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Hyundai Motor America v. Knight Motors, LP

United States District Court, W.D. Pennsylvania

October 28, 2019

HYUNDAI MOTOR AMERICA, Plaintiff,
v.
KNIGHT MOTORS, LP, et al. Defendants.

          MEMORANDUM OPINION

          J. NICHOLAS RANJAN, UNITED STATES DISTRICT JUDGE

         Defendants removed this case to federal court on October 11, 2019. [ECF 1]. In their notice of removal, Defendants alleged that the Court had subject matter jurisdiction under 28 U.S.C. § 1332, “in that [the case] arises under diversity jurisdiction and the amount in controversy exceeds $75, 000.00.” [ECF 1 at ¶ 13]. Defendants also made passing citation to 28 U.S.C. § 1331, the statute governing “federal question” jurisdiction, as a basis for removal. But Defendants did not point to any federal claim in Hyundai's complaint (there were none) or otherwise identify any factual predicate for removing under Section 1331.

         On October 15, 2019, the Court directed Defendants to show cause why the Court should not remand this case to state court under 28 U.S.C. § 1441(b)(2). [ECF 7]. The so-called “forum defendant rule” established by that statute provides that an action “may not be removed” based on diversity jurisdiction if any defendant is “a citizen of the State in which such action is brought.” 28 U.S.C. § 1441(b)(2). Defendants are, by their own admission, citizens of Pennsylvania-the state in which Hyundai filed this case.

         Shortly after the Court issued its show cause order, Hyundai moved to remand this case on the same basis. [ECF 8; ECF 9]. Defendants responded on October 18, 2019, [ECF 14], Hyundai replied on October 21, 2019, [ECF 15], and Defendants sur-replied on October 22, 2019 [ECF 16-1]. Now, for the following reasons, the Court will grant Hyundai's motion and remand this case to state court.

         I. Discussion & Analysis

         Federal district courts are courts of limited jurisdiction. They “may not exercise jurisdiction absent a statutory basis.” Home Depot U.S.A., Inc. v. Jackson, 139 S.Ct. 1743, 1746 (2019). What's more, “removal statutes are to be strictly construed, with all doubts to be resolved in favor of remand.” Manning v. Merill Lynch Pierce Fenner & Smith, Inc., 772 F.3d 158, 162 (3d Cir. 2014). And a defendant who removes a case “carries a heavy burden of showing that at all stages of the litigation the case is properly before the federal court.” Id. That said, the Court must be cautions when deciding to remand a case, “lest it erroneously deprive a defendant of the right to a federal forum.” Hunter v. Greenwood Tr. Co., 856 F.Supp. 207, 211 (D.N.J. 1992).

         Remand to state court is “required” if, at any time before final judgment, “it appears that the district court lacks subject matter jurisdiction.” Hoffman v. Nutraceutical Corp., 563 Fed.Appx. 183, 185 (3d Cir. 2014); see Stewart v. Lewis, No. 2:19-CV-00847, 2019 WL 4267387, at *2 (W.D. Pa. Sept. 10, 2019). Separately, a plaintiff may also move to remand an action to state court “if removal was ‘procedurally defective.'” Parker Hannifin Corp. v. Fed. Ins. Co., 23 F.Supp.3d 588, 590 (W.D. Pa. 2014). A motion to remand based on procedural, rather than jurisdictional, defects must be filed “within 30 days after the filing of the notice of removal.” 28 U.S.C. § 1447(c).

         In 28 U.S.C. § 1331 and 28 U.S.C. § 1332, Congress granted federal courts original jurisdiction over two types of cases relevant here. Section 1331 empowers federal courts to hear cases “arising under” federal law. This is known as “federal-question jurisdiction.” Home Depot U.S.A., Inc., 139 S.Ct. at 1746. Section 1332 empowers federal courts to hear cases between “citizens of different States, ” so long as the amount in controversy exceeds $75, 000.00. This is known as “diversity jurisdiction.” Id. “Federal-question jurisdiction affords parties a federal forum in which ‘to vindicate federal rights,' whereas diversity jurisdiction provides ‘a neutral forum' for parties from different States.” Id.

