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Nepveux Inc. v. Mobil Exploration & Producing North America Inc.

United States District Court, W.D. Louisiana, Lafayette Division

August 16, 2018

NEPVEUX, INC.
v.
MOBIL EXPLORATION & PRODUCING NORTH AMERICA, ET AL.

          REPORT AND RECOMMENDATION

          CAROL B. WHITEHURST UNITED STATES MAGISTRATE JUDGE

         Before the Court upon referral from the district judge is the Motion to Remand filed by plaintiff, Nepveux, Inc. [Rec. Doc. 13]. The motion is jointly opposed by defendants Mobile Exploration & Producing North America, Inc. (“MEPNA”), Mobile Oil Exploration and Producing Southeast, Inc. (“MOEPSI”), and SWN Production Company, LLC (“SWN”) (collectively, “defendants”) [Doc. 18], and the plaintiff has filed a reply brief [Doc. 21]. For the following reasons, the undersigned recommends that the motion to remand be GRANTED, and that this matter be remanded to the 15th Judicial District Court, Parish of Acadia, State of Louisiana.

         PROCEDURAL BACKGROUND

         The facts relevant to the instant motion are not disputed. The plaintiff corporation owns land in the Bosco Oil and Gas Field in Acadia Parish, Louisiana. The plaintiff alleges that hidden but recently discovered groundwater contamination is beneath the property. Plaintiff's predecessors-in-title and incorporators[1] first learned of this groundwater contamination while discussing a February 7, 2018, ICON Report of Initial Sampling with their attorney. Immediately after learning of the groundwater contamination, plaintiff's predecessors-in-title formed Nepveux, Inc., a Texas corporation, on February 22, 2018, and, effective the same day, assigned their 100% ownership interest in the property and any and all claims related to the contaminated land to the newly formed corporation. The “Assignment and Conveyance” of the property, duly recorded in the Acadia Parish Recording Page, states that the Assignors - Aaron Nepveux, Louis Nepveux, and Connie Arceneaux, all residents of the state of Louisiana - “do hereby transfer, assign, convey, and deliver . . . unto NEPVEUX, INC., a Texas corporation . . . “all of their interest and rights in” the property at issue in the instant litigation. The Assignment and Conveyance goes on to state:

This transfer includes all rights in the subject property, including but not limited to rights of action and causes of action in tort, contract, Mineral Code, regulatory and other applicable law(s) to recover money damages, contamination cleanup, mandatory injunction, prohibitory injunction, and/or any other remedy available to address environmental damage to soil and groundwater on or adjacent to the aforesaid transferred property. This assignment specifically, but without limitation, assigns all rights under Act 312, La. R.S. 30:29, The Groundwater Act, La. R.S. 30:2015.1, The Conservation Act, La. R.S. 30:29, et seq., and The Environmental Quality Act, La. R.S. 30:2001, et seq., and related regulations, including the right to recover attorney fees and expenses.”[2]
The assignment became effective on February 22, 2018.

         Six days later, on February 28, 2018, Nepveux, Inc. - now sole owner of the contaminated land and all associated claims - sued defendants in the Fifteenth Judicial District Court of Louisiana to have its property cleaned up and brought into compliance with state law. On April 6, 2018, defendants removed the matter to this Court. In their Notice of Removal, defendants argue that at the time of removal, the Acadia Parish Conveyance Records and Assessor's Records contained no record of any transfer of the property from the individuals to the plaintiff corporation, and that, therefore, the Court should look to the citizenship of the individuals transferring their interests to the corporation instead of the citizenship of corporation itself.

         In the instant motion, plaintiff argues the matter should be remanded to state court on grounds the parties are not diverse in this matter. The plaintiff corporation has Texas citizenship as a corporation organized under the laws of the state of Texas, while the defendants are Texas corporations. The defendants acknowledge that all parties to this lawsuit are citizens of Texas for purposes of determining diversity jurisdiction, but argue that the Court should ignore the citizenship of the plaintiff corporation, because the “shell [plaintiff] corporation” was formed solely to defeat diversity jurisdiction. After review of the relevant jurisprudence, the undersigned finds the arguments of the defendants are not supported.

         DISCUSSION

         It is well-settled that federal courts are courts of limited jurisdiction, and therefore, removal statutes are subject to strict construction. Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir. 1988). The party seeking removal bears the burden of establishing that federal jurisdiction exists. Boone v. Citigroup, Inc., 416 F.3d 182, 188 (5th Cir. 2005); Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). Any doubt regarding whether federal jurisdiction exists following removal must be resolved against a finding of federal jurisdiction. Gash v. Hartford Acc. & Indem. Co., 491 F.3d 278, 281-82 (5th Cir. 2007); Acuna v. Brown & Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000).

         28 U.S.C. §1332 grants district courts subject matter jurisdiction over cases between citizens of different states when the amount in controversy exceeds $75, 000. If the plaintiff in this matter is recognized as a validly formed Texas corporation, and therefore a citizen of Texas, diversity jurisdiction is destroyed and this matter must be remanded.

         The Supreme Court case of Provident Sav. Life Assurance Soc'y of N.Y. v. Ford, 114 U.S. 635 (1885) is instructive. Provident involved an action to collect on a judgment where, one month after obtaining the judgment in federal court, the judgment creditor assigned 100% of his interest in the judgment to Ford, a non-diverse entity, “together with all his rights and claims thereunder.” 114 U.S. at 637. Ford, as current owner of the judgment, then sued to collect the judgment in a separate state court action. The defendant removed the matter arguing that diversity jurisdiction existed because the assignment was fraudulent and the real party in interest was the original judgment creditor. The Supreme Court disagreed, stating:

The plain answer to this position is that the action was nevertheless Ford's, and as against him there was no right of removal . … [I]f it could be shown that the assignment was fraudulent as against the defendant, it would be void, and this fact would be a defense to the action brought by the assignee. … [I]t would be a defense to the action, and not a ground of removing that cause into the federal court. (emphasis supplied)

Provident, 114 U.S. at 640. But see Grassi v. CIBA-GEIGY, Ltd., 894 F.2d 181 (5th Cir. 1990) (finding that decision of the district court denying a motion to remand where the court found the overriding motive behind plaintiffs' assignment to Costa Rican corporation of 2% interest in their claim against Swiss corporation was desire to remain in state court by destroying diversity ...


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