Deltro Electric Ltd. v. Electric Power Systems International, Inc.et al

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

WESTERN DIVISION

DELTRO ELECTRIC LTD.,

Plaintiff,

Case No. 1:21-cv-303

v. JUDGE DOUGLAS R. COLE

ELECTRIC POWER SYSTEMS

INTERNATIONAL, INC., et al.,

Defendants.

OPINION AND ORDER

This cause is before the Court on Plaintiff Deltro Electric Ltd.’s (“Deltro”)

Motion to Remand (the “Motion”) (Doc. 16), following Defendant Electric Power

Systems International, Inc.’s (“EPS”) removal of this action from state court on April

30, 2021 (Doc. 1). For the reasons below, the Court DENIES Deltro’s Motion. (Doc.

16). The Court also DENIES AS MOOT EPS’s Motion to Amend/Correct Notice of

Removal (Doc. 20).

BACKGROUND

This case began in an Ohio state court when Deltro filed a complaint against

EPS on April 6, 2021. (Compl., Doc. 4, #25). EPS removed to this Court, and Deltro

now moves to remand.

Deltro’s Complaint alleges that EPS breached its obligations to Deltro under

a contract regarding the construction of a power plant in Mt. Orab, Ohio. (Id. at #23).

Most relevant here, Deltro alleges that EPS filed “a grossly overstated, exaggerated,

and invalid mechanic’s lien” on property associated with the project. (Doc. 4, ¶ 65(d),

#28). EPS is a subcontractor to Deltro, which is in turn a subcontractor to another

company (called PCL Construction Services), which acted as the general contractor

on the construction project. (Id. at #22). Deltro also sued Hillcrest Solar, LLC

(“Hillcrest”), which is both the lessee for the site at which the construction will occur

and the party who contracted for the construction of the power plant, along with CIT

Bank, N.A. (“CIT Bank”), which acted as the mortgage lender for the project. (Id.).

Hillcrest was served with the Complaint and state court Summons on April 12, 2021.

(Mot. to Remand, Ex. 5, Hillcrest USPS Delivery, Doc. 16-5, #217). Deltro included

Hillcrest in its Complaint as a defendant pursuant to an Ohio statutory requirement

for declaratory relief affecting property. See Ohio Rev. Code § 2721.12(A) (“when

declaratory relief is sought …, all persons who have or claim any interest that would

be affected by the declaration shall be made parties to the action or proceeding”).

On April 30, 2021, EPS removed this action to federal court. (Doc. 1). EPS

stated that this action falls within the federal diversity jurisdiction because Deltro is

a resident of Ontario, Canada, while each defendant is a citizen of a U.S. state other

than Ohio. (Id. at #2). Specifically, EPS says that it is a corporation incorporated in

Missouri, Hillcrest is an LLC formed in Delaware, and CIT Bank is a “National

Association” organized in Utah. (Id.). However, Deltro no longer disputes that

Hillcrest’s citizenship as an LLC is defined not by its place of formation, but rather

by the citizenship of its members. There also appears to be no dispute among the

parties that the relevant member of Hillcrest for the citizenship determination here

is a corporation named Innergex Holdings USA, Inc. (“Innergex”), which has a

principal place of business in Quebec, Canada. As discussed below, that means that

Hillcrest’s presence in this action would destroy complete diversity if Hillcrest’s

citizenship is attributed to the defendants for diversity purposes.

On the same day that the removal occurred, the general contractor on the

construction project “bonded off” EPS’s mechanic’s lien on the property. What that

means is that the general contractor essentially substituted a surety bond (naming

EPS as the protected party) in place of the lien on Hillcrest’s interests in the property

at issue. (EPS Answer, Ex. D, Order from Brown Cnty. Ct. of Common Pleas Bonding

Off Lien, Doc. 14-4, #191–2; Ex. E, Recorded Order (same), Doc. 14-5, #193–4). The

general contractor did so pursuant to a requirement in the master contract between

Hillcrest and the general contractor requiring the general contractor to bond off any

mechanic’s liens asserted against the property in connection with the project. There

is no indication that the bonding company has any recourse against Hillcrest.

On May 26, 2021, Deltro filed a motion, to which CIT Bank consented, to drop

CIT Bank from this action without prejudice pursuant to Federal Rule of Civil

Procedure 21. (Consent Mot. to Dismiss CIT Bank, Doc. 15). The Court granted that

motion on October 5, 2021. (See 10/5/21 Notation Order). So the only remaining

Defendants in this action are EPS and Hillcrest.

On May 27, 2021, Deltro moved to remand this action to state court. (Doc. 16).

