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Curry v. Sam's West, Inc.

United States District Court, W.D. Arkansas, Fayetteville Division

August 23, 2016

STEPHANIE CLAYTON CURRY, Special Administratrix of the Estate of Joe W. Clayton, Deceased PLAINTIFF
v.
SAM'S WEST, INC. D/B/A SAM'S CLUB; WALMART STORES, INC. D/B/A SAM'S CLUB; and SCHUMACHER ELECTRIC CORPORATION DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          TIMOTHY L. BROOKS UNITED STATES DISTRICT JUDGE

         This case was originally filed in the Circuit Court of Benton County, Arkansas, on May 23, 2016. Plaintiff Stephanie Clayton Curry, Special Administratrix of the Estate of Joe W. Clayton, alleged in the lawsuit that her father, Joe W. Clayton, suffered a wrongful death on May 24, 2013, caused by a defective battery charger manufactured by Defendant Schumacher Electric Corporation ("Schumacher") and sold by Defendants Sam's West ("Sam's") and Walmart Stores, Inc. ("Walmart"). Defendants jointly removed the case to this Court on June 24, 2016. (Doc. 1).

         Now pending before the Court are two motions: a Motion to Remand (Doc. 14) filed by Plaintiff, and a Motion to Dismiss (Doc. 4) filed by all Defendants collectively. Plaintiffs Motion to Remand was accompanied by a Brief in Support (Doc. 15). Defendants' Motion to Dismiss was also accompanied by a Brief in Support (Doc. 5), and Plaintiff filed a Response in Opposition (Doc. 16) and Brief in Support (Doc. 17). Although Defendants never filed a formal brief in opposition to the Motion to Remand, they filed a Reply (Doc. 28) to the Motion to Dismiss, and their Notice of Removal (Doc. 1) also contains a memorandum of law that explains their arguments in favor of finding that Sam's and Walmart were fraudulently joined, and that the Court has proper subject-matter jurisdiction over the remaining Defendant.

         On August 19, 2016, the Court conducted a hearing on both pending Motions and heard argument from counsel before taking the matter under advisement. The Court is now prepared to rule, and for the reasons explained in detail herein, the Motion to Remand (Doc. 14) is denied, the Motion to Dismiss (Doc. 4) is granted, and the case is dismissed.

         I. BACKGROUND

         Plaintiff Curry was appointed Special Administratrix of the Estate of her father, Joe W. Clayton, by the Circuit Court of Benton County, Arkansas, on or about May 23, 2016. (Doc. 3, p. 2). Neither she nor the decedent hail from Arkansas. They are citizens of Texas. The Court understands that the state court's appointment of Plaintiff was done for the limited purpose of prosecuting the instant wrongful death action.

         On June 24, 2016, Sam's, Walmart, and Schumacher collectively filed a Notice of Removal (Doc. 1) from state court, asserting that the Court should dismiss Defendants Sam's and Walmart because they were fraudulently joined. After they are dismissed, Defendants assert that the Court will then have federal subject matter jurisdiction over this dispute due to the presence of complete diversity of citizenship of the remaining parties, pursuant to 28 U.S.C. § 1332. See Id. at p. 3. As stated previously, Plaintiff is a citizen of Texas. This is so because her father, the decedent, was a citizen of Texas. See 28 U.S.C. § 1332(c)(2) ("the legal representative of the estate of a decedent shall be deemed to be a citizen only of the same State as the decedent"). As for the three Defendants, Sam's and Walmart are both citizens of Arkansas, while Schumacher is a citizen of Illinois.[1]

         The reason why the Court lacks original jurisdiction over the case now, prior to deciding the fraudulent joinder issue, is due to a provision in the law at 28 U.S.C. § 1441(b)(2), which involves a further jurisdictional restriction on removal actions. This restriction is commonly known as the "forum defendant rule, " and it provides that "[a] civil action otherwise removable solely on the basis of the jurisdiction under section 1332(a) of this title"-that is, on the basis of diversity jurisdiction-"may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such an action is brought." Id. In the case at bar, the forum defendant rule applies because two of the Defendants, Sam's and Walmart, are citizens of Arkansas, the forum in which the state court action was brought.

