Michael Ashford v. Aeroframe Services, L.L.C., et

Case: 17-30142 Document: 00514700156 Page: 1 Date Filed: 10/26/2018
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 17-30142 October 26, 2018
Lyle W. Cayce
MICHAEL ASHFORD, Clerk
Plaintiff - Appellant Cross-Appellee
v.
AEROFRAME SERVICES, L.L.C.,
Defendant - Appellee Cross-Appellant
AVIATION TECHNICAL SERVICES, INCORPORATED,
Defendant - Appellee
____________________________
consolidated with 17-30483
MICHAEL ASHFORD,
Plaintiff - Appellant
v.
AVIATION TECHNICAL SERVICES, INCORPORATED,
Defendant - Third Party Plaintiff - Appellee
v.
ROGER A. PORTER,
Third Party Defendant - Appellant
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Appeals from the United States District Court
for the Western District of Louisiana
Before DAVIS, JONES, and HIGGINSON, Circuit Judges.
STEPHEN A. HIGGINSON, Circuit Judge:
Plaintiff–Appellant Michael Ashford commenced this litigation in
October 2013, bringing claims under Louisiana law in Louisiana court against
Defendant–Appellee Aeroframe Services, LLC, and Defendant–Appellee
Aviation Technical Services, Inc. (ATS). Both Ashford and Aeroframe are
Louisiana citizens. The litigation proceeded in state court for some months
until ATS removed to federal court on the theory that Ashford and Aeroframe
had settled. On the contrary, Ashford’s claims remained pending against
Aeroframe.
As the Supreme Court has emphasized, federal diversity-of-citizenship
jurisdiction “depends upon the state of things at the time of the action
brought.” Grupo Dataflux v. Atlas Glob. Grp., L.P., 541 U.S. 567, 570–71 (2004)
(quoting Mollan v. Torrance, 22 U.S. (9 Wheat.) 537, 539 (1824)). “This time-
of-filing rule is hornbook law (quite literally) taught to first-year law students
in any basic course on federal civil procedure.” Id. (footnote omitted). And the
law is no different in cases removed from state court. “Consistent with general
principles for determining federal jurisdiction, . . . diversity of citizenship must
exist both at the time of filing in state court and at the time of removal to
federal court.” Coury v. Prot, 85 F.3d 244, 248–49 (5th Cir. 1996) (emphases
added); see also, e.g., Stevens v. Nichols, 130 U.S. 230, 231–32 (1889); 14C
Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 3723
& n.16 (4th ed. updated Sept. 2018).
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There was no diversity of citizenship at the time this suit was filed. At
that point, two of the parties, Plaintiff Michael Ashford and Defendant
Aeroframe Services, were Louisiana citizens. It is true, of course, that courts
must “look beyond the pleadings, and arrange the parties according to their
sides in the dispute.” City of Indianapolis v. Chase Nat. Bank of City of N.Y.,
314 U.S. 63, 69 (1941). It is also true that the magistrate judge in this case
found that Ashford and Aeroframe became aligned as the litigation progressed.
But the magistrate judge specifically rejected the argument that the two
parties were aligned from the beginning. This latter factual finding has not
been appealed. So even accounting for the possibility of realignment, “the state
of facts that existed at the time of filing” failed to meet the jurisdictional
prerequisite of complete diversity. Grupo, 541 U.S. at 571.
According to the dissenting opinion, we “recognized” in Zurn Industries,
Inc. v. Acton Construction Co., 847 F.2d 234 (5th Cir. 1988), that realignment
of the parties “is an exception” to the time-of-filing rule. With respect, Zurn
says no such thing. The cited portion of the opinion merely describes the
principle, familiar from City of Indianapolis, that federal courts are not bound
by the labels the parties give themselves in the pleadings. See id. at 236.
Nowhere did Zurn obviate the hornbook law that diversity must exist “at the
inception of the lawsuit.” Id. at 238. To the contrary, Zurn’s jurisdictional
analysis refused to consider post-commencement events like “cross-claims and
counterclaims filed by the defendants,” and instead held that the parties’
alignment for jurisdictional purposes “is to be determined by the plaintiff’s
principal purpose for filing suit.” Id at 237 (emphasis added). Because the
magistrate judge found that Ashford’s “principal purpose” for suing Aeroframe
was legitimate (a finding that no one appeals), fidelity to Zurn requires
relinquishing the case.
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The dissenting opinion also relies on a provision of the removal statute,
which contemplates that a suit may “become removable” after it is filed. 28
U.S.C. § 1446(b)(3). No doubt, that is sometimes true. For example, a suit may
“become removable” when a plaintiff amends the complaint to add a federal
cause of action. See § 1331. It may become removable when a defendant
discovers that he qualifies as a federal officer. See § 1442(a)(1); Morgan v.
Huntington Ingalls, Inc., 879 F.3d 602, 607 (5th Cir. 2018). And it may even
become removable when the only nondiverse defendant is formally dropped
from the suit. See § 1332(a); Grupo, 541 U.S. at 572–73; Caterpillar Inc. v.
Lewis, 519 U.S. 61, 68–69 (1996). But none of these circumstances obtains here.
