citing Alexander v. EDS Corp., 13 F.3d 940, 949 (6th Cir.1994)).

DISCUSSION
A. DeLorenzo Has Not Established the Requisite Amount in Controversy

DeLorenzo bears the burden of establishing diversity jurisdiction, Harnden, 496 F.3d at 581, which requires more than $75,000 in controversy, exclusive of interest and costs, 28 U.S.C. § 1332(a). It is undisputed that excluding interest find costs, the amount sought by CMS (about $33,000), Comp. ¶ 10, is insufficient to satisfy the amount-in-controversy requirement. DeLorenzo asks this court to make up the deficiency by counting the amount sought by its counterclaim. The court declines to do so.

1. There Is No Supreme Court Precedent Squarely Governing this Issue

The United States Supreme Court has never clearly decided whether damages sought by counterclaims or cross-claims should be counted in determining the amount in controversy for purposes of the modern diversity statute, 28 U.S.C. § 1332.

In Yankaus v. Feltenstein, 244 U.S. 127, 37 S.Ct. 567, 61 L.Ed. 1036 (1917), the plaintiff filed suit in New York state court, seeking only $800, insufficient to meet the then-prevailing $3,000 statutory' minimum amount in controversy for federal diversity jurisdiction. The defendant asserted a permissive counterclaim seeking over $3,000 in damages and removed the case to federal district court on that basis. Id. at 128, 37 S.Ct. 567. The federal district court declined to count the amount sought by the counterclaim, held that the complaint did not seek the requisite $3,000, and remanded the case to state court. The defendant ultimately appealed to the United States Supreme Court, which held that a federal district-court order remanding a case to state court is not reviewable on appeal. Id. at 133, 37 S.Ct. 567. The Supreme Court did not address whether the amount sought by a counterclaim may ever be counted in determining the amount in controversy for purposes of diversity jurisdiction.

2. There Is No Sixth Circuit Precedent Squarely Governing this Issue

Nor has the United States Court of Appeals for the Sixth Circuit issued a decision, published or unpublished, that squarely and conclusively resolves the issue. In Parris v. Mego Mortgage Corp., 14 Fed.Appx. 394 (6th Cir.2001) (per curiam) (Jones, Suhrheinrich, & Daughtrey, JJ.), a mortgagor brought a class action against mortgagees, asserting a state-law usury claim. The defendant moved to dismiss on the ground that the plaintiff had not alleged over $75,000 in controversy, but the district court denied the motion. On appeal, the defendant contended that the district court erred by counting mortgage-loan interest charges that were presently unaccrued and unincurred that might accumulate over the life of a loan that contained a right-to-prepay. Id. at 395. The Sixth Circuit affirmed the district court's exercise of diversity jurisdiction, reasoning,

Under the plain language of the [state usury statute], a contract usurious on its face will not be enforceable. The contract between the parties includes both the principal and the interest rate at which the principal must be repaid. Although theoretically Plaintiff could prepay all or a portion of the principal so as to avoid the entire amount of interest that would otherwise accrue over the life of the loan, prepayment is at her election, not at Defendants' election. In short, the jurisdictional amount is met in this case even without consideration of potential statutory damages or attorney's fee ... because the amount contracted for is $35,000 and the interest payable [under] the terms of the agreement exceeds $60,000.

Id. at 396-97.

The Sixth Circuit noted that the defendant had not counterclaimed for recovery of the principal or lawful interest. The Circuit stated that even if the defendant had filed such a counterclaim, the amount sought by the counterclaim would not be counted when determining the amount in controversy. In other words, the counterclaim could not affect the amount sought by the complaint: "Events occurring subsequent to the institution of suit which reduce the amount recoverable below the statutory limit do not oust jurisdiction." Id. at 397 (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289-90, 58 S.Ct. 586, 82 L.Ed. 845 (1938)).

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