Renaissance Marketing, Inc. v. Monitronics International, Inc.

Citations: 606 F. Supp. 2d 201; 2009 U.S. Dist. LEXIS 28808Docket: Civil 08-1823 (SEC)

Court: District Court, D. Puerto Rico; March 31, 2009; Federal District Court

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In the case of Renaissance Marketing, Inc. v. Monitronics International, Inc. et al., the United States District Court for the District of Puerto Rico addressed a Notice of Removal filed by Monitronics International, which was originally in the Puerto Rico Court of First Instance. Monitronics also submitted a motion to dismiss the case under Federal Rule of Civil Procedure 12(b)(6). Renaissance Marketing opposed the motion to dismiss and sought to remand the case, claiming the removal was untimely.

The court reviewed the filings and applicable law, ultimately denying Renaissance's Motion to Remand and granting Monitronics' Motion to Dismiss. Under 28 U.S.C. § 1441, a civil action may be removed from state to federal court if the federal court has original jurisdiction. The statute requires defendants to file a notice of removal within 30 days of receiving the initial pleading, and this period is not considered jurisdictional but must be strictly complied with. The court emphasized that federal courts have limited jurisdiction, necessitating strict adherence to removal statutes, as established in prior case law.

In the case of JJJ Constructora v. 205 U.S. Fidelity and Guarantee Co., the court addresses the issue of timeliness regarding the removal of a case under 28 U.S.C. § 1446(b). Renaissance filed a complaint against Monitronics, Alpha One Security Solutions, Inc., and Jorge Javier Marrero in the Puerto Rico Court of First Instance, claiming a breach of an exclusivity agreement in the distribution of security products. Monitronics filed a notice of removal to federal court on July 30, 2008, arguing that the removal was timely based on the date it received the summons and complaint. Renaissance contended that Monitronics was served on June 24, 2008, and therefore had until July 24, 2008, to file for removal, rendering its July 30 filing untimely. Monitronics acknowledged service through the Secretary of State on June 26, 2008, but claimed that it did not receive the actual documents until July 1, 2008, making its removal notice timely. According to Puerto Rico's Law of Corporations, service on the Secretary of State constitutes legal service for foreign corporations, and such corporations are deemed to have agreed to this method of service. The court must determine whether the removal was filed within the statutory time frame based on the actual receipt of the summons and complaint by Monitronics.

The thirty-day statutory period for a defendant to remove a case to federal court, when served through a statutory agent like the Secretary of State, begins upon the defendant receiving notice of the summons and complaint. This interpretation is supported by multiple district courts, emphasizing that a defendant's ability to pursue federal remedies should not depend on the efficiency of statutory agents in notifying them of litigation. The importance of proper service of process is underscored by U.S. Supreme Court precedents, which state that a defendant only becomes a party to the case once served, allowing them to defend themselves.

Monitronics’ notice of removal was deemed timely based on this understanding; however, Renaissance's motion for remand raises issues of complete diversity and the amount in controversy. For a case to be removed based on diversity jurisdiction, there must be complete diversity between all plaintiffs and defendants, meaning no plaintiff can share a state citizenship with any defendant. If any plaintiff is from the same state as a defendant, the federal court loses jurisdiction. The burden of proving jurisdiction rests on the party seeking removal, which must demonstrate that the matter in controversy exceeds $75,000, exclusive of interests and costs. Renaissance contends that diversity is lacking based on the "well-pleaded complaint" rule, which maintains that removal is determined from the complaint's face, indicating the potential unavailability of federal jurisdiction.

In Able Sales Co. v. Mead Johnson P.R. Inc., the court examined whether diversity jurisdiction existed for a removal case involving Renaissance's claims under state contract law and Puerto Rico Rule of Civil Procedure 59. Monitronics sought removal, claiming complete diversity despite co-defendant Marrero being a Puerto Rico citizen and Alpha One having its main business operations in Puerto Rico. Monitronics contended that both were fraudulently joined to defeat removal, asserting that Renaissance's claims were solely against Monitronics for a declaratory judgment regarding exclusivity rights under Law 21 and that there were no causes of action against Alpha One and Marrero.

Renaissance countered that Monitronics did not meet the burden of demonstrating fraudulent joinder, arguing that the omission of claims against Alpha One and Marrero in the relief sought was a clerical error, warranting remand. The court indicated that if it found fraudulent joinder, Alpha One and Marrero would be dismissed, allowing it to address Monitronics' motion to dismiss. Conversely, if Monitronics failed to prove fraudulent joinder, the case would be remanded to state court due to lack of subject matter jurisdiction.

The court highlighted the heavy burden on defendants to prove fraudulent joinder, indicating that it requires showing that the joinder was made in bad faith. A finding of fraudulent joinder implies that the plaintiff has not stated a valid cause of action against the allegedly fraudulently joined defendants.

To establish fraudulent joinder, a movant must demonstrate, through clear and convincing evidence, either (1) actual fraud in the jurisdictional fact pleadings or (2) that the plaintiff cannot establish a cause of action against the non-diverse party in state court. When evaluating the latter, the court assesses if there is any reasonable basis for anticipating recovery against the in-state defendant. All factual disputes and uncertainties regarding removal are resolved in favor of remand.

