Wells' Dairy v. American Indus. Refrigeration, No. C 01-4052-MWB.

CourtUnited States District Courts. 8th Circuit. Northern District of Iowa
Writing for the CourtBennett
PartiesWELLS' DAIRY, INC., Plaintiff, v. AMERICAN INDUSTRIAL REFRIGERATION, INC., Refrigeration Valves and Systems Corporation, O.H. Livermore Construction, Inc., and O.H. Livermore Construction, Defendants.
Decision Date10 August 2001
Docket NumberNo. C 01-4052-MWB.
157 F.Supp.2d 1018
WELLS' DAIRY, INC., Plaintiff,
v.
AMERICAN INDUSTRIAL REFRIGERATION, INC., Refrigeration Valves and Systems Corporation, O.H. Livermore Construction, Inc., and O.H. Livermore Construction, Defendants.
No. C 01-4052-MWB.
United States District Court, N.D. Iowa, Western Division.
August 10, 2001.

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Gregg Williams of Heidman, Redmond, Fredregill, Patterson, Plaza, Dykstra & Prahl, L.L.P., Sioux, IA, Richard Strawbridge of Clausen Miller, P.C., Chicago, IL, for Plaintiff Wells' Dairy.

Thomas Harrington of Cozen and O'Connor, Philadelphia, PA, John Mayne of Mayne, Marks, Madsen & Hirschbach, L.L.P., Sioux City, IA, for Defendant RVS.

Matthew Early of Rawlings, Nieland, Probasco, Killinger, Ellwanger, Jacobs & Mohrhauser, L.L.P., Sioux City, IA, Bradley Lindeman of Meagher & Geer, L.L.P., Minneapolis, MN, for Defendant AIR.

Defendant Livermore did not appear at the oral arguments.

MEMORANDUM OPINION AND ORDER REGARDING DEFENDANT RVS'S MOTION TO TAKE LIMITED DISCOVERY; PLAINTIFF WELLS' DAIRY'S MOTION TO REMAND; AND PLAINTIFF WELLS' DAIRY'S MOTION TO STRIKE AFFIDAVIT

BENNETT, Chief Judge.


 TABLE OF CONTENTS
                I. BACKGROUND ................................................................ 1022
                II. LEGAL ANALYSIS ........................................................... 1025
                 A. General Principles Of Diversity Jurisdiction And Fraudulent Joinder.... 1025
                 B. Discovery On "Fraudulent Joinder" Issues ............................. 1026
                 1. Contentions of the parties ......................................... 1026
                 2. Face of the pleadings .............................................. 1028
                 3. "Piercing the pleadings" .......................................... 1031
                 4. Predetermination discovery ......................................... 1033
                 a. Guidance from precedent ............................................ 1033
                 b. Guidance from applicable standards ................................. 1034
                 i. Comparison of "fraudulent joinder" and Rule 12(b)(6)
                 standards ..................................................... 1034
                 ii. The "species" of fraudulent joinder ..................... 1036
                 C. Wells' Dairy's Motion To Remand ....................................... 1041
                 D. Attorneys' Fees And Costs ............................................. 1041
                III. CONCLUSION .............................................................. 1043
                

Page 1022

This lawsuit, which was originally filed in the Iowa District Court for Plymouth County, arises from a catastrophic liquid ammonia explosion at plaintiff Wells' Dairy's South Ice Cream Plant in Le Mars, Iowa, on March 27, 1999. Defendant Refrigeration Valves and Systems Corporation (RVS) removed this action to this federal court on May 30, 2001, with the consent of defendant American Industrial Refrigeration, Inc. (AIR), alleging that defendant O.H. Livermore Construction, Inc. (Livermore), had been fraudulently joined solely to defeat federal diversity jurisdiction. This matter is now before the court pursuant to RVS's June 4, 2001, motion to take limited discovery on the issue of the fraudulent joinder of Livermore; Wells' Dairy's June 15, 2001, motion to remand this action to state court, without discovery, because the face of the complaint establishes that Livermore has not been fraudulently joined; and Wells' Dairy's August 2, 2001, motion to strike the affidavit of RVS's counsel offered in support of RVS's contention that Livermore has been fraudulently joined in this action.

I. BACKGROUND

Wells' Dairy's original petition1 in this action, filed in the Iowa District Court for Plymouth County on March 25, 2001, alleges that, on March 27, 1999, a liquid ammonia refrigeration system at Wells' Dairy's South Ice Cream Plant (the Plant) in Le Mars, Iowa, catastrophically failed causing a massive liquid ammonia leak. Wells' Dairy alleges further that the vapors of the liquid ammonia ignited and an explosion occurred, causing millions of dollars in damage to Wells' Dairy's property and business. Wells' Dairy seeks to hold the defendants liable for that damage on various theories.

