Toyota of Florence, Inc. v. Lynch

• Decision Date: 24 May 1989
• Docket Number: Civ. A. No. 4:89-594-15,4:89-595-15.
• Citation: 713 F. Supp. 898
• Parties: TOYOTA OF FLORENCE, INC., Plaintiff, v. Danny Ray LYNCH; JM Family Enterprises, Inc.; Southeast Toyota Distributors, Inc.; Tender Loving Care Corp.; World Omni Financial Corp.; World Omni Leasing, Inc.; Joyserv Co., Ltd.; Carnett-Partsnett Systems, Inc.; Toyoguard, Inc.; James D. Moran; John Joseph McNally; Terry Moore; William M. Donohoe; Orville Vernon; Al Hendrickson; Robert MacGregor; Dennis Puskarik; Tom Nardelli; and Toyota Motor Sales, U.S.A., Inc., Defendants. Richard L. BEASLEY, Plaintiff, v. Danny Ray LYNCH; JM Family Enterprises, Inc.; Southeast Toyota Distributors, Inc.; Tender Loving Care Corp.; World Omni Financial Corp.; World Omni Leasing, Inc.; Joyserv Co., Ltd.; Carnett-Partsnett Systems, Inc.; Toyoguard, Inc.; James D. Moran; John Joseph McNally; Terry Moore; William M. Donohoe; Orville Vernon; Al Hendrickson; Robert MacGregor; Dennis Puskarik; Tom Nardelli and Toyota Motor Sales, U.S.A., Inc., Defendants.
• Court: U.S. District Court — District of South Carolina

713 F. Supp. 898

TOYOTA OF FLORENCE, INC., Plaintiff, v. Danny Ray LYNCH; JM Family Enterprises, Inc.; Southeast Toyota Distributors, Inc.; Tender Loving Care Corp.; World Omni Financial Corp.; World Omni Leasing, Inc.; Joyserv Co., Ltd.; Carnett-Partsnett Systems, Inc.; Toyoguard, Inc.; James D. Moran; John Joseph McNally; Terry Moore; William M. Donohoe; Orville Vernon; Al Hendrickson; Robert MacGregor; Dennis Puskarik; Tom Nardelli; and Toyota Motor Sales, U.S.A., Inc., Defendants.

Richard L. BEASLEY, Plaintiff, v. Danny Ray LYNCH; JM Family Enterprises, Inc.; Southeast Toyota Distributors, Inc.; Tender Loving Care Corp.; World Omni Financial Corp.; World Omni Leasing, Inc.; Joyserv Co., Ltd.; Carnett-Partsnett Systems, Inc.; Toyoguard, Inc.; James D. Moran; John Joseph McNally; Terry Moore; William M. Donohoe; Orville Vernon; Al Hendrickson; Robert MacGregor; Dennis Puskarik; Tom Nardelli and Toyota Motor Sales, U.S.A., Inc., Defendants.

Civ. A. Nos. 4:89-594-15, 4:89-595-15.

United States District Court, D. South Carolina, Florence Division.

May 24, 1989.

D. Kenneth Baker, Baker & Jackson, Darlington, S.C., for plaintiffs.

Hardwick Stuart, Jr., Adams Quackenbush Herring & Stuart, Columbia, S.C., Raymond W. Bergan, Daniel F. Katz, Elena Kagan, Williams & Connolly, Washington, D.C., for JM Family defendants.

Stephen G. Morrison, Nina Nelson Smith, David E. Dukes, James M. Griffin, Nelson, Mullins, Riley & Scarborough, Columbia, S.C., for defendant, Toyota Motor Sales, U.S.A., Inc.

CONSOLIDATED ORDER

HAMILTON, District Judge.

