Elarton v. First Nat. Bank of Onaga, Kansas
| Decision Date | 28 December 2001 |
| Docket Number | No. CIV.A. 301CV34WS.,CIV.A. 301CV34WS. |
| Citation | 189 F.Supp.2d 574 |
| Parties | Lloyd D. ELARTON Plaintiff v. FIRST NATIONAL BANK OF ONAGA, Kansas; Chemical States Marketing, LLC; and Dan Smith Defendants |
| Court | U.S. District Court — Southern District of Mississippi |
Carroll H. Ingram, Ingram & Associates, Hattiesburg, Dewitt L. Fortenberry, Jr., Fortenberry Law Firm, PLLC, Mendenhall, for Lloyd D. Elarton, plaintiffs.
John (Jack) W. Land, Mark A. Nelson, Bryan, Nelson, Randolph and Weathers, Hattiesburg, Gregory J. Bien, Martha A. Peterson, Sloan, Listrom, Eisenbarth, Sloan & Glassman, LLC, Topeka, KS, for First National Bank of Onaga, Kansas, Chemical States Marketing, LLC, Dan Smith, defendants.
ORDER REMANDING CASE TO STATE COURT
Before the court is plaintiff's motion asking this court under the authority of Title 28 U.S.C. § 1447(c)1 to remand this cause to the Circuit Court of Pike County, Mississippi, where this lawsuit originated. Complaining that he had been the victim of an illegal financial investment scheme, plaintiff Lloyd D. Elarton filed the instant action in that state court against defendants First National Bank of Onaga, Kansas ("First National"); Chemical State Marketing, LLC ("Chemical States"); and Dan Smith, an individual, asserting claims of fraud, breach of contract, negligence constructive trust, and breach of fiduciary duty under the laws of Mississippi.
The above-named defendants timely removed the state-filed action to this court, alleging that this court has original federal question jurisdiction under Title 28 U.S.C. § 1441(a),2 (b)3 and § 1331,4 more specifically, that this court has jurisdiction over this dispute pursuant to the All Writs Act, Title 28 U.S.C. § 1651(a).5
Having reviewed the parties' submissions and the relevant law, this court finds that the plaintiff's motion to remand is well-taken. This court is not persuaded, as argued by the defendants, that the All Writs Act, here, vests this court with jurisdiction over this otherwise non-removable state law cause of action. The court's reasoning is set out below.
Plaintiff opened an Individual Retirement Account ("IRA") with First National, depositing into this account approximately $176,000. The plaintiff employed Defendant Dan as his IRA account representative, thereby authorizing Smith to invest monies on the plaintiff's behalf.
The plaintiff claims that Smith and his employer, Central States Marketing, persuaded plaintiff to invest his life savings, $175,955.50, in a pyramid or ponzi scheme operated by Chemical Trust. The plaintiff alleges that he received a package of materials from the defendants describing the nature of the investment in Chemical Trust. According to the plaintiff, the materials contained a number of false and misleading statements regarding Chemical Trust, the security of the investment, and the financial strength of Chemical Trust. The plaintiff further claims that he was told that his money would be invested in bank notes which would be purchased from large banks regulated by the Federal Reserve. To the contrary, the plaintiff contends, his money was not used to purchase bank notes, and was not underwritten or secured by a surety company. Instead, the plaintiff claims, his money was deposited under arrangements between Chemical Trust and First National.
Under this ponzi or pyramid scheme, existing investors did not receive interest payments from their own investments as would normally be the case. Rather, payments, if any, made to the investors came from the investment funds of new investors. Through this ponzi scheme, says the plaintiff, the defendants formed an enterprise designed to defraud the plaintiff inducing him to invest his monies into the scheme.
According to the plaintiff, Defendant First National, as the custodian bank, acted as a conduit for the transfer of his money to Defendant Chemical Trust. The plaintiff further complains, that as custodian, the bank
without any investigation whatsoever into the Chemical Trust "guaranteed contracts." In their roles as custodians and caretakers of Plaintiffs funds, the Bank obtained the Plaintiff's funds by entering into an arrangement with Chemical Trust, and thereafter failed to maintain the funds of the Plaintiff in a reasonable manner by allowing funds to be diverted to various other banks and accounts at the sole direction of Chemical Trust.
Pl.'s Compl. at ¶ 14. The plaintiff's complaint further alleges:
The Bank was vital to the operation of the enterprise. The Bank, through its representatives and employees knew that they would function as a conduit, whereby Plaintiff's funds would initially be used to open an account at the Bank, and thereafter be diverted to various locations at the direction of Chemical Trust under the guise of "guaranteed contracts." The Bank knew or should have known that Plaintiffs [sic] proceeds were illegally obtained, but knowingly directed and allowed such proceeds to be diverted from Plaintiffs [sic] account into the Chemical Trust scheme. The Bank's involvement with the enterprise likewise perpetuated a false sense of credibility to the Plaintiff.
