St. Luke #2, LLC v. Hermes Health All.

• Decision Date: 08 December 2022
• Docket Number: Civil Action 22-1723
• Parties: ST. LUKE #2, LLC v. HERMES HEALTH ALLIANCE, LLC
• Court: U.S. District Court — Eastern District of Louisiana

ST. LUKE #2, LLC
v.
HERMES HEALTH ALLIANCE, LLC

Civil Action No. 22-1723

United States District Court, E.D. Louisiana

December 8, 2022

SECTION “R” (3)

ORDER AND REASONS

SARAH S. VANCE UNITED STATES DISTRICT JUDGE

Before the Court is plaintiff St. Luke #2, LLC's (“St. Luke”) motion to remand^[1] and defendant Hermes Health Alliance, LLC's (“Hermes”) motion to remand.^[2] The removing third-party defendants (the “Insurers”) oppose the motions to remand.^[3] For the following reasons, the Court grants the motions to remand.

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I. BACKGROUND

This case arises from a landlord-tenant dispute between St. Luke and Hermes brought about by property damage following Hurricane Ida.^[4] St. Luke operates a nursing facility for elderly residents located in New Orleans, Louisiana.^[5]Hermes is the lessor for the property on which St. Luke operates its nursing facility, located at 4201 Woodland Drive in New Orleans.^[6] Hermes and St. Luke originally entered into a seven-year lease agreement in 2009, which was extended for an additional five years in 2016.^[7] In August of 2021, Hurricane Ida caused significant damage to the property, forcing the residents to evacuate the premises.^[8] On November 8, 2021, St. Luke sued Hermes in the 22nd Judicial District Court for St. Tammany Parish. St. Luke alleged that Hurricane Ida rendered the property unfit for use in violation of the lease agreement, unless the lessor took certain affirmative steps to rectify the deficiency.^[9] These remedial measures included notifying the tenant within 30 days that the lessor would repair the property, and following through with the repairs within 120 days.^[10] In response, Hermes

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asserted several affirmative defenses and counterclaims, including a third-party demand against the Insurers for alleged denial of coverage in bad faith.^[11] Hermes contends that it could not meet its contractual obligation, in part, because “the denial of Hermes' insurance claim by Hermes' Property Insurers has made that financially impossible.”^[12]

On June 10, 2022, the Insurers removed this case to federal court.^[13]Subsequently, plaintiff and defendant each moved to remand the case to state court.^[14] In their motions to remand, plaintiff and defendant contend that neither 9 U.S.C. § 205, nor 28 U.S.C. § 1441(c) authorizes third-party defendants to remove cases to federal court.^[15] The Insurers oppose the motions to remand.^[16]

The Court considers the parties' arguments below.

II. LEGAL STANDARD

Federal courts have jurisdiction over cases “arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. Whether a claim arises federal law must be determined by referring to the “well-pleaded complaint.”

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Merrell Dow Pharm., Inc. v. Thompson, 478 U.S. 804, 8808 (1986) (quoting Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 9-10 (1983)); Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001). For diversity jurisdiction to exist, there must be complete diversity between plaintiffs and defendants, and the amount in controversy must exceed $75,000. See 28 U.S.C. § 1332(a); Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373 (1978).

A defendant may remove a civil action filed in state court if a federal court would have original jurisdiction over the suit. 28 U.S.C. § 1441(a). On a motion to remand, the removing party bears the burden of establishing that one of the bases of jurisdiction exists and that the removal was not procedurally defective. Shearer v. Sw. Serv. Life Ins. Co., 516 F.3d 276, 278 (5th Cir. 2008). “[D]oubts regarding whether removal jurisdiction is proper should be resolved against federal jurisdiction.” African Methodist Episcopal Church v. Lucien, 756 F.3d 788, 793 (5th Cir. 2014) (internal quotation marks omitted). A court “must remand a case if at any time before final judgment it appears that the district court lacks subject matter jurisdiction over a case removed from state court.” Id. (internal quotation marks omitted).

III. DISCUSSION

A. Removal Under Section 205

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The starting point for any jurisdictional issue is the axiom that “[f]ederal courts are court of limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). Thus, the Court “must presume that a suit lies outside [its] jurisdiction, and the burden of establishing federal jurisdiction rests on the party seeking [removal].” Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001). Further, the right to removal is statutory. Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546, 552 (2005). Without a statutory basis for removal, the Court must dismiss this case for lack of jurisdiction. Id.