         The Eighth Circuit has made clear that the violation of the forum defendant rule "is a jurisdictional defect and 'not a mere procedural irregularity capable of being waived.'" Horton v. Conklin, 431 F.3d 602, 604 (8th Cir. 2005) (quoting Hurt v. Dow Chem. Co., 963 F.2d 1142, 1145 (8th Cir. 1992)). Defendants correctly state, however, that the Court may find an exception to the forum defendant rule if the forum Defendants, Sam's and Walmart, were fraudulently joined in the action, that is, "if the plaintiffs claim against the diversity destroying defendant[s] has 'no reasonable basis in fact and law.'" Knudson v. Sys. Painters, Inc., 634 F.3d 968, 977 (8th Cir. 2011) (quoting Filla v. Norfolk S. Ry. Co., 336 F.3d 806, 810 (8th Cir. 2003), and observing that "the Filla standard remains good law in this circuit, " 634 F.3d at 977 n.7).

         Plaintiff disagrees that she has fraudulently joined Sam's and Walmart. She maintains she has asserted valid claims against them under Arkansas law, and in her Motion to Remand, she asks that the case be returned to state court for further proceedings. Defendants respond that Texas law, rather than Arkansas law, applies to the claims in this case, and no reasonable basis exists under Texas law to find Sam's or Walmart liable for the torts alleged in the Complaint, all of which arise from the alleged wrongful death of Mr. Clayton. Defendants have also filed a Motion to Dismiss in which they state that all claims against Schumacher are time-barred under the Texas two-year statute of limitations for wrongful death actions. Plaintiff, on the other hand, believes her claims were timely filed under Arkansas law, which has a three-year statute of limitations for wrongful death actions. The Court will consider below the merits of both pending Motions.

         II. LEGAL STANDARDS

         A. Motion to Remand

         First the Court must resolve the Motion to Remand. Plaintiff contends that, due to the application of the forum defendant rule, the Court lacks subject-matter jurisdiction over the case and must send it back to state court. Defendants believe that subject-matter jurisdiction is proper in this Court once the forum Defendants, Sam's and Walmart, are dismissed on the basis of fraudulent joinder. "While fraudulent joinder-the filing of a frivolous or otherwise illegitimate claim against a non-diverse defendant solely to prevent removal-is rather easily defined, it is much more difficulty [sic] applied." Filla, 336 F.3d at 809. In the past, district courts have employed varying standards to evaluate whether valid claims exist against a defendant or defendants at the removal stage, including "something close to a dismissal standard." Id. at 810. However, the Eighth Circuit in Filla v. Norfolk Southern Railway Company clarified that the general "reasonableness" of the underlying state law claims is of "paramount consideration" when conducting a fraudulent joinder analysis:

Where applicable state precedent precludes the existence of a cause of action against a defendant, joinder is fraudulent. "[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 Service 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 under the facts alleged- then there is no fraudulent joinder. See Foslip Pharmaceuticals, Inc. v. Metabolite Intern., Inc., 92 F.Supp.2d 891, 903 (N.D.Iowa 2000). As we recently stated in Wiles [v. Capitol Indemnity Corp., 280 F.3d 868 (8th Cir. 2002], ". . . joinder is fraudulent when there exists no reasonable basis in fact and law supporting a claim against the resident defendants." 280 F.3d at 871. Conversely, if there is a reasonable basis in fact and law supporting the claim, the joinder is not fraudulent.

336 F.3d at 810 (footnote omitted).

         The Court's job, therefore, is to "simply determine whether there is a reasonable basis for predicting that the state's law might impose liability against the defendant." Id. at 811. If there is any doubt involved in making that prediction, "the district court should resolve all facts and ambiguities in the current controlling substantive law in the plaintiffs favor, " not make a final decision, and remand the case, "leav[ing] ...


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