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Vaith v. General Motors, LLC

United States District Court, D. Minnesota

June 28, 2018

Chad Vaith, Plaintiff,
v.
General Motors, LLC and House Chevrolet Co., Defendants.

          Brent S. Schafer, Shafer Law Firm, PA, Robert Cowan and Laurence G. Tien, Bailey, Peavy, Bailey, Cowan, Heckaman, PLLC, for Plaintiff

          Michael P. Cooney, Michael A. Stephani, David P. Graham, and Kirstina Kaluza, Dykema Gossett PLLC, for Defendant General Motors, LLC

          Robert G. Benner, Dunlap & Seeger, PA, for Defendant House Chevrolet

          REPORT AND RECOMMENDATION

          HILDY BOWBEER, UNITED STATES MAGISTRATE JUDGE

         This matter is before the Court on Defendant House Chevrolet's Motion to Dismiss [Doc. No. 10] and Plaintiff Chad Vaith's Motion to Remand [Doc. No. 22]. These motions were referred to the undersigned by the Honorable John R. Tunheim, Chief United States District Judge, in an Order of Referral dated April 3, 2018 [Doc. No. 43]. For the reasons set forth below, the Court recommends that the Motion to Dismiss be granted and the Motion to Remand be denied.

         I. Background

         On June 2, 2014, Vaith purchased a new 2014 Chevy Silverado 1500 LTZ from the House Chevrolet car dealership in Stewartville, MN. (Compl. ¶ 10 [Doc. No. 1-1].) Roughly six months later, Vaith lost control of his Silverado pickup while driving southbound along County Road 5 and crashed it into a ditch near Byron, Minnesota. (Id. ¶¶ 10-14.) Vaith asserts that unspecified vehicle defects caused him to lose control of and crash the vehicle. (Id. ¶ 17.) Vaith additionally claims that his injuries were exacerbated by faulty safety equipment, and asserts in particular that defective safety belt pretensioners did not engage to brace him for the impact of the crash and that defective airbags failed to deploy to decelerate his forward momentum from the crash. (Id. ¶ 15.) As a result of the accident and the alleged failure of the safety equipment in the vehicle to deploy, Vaith suffered serious injuries including head trauma, a punctured and collapsed lung, and multiple fractures in his sternum, ribs, and vertebrae. (Id. ¶¶ 15, 81.)

         On December 5, 2017, Vaith sued General Motors and House Chevrolet in Olmstead County, Minnesota. (Id.) Vaith asserts the following six causes of against General Motors: defective design, defective manufacture, negligence in the sale of defective products, strict liability, fraud by non-disclosure, and failure to warn. (Id. ¶¶ 27-59.) Vaith asserts the following three causes of action against both General Motors and House Chevrolet: misrepresentation, consumer fraud, and civil conspiracy. (Id. ¶¶ 60-80.) In support of his claims against the joint defendants, Vaith alleges that General Motors and House Chevrolet made misrepresentations to him regarding the safety of the Silverado pickup truck and also failed to warn him of numerous Silverado defects and product recalls. (Id. ¶¶ 16-25.) Further, Vaith asserts that House Chevrolet should have ensured that its vehicles were safe and contained properly functioning throttle body units, airbags, power-steering, power brakes, and safety equipment. (Id. ¶ 18.) Vaith additionally asserts that House Chevrolet knew or should have known about numerous vehicle defects and product recalls on 2014 model year Silverados issued by the National Highway Traffic Safety Administration (NHTSA). (Id. ¶¶ 16, 23.) Therefore, Vaith claims that General Motors and House Chevrolet intentionally concealed material facts regarding the safety of the Silverado pickup truck, and asserts that Vaith relied on those misrepresentations when purchasing it. (Id. ¶¶ 62-75, 81.)

         The instant case involves facially non-diverse parties, because both Vaith and House Chevrolet are residents of Minnesota. Nevertheless, General Motors removed this action to federal court asserting that the real parties to the litigation are diverse because House Chevrolet had been fraudulently joined to the action. (Notice of Removal ¶¶ 11-15 [Doc. No. 1].) Shortly thereafter, House Chevrolet moved to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) [Doc. No. 10]. On March 5, 2018, Vaith moved to remand the case to state court, asserting that removal is improper because Vaith and House Chevrolet are both citizens of Minnesota. (Mot. Remand [Doc. No. 22].)

