Court Opinion

ID: 5656
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:08:10+00
Date Added: 2024-06-11T16:44:47.835429
License: Public Domain

United States Court of Appeals,

                                             Fifth Circuit.

                                             No. 92-4946

                                         Summary Calendar.

                Rex Allen JERNIGAN and Rose B. Jernigan, Plaintiffs-Appellants,

                                                    v.

ASHLAND OIL INC., Ashland Pipe Line Co., and Drilled Crossings, Inc., Defendants-Appellees.

                  Rex A. JERNIGAN, Mrs., and Rex A. Jernigan, Mr., Plaintiffs,

                                                    v.

                    ASHLAND OIL INC., Ashland Pipe Line Co., Defendants.

                                           April 30, 1993.

Appeal from the United States District Court for the Western District of Louisiana.

Before KING, DAVIS, and WIENER, Circuit Judges.

       PER CURIAM:

       Plaintiffs-Appellants Rex and Rose Jernigan (collectively, Jernigan) appeal the dismissal of

their claims against Defendants-Appellees Ashland Oil Inc. (Ashland Oil), Ashland Pipe Line Co.

(Ashland Pipeline), and Drilled Crossings, Inc., claiming that removal under 28 U.S.C. § 1446(b) was

improper and, therefore, that the district court lacked subject matter jurisdiction. As we find that the

district court possessed jurisdiction, we affirm.

                                                    I

                                   FACTS AND PROCEEDINGS

       While domiciled in Louisiana, Jernigan filed suit there in state court against Ashland Oil and

Ashland Pipeline, both foreign corporations, and Drilled Crossings, a Louisiana corporation, for

personal injuries suffered by Rex Jernigan while installing a pipeline under the Red River. On January

29, 1990, Jernigan amended his complaint, adding several more defendants—Theta II Enterprise, Inc.

(Theta II), and "Baker Pipeline, Inc., a subsidiary of Theta II Enterprises, Inc." (Baker)—both

Louisiana corporations. Jernigan also added Baker Pipeline, Inc. as a defendant, referring inartfully
to a previously liquidated Texas corporation named Baker Pipeline Construction Co., Inc. (Baker

Pipeline Construction).

          Baker, Theta II, and Drilled Crossings were served with copies of the amended pleading on

January 29, 1990. Ashland Oil was served on February 2, 1990, and Ashland Pipeline was served on

February 28, 1990. Ashland Oil removed the action to federal district court on March 30, 1990.

Jernigan sought remand on grounds that removal was effected more than thirty days after the

removing party received the initial pleadings.1

          Ashland Oil responded, by affidavits, that its motion was timely because it had sought removal

as soon as it became aware that the state court lacked subject matter jurisdiction; that previously the

state court appeared to have had jurisdiction, albeit such appearance was erroneous, resulting from

the fraudulent or improper joinder of non-diverse parties. This allegation of fraudulent joinder

focused on Baker, which Ashland Oil claimed does not exist as a separate entity but merely as an

unincorporated operating division of Theta II.2 Finally, Ashland Oil argued that Theta II and Drilled

Crossings are immune under the Louisiana Worker's Co mpensation Law,3 and therefore must be

disregarded for diversity purposes.

          Jernigan did not respond to Ashland's affidavits, and the district court denied the motion to

remand. Jernigan then filed a motion to reconsider, insisting that Jernigan's social security earnings

show that he received wages from Baker, Baker Pipeline Construction, and Theta II. This was proof,

Jernigan argued, that Baker is a separate entity from Theta II. In addition, Jernigan disputed Ashland

Oil's contention that the contract between Theta II and Drilled Crossings predated the accident. If

it did not, posits Jernigan, then Drilled Crossings would not be immune as a matter of law, and its

citizenship would not be disregarded for diversity purposes.