More specifically, Wells' Dairy alleges that AIR is a California corporation with its principal place of business in Watsonville, California, that AIR entered into a written contract with Wells' Dairy in October 1991 under which AIR agreed to design and build the Plant, and that AIR thereafter contracted to upgrade and add to the Plant. Wells' Dairy alleges that AIR was responsible for designing, installing, and inspecting the liquid ammonia circulation system, a ventilation system, and an ammonia detection system for the Plant. In Counts I, II, and III of its original state-court petition, Wells' Dairy asserts claims of breach of contract, negligence, and strict liability in tort, respectively, against AIR for damages arising

Page 1023

from the March 27, 1999, explosion caused by the failure of the systems designed, installed, and inspected by AIR. Next, Wells' Dairy alleges that RVS is a Texas corporation with its principal place of business in Bryan, Texas, and that RVS participated in the design of the liquid ammonia circulation system at the Plant. In Counts IV and V of its original state-court petition, Wells' Dairy alleges claims of negligence and strict liability in tort against RVS arising from the explosion caused by the failure of the ammonia system RVS helped to design. Finally, Wells' Dairy alleges that Livermore is an Iowa Corporation with its principal place of business in Le Mars, Iowa, and that Livermore acted as general contractor for the construction of the Plant. In Counts VI and VII of its original state-court petition, Wells' Dairy asserts claims of breach of contract and negligence against Livermore, alleging that Livermore's breach of its contractual and common-law duties was a cause of the March 27, 1999, explosion.

Defendants Livermore and AIR answered Well's Dairy's original state-court petition and asserted affirmative defenses, Livermore on April 16, 2001, and AIR on May 2, 2001. However, on May 30, 2001, with the consent of AIR, RVS removed this action to this federal court, alleging that defendant Livermore had been fraudulently joined solely to defeat federal diversity jurisdiction. Accordingly, RVS alleged that this action is removable pursuant to 28 U.S.C. § 1441 et seq., as this is an action over which this court would have original jurisdiction pursuant to 28 U.S.C. § 1332(a) where the citizenship of defendant Livermore is properly disregarded.

On June 4, 2001, shortly after removing this action, RVS filed a motion in this court for leave to take limited discovery on the issue of the fraudulent joinder of Livermore. The essence of RVS's contention that Livermore has been fraudulently joined is that "Livermore had no involvement in the design of the Plant or any of its Systems, including the ventilation system, and its role in construction of the Plant did not include any responsibilities for the construction of the ventilation system, the liquid ammonia circulation system, or the ammonia detection system which are the only systems alleged by Wells in its Petition to have contributed to cause the explosion." Defendant RVS's Memorandum Of Law In Support Of The Motion For Leave To Take Limited Discovery On The Issue Of The Fraudulent Joinder Of O.H. Livermore Construction, Inc. (RVS's Brief In Support Of Limited Discovery) at 2-3 (emphasis added). RVS argues that it should be permitted to take limited discovery to allow it to support these contentions, which would demonstrate that Wells' Dairy's claims against Livermore are frivolous, thereby establishing that Livermore has been fraudulently joined in this action solely to defeat federal diversity jurisdiction.

However, on June 15, 2001, Wells' Dairy filed its own motion to remand this action to state court and combined with that motion a resistance to RVS's motion to take limited discovery. Wells' Dairy contends that discovery is not required, because the impropriety of removal and the propriety of remand should be judged on the face of the pleadings. Wells' Dairy contends that RVS has failed to plead fraudulent joinder with the particularity required for pleading this or any other kind of fraud, and certainly RVS's disputes with the allegations in Wells' Dairy's petition do not amount to "clear and convincing evidence" of fraudulent joinder. On the other hand, Wells' Dairy contends that its claims against Livermore satisfy the applicable Iowa pleading requirements, are sufficient to defeat a Rule 12(b)(6) motion to dismiss for failure to state a claim — which Wells' Dairy points

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out Livermore has not made in this case — and thus are more than sufficient to demonstrate the "slight possibility of a right to relief" necessary to establish proper joinder of Livermore. Consequently, Wells' Dairy argues that removal was improper and this case should be remanded to the Iowa District Court for Plymouth County, without the unnecessary delay of even limited discovery.2

On July 17, 2001, RVS's counsel submitted his affidavit in support of RVS's resistance to Wells' Dairy's motion to remand, in which counsel avers that he has been informed by Livermore's counsel that Livermore was responsible only for building the "shell" of the Plant pursuant to plans provided by Wells' Dairy, that Livermore had no responsibility for design or construction of any of the ammonia systems, the failure of which allegedly caused the explosion, and that officers of Wells' Dairy had assured officers of Livermore prior to the filing of this litigation that Wells' Dairy did not believe that Livermore had done anything wrong, but that Wells' Dairy's insurers were "calling the shots" in the impending litigation. Counsel averred that he had not yet been able to procure affidavits from those officers of Livermore involved in the...

