The opinion of the court was delivered by: Eduardo C. Robreno, J.
The instant motion to remand was filed on behalf of 444 plaintiffs ("plaintiffs") arguing that this Court must remand their actions to Mississippi state court for lack of subject matter jurisdiction. Defendants*fn1 have filed timely responses. For the reasons set forth herein, plaintiffs' motion to remand will be granted in part and denied in part.
These cases originated in Mississippi state court and were removed to federal court by defendants Union Carbide and ConocoPhillips. The basis for removal was the allegedly fraudulent joinder of two non-diverse defendants, Oilfield Service & Supply, Inc. ("Oilfield Service") and Mississippi Mud., Inc. ("Mississippi Mud"). In addition, twenty-five of these cases were removed under the theory that plaintiffs were entitled to assert federal jurisdiction under the Outer Continental Shelf Lands Act ("OCSLA").
After removal, plaintiffs filed motions to remand, on the same grounds considered here, in the Southern District of Mississippi. After considering these motions, United States District Judge Walter Gex remanded five of these cases to Mississippi state court. Before Judge Gex was able to rule on the remaining motions, the cases were transferred to the Eastern District of Pennsylvania and consolidated as part of MDL-875 by the Judicial Panel on Multidistrict Litigation. The remand motions remaining on the docket at the time of the consolidation with MDL-875 were denied by the MDL court without prejudice. (MDL-875 Administrative Order no. 11 at 3, doc no. 5936, 01-md-875.) Plaintiffs have renewed their request for remand in the 444 cases and this renewed motions is now before the Court.
Based on their procedural histories, these cases fall into three categories. Plaintiffs' motion to remand will be considered under the facts of each category individually.
a.) Category 1: This category consists of 354 plaintiffs whose cases were initiated in 2004. Originally filed as a multi-plaintiff action, these plaintiffs had their cases severed into individual actions in Mississippi state court in 2006. After severance, each plaintiff filed an individual amended complaint. Defendants subsequently removed these cases as a group to federal court on Sept. 26, 2008. (Defs.' Notice of Removal Ex. "D", doc. no. 58, 09-mc-103.) The basis for removal in these cases is the alleged fraudulent joinder of non-diverse parties Oilfield Service and Mississippi Mud.
b.) Category II: This category consists of 65 cases which were filed in 2004, but were dismissed in Mississippi state court because they were filed in an improper venue. Plaintiffs re-filed these cases on Sept. 28, 2007, and defendants removed these cases as a group to federal court on Sept. 26, 2008, within one year of the date of re-filing. (Defs.' Notice of Removal Ex. "D", doc. no. 58, 09-mc-103.) As in Category I, the basis for removal in these cases is the alleged fraudulent joinder of non-diverse parties Oilfield Service and Mississippi Mud.
c.) Category III: This category consists of 25 cases which were removed based on federal question jurisdiction. The defendants aver that plaintiffs' claims are governed by OCSLA. As an alternative basis of federal jurisdiction, defendants also assert the fraudulent joinder of Oilfield Service and Mississippi Mud.
After removal, the cases in all three categories were grouped by the Court for settlement purposes, pursuant to MDL-875 procedures.*fn2 See MDL-875 Website, Settlement Conference Procedures, available at www.paed.uscourts.gov/mdl875.asp. After attending several settlement conferences with defendants and Magistrate Judge Strawbridge, plaintiffs filed the instant motion to remand.
A district court considering a motion to remand "must focus on the plaintiff's complaint at the time the petition for removal was filed... [and] must assume as true all factual allegations of the complaint." In re Briscoe, 448 F.3d 201, 218 (3d Cir. 2006). The "party who urges jurisdiction on a federal court bears the burden of proving that jurisdiction exists..." Boyer v. Snap-on Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990); see also Steel Valley Auth. v. Union Switch & Signal Div., 809 F.2d 1006, 1010 (3d Cir. 1987), cert. dismissed sub nom. American Standard v. Steel Valley Auth., 484 U.S. 1021 (1988) ("It remains the defendant's burden to show the existence and continuance of federal jurisdiction."). Because the removal of an action from the state court to a federal forum implicates comity and federalism, it is said that "removal statutes are to be strictly construed against removal and all doubts should be resolved in favor of remand." Steel Valley Auth., 809 F.2d at 1010 (citing Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1985)); accord Brown v. Francis, 75 F.3d 860, 865 (3d Cir. 1996); Boyer, 913 F.2d at 111.
The practical application of this "all doubts" standard is to place upon a defendant "a heavy burden of persuasion" when contending that a non-diverse party has been fraudulently joined. Boyer, 913 F.2d at 111. To prevail, the removing party must show that there is "no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendants... " In re Briscoe, 448 F.3d at 218.
