Moreno Energy, Inc. v. Marathon Oil Co.

• Decision Date: 03 August 2012
• Docket Number: Civil Action No. H–11–4518.
• Parties: MORENO ENERGY, INC., Plaintiff, v. MARATHON OIL COMPANY, Marathon E.G. Production Limited, and Marathon E.G. International Limited, Defendants.
• Court: U.S. District Court — Southern District of Texas

884 F.Supp.2d 577

MORENO ENERGY, INC., Plaintiff,

v.MARATHON OIL COMPANY, Marathon E.G. Production Limited, and Marathon E.G. International Limited, Defendants.

Civil Action No. H–11–4518.

United States District Court,

S.D. Texas,

Houston Division.

Aug. 3, 2012.

Allen H. Rustay, James Stephen Barrick, Hicks Thomas et al., Houston, TX, for Plaintiff.

Andrew M. Edison, Edison, McDowell & Hetherington, LLP, Houston, TX, for Defendants.

OPINION AND ORDER

MELINDA HARMON, District Judge.

Pending before the Court in the above referenced declaratory judgment action, alleging breach of contract, conversion, and unjust enrichment/money had and received, arising out of Defendants' alleged efforts to deprive Plaintiff Moreno Energy, Inc. (“Moreno”), a citizen of Texas, of substantial portions of its overriding royalty interest in the Alba Field, a “super giant” gas condensate field located in Equatorial Guinea, West Africa, is Moreno's motion to remand (instrument # 8).

Relevant Law

The right to remove a case from state court depends upon the plaintiff's pleading at the time of the petition for removal. Pullman Co. v. Jenkins, 305 U.S. 534, 537–38, 59 S.Ct. 347, 83 L.Ed. 334 (1939); Cavallini v. State Farm Mutual Auto Ins., 44 F.3d 256, 264 (5th Cir.1995); Ford v. Property & Cas. Ins. Co. of Hartford, No. Civ. A. H–09–1731, 2009 WL 4825222, *2 (S.D.Tex. Dec. 9, 2009).

Under 28 U.S.C. § 1441(a)¹ any state court action over which federal courts would have original jurisdiction may be removed from state to federal court. Gasch v. Hartford Accident & Indemnity Co., 491 F.3d 278, 282 (5th Cir.2007);Gutierrez v. Flores, 543 F.3d 248, 251 (5th Cir.2008) ( “A district court has removal jurisdiction in any case where it has original jurisdiction.”).

Under 28 U.S.C. § 1332, a defendant may remove a case if there is (1) complete diversity of citizenship and (2) the amount in controversy is greater than $75,000, exclusive of interests and costs. When jurisdiction is based on diversity, citizenship of the parties must be distinctly and affirmatively alleged. Getty Oil Corp. v. Ins. Co. of North America, 841 F.2d 1254, 1259 (5th Cir.1988), citing McGovern v. American Airlines, Inc., 511 F.2d 653, 654 (5th Cir.1975). It is black letter law that diversity jurisdiction in a case involving a limited partnership or limited liability partnership is based on the citizenship of all members of the partnership. Carden v. Arkoma Assoc., 494 U.S. 185, 195, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990) (“We adhere to our oft-repeated rule that diversity jurisdiction in a suit by or against [an artificial entity] depends on the citizenship of ‘all the members,’ ‘the several persons composing such association,’ ‘each of its members.’ ” [citations omitted] ); Mullins v. TestAmerica, Inc., 300 Fed.Appx. 259, 259 (5th Cir.2008) (the citizenship of a limited partnership is that of all its partners, general and limited). When partners or members of a limited partnership are themselves entities or associations, each layer of members or partners must be traced until one arrives at an entity not a limited partnership. Mullins v. TestAmerica, Inc., 564 F.3d 386, 397–98 (5th Cir.2009). “ ‘Failure to adequately allege the basis for diversity jurisdiction mandates dismissal.’ ” Mullins, 300 Fed.Appx. at 259,quoting Stafford v. Mobil Oil Corp., 945 F.2d 803, 805 (5th Cir.1991).

The doctrine of improper joinder, or fraudulent joinder,² prevents defeat of federal removal jurisdiction premised on diversity by the presence of an improperly joined, non-diverse defendant. Borden v. Allstate Ins. Co., 589 F.3d 168, 171 (5th Cir.2009). Citizenship of an improperly joined party is totally disregarded in determining the court's subject matter jurisdiction. Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568, 572 (5th Cir.2004).

