Katz v. Costa Armatori, SPA

• Decision Date: 03 April 1989
• Docket Number: No. 88-2006-Civ.,88-2006-Civ.
• Citation: 718 F. Supp. 1508
• Parties: Irving KATZ and Viola Katz, Plaintiffs, v. COSTA ARMATORI, S.P.A., and Dr. Ennio Tossi, Defendants.
• Court: U.S. District Court — Southern District of Florida

718 F. Supp. 1508

Irving KATZ and Viola Katz, Plaintiffs, v. COSTA ARMATORI, S.P.A., and Dr. Ennio Tossi, Defendants.

No. 88-2006-Civ.

United States District Court, S.D. Florida.

April 3, 1989.

Robert Pasin, Fort Lauderdale, Fla., for plaintiffs.

George Mencio, Jr., Barbara Ehrich Locke, Holland & Knight, Miami, Fla., for defendants.

FINAL ORDER OF REMAND

JAMES LAWRENCE KING, Chief Judge.

Plaintiffs' motion to remand presents a common question, albeit in a limited context: whether a state court's summary adjudication in favor of a nondiverse defendant entitles the sole remaining diverse defendant to remove the case to federal court. The question ordinarily is answered negatively, unless the nondiverse defendant was "fraudulently joined." A precise parameter for this "fraudulent joinder" exception has not conclusively been surveyed, and today the court lends its voice to the debate over this exception's scope.

The plaintiffs seek recovery for personal injuries that allegedly occurred while Viola Katz was a passenger on the vessel COSTA RIVIERA. Viola Katz purportedly broke bones in her arm, hand, and wrist when she fell on board the vessel, and these injuries were allegedly exasperated by the negligence of the ship's doctor.

The plaintiffs initiated this action in a Florida state court, seeking recovery from three defendants: Costa Cruises, Inc., and Costa Armatori, S.p.A. (the alleged joined owner of the vessel Costa Riviera) and Dr. Ennio Tossi (the ship's treating physician). Costa Cruises, Inc. is a New York corporation with its principal place of business in Miami, Florida. Costa Armatori is an Italian corporation with its principal place of business in Genoa, Italy. Dr. Ennio Tossi is an alien, and both plaintiffs are citizens of Florida. Accordingly, when the plaintiffs filed this action, complete diversity did not exist.

Costa Cruises, Inc. defended by asserting that it acted only as an agent for the disclosed principal, Costa Armatori, the true owner of COSTA RIVIERA. Accordingly, pursuant to the controlling federal mari-time law, Costa Cruises believed it could not be liable for Viola Katz' injuries.

The state court agreed with Costa Cruises' position and granted its motion for summary judgment. The state court found that Costa Cruises was acting as an agent for the disclosed principal, Costa Armitori, and, thus, Costa Cruises could not be liable for any actions of its principal under federal maritime law.

Ten days after the issuance of this summary judgment order, the defendant Costa Armatori petitioned this court for removal.¹ As the case then existed, complete diversity was present. Accordingly, because this court could have had original jurisdiction over this controversy, the action apparently became removable pursuant to 28 U.S.C. § 1441(b).

The plaintiffs now move to remand. From their perspective, the judgment in favor of Costa Cruises was involuntary. This involuntary action, they argue, prevents this case from becoming removable under the "voluntary/involuntary rule."

The judicially-created voluntary/involuntary rule exists only in diversity cases. The rule provides "that if `a resident defendant was dismissed from the case by the voluntary act of the plaintiff, the case became removable, but if the dismissal was the result of either the defendant's or the court's action against the wish of the plaintiff, the case could not be removed.'" Insinga v. La Bella, 845 F.2d 249, 253-54 (11th Cir.1988) (citing Weems v. Louis Dreyfus Corp., 380 F.2d 545, 546 (5th Cir. 1967)).

The underlying purposes behind the rule are twofold. The first purpose rests upon the foundations of comity and judicial efficiency. Insinga, 845 F.2d at 252. Federal courts desire to avoid a transfer of a case when removal is premised on developments in the state court that could later be reversed by a state appellate court. Id. If reversal occurs, the parties would relegate to their original nondiverse positions, which of course would defeat federal jurisdiction.² Id.

The second policy supporting the voluntary/involuntary rule is grounded in the plaintiff's right to determine the removability of the case. See Self v. General Motors Corp., 588 F.2d 655 (9th Cir.1978); see also Insinga, 845 F.2d at 253. This policy has its genesis in the analog of federal question removal cases, where "the removability of a case depends upon an examination of the face of the plaintiffs `well-pleaded' complaint, without recourse to the defendants pleadings." Insinga, 845 F.2d at 253 (citing Louisville and Nashville Railroad v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908)). The United States Supreme Court held in Great Northern Railway Co. v. Alexander, 246 U.S. 276, 281-82, 38 S.Ct. 237, 239-40, 62 L.Ed. 713 (1918), that a plaintiff's power to determine the removability of the case continues throughout the litigation.