Finally, the dissenting opinion cites Peters v. Standard Oil Co. of Texas
for the proposition that “any realignment of parties should take place before
jurisdiction is decided.” That assertion seems undoubtedly correct. In Peters,
for example, our court examined the facts in existence at the time of filing and
concluded that the “real interest” of one defendant aligned him with the
plaintiffs. 174 F.2d 162, 163 (5th Cir. 1949). We therefore treated him as a
plaintiff in the diversity analysis. See id. Likewise, a proper jurisdictional
analysis in this case would begin by looking for potential realignment. But
again, unlike in Peters, the magistrate judge here found that Ashford and
Aeroframe were (at least initially) adverse. And because that plaintiff and that
defendant are both citizens of Louisiana, it cannot be said that diversity of
citizenship existed “at the time of filing in state court.” Coury, 85 F.3d at 248–
49.
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Accordingly, the district court’s judgment is VACATED, and the matter
is REMANDED with instructions to remand to state court. 1
1Because the district court lacked jurisdiction, all its orders are vacated. This resolves
the consolidated case.
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W. EUGENE DAVIS, Circuit Judge, concurring in the judgment:
I would conclude that diversity jurisdiction is lacking in this matter
because the record does not contain a sufficient basis to find that Ashford and
Aeroframe are not adverse parties. Although our precedent provides that a
case can become removable under federal diversity jurisdiction if the plaintiff
and the nondiverse defendant enter into an irrevocable settlement agreement,
Vasquez v. Alto Bonita Gravel Plant Corp., 56 F.3d 689, 693 (5th Cir. 1995), no
such agreement was ever produced in this case. “[A]bsent such an irrevocable
settlement, the nondiverse defendant remain[s] a party to the case.” Id. at 690.
Furthermore, assuming that realignment is permitted to establish
diversity jurisdiction upon removal, it was improper to realign Aeroframe as a
plaintiff in this matter based on an email generated by Ashford’s counsel. I
acknowledge that diversity jurisdiction cannot be manufactured “by the
parties’ own determination of who are plaintiffs and who defendants.” City of
Indianapolis v. Chase Nat’l Bank, 314 U.S. 63, 69 (1941). However, we cannot
cast aside the rule that the alignment of parties “must be ascertained from the
‘principal purpose of the suit’ and the ‘primary and controlling matter in
dispute.’” Id. at 69–70 (citations omitted). 1
In his petition, Ashford sued Aeroframe, his former employer, under the
Louisiana Last Paycheck Law, La. R.S. 23:631, for unpaid wages and related
damages. Ashford also sued ATS for negligence, interference with contract,
and unfair trade practices and again sought as damages unpaid wages and
1 We have noted that “[t]he determination of the ‘primary and controlling matter in
dispute’ . . . is to be determined by plaintiff’s principal purpose for filing [his] suit.” Zurn
Industries, Inc. v. Acton Const. Co., Inc., 847 F.2d 234, 237 (5th Cir. 1988).
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other lost benefits, as well as future wages. Thus, the principal purpose for the
filing of Ashford’s suit was to recover his unpaid wages and related damages
resulting from the termination of his employment by Aeroframe. In its answer,
Aeroframe denied the allegations in Ashford’s petition and further prayed for
judgment in its favor and against Ashford. The record shows that since the
filing of its answer, Aeroframe itself has made no assertions, admissions,
and/or stipulations inconsistent with its answer. 2 Moreover, in its appellate
brief, Aeroframe specifically asserts that it “has never agreed that statutory
penalties are owed to Mr. Ashford, even if he can establish he is owed any back
owed wages (which Aeroframe has disputed and continues to dispute).”
Consequently, the necessary “collision of interest,” City of Indianapolis, 314
U.S. at 69, exists between Ashford and Aeroframe such that no realignment is
warranted. 3
Judge Jones takes the position that an email, which was drafted by
Ashford’s counsel to Ashford and other former employees of Aeroframe whom
counsel is representing, reflects “Aeroframe’s promise to pay Ashford” and
“states that all of Ashford’s requested relief (‘wages, penalties, and attorney’s
fees’) would be stipulated to by Aeroframe.” Judge Jones posits that the email
constitutes “proof that Aeroframe and Ashford had the same ‘ultimate
interests’ in the outcome of the action.”
2 Further corroborating that Ashford and Aeroframe continue to be adverse is that
Aeroframe has separate counsel in this appeal, who has briefed the issues and argued on
behalf of Aeroframe.
3 This case is unlike City of Indianapolis wherein the plaintiff sought a judgment
declaring the validity and binding nature of a lease, and the realigned defendant denied “[i]n
its answer . . . that it had ever contended or admitted that the said . . . lease was not and is
not a valid and binding obligation upon the defendants.” 314 U.S. at 71.
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My problem with such “proof” is that the email was drafted by Ashford’s
counsel. We have nothing from Aeroframe confirming a promise to pay and/or
to stipulate to Ashford’s requested relief. This one-sided email would certainly
not qualify as an irrevocable settlement under Vasquez, nor is it sufficient proof
under City of Indianapolis that Ashford and Aeroframe are aligned.
For these reasons, I respectfully concur.
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EDITH H. JONES, Circuit Judge, dissenting:
The majority today refuse to realign the parties according to their true
and ultimate interests in the litigation, leading them to incorrectly conclude
that this court lacks diversity jurisdiction.
