Sierra v. Halliburton Energy Servs., Inc.

• Decision Date: 08 August 2018
• Docket Number: CIVIL NO. 6:17-CV-1002
• Parties: RICHARD SIERRA, ET AL. v. HALLIBURTON ENERGY SERVICES, INC., ET AL.
• Court: U.S. District Court — Western District of Louisiana

RICHARD SIERRA, ET AL. v. HALLIBURTON ENERGY SERVICES, INC., ET AL.

CIVIL NO. 6:17-CV-1002

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA LAFAYETTE DIVISION

August 8, 2018

JUDGE ROBERT G. JAMES

MAGISTRATE JUDGE HANNA

RULING

Two motions in this matter were referred to the Magistrate Judge for Report and Recommendation ("R&R"): (1) a Motion to Dismiss, or Alternatively to Stay and Compel Arbitration, or in the Further Alternative for a More Definite Statement [Doc. No. 5] filed by Defendant Halliburton Energy Services, Inc. ("Halliburton"); and (2) a Motion to Remand [Doc. No. 11] filed by Plaintiffs Richard Sierra, Chad Venable, and LOS, Inc. The Magistrate Judge has now issued the R&R [Doc. No. 53], as well as a supplemental R&R [Doc. No. 59], wherein he recommends the Motion to Remand be granted and the Motion to Dismiss be denied as moot. [Doc. No. 53 at 17-18; Doc. No. 59 at 2-3]. Halliburton objects to the Magistrate Judge's recommendation [Doc. Nos. 55, 60], and Plaintiffs have filed responses to the objections. [Doc. Nos. 56, 61] For the reasons that follow, the Court DECLINES TO ADOPT the Report and Recommendation and DENIES the motion to remand.

I. Background

This lawsuit originated in state court, when Plaintiffs sued Halliburton and an Auditor employed by Halliburton for damages allegedly resulting from an audit of LOS performed by Defendants. The substance of the Petition reads as follows:

2. LOS, Inc. entered into a Master Purchase Agreement (hereinafter referred to as "Agreement") with Halliburton for NDT (non-destructive testing).

3. On or about June 1, 2013, Auditor, through Halliburton, performed an audit of LOS, Inc.'s practices and procedures, and informed LOS, Inc. that it was non-compliant.

4. LOS, Inc. was not provided with any written documentation or written score/result of the audit and the alleged deficiencies were never identified, if same truly existed.

5. Halliburton arbitrarily, capriciously and without giving LOS, Inc. an opportunity to cure any alleged deficiencies, awarded LOS, Inc. an audit score of zero and posted this audit score on Halliburton's website, which was viewable by all of Halliburton's customers.

6. In response, LOS, Inc. retained the services of a third party to investigate the audit and the basis for the score, but Halliburton refused to respond to said requests.

7. Based on said investigation, the audit was false, as was said score posted by Halliburton.

8. As a consequence of the false score given by Auditor and Halliburton, LOS, Inc. lost all existing clients and work.

9. As a by-product of the conduct of Halliburton and Auditor, LOS, Inc.'s business was destroyed and all non-destructive testing had to be discontinued.

10. Halliburton is vicariously liable for the actions and/or inactions of its employee, Auditor, who was acting in furtherance of Halliburton's business enterprise and /or in furtherance of Halliburton's business mission, through the doctrine of respondeat superior for the damages suffered by LOS, Inc.

11. Upon information and belief and at all times relevant herein, the aforementioned incident was caused totally, solely and/or concurrently through the intentional actions and/or fault of the Defendants in the following non-exclusive particulars, to-wit:

a. Breach of Contract;

b. Breach of Fiduciary Duty;

c. Tortious Interference with Contract;d. Fraud;

e. Misrepresentation;

f. Business Defamation;

g. Loss and Destruction of Business;

h. Deceptive Trade Practices and Unfair Competition; and

i. Antitrust Violations.

[Doc. No. 1-1 at 2-3].

Exactly four years after the Auditor informed LOS that his audit showed LOS to be "non-compliant," Plaintiffs filed this suit in the 15^th Judicial District Court, Lafayette Parish, Louisiana. Halliburton removed the suit to this Court, alleging subject-matter jurisdiction exists pursuant to 28 U.S.C. § 1332, as the amount in controversy exceeds the jurisdictional minimum and the parties are diverse in citizenship when the citizenship of the Auditor is disregarded, whom Halliburton asserts was improperly joined. Generally, Halliburton contends: (1) Plaintiffs cannot recover against the Auditor with regard to any contractual claims, as he was not a party to the Master Purchase Agreement; (2) Plaintiffs cannot recover against the Auditor with regard to any tort claims, because the Auditor did not owe any duty to Plaintiffs and Halliburton is vicariously liable for the Auditor's actions and omissions; and (3) Plaintiffs cannot recover against the Auditor with regard to any tort claims, because all such claims have prescribed. [Doc. No. 16]