These cases arise out of an allegedly fraudulent and deceptive scheme designed to ruin plaintiffs financially. Both actions were originally brought in the Court of Common Pleas for Darlington County and were subsequently removed to this court under 28 U.S.C. § 1441(b) and (c) on March 13, 1989.¹ Toyota of Florence (TOF), plaintiff in Civil Action No. 4:XX-XXX-XX, and Richard L. Beasley (Beasley), plaintiff in Civil Action No. 4:XX-XXX-XX, both filed motions to remand on March 23, 1989.²

Plaintiffs allege seven (7) causes of action in their complaint against nineteen (19) corporate and individual defendants. Claims one through five are directed against all defendants and include common law and statutory causes of action, including: fraud, the Racketeer Influenced and Corrupt Organizations Act (RICO), civil conspiracy, the South Carolina Dealer's Day in Court Act, and the South Carolina Unfair Trade Practices Act. Claims six and seven, alleging breach of contract and breach of contract accompanied by fraudulent acts, are directed solely against defendant Southeast Toyota Distributors, Inc. (SET).³

Plaintiffs contend that removal of these entire actions is not appropriate under either § 1441(c) or (b). First, plaintiffs contend that the RICO claim does not vest this court with jurisdiction to the exclusion of the state court.⁴ Plaintiffs also assert that removal under § 1441(b) is improper because defendants Toyota Motor Sales, U.S.A., Inc. (TMS) and Danny Ray Lynch (Lynch) did not join in the removal petition. Plaintiffs also argue that this court should remand all claims pursuant to § 1441(c) except claims six and seven, which they purportedly concede are "separate and independent" for purposes of that statute. Additionally, plaintiffs would have this court stay proceedings involving claims six and seven while the remaining claims are adjudicated in the state court.⁵

The JM Family defendants argue, however, that removal under § 1441(c) is proper because the plaintiffs "concede" that the claims asserted against SET are separate and independent and thus that this court should retain jurisdiction of all claims in these cases due to "the close ties between SET and the other JM Family defendants" to prevent "massive waste of judicial resources, duplication of effort, and inconvenience to the parties and witnesses...." These defendants further assert that the propriety of removal under § 1441(b) need not be addressed because removal under § 1441(c) is proper.

It is well settled, however, that federal jurisdiction cannot be conferred by mere concession of a litigant or even by mutual agreement of the parties where jurisdiction is otherwise improper. Rather, the Supreme Court has consistently instructed lower federal courts to carefully guard "against expansion of federal jurisdiction by judicial interpretation or by ... consent of the parties." American Fire & Casualty Co. v. Finn, 341 U.S. 6, 17-18, 71 S.Ct. 534, 541-542, 95 L.Ed. 702 (1951). Accord Owen Equipment & Erection Company v. Kroger, 437 U.S. 365, 374, 98 S.Ct. 2396, 2403, 57 L.Ed.2d 274 (1978). This circuit recently reaffirmed the duty of a federal court to evaluate its jurisdiction sua sponte in Davis v. Pak, 856 F.2d 648 (4th Cir.1988). As stated by the court: "it is always incumbent upon a federal court to evaluate its jurisdiction sua sponte, to ensure that it does not decide controversies beyond its authority." Id. at 650. See Rule 12(h)(3), Fed.R.Civ.Proc. Consequently, the mere fact that plaintiff may think claims six and seven are separate and independent from the remaining claims does not preclude this court from evaluating this jurisdictional prerequisite to removal under § 1441(c) as the JM Family defendants seem to imply.