          The district court considered Jernigan's new evidence despite Jernigan's previous failure to

   1
       28 U.S.C. § 1447.
   2
     There is some confusion whether Baker as merely a division of Theta II or an incorporated
wholly-owned subsidiary, but for purposes of the legal issues here under consideration, that
distinction is immaterial, so long as Baker was not a separate entity independent of Theta II.
   3
       LA.REV.STAT.ANN. 23:1032, 23:1061.
respond to the first motion. Stating that a district court may resolve factual disputes to determine

jurisdiction, the district court found "ample evidence" that the subject contract between Theta II and

Drilled Crossings existed prior to the date of the accident. The district court concluded therefore that

Drilled Crossings was immune and that its citizenship must be disregarded for diversity purposes.

Consequently, the district court denied the motion to reconsider and subsequently granted summary

judgment motions for all the defendants. Jernigan timely appealed.

                                                   II

                                             ANALYSIS

        The sole issue before us is whether, by virtue of diversity, the district court possessed subject

matter jurisdiction over Jernigan's claim against Ashland Oil.             This issue implicates two

considerations: (1) was Ashland Oil's removal proper; and (2) did the district court err in

determining that a contract existed between Theta II and Drilled Crossings, the absence of which

would make joinder of Theta II proper and destroy diversity and require remand. Before beginning

our analysis of these issues, some background discussion is helpful.

        It is axiomatic that diversity jurisdiction, the alleged basis of this court's jurisdiction in the

instant case, requires complete diversity between plaintiffs and defendants. In other words, for

diversity jurisdiction to exist, no plaintiff may be a domiciliary of the same state as any defendant.

In the instant case, t he respective domiciles of the parties are not in dispute; plaintiffs are both

Louisiana domiciliaries; Ashland Oil and Ashland Pipeline are foreign corporations; the remaining

defendants are Louisiana corporations. As long as any of the Louisiana corporations are separate

defendants in this case, complete diversity among the parties is lacking, making the district court

powerless to decide the underlying claim. If, on the other hand, the Louisiana corporations are not

considered separate from the non-Louisiana corporations, Ashland Oil and Ashland Pipeline, for

purposes of determining diversity jurisdiction, then this case is one that could have been brought in

federal court originally, making removal proper and remand improper.

        As the district court's opinion demonstrates, Ashland Oil contends that the Louisiana

corporations should not be considered in determining diversity. Ashland Oil insisted, and the district
court so found, that Baker is no t a pro per party because it is not a separate entity, but is in fact a

division of Theta II. (The same result would appertain if Baker were separately incorporated but

wholly owned by Theta II.) And, Theta II's citizenship is irrelevant because it is Jernigan's employer

and, under Louisiana law, Jernigan's remedies against his employer are restricted exclusively to his

workers' compensation damages. As Theta II thus may not be held liable in to to Jernigan, its
                                                                            rt

citizenship is not considered in determining diversity. Ashland Oil's final contention is that Drilled

Crossings is also the statutory employer of Jernigan by virtue of Theta II's contract wi th Drilled

Crossings, in which Theta II, as Drilled Crossings subcontractor, agreed to perform the services that

Drilled Crossings had contracted to perform for Ashland Oil.

A. Removal

          Ashland Oil states without contradiction that the first time it could have realized that Drilled

Crossings and all of the other defendants were improperly joined was when it received a copy of

Drilled Crossings' answer, filed on March 23, 1990. Ashland Oil immediately compared the answers

of Drilled Crossings and Theta II, then communicated with counsels for these companies, recognizing

for the first time possible the relationship between Drilled Crossings and Theta II. A week later, on

March 30, 1990, Ashland Oil removed the case to federal court pursuant to § 1446(b), which

provides:

          If the case stated by the initial pleading is not removable, a notice of removal may be filed
          within thirty (30) days after receipt by the defendant, through service or otherwise, of a copy
          of an amended pleading, motion, order or other paper from which it may first be ascertained
          that the case is one which is or has become removable, except that a case may not be removed
          on the basis of jurisdiction conferred by § 1333 of this Title more than one (1) year after
          commencement of the action.4

Ashland Oil thus avers that not until March 23, 1990, could it discover that none of the Louisiana

corporations were proper defendants and that therefore diversity jurisdiction existed. Jernigan has

never controverted this assertion, so we, like the district court, accept as true Ashland Oil's

contention that it was not aware that the case was removable until March 23rd.