“A claim of fraudulent joinder must be pleaded with particularity and supported by clear and convincing evidence.” Parks v. New York Times Co., 308 F.2d 474, 478 (5th Cir.1962), cert. denied,376 U.S. 949, 84 S.Ct. 964, 11 L.Ed.2d 969 (1964). Improper joinder may be established by showing (1) actual fraud in the pleading of jurisdictional facts or (2) an inability to establish a cause of action against the non-diverse defendant in state court. Gasch, 491 F.3d at 281;Smallwood, 385 F.3d at 573. Defendants claiming improper joinder based on the second type bear a heavy burden of showing there is no possibility of recovery by the plaintiff against the instate defendant, i.e., in other words that there is no reasonable basis for predicting that state law would allow recovery against the in-state defendant. Travis v. Irby, 326 F.3d 644, 649 (5th Cir.2003); Smallwood, 385 F.3d at 576. A “reasonable basis” means more than a mere a hypothetical basis. Griggs v. State Farm Lloyds, 181 F.3d 694, 701 (5th Cir.1999) ( “whether the plaintiff has stated a valid state law cause of action depends upon and is tied to the factual fit between the plaintiffs' allegations and the pleaded theory of recovery”).

To determine whether a plaintiff has a “reasonable basis for recovery under state law, the court may “conduct a Rule 12(b)(6) type analysis.” Smallwood, 385 F.3d at 573;Anderson v. Georgia Gulf Lake Charles, 342 Fed.Appx. 911, 915 (5th Cir.2009). First the court should look at the pleadings to determine whether the allegations state a claim under state law against the in-state defendant. Smallwood, 385 F.3d at 573. If the “plaintiff has stated a claim, but has misstated or omitted discrete facts that would determine the propriety of joinder,” the court may look beyond the pleadings and consider summary judgment-type evidence. Georgia Gulf, 342 Fed.Appx. at 915–16. Discovery should be restricted and the summary inquiry should be limited to identifying “discrete and undisputed facts that would bar a plaintiffs' recovery against an in-state defendant; anything more risks ‘moving the court beyond jurisdiction and into the resolution of the merits ....’ ” Id. at 916,quoting Smallwood, 385 F.3d at 573–74.³

The district court must resolve all contested fact issues and ambiguities of state law in favor of the plaintiff and remand. Gasch, 491 F.3d at 281. The Fifth Circuit explains, since “ ‘the effect of removal is to deprive the state court of an action properly before it, removal raises significant federalism concerns.’ The removal statute is therefore to be strictly construed, and any doubt about the propriety of removal must be resolved in favor of remand.” Id. at 281–82,quoting Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 365–66 (5th Cir.1995).

Procedural defects may also defeat removal jurisdiction. “A motion to remand the case on the basis of any defect in removal procedure needs to be made within 30 days after the filing of the notice of removal.” 28 U.S.C. § 1447(c).⁴ A defect in the procedure for removal, if timely asserted within 30 days, may be grounds for remand to state court; if the plaintiff fails to assert a procedural defect in a timely motion to remand, it is waived. Caterpillar, Inc. v. Lewis, 519 U.S. 61, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996); Moody v. Commercial Ins. Co. of Newark, N.J., 753 F.Supp. 198, 201–02 (N.D.Tex.1990). “ ‘[M]ere modal or procedural defects are not jurisdictional.’ ” James J. Flanagan Shipping Corp. v. Mediterranean Shipping Co., S.A., 499 F.Supp.2d 710, 711–12 & n. 1 (E.D.Tex.2007) (concluding that “the omission of a copy of the service of process is merely a procedural error with no impact on jurisdiction” and allowing Defendants to supplement the removal record), quoting Covington v. Indemnity Ins. Co. of North America, 251 F.2d 930, 933 (1958). See also Johnson v. Helmerich & Payne, Inc., 892 F.2d 422, 423 (5th Cir.1990) (The failure of all defendants to join in or consent to the removal petition within thirty days of service is not a jurisdictional defect); Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254, 1263 (5th Cir.1988).

Title 28 U.S.C. § 1446 governs the procedure for removal of a case from state to federal district court. Section 1446(a) provides, A defendant or defendants desiring to remove any civil action or criminal prosecution from a State court shall file in the district court of the United States for the district and division within which such action is pending a verified petition containing a short and plain statement of the facts which entitle him or them to removal together with a copy of all process, pleadings and orders served upon him or them in such action. [emphasis added by the court]

Section 1446(b) reads,

The petition for removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceedings is based or within thirty days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.

Courts have interpreted § 1446(a) to mandate that all then served and properly joined defendants must consent to the removal and join in the removal petition. Fontenot v. Global Marine, Inc., 703 F.2d 867, 870 n. 3 (5th Cir.1983); Tri–Cities Newspapers, Inc. v. Tri–Cities Printing Pressmen and Assistants' Local 349, 427 F.2d 325, 326 (5th Cir.1970). In the Fifth Circuit, all served defendants must join in the petition for removal within thirty days of service on the first defendant, and if consent of all served defendants is not timely obtained, the removal is procedurally defective. Doe v. Kerwood, 969 F.2d 165, 167, 169 (5th Cir.1992). This “rule of unanimity” requires that there be “some timely filed written indication from each served defendant, or from some person or entity purporting to formally act on its behalf in this respect and to have the authority to do so, that it has actually consented...