Even more disturbing, the majority refuse to discuss the Rule 11
sanctions request by appellee Aviation Technical Services predicated on the
bad faith filing by its opponents of cross-summary judgment motions as an end-
run around unfavorable district court rulings, and their subsequent contrived
appeal to this court. I see nothing in the Rule preventing the district court
from imposing sanctions despite the (erroneous) dismissal of this case. I
respectfully dissent.
Because realignment of the parties and possible sanctions involve highly
fact-specific inquiries, and because the majority opinion does not detail the
history of the underlying litigation, it is necessary to elaborate on the factual
and procedural background of this case before proceeding to an analysis of
diversity jurisdiction.
BACKGROUND
I. Facts
Aeroframe Services, LLC (“Aeroframe”) used to have an aircraft
maintenance, repair, and overhaul business at Chennault International
Airport in Louisiana. Due to financial difficulties, Aeroframe began to look for
a partner or purchaser in 2012. Aeroframe was in default on a $9,775,500 note
held by EADS, Inc., which was secured by Aeroframe’s equipment. In
November 2012, Aeroframe entered into a non-disclosure agreement (“NDA”)
with Aviation Technical Services (“ATS”) for the purpose of discussing
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partnership. This agreement stated that both parties would disclose certain
confidential information to each other and “any such information will be kept
secret and strictly confidential.” ATS decided it was not interested. In
February 2013, Aeroframe offered to sell the company to ATS. Again, ATS
declined. Roger Porter was the owner and manager of Aeroframe, and was
Aeroframe’s primary representative in these negotiations. Along with the
acquisition of Aeroframe, Porter was also seeking employment or a consulting
position with ATS.
In May 2013, ATS and Aeroframe entered into another NDA. This
agreement only prevented Aeroframe from disclosing confidential information.
This NDA stated that it was the “entire agreement of the parties in respect to
the subject matter hereof.” In June 2013, the parties entered into an
Exclusivity Agreement, which among other things, prevented Aeroframe from
soliciting any similar proposals for at least 30 days. The Exclusivity
Agreement referenced an NDA: “Other than the NDA, which shall remain in
full force and effect, this Agreement expresses the entire understanding of the
parties with respect to the subject matter of the Agreement.” As noted by the
district court, the Agreement does not clearly specify which NDA it references.
ATS and Porter agree that a key component for any transaction would
be the settlement of the EADS note. ATS’s CFO testified that Porter asked for
a loan to buy the note, but they said no. He also testified that Porter told ATS
that they would have to buy it because he would not be able to.
In July, Porter began negotiating with another aircraft maintenance
outfit named AAR. ATS sent Porter a proposed consulting agreement on July
11, which he rejected. On July 12, Aeroframe’s attorney emailed ATS the
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contact information for EADS’s counsel. ATS and EADS began negotiating the
price of the note. On July 17, ATS sent Porter a revised agreement and
informed Porter that it knew he had “other potential buyers” and needed to
know what Porter was thinking. AAR executed a Letter of Intent on July 19,
which contained a 30 day exclusivity period. The same day, Porter texted an
employee of ATS stating that he “started a dialog with another company” and
advised AAR to pull out its people who had been at ATS.
Negotiations between Porter and ATS did not end there. Porter and the
CEO of ATS emailed about Porter’s possible employment, and the CEO sent
Porter an outline of an employment agreement on July 20. Porter told the COO
of ATS that he was in an exclusive agreement with another party on July 22.
Porter later confirmed to the COO that AAR was the other potential buyer.
As noted above, ATS began negotiating with EADS for the note earlier
in July. These parties continuously bargained until they agreed on a price on
July 23 and finalized the note purchase on July 30th. ATS then informed
Porter, Aeroframe, and AAR. The next day, ATS and AAR contacted the
Chennault Airport about taking over Aeroframe’s lease. Porter visited the
airport with AAR. On the same day, ATS offered Porter employment, which
he accepted. On August 1, ATS’s COO asked Porter to keep him updated about
communications from AAR and Porter said he would. Later that day, the COO
texted Porter asking about a rumored meeting between AAR and Chenault
Airport. Porter did not inform the COO that he had attended the meeting. In
fact, Porter represented that he was having dinner with the executive director
of Chennault Airport that evening, but he met with AAR instead. That evening
he signed an employment contract with AAR.
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When the president of the board of commissioners for Chennault Airport
learned that Porter had signed an employment agreement with AAR, he called
an emergency meeting for August 3. At this meeting, Porter surrendered
Aeroframe’s lease and recommended that the Board award the lease to AAR.
The board voted to do so. The president of the board testified that he relied on
Porter’s judgment when he voted on the lease award.
Porter emailed the COO of ATS the next day and stated that he was
informed “via email that AAR had secured the lease at Chennault and they are
requesting I remove all aeroframe assets over the next two weeks.” On
August 4, Porter agreed on behalf of Aeroframe to vacate the premises by
August 31. A couple days later, ATS sent a demand letter to Aeroframe
advising it to cure its default on the EADS note within five days or face
acceleration. Porter decided to close Aeroframe’s operations on August 9. He
has stated that this was due to the failure of a customer to pay its invoices,
lack of funds for payroll, and “imminent foreclosure of the equipment by ATS.”
Aeroframe did not cure its default, and ATS sent a letter accelerating the
note. Aeroframe signed a strict foreclosure agreement on August 20.
