Value Recovery Group, Inc. v. Hourani

• Decision Date: 21 September 2000
• Docket Number: No. Civ.A. H-00-1847.,Civ.A. H-00-1847.
• Citation: 115 F.Supp.2d 761
• Parties: VALUE RECOVERY GROUP, INC., Plaintiff, v. Monzer HOURANI, Individually, d/b/a MEDISTAR, et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

115 F.Supp.2d 761

VALUE RECOVERY GROUP, INC., Plaintiff, v. Monzer HOURANI, Individually, d/b/a MEDISTAR, et al., Defendants.

No. Civ.A. H-00-1847.

United States District Court, S.D. Texas, Houston Division.

September 21, 2000.

COPYRIGHT MATERIAL OMITTED

Michael J Stanley, Beirne Maynard and Parsons, Houston, TX, for Value Recovery Group, plaintiff.

Scott Douglas Cunningham, Attorney at Law, Houston, TX, John Calrton Wynne, Andrews & Kurth, Houston, TX, for Monzer Hourani, Individually dba Medistar, defendant.

MEMORANDUM AND ORDER

LAKE, District Judge.

Value Recovery Group, Inc. ("VRG") filed this action in the 165th Judicial District of Harris County, Texas, to enforce a judgment against Monzer Hourani, asserting causes of action pursuant to § 31.002 of the Texas Civil Practices and Remedies Code, §§ 24.005 and 24.006 of the Texas Business and Commerce Code (the Uniform Fraudulent Transfer Act), and 28 U.S.C. § 3301 et seq. (the Federal Fraudulent Transfer Act). See Plaintiff's First Amended Original Petition, Exhibit 1-B to Defendant's Notice of Removal (Docket Entry No. 1). VRG seeks to have all of the corporate defendants declared alter egos of Monzer Hourani and seeks declaratory relief regarding the disposition of assets held by defendants. All defendants except Monzer Hourani and Integrated Engineering & Construction, Inc.¹ ("Removing Defendants") removed the action to this court on June 1, 2000, on the basis of federal question jurisdiction under 28 U.S.C. § 1441(a). (Notice of Removal [Docket Entry No. 1]) Pending before the court is the Motion of VRG to Remand (Docket Entry No. 19). For the reasons discussed below, Value Recovery Group's motion will be granted.

I. Background

VRG alleges that Monzer Hourani defaulted on a guarantee of a note from Crossroads Park, Inc. to Commonwealth Mortgage Corp. See Plaintiff's First Amended Original Petition, p. 5, at Exhibit 1-B to Defendants' Notice of Removal (Docket Entry No. 1). When the institution that owned the mortgage, Commonwealth Savings Association, failed, the Resolution Trust Corporation (RTC) became the conservator of Commonwealth's assets, including Hourani's defaulted obligation. See id. The RTC obtained a $6.4 million judgment against Hourani in Resolution Trust Corporation as Conservator for Commonwealth Savings Association by Federal Deposit Insurance Corporation as Manager for Conservator v. Monzer Hourani, No. H-90-1483 (S.D.Tex. Oct. 30, 1990). The RTC filed an abstract of judgment in 1992, but collection attempts were unsuccessful. VRG purchased the right to enforce the judgment through an assignment of rights.² See id. VRG filed suit in state court on April 30, 1999, against Monzer Hourani, several of his family members in Houston and Lebanon, and approximately 35 businesses, seeking to enforce its judgment. See Plaintiff's Original Petition, at Exhibit 1-A to Defendants' Notice of Removal (Docket Entry No. 1). The Removing Defendants counterclaimed in state court on June 14, 1999, alleging tortious interference with contracts and prospective business relationships, defamation and libel, business disparagement, and filing a fraudulent claim to real property. The Removing Defendants seek damages, sanctions, and declaratory relief. See Defendants' Original Answer, at Exhibit 1-C to Defendants' Notice of Removal (Docket Entry No. 1).

VRG's original petition contained only state law claims. See Plaintiff's Original Petition, at Exhibit 1-A to Defendants' Notice of Removal (Docket Entry No. 1). VRG filed a First Amended Petition adding a cause of action under the Federal Fraudulent Transfer Act around March 24, 2000.³ See Plaintiff's First Amended Original Petition, at Exhibit 4 to Moving Defendants' Motion for Partial Summary Judgment (Docket Entry No. 18). Defendants moved to strike the visiting judge assigned to the action. When the visiting judge ruled that defendants' motion to remove him was untimely, two of the defendants filed a petition for writ of mandamus in the Fourteenth Court of Appeals and sought a stay of the state court case while the petition was being considered. See In re Hourani, 20 S.W.3d 819 (Tex.App. — Houston [14th Dist.] 2000, orig. proceeding). On April 4, 2000, the Court of Appeals issued an order staying all proceedings in the trial court pending a decision on the petition for writ of mandamus. On May 31, 2000, the Court of Appeals issued its opinion in the case and dissolved the stay. See In re Hourani, 20 S.W.3d at 819, 826.

