Deep Marine Technology, Inc. v. Conmaco/Rector

• Decision Date: 26 June 2007
• Docket Number: Civil Action No. H-05-3690.
• Parties: DEEP MARINE TECHNOLOGY, INC., Plaintiff v. CONMACO/RECTOR, L.P., Defendant.
• Court: U.S. District Court — Southern District of Texas

515 F.Supp.2d 760

DEEP MARINE TECHNOLOGY, INC., Plaintiff v. CONMACO/RECTOR, L.P., Defendant.

Civil Action No. H-05-3690.

United States District Court, S.D. Texas, Houston Division.

June 26, 2007.

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Robert Alan Axelrad, Zimmerman Axelrad Et Al, Houston, TX, for Plaintiff.

Stewart F. Peck, Benjamin W. Kadden, Christopher T. Caplinger, Lugenbuhl Wheaton Et Al, New Orleans, LA, W. Ross Spence, Snow Fogel Et Al, Houston, TX, for Defendant.

MEMORANDUM AND ORDER

EWING WERLEIN, JR., District Judge.

Pending are Plaintiff Deep Marine Technology, Inc.'s Motion for Partial Summary Judgment (Document No. 38), and its Motion to Remand (Document No. 55) and Supplement thereto (Document No. 68). After carefully considering the motions, responses, supplements and the applicable law, the Court concludes as follows.

I. Background

This dispute arises out of a lease for a winch manufactured and refurbished by Defendant Conmaco/Rector, L.P. ("Conmaco"), and installed aboard a vessel belonging to Plaintiff Deep Marine Technology, Inc. ("Plaintiff'). Plaintiff, a company incorporated and with its principal place of business in Texas, sought to acquire and install on its vessel a winch for use in its offshore diving operations. Plaintiff contacted Conmaco, a Delaware limited partnership whose citizenship allegedly depends on that of a single individual, Duane P. Smith, spoke to one of its salesmen, and visited Conmaco's principal place of business in Belle Chasse, Louisiana. Subsequently, Conmaco representatives met with Plaintiff at Plaintiff's Houston-area offices. At that meeting, Plaintiff allegedly explained its need for a winch capable of raising and lowering loads weighing up to 50 tons to and from a subsea depth of up to 10,000 feet. Conmaco's representatives allegedly recommended a DMW-250 single drum winch (the "Winch") and assured Plaintiff that the Winch possessed the foregoing capacity. Plaintiff contends that Conmaco's representatives "walked" Plaintiff through a notebook containing operation and performance specifications for the Winch, including two pages of data reflecting that the Winch possessed a capacity far greater than Plaintiff required. Document No. 38 ex. 1 at 1-2. After that meeting, the parties continued to negotiate terms via email. Document No. 41 ex. B at 78:25-79:8. Defendant later sent an equipment lease (the "Lease") prepared in Louisiana to Plaintiff's Houston office. Plaintiffs CEO signed the agreement and tendered it to Conmaco, allegedly in reliance on the representations made by Conmaco at the Houston meeting. Document No. 38 at 3. Conmaco is believed to have executed the agreement in Louisiana.¹

Conmaco refurbished, repaired, and tested the Winch at its facility in Louisiana. Plaintiffs representatives visited the yard periodically to view the progress of the refurbishment and receive training from Conmaco regarding the operation of the Winch. Document No. 41 ex. B at 71:4-7, ex. A at 64:5-20. Upon its completion, Conmaco installed the Winch aboard Plaintiff's vessel, which was located off the coast of Louisiana. About one month later, while the vessel was operating in Louisiana waters, the Winch allegedly failed to perform as promised, thus causing Plaintiff to lose payments from customers that it would have received in Houston, and to incur costs that were paid out of its Houston office. Document No. 38 ex. 1 at 3.

Plaintiff filed suit in state court on September 21, 2005, alleging breach of contract, fraud, and negligent misrepresentation. Document No. 1 ex. A. Conmaco removed the case on October 28, 2005 on the basis of diversity jurisdiction and filed a counterclaim for breach of contract. Id. ex. A at 2; Document No. 36 at 5-6. Plaintiff moved to remand, asserting that the parties are not diverse because Duane P. Smith ("Smith"), the individual upon whom the citizenship of Conmaco depends, is a citizen of Texas, where he has lived since late August, 2005, when he and his family fled from New Orleans, Louisiana, in advance of Hurricane Katrina. Alternatively, Plaintiff moves for partial summary judgment asserting that its claims are governed by Texas law.

II. Discussion

A. Plaintiffs Motion to Remand: Citizenship of Conmaco

1. Legal Standards for Removal on the Basis of Diversity Jurisdiction

Plaintiff contends that diversity is lacking because Smith, and hence, Conmaco, shares the same state of citizenship as Plaintiff. A defendant may remove to federal court a civil action over which the federal court has diversity jurisdiction. 28 U.S.C. §§ 1332(a), 1441(b). Federal district courts have diversity jurisdiction over civil actions in which the amount in controversy exceeds $75,000, exclusive of interest and costs, and the parties are citizens of different states. 28 U.S.C. § 1332. Whether diversity exists is determined at (1) the time the state court action is filed; and (2) the time of removal. See Coury v. Prot, 85 F.3d 244, 249-50 (5th Cir.1996). The removing party bears the burden of establishing that federal jurisdiction exists. De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir.), cert. denied, 516 U.S. 865, 116 S.Ct. 180, 133 L.Ed.2d 119 (1995). Any doubt as to the propriety of removal must be resolved in favor of remand. See Acuna v. Brown & Root Inc., 200 F.3d 335, 339 (5th Cir.), cert. denied, 530 U.S. 1229, 120 S.Ct. 2658, 147 L.Ed.2d 273 (2000); Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). "In making a jurisdictional assessment, a federal court is not limited to the pleadings; it may look to any record evidence, and may receive affidavits, deposition testimony or live testimony concerning the facts underlying the citizenship of the parties." Coury, 85 F.3d at 249.

