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MOORCO INTL., INC. v. ELSAG BAILEY PROCESS AUTOMAT

April 10, 1995

MOORCO INTERNATIONAL, INC., Plaintiff,
v.
ELSAG BAILEY PROCESS AUTOMATION, N.V., and ELSAG BAILEY, INC., Defendants.



The opinion of the court was delivered by: ANITA B. BRODY

 Anita B. Brody, J.

 April 10, 1995

 Plaintiff has also requested that it be awarded costs on this motion. Because I conclude that defendants' removal of this action to federal court was not in bad faith or obviously without basis, I will deny plaintiff's request for costs.

 I. BACKGROUND

 The following facts are presented as alleged in the complaint filed in Texas state court. Plaintiff, Moorco International, Inc. ("Moorco"), is a Delaware corporation with its principal place of business in Texas. It manufactures and services fluid measurement and pressure control instruments for use in the petroleum, industrial process, and electrical power industries. Between September 1993 and March 1994, Moorco took part in a bidding contest to acquire control of the Fischer & Porter Company ("Fischer & Porter), a Pennsylvania manufacturer and supplier of similar measurement and control products. In March 1994, Fischer & Porter entered into a merger agreement with Moorco, the prevailing bidder, and announced the agreement in a contemporaneous press release. Shortly after the Moorco-Fischer & Porter agreement was announced, Elsag Bailey Process Automation, N.V. ("Elsag Netherlands"), a Netherlands holding company, and Elsag Netherlands' wholly owned operating subsidiary, Elsag Bailey, Inc. ("Elsag Delaware"), a Delaware corporation with its principal place of business in Ohio, initiated attempts to acquire Fischer & Porter. The efforts of Elsag Netherlands and Elsag Delaware (together, "Elsag defendants") culminated in Fischer & Porter's termination of the Moorco merger agreement and subsequent execution of a similar agreement with Elsag Netherlands. Thereafter, Moorco and Fischer & Porter were unable to agree on the proper calculation of the amount due Moorco under a "termination fee" provision of the canceled Moorco agreement.

 A flurry of litigation followed upon the termination of the Moorco merger agreement. First, Fischer & Porter and Elsag Netherlands filed a declaratory and injunctive action against Moorco in Pennsylvania state court, seeking an adjudication that Fischer & Porter and Elsag Netherlands were not liable for breach of the Moorco merger agreement. That action was removed by Moorco to this Court and docketed under No. 94 Civ. 4432. Moorco then filed two separate actions in federal court in the Southern District of Texas, one against Fischer & Porter and the other against Elsag Netherlands. Moorco withdrew the Texas federal action against Elsag Netherlands, however, and commenced the instant action in Texas state court against both Elsag Netherlands and Elsag Delaware. The Texas state court action alleged Texas state law claims of breach of contract against Elsag Netherlands and of tortious interference with contract and prospective business relations against both Elsag Netherlands and Elsag Delaware. Subsequently, the Texas federal action against Fischer & Porter was transferred to this Court and docketed under No. 94 Civ. 7144.

 Meanwhile, Elsag defendants had removed the instant Texas state court action to federal court in Texas and had filed a motion to transfer it to this Court. Moorco immediately moved the Texas federal court to remand the case back to the District Court of Harris County, Texas. The Texas federal court granted the transfer request without reaching the remand issue. Thus, with the remand motion outstanding, this action was transferred here and docketed under No. 95 Civ. 092. By Order of January 25, 1995, I consolidated all three actions under No. 94 Civ. 4432. now address the outstanding remand motion in the removed Texas state court action, No. 95 Civ. 092.

 II. DISCUSSION

 A. Fraudulent Joinder

 Removal of this action is predicated upon diversity of citizenship. Elsag Delaware, however, is a fellow Delaware citizen of Moorco's. Recognizing this, Elsag defendants contend that Elsag Delaware has been fraudulently joined to this action and should be disregarded for purposes of establishing jurisdiction in federal court.

 The law of fraudulent joinder has evolved into what are now "settled precepts." Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 (3d Cir. 1992). The removing party bears a "heavy burden of persuasion" in demonstrating that the resident defendant was fraudulently joined. Id. (citations omitted). Joinder is fraudulent "where there is no reasonable basis in fact or colorable ground supporting the claim against the joined [non-diverse] defendant, or no real intention in good faith to prosecute the action against the defendants or seek a joint judgment." Id. (internal quotations omitted). If there is "even a possibility" that the complaint states a cause of action against the non-diverse defendant, remand is required. Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990), cert. denied, 498 U.S. 1085, 111 S. Ct. 959, 112 L. Ed. 2d 1046 (1991). Thus, remand can be staved off only if the claim asserted against the resident defendant is "wholly insubstantial and frivolous." Batoff, 977 F.2d at 852 (citing Lunderstadt v. Colafella, 885 F.2d 66, 70 (3d Cir. 1989)).

 This jurisdictional inquiry into a plaintiff's allegations is less searching than the analysis applied under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. Id. In undertaking it, a district court must assume as true all factual allegations in the complaint. See Steel Valley Auth. v. Union Switch & Signal Div., 809 F.2d 1006, 1010 (3d Cir. 1987), cert. dismissed, 484 U.S. 1021, 108 S. Ct. 739, 98 L. Ed. 2d 756 (1988). A district court must also "resolve any uncertainties as to the current state of controlling substantive law in favor of the plaintiff." Boyer, 913 F.2d at 111. If there is doubt as to which jurisdiction's substantive law controls, the law of the plaintiff's asserted jurisdiction is applied if its suggestion has even a colorable basis, as ...


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