SEBRING HOMES v. TR Arnold & Associates, Inc.

• Citation: 927 F. Supp. 1098
• Decision Date: 18 December 1995
• Docket Number: No. 3:94-CV-485RM.,3:94-CV-485RM.
• Parties: SEBRING HOMES CORP., et al., Plaintiffs, v. T.R. ARNOLD & ASSOCIATES, INC., Defendant.
• Court: U.S. District Court — Northern District of Indiana

927 F. Supp. 1098

SEBRING HOMES CORP., et al., Plaintiffs, v. T.R. ARNOLD & ASSOCIATES, INC., Defendant.

No. 3:94-CV-485RM.

United States District Court, N.D. Indiana, South Bend Division.

December 18, 1995.

Max K. Walker, Jr., Cosentino Walker Shewmaker and Christofeno, Elkhart, IN, for plaintiffs.

James M. Matthews, Robert Allen Wade, Baker and Daniels, South Bend, IN, Kennard R. Weaver, Eileen A. Groves, Baker and Daniels, Elkhart, IN, for defendant.

MEMORANDUM AND ORDER

MILLER, District Judge.

This cause is before the court on the parties' responses to the question regarding subject matter jurisdiction raised in the November 30, 1995 telephonic status conference, the defendant's motion to compel discovery or dismiss and for sanctions, and the defendant's supplement to the motion to compel or dismiss and for sanctions. For the reasons that follow, the court remands this case to state court for further proceedings.

I. PROCEDURAL BACKGROUND

Plaintiff Sebring Homes Corp. ("Sebring") is an Indiana corporation that manufactures and distributes recreational vehicles and manufactured homes. Plaintiffs Darlene and Martin Ornatowski are the president and vice president, respectively, of Sebring.

Defendant T.R. Arnold & Associates, Inc. ("Arnold") is an Indiana corporation that offers consulting services to corporations that design and manufacture motor homes, recreational vehicles, and manufactured housing. Arnold's consulting services typically involve review of structure plans and inspection of the structure during construction to determine whether it meets the applicable state and federal guidelines and whether it was built according to the manufacturer's plans. Sebring has used Arnold's consulting services in connection with some of the vehicles and homes it has manufactured.

On April 12, 1993, the United States filed a complaint for civil money penalties and injunctive relief against Sebring and Darlene and Martin Ornatowski, as individuals and officers of Sebring, for alleged violations of the National Manufactured Housing Construction and Safety Standards Act of 1974, 42 U.S.C. § 5401 et seq. (Cause No. 3:93-CV-248RM).

On April 28, 1994, Sebring and the Ornatowskis filed a complaint in Elkhart Circuit Court against Arnold, for indemnification for any amount for which they were found liable to the United States in the pending federal suit against them (Cause No. 3:94-CV-485). On June 14, 1994, Arnold filed a notice of removal in the state action. The next day, this court denied a motion to file a third-party complaint against Arnold in Cause No. 3:93-CV-248RM. Arnold then moved to consolidate Cause Nos. 94-485 and 93-248. Chief Judge Allen Sharp granted the motion to consolidate, but the United States filed an objection to the motion to consolidate, which this court construed as a motion to vacate the consolidation. This court granted the motion to vacate the consolidation, and Cause No. 93-248 proceeded without Arnold as a party.

In No. 93-248, a consent decree was filed April 12, 1995, granting judgment against Sebring in the amount of $96,000, and the clerk entered judgment against Sebring on April 13. In No. 94-485, the court held a scheduling conference on September 20, 1994 to establish discovery and motion deadlines. On July 10, 1995, the court set this cause for a three-day bench trial to begin December 4, 1995. On September 22, Arnold filed a motion to dismiss or to compel discovery, and award sanctions under Federal Rule of Civil Procedure 37(a)(4), alleging that the plaintiffs had not produced requested documents and interrogatory answers. On October 20, Arnold filed a supplement to its motion to compel discovery or dismiss, informing the court that the plaintiffs had produced the materials requested in the motion to compel, and asking the court to award it reasonable attorney's fees in connection with the discovery dispute.