The citizenship of an unincorporated association such as a limited partnership depends on the citizenship of all its partners. See Carden v. Arkoma Assocs., 494 U.S. 185, 110 S.Ct. 1015, 1018, 108 L.Ed.2d 157 (1990); Corfield v. Dallas Glen Hills, LP, 355 F.3d 853, 856 (5th Cir.2003). According to all circuits that have addressed the issue, this rule extends to limited liability companies. See Johnson v. Columbia Props. Anchorage, L.P., 437 F.3d 894, 899 (9th Cir.2006); Pramco, LLC ex rel. CFSC Consortium, LLC v. San Juan Bay Marina, Inc., 435 F.3d 51, 54-55 (1st Cir.2006); Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 120 (4th Cir.2004); Rolling Greens MHP, L.P. v. Comcast SCH Holdings L.L.C., 374 F.3d 1020, 1022 (11th Cir.2004); GMAC Commercial Credit LLC v. Dillard Dep't Stores, Inc., 357 F.3d 827, 829 (8th Cir. 2004); Homfeld L.L.C. v. Comair Holdings, Inc., No. 01-1151, 53 Fed.Appx. 731, 732-33, 2002 WL 31780184, at *1 (6th Cir. Dec.3, 2002) (unpublished opinion); Handelsman, v. Bedford Village Assocs. Ltd. P'ship, 213 F.3d 48, 51-52 (2d Cir.2000); Cosgrove v. Bartolotta, 150 F.3d 729, 731 (7th Cir.1998). Moreover, citizenship of an unincorporated association must be traced through each layer of the association, however many there may be. See Meyerson v. Harrah's E. Chicago Casino, 299 F.3d 616, 617 (7th Cir.2002) (per curiam); accord Kinder Morgan Liquids Terminals, LLC v. Ponns & Co., No. CIV. A H-06-3225, 2006 WL 3691192, at *2 (S.D.Tex. Dec.12, 2006) (Rosenthal, J.).

2. Citizenship of Duane P. Smith

Here, Conmaco is comprised of two partners, DSS Management Company, LLC ("DSS") and D. Smith & Sons, LLC ("D. Smith & Sons"), which is also the sole member of DSS. Document No. 59 ex. C at 15; Document No. 59-2 ¶ 6. D. Smith & Sons is managed by Smith and has three members: Smith, the Cameron Duane Smith Trust, and the Duane Patrick Smith, Jr. Trust. Document No. 59 ex. C at 14, ex. D at 17. Because Smith serves as Trustee of both the CPS and DPS Trusts, id. exs. E, F, the citizenship of the trusts depends on that of Smith. See E.R. Squibb & Sons, Inc. v. Accident & Cas. Ins. Co., 160 F.3d 925, 931 (2d Cir.1998) (citing Navarro Savings Ass'n v. Lee, 446 U.S. 458, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980)); Hemenway v. Peabody Coal Co., 159 F.3d 255, 257 (7th Cir.1998); Ronald Alexander Leblanc Trust v. Ransom, 276 F.Supp.2d 647, 651 (S.D.Tex.2003) (Hittner, J.). In sum, tracing through the various levels of Conmaco reveals that its citizenship turns on that of a single individual, Smith, as manager of Conmaco's limited partners, DSS and D. Smith & Sons, member of D. Smith & Sons, and trustee of its only other members.

The parties dispute whether Smith, after he relocated to Texas in advance of Hurricane Katrina, possessed an intent to remain in Texas such that he should be deemed a citizen of Texas for diversity purposes. The citizenship of an individual is synonymous with his domicile. See Coury, 85 F.3d at 249; Stine v. Moore, 213 F.2d 446, 448 (5th Cir.1954). An individual is domiciled in the place where he has "his true, fixed, and permanent home and principal establishment, and to which he has the intention of returning whenever he is absent therefrom...." Mas v. Perry, 489 F.2d 1396, 1399 (5th Cir.1974) (quoting Stine, 213 F.2d at 448); accord Preston v. Tenet Healthsystem Mem'l Med. Ctr., Inc., 485 F.3d 804, 815 (5th Cir.2007) ("[C]itizenship requires residency and the intent to return or remain in the state."). Determining a litigant's domicile requires examination of the totality of the circumstances, including such factors as where a litigant (1) exercises political or civil rights; (2) pays taxes; (3) holds licenses; (4) maintains bank accounts; (5) belongs to clubs and churches; (6) operates a business or is employed; and (7) maintains his family home. See Coury, 85 F.3d at 251. Additionally, "[t]here is a presumption of continuing domicile that applies whenever a person relocates. In order to defeat the presumption and establish a new domicile ..., the person must demonstrate both (1) residence in a new state, and (2) an intention to remain in that state...