Lorenz v. Texas Workforce Commission ( 2006 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS October 30, 2006
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
)))))))))))))))))))))))))) Clerk
No. 05-50938
Summary Calendar
))))))))))))))))))))))))))
DANIEL ABRAHAM LORENZ,
Plaintiff–Appellant,
v.
TEXAS WORKFORCE COMMISSION; WAL-MART ASSOCIATES, INC.,
Defendants–Appellees.
Appeal from the United States District Court
for the Western District of Texas, San Antonio
No. 5:04-CV-0806
Before DEMOSS, STEWART, and PRADO, Circuit Judges.
PER CURIAM:*
Daniel Lorenz appeals the district court’s order dismissing
his wrongful discharge claim against Wal-Mart Associates, Inc.
and remanding his unemployment benefits claim against the Texas
Workforce Commission to Texas state court. Because the district
court lacked subject matter jurisdiction over this case, we
VACATE the order of the district court and REMAND this case with
*
Pursuant to 5TH CIRCUIT RULE 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIRCUIT
RULE 47.5.4.
instructions that it be remanded to the state court from which it
was removed.
I. FACTUAL BACKGROUND
Plaintiff-Appellant Daniel Lorenz (“Lorenz”), proceeding pro
se, was employed by Defendant-Appellee Wal-Mart Associates, Inc.
(“Wal-Mart”).1 According to Lorenz, he reported several public
health infractions committed by Wal-Mart employees to Wal-Mart
management. Lorenz also wore a crucifix, a shirt with a clerical
collar, and a kaffiyeh while at work. He claims he was counseled
by Wal-Mart to stop wearing his religious attire because
customers had complained. Wal-Mart terminated Lorenz’s
employment on March 1, 2004.
Lorenz then requested unemployment benefits from the Texas
Workforce Commission (“TWC”), also a Defendant-Appellee in this
case. The TWC denied his claim, and has upheld that decision
through several levels of administrative appeal.
II. PROCEDURAL HISTORY
Lorenz brought suit against Wal-Mart and the TWC in Texas
state court on August 2, 2004. He labeled his claim against Wal-
Mart as “Wrongful Discharge” and his claim against the TWC as
“Negligent Misrepresentation.” The substance of his petition
indicates that he believed Wal-Mart singled him out for religious
1
Wal-Mart states that its correct name is Wal-Mart Stores,
Inc. and that Lorenz has incorrectly identified it as Wal-Mart
Associates, Inc.
2
discrimination based on his attire and changed his wages in
retaliation for his reports of public health violations. He also
alleges that Wal-Mart ultimately terminated him because of his
religious attire. His claim against the TWC is essentially a
request for judicial review of the TWC’s decision to deny him
unemployment benefits. It is unclear if he is also bringing a
separate tort of negligent misrepresentation.
The TWC answered in state court and moved to sever Lorenz’s
claim for unemployment benefits from his wrongful discharge
claim. Wal-Mart then removed the case, with the TWC’s consent,
to the Western District of Texas on the basis of federal question
jurisdiction and diversity jurisdiction. Once in federal court,
Wal-Mart filed a motion to dismiss on the ground that Lorenz had
not exhausted his administrative remedies with respect to his
religious discrimination claim. Wal-Mart also filed a motion to
sever the wrongful discharge claim from Lorenz’s appeal of the
TWC’s decision. The TWC filed a motion to remand Lorenz’s appeal
regarding unemployment benefits to state court on the ground that
sovereign immunity prevented Lorenz from proceeding against the
TWC in federal court.
The case was referred to a magistrate judge for all pretrial
matters. On May 5, 2005, the magistrate judge issued her
Memorandum and Recommendation, in which she recommended that Wal-
Mart’s motion to dismiss be granted, Wal-Mart’s motion to sever
be denied as moot, and the TWC’s motion to remand be granted.
3
Lorenz filed objections; however, on May 24, 2005, the district
court adopted the magistrate judge’s recommendations, dismissed
the wrongful discharge claim against Wal-Mart, and remanded
Lorenz’s claim against the TWC to Texas state court. Lorenz now
appeals this order.
III. DISCUSSION
Before reaching the merits of Lorenz’s appeal, the court
must first determine if this court and the district court have
subject matter jurisdiction over this case. See Steel Co. v.