The Removing Defendants removed the case to this court on June 1, 2000, asserting federal question jurisdiction under 28 U.S.C. § 1441(a). See Notice of Removal (Docket Entry No. 1). VRG timely moved to remand on June 26, 2000, arguing that removal was untimely because it was not filed within thirty days of the March 2000 amended petition that first asserted a federal cause of action. See Plaintiff's Motion to Remand (Docket Entry No. 19). The Removing Defendants argue that the state court stay, in place from April 4 through May 31, 2000, tolled the time for removal during that period. The Removing Defendants argue that they removed the case the day after the state court stay was lifted, and well within the thirty-day removal period if the stay tolled the time for removal.

II. Analysis

28 U.S.C. § 1447(c) provides two grounds for remand: (1) a defect in removal procedure and (2) lack of subject matter jurisdiction. See Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 116 S.Ct. 494, 497, 133 L.Ed.2d 461 (1995). When considering a motion to remand, the removing party bears the burden of showing that removal was proper. See Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir.1988), appeal after remand, 915 F.2d 965 (5th Cir.1990), aff'd, 503 U.S. 131, 112 S.Ct. 1076, 117 L.Ed.2d 280 (1992). Because removal jurisdiction "raises significant federalism concerns," Willy, 855 F.2d at 1164, courts must construe removal statutes "narrowly, with doubts resolved in favor of remand to the state court." Jefferson Parish Hosp. Dist. No. 2 v. Harvey, 788 F.Supp. 282, 283-84 (E.D.La.1992). If there is any doubt that a right to removal exists, "ambiguities are to be construed against removal." Samuel v. Langham, 780 F.Supp. 424, 427 (N.D.Tex.1992).

The time for removal is governed by 28 U.S.C. § 1446(b), which provides:

(b) The notice of removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth a claim for relief upon which such action or proceeding is based....

If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, 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, except that a case may not be removed on the basis of jurisdiction conferred by section 1332 of this title more than 1 year after commencement of the action.

VRG asserts two arguments in favor of remand. First, VRG argues that at various times before it filed an amended petition the Removing Defendants could have reasonably ascertained from other pleadings and papers that the case involved a federal question. See Plaintiff's Motion to Remand, p. 4 (Docket Entry No. 19). Second, VRG argues that even if its amended petition presented the first opportunity to remove, removal was not effected until more than sixty days after that pleading was filed. VRG argues that the state court stay may have prevented any action by the Removing Defendants in state court, but had no effect on any rights they had to act in federal court.

The Removing Defendants argue that the amended petition was the first time that VRG asserted, in a well-pleaded complaint, a federal cause of action. The Removing Defendants argue that the state court stay prevented them from taking any action in the case, not just in the state court. They argue that they promptly filed for removal on the day after the stay was lifted and well within the time for removal if the stay tolled the time for removal. They argue that equity requires this court to deny the motion to remand and also that the subject matter jurisdiction of this court has been mandatorily invoked by proper removal.

A. When did the time for removal begin to run?

VRG argues that pleadings and correspondence before the first amended petition was filed constituted "other paper[s]" stating that federal law was applicable to their claims. See 28 U.S.C. § 1446(b) (West 2000). The Removing Defendants argue that these other papers did not make the case removable because they did not assert a federal cause of action. They argue that the first amended petition was VRG's first notice of reliance on a federal statute for recovery.

The time for removal begins to run upon defendants' receipt of a pleading from which it may first be ascertained that the case is one which is or has become removable. See 28 U.S.C. § 1446(b) (West 2000). The existence of federal question jurisdiction makes an action removable. See 28 U.S.C. § 1331 (West 2000). A federal question arises if a substantial, disputed question of federal law is presented on the face of the well-pleaded complaint. See Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908); Carpenter v. Wichita Falls Indep. School District, 44 F.3d 362, 366 (5th Cir. 1995). Because a plaintiff is the master of his complaint, he may defeat attempts at removal by alleging only state law claims. See Carpenter, 44 F.3d at 367, citing Caterpillar, Inc. v. Williams, 482 U.S. 386, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987).

While VRG may have asserted that federal law was applicable to its claims, it did not allege any cause of action that arose under the Constitution or laws of the United States...