Universal Truck & Equip. Co. v. Southworth-Milton, Inc.

• Citation: 765 F.3d 103
• Decision Date: 02 September 2014
• Docket Number: No. 13–2070.,13–2070.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)
• Parties: UNIVERSAL TRUCK & EQUIPMENT COMPANY, INC.; New London Mining Manufacturing & Processing, LLC; Nicholas E. Cambio, individually and as Trustee of the Nicholas E. Cambio, Roney A. Malafronte and Vincent A. Cambio Trust; Vincent A. Cambio, Plaintiffs–Appellants, v. SOUTHWORTH–MILTON, INC., Defendant–Appellee, Caterpillar, Inc.; Caterpillar Financial Service Corporation; W. Frank Blouni; John R. Brazil; Daniel M. Dickinson; John T. Dillon; Eugene V. Fife; Gail D. Fosler; Juan Gallardo; David R. Goode; Peter A. Magowan; William A. Osborn; James W.L. Owens; Charles D. Powell; Edward B. Bust, Jr.; Susan C. Schwab; Joshua I. Smith; Kent Adams; Jim Duensing; Peter D'Agostino, Defendants.

765 F.3d 103

UNIVERSAL TRUCK & EQUIPMENT COMPANY, INC.; New London Mining Manufacturing & Processing, LLC; Nicholas E. Cambio, individually and as Trustee of the Nicholas E. Cambio, Roney A. Malafronte and Vincent A. Cambio Trust; Vincent A. Cambio, Plaintiffs–Appellants,

v.SOUTHWORTH–MILTON, INC., Defendant–Appellee,Caterpillar, Inc.; Caterpillar Financial Service Corporation; W. Frank Blouni; John R. Brazil; Daniel M. Dickinson; John T. Dillon; Eugene V. Fife; Gail D. Fosler; Juan Gallardo; David R. Goode; Peter A. Magowan; William A. Osborn; James W.L. Owens; Charles D. Powell; Edward B. Bust, Jr.; Susan C. Schwab; Joshua I. Smith; Kent Adams; Jim Duensing; Peter D'Agostino, Defendants.

No. 13–2070.

United States Court of Appeals,

First Circuit.

Sept. 2, 2014.

Richard G. Riendeau, for appellant.

J. Richard Ratcliffe, with whom Jeffrey Biolchini and Ratcliffe Harten Burke & Galamaga, LLP were on the brief, for appellee.

Before TORRUELLA, DYK ^* and KAYATTA, Circuit Judges.

DYK, Circuit Judge.

The plaintiffs here filed a breach of contract complaint in state court. After the only non-diverse defendant was dismissed from the case by the state court, the remaining defendants removed the lawsuit to federal court, invoking diversity jurisdiction. At the time of removal, the dismissal of the non-diverse defendant was not final. The district court denied the plaintiffs' motion to remand and later granted summary judgment in favor of defendant Southworth–Milton, Inc. (“Southworth”) and awarded attorneys' fees. In addition to challenging the summary judgment decision and award of attorneys' fees in favor of Southworth, the plaintiffs argue that the case should be remanded to state court.

We hold that, despite the defendants' failure to comply with the statutory removal requirements, a remand to state court is not required because complete diversity existed at the time of judgment, and plaintiffs failed to object to the statutory procedural defect in a timely manner. We also affirm the district court's grant of summary judgment and award of attorneys' fees in favor of defendant Southworth.

I.

The plaintiffs in this action are Universal Truck & Equipment Co., Inc. (“Universal”); New London Mining Manufacturing & Processing, LLC (“NLM”); Nicholas E. Cambio, individually and as Trustee of the Nicholas E. Cambio, Roney A. Malafronte and Vincent A. Cambio Trust; and Vincent A. Cambio (collectively, the “appellants” or “plaintiffs”). They are citizens of Rhode Island. They brought state law contract claims against the following defendants: Southworth, Caterpillar, Inc. (“Caterpillar”), Caterpillar Financial Services Corp. (“CAT Financial”), and several other entities and individuals (collectively, the “appellees” or “defendants”). Southworth is a New Hampshire corporation and authorized Caterpillar equipment dealer with its principal place of business in Milford, Massachusetts. Caterpillar and CAT Financial are distinct Delaware corporations with principal places of business in Illinois and Tennessee, respectively. All but one of the other defendants were not Rhode Island citizens. But Peter D'Agostino, a salesman at Southworth, was also named as an original defendant in state court, and he was a citizen of Rhode Island. If D'Agostino were a proper party to the action, his Rhode Island residency would have prevented diversity jurisdiction.

So far as pertinent for the present purposes, the state court action arose from an alleged oral agreement between defendants Caterpillar, CAT Financial, and Southworth, on the one hand, and plaintiff NLM, on the other. Around March 17, 2008, NLM purchased or refinanced construction equipment from Caterpillar's Southworth dealership for approximately $3.4 million. The purchase was financed by CAT Financial, and NLM provided a security agreement and promissory note to CAT Financial.

After the 2008 national recession, NLM experienced a severe downturn in its business, and by mid–2009, NLM was unable to make its monthly payments to CAT Financial. As a result, CAT Financial and NLM began to explore refinancing options.

