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Heffron v. Burlington Northern & Santa Fe Ry. Co.: US District Court : CIVIL PROCEDURE - no showing of fraudulent joinder of non-diverse defendant; remand to state court

1 In considering a motion to remand, [t]he allegations of the complaint as set forth at the
time the petition for removal was filed are controlling. Crosby v. Paul Hardeman, Inc., 414
F.2d 1, 3 (8th Cir. 1969) (citing Pullman Co. v. Jenkins, 305 U.S. 534, 537-38 (1939)).
Dale Heffron, Heffron Properties, LLC,
and Heffron Properties-Willmar, LLC,
v. Civil No. 08-5194 ADM/AJB
Burlington Northern and Santa Fe Railway
Company and Herbert Beam,
Mark R. Bradford, Esq., Bassford Remele, PA, Minneapolis, MN, argued on behalf of Plaintiffs.
Glenn Olander-Quamme, Esq., Spence, Ricke, Sweeney & Gernes, PA, St. Paul, MN, argued on
behalf of Defendants.
On December 4, 2008, the undersigned United States District Judge heard oral argument
on Plaintiffs Dale Heffron (Heffron); Heffron Properties, LLC; and Heffron Properties-
Willmar, LLCs (collective Plaintiffs) Motion to Remand [Docket No. 6]. For the reasons set
forth below, Plaintiffs motion is granted and the matter is remanded to state court.
Heffron is a resident of Minnesota, and Heffron Properties, LLC and Heffron Properties-
Willmar, LLC are Minnesota corporations. Notice of Removal [Docket No. 1], Attach. 1
(Compl.) 1-3. Defendant Burlington Northern and Santa Fe Railway Company (BNSF) is a
Texas corporation, and Defendant Herbert Beam (Beam) is a Minnesota resident and an
employee of BNSF. Id. 4-5.
In December 2006, Beam contacted Heffron to discuss a potential business opportunity.
Beam informed Heffron that BNSF was interested in lodging arrangements at a location closer to
the Willmar, Minnesota terminal than the companys existing arrangements for its employees
temporarily stationed there. Id. 6. Beam told Heffron that BNSF hoped to reduce the costs of
transporting its employees between the terminal and the lodging facility. Id. Beam showed
Heffron one particular building on West Benson Avenue located very near the parking lot for
BNSFs Willmar terminal. Heffron Decl. [Docket No. 10] 4. Beam felt the building would be
ideal for BNSFs needs, and he encouraged Heffron to buy it. Id. 5. If Heffron purchased and
renovated the West Benson building to BNSFs specifications, Beam said, BNSF would enter
into a long-term lodging contract. Id. 6. Also, Beam introduced Heffron to other
representatives of BNSF on two separate occasions who, like Beam, stated that if Heffron
purchased and renovated the West Benson building, BNSF would enter into a long-term lease
agreement. Id. 9. Heffron claims that Beam never disclosed that he lacked authority to bind
BNSF or to make any promises on BNSFs behalf regarding lodging arrangements for BNSF
employees in Willmar. Id. 8.
During the course of their discussions, Beam told Heffron that approximately one-third of
his annual bonus from BNSF was based on his ability to produce cost savings for the railroad.
Id. 7. Heffron alleges that Beam presented information to him suggesting that BNSF would
save tens of thousands of dollars by lodging its employees at the West Benson building. Id.
Heffron ultimately decided to pursue the project by seeking bank financing to purchase
the West Benson building. Compl. 18. To assist him, BNSF agreed to provide an executed
copy of a lodging agreement to give assurance to the bank regarding its financing of the project.
Heffron Decl. Ex. B. Heffron obtained financing from the bank and, on October 15, 2007,
purchased the West Benson building. Compl. 20; Heffron Decl. 10. Heffron completed
renovations in April 2008, but BNSF refused to enter into a formal lodging agreement and
refused to use the West Benson property for its lodging needs. Compl. 23-24; Heffron Decl.
Plaintiffs commenced this action in state court on August 22, 2008, asserting claims of
breach of contract, promissory estoppel, tortious interference with prospective economic
advantage, and misrepresentation against BNSF. Compl 25-48. Additionally, Plaintiffs
asserted a claim of negligence against Beam. Id. 49-53. BNSF and Beam (collectively
Defendants) removed the matter to this Court, asserting diversity of citizenship under 28
U.S.C. 1332(a). Plaintiffs now move to remand the matter back to state court.
A. Motion to Remand Standard
A case shall be remanded back to state court [i]f at any time before final judgment it
appears that the district court lacks subject matter jurisdiction . . . . 28 U.S.C. 1447(c). The
party seeking removal and opposing remand has the burden of establishing federal subject matter
jurisdiction. See In re Bus. Mens Assurance Co. of Am., 992 F.2d 181, 183 (8th Cir. 1993).