AAR did not end up hiring Porter, and Porter sued. This lawsuit is still
pending in the Western District of Tennessee. 1 Emails among AAR employees
suggest that they could not hire Porter because he did not make payroll at least
twice and blamed his failure on his customers. 2
1 See Porter v. AAR Aircraft Servs., Inc., 2:15-cv-02780-JTF-tmp (W.D. Tenn.).
2 Part of one email states:
Two reasons why Roger cannot go into an operating position at our new
business in Lake Charles:
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II. Procedural History
Michael Ashford, a former employee of Aeroframe, sued Aeroframe and
ATS in October 2013 in state court. Ashford claimed that under Louisiana’s
Last Paycheck Law, Aeroframe owed him an amount equal to his unpaid wages
and vacation time. He also sought statutory penalties equal to 90 days of
wages, attorney’s fees, costs, and interest under La. Rev. Stat. 23:632. Ashford
sued ATS for interference with a contract, violations of the Louisiana Unfair
Trade Practices Act (“LUTPA”), and violations of La. Civ. Code Art. 2315. ATS
cross-claimed against Aeroframe and brought a third-party claim against
Porter. Porter and Aeroframe cross-claimed against ATS. Ashford, Porter, and
Aeroframe are citizens of Louisiana. ATS is a Washington corporation.
a. Jurisdiction Disputes
ATS removed the case to federal court in May 2014. During discovery in
state court, ATS received a copy of an email written by Ashford’s counsel that,
ATS argued, showed that the parties should be realigned so that ATS would
be the only defendant and there would be complete diversity. The email sent
by Ashford’s counsel, Somer Brown at the Cox Law Firm, states:
For those of you who missed the Aeroframe client meeting
on Friday, please allow this to serve as an update and a request for
you to execute and return the attached waiver.
1. He has committed the most grievous of business leadership/ownership
mistakes by missing at least two payrolls. This will totally diminish employee
trust, confidence and therefore his leadership effectiveness.
2. He blames his failure on his customers FedEx and ILFC. We can’t afford
to have a leader who blames his customers for his failure. In my brief
conversations I did not hear him take ownership for his failure. I only want
leaders who take ownership.
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In March we traveled to Seattle and took the deposition of
ATS’s corporate representatives. Those individuals confirmed
that, as Roger Porter had previously told us, ATS came in after
knowing that AAR was doing a deal with Aeroframe. It is our
belief, now confirmed by undisputed testimony from ATS and
Roger Porter, that ATS was the cause of Aeroframe’s closure and
the loss of your employment and benefits.
Roger has filed a cross-claim against ATS for his own losses
and those of Aeroframe. Aeroframe has retained counsel from
Natchitoches who is working cooperatively with us and will not
defend against your wage claims. In fact, your entitlement to
wages, penalties, and attorney’s fees will be stipulated to by
Aeroframe.
Roger has approached my partner, Tom Filo, and requested
that her [sic] pursue Roger’s individual claim against ATS. Roger
has agreed to stipulate in writing that if we represent him, his
clients will be paid first out of any monies that he collects. He
understands that we will not represent him absent this written
agreement.
However, in order for our firm to get involved on behalf of
Roger, we need each of our employee-clients to sign the attached
conflict waiver. Without this signed document from each of you, we
cannot assist Roger in collecting money FOR YOU.
If you have any questions, please feel free to call or email me.
We need these documents back as soon as possible. If you are not
willing to enter into this arrangement with us, please contact me
so that I can get you in touch with other counsel, but please also
be advised that Roger’s written stipulation of first payments will
only apply to the employees who are represented by this law firm.
In response to a motion to remand, the magistrate judge rejected ATS’s
argument that this email was evidence that Ashford’s claim against Aeroframe
was a pretense. However, the magistrate judge read the letter to show that
“since inception of this litigation, these parties have voluntarily entered into
an agreement which aligns all of their interests against those of ATS.” Ashford
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v. Aeroframe Servs., LLC, No. 2:14-CV-992, 2015 WL 13650549, at *9 (W.D. La.
Jan. 30, 2015). The judge held that the letter could be considered for purposes
of removal because “[c]ompromise with an adverse litigant is . . . a voluntary
action that will support removal.” Id. (citations omitted).
The magistrate judge noted the absence of a written agreement among
Ashford, Aeroframe, and Porter. If no such agreement existed, however, the
magistrate judge held there would be an irreconcilable conflict because the
same law firm was representing Ashford and Porter. Id. at *10. 3 The judge
held that consent to removal by Aeroframe was not required because it had
compromised with Ashford. Id. at *11. The district court used different
reasoning: it focused on the law of realignment rather than whether Ashford
and Aeroframe had a binding settlement. The court held that the “[t]he
decision to look past the pleadings and realign the parties on removal was
neither clearly erroneous nor contrary to law in light of the admission that
Aeroframe had agreed to stipulate to Ashford’s damages.” Ashford v.
Aeroframe Servs., LLC, No. 2:14-CV-992, 2015 WL 2089994, at *3 (W.D. La.
May 4, 2015). However, the court reversed and remanded in part for the
magistrate judge to consider whether the amount in controversy was greater
than $75,000. Id. at *4.