         II. Fraudulent Joinder and House Chevrolet's Rule 12(b)(1) Motion to Dismiss

         With limited exceptions, Minnesota law requires that claims sounding in strict liability against a product seller for injuries caused by a defective product must be dismissed where the manufacturer of that product is available to be sued and could satisfy a judgment. Minn. Stat. § 544.41. An injured plaintiff may, however, sustain claims other than strict liability against the seller. Furthermore, the claims against the seller will not be dismissed if the plaintiff “can show” that the seller created the defect, exercised significant control over the design, manufacture, or warnings for the product relative to the alleged defect that caused the injury, or had actual knowledge of the product defect. Minn. Stat. § 544.41 Subd. 3. Plaintiff here does not assert strict liability claims against House Chevrolet, but does allege that House Chevrolet knew of the defects in Vaith's Silverado and misrepresented or fraudulently concealed them from him.

         House Chevrolet argues Vaith's claims cannot be sustained, and that it should be dismissed under Rule 12(b)(1) pursuant to the fraudulent joinder doctrine because Vaith included House Chevrolet as a defendant for the sole purpose of defeating complete diversity.[1] House Chevrolet argues in particular that Vaith makes only vague and conclusory accusations, according to House Chevrolet, that do not indicate the “who, what, where, when, and how of the alleged fraud.” Drobnek v. Anderson Corp., 561 F.3d 778, 783 (8th Cir. 2009). Thus, House Chevrolet argues, Vaith has failed to plead his claims for misrepresentation, fraud, and conspiracy with the particularity required by Rule 9(b), and his complaint asserts no reasonable basis for liability on the part of House Chevrolet.

         Vaith counters that his complaint alleges facts sufficient to meet the particularity requirement because it places House Chevrolet on notice of allegations against it and raises a reasonable expectation that discovery will reveal evidence supporting House Chevrolet's liability. Vaith additionally argues that even if the Court determines it has not sufficiently pled its claims against House, it should not rule on the motion to dismiss because House Chevrolet failed to demonstrate it was fraudulently joined. Therefore, the Court should remand the case to state court on the basis that there is no diversity jurisdiction and leave it to the state court to determine whether the claims against House were adequately pled.

         A. Legal Standard

         “The doctrine of fraudulent joinder allows a district court to assume jurisdiction over a facially nondiverse case temporarily and, if there is no reasonable basis for the imposition of liability under state law, dismiss the nondiverse party from the case and retain subject matter jurisdiction over the remaining claims.” Murphy v. Aurora Loan Servs., LLC, 699 F.3d 1027, 1031 (8th Cir. 2012).

         Fraudulent joinder occurs where a plaintiff files “a frivolous or otherwise illegitimate claim against a non-diverse defendant solely to prevent removal.” Filla v. Norfolk S. Ry. Co., 336 F.3d 806, 809 (8th Cir. 2003). Thus, “[w]here applicable state precedent precludes the existence of a cause of action against a defendant, joinder is fraudulent.” Filla, 336 F.3d at 810. “However, if there is a ‘colorable' cause of action - that is, if the state law might impose liability on the resident defendant under the facts alleged - then there is no fraudulent joinder.” Id. Stated another way, “[j]oinder is fraudulent and removal is proper when there exists no reasonable basis in fact and law supporting a claim against the resident defendants.” Wiles v. Capitol Indem. Corp., 280 F.3d 868, 871 (8th Cir. 2002); Wells' Dairy, Inc. v. Am. Indus. Refrigeration, Inc., 157 F.Supp.2d 1018, 1038 (N.D. Iowa 2001) (fraudulent joinder found where pleadings contained a “legally insufficient factual basis for an element of the claim against the non-diverse defendant”).

