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Friedlander v. Figuerado

United States District Court, E.D. Kentucky, Central Division, Lexington

April 30, 2014

ERIC FRIEDLANDER, Plaintiff,
v.
JAMES FIGUERADO, ST. THOMAS GLEN RESORTS, LLC, and FIFTH THIRD BANK, INC., Defendant.

OPINION & ORDER

KAREN K. CALDWELL, Chief District Judge.

This matter is currently before the Court upon the motion of the plaintiff, Eric Friedlander, to remand this action to Fayette Circuit Court and for an award of attorneys' fees and costs pursuant to 28 U.S.C. § 1447(c) [DE #3]. This motion is fully briefed and is ripe for review. For the reasons set forth below, the motion will be granted in part and denied in part.

I. FACTUAL AND PROCEDURAL BACKGROUND

Friedlander filed his original Complaint against the Defendants, James Figuerado ("Figuerado"), St. Thomas Glen Resorts, LLC (the "LLC"), and Fifth Third Bank ("Fifth Third")in Fayette Circuit Court on November 27, 2013 [DE #1-1]. A First Amended Complaint was subsequently filed against the same Defendants on December 19, 2013 [DE #1-2]. In the First Amended Complaint, Friedlander asserts claims against Fifth Third for fraud, breach of fiduciary duty, interference with a prospective business advantage, breach of implied covenant of good faith and fair dealing, aiding and abetting fraud, and gross negligence. He also asserts a claim against Figuerado, the majority member of the LLC, for breach of fiduciary duty. Finally, Friedlander asserts claims against the LLC for breach of contract and for an accounting.

There is no dispute that Friedlander is a Kentucky citizen, Figuerado is a Florida citizen, the LLC has Kentucky and Florida citizenship, and Fifth Third is an Ohio citizen. Nevertheless, on January 2, 2014, Fifth Third filed its Notice of Removal pursuant to 28 U.S.C. §§ 1332, 1441, and 1446, alleging that that this Court has original jurisdiction over this matter under 28 U.S.C. § 1332(a) because there is complete diversity of citizenship between Friedlander and the properly joined defendants, and the amount in controversy exceeds $75, 000, exclusive of interest and costs. [DE #1][1]. Specifically, Fifth Third contends that the LLC has been fraudulently joined to defeat diversity jurisdiction and thus its citizenship should not be considered for diversity purposes. Alternatively, Fifth Third contends that the LLC is only a nominal party whose citizenship is not considered when determining diversity jurisdiction.

Friedlander has filed a timely motion to remand [DE #3]. He contends that this Court lacks subject matter jurisdiction over this case as there is not complete diversity of citizenship between the parties. Specifically, he argues that he has a colorable cause of action against the LLC in state court, that his claims against the LLC are not derivative, and that Fifth Third has not produced clear and convincing evidence that he cannot establish a cause of action against the LLC under Kentucky law. In addition to a remand to state court, Friedlander also moves for an award of attorneys' fees and costs under 28 U.S.C. § 1447(c).

II. FRAUDULENT JOINDER

A case may only be removed to federal court if it could have been originally brought in federal court, and as there is no federal question in this case, jurisdiction is only proper if the parties are completely diverse and the amount in controversy exceeds $75, 000. See 28 U.S.C. § 1332(a), 1441(a). As the party invoking jurisdiction, the defendants have the burden of proving diversity jurisdiction. Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868, 871 (6th Cir. 2000).

Friedlander, a Kentucky citizen, filed this action in state court. It is undisputed that the LLC is also a citizen of Kentucky, and therefore, complete diversity of citizenship does not exist under 28 U.S.C. § 1332(a)(1). The issue, then, is whether the LLC was fraudulently joined so as to defeat diversity jurisdiction. The burden is on the defendants to show fraudulent joinder, and as with any dispute over removal, all doubts are to be resolved against removal. See Brierly v. Alusuisse Flexible Packaging, Inc., 184 F.3d 527, 534 (6th Cir. 1999); Alexander v. Elec. Data Sys. Corp., 13 F.3d 940, 949 (6th Cir. 1994). To prove fraudulent joinder, the removing party must present clear and convincing evidence that a plaintiff could not have established a cause of action against non-diverse defendants under state law. Alexander, 13 F.3d at 949; Parker v. Crete Carrier Corp., 941 F.Supp. 156, 159 (E.D.Ky 1996). The Sixth Circuit has explained the relevant considerations in analyzing a claim of fraudulent joinder as follows:

[T]he removing party must present sufficient evidence that a plaintiff could not have established a cause of action against non-diverse defendants under state law. However, if there is a colorable basis for predicting that a plaintiff may recover against non-diverse defendants, this Court must remand the action to state court. The district court must resolve all disputed questions of fact and ambiguities in the controlling... state law in favor of the nonremoving party. All doubts as to the propriety of removal are resolved in favor of remand.

Coyne v. American Tobacco Co., 183 F.3d 488, 493 (6th (citations omitted).

Thus, the question before the Court is not whether the plaintiff will prevail at trial on their claims against the LLC or whether the Court believes that LLC was joined to defeat diversity. See Jerome-Duncan, Inc. v. Auto-By-Tel, LLC, 176 F.3d 904, 907 (6th Cir. 1999)(holding that a plaintiff's motive in joining a non-diverse defendant is "immaterial to our determination regarding fraudulent joinder"). The question is whether, resolving all ambiguities in favor of Friedlander, the defendants have shown there is no colorable basis for predicting that he could prevail against the non-diverse LLC in state court.

When deciding issues of fraudulent joinder, the Court must "apply a test similar to, but more lenient [to a plaintiff] than, the analysis applicable to a Rule 12(b)(6) motion to dismiss." Casias v. Wal-Mart Stores, Inc., 695 F.3d 428, 433 (6th Cir. 2012).. "[T]he benefit of the doubt given a plaintiff as a party of the fraudulent joinder inquiry should be more deferential than even that given under Rule 12(b)(6)." See Little v. Purdue Pharma., L.P., 227 F.Supp.2d 838, 845 (S.D.Ohio 2002). In reviewing allegations of fraudulent joinder, the Court may "pierce the pleading" and consider evidence normally reserved for summary judgment, such as affidavits submitted by the parties. Id. However, [t]he court may look to material outside the pleadings ...


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