3 “The arrangement obviously came to fruition as Mr. Filo [an attorney at the Cox Law
Firm] did in fact enroll as counsel some three weeks following the date of the e-mail and
plaintiff has admitted as much in brief. The only document missing from this scenario is the
written agreement by Aeroframe stipulating Ashford’s damages. We must assume that
Ashford’s counsel insured this step was completed, however, insofar as that was one of the
underlying elements of Porter’s inducement to have Ashford waive privilege.” (internal
citation omitted).
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Ashford filed an affidavit stating that his claims fell below the
jurisdictional amount. He then attempted to appeal the diversity decision to
this court, but his appeal was dismissed for lack of jurisdiction. The district
court issued an amended order holding that it was “facially apparent from
plaintiff’s pleading” that the amount in controversy exceeded the jurisdictional
requirement. Ashford and Aeroframe then appealed to this court, which
denied interlocutory review because the questions at issue were primarily
factual.
Ashford then filed for summary judgment against Aeroframe, and
Aeroframe filed a motion to dismiss against Ashford. The district court stated
that these motions “appear to be nothing more than an attempt to re-litigate
previously decided issues.” Ashford v. Aeroframe Servs., LLC, No. 2:14-CV-
992, 2017 WL 660578, at *1 (W.D. La. Feb. 14, 2017). The court denied both
motions as moot:
. . . Because the court previously found that the claims between
Ashford and Aeroframe are resolved, the Motion for Summary
Judgment is moot and will be denied.
Aeroframe’s Motion to Dismiss is an even more blatant
attempt of the parties to re-litigate their failed motions to remand.
. . . These exact arguments were addressed in the Memorandum
Ruling denying their motions to remand. While the parties may
not be happy with the result, they cannot continuously forum shop
with thinly veiled motions to remand. The claims between Ashford
and Aeroframe have been resolved.
Id. at *2. The court also noted that it thought ethical rules would be violated
if Aeroframe and Ashford were actually adverse. Id. at *1 n.5.
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Ashford and Aeroframe appealed this decision, which is appeal number
17-30142 pending before us. ATS moved to be added to that case as a party-
appellee and Ashford opposed the motion. This court granted the motion.
b. Summary Judgment
ATS moved for summary judgment. Ashford, Porter, and Aeroframe
moved to continue deadlines in order to conduct more discovery before
summary judgment. The court denied this motion as “simply an effort to delay
and prolong these proceedings.”
The parties disagreed about how the EADS note should be settled.
Porter stated in a declaration that Aeroframe never agreed “to allow ATS to
purchase the EADS note.” Ashford v. Aeroframe Servs., LLC, No. 2:14-CV-
00992, 2017 WL 2293109, at *3 (W.D. La. May 24, 2017). The district court
found that “plaintiffs’ attempt to distinguish between the settlement and
purchase of the debt” was a “semantic distinction.” Id. The court found that:
none of the plaintiffs offer evidence of another agreed upon method
of settling or eliminating the debt. The only evidence provided
supports ATS’s interpretation of how the debt was to be settled, by
purchasing the note from EADS, especially considering that
Aeroframe put ATS into direct contact with EADS, ATS rejected
Aeroframe’s request to borrow the money to pay EADS on the
defaulted loan, and Aeroframe has failed to offer the court any
other viable method of settling the debt.
Id. (footnote omitted).
When discussing Ashford’s LUTPA claim, 4 the court decided that the
May NDA, which only imposed confidentiality requirements on Aeroframe,
4 The district court granted ATS’s summary judgment motion for all of Ashford’s
claims, but Ashford only appeals on his LUTPA claim.
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was the NDA in effect in July. Id. at *12. Therefore, the court decided that
ATS did not violate an NDA by communicating with EADS. Id. The court also
stated that Ashford “presented no evidence that ATS was required to get
Aeroframe’s authorization to purchase the note.” Id. The court also held that
Ashford had failed to present evidence that “ATS bought the note to sabotage
the agreement between Aeroframe and AAR.” Id. Alternatively, the court held
that Ashford’s LUTPA claims should also fail because he did not provide
evidence of causation: “[Ashford] offers no evidentiary support for the
contention that AAR intended to employ and pay back wages for Aeroframe’s
employees, and this court is unwilling to make such a speculation.” Id. at *13.
The court used similar reasoning for Porter’s LUTPA claim. The court
had already held ATS did not breach an NDA by communicating with EADS.
The court first noted that “a simple breach of contract claim does not rise to
the level of a LUTPA claim.” Id. at *20. Second, Aeroframe had not provided
any evidence that the parties intended to settle the debt in a different manner.
Even if it had, Porter had failed to show that “ATS intended to sabotage
Porter’s deal by purchasing or foreclosing on the EADS note.” Id. The evidence
presented by Porter did not show “an element of fraud, deceit, or
misrepresentation,” as required for a successful LUTPA claim. Id. Finally,
the court held that Porter had failed to show causation because “AAR extended
an offer [of employment] after the purchase of the EADS note and . . . AAR did
not employ Porter based on reasons independent from ATS’s actions.” Id. at
*21.
The court granted summary judgment to ATS on Porter’s tortious
interference with business relations claim. Porter had failed to raise a
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genuine, material fact issue that he was “actually prevented . . . from dealing
with a third party” because AAR continued to deal with him after ATS bought
the note. Id. at *19. The court also held that the evidence “shows that ATS
purchased the EADS note for business reasons, not out of malice.” Id.
