Washington v. Ernster

• Decision Date: 29 January 2007
• Docket Number: Civil Action No. 1:06-CV-623.
• Citation: 551 F.Supp.2d 568
• Parties: Mickey L. WASHINGTON, Plaintiff, v. Cletus P. ERNSTER, III, and Cletus P. Ernster, III, P.C., Defendants/Third-Party Plaintiffs, v. Dennis Sweet, Richard Freese, Shane Langston, Langston Sweet & Freese, PLLC, Sweet & Freese, PLLC, Pieter Teeuwissen, Dale Danks, Jr., Anthony Simon, Danks, Simon & Teeuwissen, PLLC, and R.G. Taylor II, P.C. & Associates, Third-Party Defendants.
• Court: U.S. District Court — Eastern District of Texas

551 F.Supp.2d 568

Mickey L. WASHINGTON, Plaintiff, v. Cletus P. ERNSTER, III, and Cletus P. Ernster, III, P.C., Defendants/Third-Party Plaintiffs, v. Dennis Sweet, Richard Freese, Shane Langston, Langston Sweet & Freese, PLLC, Sweet & Freese, PLLC, Pieter Teeuwissen, Dale Danks, Jr., Anthony Simon, Danks, Simon & Teeuwissen, PLLC, and R.G. Taylor II, P.C. & Associates, Third-Party Defendants.

Civil Action No. 1:06-CV-623.

United States District Court, E.D: Texas.

January 29, 2007.

COPYRIGHT MATERIAL OMITTED

Danny Ray Scott, Jr., Law Office of Danny R. Scott, PC, Beaumont, TX, for Plaintiff.

Lance Christopher Kassab, Lance Christopher Kassab, PC, Houston, TX, Jeffrey Mark Tillotson, Britta Erin Stanton, Lynn Tillotson & Pinker LLP, Dallas, TX, David Anthony Busby, David Anthony Busby, Langston & Langston, James W. Craig, Phelps Dunbar, Paige Craig Jones, Jackson, MS, Kathleen Hopkins Alsina, Kathleen Hopkins Alsina, Phelps Dunbar, Ernest William Boyd, Jeremy Richard Stone, Mehaffy & Weber, Houston, TX, for Defendants.

MEMORANDUM AND ORDER

MARCIA A. CRONE, District Judge.

Pending before the court is Plaintiff Mickey L. Washington's ("Washington") Motion to Remand (# 11). Washington seeks remand to state court of this action for negligent misrepresentation and declaratory judgment against Defendants Cletus P. Ernster, III, and Cletus P. Ernster, III, P.C. (collectively, "Ernster"). Having reviewed the pending motion, the submissions of the parties, the pleadings, and the applicable law, this court is of the opinion that remand is warranted.

I. Background

All parties to this action are attorneys or law firms that were involved in a series of cases concerning Dillard's . Department Store ("the Dillard's litigation"). Prior to the filing of this lawsuit, Washington, an employee of Ernster, was notified that he would be sued by Nell McCallum & Assocaties, Inc. ("McCallum"), a court reporting company, for an unpaid debt related to the Dillard's litigation. Therefore, on June 16, 2006, Washington filed his original petition in the 58th Judicial District Court of Jefferson County, Texas, asserting a claim for negligent misrepresentation against Ernster and seeking declaratory and injunctive relief. Specifically, Washington alleged that he worked for Ernster under the belief that he would not be held personally liable for debts incurred in furtherance of his employer's business. Additionally, Washington sought a declaratory judgment (1) stating that Washington does not owe the debt to McCallum, (2) specifying the person or entity that owes the debt, and (3) ordering the liable party to pay the debt. Finally, Washington requested injunctive relief barring any entity from attempting to collect the debt from him personally. McCallum filed separate actions against Washington and Ernster on June 30, 2006, and July 5, 2006, respectively.

On August 8, 2006, Ernster filed an answer to Washington's original petition as well as a third-party petition against Dennis Sweet ("Sweet"); Richard Freese; Shane Langston ("Langston"); Langston Sweet & Freese, PLLC; Sweet & Freese, PLLC; Pieter Teeuwissen ("Teeuwissen"); Dale Danks, Jr. ("Danks"); Anthony Simon ("Simon"); Danks, Simon & Teeuwissen, PLLC; and R.G. Taylor II, P.C. & Associates ("Taylor") (collectively, "Third-Party Defendants"). Ernster claims that Third-Party Defendants are responsible for the debt to McCallum pursuant to a Dillard's Department Store Litigation Letter Agreement ("the Dillard's Agreement"), which was signed by Ernster and Third-Party Defendants in August 2000. The Dillard's Agreement purports to allocate attorneys' fees from lawsuits filed against Dillard's and provides that the parties agree to "bear all costs and expenses in proportion to their respective contingent fee interest" in the litigation. Thus, Ernster seeks declaratory relief and asserts claims against Third-Party Defendants for negligent misrepresentation, breach of contract, and fraud.¹

On October 6, 2006, the Justice of the Peace Court of Harris County Texas, Precinct 1, Place 2, issued separate judgments against Washington and Ernster for the debt to McCallum. Specifically, the court ordered Washington to pay the sum of $3,802.55, with pre-judgment interest at the rate of 6% per annum from June 23, 2005, until the date of judgment, reasonable attorney's fees of $1,000.00, plus interest on the entire amount at the rate of 8.25% per annum from the date of judgment until the date of final payment, and all court costs.