          Jernigan does, however, attack the validity of Ashland Oil's removal on two grounds. First,

   4
       28 U.S.C. § 1446(b).
he asserts that the removal was not timely. But, he does so measuring the thirty days from the initial

service of the defendants, not from the time Ashland Oil discovered the availability of removal.

Jernigan's argument is without merit, however, as § 1446(b) expressly grants an additional thirty days

from the time that a defendant discovers that the case has become or always has been removable. The

thirty days is measured from receipt of whatever writing—in this case Drilled Crossings'

answer—constitutes first notice. Ashland Oil's notice of removal was filed well within the thirty days

granted under § 1446(b).

           Jernigan also attacks the form of the notice of removal, insisting that it is fatally flawed

because Ashland Oil neglected to obtain the consent of all codefendants and failed to explain the lack

of such co nsent. We do not dispute Jernigan's statement of the law; as a general rule, removal

requires the consent of all co-defendants. In cases involving alleged improper or fraudulent joinder

of parties, however, application of this requirement to improperly or fraudulently joined parties would

be nonsensical, as removal in those cases is based on the contention that no other proper defendant

exists.

          Neither can we agree with Jernigan's contention that Ashland Oil's failure to explain the

absence of its codefendants' consent is fatal. Ashland Oil's notice to remove makes clear that it takes

the position that no other proper defendant exists. Certainly, if there is no need to obtain the consent

of the improperly or fraudulently joined defendants, it follows that the defendant need not explain the

absence of consent.

B. Determination of Jurisdiction

          Once a case has been removed, the removing party bears the burden of proving that the court

has jurisdiction to hear the claim.5 If the removing party alleges jurisdiction on the basis that

non-diverse parties have been fraudulently joined, then the removing party must prove the existence

of fraud.6 To prove its allegation of fraud, Ashland Oil "must show either that there is no possibility

   5
       Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 42 (5th Cir.1992) (citations omitted).
   6
   Carriere v. Sears, Roebuck and Co., 893 F.2d 98 (5th Cir.), cert. denied, 498 U.S. 817, 111
S. Ct. 60, 112 L. Ed. 2d 35 (1990).
that the plaintiff would be able to establish a cause of action against the in-state defendant in state

court; or that there has been outright fraud in the plaintiff's pleadings of jurisdictional facts."7

          In determining whether the joinder of parties was fraudulent, the district court "must evaluate

all of the factual allegations in the light most favorable to the plaintiff, resolving all contested issues

of substantive fact in favor of the plaintiff."8 In this context, the proceeding "is similar to that used

for ruling on a motion for summary judgment under Fed.R.Civ.P., Rule 56(b)."9 If there is "arguably

a reasonable basis for predicting that the state law might impose liability on the facts involved," then

there is no fraudulent joinder.10

           Ashland Oil proceeded to prove that, as a matter of law, Jernigan cannot establish a cause

of action against any of the Louisiana corporations in state court. In support of this position, Ashland

Oil submitted affidavits and depositions to the district court. That court found such evidence

compelling and concluded that the Louisiana corporations had been fraudulently joined. In reaching

this conclusion, the court found that there was ample evidence to support Ashland Oil's claims that

(1) Baker was a division or subsidiary of Theta II and had no independent existence; and (2) a

contract existed between Drilled Crossings and Theta II at the time of the accident. Included in the

district court's findings is the fact that Baker Pipeline Construction had been dissolved, making legally

impossible any role of that corporation in the instant occurrences.

          Although the district court appears to have articulated the incorrect standard when it

concluded that it could resolve factual disputes in determining jurisdiction,11 we find that the result

   7
       B., Inc. v. Miller Brewing Co., 663 F.2d 545 (5th Cir.1981).
   8
       Id. at 549.
   9
       Id. at 549 n. 9.
   10
     Bobby Jones Garden Apts. v. Suleski, 391 F.2d 172, 177 (5th Cir.1968). Jernigan correctly
asserts that the district court applied the wrong standard, apparently misreading Miller Brewing
Co., 663 F.2d at 545, for the proposition that a district court could resolve factual disputes in
order to determine jurisdiction. As we explain below, however, the district court's misplaced
reliance on Miller Brewing does not alter the outcome of this case, however, as application of the
correct standard mandates the same result.
   11
        See supra note 10.
reached was nonetheless the correct one. A review of the record discloses that in actuality there are

no genuine issues of material fact. Rather, the only "issues" allegedly contested are unilateral with