         That said, Defendant bears the burden to establish fraudulent joinder, and the burden has been described as “a heavy one.” Arens v. O'Reilly Auto., Inc., 874 F.Supp.2d 805, 808 (D. Minn. 2012). The central question in assessing a claim of fraudulent joinder is whether “there is arguably a reasonable basis for predicting that the state law might impose liability based upon the facts involved.” Id. at 809 (internal citations omitted) (emphasis in original). “[I]n situations where the sufficiency of the complaint against the non-diverse defendant is questionable, the better practice is for the federal court not to decide the doubtful question in connection with a motion to remand but simply to remand the case and leave the question for the state courts to decide.” Filla, 336 F.3d at 811.

         B. Dispute Regarding the Appropriate Standard for Fraudulent Joinder

         Vaith asserts that establishing fraudulent joinder requires more than showing that the claims should be dismissed for failing to state a claim pursuant to Rule 12(b)(6). Knudson v. Sys. Painters, Inc., 634 F.3d 968, 980 (8th Cir. 2011). “[I]f it is clear under governing state law that the complaint does not state a cause of action against the non-diverse defendant, the joinder is fraudulent and federal jurisdiction of the case should be retained.” Id. “However, joinder is not fraudulent where ‘there is arguably a reasonable basis for predicting that the state law might impose liability based upon the facts involved.'” Id. Thus, where facially non-diverse parties have been removed to federal court, Vaith argues a federal court should remand wherever there is even the slightest doubt as to whether a state court could potentially find liability against a defendant.

         General Motors contends that its burden for establishing fraudulent joinder is not higher than the burden for a Rule 12(b)(6) motion to dismiss. As support, General Motors points to the following passage from Junk v. Terminix Int'l:

The parties dispute whether we should review the district court's denial of [Plaintiff's] remand motion and subsequent dismissal of [Defendant] under the fraudulent joinder standard outlined in Filla v. Norfolk Southern Railway Co., 336 F.3d 806, 809-11 (8th Cir.2003), or under the standard in Fed.R.Civ.P. 12(b)(6). This question is significant because the two standards differ, with Rule 12(b)(6) being more demanding. Under the Filla standard “the district court's task is limited to determining whether there is arguably a reasonable basis for predicting that the state law might impose liability based upon the facts involved.” Filla, 336 F.3d at 811. In contrast, [t]o survive a [Rule 12(b)(6) ] motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.

628 F.3d 439, 445 (8th Cir. 2010) (internal quotations omitted).

         The Court agrees with Vaith that Filla imposes a higher burden for defendants to establish fraudulent joinder than is required to demonstrate failure to state a claim under Rule 12(b)(6). Some confusion may stem from a misunderstanding of the vantage point from which the Eighth Circuit was commenting in Terminix. In that case, the Eighth Circuit explained that a plaintiff's task to overcome a Rule 12(b)(6) motion to dismiss is more demanding than to overcome a claim of fraudulent joinder under the Filla standard, because Filla merely requires a plaintiff to show there is some plausible way a state court could find liability against the defendant. Logically, therefore, the defendant's burden to sustain a claim of fraudulent joinder under the Filla standard is higher than its burden to prevail on a Rule 12(b)(6) motion, because the defendant cannot rest its argument on some defect in the artfulness of the plaintiff's complaint-it must show that there is no reasonable basis to expect that liability would be imposed upon the defendant in state court for the claims asserted in the complaint. Block v. Toyota Motor Corp., 665 F.3d 944, 948 (8th Cir. 2011) (when considering fraudulent joinder, “we do not focus on the artfulness of the plaintiff's pleadings”); see also, Wilkinson v. Shackelford, 478 F.3d 957, 964 (8th Cir. 2007).

         With the appropriate standard in mind, the Court will now turn its attention to the specific claims and pleadings placed at issue by the motion to dismiss.

         C. Count VII - Misrepresentation

         House Chevrolet asserts that Vaith's pleadings for misrepresentation fall considerably short of meeting the particularity requirements under Federal Rule of Civil Procedure 9(b), and thus do not provide a reasonable basis for predicting that the state law might impose liability. “Misrepresentation, whether negligent or fraudulent, constitutes fraud under Minnesota law” and must be pled with particularity. Juster Steelv. Carlson Companies, 366 N.W.2d 616, 618 (Minn.Ct.App. 1985).[2] Thus, to meet the heightened standards for pleading misrepresentation, a complaint must include ‚Äúsuch matters as the time, place and contents of false representations, as well ...


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