Also on October 6, 2006, Third-Party Defendant Sweet removed Washington's case to this court on the basis of diversity of citizenship, alleging that complete diversity exists among the real parties in interest and that the amount in controversy exceeds $75,000.00, exclusive of interest and costs. It is undisputed that Washington and Ernster are citizens and residents of the State of Texas. Third-Party Defendant Taylor is also a citizen of Texas, while the remaining Third-Party Defendants are citizens of either Mississippi or Alabama. According to Sweet, only he, Langston, and Danks had been served with process at the time of removal, and Langston and Danks consented to Sweet's removal of this action to federal court. Ernster and Taylor, however, did not consent to removal.

In their Notice of Removal, Third-Party Defendants argue that Washington and Ernster are colluding to avoid federal jurisdiction. Specifically, they assert that Washington sued Ernster nominally to prevent diversity, and Ernster then added Taylor as a nominal third-party defendant to impede further diversity jurisdiction. Third-Party Defendants, therefore, request that the court realign the parties in accordance with their true interests in this case, designating Washington, Ernster, and Taylor as plaintiffs and the remaining Third-Party Defendants as defendants. Such an arrangement would result in complete diversity of citizenship.

On November 6, 2006, Washington filed a motion to remand this action to state court, contending that because complete diversity does not exist among the parties, federal jurisdiction is lacking. Washington first argues that remand is appropriate because Ernster did not consent to removal. Moreover, Washington asserts that Sweet, Langston, and Danks, in their capacity as Third-Party Defendants, cannot invoke removal jurisdiction in any event. Finally, Washington contends that Third-Party Defendants have failed to meet their heavy burden of proving fraudulent joinder. In response, Third-Party Defendants argue that because Ernster was fraudulently joined, he need not consent to removal. Additionally, they claim that once the court has properly realigned the parties, Third-Party Defendants will be deemed defendants and, hence, proper parties to remove this action. Finally, they assert that there is no reasonable basis for predicting that Washington could establish liability against Ernster or that Ernster could establish liability against Taylor under state law.

II. Analysis

"Federal courts are courts of limited jurisdiction." Peoples Nat'l Bank v. Office of the Comptroller of the Currency of the United States, 362 F.3d 333, 336 (5th Cir.2004); accord Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); Johnson, v. United States, 460 F.3d 616, 621 n. 6 (5th Cir.2006); Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir.), cert. denied, 534 U.S. 993, 122 S.Ct. 459, 151 L.Ed.2d 377 (2001); Murphy v. Uncle Ben's, Inc., 168 F.3d 734, 741 (5th Cir. 1999). "They possess only that power authorized by Constitution and statute, which is not to be expanded by judicial decree." Kokkonen, 511 U.S. at 377, 114 S.Ct. 1673 (citations omitted). The court "must presume that a suit lies outside this limited jurisdiction, and the burden of establishing federal jurisdiction rests on the party seeking the federal forum." Howery, 243 F.3d at 916 (citing Kokkonen, 511 U.S. at 377, 114 S.Ct. 1673); see also Boone v. Citigroup, Inc., 416 F.3d 382, 388 (5th Cir.2005). In an action that has been removed to federal court, a district court is required to remand the case to state court if, at any time before final judgment, it determines that it lacks subject matter jurisdiction. See 28 U.S.C. § 1447(c); Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 571, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004); McDonal v. Abbott Labs., 408 F.3d 177, 182 (5th Cir.2005).

Federal courts have subject matter jurisdiction and are authorized to entertain causes of action only where a question of federal law is involved or where there is diversity of citizenship between the parties and the amount in controversy exceeds $75,000.00, exclusive of interest and costs. See 28 U.S.C. §§ 1331, 1332; Lincoln Prop. Co. v. Roche, 546 U.S. 81, 89, 126 S.Ct. 606, 613, 163 L.Ed.2d 415 (2005); Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552, 125 S.Ct. 2611, 2617, 162 L.Ed.2d 502 (2005); McDonal, 408 F.3d at 181; Howery, 243 F.3d at 914-15; Hart v. Bayer Corp., 199 F.3d 239, 246 (5th Cir.2000). In order to determine whether jurisdiction is present in a removed action, the claims set forth in the state court petition are considered as of the date of removal. See Wisconsin Dep't of Corr. v. Schacht, 524 U.S. 381, 391, 118 S.Ct. 2047, 141 L.Ed.2d 364 (1998); McGowin v. ManPower Int'l, Inc., 363 F.3d 556, 558 n. 1 (5th Cir.2004); Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir.2002); Howery, 243 F.3d at 916; Gebbia v. Wal-Mart Stores, Inc., 233 F.3d 880, 883 (5th Cir.2000); Texas Beef Group v. Winfrey, 201 F.3d 680, 686 (5th Cir.2000); Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir.1995).

In cases where, as here, there is no suggestion that a federal question is involved, subject matter jurisdiction exists only if there is complete diversity among the parties and the amount in controversy exceeds $75,000.00. See ...