Citizens for a Better Env’t, 523 U.S. 83, 94 (1998) (stating that
on appeal, “the first and fundamental question is that of
jurisdiction”). Parties cannot waive the want of subject matter
jurisdiction. Hospitality House, Inc. v. Gilbert, 298 F.3d 424,
429 (5th Cir. 2002); see also Stockman v. Fed. Election Comm’n,
138 F.3d 144, 151 (5th Cir. 1998) (noting that without
jurisdiction, federal courts lack the power to adjudicate
claims). Thus, even if not suggested by the parties, the court
has the duty to ensure that it has jurisdiction. See Steel Co.,
523 U.S. at 94; see also Ruhrgas AG v. Marathon Oil Co., 526 U.S.
574, 583 (1999) (stating that “subject-matter delineations must
be policed by the courts on their own initiative”).
This case is currently in federal court because Wal-Mart
removed it with the TWC’s consent. Removal is proper in any
civil action “of which the district courts of the United States
4
have original jurisdiction . . . .” 28 U.S.C. § 1441(a) (2000).
The party removing the case bears the burden of establishing
federal subject matter jurisdiction. Boone v. Citigroup, Inc.,
416 F.3d 382, 388 (5th Cir. 2005). Doubts about whether removal
jurisdiction is proper should be resolved against federal
jurisdiction. Acuna v. Brown & Root, Inc., 200 F.3d 335, 339
(5th Cir. 2000). Thus, if at any time before final judgment “it
appears that the [federal] district court lacks subject matter
jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c).
In its notice of removal, Wal-Mart sets forth two grounds
for federal jurisdiction. The first is federal question
jurisdiction, in which Wal-Mart asserts that Lorenz’s wrongful
discharge claim is actually a claim of religious discrimination
under Title VII of the Civil Rights Act of 1964, 42 U.S.C.
§ 2000e-2. The second is diversity jurisdiction, which Wal-Mart
couples with the assertion that Lorenz improperly joined the TWC
to prevent removal. We will examine each in turn to determine
whether they provide a basis for the exercise of federal subject
matter jurisdiction.
A. Federal Question Jurisdiction
Wal-Mart first asserts that Lorenz’s wrongful discharge
claim arises under the laws of the United States, which would
create federal question jurisdiction under 28 U.S.C. § 1331(giving district courts original jurisdiction over “all civil
actions arising under the Constitution, laws, or treaties of the
5
United States”). To reach this conclusion, Wal-Mart
characterizes Lorenz’s wrongful discharge claim as a claim for
religious discrimination under Title VII. On appeal, however,
Lorenz repeatedly asserts that he is not bringing a Title VII
claim.
The presence or absence of federal question jurisdiction is
governed by the well-pleaded complaint rule, which states that
federal jurisdiction exists only when a federal question is
presented on the face of the plaintiff’s properly pleaded
complaint. Caterpillar, Inc. v. Williams, 482 U.S. 386, 392
(1987); Hoskins v. Bekins Van Lines, 343 F.3d 769, 772 (5th Cir.
2003). Thus, the plaintiff is made the master of his claim, and
he may avoid federal jurisdiction by exclusive reliance on state
law. Caterpillar, 482 U.S. at 392; see also Medina v. Ramsey
Steel Co., 238 F.3d 674, 680 (5th Cir. 2001). Here, it is
unclear on what law Lorenz does rely for his wrongful discharge
claim, as he does not reference any law in his petition. His
petition does claim that he was subjected to the infliction of an
unreasonable hardship, retaliated against because of his report
of public health violations, and terminated because of his
religious attire. Thus, although Lorenz does not clearly state a
specific cause of action, it is clear that his petition makes no
mention of Title VII as the source of his claim.
In deciding Wal-Mart’s motion to dismiss, the magistrate
judge recognized that Lorenz denied bringing a religious
6
discrimination claim, but the magistrate judge found that,
regardless of what Lorenz argued, his petition actually stated a
claim for religious discrimination. However, assuming Lorenz’s
claim is one for religious discrimination, it is possible to
bring such a claim under Texas state law. Indeed, in its notice
of removal, Wal-Mart concedes that Lorenz does not state whether
he is bringing his claim under Title VII or the Texas anti-
discrimination statute, TEX. LABOR CODE ANN. § 21.051 (Vernon 2006),
as both prohibit religious discrimination by employers.