Title 28 U.S.C. § 1446(b) governs the timing of removal, specifying that "a case may not be removed on the basis of jurisdiction conferred by section 1332 of this title more than 1 year after commencement of the action." Additionally, "notice of removal of a civil action... shall be filed within thirty days after the receipt by the defendant... of the initial pleading setting forth the claim for relief...." 28 U.S.C. § 1446(b). Where it is not evident from the initial pleading whether the case is removable, "a notice of removal may be filed within thirty days after receipt by the defendant... 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..." Id.
As the MDL transferee court, the Court must first determine which jurisdiction's law to apply to the substantive and procedural issues in these cases.
On matters of procedure, the transferee court must apply federal law as interpreted by the court of the district where the transferee court sits. See In re Diet Drugs Prods. Liab. Litig., 294 F.Supp.2d 667, 672 (E.D. Pa. 2003). Issues involving the timeliness of remand implicate federal procedural law. See In re Avandia Mktg., Sales Practices and Prods. Liab. Litig., 624 F.Supp.2d 396, 408-9 n.15 (E.D. Pa. 2009).
As noted above, after the cases were removed to federal court but before they were consolidated into MDL-875, the plaintiffs filed motions to remand in 449 individual cases. Judge Gex of the Southern District of Mississippi, in the only rulings that were made prior to the transfer to MDL-875, granted five of these motions. The remaining motions were pending upon transfer to the Eastern District of Pennsylvania and consolidation under MDL-875. As to the five motions ruled on by Judge Gex, "there is nothing in the text [of § 1407] that authorizes a transferee judge to vacate or modify an order of a transferor judge," In re Pharmacy Benefit Managers Antitrust Litig., Civ. No. 07-1151, -- F.3d --, 2009 WL 3030370, at *6 (3d Cir. Sept. 24, 2009), unless it is warranted after application of law of the case principles. Id. at *7; see also, In re Ford Motor Co., 580 F.3d 308, 312 (5th Cir. Aug. 21, 2009). Under the circumstances of this case, the orders entered by Judge Gex on any motions to remand are binding on this Court.
There were, however, 444 motions to remand pending, but not yet acted upon by Judge Gex at the time the cases were transferred and consolidated under MDL-875. As described above, these motions were denied without prejudice after being transferred to the Eastern District of Pennsylvania, but have been renewed and are now before the Court. As to these cases, the Court will "adjudicate [these] transferred cases no differently than cases originally filed before it." In re Korean Air Lines Disaster, 829 F.2d 1171, 1178 (D.C. Cir. 1987). Therefore, as to the pending motion to remand, the Court will apply federal procedural law, as interpreted by the Third Circuit, the circuit where the transferee court sits.
In applying substantive law, the transferee court must distinguish between matters of federal and state law. In matters requiring the interpretation of the Constitution, a federal law or a federal rule of procedure, a transferee court applies the law of the circuit where it sits. Therefore, in cases where jurisdiction is based on federal question, this Court, as the transferee court, will apply federal law as interpreted by the Third Circuit.*fn3
In matters where the Court has jurisdiction under 28 U.S.C. § 1332 based upon diversity of citizenship, the transferee court applies state substantive law as determined by the choice of law analysis required by the state in which the action was filed. Therefore, in the instant cases, this Court will apply the state substantive law as determined by the choice of law rules of Mississippi, the state in which the cases were filed.*fn4
The Category I cases refer to the 354 plaintiffs who originally filed their cases in Mississippi state court in 2004, yet removal was not effected until 2008. (Pls.' Mot. Remand 1-2, doc. no. 44, 09-mc-103.)
Plaintiffs argue that the Category I cases should be remanded for two reasons. First, because they were removed beyond the time limitations on removal found in § 1446(b); and second because the plaintiffs have valid claims against two non-diverse defendants, Oilfield Service and Mississippi Mud, destroying diversity of citizenship and leaving the defendants no basis for invoking federal jurisdiction. (Pls.' Memo. Supp. Mot. Remand 15, doc. no. 45, 09-mc-103.)
In response, the defendants present a two part argument against remand. First, they contend that they are entitled to an "equitable exception," allowing for effective removal after one year has passed from the commencement of the action. (Defs.' Resp. in Opp'n to Remand 12, doc. no. 58, 09-mc-103.) The defendants contend that, because the plaintiffs engaged in "forum manipulation," equity requires the Court to allow the removal of these cases. (Id. at 13.) Second, if the Court applies an equitable exception, defendants argue that Oilfield Service and Mississippi Mud are fraudulently joined, and thus, are not proper forum defendants.