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18 practice notes
  • Walker Mfg., Inc. v. Hoffmann, Inc., No. C 00-103-MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • May 12, 2003
    ...Conduct Act (IOCCA), IOWA CODE § 706A.2(1)(c). However, the court dismissed that claim by order dated April 25, 2001. See Walker 1, 157 F.Supp.2d at 1018. 2. In its Statement Of Disputed Material Facts In Resistance To Motion For Partial Summary Judgment, Walker asserts that there are numer......
  • Van Beek v. Ninkov, No. C 03-014-MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • June 2, 2003
    ...by appeal or writ of mandamus. McCorkindale, 909 F.Supp. at 650; see also Wells' Dairy, Inc. v. American Indus. Refrigeration, Inc., 157 F.Supp.2d 1018, 1041-43 (N.D.Iowa 2001) (reiterating this summary); Foslip Pharmaceuticals, Inc., 92 F.Supp.2d at 901 (quoting McCorkindale, 909 F.Supp. a......
  • Bohnenkamp v. Hog Slat, Inc., C21-4014-LTS
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • July 13, 2021
    ...at *2 n.2 (D. Minn. Aug. 17, 2012), aff'd , 518 F. App'x 514 (8th Cir. 2013) ; Wells’ Dairy, Inc. v. Am. Indus. Refrigeration, Inc. , 157 F. Supp. 2d 1018, 1022 n.1 (N.D. Iowa 2001) ; Palmquist v. Conseco Med. Ins. Co. , 128 F. Supp. 2d 618, 621 (D.S.D. 2000) ; but see Glazer v. Unum Life I......
  • Gross v. Fca U.S. LLC, No. 17 C 4889
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • December 7, 2017
    ...v. Wachovia Mortg., FSB, 641 F. Supp. 2d 602, 607 (N.D. Tex. 2009); see also Wells' Dairy, Inc. v. Am. Indus. Refrigeration, Inc., 157 F. Supp. 2d 1018, 1036 (N.D. Iowa 2001) ("[T]he 'fraud' consists of knowingly—or possibly mistakenly—pleading that a defendant is a citizen of the same stat......
  • Request a trial to view additional results
18 cases
  • Walker Mfg., Inc. v. Hoffmann, Inc., No. C 00-103-MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • May 12, 2003
    ...Conduct Act (IOCCA), IOWA CODE § 706A.2(1)(c). However, the court dismissed that claim by order dated April 25, 2001. See Walker 1, 157 F.Supp.2d at 1018. 2. In its Statement Of Disputed Material Facts In Resistance To Motion For Partial Summary Judgment, Walker asserts that there are numer......
  • Van Beek v. Ninkov, No. C 03-014-MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • June 2, 2003
    ...by appeal or writ of mandamus. McCorkindale, 909 F.Supp. at 650; see also Wells' Dairy, Inc. v. American Indus. Refrigeration, Inc., 157 F.Supp.2d 1018, 1041-43 (N.D.Iowa 2001) (reiterating this summary); Foslip Pharmaceuticals, Inc., 92 F.Supp.2d at 901 (quoting McCorkindale, 909 F.Supp. a......
  • Bohnenkamp v. Hog Slat, Inc., C21-4014-LTS
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • July 13, 2021
    ...at *2 n.2 (D. Minn. Aug. 17, 2012), aff'd , 518 F. App'x 514 (8th Cir. 2013) ; Wells’ Dairy, Inc. v. Am. Indus. Refrigeration, Inc. , 157 F. Supp. 2d 1018, 1022 n.1 (N.D. Iowa 2001) ; Palmquist v. Conseco Med. Ins. Co. , 128 F. Supp. 2d 618, 621 (D.S.D. 2000) ; but see Glazer v. Unum Life I......
  • Gross v. Fca U.S. LLC, No. 17 C 4889
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • December 7, 2017
    ...v. Wachovia Mortg., FSB, 641 F. Supp. 2d 602, 607 (N.D. Tex. 2009); see also Wells' Dairy, Inc. v. Am. Indus. Refrigeration, Inc., 157 F. Supp. 2d 1018, 1036 (N.D. Iowa 2001) ("[T]he 'fraud' consists of knowingly—or possibly mistakenly—pleading that a defendant is a citizen of the same stat......
  • Request a trial to view additional results

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