Thus, we are left with a petition that is ambiguous as to
what cause of action Lorenz is bringing and on what law he bases
his claim. It is possible to construe his pleadings as stating a
federal claim, but it is equally possible that he is bringing a
claim solely under state law. We have held that ambiguities are
construed against removal because the removal statute is strictly
construed in favor of remand. Manguno v. Prudential Prop. & Cas.
Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002); see also Willy v.
Coastal Corp., 855 F.2d 1160, 1164 (5th Cir. 1988). Therefore,
we must construe the ambiguities in Lorenz’s petition against
removal. When we do so, we are left with no allegations on which
to base federal question jurisdiction and must turn to whether
federal subject matter jurisdiction can be sustained on some
other ground.
B. Diversity Jurisdiction
The other ground for subject matter jurisdiction asserted by
7
Wal-Mart in its removal papers is diversity jurisdiction pursuant
to 28 U.S.C. § 1332(a). Wal-Mart, a citizen of Delaware and
Arkansas, claims that it is diverse from Lorenz, a Texas citizen,
and that Lorenz improperly joined the TWC, also a Texas citizen,
in order to defeat diversity jurisdiction. In making this
argument, Wal-Mart reads Lorenz’s petition as solely making a
tort claim of negligent misrepresentation against the TWC and not
as appealing a claim for unemployment benefits. Thus, Wal-Mart
argues that because a negligent misrepresentation claim cannot
lie against the TWC, the TWC is improperly joined and should not
be considered for purposes of diversity jurisdiction. The court,
therefore, turns to the improper joinder analysis.
We have stated that there are two ways to establish improper
joinder: (1) actual fraud in the pleading of jurisdictional
facts; and (2) the inability of the plaintiff to establish a
cause of action against the non-diverse party in state court.
Guillory v. PPG Indus., Inc., 434 F.3d 303, 308 (5th Cir. 2005);
McDonal v. Abbott Labs., 408 F.3d 177, 183 (5th Cir. 2005).
Actual fraud is not at issue in this case; therefore, the court
must determine whether Lorenz can establish a cause of action
against the TWC.
The burden of demonstrating improper joinder is a heavy one
and is placed on the party seeking removal. McDonal, 408 F.3d at
183. To meet it, a defendant must show that there is no
reasonable basis to predict that the plaintiff might be able to
8
recover against the in-state defendant. Smallwood v. Ill. Cent.
R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc). In
considering whether the plaintiff may recover, we need not
determine whether the plaintiff will actually, or even probably,
prevail on the merits, but look only for a possibility that he
may do so. Guillory, 434 F.3d at 308-09. We also evaluate the
factual allegations in the light most favorable to the plaintiff
and resolve all ambiguities in controlling state law in the
plaintiff’s favor. Id. at 308; see Gray ex rel. Rudd v. Beverly
Enters.-Miss., Inc., 390 F.3d 400, 405 (5th Cir. 2004).
As noted above, Wal-Mart focuses its improper joinder
argument on the negligent misrepresentation label that Lorenz
gives his claim against the TWC. Review of Lorenz’s petition
reveals, however, that Lorenz is appealing the TWC’s decision to
deny him unemployment benefits. See Johnson v. Atkins, 999 F.2d
99, 100 (5th Cir. 1993) (per curiam) (stating that courts are to
liberally construe pro se complaints). Lorenz describes the
appeal process he has followed and specifically asks the court to
“judicially review” the TWC’s decision. Although not making any
ruling as to the propriety of Lorenz’s appeal, the court does
note that judicial review of TWC decisions is permissible
pursuant to TEXAS LABOR CODE § 212.201. Further, the TWC has
treated Lorenz’s lawsuit as an appeal of its unemployment
benefits decision.
Wal-Mart bore the burden of demonstrating improper joinder
9
by showing there was no reasonable basis to predict that Lorenz
might recover against the TWC. See McDonal, 408 F.3d at 183.
Because it is possible for Lorenz to prevail against the TWC,
Wal-Mart has failed to meet its burden. Therefore, the TWC has
not been improperly joined, and diversity jurisdiction does not
provide this court or the district court with federal subject
matter jurisdiction. Because there is no federal question
jurisdiction nor is there diversity jurisdiction, there can be no
federal subject matter jurisdiction and this case must be
remanded to state court.
IV. CONCLUSION
Because the district court lacked subject matter
jurisdiction over Lorenz’s claims, we VACATE the orders of the
district court and REMAND this case to the district court with
instructions that it be remanded to the state court from which it
was removed.
VACATED and REMANDED.
10