         When a case that would be within the federal courts' original jurisdiction is filed in state court, a defendant may remove that case to federal court. 28 U.S.C. § 1441(a). “In removed cases, a federal court may only exercise jurisdiction on a basis which the removing party has alleged in its notice of removal.” Jessup v. Cont'l Motors, Inc., No. 12-CV-4439, 2013 WL 309895, at *3 (E.D. Pa. Jan. 24, 2013); see14C Charles Alan Wright & Arthur R. Miller, et al., Federal Practice and Procedure § 3733 (4th ed. 2012) (“In most circumstances ... defendants may not add completely new grounds for removal or furnish missing allegations, even if the court rejects the first-proferred basis of removal.”). “This rule accords with the fundamental principle that the party seeking to establish federal jurisdiction bears the burden to do so.” Jessup, No. 12-CV-4439, 2013 WL 309895, at *3.

         Defendants' notice of removal articulated one basis for the Court to exercise jurisdiction over this case: diversity. In describing why removal was proper, Defendants stated only that the case was “one which may be removed to this Court … in that it arises under diversity jurisdiction and the amount in controversy exceeds $75, 000.00.” [ECF 1 at ¶ 13] (emphasis added). The civil cover sheet accompanying Defendants' filing identified “diversity” as the sole “basis of jurisdiction.” [ECF 1-1]. Defendants' later-filed, 187-paragraph counterclaims also identified diversity, and not federal question jurisdiction, as the basis for proceeding in this Court. [ECF 5 at p. 14, ¶ 5].

         That said, the Court acknowledges that Defendants passingly cite Section 1331 in their notice of removal, albeit without any factual enhancement. See [ECF 1] (“This Court has jurisdiction pursuant to 28 U.S.C. § 1331 and 1332, and is one which may be removed to this Court … in that it arises under diversity jurisdiction[.]”). And Defendants now say that their omission of federal question jurisdiction from both their cover sheet and counterclaims was “inadvertent.” See [ECF 14 at ¶ 8] (“However, Defendants admit that their Civil Cover Sheet inadvertently only identified diversity as the basis of jurisdiction.”); [Id. at ¶ 9] (“[I]t appears that Paragraph 5 of Defendants' counterclaims is equally deficient as it also only identifies Section 1332 as the basis of this Court's jurisdiction[.] … [T]he paragraph should have correctly stated that jurisdiction over the counterclaims was proper pursuant to both Section 1331 and 1332.”).

         For purposes of this motion, the Court will accept Defendants' representations and consider whether it may exercise either diversity jurisdiction or federal question jurisdiction over this case. The answer to both questions is no.

         A. The Court does not have diversity jurisdiction over Hyundai's claims, because Defendants are citizens of Pennsylvania.

         First, diversity jurisdiction does not exist here. 28 U.S.C. § 1332. “[J]urisdiction based on diversity of citizenship requires that opposing parties be citizens of diverse states.” GBForefront, L.P. v. Forefront Mgmt. Grp., LLC, 888 F.3d 29, 34 (3d Cir. 2018). “Complete diversity requires that, in cases with multiple plaintiffs or multiple defendants, no plaintiff be a citizen of the same state as any defendant.” Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 419 (3d Cir. 2010).

         “The key inquiry in establishing diversity is thus the ‘citizenship' of each party to the action.” Id. And the rules governing citizenship are well known: “A natural person is deemed to be a citizen of the state where he is domiciled.” Id. “A corporation is a citizen both of the state where it is incorporated and of the state where it has its principal place of business.” Id. “And a partnership, as an unincorporated entity, takes on the citizenship of each of its partners.” Id.

         Defendants have alleged that they are all citizens of Pennsylvania, while Hyundai is a citizen of California. [ECF 1 at ¶¶ 9-12]. Thus, the opposing parties appear to be “citizens of diverse states.” GBForefront, L.P., 888 F.3d at 34.

         In Section 1441(b)(2), however, Congress created an exception to the removal statute, barring removal of cases based on diversity if any defendant “is a citizen of the State in which such action is brought.” 28 U.S.C. § 1441(b)(2). This is often called the “forum defendant rule.” Encompass Ins. Co. v. Stone Mansion Rest. Inc., 902 F.3d 147, 152 (3d Cir. 2018). Thus, diversity jurisdiction in a removal case is “narrower than if the case was originally filed in federal court by the plaintiff.” Id. The rule reflects the fact “that the rationale for diversity jurisdiction no longer exists when one of the defendants is a citizen of the forum state since the likelihood of bias is reduced, if not eliminated.” Stunteback ...


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