In the case at hand, Renaissance's complaint primarily seeks relief for a breach of contract against Monitronics and does not explicitly state claims against Alpha One and Marrero, despite mentioning them in factual allegations. No claims for damages or other relief are directed at these parties, and they have not been served in the suit. Although the court acknowledges that relief can be granted even without a formal request in pleadings, it must consider the likelihood of plaintiff recovery against non-diverse parties.

Renaissance's allegations against Monitronics focus on specific contract breaches. The complaint does not adequately support claims against Alpha One and Marrero, despite general allegations of interference. Even if Renaissance may have valid claims against them, such as for tortious interference, the likelihood of prevailing in state court against these parties appears low, especially given their lack of service. Moreover, Renaissance previously filed a separate suit against Alpha One and Marrero, seeking injunctive relief and damages for alleged tortious interference with the exclusivity contract with Monitronics.

Renaissance's detailed complaint against Alpha One and Marrero is noted, emphasizing that Monitronics is not a party to this suit. Renaissance has opted to pursue separate lawsuits against different parties for varying remedies and is attempting to join Alpha One and Marrero to circumvent diversity jurisdiction. The court asserts that simultaneous litigation against the same defendants on the same facts is impermissible, and Renaissance has failed to demonstrate proper service on Alpha One and Marrero. Consequently, the court finds the joinder of these parties fraudulent, which permits disregarding them for diversity jurisdiction purposes, thus establishing complete diversity in the case.

Additionally, Renaissance contests that Monitronics does not meet the $75,000 jurisdictional amount, while Monitronics argues that the amount in controversy exceeds this threshold, citing contract proceeds with Renaissance over $9.3 million. The court must apply a long-standing test to evaluate the jurisdictional amount based on the plaintiff's good faith claims. If challenged, the burden lies with the party invoking jurisdiction to provide specific facts indicating that the claim does not fall below the jurisdictional minimum. Since Renaissance did not specify a damages amount, the court must assess if the claims, on their face, exceed the jurisdictional amount, potentially relying on summary-judgment evidence if necessary.

The Court must determine if the amount in controversy exceeds $75,000, which is a requirement under 28 U.S.C.A. § 1332. Renaissance has been the exclusive dealer for Monitronics' alarm monitoring services in Puerto Rico since 2004, with contract proceeds exceeding $9.3 million. Based on the factors outlined in Law 21 for assessing damages, it is likely that Renaissance's claim surpasses the jurisdictional threshold. Consequently, the Court concludes that Monitronics appropriately removed the case, denying Renaissance's motion to remand and proceeding to Monitronics' motion to dismiss.

Monitronics seeks dismissal of the complaint under Rule 12(b)(6) due to the failure to state a claim, asserting that the Alarm Monitoring Purchase Agreement designates Texas courts, specifically federal courts in Dallas County, as the proper forum for disputes arising from the agreement. Monitronics argues that the contract's language clearly reflects the parties’ intent to restrict jurisdiction to Texas courts. Section 7.07 of the agreement stipulates that it shall be governed by Texas law, while Section 7.12 confirms that Dallas is both the place of making and performance, granting irrevocable submission to Texas courts’ jurisdiction and waiving any objections to venue or claims of inconvenience.

The enforcement of forum-selection clauses is similarly treated under federal and Puerto Rico law, with the First Circuit applying federal standards in diversity cases. A motion to dismiss based on such a clause is categorized under Rule 12(b)(6) for failure to state a claim rather than lack of subject-matter jurisdiction. The First Circuit emphasizes the importance of enforcing these clauses, which are considered prima facie valid unless the opposing party demonstrates that the clause is unreasonable, unjust, or invalid due to fraud.

The burden of proof shifts to the non-moving party to demonstrate that a forum selection clause is unenforceable based on one of three criteria: 1) it was not freely negotiated or resulted from fraud; 2) it violates a strong public policy of the forum; or 3) enforcing it would severely hinder the party's ability to litigate. Renaissance argues that enforcing the clause would contradict Puerto Rico's public policy because Texas courts would not apply Puerto Rico law, rendering Law 21 ineffective. However, the court notes that Monitronics disputes the existence of any exclusivity agreement with Renaissance, which could negate the applicability of Law 21. The validity of forum selection clauses is well-established in Puerto Rico law and has been upheld even against conflicting local statutes. Without evidence of unreasonableness or fraudulent inducement, the court finds the forum selection clause valid and clarifies that Renaissance can still seek relief in the appropriate venue.

Monitronics' motion to dismiss has been granted, resulting in the dismissal of the case without prejudice, with judgment to be entered accordingly. The document references various cases addressing the start of the removal period in relation to service on statutory agents. Key rulings include that the removal period begins when the defendant actually receives the summons and complaint, not when the statutory agent receives it. Specific cases cited emphasize that service upon a statutory agent does not initiate the removal time frame; rather, it commences upon the defendant's direct receipt of notice. Additionally, Article 4 outlines that damages are to be assessed based on the actual value of investments and expenses incurred by the sales representative, benefits derived from representation, and factors such as the representative's tenure and market share.