Formosa v. Lowe's Home Centers, Inc.

Citations: 806 F. Supp. 2d 1181; 80 Fed. R. Serv. 3d 590; 2011 U.S. Dist. LEXIS 92486; 2011 WL 3717077Docket: Case No. 2:10-cv-2411-SLB

Court: District Court, N.D. Alabama; August 15, 2011; Federal District Court

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Plaintiff Marie Formosa initiated a lawsuit in the Circuit Court of Jefferson County, Alabama, against defendants Lowe's Home Centers, Inc. and L.G. Sourcing, Inc., along with twenty-seven fictitious defendants. Formosa, an Alabama citizen, alleges injuries from a workplace incident involving a defective barstool on August 1, 2008. Her complaint includes a worker's compensation claim against Lowe's and several state law claims against L.G. Sourcing, including negligent design, failure to warn, and breach of warranties under the Alabama Extended Manufacturer's Liability Doctrine. Formosa seeks both compensatory and punitive damages and demands a jury trial.

L.G. Sourcing removed the case to federal court on September 7, 2010, citing diversity jurisdiction and arguing that the worker's compensation claim was fraudulently joined and should be severed for remand to state court. L.G. Sourcing's motion seeks to retain jurisdiction over the remaining claims. Formosa countered with a Motion to Remand, advocating for the entire case to return to state court. The court, after reviewing the case, decided to grant L.G. Sourcing's Motion to Sever and for Partial Remand while denying Formosa's Motion to Remand.

Pursuant to 28 U.S.C. § 1441(a), any civil action in state court that falls under the original jurisdiction of U.S. district courts may be removed by defendants to the appropriate district court. The district court must first assess whether it has original jurisdiction over the claims. The burden is on the removing defendant to demonstrate the legitimacy of the removal and existence of federal jurisdiction, as established in *Univ. of S. Ala. v. Am. Tobacco Co.* and *Leonard v. Enterprise Rent A Car*. Due to concerns regarding federalism, removal statutes are interpreted narrowly, with any uncertainties resolved in favor of remand. Certain actions, specifically those arising under state workers' compensation laws, are designated as "nonremovable" under 28 U.S.C. § 1445, which applies to Formosa's claim against Lowe's for workers' compensation benefits.

Formosa's Motion to Remand, filed 35 days after removal, raises the issue of timeliness. Under 28 U.S.C. § 1447(c), a motion to remand based on defects other than lack of subject matter jurisdiction must be filed within 30 days of removal. L.G. Sourcing contends that this untimeliness waives Formosa's right to contest removal. The determination hinges on whether Formosa's basis for remand—improper removal under § 1445(c)—is a procedural defect or a lack of subject matter jurisdiction. If it is deemed procedural, the objection is waived due to the late filing. Conversely, if it is viewed as a lack of subject matter jurisdiction, the 30-day limit is irrelevant and remand is mandated. Various circuit courts, including the Second, Fourth, Fifth, Eighth, and Ninth, have characterized wrongful removal under anti-removal provisions as procedural, supporting the notion that such objections can be waived if not raised timely.

In *Williams v. KFC Nat'l Mgmt. Co.*, the court established that an opposing party must move to remand a case within 30 days of removal to avoid forfeiting the objection to improper removal. The case also clarifies that the bar against removal under 28 U.S.C. § 1445(c) is nonjurisdictional and can be waived. However, the Eleventh Circuit has determined that federal courts lack subject matter jurisdiction over removed workers' compensation claims, as illustrated in *Reed v. Heil Co.*, where the court reversed a summary judgment on a retaliatory discharge claim due to improper removal. The Eleventh Circuit upheld this principle in *Alansari v. Tropic Star Seafood Inc.*, where a remand motion filed after the 30-day limit was deemed irrelevant due to the jurisdictional nature of § 1445(c). As such, the court in this case concluded that it lacked subject matter jurisdiction over a workers' compensation claim under Alabama law and ordered the claim to be remanded, regardless of the timing of the plaintiff's motion.

The court must decide whether to remand the worker's compensation claim and whether to also remand the remaining counts or sever the worker's compensation claim while retaining jurisdiction over the common law claims based on diversity jurisdiction. L.G. Sourcing acknowledges that the worker's compensation claim is nonremovable but contends that its misjoinder with personal injury claims allows for removal, followed by severance and remand. L.G. Sourcing argues that claims are fraudulently joined under Alabama law because worker's compensation claims cannot be combined with personal injury claims and must be tried by a court rather than a jury, which Formosa demands. L.G. Sourcing further asserts that severance is necessary due to Formosa seeking punitive damages, which are not available in worker's compensation claims. In contrast, Formosa argues for remanding the entire case, claiming no fraudulent joinder occurred. L.G. Sourcing also contends that Formosa's Motion to Remand was untimely. Under Rule 21 of the Federal Rules of Civil Procedure, federal courts have the authority to sever claims to maintain jurisdiction. The court has broad discretion in deciding on severance, considering factors such as judicial economy. The burden of proving fraudulent joinder rests heavily on the removing party, with the Eleventh Circuit identifying three forms of fraudulent joinder. L.G. Sourcing implicitly claims the third form applies here, suggesting no joint liability exists between it and Lowe's, and asserting the lack of real connection between the claims.

District courts in Alabama have consistently rejected claims of fraudulent joinder related to worker's compensation and third-party tort claims stemming from the same work-related incident, as evidenced in cases such as Wingard v. Guillot Textilmaschinen GmbH, Williams v. CNH America, LLC, and Brooks v. Paulk, Cope, Inc. In Brooks, the court emphasized that misjoinder cannot be deemed fraudulent if joinder is proper under Federal Rule of Civil Procedure 20, which permits the joining of defendants if claims arise from the same transaction or occurrence and share common questions of law or fact. The Eleventh Circuit's decision in Tapscott v. MS Dealer Service Corp. clarified that while misjoinder can be fraudulent, it must be egregious to meet that standard.