The Insurers assert that two different statutes authorize their removal of this case. The first statutory basis for removal asserted by the Insurers is 9 U.S.C. § 205, the removal provision in the implementing legislation for the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Section 205 states that:

Where the subject matter of an action or proceeding pending in a State court relates to an arbitration agreement or award falling under the Convention, the defendant or the defendants may, at any time before the trial thereof, remove such action or proceeding to the district court of the United States for the district and division embracing the place where the action or proceeding is pending. The procedure for removal of causes otherwise provided by law shall apply, except that the ground for removal provided in this section need not appear on the face of the complaint but may be shown in the petition for removal. For the purposes of Chapter 1 of this title any action or proceeding removed under this section shall be deemed to have been brought in the district court to which its removed.

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9 U.S.C. § 205 (emphasis added). The parties contest whether Section 205 authorizes third-party defendants to remove a case.

The parties propose two different interpretations of the term “defendant” in Section 205. The Insurers contend that “defendant” includes both the parties sued by the original plaintiff and third-party defendants brought into the case by a defendant. Plaintiff and defendant assert that this Court should interpret “defendant” in the same manner that the Supreme Court did when it analyzed 28 U.S.C. § 1441(a), the general removal statute, in Home Depot U.S.A., Inc. v. Jackson, 139 S.Ct. 1743 (2019). Section 1441(a) states that:

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.

28 U.S.C. § 1441(a) (emphasis added). The Supreme Court held that “defendant” as used in Section 1441(a) “refers only to the part[ies] sued by the original plaintiff,” and not third-party defendants brought into the action by a counterclaim. Id. at 1746. The Court explained that this is so, in part, because “the general removal statute permits ‘the defendant or the defendants' in a state-court action over which the federal courts would have original jurisdiction to remove that action to federal court.” Id. The Court went on to explain that the determination of whether the district court would have had original jurisdiction requires courts

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to view “the action as defined by the plaintiff's complaint.” Id. And, “‘the defendant' to that action is the defendant to that complaint, not a party named in a counterclaim.” Id.

The Court finds that the reasoning of Home Depot is applicable here, and the term “defendant” in Section 205 likewise does not include third-party defendants. That Home Depot dealt with a different removal statute does not persuade the Court that the case is inapposite. When the language in one statute “tracks the wording of” another, this is “a strong indication that the two statutes should be interpreted [similarly].” Northcross v. Bd. of Educ. of Memphis City Schools, 412 U.S. 427, 428 (1973). This is especially so where the two statutes share a common purpose. Id. Despite the Insurers' contentions otherwise, Home Depot not only dealt with the same language that the Court must interpret here, but the context- defining which parties may remove a case-is also identical. Accordingly, the Court sees no reason to give the term “defendant” a different meaning than the Supreme Court did when analyzing the general removal statute in Home Depot.

But even before Home Depot, several courts in this circuit interpreted Section 205 as precluding removal by third-party defendants. See, e.g., Kinder Morgan Louisiana Pipeline LLC v. Welspun Gujarat Stahl Rohren Ltd., 752 F.Supp.2d 772, 778 (S.D. Tex. 2010) (holding that the term “defendant” as used in Section 205 “exclude[s] third-party defendants”); Caringal v. Karteria Shipping,

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Ltd., 108 F.Supp.2d 651, 654 (E.D. La. 2000) (holding that under Section 205, third-party defendants “did not have any statutory authority to remove the case”); IQ Holdings, Inc. v. Villa D'Este Condo. Owners Ass'n, Inc., No. 11-1770, 2011 WL 2600561, at *2 (S.D. Tex. June 29, 2011) (likewise).

The Insurers, on the other hand, do not point to a single case that analyzed the present issue and reached the conclusion they propose. Nor do they make any attempt to distinguish the cases holding that third-party defendants may not remove a case under Section 205. In fact, the only case the Insurers cite in which a court allowed removal by a third-party defendant under Section 205 is Viator v. Dauterive Contractors, Inc., 638 F.Supp.2d 641 (E.D. La. 2009). But that non-precedential case did not analyze the issue of the meaning of “defendant” in Section 205 and...