Deltro argues that removal was inappropriate for three reasons. First, EPS failed to

show that all Defendants had consented to removal. (Id. at #206). Second, EPS failed

to show that Hillcrest was not a resident of the forum state (Ohio) as required for

removal jurisdiction. (Id. at #207). Third, and most relevant now, EPS failed to show

that Hillcrest’s citizenship would not destroy complete diversity between Deltro and

Defendants. (Id. at #208). Deltro also sought attorneys’ fees. (Id. at #209).

EPS opposed Deltro’s motion. (See Doc. 19). EPS argues that Hillcrest is only

a nominal party against whom Deltro seeks no relief, present in this suit solely to

satisfy Ohio’s statutory requirement. (Id. at #226–27). For that reason, EPS argues,

none of Deltro’s arguments support remand to state court. Specifically, Hillcrest’s

consent is not required for removal (id. at #229), and Hillcrest’s citizenship is not

relevant for purposes of either the forum-state defendant rule or complete diversity,

(id. at #231, 232).

On the same day it filed its opposition, EPS also filed a Motion to Amend its

Notice of Removal in the event that the Court determined that Hillcrest was not a

nominal party. (Doc. 20). EPS attached correspondence between its counsel and

counsel for Hillcrest in which Hillcrest’s lawyer states that (1) Hillcrest consented to

removal by telephone on or around April 26, 2021, and (2) Hillcrest’s member and

sub-members, “ending with Innergex Holdings USA, Inc.,” are all Delaware LLCs or

corporations with no overlapping state of organization with either Missouri or Utah.1

(Mot. to Amend Notice of Remand, Ex. 2, Nelson Decl., Doc. 20-2, #246–48). But again,

as noted above, because Innergex is a citizen of Canada, there is presently no serious

dispute that such amendment or correction would fail to cure the lack of complete

1 The Court notes that Hillcrest’s counsel may have inadvertently compared Hillcrest’s

citizenship to that of the other defendants in this action rather than to Plaintiff Deltro’s

citizenship, which is of course the citizenship that would typically matter for diversity

purposes.

diversity if Hillcrest were considered as a real party defendant rather than a nominal

party.

Deltro replied in support of its Motion on June 29, 2021. (Doc. 21). Deltro

argues that Hillcrest is not a nominal party because EPS and Deltro have both

pursued liens on property in which Hillcrest has an interest and because Hillcrest’s

presence in this suit was required under Ohio law. (Id. at #250). Thus, Deltro

reiterates, EPS’s removal was still improper because its Notice of Removal did not

indicate Hillcrest’s consent or demonstrate that Hillcrest’s citizenship would not run

afoul of the forum-defendant rule or destroy complete diversity. (Id. at #251–54).

Deltro also responded in opposition (Doc. 22) against EPS’s Motion to Amend (Doc.

20). EPS replied in support (Doc. 23) of its Motion to Amend (Doc. 20) on July 13,

2021. The Court heard further argument from the parties on the Motion by telephone

on October 26, 2021. The matter is now fully briefed and ready for the Court’s review.

LEGAL STANDARD

When all defendants agree to remove an action from state court to federal

court, the federal court has jurisdiction only if it would have had original jurisdiction

over the action. 28 U.S.C. § 1441(a). Here, EPS claims this matter falls within the

Court’s original jurisdiction under 28 U.S.C. § 1332(a). For that to be true, two

conditions must be met: (1) the parties must be sufficiently diverse; and (2) the

amount in controversy must exceed $75,000. Id. Additionally, removal to federal court

is unavailable if any defendant is a resident of the forum state. See 28 U.S.C.

§ 1441(b)(2); Lincoln Property Co. v. Roche, 546 U.S. 81, 84 (2005). There is an

exception to the consent, citizenship, and in-forum defendant requirements, however,

for nominal parties that have no interest in the result of the litigation. Maiden v.

North American Stainless, L.P., 125 F. App’x 1, 3 (6th Cir. 2004); Rasawehr v. Belcher,

No. 3:20-CV-00073, 2020 WL 5814557, at *3 (N.D. Ohio Sept. 30, 2020). A nominal

party is one to whom it is of “no moment … which side succeeds in the controversy.”

Manley v. Foundations Plus, Ltd., No. 2:15-CV-1786, 2016 WL 5219569, at *5 (S.D.

Ohio Sept. 20, 2016). Removal jurisdiction is assessed based on the facts as they

existed at the time of removal, see Harper v. AutoAlliance Int'l, Inc., 392 F.3d 195,

210 (6th Cir. 2004), but complete diversity is also required at the time the original

action was filed in state court, see Smith v. Hilliard, 578 F. App’x 556, 561 (6th Cir.

