De La Rosa v. Reliable, Inc., CIV 15–0283 JB/KK.

• Court: United States District Courts. 10th Circuit. District of New Mexico
• Citation: 113 F.Supp.3d 1135
• Docket Number: No. CIV 15–0283 JB/KK.,CIV 15–0283 JB/KK.
• Parties: Elvira DE LA ROSA, individually, and as Personal Representative of the Wrongful Death Estate of Javier De La Rosa, and as parent and next friend of Ismael De La Rosa, Isaiah De La Rosa, and Rebeka De La Rosa, minors; and Jonathan De La Rosa, Plaintiffs, v. RELIABLE, INC., a New Mexico domestic for-profit corporation; Cooper Tire & Rubber Company, a foreign corporation doing business in the State of New Mexico; and Ford Motor Company, a foreign corporation doing business in the State of New Mexico, Defendants.
• Decision Date: 27 June 2015

113 F.Supp.3d 1135

Elvira DE LA ROSA, individually, and as Personal Representative of the Wrongful Death Estate of Javier De La Rosa, and as parent and next friend of Ismael De La Rosa, Isaiah De La Rosa, and Rebeka De La Rosa, minors; and Jonathan De La Rosa, Plaintiffs,

v.RELIABLE, INC., a New Mexico domestic for-profit corporation; Cooper Tire & Rubber Company, a foreign corporation doing business in the State of New Mexico; and Ford Motor Company, a foreign corporation doing business in the State of New Mexico, Defendants.

No. CIV 15–0283 JB/KK.

United States District Court, D. New Mexico.

Filed June 27, 2015.

Daniel P. Buttram, Whitener Law Firm, P.A., Albuquerque, NM, Wesley T. Ball, Kaster Lynch Farrar & Ball, LLP, Houston, TX, for Plaintiffs.

Michael Clemens, Quiana Aurelia Salazar–King, Butt Thornton & Baehr PC, Albuquerque, NM, for Defendant Reliable, Inc.

Eric R. Burris, Brownstein Hyatt Farber Schreck, Albuquerque, NM, Steven D. Jansma, Troy Vancil, Norton Rose Fulbright, San Antonio, TX, for Defendant Cooper Tire & Rubber Company.

Richard E. Hatch, Todd Rinner, Rodey, Dickason, Sloan, Akin, & Robb P.A., Albuquerque, NM, for Defendant Ford Motor Company.

MEMORANDUM OPINION AND ORDER

JAMES O. BROWNING, District Judge.

THIS MATTER comes before the Court on: (i) the Plaintiffs' Opposed Motion to Remand, filed May 6, 2015 (Doc. 20)("Motion to Remand"); and (ii) Defendant Reliable, LLC's Motion to Amend Notice of Removal to the United States District Court for the District of New Mexico, filed May 8, 2015 (Doc. 21)("Motion to Amend"). The Court held a hearing on June 22, 2015. The primary issues are (i) whether Defendant Reliable, Inc. ("Defendant Reliable")¹ can establish that the Court had diversity jurisdiction over this case when the Plaintiffs filed the Complaint for Wrongful Death and Loss of Consortium and Other Damages Under the New Mexico Wrongful Death Act and New Mexico Statutory and Common Law, filed in state court on January 12, 2015, filed in federal court on April 7, 2015 (Doc. 1–2)("Complaint"); and (ii) whether the Court should permit Defendant Reliable to amend the Notice of Removal to the United States District Court for the District of New Mexico, filed April 7, 2015 (Doc. 1)("Notice of Removal"). Because Defendant Reliable cannot show that it was no longer a New Mexico citizen when the Plaintiffs filed the Complaint, the Court will grant the Motion to Remand and will remand the case to state court. Additionally, because the Motion to Amend does not allege a new jurisdictional theory, but alleges only additional facts to cure a technical defect in the Notice of Removal, the Court will grant the Motion to Amend.

PROCEDURAL BACKGROUND

The Plaintiffs filed suit in state court, alleging a number of state law causes of action that arise out of a fatal car accident that occurred because of an allegedly defective tire. See Complaint at 1. The Plaintiffs name, as Defendants, "Reliable, Inc., a New Mexico domestic for-profit corporation," Cooper Tire & Rubber Company, and Defendant Ford Motor Company. Complaint at 1 (capitalization altered for readability). Against Cooper Tire, the Plaintiffs allege causes of action for Defective Design, Manufacturing, and Marketing, Negligence, Breach of Express and Implied Warranties, Strict Liability, and Punitive and Exemplary Damages. See Complaint ¶¶ 160–124, at 4–25. Against Ford Motor, the Plaintiffs allege causes of action for Strict Liability, Breach of Express and Implied Warranties, Negligence, and Punitive and Exemplary Damages. See Complaint ¶¶ 125–41 at 25–29. Against Reliable, Inc. they allege causes of action for Negligence, Strict Liability, Breach of Express and Implied Warranties, and Punitive and Exemplary Damages. See Complaint ¶¶ 142–61, at 29–32.