The Magistrate Judge recommends granting the Motion to Remand, finding Halliburton has "not met its burden of showing that the auditor was improperly joined as a defendant in this action," and therefore Halliburton has failed to show the parties are diverse in citizenship. [Doc. No. 53 at 17]. As stated in the R&R, "[a]n issue has been raised in this lawsuit regarding whetherTexas law or Louisiana law should apply."¹ Id. at 14. The Magistrate Judge found that issue need not be resolved at present, as "the result is the same under the laws of both states." Id. The Magistrate Judge ultimately concluded:

Viewing the allegations of the petition in a light most favorable to the plaintiffs, as must be done in resolving this motion, even though the auditor was employed by Halliburton, there is a reasonable possibility that he might be found liable for intentional misrepresentations or intentional fraud in the confection of the audit report that was beyond the scope of his employment with Halliburton and served only his own personal interests. In that case, Halliburton might not be found vicariously liable for his actions.

[Doc. No. 53 at 16; see also Doc. No. 59 at 2].²

Halliburton objects to the Magistrate Judge's recommendation, arguing that while the allegations set forth in the Petition may be sufficient to establish "a theoretical possibility of recovery," the allegations do not show there is a "reasonable possibility of recovery" because Plaintiffs have failed to set forth sufficient factual allegations to state any claim against the Auditor. [Doc. No. 55 at 5, 8 (emphasis in original)]. Accordingly, Halliburton contends the Auditor was improperly joined to defeat diversity jurisdiction in this matter. [Doc. No. 55 at 4].

II. Applicable Law

In reviewing a dispositive pretrial matter assigned to a magistrate judge, "The district judgemust determine de novo any part of the magistrate judge's disposition that has been properly objected to. The district judge may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions." FED. R. CIV. P. 72(b)(3); see also Davidson v. Georgia-Pacific, L.L.C., 819 F.3d 758, 765 (5^th Cir. 2016).

When a suit is removed from state court, the removing party bears the burden of proving federal jurisdiction exists over the matter. Shearer v. Southwest Service Life Ins. Co., 516 F.3d 276, 278 (5^th Cir. 2008). The federal removal statute, 28 U.S.C. § 1441(a) allows for the removal of "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." Subsection (b) specifies that suits arising under a court's diversity jurisdiction "may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought."³ Id. (emphasis added). To establish diversity jurisdiction, the removing party "must demonstrate that all of the prerequisites of diversity jurisdiction contained in 28 U.S.C. § 1332 are satisfied."⁴ Smallwood v. Illinois Cent. R. Co., 385 F.3d 568, 572 (5^th Cir. 2004). In this matter, Plaintiffs LOS and Richard Sierra and the Auditor employed by Halliburton are all citizens of Louisiana. [Doc. No. 53 at 8-11]. Accordingly, unless the Auditor was improperly joined, there is an absence of diversity between the parties.

To establish improper joinder, a removing party must prove either actual fraud in the pleading of jurisdictional facts, or the "inability of the plaintiff to establish a cause of action againstthe non-diverse party in state court." Smallwood at 573 (quoting Travis v. Irby, 326 F.3d 644, 646-47 (5^th Cir. 2003)). In this matter, there is no allegation of actual fraud in the naming of the Auditor as a Defendant. Accordingly, under the second method of proving improper joinder, a removing party must demonstrate "that there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant." Id.; see also Campbell v. Stone Ins. Inc., 509 F.3d 665, 669 (5^th Cir. 2007). "This means that there must be a reasonable possibility of recovery, not merely a theoretical one." Campbell at 669 (quoting McDonal v. Abbott Labs., 408 F.3d 177, 183 (5^th Cir. 2005)).

Generally, the standard for evaluating a claim of improper joinder under the second method is similar to that used in evaluating a motion to dismiss for failure to state a claim pursuant to FED. R. CIV. P. 12(b)(6). Id.; Smallwood at 573. In conducting this inquiry, the court looks to federal pleading standards and evaluates all of the factual allegations set forth in the complaint in the light most favorable to the plaintiff. Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 208 (5^th Cir. 2016). "Ordinarily, if a plaintiff can survive a Rule 12(b)(6) challenge, there is no improper joinder." Smallwood at 573. Because the doctrine of improper joinder is a "narrow exception" to the rule of complete diversity, "the burden of persuasion on a party claiming improper joinder is a 'heavy one.'" Campbell at 669 (quoting McDonal at 183).

Under the 12(b)(6) standard, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Harold H. Huggins...