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Oritz v. Cequent Performance Products

United States District Court, E.D. Pennsylvania

April 3, 2017

LISANDRO ORITZ
v.
CEQUENT PERFORMANCE PRODUCT d/b/a Bulldog, CAMDEN IRON AND METAL

          MEMORANDUM RE: FRAUDULENT JOINDER

          Baylson, J.

         In this personal injury action, Plaintiff Lisandro Ortiz alleges that he sustained serious injuries while operating a forklift in the course of his employment, and brings claims arising from that accident against Defendants Cequent Performance Products, Camden Iron & Metal, Inc., and Rhino Recycling, Inc. (“Rhino”). Pending before the Court is Rhino's motion to dismiss, but in order to decide that motion we first must determine the threshold issue of our jurisdiction. This case was removed from the Court of Common Pleas of Philadelphia County by Camden Iron & Metal, Inc. and Rhino (“Removing Defendants”) notwithstanding the lack of complete diversity between parties, pursuant to a fraudulent joinder theory.

         For the reasons set forth below, we find that Plaintiff did not fraudulently join Rhino, and therefore that we do not have subject matter jurisdiction over this case. We deny Rhino's motion to dismiss as moot and remand the case.

         I. Factual and Procedural Background

         Plaintiff alleges that he was seriously injured when, on October 16, 2014, he was operating a forklift on a ramp during the course of his employment and the ramp suddenly collapsed. ECF No. 1, Notice of Removal, Ex. A (Complaint) ¶ 8. Plaintiff filed suit on November 22, 2016 in the Court of Common Pleas of Philadelphia County, asserting claims for product liability, strict liability, negligence, and breach of warranty against all three defendants. Removing Defendants promptly filed a notice of removal in which they argued that removal was proper notwithstanding Rhino's status as a Pennsylvania corporation, under a fraudulent joinder theory. Id. at 5-7. Specifically, Removing Defendants contended that Pennsylvania's Worker's Compensation Act (“PWCA”) immunizes Rhino from liability for any injuries sustained by Plaintiff during the course of his employment with Rhino. Id. According to Removing Defendants, it is a legal impossibility for Plaintiff to recover from Rhino because Plaintiff was Rhino's employee at the time of the alleged accident and therefore his sole remedy from Rhino arises under the PWCA. In support of this argument, Removing Defendants submitted the affidavit of Stephen Deacon, Chief Operations Officer of Camden Iron & Metal, Inc., in which Mr. Deacon states that Camden Iron & Metal, Inc. is a parent corporation of Rhino and that at the time of Plaintiff's accident Plaintiff was an employee of Rhino. Id., Ex. B (Affidavit of Stephen Deacon). Rhino then filed a motion to dismiss on the same grounds asserted in the notice of removal. ECF No. 4, Rhino Mot.

         Plaintiff did not seek remand but rather opposed Rhino's dismissal from the case, stating that he believes he was employed by Eastern Metal Recycling at the time of the accident, not Rhino, and that his employment relationship is an issue of fact to be investigated during discovery. ECF No. 5, Pl.'s Opp'n at 3-4. Rhino replied, largely reiterating the same arguments made in its motion. ECF No. 9, Rhino Reply.

         II. Legal Standard

         Under 28 U.S.C. § 1332, this Court has subject matter jurisdiction over civil actions between citizens of different states where the amount in controversy exceeds $75, 000. 28 U.S.C. § 1332. Complete diversity is required, meaning that “every plaintiff must be of diverse state citizenship from every defendant.” In re Briscoe, 448 F.3d 201, 215 (3d Cir. 2006). A corporate defendant is deemed a citizen of its state of its incorporation and the state where it has its principal place of business. 28 U.S.C. §1332(c). Here, Plaintiff is a Pennsylvania citizen and Rhino is a Pennsylvania corporation; therefore, complete diversity is lacking and under most circumstances we would not have jurisdiction to hear the case.[1]