Alternatively, as with the LUTPA claim, Porter failed to establish a genuine
fact issue regarding causation. Id.
Finally, the court granted summary judgment against Porter on his
intentional interference with contractual relations claim. The court held that
“Porter’s claim could only survive by expanding Louisiana tort law” because
“the Louisiana Supreme Court has only recognized this cause of action against
a corporate officer, not a corporate entity.” Id.
The court also granted summary judgment against Aeroframe, which
has not appealed. Ashford and Porter appealed from the summary judgment
decision, yielding case number 17-30483, which was consolidated with appeal
number 17-30142.
STANDARD OF REVIEW
This court reviews removal decisions de novo. Estate of Martineau v.
ARCO Chemical Co., 203 F.3d 904, 910 (5th Cir. 2000). This court reviews the
“district court’s determination of the amount in controversy de novo.” White v.
FCI USA, Inc., 319 F.3d 672, 674 (5th Cir. 2003) (citation omitted).
The standard of review on summary judgment is de novo. Rayborn v.
Bossier Par. Sch. Bd., 881 F.3d 409, 414 (5th Cir. 2018) (citation omitted).
Summary judgment is proper “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Id. (quoting Fed. R. Civ. P. 56(a)). “All facts and evidence are
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viewed in the light most favorable to the nonmovant.” In re Larry Doiron, Inc.,
879 F.3d 568, 570-71 (5th Cir. 2018). This court reviews discovery orders for
abuse of discretion. Grogan v. Kumar, 873 F.3d 273, 280 (5th Cir. 2017)
(citation omitted).
DISCUSSION
I. Diversity Jurisdiction Exists in This Case
The general rule is that diversity of citizenship must exist at the time of
filing in state court and at the time of removal. Coury v. Prot, 85 F.3d 244, 249
(5th Cir. 1996). A removing defendant bears the burden of establishing
removal jurisdiction. Ashford and Porter contend that this case could not
properly be removed because, even if the Somer Brown email showed
realignment, the magistrate judge found that the realignment of interests
occurred after the case was filed. Their argument ignores the plain text of the
removal statute, which explicitly states that a case may be removed upon
“receipt . . . of . . . [a] paper from which it may first be ascertained that the case
is one which is or has become removable.” 28 U.S.C. § 1446(b)(3) (emphasis
added). The statute makes it clear that an initially non-removable case may
become removable.
One way a case may become removable is through the realignment of
interests. We recognized in Zurn Industries, Inc. v. Acton Construction Co.,
Inc. that realignment of parties is an exception to the general rule that
diversity of citizenship is decided at the start of the suit. 847 F.2d 234, 236
(5th Cir. 1988). This ruling comports with Peters v. Standard Oil Co. of Tex.,
which states that any realignment of parties should take place before
jurisdiction is decided. 174 F.2d 162, 163 (5th Cir. 1949). These decisions
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accord with Supreme Court precedent, which states that courts must “look
beyond the pleadings, and arrange the parties according to their sides in the
dispute.” City of Indianapolis v. Chase Nat. Bank of City of New York,
314 U.S. 63, 69, 62 S. Ct. 15, 17 (1941) (citation omitted). 5 Although in City of
Indianapolis, the Court realigned the parties and found diversity jurisdiction
lacking, nothing in the decision suggests that the opposite result should not
also be possible. 6 Indeed, the Wright & Miller treatise confirms that
realignment should be determined before jurisdiction, and it states that
realignment may destroy or create diversity jurisdiction. 13E Charles Alan
Wright & Arthur R. Miller, Federal Practice and Procedure § 3607 (3d ed.). 7
5For over one hundred years, the Supreme Court has demonstrated that “when the
arrangement of the parties is merely a contrivance between friends for the purpose of
founding a jurisdiction which otherwise would not exist, the device cannot be allowed to
succeed.” City of Dawson v. Columbia Ave. Saving Fund, Safe Deposit, Title & Tr. Co.,
197 U.S. 178, 181, 25 S. Ct. 420, 422 (1905).
6 Cf. Standard Oil Co. of Tex., 174 F.2d at 163-64 (realigning the parties and thereby
creating diversity jurisdiction); City of Vestavia Hills v. Gen. Fid. Ins. Co., 676 F.3d 1310,
1313-14 (11th Cir. 2012) (“This Court concludes that the converse of this principle—that
parties cannot avoid diversity by their designation of the parties—is also true.”) (emphasis
in original); Cleveland Hous. Renewal Project v. Deutsche Bank Tr. Co., 621 F.3d 554, 559-
60, 568 (6th Cir. 2010) (“For the foregoing reasons, we uphold the district court’s realignment
of the parties to establish complete diversity.”).
7 Wright & Miller states:
Realignment of the parties usually will have the effect of leading the court to
decide that subject matter jurisdiction is defeated; the rule works both ways,
however, and subject matter jurisdiction will be sustained if diversity of
citizenship exists when the parties are aligned properly, even though it is
lacking on the face of the pleadings.
13E Wright & Miller, Federal Practice and Procedure § 3607 at 308.
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Ashford and Aeroframe argue that according to Vasquez v. Alto Bonito
Gravel Plant Corp., there had to be an enforceable settlement agreement
between them in order for the district court to realign Aeroframe as a plaintiff.
