Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-arwd-5_06-cv-05001/USCOURTS-arwd-5_06-cv-05001-0/pdf.json

Parties Involved:
Douglas Cummings
Defendant
Joan Cummings
Defendant
Craig Hull
Defendant
Hull & Company
Defendant
South Pass Development Company, LLC
Plaintiff

Document Text:

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UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

FAYETTEVILLE DIVISION

SOUTH PASS DEVELOPMENT

COMPANY, LLC PLAINTIFF

vs. Case No. 06-5001

DOUGLAS CUMMINGS,

JOAN CUMMINGS, and

CRAIG HULL d/b/a Hull

& Company DEFENDANTS

O R D E R

On this 25 day of August, 2006, comes on to be considered th

plaintiff’s Motion to Remand for Lack of Diversity of Citizenship

(Doc. 9). The Court, being well and sufficiently advised, finds

that the motion should be GRANTED. The Court finds and orders as

follows with respect thereto:

1. Plaintiff, an Arkansas limited liability company,

initiated this action in state court against Douglas and Joan

Cummings, husband and wife residents of Michigan, and Craig Hull,

a resident of Arkansas. Plaintiff asserted breach of contract and

fraud claims arising out of an alleged agreement the Cummings’

entered into to sell plaintiff 5.9 acres of property located in

Washington County, Arkansas.

2. The Cummings’ removed the action to this Court on the

basis of diversity jurisdiction. (Doc. 1.) They acknowledged that

separate defendant Hull was an Arkansas resident, but asserted that

his residency should be disregarded for the purposes of diversity

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jurisdiction, as plaintiff fraudulently joined him as a defendant.

(Doc. 1.)

3. Plaintiff moves to remand the action to state court,

asserting that it has a viable claim against Hull for fraud and

that complete diversity of citizenship is therefore lacking. (Doc.

9.) The Court permitted the parties to conduct limited discovery

into the issue of whether Hull was fraudulently joined. (Doc. 15.)

4. “[I]t is well established that if it is clear under

governing state law that the complaint does not state a cause of

action against the non-diverse defendant, the joinder is fraudulent

and federal jurisdiction of the case should be retained.” Iowa

Public Serv. Co. v. Medicine Bow Coal Co., 556 F.2d 400, 406 (8th

Cir. 1977) (emphasis added). However, if there is a colorable

cause of action – that is, if the state law might impose liability

on the resident defendant – then there is no fraudulent joinder.

See Filla v. Norfolk Southern Ry. Co., 336 F.3d 806, 810 (8 Cir. th

2003). This Court’s task is limited to determining whether there

is arguably a reasonable basis for predicting that the state law

might impose liability based upon the facts involved. See id. at

811. The Court is required to resolve all doubts about federal

jurisdiction in favor of remand. See In re Business Men’s Assur.

Co. of America, 992 F.2d 181, 183 (8 Cir. 1993). th

5. Under Arkansas law, the tort of fraud has five elements:

(1) a false representation, usually of a material fact;

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(2) knowledge or belief by the defendant that the

representation is false or that he lacks a sufficient

basis of information to make the statement;

(3) intent to induce the plaintiff to act in reliance upon

the representation;

(4) justifiable reliance by the plaintiff upon the

representation; and

(5) resulting damage to the plaintiff.

See Ripplemeyer v. National Grape Co-op Ass’n, Inc. 807 F. Supp.

1439, 1450 (W.D. Ark. 1992)

6. The facts supporting plaintiff’s claim of fraud against

Hull are set forth in plaintiff’s complaint and in the depositions

of Richard Alexander and John Nock (Doc. 24 Attachs.), who

participated in the subject negotiations on behalf of plaintiff.

These facts are as follows:

a. In response to an offer by plaintiff to purchase the

subject acreage, a written counteroffer was submitted to

plaintiff by Hull, who was identified on the counteroffer

as the listing agent of the property and the supervising

broker of the transaction. 

b. The property was owned by defendant Douglas Cummings and

his brother, Gordon Cummings, and the counteroffer

contained two signatures on the sellers’ signature lines.

The signatures were illegible, but Alexander and Nock

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assumed that they were the signatures of Douglas and

Gordon Cummings because Hull assured Alexander and Nock

that they had a “done deal” and a binding contract.

c. It was not until weeks later that Alexander and Nock

learned that defendant Douglas Cummings had not signed

the counteroffer and that the signatures on the

counteroffer were actually those of Gordon Cummings and

his wife.

d. Hull nevertheless continued to assure Alexander and Nock

that they were still under contract, that Hull was acting

as defendant Douglas Cummings’ agent, and that Cummings

intended to sign the contract prior to closing.

e. Plaintiff incurred expenses in connection with the

anticipated closing, which never came to fruition, as

defendant Douglas Cummings refused to execute the seller

documents and deliver a deed to plaintiff.

7. The above facts could possibly support a claim of fraud

against Hull, as it could be inferred from these facts that Hull

made false representations to plaintiff leading plaintiff to

believe that they had a binding contract; that Hull did so knowing

his representations to be false and with the intent to induce

plaintiff to act in reliance on these representations; and that

plaintiff justifiably relied upon these representations and

incurred expenses in anticipation of closing. The Court therefore

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finds that Hull was not fraudulently joined as a defendant and that

his inclusion in this action divests this Court of complete

diversity jurisdiction.

8. Accordingly, plaintiff’s Motion to Remand for Lack of

Diversity of Citizenship (Doc. 9) is GRANTED and this case is

hereby REMANDED to the Circuit Court of Washington County,

Arkansas. 

Defendants’s Motions to Dismiss (Docs. 4, 17) and Motion to

Stay (Doc. 6) are DENIED as moot.

IT IS SO ORDERED.

/S/JIMM LARRY HENDREN 

JIMM LARRY HENDREN

UNITED STATES DISTRICT JUDGE

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