Court Opinion

ID: 20845
Source: CourtListenerOpinion
Date Created: 2010-04-25 07:38:26+00
Date Added: 2024-06-11T08:51:33.415786
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                              FOR THE FIFTH CIRCUIT

                               _____________________
                                    No. 99-50430
                               _____________________

       JARVIS CHRISTIAN COLLEGE; CENTRAL
       CHRISTIAN CHURCH OF DALLAS;
       JAMES T. JERNIGAN,

                                                      Plaintiffs-Appellants,
                                        versus

       FEDERAL EXPRESS CORPORATION;
       CALIBER SYSTEM, INC.; VIKING
       FREIGHT, INC.; RANDOLPH C. BANGHAM;
       JOSEPH M. CLAPP; TOM CLOWE, JR.,

                                                      Defendants-Appellees.

          _______________________________________________________

                    Appeal from the United States District Court for
                             the Western District of Texas

                           (D.C. No. W-98-CV-355)
          _______________________________________________________
                                April 26, 2000

Before KING, Chief Judge, REAVLEY and STEWART, Circuit Judges.

PER CURIAM:*

       The plaintiff class appeals from the final judgment against it, contending only

that the district court lacked subject-matter jurisdiction. Because the defendant

   *
    Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should
not be published and is not precedent except under the limited circumstances set
forth in 5TH CIR. R. 47.5.4.
Clowe was fraudulently joined, there was diversity jurisdiction and we affirm.
         The jurisdictional issues presented are questions of law which we review de

novo.1 We determine whether a defendant was fraudulently joined based on a

plaintiff’s state-court petition and any supplemental evidence submitted to the court
in connection with a motion to remand.2

         A nondiverse defendant destroys diversity jurisdiction unless he is

fraudulently joined. A defendant is fraudulently joined if there is no possibility that

the plaintiff could prevail, in state court, on any claim stated by the state-court
petition against that defendant.3 The party asserting diversity jurisdiction has the
burden of proving fraudulent joinder.4 In making this determination, the court must
resolve all contested issues of substantive fact, as well as all ambiguities of state

substantive law, in the plaintiff’s favor.5
         The class’ petition and the supplemental evidence failed to allege any facts of

reliance on Clowe’s purported representations to Central Freight’s employees in
deciding the merger. The petition only mentions reliance as follows:
        . . . CLOWE, with actual awareness of the falsity thereof, made false
        representations of past or existing material facts, when the false
        representation was:

   1
   Robinson v. TCI/US West Communications, Inc., 117 F.3d 900, 904 (5th Cir.
1997).
   2
       Burden v. General Dynamics Corp., 60 F.3d 213, 216 (5th Cir. 1995).
   3
       Griggs v. State Farm Lloyds, 181 F.3d 694, 699-701 (5th Cir. 1999).
   4
       Burden, 60 F.3d at 217.
   5
       Id.
                                              2
      a)     made to a person for the purpose of inducing that person to enter
             into a contract; and
      b)     relied on by that person in entering into that contract.

Only those class members who were Central Freight employees at the time of the
merger could have relied on Clowe’s representations. The petition does not allege

that Central Freight’s employees voted their directly-owned shares in favor of the

merger because of Clowe’s representations. In fact, there is nothing in the petition
to indicate whether the employee class members voted for or against the merger.
Because the petition does not raise a contested fact issue whether the class relied on

Clowe’s representations in voting for the merger, there is no possibility that the

class could prevail on its stock fraud claims.
      Furthermore, there is no possibility that Clowe’s representations to the class

could be the but-for cause of the merger. The state-court petition alleged that 81%
of the shareholders approved the merger. The ERISA plans, however, controlled
82% of the shares. The plans, therefore, could decide to accept or reject the merger

regardless of how Central Freight’s employees voted. As the class does not allege

that the plans, through Ameritrust, relied on Clowe’s representations, the class’
allegations cannot support causation as a matter of law.

      Since there is no possibility that the class could prevail against Clowe in state

court, we find that he was fraudulently joined and that the district court had diversity

jurisdiction over this case.
      AFFIRMED.

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