1. Notice of Removal.

Defendant Reliable removed the case to federal court on April 7, 2015. See Notice of Removal at 1. Defendant Reliable asserts that the Plaintiffs misnamed it in the Complaint as "Reliable, Inc.," but that its name is "Reliable LLC." Notice of Removal at 1. Defendant Reliable asserts that each of the Plaintiffs was, or is, a New Mexico citizen. See Notice of Removal ¶¶ 2–5, at 2. It contends that, on December 31, 2014, the president of Reliable, Inc. executed a plan to convert Reliable, Inc. from a New Mexico corporation into a New Mexico limited liability company, Reliable, LLC ("Reliable, LLC NM"). Notice of Removal ¶ 7, at 2 (citing Plan of Conversion of Reliable, Inc. into Reliable, LLC, filed April 7, 2015 (Doc. 1–3)("Plan of Conversion")). Defendant Reliable states that the plan was effective when Reliable LLC NM's Articles of Organization were filed with the State of New Mexico, see Notice of Removal ¶ 8, at 2 (citing Plan of Conversion ¶ 1, at 1), and that the Articles of Organization were filed in New Mexico on January 12, 2015, see Notice of Removal ¶ 9, at 3 (citing Statement of Acceptance of Appointment by Designated Initial Registered Agent, filed April 7, 2015 (Doc. 1–4) ("Articles of Organization"); Letter Approving Statement of Conversion and Articles of Organization, filed April 7, 2015 (Doc. 1–5) ("Letter Approving Conversion")). Reliable asserts that the New Mexico Secretary of State's office² approved and filed the Plan of Conversion and the Articles of Organization on January 12, 2015. See Notice of Removal ¶ 10, at 3.

Defendant Reliable states that, on December 31, 2014, the authorized representatives signed the Agreement and Plan of Merger of Reliable LLC into Reliable LLC, filed April 7, 2015 (Doc. 1–6)("Agreement of Merger"), and the Articles of Merger of Reliable, LLC and Reliable, LLC, filed April 7, 2015 (Doc. 1–7) ("Articles of Merger"). Notice of Removal ¶¶ 11–12, at 3. It contends that, on January 12, 2015, the New Mexico Office of the Secretary of State received and confirmed that the Agreement of Merger conformed with the law. See Notice of Removal ¶ 13, at 3. Defendant Reliable says that, on January 12, 2015, at 8:21 a.m. Eastern Standard Time ("EST"), Reliable, LLC ("Reliable, LLC DE") was formed under Delaware laws. See Notice of Removal ¶ 14, at 3 (citing State of Delaware Limited Liability Company Certificate of Formation of Reliable, LLC, filed April 7, 2015 (Doc. 1–9)("Delaware Certificate of Formation")).

Defendant Reliable argues that the Complaint was filed in New Mexico state court on January 12, 2015, at 8:34 a.m. MST.³ See Notice of Removal ¶ 1, at 1–2. It contends that diversity jurisdiction is determined at the time the Complaint is filed, and that, when the Complaint was filed, Reliable, Inc. no longer existed, because it had been converted into Reliable, LLC NM, and then merged into Reliable, LLC DE. See Notice of Removal ¶¶ 15–16, at 3. Defendant Reliable asserts that, on January 12, 2015, at 8:34 MST, Reliable, LLC DE was the proper party to this lawsuit. See Notice of Removal ¶ 17, at 3. Defendant Reliable argues that a limited liability company is deemed to be a citizen of each state in which its members reside, and that none of Reliable, LLC DE's members are residents or citizens of New Mexico. See Notice of Removal ¶¶ 18–19, at 4. Defendant Reliable maintains that, because Ford and Cooper Tire are foreign corporations with principal places of business in states other than New Mexico, there is complete diversity of citizenship between the Plaintiffs and the Defendants. See Notice of Removal ¶¶ 23–26, at 4. Reliable states that the Plaintiffs served Reliable, Inc. on March 11, 2015, and that, although the Complaint does not state a specific monetary demand, it is over $75,000.00. See Notice of Removal ¶ 22, at 4; id. ¶¶ 27–29, at 4–5.

2. The Motion to Remand.

The Plaintiffs filed the Motion to Remand on May 6, 2015. See Motion to Remand at 1. The Plaintiffs argue that Defendant Reliable is unable to establish that it converted to a Delaware limited liability company, that Defendant Reliable's corporate reorganization appears to be a scheme to manufacture diversity jurisdiction, and that Defendant Reliable fails to establish the citizenship of all necessary entities. See Motion to Remand at 1. They maintain that Reliable, Inc. became Reliable, LLC DE only after the State of New Mexico received the Articles of Organization and the Plan of Conversion on January 12, 2015, but that Defendant Reliable cannot show what time of day the State of New Mexico received those documents. See Motion to Remand at 2 & 4. The Plaintiffs contend that Defendant Reliable—the removing party—has the burden of proving that removal was proper. See Motion to Remand at 3–4.

The Plaintiffs argue that, if the New Mexico Secretary of State received the filings after 8:34 a.m. Mountain Standard Time ("MST"), it would not affect the Court's jurisdiction, because a change of citizenship after filing suit cannot be used to create or defeat jurisdiction. See Motion to Remand at 4 (citing Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 571, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004) ; Slaughter v. Toye Bros. Yellow Cab Co., 359 F.2d 954, 956 (5th Cir.1966) ; McDaniel v. Loya, 304 F.R.D. 617, 625 (D.N.M.2015) (Browning, J.)). They maintain that, because the Court cannot reasonably ascertain Defendant Reliable's citizenship as of 8:34 a.m. MST, the Court should remand the case to state court. See Motion to Remand at 4–5.

The Plaintiffs contend that Defendant Reliable's reorganization appears to be a sham to manufacture diversity jurisdiction. See Motion to Remand at 5. They assert that 28 U.S.C. § 1359 prohibits the exercise of jurisdiction in the face of collusive conveyances. See Motion to Remand at 5. The Plaintiffs state that § 1359 also prohibits collusive formation and conversion of entities, and that the Court must consider whether Defendant Reliable's conduct was improper or collusive. See Motion to Remand at 6 (citing Lester v. McFaddon, 415 F.2d 1101, 1104 (4th Cir.1969) ). They argue that courts have held that corporations violate § 1359 when they merge...