Davis v. Overland Contracting, Inc.

• Decision Date: 24 April 2020
• Docket Number: Case No. 19-2531-DDC-KGG
• Parties: RICHARD DAVIS doing business as DAVIS ELECTRIC, Plaintiff, v. OVERLAND CONTRACTING, INC., Defendant.
• Court: U.S. District Court — District of Kansas

RICHARD DAVIS doing business as DAVIS ELECTRIC, Plaintiff, v. OVERLAND CONTRACTING, INC., Defendant.

Case No. 19-2531-DDC-KGG

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

April 24, 2020

MEMORANDUM AND ORDER

This matter comes before the court on two motions: (1) plaintiff Richard (John) Davis doing business as Davis Electric's Motion to Remand to Kansas State Court and for Attorney Fees (Doc. 7) and (2) defendant Overland Contracting, Inc.'s Motion to Dismiss (Doc. 5).

Plaintiff has moved to remand to state court, arguing that defendant's principal place of business is in Kansas for purposes of establishing diversity jurisdiction and removal was improper under the diversity statute. Doc. 7. Defendant has responded, opposing the motion and asserting that its principal place of business is in North Carolina. Doc. 14. Plaintiff did not file a reply, and the time to do so has expired.

In a separate motion, defendant has moved to dismiss plaintiff's breach of contract claim under Federal Rule of Civil Procedure 12(b)(6), arguing that plaintiff's Petition fails to state a claim upon which relief can granted. Docs. 5 & 6. Plaintiff has responded, Doc. 8, and defendant has replied, Doc. 11.

These matters thus are fully briefed. For reasons explained below, the court denies plaintiff's Motion to Remand and grants defendant's Motion to Dismiss.

I. Motion to Remand

The court first addresses plaintiff's motion for remand. Plaintiff initially filed this breach of contract action in the Johnson County, Kansas District Court on August 20, 2019. Doc. 1-1. On September 3, 2019, defendant removed the action to this court based on diversity jurisdiction. Doc. 1 at 1-2. The remand dispute centers on where defendant's principal place of business is located for purposes of establishing its citizenship and thus whether defendant's removal from state court was proper.

A. Legal Standard

"Federal courts are courts of limited jurisdiction and, as such, must have a statutory basis to exercise jurisdiction." Montoya v. Chao, 296 F.3d 952, 955 (10th Cir. 2002) (citation omitted). "A court lacking jurisdiction cannot render judgment but must dismiss the cause at any stage of the proceedings in which it becomes apparent that jurisdiction is lacking." Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir. 1974) (citation omitted); see also 28 U.S.C. § 1447(c) ("If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded."). Since federal courts are courts of limited jurisdiction, the party invoking federal jurisdiction bears the burden to prove it exists. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). And, "[w]hen challenged on allegations of jurisdictional facts, the parties must support their allegations by competent proof." Hertz Corp. v. Friend, 559 U.S. 77, 96-97 (2010) (citation omitted). The burden of persuasion imposed on defendant, as the removing party here, requires it to establish that the court's exercise of diversity jurisdiction is appropriate by a preponderance of the evidence. See McPhail v. Deere & Co., 529 F.3d 947, 954-55 (10th Cir. 2008) (explaining in a diversity jurisdiction dispute over the amount in controversy that "[t]he 'preponderance of the evidencestandard' applies to jurisdictional facts, not jurisdiction itself" because jurisdiction is a legal conclusion reached as a consequence of the jurisdictional facts and thus a removing party must satisfy this burden and "prove contested facts" establishing defendant is entitled to stay in federal court); see also Middleton v. Stephenson, 749 F.3d 1197, 1200 (10th Cir. 2014) (explaining the "party invoking diversity jurisdiction bears the burden of proving its existence by a preponderance of the evidence"); Bellman v. NXP Semiconductors USA, Inc., 248 F. Supp. 3d 1081, 1108 (D.N.M. 2017) ("The defendant seeking removal must establish that federal court jurisdiction is proper by a preponderance of the evidence." (internal quotation marks and citations omitted)); Stucky ex rel. Stucky v. Bates, 2 F. Supp. 2d 1434, 1437 (D. Kan. 1998) ("The existence of diversity jurisdiction is usually determined from the complaint. However, when the allegation of diversity is challenged, the party asserting jurisdiction has the burden of proving diversity by a preponderance of the evidence." (internal citations omitted)).