In the current case, the court finds that the requirements of Rule 20 are satisfied since the plaintiffs seek several liability against multiple defendants for damages arising from the same incident, despite the differing nature of the claims (workers' compensation vs. tort). The court concludes that the presence of common questions of fact suffices for joinder, irrespective of the relief sought or the trial procedures involved, thus determining that the plaintiffs' actions do not constitute egregious misjoinder.

The court determines that claims in this case are properly joined due to several liability and common factual questions, as supported by Federal Rule of Civil Procedure 20. L.G. Sourcing's argument for fraudulent joinder is rejected, and removal is contingent on granting a motion to sever on other grounds. Several Alabama district courts have opted to remand cases with worker's compensation claims rather than sever and remand those claims, especially when federal jurisdiction is based solely on diversity. This approach is illustrated by cases such as Wingard and Bryant, where courts denied motions to sever, emphasizing judicial economy. 

The uncertainty surrounding the typical practice of severance for worker's compensation claims in state courts contributes to this trend. The Wingard court highlighted the inefficiency of remanding cases if state courts are likely to sever these claims. Although some Alabama cases suggest that severance is the usual practice, the court finds that severing worker's compensation claims from claims under the Alabama Extended Manufacturer's Liability Doctrine (AEMLD) is justified. Key reasons include the expedited resolution of worker's compensation cases and the distinct nature of recoverable damages, which are statutorily defined. Specifically, Ala.Code 1975 restricts recovery options in worker's compensation cases, differentiating them from other claims.

Compensation for "temporary total disability" under the Workers' Compensation Act is set at 66 2/3 percent of the average weekly earnings at the time of injury, subject to maximum and minimum limits. In contrast, "permanent partial disability" compensation is similarly calculated based on average weekly earnings but is limited to a specific number of weeks defined by statute, depending on the body part lost. Pain and suffering damages are not permitted in workers' compensation cases but can be claimed under Alabama Extended Manufacturer's Liability Doctrine (AEMLD) claims. Formosa has asserted mental anguish damages under AEMLD.

The court acknowledges that while the nature of relief typically does not influence the analysis of joinder appropriateness, the differing damages do favor severance. Formosa's concern that separating workers' compensation claims from third-party tort claims may hinder the employer's subrogation rights is deemed unconvincing. The Alabama Workers' Compensation Act allows employers to seek subrogation for any proceeds recovered by the plaintiff against third parties in on-the-job injury cases. 

Citing Priest v. Sealift Services Intern. Inc., the court expressed apprehension that severance might obstruct the employer's subrogation rights, especially if the plaintiff wins the tort claim before the workers' compensation case concludes. However, given that workers' compensation claims are expedited in state court, it is likely that these will be resolved more quickly than tort claims, thus not jeopardizing the employer's subrogation rights. Should it become necessary, the employer will be allowed to intervene to safeguard its subrogation interests. 

Formosa argues that severance would prevent the worker's compensation carrier from intervening due to federal court restrictions on workers' compensation issues. The court notes uncertainty about whether a subrogation claim falls under Alabama's workers' compensation laws in this context. However, it clarifies that 1445(c) only restricts the removal of workers' compensation claims, allowing the employer or its insurance carrier to intervene after the case is removed.

In Lemaster v. Taylor Indus. LLC, the court ruled that the subrogation claim of an employer's worker's compensation insurer was not barred under 28 U.S.C. § 1445(c) since the insurer was not a party at the time of removal, meaning worker's compensation issues were not present then. The court decided to sever common law claims while retaining jurisdiction based on diversity. Formosa argued for remanding the AEMLD and non-worker's compensation claims, citing Bryant v. Wausau Underwriters. The removal statute, 28 U.S.C. § 1441(c), allows for removal of actions with non-removable claims if they are joined with a separate claim under federal jurisdiction. However, this statute does not authorize the removal of actions with non-removable claims linked solely to diversity jurisdiction. Various district courts have distinguished between cases removed with federal question claims versus those involving only diversity, concluding that worker's compensation claims joined with state law claims based on diversity cannot be removed to federal court. Citing multiple precedents, the ruling emphasized that if a case contains a worker's compensation claim, the entire action must be remanded, even if it could have been filed in federal court initially due to diversity. Conversely, a court may maintain jurisdiction over state law claims if they are not linked to a non-removable worker's compensation claim, as seen in Perdue v. Westpoint Home, Inc.

The court determines that it does not need to examine the removability of non-worker's compensation state law claims (Counts Two, Three, and Four) since any procedural defect regarding their removal has been waived by Formosa, who failed to file a motion to remand within thirty days of the removal. The court asserts that subject matter jurisdiction exists over these claims based on diversity jurisdiction, allowing it to retain jurisdiction despite any improper removal. When a plaintiff challenges removal after the thirty-day limit, the focus shifts from the propriety of removal to the existence of subject matter jurisdiction. If a case is tried on the merits without objection in federal court and judgment is entered, the appeal will center on whether the federal court would have had original jurisdiction had the case been filed there. The court refrains from addressing whether a complete remand would have been appropriate had Formosa acted within the thirty-day window. Consequently, L.G. Sourcing's Motion to Sever and for Partial Remand is granted, and Formosa's Motion to Remand is denied. An order reflecting this decision will be issued.