Banking

** Note: This is part two of a two-part series.

1. Case is filed in Mississippi federal court.  Texas plaintiff and Delaware plaintiff.  The four defendants are residents of Louisiana, Mississippi, Delaware, and California.  Is diversity jurisdiction present?

No.  There is a Delaware plaintiff and a Delaware defendant.  Complete diversity is not present. KeyBank Nat. Ass’n v. Perkins Rowe Associates, L.L.C., 539 Fed. Appx. 414, 416 (5th Cir. 2013) (“28 U.S.C. § 1332(a)(1) . . . requires complete diversity between all plaintiffs and all defendants.”) (quotingLincoln Prop. Co. v. Roche, 546 U.S. 81, 89 (2005)).

2. Case is in Mississippi state court.  Mississippi plaintiff.   Alabama defendant and Mississippi defendant.  The Mississippi defendant settles and is dismissed.   Is the case removable?

Yes.  The “voluntary dismissal by a plaintiff of all defendants whose citizenship is not diverse from that of the plaintiff, through settlement or otherwise, renders the case removable by any remaining defendants whose citizenship is diverse.” Horton v. Scripto-Tokai Corp., 878 F. Supp. 902, 907 (S.D. Miss. 1995) (“So, plaintiff’s voluntary dismissal of Hawkins, the sole original non-diverse defendant, from this lawsuit transformed this case from one not proper for removal to one that met the removal prerequisite.”); see also Estate of Martineau v. ARCO Chemical Co., 203 F.3d 904, 911 (5th Cir. 2000)(holding that case was properly removed after settlement with non-diverse defendant and recognizing that “a case may be removed based on any voluntary act of the plaintiff that effectively eliminates the nondiverse defendant from the case”) (quoting Vasquez FDIC v. Abraham, 137 F.3d 264, 269 (5th Cir. 1998)).

The case must be removed within 30 days of the time the removing defendant receives a “motion, order or other paper.”  28 U.S.C. § 1446(b)(3).

3. Case is filed in Mississippi state court.  The plaintiff and defendant are diverse.  The complaint seeks to quiet title in a $600,000 piece of property.  The complaint seeks “less than $75,000 in damages and specifically seeks $30,000 in damages and attorneys’ fees.”  Is the case removable?

Yes. “When the validity of a contract or a right to property is called into question in its entirety, the value of the property controls the amount in controversy.” Waller v. Prof’l Ins. Corp., 296 F.2d 545, 547–48 (5th Cir. 1961); see also Celestine v. TransWood, Inc., 467 Fed. Appx. 317, 319 (5th Cir. 2012) (recognizing that the “amount in controversy for jurisdictional purposes is determined by the amount of damages or the value of the property that is the subject of the action”) (citing Hunt v. Wash. State Apple Adver. Comm’n, 432 U.S. 333, 347 (1977)); see also Dillard Family Trust v. Chase Home Finance, LLC, 2011 WL 6747416, at *4 (N.D. Tex. 2011) (recognizing in a quiet title action that since the value of the property set by Dallas County was over $75,000 that the amount in controversy was satisfied); White v. BAC Home Loans Servicing, L.P., 2011 WL 3841952, at *2 (S.D. Tex. 2011) (same holding where Harris County placed a value for the property greater than $75,000).

A Complaint that states that the amount in controversy is less than $75,000 is not determinative of whether the amount in controversy threshold is in fact met.  Jackson v. Balboa Ins. Co., 590 F. Supp. 2d 825, 827-28 (S.D. Miss. 2008) (denying remand where amount in controversy was satisfied despite the allegation in plaintiff’s complaint that the “Complaint filed by the Plaintiff herein specifically states that he is not seeking monetary relief in excess of $75,000,” and finding that “[s]uch statements do not set forth a specific monetary demand.”) (citing Manguno v. Prudential Property and Cas. Ins. Co., 276 F.3d 720, 722-23 (5th Cir. 2002)).

4. Case is filed in Mississippi state court.  Mississippi plaintiff.  A corporation (engaging in tire distribution) is the defendant.   The corporation has shareholders in Mississippi, Louisiana, and Alabama.  The state of incorporation is Louisiana.  The central office is in Louisiana, and the central office is where the executives work and the policy and financial decisions take place.  The tire distribution centers are in both Louisiana and Mississippi, but 80% of the tire distribution centers are in Mississippi.  The Secretary of State of Mississippi lists Jackson, Mississippi, as the principal office for the corporation.  Is the case removable?

Yes.  The corporation is a citizen of Louisiana because Louisiana is home to the corporation’s nerve center, and the corporation was incorporated in Louisiana. “A corporation may simultaneously be a citizen of two states, the place of incorporation and the state of its principal place of business.” Maxey v. Security-Connecticut Life Ins. Co., 2006 WL 1791151, at *2 (N.D. Miss. 2006) (citing 28 U.S.C. § 1332(c)(1)). The “nerve center” test controls the principal place of business.  Hertz Corp. v. Friend, ––– U.S. ––––, ––––, 130 S.Ct. 1181, 1192, 175 L.Ed.2d 1029 (2010) (adopting the “nerve center” test as the appropriate test for determining the principal place of business and rejecting the other tests used by numerous Circuits including the Fifth Circuit’s “total activities” test).

A corporation can have “one and only one principal place of business.”  J.A. Olson Co. v. City of Winona, Miss., 818 F.2d 401, 406 (5th Cir. 1987).  To determine the “nerve center,” one looks to “where a corporation’s officers direct, control, and coordinate the corporation’s activities.”  Hertz, 130 S.Ct. at 1192.  This location “should normally be the place where the corporation maintains its headquarters—provided that the headquarters is the actual center of direction, control, and coordination.” Id.