Jernigan, produced entirely by his own confusion as to the identity of his employer. As with a

summary judgment motion, in determining diversity the mere assertion of "metaphysical doubt as to

the material facts"12 is insufficient to create an issue if there is no basis for those facts. In the instant

case, there are just no facts available to be construed in Jernigan's favor because as a matter of law

his allegations of corporate and contractual relationships simply cannot exist.

        Jernigan's arguments are not entirely clear. He concedes in his pleadings that Baker is a

subsidiary of Theta II,13 and he admits, at least implicitly by his arguments, that Theta II was his

statutory employer.14 Nonetheless, he continues to dispute whether Theta II had entered into a

contract with Drilled Crossings at the time of his injury. His argument on this point consists of two

elements. First, he notes that the contract dated January 6, 1989 was between Drilled Crossings and

Baker Pipeline, not Theta II. Second, he refers to testimony of James R. Baker, Jr., that Jerry G.

Baker, the party who signed the contract, was the sole owner of Baker Pipeline Construction Co. and

that Jerry G. Baker had no connection with Theta II enterprises.

        Stated more cogently, Jernigan claims that the "Baker Pipeline" listed on the contract is in fact

Baker Pipeline Construction, which he mislabeled in his complaint as Baker Pipeline, Inc. But, even

if we construe Jernigan's factual disputes and contradictions in his favor, he must fail on his

allegations as a matter of law. It is indisputable that the contract on its face is between Drilled

Crossings and Baker, not Baker Pipeline Construction. Moreover, at the time the contract was

executed, Baker Pipeline Construction had been dissolved under Texas law and no longer existed as

a legal entity. In his deposition testimony, James A. Baker, Jr. testifies that, although his brother

   12
    Matsushita v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d
538 (1986).
   13
    Jernigan's amended complaint names as a defendant "Baker Pipeline, Inc., a subsidiary of
Theta II Enterprises, Inc."
   14
     Specifically, he concedes that if there is a contract between Theta II and Drilled Crossings,
then Drilled Crossings is immune from suit. This can only be true if Theta II is Jernigan's
statutory employer.
Jerry held no formal office or position within Theta II, he (James) had authorized Jerry Baker to sign

the contract on Theta II's behalf.

        The only evidence Jernigan proffers in response as contradicting these undisputed facts is his

own, conclusionary allegation that Jerry Baker entered into the contract with Drilled Crossings on

behalf of his (nonexistent) corporation, Baker Pipeline Construction. 15 Such a bold, unsupported

allegation is insufficient to raise a genuine issue of material fact in a summary judgment proceeding,

and it is equally inadequate here.

                                                  III

                                           CONCLUSION

        After stripping this case of the obfuscation that results from Jernigan's confusion between two

similarly named companies—Baker Pipeline and Baker Pipeline Construction—we conclude as a

matter of law that he is unable to recover from any of the named Louisiana corporations in state

court. His statements to the contrary are insufficient as a matter of law, as they are nothing more than

conclusionary allegations, wholly lacking in specific factual support. As a result, the Louisiana

corporations were improperly joined, so their citizenship is to be disregarded for purposes of

determining diversity jurisdiction. Ashland Oil and Ashland Pipeline, the only remaining proper

defendants are foreign corporations, entitled to remove the case wit hin thirty days following their

discovery of the improper joinder of the Louisiana corporations—which they did. Finally, Jernigan's

arguments regarding the timeliness and form of the removal are without merit.

        For the foregoing reasons, the decision of the district court is

        AFFIRMED.

   15
      Jernigan did submit evidence that the had received payments from Baker Pipeline
Construction. It is conceded by Theta II, however, that Jernigan had previously been employed
by Baker Pipeline Construction prior to its dissolution. Evidence of these payments, therefore, is
irrelevant to the issue of his employment at the time of the accident, as he implicitly concedes by
his arguments that he was then an employee of Theta II.