56 F.3d 689 (5th Cir. 1995), abrogated on other grounds by Estate of Martineau,
203 F.3d at 911. In Vasquez, a defendant attempted to remove because the
non-diverse defendant had settled with the plaintiff. Id. at 690. This court
held that the enforceability of the settlement was a question of state law, found
it not sufficiently binding to be enforceable, and dismissed. Id. at 693-94.
Vasquez, however, was not a realignment case, nor does this case turn
on whether Aeroframe is still a party to this suit. Instead, it turns on whether
Aeroframe’s promise to pay Ashford was proof that Aeroframe and Ashford had
the same “‘ultimate interests’ in the outcome of the action.” Griffin v. Lee,
621 F.3d 380, 388 (5th Cir. 2010) (citation omitted).
Likewise, this case is not controlled by Caterpillar Inc. v. Lewis or Grupo
Dataflux v. Atlas Global Group, L.P. Caterpillar held that a jurisdictional
defect was cured when the non-diverse party was dismissed from the lawsuit
before judgment was entered. 519 U.S. 61, 73, 117 S. Ct. 467, 475 (1996).
Grupo Dataflux explained that Caterpillar had not changed the long-standing
principle that one of the original parties to a lawsuit cannot change its
citizenship during the lawsuit to preserve or defeat diversity. 541 U.S. 567,
572-75, 124 S. Ct. 1920, 1924-26 (2004). Neither of these cases involved
realignment. I would hold that the district court did not err when it considered
events after this lawsuit was filed in state court to determine whether the
parties had realigned their interests and the suit had become removable.
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This circuit determines proper alignment by asking “whether the parties
with the same ‘ultimate interests’ in the outcome of the action are on the same
side.” Griffin, 621 F.3d at 388 (citation omitted). 8 As pointed out by the
district court, the Somer Brown email states that all of Ashford’s requested
relief (“wages, penalties, and attorney’s fees”) would be stipulated to by
Aeroframe. Therefore, it was proper to realign Aeroframe as a plaintiff.
It was also proper not to require Aeroframe’s consent to removal.
Normally all co-defendants must consent to removal. 28 U.S.C. § 1441(a).
There is an exception for “nominal” defendants. See Tri-Cities Newspapers,
Inc. v. Tri-Cities Printing Pressmen and Assistants’ Local 349, 427 F.2d 325,
326 (5th Cir. 1970). A defendant is “nominal” if “in the absence of the
(defendant), the Court can enter a final judgment consistent with equity and
good conscience which would not be in any way unfair or inequitable to the
plaintiff.” Id. at 327 (citation omitted). Aeroframe’s stipulation of all requested
relief to Ashford rendered it a “nominal” defendant.
Finally, Ashford and Porter challenge whether the jurisdictional amount is met
in this case. They rely on Ashford’s post-removal affidavit, which stated that
8 In deciding if parties share the same ultimate interests, the Fifth Circuit—along
with the Third, Fourth, Sixth, and Ninth Circuits—applies the “primary purpose” test, which
looks at whether the parties’ interests are aligned regarding the “plaintiff’s principal purpose
for filing its suit.” See Zurn, 847 F.2d at 237 (“If the parties are not realigned on that
[principal] claim, and there is no showing that the claim was a sham simply asserted for
federal jurisdiction, subject matter jurisdiction exists.”); Palisades Collections LLC v. Shorts,
552 F.3d 327, 337 (4th Cir. 2008); 15 Moore’s Federal Practice: Civil § 102.20 (Matthew
Bender 3d ed.). “Use of this ‘primary purpose’ test often requires realignment.” 15 Moore’s
Federal Practice: Civil § 102.20; cf. Lowe v. Ingalls Shipbuilding, A Div. of Litton Sys., Inc.,
723 F.2d 1173, 1178 (5th Cir. 1984); Indem. Ins. Co. of N. Am. v. First Nat. Bank at Winter
Park, Fla., 351 F.2d 519, 523 (5th Cir. 1965); Cleveland Hous. Renewal Project, 621 F.3d at
559-60; Dev. Fin. Corp. v. Alpha Hous. & Health Care, Inc., 54 F.3d 156, 160 (3d Cir. 1995);
Dolch v. United California Bank, 702 F.2d 178, 181 (9th Cir. 1983).
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the amount in controversy was less than the jurisdictional threshold. This
court has held that “if it is facially apparent from the petition that the amount
in controversy exceeds $75,000 at the time of removal, post-removal affidavits
. . . reducing the amount do not deprive the district court of jurisdiction.”
Gebbia v. Wal-Mart Stores, Inc., 233 F.3d 880, 883 (5th Cir. 2000) (citing
St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 292, 58 S. Ct. 586,
592 (1938)). The magistrate judge found, and the district court affirmed, that
Ashford’s pleading facially met the jurisdictional amount. Ashford sued ATS
for unpaid wages, lost benefits, lost future wages, and attorney’s fees. The
magistrate judge held that “[a]lthough lost wages may be negligible, future lost
wages, future benefits lost and attorney fees for the prosecution of this matter
place the amount in controversy well above the minimum threshold.” Ashford
v. Aeroframe Servs., LLC, 2015 WL 13650549, at *11. In sum, ATS successfully
established that diversity existed between it and the realigned parties
pursuant to 28 U.S.C. § 1446(b)(3).