         An exception to this rule exists in cases where a non-diverse defendant has been fraudulently joined. The doctrine of fraudulent joinder permits a defendant to remove an action notwithstanding a lack of complete diversity, “if [the diverse defendant] can establish that the non-diverse defendants were ‘fraudulently' named or joined solely to defeat diversity jurisdiction.” Briscoe, 448 F.3d at 216. Therefore, if Rhino was fraudulently joined, then this case is properly before the Court. Alternately, if Rhino was not fraudulently joined, then we must remand the case for lack of subject matter jurisdiction. 28 U.S.C. § 1447(c) (“If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.”); CNA v. United States, 535 F.3d 132, 145-46 (3d Cir. 2008) (“[T]he [c]ourt may dismiss for lack of subject matter jurisdiction at any time.”).

         At the outset, we note the “heavy burden of persuasion” borne by a removing party seeking to show fraudulent joinder. Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 (3d Cir. 1992). Joinder will only be deemed fraudulent “where 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 or seek a joint judgment.” Id. (quoting Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990)) (internal quotations omitted). Stated differently, the removing party must show the plaintiff's claim against the resident defendant to be “wholly insubstantial and frivolous.” Id. at 852. The court is precluded from finding that a party was fraudulently joined “based on its view of the merits of those claims or defenses, ” and “all doubts should be resolved in favor of remand.” Boyer, 913 F.2d at 113; Batoff, 977 F.2d at 851. In making this inquiry, the court may look beyond the pleadings to identify any indicia of fraudulent joinder. Briscoe, 448 F.3d at 219.

         Importantly, the standard for fraudulent joinder is higher than the standard for dismissal under Rule 12; that is, “it is possible that a party is not fraudulently joined, but that the claim against that party ultimately is dismissed for failure to state a claim upon which relief may be granted.” Batoff, 977 F.2d at 852. A review of the case law makes clear that a finding of fraudulent joinder is “reserved for situations where recovery from the non-diverse defendant is a clear legal impossibility” rather than simply an unlikely outcome. Salley v. AMERCO, No. 13-921, 2013 WL 3557014, at *3 (E.D. Pa. July 15, 2013) (collecting cases).

         III. Analysis

         The dispute at the center of this analysis concerns the employment relationship, or lack thereof, between Plaintiff and Rhino at the time of the subject accident. The issue is critical because it controls whether the PWCA's exclusivity provision will bar Plaintiff from pursuing a claim against Rhino. Under the Act, employees are provided “the right to a fixed level of compensation for work-related injuries and, in return, . . . their employers [are exempted] from common law liability for negligence.” Mathis v. United Eng'rs & Constructors, Inc., 554 A.2d 96, 101 (Pa. Super. Ct. 1989); 77 P.S. § 481(a). Liability under the PWCA is therefore exclusive, “and employers are not to be liable to employees ‘in any action at law or otherwise on account of any injury or death . . . or occupational disease.'” Claudio v. MGS Mach. Corp., 798 F.Supp.2d 575, 580 (E.D. Pa. 2011) (quoting 77 P.S. § 481(a)). Thus, if Plaintiff was a Rhino employee at the time of the accident, then he will be precluded from pursuing any claim against Rhino for his injuries.

         The existence of an employment relationship under the PWCA depends on application of the same rules “as those at common law for ascertaining the relation of master and servant.” 77 P.S. §§ 21-22; Kiehl v. Action Mfg. Co., 517 Pa. 183, 187 (Pa. 1987). Key to the analysis is whether the purported employer “maintains control or the right to control the work to be done and the manner of doing it.” Kiehl, 517 Pa. at 187. In the parent/subsidiary context, the court must determine “which corporation has control over an employee . . . by focusing on the functions performed by each corporation and by the employee in addition to other indicia of control.” Mohan v. Cont'l Distilling Co., 422 Pa. 588, 593 (1966). As a whole, ...


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