On October 24, Arnold moved for summary judgment, accompanied by a motion for leave to file a dispositive motion since the deadline for dispositive motions had passed. The court granted Arnold's motion for leave to file the motion and, although they were granted an enlargement of time to respond, the plaintiffs did not file a response. Arnold filed a reply in support of its motion for summary judgment on November 27.

The court held a telephonic status conference in this cause on November 30. During that conference, the court vacated the bench trial scheduled to begin December 4, discussed with the parties its concerns regarding subject matter jurisdiction, and afforded the parties to and including December 11 within which to file any briefs on the issue of jurisdiction.

II. SUBJECT MATTER JURISDICTION

Arnold's notice of removal claims that federal question jurisdiction exists pursuant to 28 U.S.C. § 1331 because substantial questions of federal law exist. Arnold claims that federal question jurisdiction exists because: (1) Arnold was a certified "Production Inspection Primary Inspection Agency" ("IPIA") under the direction and control of the Secretary of Housing and Urban Development pursuant to 24 C.F.R. § 3282.362; (2) Arnold's duties as an IPIA were set forth in the Manufactured Homes Procedural and Enforcement Regulations (promulgated by the Secretary); (3) Sebring was required to contract with an IPIA under the regulations; (4) "by Plaintiffs' own admission in the Complaint, recovery against Arnold is contingent upon the Federal Court's interpretation of the Regulations and Arnold's actions thereunder"; (5) because Arnold's duties were controlled by the regulations, and "because recovery pursuant to the Complaint may not be granted without analyzing Arnold's performance in light of the Regulations,"; and (6) because Arnold was acting under and pursuant to the Secretary's directions, "a substantial nexus is established between the Secretary and the actions for which Arnold is being sued."

In its brief on the jurisdiction issue, Arnold argues that this court has jurisdiction over the plaintiffs' claims pursuant to 28 U.S.C. § 1331 because of the federal issues raised in the complaint, and pursuant to the federal supplemental jurisdiction statute, 28 U.S.C. § 1367, because this matter is related to Cause No. 93-248. Arnold also argues that it would be prejudiced if the court remanded this cause so late in the proceedings, and while a dispositive motion is pending.

A. Removal and Supplemental Jurisdiction

The court has the obligation to inquire into its own subject matter jurisdiction, Market Street Associates Limited Partnership v. Frey, 941 F.2d 588 (7th Cir.1991), and in the absence of subject matter jurisdiction, "the case shall be remanded." 28 U.S.C. § 1447(c). Removal of actions from state to federal court is governed by 28 U.S.C. § 1441, which provides in pertinent part:

(a) Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending....

(b) Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which the action is brought.

Congress made the removal jurisdiction of the federal district courts coextensive with the federal district courts' original jurisdiction. Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987); Arkansas v. Kansas & Texas Coal Co., 183 U.S. 185, 189, 22 S.Ct. 47, 48, 46 L.Ed. 144 (1901) (removal proper where federal court would have original jurisdiction). Because there is no diversity of citizenship between plaintiffs and defendant, the defendant's ability to remove this case and this court's jurisdiction turn on the existence of federal question jurisdiction. See Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987) ("Absent diversity of citizenship, federal-question jurisdiction is required.").

Arnold's continued attempts, now under the supplemental jurisdiction statute, to append this suit to the related suit, No. 93-248, does not affect this conclusion. Arnold argues that when this court denied the motion in No. 93-248 to add Arnold as a third-party defendant, and when this court vacated the consolidation, it did so based solely on reasons of undue delay and prejudice, and not because No. 94-485 lacked a proper jurisdictional basis. That the court did not sua sponte remand the case to state court is not, however, equal to a finding that jurisdiction exists.

More importantly, the denial of the motion to add Arnold as a third-party defendant in the related case foreclosed the possibility that the plaintiffs' claims in this action could be based on supplemental jurisdiction, because the claims are now part of a separate suit, and a removal petition may not base subject matter jurisdiction on the supplemental jurisdiction statute, 28 U.S.C. § 1367. In the removal statute, 28 U.S.C. § 1441, Congress provided for the removal of "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." (emphasis added). The supplemental jurisdiction statute does not confer original jurisdiction on claims or suits. The supplemental jurisdiction statute, 28 U.S.C. § 1367, provides that:

in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in

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