Around July 29, 2009, NLM and CAT Financial agreed that NLM would sell four of the purchased construction vehicles in order to reduce NLM's debt to CAT Financial. Southworth agreed to store the four vehicles on its lot for a seventy-five day period while NLM attempted to sell them. The vehicles were transferred to Southworth's custody, if not immediately to its lot, around August 9, 2009.

While the four vehicles were awaiting sale, a conversation occurred, which forms the basis for the claimed oral contract. Original defendant Peter D'Agostino, a salesman at Southworth, visited NLM and spoke to an NLM officer, Vincent Cambio, regarding the status of the refinancing negotiations. When D'Agostino asked Cambio about the progress of the sales, Cambio responded “I got to tell you, you know how they're going; you know better than me.” Transcript of Summary Judgment Hearing at 5:10–11, Universal Truck & Equipment Co., Inc. v. Caterpillar, Inc., et al., No. 1:10–cv–00466 (D.R.I., Dec. 5, 2012), ECF No. 103. D'Agostino then asked, “So you're going to get rid of some equipment?” Id. at 5:12–13, to which Cambio answered, “Yeah there's no use for them. Are you going to try to sell some of them for us like outright sales?” Id. at 5:13–15. D'Agostino then replied, “I'll do what I can do,” or “we'll do what we can do.” Id. at 5:16–17. D'Agostino, allegedly acting for Southworth and other defendants, never managed to sell the equipment, and CAT Financial eventually repossessed and sold it.

On June 18, 2010, the plaintiffs filed suit in Rhode Island Superior Court. While the complaint set forth various claims, only one is relevant for present purposes. The complaint alleged that “NLM entered into negotiations with [Caterpillar], CAT Financial and [Southworth] through their agent [D'Agostino],” and “[a]s part of the Oral Agreement, [Southworth] through its agent [D'Agostino] agreed to act as broker of the four (4) remaining vehicles ... to be marketed and sold at [Southworth] in the ordinary course of business.” Complaint at 7–8, Universal Truck & Equipment Co., Inc. v. Caterpillar, Inc., et al., No. 1:10–cv–00466 (D.R.I., Nov. 16, 2010), ECF No. 1–1. The complaint alleged that CAT Financial's repossession and sale of the vehicles constituted a breach of this oral agreement and resulted in a loss to the plaintiffs.

When plaintiffs initiated this lawsuit, it would not have been removable if D'Agostino, a resident of Rhode Island, were properly named as a defendant. His presence would have defeated complete diversity. However, D'Agostino filed a motion to dismiss the case against him for failure to state a claim, arguing that he was not a party to the alleged contract. On October 25, 2010, the Superior Court of Rhode Island granted D'Agostino's motion and dismissed him from the action. On November 16, 2010, before this dismissal became final and non-appealable, the defendants filed a notice of removal to the United State District Court for the District of Rhode Island, asserting that diversity jurisdiction existed as of the date D'Agostino was dismissed because the plaintiffs were Rhode Island residents and the remaining defendants were not.

The defendants asserted that removal was timely because it occurred within 30 days after the state court dismissed all claims asserted against D'Agostino. The removal statute states:

if the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant ... of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.

28 U.S.C. § 1446(b)(3).

On December 10, 2010, the plaintiffs filed a motion to remand to state court, correctly pointing out that the state court's dismissal of D'Agostino had not become final, and arguing that therefore removal was improper. The defendants responded to this motion, arguing, for the first time, that removal was proper because D'Agostino was fraudulently joined, the plaintiffs having “failed to articulate any basis for their claims against D'Agostino.” Defendants' Memorandum In Support of Objection to Plaintiffs' Motion for Remand at 4, Universal Truck & Equipment Co., Inc. v. Caterpillar, Inc., et al., No. 1:10–cv–00466 (D.R.I., Dec. 22, 2010), ECF No. 5. In reply to this argument, the plaintiffs simply asserted that the joinder was not fraudulent, but raised no objection as to the timeliness of a removal based on fraudulent joinder. On February 3, 2011, the district court denied the motion to remand to state court, agreeing with the defendants' fraudulent joinder theory and finding that D'Agostino had not been properly joined in the lawsuit.

Following the motion to remand, the parties engaged in discovery, and the defendants eventually moved for summary judgment.¹ On November 5, 2012, the district court granted summary judgment in favor of the defendants with respect to the plaintiffs' claims, holding that no reasonable jury could find that the alleged oral agreement existed. On May 9, 2013, the court awarded attorneys' fees to Southworth on the grounds that the claims were frivolous. The district court then granted certification under Rule 54(b). Rule 54(b) Order, Universal Truck & Equipment Co., Inc. v. Caterpillar, Inc., et al., No. 1:10–cv–00466 (D.R.I., July 3, 2013), ECF No. 141. Plaintiffs appealed the judgment in favor of Southworth.²

We have jurisdiction under 28 U.S.C. § 1291. We review de novo the question of whether there was a defect in the removal process. See Esposito v. Home Depot U.S.A., Inc., 590 F.3d 72, 76 (1st Cir.2009); Loftis v. United Parcel Service, Inc., 342 F.3d 509, 514 (6th Cir.2003). We review the grant of summary judgment de novo and the district court's award of attorneys' fees for abuse of discretion. Hardy v. Loon...