The defendant readily concedes that if the voluntary/involuntary rule were to apply here this action would not be removable. They maintain, however, that the rule is inapplicable because this action falls within the rule's fraudulent joinder exception.

The fraudulent joinder exception derives from the statutory requirements of 28 U.S.C. § 1441(b). In referring to diversity cases, § 1441(b)'s language directs the court to align the citizenship of the parties properly joined. If a party is improperly added, that party becomes "a sham party," see Bookkeepers Tax Services, Inc. v. National Cash Register Co., 598 F.Supp. 336 (E.D.Tex.1984), aff'd in part, rev'd in part on other grounds, 808 F.2d 1119 (5th Cir. 1987), and the court disregards that joinder for purposes of removal, see Hughes Construction Co. v. Rheem Manufacturing Co., 487 F.Supp. 345 (N.D.Miss.1980).

Fraudulent joinder exists in one of two situations. See Insinga, 845 F.2d at 254. The first situation covers the plaintiff fraudulently pleading jurisdictional facts in order to subject the nondiverse defendant to the jurisdiction of the state court. Id. (citing Coker v. Amoco Oil Co., 709 F.2d 1433, 1440 (11th Cir.1983)). The second instance exists when the plaintiff could not possibly prove a cause of action against the nondiverse defendant. Insinga, 845 F.2d at 254 (citing Coker, 709 F.2d at 1440).

Because the removing party has the burden of proof on the issue of diversity in the removal context, see Coker v. Amoco Oil Co., 709 F.2d 1433, 1440 (11th Cir.1983), the removing party must carry the burden of proof for fraudulent joinder, id., a burden that courts characterize as "heavy," see, e.g., McMorris v. Stafford, 655 F.Supp. 671, 672 (M.D.La.1987) (citing cases). A claim that joinder is fraudulent must be asserted with particularity and supported by clear and convincing evidence. See Arno v. Costa Line, Inc., 589 F.Supp. 1576, 1579 (E.D.N.Y.1984) (citing authority).

Costa Armatori alleges that the second instance of fraudulent joinder exists here. The defendant rests his argument upon common sense. Costa Armatori points to the state court's summary judgment against the nondiverse defendant, Costa Cruises. Armatori argues that when a court has issued summary judgment in favor of a defendant on a cause of action, a plaintiff "could then never prove" that cause of action against that defendant. Because the state court summary judgment here mandates that Costs Cruises could not be liable, Costa Armatori believes the plaintiffs fraudulently joined Costa Cruises.

Defendants argument is a fortiori logical. When a state court has granted summary judgment on a particular cause of action in favor of a defendant, a plaintiff rationally could never prove that cause of action against that defendant. This logic, however, exists only on a Platonic plane, for the ratiocination does not quite cover all the intricacies of removal. The twofold question necessarily before the court is whether a state court judgment forecloses a federal court from conducting an independent fraudulent joinder analysis, or must the federal court consider other factors to determine the existence of improper union. Essentially, this court must find the degree of deference the state court judgment receives in the federal fraudulent joinder context. In conducting this inquiry, the court first determines whether federal law governs this diversity issue under the Erie doctrine, then analyzes the two separate lines of precedents that address the question, and concludes by formulating a two prong test for fraudulent joinder that most thoroughly promotes the congressional policy behind removal.

Because this is a diversity case, the court must first resolve whether federal or state law should govern this fraudulent joinder question. Fortunately, the fraudulent joinder exception is part of the federal common law interpreting 28 U.S.C. § 1441(b). A "considerably less intricate analysis," therefore, is needed than that which governs the "`relatively unguided Erie choice.'" See Stewart Organization, Inc. v. Ricoh Corp., ___ U.S. ___, 108 S.Ct. 2239, 2242, 101 L.Ed.2d 22 (1988) (quoting Hanna v. Plumer, 380 U.S. 460, 470, 85 S.Ct. 1136, 1143, 14 L.Ed.2d 8 (1965)).

When a federal statute covers the point in dispute, the district court must determine whether the federal statute represents a valid exercise of Congress' authority under the Constitution. See Hanna v. Plumer, 380 U.S. at 471, 85 S.Ct. at 1144. "If Congress intended to reach the issue before the district court, and if it enacted its intention into law in a manner that abides with the Constitution, that is the end of the matter." See Stewart Organization, Inc., 108 S.Ct. at 2242. Federal courts then must apply the congressional dictate. See Prima Paint Corp. v. Flood and Conklin Mgr. Co., 388 U.S. 395, 406, 87 S.Ct. 1801, 1807, 18 L.Ed.2d 1270 (1967).³

The fraudulent joinder exception to the voluntary/involuntary rule is itself an issue of removal. By enacting 28 U.S.C. § 1441(b), Congress intended to exhaustively establish...