Section 1446(b) imposes a strict one year limitation on the length of time that a party has available for removal after the commencement of the action. As described above, the petition for removal in the Category I cases was not filed until more than four years after these cases were originally commenced in state court.*fn5 (Defs.' Resp. in Opp'n Mot. to Remand at Ex. D, doc. no. 58, 09-mc-103.)
While § 1446(b) does not explicitly detail any exception to the one year limitation, the Third Circuit has held that the one year limit on removal is a procedural bar, not a jurisdictional one. Ariel Land Owners, Inc. v. Dring, 351 F.3d 611, 616 (3d Cir. 2003).*fn6 The practical effect of this holding is to open the door to an examination of equitable considerations in deciding whether to allow exceptions to the one year limitation on removal.
In determining whether the equitable exception applies, courts have looked at the balance of the equities. In balancing the equities, courts have considered three factors: first, how vigorously the plaintiff prosecuted the action in state court; second, whether the defendants were complicit in any delay in removal of the case; and third, whether or not plaintiffs' joining of the non-diverse defendants amounted to "flagrant forum manipulation." See Namey v. Malcolm, 534 F.Supp.2d 494, 498 (M.D. Pa. 2008) (holding that because defendants were partly responsible for the delay in state court, application of an equitable exception was inappropriate); Lee v. Carter-Reed Co., 06-1173, 2006 WL 3511160, at *5 (D.N.J. Dec. 5, 2006) (holding that defendants did not allege facts sufficient to show that plaintiff's conduct amounted to forum manipulation); In re Diet Drugs Prods. Liab. Litig., 03-20376, 2004 WL 1535806 at *4 (E.D. Pa. June 18, 2004) (holding that defendants met the burden of showing fraudulent joinder where there was no possibility for recovery against the in-state defendants).
Balancing the equities in the Category I cases, the first two factors are particularly relevant here. In essence, they ask how diligently the parties pursued the litigation in state court prior to the untimely removal. See Lee, 2006 WL 3511160 at *5; see also Namey, 534 F.Supp.2d at 498.
Arguing in favor of the application of an equitable exception, the defendants contend that they diligently pursued the litigation in state court but were frustrated by plaintiffs' forum manipulation. Defendants claim that they participated in all pretrial fact discovery, but that Oilfield Service was purposely never pursued by plaintiffs in an effort to keep them in the case as a nominal forum defendant. (Defs.' Resp. in Opp'n to Mot. Remand Ex. D, doc. no. 58, 09-mc-103.) As a result, defendants claim that they had no way of uncovering plaintiffs' forum manipulation until Oilfield Service filed a motion for summary judgment. (Id.) Having timely filed their notice of removal within thirty days of receipt of Oilfield Service's summary judgment motion, an "other paper" for purposes of § 1446(b), defendants claim they are entitled to an equitable exception which would allow them to satisfy both of the timing requirements found in § 1446. Id. at 16.*fn7
Arguing against the application of an equitable exception, plaintiffs counter that while they actively conducted litigation for more than four years in Mississippi state court, defendants were content to let the cases languish. Plaintiffs submit that they completed individual written fact sheets for each defendant and conducted some eighty-eight depositions. (Pls.' Memo. Supp. of Mot. Remand 21, doc. no. 45, 09-mc-103.) Although plaintiffs never made any attempt to hide the fact that Oilfield Service and Mississippi Mud were the only non-diverse parties to the litigation, defendants never questioned or attempted to investigate the legitimacy of their joinder between 2004 and late 2008. (Id.) Plaintiffs further submit that they were continuing to develop this case against all defendants, including Oilfield Service and Mississippi Mud, when the cases were improperly removed to federal court. (See Pls.' Memo. Supp. of Mot. Remand 20-22, doc. no. 45, 09-mc-103.)
The Court concludes that the defendants were content to let the cases languish in state court, failing to "use all procedural devices available to facilitate compliance with the one year requirement of § 1446(b)." 534 F.Supp.2d at 498. First, defendants apparently never sought discovery which would have established that the two non-diverse defendants were fraudulently joined. Second, despite the exchange of written discovery and the taking of numerous depositions, defendants never examined the basis for liability against the non-diverse defendants. (Pls.' Memo. Supp. of Mot. Remand 21, doc. no. 45, 09-mc-103.) In fact, in a case where the defendants argue that Oilfield Service and Mississippi Mud are so clearly absolved from liability that their joinder constitutes fraud, neither defendant filed a dispositive motion until August of 2008, four years after the cases were commenced. Under the circumstances, it is clear that, at least through lack of diligence, the defendants are partly responsible for the delay in proceedings in state court. Namey, 534 F.Supp.2d at 498.
On balance, the defendants have failed to show that the equities tilt in their favor, and application of an equitable exception is not appropriate.