The duty of a federal district court to assess its jurisdiction sua sponte is critical because the statutory right of removal "exists only in certain enumerated classes of actions, and in order to exercise the right of removal, it is essential that the case be shown to be one within one of those classes." Hinks v. Associated Press, 704 F.Supp. 638, 639 (D.S.C.1988) (quoting Voors v. National Women's Health Organization, Inc., 611 F.Supp. 203, 205 (N.D. Ind.1985)); Chesapeake & Ohio Railway Co. v. Cockrell, 232 U.S. 146, 151, 34 S.Ct. 278, 279, 58 L.Ed. 544 (1914). The removing party bears the burden of establishing its right to a federal forum. P.P. Farmers' Elevator Co. v. Farmers Elevator Mutual Ins. Co., 395 F.2d 546, 548 (5th Cir. 1968); American Buildings Co. v. Varicon, Inc., 616 F.Supp. 641, 643 (D.Mass. 1985). This court's reading of the removal statutes must also "reflect the clear congressional intention to restrict removal." Able v. Upjohn Co., Inc., 829 F.2d 1330, 1332 (4th Cir.1987), cert. denied, ___ U.S. ___, 108 S.Ct. 1229, 99 L.Ed.2d 429 (1988); McKay v. Boyd Construction Co., Inc., 769 F.2d 1084, 1087 (5th Cir.1985); Ontiveros v. Anderson, 635 F.Supp. 216, 220 (N.D.Ill.1986). Indeed, this congressional intention has uniformly led courts to resolve doubts about the propriety of removal in favor of retained state court jurisdiction. Able, 829 F.2d at 1332; Jones v. General Tire & Rubber Co., 541 F.2d 660, 664 (7th Cir.1976); Greenshields v. Warren Petroleum Corp., 248 F.2d 61, 65 (10th Cir.), cert. denied, 355 U.S. 907, 78 S.Ct. 334, 2 L.Ed.2d 262 (1957); Adams v. Aero Services International, Inc., 657 F.Supp. 519, 521 (E.D.Va.1987).⁶ Perhaps most important, although state law may be relevant in determining the nature of the claims to which the federal test is applied, it is well established that removability under § 1441 is ultimately a federal law determination. Grubbs v. General Electric Credit Corp., 405 U.S. 699, 706, 92 S.Ct. 1344, 1349, 31 L.Ed.2d 612 (1972); Able, 829 F.2d at 1333 n. 2; 14A C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 3724, at 396-97.

The removability determination is conducted solely by reference to plaintiff's course of pleading, subject to certain exceptions not asserted by any party to these actions. Finn, 341 U.S. at 14, 71 S.Ct. at 540; Paxton v. Weaver, 553 F.2d 936, 938 (5th Cir.1977) (plaintiff's state court pleading controls removability); Union Planters National Bank of Memphis v. CBS, Inc., 557 F.2d 84, 89 (6th Cir.1977); Her Majesty Industries, Inc. v. Liberty Mutual Insurance Co., 379 F.Supp. 658, 662 (D.S.C. 1974). Importantly, the court must also refrain from determining the merits of a claim upon a motion to remand. 29 Federal Procedure, Lawyers Edition § 69:115, at 589 (1984). In light of these firmly established principles, this court must evaluate the propriety of removal by the JM Family defendants under § 1441(c), or, alternatively, pursuant to § 1441(b). Because the court has determined that these cases were removed improvidently and without jurisdiction, it is constrained to remand both cases to state court. 28 U.S.C. § 1447(c).

The primary thrust of plaintiffs' complaint asserts that the JM Family corporate and individual defendants⁷ "conspired, combined and concurred with the Defendant Danny Ray Lynch to induce TOF and Beasley to invest in Toyota of Florence, Inc. and, with Lynch, to purchase or agree to purchase the Cherokee Toyota Dealership, to pay large sums of money to Cherokee Toyota and Jordan apparently the former owner of Cherokee Toyota for the purchase, to commit to guarantees of future payment of even larger sums, and to undergo large financial losses as a result thereof." Complaint, para. 33. Obviously, various representations were made to plaintiff Beasley by representatives of the various JM Family defendants, and, in addition, Beasley and SET executed the Toyota Dealership Agreement as an integral part of these arrangements.⁸ Interestingly, the main thrust of plaintiffs' factual allegations in the complaint are found within the fraud claim. According to the complaint, plaintiff Beasley was "coaxed and encouraged to actively solicit purchase of the Jordan interests" through various representations and misrepresentations by the defendants. Complaint, para. 37-44. Paragraph 39(h) alleges that "SET violated its fiduciary and contractual obligation to assist with competent management and assistance...." (emphasis added). Indeed, plaintiffs' sixth claim for relief, breach of contract, alleges that defendant SET breached the dealer agreement "as set forth in Paragraph 39, causing the...