When considering a motion to remand, a court must resolve all doubts about federal jurisdiction
in favor of remand. See id.
B. Fraudulent Joinder
Under 1332(a), federal subject matter jurisdiction on the basis of diversity of
citizenship exists when there is both an amount in controversy greater than ,000 and
complete diversity of citizenship, meaning that none of the defendants holds citizenship in a
state where any plaintiff holds citizenship. See Capitol Indem. Corp. v. Russellville Steel Co.,
Inc., 367 F.3d 831, 835 (8th Cir. 2004). BNSF does not dispute that Beam and Plaintiffs are
citizens of Minnesota and thus complete diversity is lacking. Rather, BNSF argues that Plaintiffs
fraudulently joined Beam as a defendant for the purpose of attempting to defeat complete
diversity. Defs. Mem. in Oppn to Pls. Mot. to Remand [Docket No. 17] at 2.
Under the doctrine of fraudulent joinder, the filing of a frivolous or otherwise
illegitimate claim against a non-diverse defendant in an attempt to defeat complete diversity
does not prevent removal. Filla v. Norfold S. Ry. Co., 336 F.3d 806, 806 (8th Cir. 2003);
Anderson v. Home Ins. Co., 724 F.2d 82, 84 (8th Cir. 1983). In determining whether a nondiverse
defendant has been fraudulently joined, the district courts task is limited to determining
whether there is arguably a reasonable basis for predicting that the state law might impose
liability [against the non-diverse defendant] based upon the facts involved. Filla, 336 F.3d at
811. [I]f there is a colorable cause of actionthat is, if the state law might impose liability on
the [non-diverse] defendant under the facts allegedthen there is no fraudulent joinder. Id. at
810 (footnote omitted). In other words, if there is a reasonable basis in fact and law supporting
the claim, the joinder is not fraudulent. Id.
Plaintiffs claim that Beam had the authority to bind BNSF regarding lodging
arrangements for BNSF employees in Willmar. Pleading in the alternative, Plaintiffs assert that
if it is ultimately determined that Beam lacked such authority, then he breached a duty owed to
Plaintiffs by failing to inform them that he lacked such authority. Compl. 49-53. Essentially,
the claim against Beam, though not expressly labeled as such, is one for negligent
misrepresentation by omission. To establish such a claim, a plaintiff must show that the
defendant has failed to communicate certain information that the ordinary person in his or her
position would have discovered or communicated. Safeco Ins. Co. of Am. v. Dain Bosworth,
Inc., 531 N.W.2d 867, 870 (Minn. Ct. App. 1995). This duty of care arises when the defendant
suppl[ies] information for the guidance of others in the course of a transaction in which [he] has
a pecuniary interest, or in the course of [his] business, profession or employment. Id. at 870.
Here, Plaintiffs Complaint alleges that Beam provided information for the guidance of
Heffron regarding a proposed business transaction. Specifically, Plaintiffs allege that Beam
advised Heffron that BNSF would enter into a long-term lodging agreement with him if he
purchased and renovated the West Benson building. Compl. 6, 10-11. Plaintiffs have also
pleaded that Beam had a pecuniary interest by virtue of the allegations that (1) Beams annual
bonus from BNSF was based in part on his ability to produce costs savings for BNSF and (2) the
proposed business arrangement between Heffron and BNSF would save BNSF tens of
thousands of dollars. Thus, Plaintiffs have pleaded the prima facie elements of a negligent
misrepresentation claim against Beam. Defendants argue certain questions of law and fact will
ultimately prove fatal to Plaintiffs claimnamely, whether the relationship between Beam and
Heffron was such that Beam owed Heffron a duty of care and whether Heffrons reliance on
Beams representations (or alleged omissions) regarding the extent of his authority to bind BNSF
was unjustifiable. However, such [d]oubtful questions of law and fact are both to be tried by
the court having jurisdiction; they are not to be determined in [a motion to remand]. Rhodes v.
Dierks Lumber & Coal Co., 108 F.2d 846, 848 (8th Cir. 1940). The limited inquiry for the Court
when considering an assertion of fraudulent joinder is whether Plaintiffs have alleged a
reasonable basis in fact and law to support their claim against Beam. Plaintiffs claim satisfies
this standard, and, therefore, the joinder of Beam was not fraudulent and the matter must be
remanded to state court.
Based upon the foregoing, and all of the files, records and proceedings herein, IT IS
HEREBY ORDERED that Plaintiffs Motion to Remand [Docket No. 6] is GRANTED and the
action is accordingly REMANDED to Kandiyohi County District Court, pursuant to 28 U.S.C.
s/Ann D. Montgomery
Dated: December 17, 2008.


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