Since the Court will not apply an equitable exception to § 1446(b), an evaluation of whether Oilfield Service and/or Mississippi Mud are fraudulently joined is not necessary in the Category I cases.*fn8 Therefore, as to the 354 cases in Category I, plaintiffs motion to remand is granted.
The sixty-five plaintiffs in Category II originally filed their cases in 2004 as part of the same multi-plaintiff action as the plaintiffs in Category I. (Pls.' Memo. Supp. of Mot. Remand 2, doc. no. 45, 09-mc-103.) Under Mississippi law, however, these sixty-five plaintiffs were dismissed from the action for improper venue. (Id.) These sixty-five cases were then re-filed by plaintiffs in September of 2007, this time in a proper Mississippi venue. The cases were then removed within the one year time limitation after they were refiled. (Id.)
As in Category I, removal under § 1332 was based on an allegation of fraudulent joinder of non-diverse parties. In their motion to remand, the plaintiffs argue that there is no basis for a finding of fraudulent joinder because Oilfield Service and Mississippi Mud are proper forum defendants and plaintiffs have asserted colorable claims against them.
Whether a party was fraudulently joined to defeat diversity is a procedural issue. Because the issue of fraudulent joinder is a procedural issue, it is a matter of federal law as interpreted by the Third Circuit.
Fraudulent joinder may be found on either factual or legal grounds. In re Avandia, 624 F.Supp.2d at 411. The Third Circuit test for fraudulent joinder requires a finding that "there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendant or seek a joint judgment." Abels, 770 F.2d at 32 (quotation omitted).
In assessing the factual basis of a claim, a court may engage in a limited piercing of the pleadings to discover any fraudulent joinder. Boyer, 913 F.2d at 112. The extent of a court's inquiry, however, is "less probing than the factual review a district court conducts in deciding a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6)." In re Avandia, 624 F.Supp.2d at 412 (citing Batoff v. State Farm Ins. Co., 977 F.2d 848, 852 (3d Cir. 1992). Therefore, a court could remand the case to state court even though "the claim against that party [may] ultimately [be] dismissed [by the state court] for failure to state a claim upon which relief may be granted." In re Briscoe, 448 F.3d at 217 (quoting Batoff, 977 F.2d at 852).
After piercing the pleadings, the federal court must determine that a claim is colorable if it is not "wholly insubstantial or frivolous." Batoff, 977 F.3d at 852. Here, the Court will address each non-diverse defendant in turn to determine whether each was fraudulently joined solely to avoid federal jurisdiction.
In opposition to the instant motion to remand, defendants argue that Mississippi Mud was fraudulently joined because they were never properly served, and therefore, they were intended to be a nominal forum defendant joined solely to defeat federal jurisdiction. (Defs.' Memo. in Opp'n to Pls.' Mot. Remand 21, doc. no. 58, 09-mc-103.) Additionally, defendants argue that the plaintiffs failed to pursue the proper successor in interest to Mississippi Mud, which is GEO Drilling Fluids, a diverse entity incorporated in Delaware and with a principal place of business in Connecticut. (Id. at 20.)
Plaintiffs admit that they were unable to timely serve Mississippi Mud, but submit that it was due to confusing public records related to Mississippi Mud's corporate history. (Pls.' Memo. Supp. of Mot. Remand 28, doc. no. 45, 09-mc-103.) Plaintiffs do not address the fact that GEO Drilling Fluids is the proper successor in interest to Mississippi Mud and would be a diverse defendant. Plaintiffs claim that, once they "learned more about [Mississippi Mud's] corporate history, service was attempted, although it was [attempted] after 120 days." (Id. at 28-9.)
Because service was never effected on Mississippi Mud and never attempted on its successor, plaintiffs have not shown a "real intention in good faith to prosecute the action" against Mississippi Mud or its successor. Abels, 770 F.2d at 32. Therefore, a finding of fraudulent joinder as to Mississippi Mud is appropriate.
Unlike Mississippi Mud, Oilfield Service was timely served by the plaintiffs. In opposing remand, the defendants argue that the Court should find that Oilfield Service was fraudulently joined for three reasons. First, they contend that plaintiffs never made a good faith effort to pursue claims against Oilfield Service because plaintiffs never deposed the corporate representative, never required Oilfield Service to respond to interrogatories, and never required Oilfield Service to respond to written requests for document production. (Defs.' Memo. in Opp'n to Pls.' Mot. Remand 18, doc. no. 58, 09-mc-103.) Second, defendants argue that there is no factual basis for plaintiffs' claims against Oilfield Service because Oilfield Service never sold asbestos containing products. (Id.) Third, defendants claim that even if Oilfield Service did ...