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Viking Construction Group, LLC v. Satterfield and Pontikes Construction Inc.

United States District Court, E.D. Louisiana

January 12, 2018


         SECTION I

          ORDER & REASONS


         Before the Court is a motion[1] to remand and for costs, expenses, and sanctions filed by plaintiffs Viking Construction Group, LLC (“Viking”), Educational Electronics Corporation (“EEC”), Novo Communications, LLC (“Novo”), Hall Collums Construction, LLC (“HCC”), Perle Construction Group, LLC (“Perle”), and Tom Branighan, Inc. (“TBI”). For the following reasons, the motion is denied.


         The claims asserted in this case are rooted in the Louisiana Racketeering Act (“Louisiana RICO”). Plaintiffs allege that defendants Satterfield & Pontikes, LLC (“S&P, LLC”) and Satterfield and Pontikes, Inc. (“S&P, Inc.”) (collectively “S&P”) formed an enterprise for the purpose of securing federally funded construction projects in Orleans Parish by submitting bids that members of the enterprise knew would be low enough to guarantee awarding the contracts but insufficient to adequately and timely complete the work through subcontractors.[2] Plaintiffs assert that, after securing contracts, S&P would negotiate change orders so as to increase overall payments from the government while also defrauding subcontractors out of labor, materials, supplies, and funds.[3] Plaintiffs further contend that defendant CDW Services, LLC (“CDW”) participated in this enterprise by conspiring with S&P and by filing a verified petition for summary proceeding in state court that purportedly contained materially false statements, the purpose of which was to remove a lien that had been filed by plaintiff Perle to recover for amounts owed on several unpaid invoices.[4]

         Plaintiffs filed this lawsuit in state court on October 27, 2017.[5] Defendants filed a timely notice of removal on November 20, 2017, asserting diversity jurisdiction.[6] Plaintiffs then filed the present motion to remand on December 15, 2017, arguing that complete diversity does not exist.[7]

         The parties do not dispute that diversity exists between all plaintiffs and both S&P defendants.[8] Plaintiffs insist, however, that diversity is destroyed by the presence of defendant CDW, whose member, Chris Walker, is a citizen of Louisiana.[9]The S&P defendants do not deny that CDW is a Louisiana citizen. Rather, they maintain that CDW was improperly joined as a defendant and, as a result, its citizenship is irrelevant for purposes of diversity jurisdiction.[10]

         Accordingly, the central question before the Court is whether CDW is a properly joined defendant. If it is, then complete diversity is lacking, and remand is required.[11] If it is not, then complete diversity exists, and remand would be inappropriate.[12]


         When challenging the propriety of joinder, “[t]he removing party ‘bears a heavy burden of proving that the joinder of the in-state party was improper . . . that is, to show that sham defendants were added to defeat jurisdiction.” Smallwood Ill. Cent. R.R. Co., 385 F.3d 568, 574 (5th Cir. 2004). “Since the purpose of the improper joinder inquiry is to determine whether or not the in-state defendant was properly joined, the focus of the inquiry must be on the joinder, not the merits of the plaintiff's case.” Id. at 573.

         A removing defendant may show improper joinder in one of two ways: “(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.” Id. (quoting Travis v. Irby, 326 F.3d 644, 646-47 (5th Cir. 2003)). As to the second method-the only one at issue here-the Fifth Circuit has held that the test “is whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant, which stated differently means that there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant.” Id. In determining the validity of an improper joinder claim, the Court does “not determine whether the plaintiff will actually or even probably prevail on the merits of the claim, but look[s] only for a possibility that the plaintiff might do so.” Guillory v. PPG Indus., Inc., 434 F.3d 303, 309 (5th Cir. 2005).

         To assess a plaintiff's possibility of recovery against an in-state defendant, the Court “may conduct a Rule 12(b)(6)-type analysis, looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law against the in-state defendant.” Smallwood, 385 F.3d at 574. “Ordinarily, if a plaintiff can survive a Rule 12(b)(6) challenge, there is no improper joinder.”[13] Id. When conducting the 12(b)(6)-style inquiry, federal pleading standards apply. Int'l Energy Ventures Mgmt., LLC v. United Energy Grp., Ltd., 818 F.3d 193, 208 (5th Cir. 2016). Further, the court “must evaluate all of the factual allegations in the light most favorable to the plaintiff, resolving all contested issues of substantive fact in favor of the plaintiff.” Guillory, 434 F.3d at 308 (quotations omitted).


         The S&P defendants argue that defendant CDW, a Louisiana citizen, was improperly joined. Under the improper joinder doctrine described above, for CDW to be a properly joined defendant, there must be a reasonable basis for the Court to predict that plaintiffs might be able to recover against CDW. Plaintiffs' only claim against CDW sounds in racketeering. Therefore, the threshold issue is whether plaintiffs can establish a cause of action against CDW under Louisiana RICO.


         To state a valid civil cause of action under Louisiana RICO, a party must show that (1) a person engaged in (2) a pattern of racketeering activity (3) connected to the acquisition, establishment, conduct, or control of an enterprise.[14] Brown v. Protective Life Ins. Co., 353 F.3d 405, 407 (5th Cir. 2003). The term “pattern of racketeering activity” means

engaging in at least two incidents of racketeering activity that have the same or similar intents, results, principals, victims, or methods of commission or otherwise are interrelated by distinguishing characteristics and are not isolated incidents, provided at least one of such incidents occurs after August 21, 1992, and that the last of such ...

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