The fact that the corporation listed Mississippi as its principal office in corporate filings is relevant, but these filings are not outcome determinative since such filings “would create opportunities for jurisdictional manipulation” as the Supreme Court warned about such corporate filings in the Hertzdecision.  See also Teal Energy USA, Inc. v. GT, Inc., 369 F.3d 873 (5th Cir. 2004) (filings with IRS and Texas secretary of state stating the “principal place of business” were indicative of the principal place of business for diversity jurisdiction purposes, but these filings by themselves were not outcome determinative); N. California Power Agency v. AltaRock Energy, Inc., 2011 WL 2415748 (N.D. Cal. June 15, 2011) (remanding action to state court since defendant “produce[d] no evidence save a print-out from the California Secretary of State’s web site,” and defendant’s could produce no “other evidence,” then this [Secretary of State filing] has the hallmark of “jurisdictional manipulation” the Court warned of in Hertz.”); Guitar Holding Co. v. El Paso Natural Gas Co., 2010 WL 3338550 (W.D. Tex. Aug. 18, 2010) (rejecting argument that secretary of state filings constituted an admission by a party opponent since the declarations were made “for other purposes,” and although admissible as evidence, they “are amenable to rebuttal,” and “ the Supreme Court [in Hertz] has explicitly held that corporate form filings indicating a corporation’s principle office, without further explanation, are not dispositive regarding a corporation’s nerve center.”); Darrough v. LTI Trucking Services, Inc., 2012 WL 1149158 (S.D. Ill. Apr. 5, 2012) (same); etradeshow.com, Inc. v. Netopia Inc., 2004 WL 515552, at *1-2 (N.D. Tex. 2004) (“While a corporation’s statements made to a state’s secretary of state are not binding on the Court, they are relevant to its inquiry.”)

5. Case is filed in Mississippi state court.  Louisiana plaintiff.  The five defendants are residents of Alabama, Tennessee, Arkansas, Mississippi, and Florida.  Is the case removable?

No.  The case is filed in Mississippi and there is a Mississippi defendant.  The forum defendant rule prevents removal.  A case “may not be removed if any of the parties in interest properly joined and served as defendant is a citizen of the State in which such action is brought.” 28 U.S.C. § 1441(b)(2).  “This exception is commonly referred to as the forum-defendant or in-state-defendant rule.”  McGee v. Willbros Const., US, LLC, 825 F. Supp. 2d 771, 775 (S.D. Miss. 2011) (citing In re 1994 Exxon Chemical Fire, 558 F.3d 378, 391 (5th Cir. 2009)).  “It is well-settled in this circuit that the forum-defendant rule concerns not whether the district court has subject matter jurisdiction over the controversy, rather it is a procedural limitation that prevents removal of an action that would otherwise be removable on the basis of diversity jurisdiction.” Id. “As such, whether defendants to a lawsuit are diverse, or are residents of the forum state, are two separate inquiries which are treated differently for purposes of remand.”  Id.

This is a procedural rule and not a jurisdictional rule.  As a result, if the plaintiff is agreeable to the removal (and agrees to not file a motion to remand) then the removal may be allowed. Chaves v. Exxon Mobil Corp., 2007 WL 911898, at*1 (D. Conn. 2007) (“we have held that, even if removal was statutorily improper, a party opposing removal must move to remand within the 30 day limitation or the objection will be forfeited (except for objections that implicate constitutional subject matter jurisdiction such as a lack of diversity or a federal question”) see also Williams v. AC Spark Plugs Div. of Gen. Motors Corp., 985 F.2d 783 (5th Cir.1993); Air–Shields, Inc. v. Fullam, 891 F.2d 63, 65–66 (3d Cir. 1989) (finding that district court’s sua sponte decision to remand on procedural grounds more than 30 days after the filing of the notice of removal exceeded the court’s authority).

6.  Case is in Mississippi state court.  Mississippi plaintiff.  Louisiana defendant and Mississippi defendant.  The Louisiana defendant files a motion to sever and the plaintiff opposes the motion to sever.  The state court grants the motion and severs the Mississippi defendant into a separate state court case.  Can the Louisiana defendant remove?

Yes. There is “the judicially-created ‘voluntary-involuntary’ rule whereby ‘an action nonremovable when commenced may become removable thereafter only by the voluntary act of the plaintiff.’”Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d 529, 532 (5th Cir. 2006); Weems v. Louis Dreyfus Corp.,380 F.2d 545, 547 (5th Cir. 1967).  However, when a diverse state court defendant is severed then this presents an exception to the voluntary-involuntary rule and the diverse defendant can remove the case. Crockett, 436 F.3d at 533 (5th Cir. 2006) (“removal on the basis of an unappealed severance, by a state court, of claims against improperly joined defendants is not subject to the voluntary-involuntary rule. Accordingly, removal jurisdiction existed in this case upon the severance of Crockett’s claims against the nondiverse in-state health care defendants.”)

7. Case is in Mississippi state court.  Mississippi plaintiff.  An LLC is the defendant.  The state of “registration” or “incorporation” for the LLC is Mississippi.  The members of the LLC are residents of Louisiana.  The executive offices for the LLC are in Mississippi.  The primary place of business or principal place of business is in Louisiana.  Is the case removable?

Yes.  The citizenship of an LLC is determined by the citizenship of its members.  Harvey v. Grey Wolf Drilling Co., 542 F3d 1077, 1080-81 (5th Cir. 2008) (the authorities “overwhelmingly support the position that a LLC should not be treated as a corporation for purposes of diversity jurisdiction. Rather, the citizenship of a LLC is determined by the citizenship of all of its members. Under this approach, Grey Wolf is a citizen of Nevada and Texas (the residences of its members), not Louisiana (Grey Wolf’s state of organization, resulting in complete diversity.”)