II. The 17-30142 Appeal and Sanctions Request
As detailed above, Aeroframe and Ashford filed dispositive motions
against each other shortly after their second failed attempt at an interlocutory
appeal. The district court found that these motions were “nothing more than
an attempt to re-litigate previously decided issues” and denied both motions as
moot. Ashford, 2017 WL 660578, at *1-2. Given that the briefs in this appeal
were almost completely dedicated to the jurisdiction issue, it seems clear that
these motions were filed merely to re-litigate jurisdiction. Having concurred
with the district court’s findings and conclusion of diversity jurisdiction, I
would affirm the court’s denial of Aeroframe’s motion to dismiss and the court’s
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dismissal as moot of Ashford’s motion for summary judgment against
Aeroframe.
ATS, as intervenor on appeal, has moved for sanctions under 28 U.S.C.
§ 1927 and Federal Rule of Appellate Procedure 38.
ATS argues that it is entitled to sanctions because Aeroframe and
Ashford perpetrated a fraud on the court by (1) manufacturing “an elaborate
false conflict between Ashford and Aeroframe to defeat removal” and
(2) attempting “to posture these appeals in such a way that ATS did not have
the right to participate such that this Court would not be presented with a
clear picture of the facts and circumstances of these appeals.” ATS asserts that
the 17-30142 appeal violates Rule 3.1 of the Rules of Professional Conduct.
ATS argues that the appeals should be dismissed with prejudice and ATS
should be awarded costs and fees. To the date of its brief, ATS’s total legal
expenses have well exceeded $600,000.
Ashford responds that ATS has already moved for sanctions against
Porter in district court. The court stayed the underlying case until the two
appeals are resolved. Ashford argues that ATS is trying to avoid the district
court’s stay order and deny due process to Ashford by bypassing a discovery
hearing on these issues. Ashford denies that ATS has proven collusion.
Ashford contends that ATS is the reason that Porter is in this case, and “[h]ow
ATS’s actions in bringing a party into this lawsuit amounted to fraud by
Mr. Ashford’s counsel is unfathomable.”
These cases have more than a whiff of professional impropriety and
shenanigans. From this court’s vantage point, it is difficult to separate real
litigation abuse from “mere” hardball litigation tactics. Sanctions must also,
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lamentably, take into consideration the majority’s insistence on dismissing this
case. Because Rule 11 does not seem to preclude the imposition of post-
dismissal sanctions, I believe the district court should consider this possibility,
on whom sanctions should be imposed, and what amount is appropriate.
III. The 17-30483 Appeal
a. The District Court Did Not Abuse Its Discretion when It
Denied Ashford’s Request for Additional Discovery Before
Summary Judgment
Ashford argues that the district court abused its discretion when it
denied his motion for further discovery before granting summary judgment.
He also argues that he was at a disadvantage because many of ATS’s facts
came from a litigation involving AAR in Tennessee to which Ashford is not a
party. Ashford did not, however, comply with Fed. Rule Civ. Pro. 56(d) by
submitting an affidavit “that it cannot present facts essential to justify its
position.” ATS responds that the documents from the Tennessee litigation
were Porter’s pleadings and affidavit, and Ashford is represented by the same
law firm as Porter. ATS also points out that Ashford was able to conduct
depositions of ATS’s CFO and COO, who were involved in the Aeroframe
negotiations. Given Ashford’s vexatious behavior, the district court did not
abuse its discretion when it found that this motion was “simply an effort to
delay and prolong these proceedings” and denied the motion.
b. The Summary Judgment Ruling
As detailed above, the district court granted summary judgment to ATS
on the LUTPA claims after holding that Porter and Ashford had failed to
present evidence of causation. Ashford argues that “[w]hether Aeroframe
could have made payroll and/or whether AAR would have already taken over
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operations but for the ATS Note purchase and foreclosure are issues that
should not be decided summarily and as a matter of law.” However, he cites
no proof that AAR had intended to hire Aeroframe’s employees. Porter fails to
address the causation issue and has therefore waived it. N.W. Enterprises Inc.
v. City of Houston, 352 F.3d 162, 183 n.24 (5th Cir. 2003). Ashford provides
some arguments regarding causation in his reply brief. Because these are
brought up for the first time in the reply brief, they are waived. DePree v.
Saunders, 588 F.3d 282, 290 (5th Cir. 2009). Even if they were not waived,
they suffer from the same defect the original brief did because they fail to point
the court to evidence that supports Ashford’s causation theory. Summary
judgment against Porter and Ashford on their LUTPA claims should be
affirmed. 9
CONCLUSION
For the foregoing reasons, I would uphold diversity jurisdiction in this
case. I would dismiss the 17-30142 appeal. I would affirm the district court’s
denial of Ashford’s motion for further discovery and grant of summary
judgment to ATS on all claims. I urge the district court to consider Rule 11
sanctions as authorized. Given the majority’s differing conclusion on these
points, I respectfully dissent.
9 Porter does not explicitly state which claims he is appealing. He has failed to address
the district court’s reasoning regarding his two other claims, so they are also waived. N.W.
Enterprises Inc., 352 F.3d at 183 n.24.
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