Defendant invokes the court's subject matter jurisdiction under the federal removal statute—28 U.S.C. § 1441—and the federal diversity statute—28 U.S.C. § 1332. Section 1441(a) and (b) allows a defendant to remove an action originally filed in state court to federal court when diversity of citizenship under 28 U.S.C. § 1332(a) exists. But, under 28 U.S.C. § 1441(b)(2), "[a] civil action otherwise removable solely on the basis of the jurisdiction under section 1332(a) of this title may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." So, removal is not permitted—even when complete diversity exists—if the plaintiff brought the state court action in a state where the defendant is a citizen. Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996) ("When a plaintiff files in state court a civil action over which the federal district courts would have original jurisdiction based on diversity of citizenship, the defendant . . . may removethe action to federal court . . . provided that no defendant is a citizen of the State in which such action is brought . . . ." (citing 28 U.S.C. § 1441(a), (b)) (internal quotation marks omitted)); see also Brazell v. Waite, 525 F. App'x 878, 884 (10th Cir. 2013) (explaining the forum-defendant rule prohibits removal based on diversity jurisdiction when the action is brought in the state where defendant is a citizen, but this rule is not jurisdictional and can be waived).

Section 1332 confers original jurisdiction on federal district courts where the amount in controversy exceeds $75,000 and complete diversity of citizenship exists between all plaintiffs and all defendants. 28 U.S.C. § 1332(a)(1); see also Radil v. Sanborn W. Camps, Inc., 384 F.3d 1220, 1225 (10th Cir. 2004). To establish diversity jurisdiction, the citizenship of a business entity is determined by its organizational structure. If the business is a corporation, its citizenship is both where it is incorporated and the state where its principal place of business is located. 28 U.S.C. § 1332(c)(1); Newsome v. Gallacher, 722 F.3d 1257, 1267 (10th Cir. 2013).

The Supreme Court has instructed courts to apply the "nerve center" test when determining the location of a corporation's principal place of business:

We conclude that "principal place of business" is best read as referring to the place where a corporation's officers direct, control, and coordinate the corporation's activities. . . . And in practice it should normally be the place where the corporation maintains its headquarters—provided that the headquarters is the actual center of direction, control, and coordination, i.e., the "nerve center," and not simply an office where the corporation holds its board meetings (for example, attended by directors and officers who have traveled there for the occasion).

Hertz Corp., 559 U.S. at 92-93.

Here, the parties do not dispute that plaintiff is a citizen of Missouri, defendant is incorporated in and a citizen of Delaware, and the amount in controversy exceeds $75,000. But the parties dispute the location of defendant's principal place of business. If defendant's principal place of business is in Kansas—as plaintiff contends—the forum-defendant rule in§ 1441(b)(2) prohibits removal from state court and the case should return to state court. But if defendant's principal place of business is North Carolina—as defendant contends—removal was proper and the case should remain in this court. The court thus considers below, under the preponderance of the evidence standard, whether defendant plausibly has established its principal place of business is in North Carolina.

B. Analysis

Defendant's notice of removal asserts that plaintiff is a citizen of Missouri and defendant is a Delaware corporation with its principal place of business in North Carolina. Doc. 1 at 2. Defendant provides its Corporation Annual Report filed with the Kansas Secretary of State, and it lists a "principal office" address in Garner, North Carolina. Doc. 1-2 at 1.

Plaintiff's Petition likewise alleges that defendant is a Delaware corporation. Doc. 1-1 at 5. But, plaintiff argues that remand to the Johnson County, Kansas District Court is appropriate because defendant's principal place of business is located in Kansas, and thus defendant is a citizen of the state where plaintiff filed the state court action. The Petition alleges that defendant has "a business address of 6800 W. 115th Street, Suite 2292, Overland Park, KS 66211." Id. And, plaintiff relies on the same Kansas Corporation Annual Report provided by defendant, which shows an "official mailing address" for defendant in Kansas: "Tax Dept, 11401 Lamar Avenue, Overland Park[,] KS 66211." Doc. 1-2 at 1; Doc. 7-1 at 1. The report also lists six officers and one director and identifies each one's address as "11401 Lamar [Ave.], Overland Park, KS 66211." Id. Next, plaintiff provides a North Carolina Annual Report, which lists defendant's "mailing" address as the 11401 Lamar Avenue, Overland Park, KS address. Doc. 7-2 at 1. And, this report lists four officers with the same address in Kansas. Id. at 1-2. But this report also lists "reg office," "reg mailing," and "principal office" addresses in North Carolina.Id. at 1. Finally, plaintiff provides two documents filed with the California Secretary of State. The first is a 1997 "Statement and Designation by a Foreign Corporation." This document shows defendant doing business in California as "KS OVERLAND CONTRACTING...