Pl.'s Compl. at ¶ 17.
Based on these allegations, the plaintiff sought relief in state court for fraud, breach of contract, negligence, constructive trust, and breach of fiduciary duty. The defendants removed that action to this court, prompting the plaintiff's motion to remand that is presently before the court.
The party seeking to remove an action to federal court bears the heavy burden of demonstrating that the removal to federal court is proper. Washington v. Direct Gen. Ins. Agency, Inc., 130 F.Supp.2d 820, 823 (S.D.Miss.2000). "Further, the removal statutes are strictly construed, and all doubts will be resolved against a finding of proper removal." Id. (citing, inter alia, Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 42 (5th Cir. 1992)).
Removal is proper under Title 28 U.S.C. § 1441(b) if the district court would have had original federal question jurisdiction over the matter when it was filed. That is, "removal is appropriate if the action could have been filed originally in federal court." Washington, 130 F.Supp.2d at 823. When removal is based on federal question jurisdiction, the federal question must be presented on the face of the plaintiff's well-pleaded complaint as it exists at the time of removal. Metro Ford Truck Sales, Inc. v. Ford Motor Co., 145 F.3d 320, 326-27 (5th Cir.1998). Pursuant to the "well-pleaded complaint rule," federal courts have original jurisdiction and, thus, removal jurisdiction over cases where, when considering the plaintiff's well-pleaded complaint, the cause of action is created under federal law or the plaintiff's remedy depends on the resolution of a substantial question of federal law. Washington, 130 F.Supp.2d at 823.
Here, defendants admit that the plaintiff's well-pleaded complaint asserts no causes of action arising under federal law; rather, the defendants argue that removal of the instant case was proper under the All Writs Act, Title 28 U.S.C. § 1651. The defendants theorize that this lawsuit should remain here because a state court intervention and adjudication potentially could undermine or frustrate federal court orders entered by the United States District Court for the District of South Carolina and the United States District Court for the District of Kansas. On January 7, 2000, the United States District Court for the District of South Carolina placed defendant Chemical Trust into receivership pursuant to Title 21 U.S.C. § 8536 (the "South Carolina Order"). And, on April 27, 2001, the United States District Court for the District of Kansas granted summary judgment to defendant First National in an unrelated case, but involving similar claims (the "Kansas Order"). As earlier stated, defendants argue that the orders, the South Carolina Order and the Kansas Order, might somehow be undermined or contradicted if this lawsuit be returned to state court.
Some circuits have held that the All Writs Act may provide a basis for removal under certain, exceptional circumstances. See, e.g., NAACP v. Metropolitan Council, 144 F.3d 1168, 1170-71 (8th Cir.1998); Davis v. Glanton, 107 F.3d 1044, 1047 n. 4 (3d Cir.1997); Sable v. General Motors Corp., 90 F.3d 171, 175 (6th Cir.1996); In re VMS Sec. Litig., 103 F.3d 1317, 1323 (7th 1996); In re Agent Orange Prod. Liab. Litig., 996 F.2d 1425, 1431 (2d Cir. 1993). The Second Circuit's opinion in In re Agent Orange has probably drawn the most attention, holding that a district court may allow removal of an otherwise unremovable state court case "in order to `effectuate and prevent the frustration of orders it has previously issued in its exercise of jurisdiction otherwise obtained.'" 996 F.2d at 1431 (quoting United States v. New York Tel. Co., 434 U.S. 159, 172, 98 S.Ct. 364, 372, 54 L.Ed.2d 376 (1977)). In In re Agent Orange, the Court found that exceptional circumstances for removal existed where members of a class action suit, which was the subject of a previous settlement order by the district court, sought to maintain separate actions in state court. Id. at 1431. While recognizing that "the All Writs Act is not a jurisdictional blank check which district court may use whenever they deem it advisable," the Court nevertheless concluded that pursuit of separate causes of action by class members of a previously settled class action suit would have a "deleterious effect on the [prior] settlement," and, thus, constituted exceptional circumstances sufficient to confer removal jurisdiction upon the federal district court. Id.
The Ninth, Tenth and Eleventh Circuits disagree, holding that the All Writs Act cannot serve as the basis for federal question and, thus, removal jurisdiction. See Westinghouse Elec. Corp. v. Newman & Holtzinger, P.C., 992 F.2d 932,...
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...and, thus, removal jurisdiction upon state court actions not otherwise removable to federal court. See Elarton v. First Nat'l Bank of Onaga, 189 F.Supp.2d 574, 581 (S.D.Miss. 2001). Counsel for Plaintiffs, as officers of this Court, have represented that they are not seeking any damages tha......