2014) (citing Jerome-Duncan, Inc. v. Auto-By-Tel, LLC, 176 F.3d 904, 907 (6th Cir.

1999)). When jurisdiction upon removal is uncertain, federal courts must construe

the removal statutes strictly, resolving all doubts in favor of remand. See Brierly v.

Alusuisse Flexible Packaging, Inc., 184 F.3d 527, 534 (6th Cir. 1999).

LAW AND ANALYSIS

As noted, parties asserting federal diversity jurisdiction must generally make

two showings: (1) that the parties are completely diverse; and (2) that the case meets

the jurisdictional threshold—above $75,000. There is no dispute that the amount in

controversy requirement is met. It also is not seriously disputed, however, that the

parties here would fail to satisfy the complete diversity requirement if Hillcrest is a

defendant whose citizenship counts for diversity purposes. Deltro and Hillcrest are

both citizens of a foreign country (Canada). Thus, if Hillcrest’s citizenship counts for

jurisdictional purposes, there is no complete diversity because: (1) “the presence of

foreign parties on both sides of the dispute destroys the complete diversity required

by § 1332(a)(2),” and (2) § 1332(a)(3) is also unavailable because Deltro, the sole

plaintiff, is not a citizen of a U.S. state. U.S. Motors v. General Motors Europe, 551

F.3d 420, 424 (6th Cir. 2008) (citing Peninsula Asset Management (Cayman) Ltd. v.

Hankook Tire Co., 509 F.3d 271, 271–72 (6th Cir. 2007)).

EPS claims that a different result attains here, however, because of a settled

exception to the rule requiring complete diversity. Specifically, EPS argues that

Hillcrest is a nominal party to this action, such that Hillcrest’s citizenship does not

count for jurisdictional purposes.2

Unlike real parties in interest, formal or nominal parties have “no stake in the

outcome of the case.” Baiul-Farina v. Lemire, 804 F. App’x 533, 537 (9th Cir. 2020)

(quoting Strotek Corp. v. Air Transp. Ass’n of America, 300 F.3d 1129, 1133 (9th Cir.

2002) and citing Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 461 (1980)); compare

Amerisure Ins. Co. v. Orange & Blue Const., Inc., 545 F. App’x 851, 854 (11th Cir.

2013) (party nominal because it “had no real stake or control over this litigation”).

Importantly, the mere fact that a plaintiff could assert claims for relief against a

defendant does not make that defendant a real party in interest rather than a

nominal defendant. Rather, the question is whether the plaintiff is in fact pursuing

those claims in the litigation at issue. See Mortenson Fam. Dental Ctr., Inc. v.

Heartland Dental Care, Inc., 526 F. App’x 506, 508 (6th Cir. 2013) (“Whether the LLC

2 If Hillcrest is a nominal party, then its consent also was not required for removal. Hicks v.

Emery Worldwide, Inc., 254 F. Supp. 2d 968, 972 n.4 (S.D. Ohio 2003).

could assert certain rights against its members, however, makes no difference here.

What matters is that the LLC is not doing so in this case.”).

Here, EPS claims that Hillcrest was named solely pursuant to an Ohio

statutory requirement (Ohio law governs the claims in this case) that, in a declaratory

judgment action involving real property, the plaintiff must name all parties having

an interest in the property. See Ohio Rev. Code § 2721.12(A). In American Land

Investments, Ltd. v. Allstate Ins. Co., a court in this district already has considered

the status of a defendant named pursuant to that statute for diversity purposes.

American Land Investments, 3:16-cv-00489, 2017 WL 2927318, at *2 (S.D. Ohio July

10, 2017). There, a residential real estate company sued an insurance company for

payment on a policy after vandalism of several units in one of the plaintiff’s

properties. Id. at *1–2. In addition to the insurance company, the suit also named a

mortgagee listed in the insurance policy pursuant to Ohio’s statutory requirement

because the suit sought a declaration as to how payment should be disbursed to both

the plaintiff real estate company and the mortgagee. Id. at *2. The court determined

that the mortgagee was not a real party in interest because, under the policy, the

mortgagee had no rights or responsibilities that arose from the relationship between

the plaintiff and the insurance company and because it was not entitled to enforce

the rights asserted between the plaintiff and the insurance company. Id. at *3.

Here, the Court likewise agrees with EPS that Hillcrest is only a nominal party

to the present suit. Deltro seeks no relief against Hillcrest, and Hillcrest’s Answer

(Doc. 9) to Deltro’s Complaint (Doc. 4) also asserts no claims against Deltro. Deltro

does not argue that Hillcrest has any pertinent rights or responsibilities attendant

on the relationship between Deltro and EPS, nor does Deltro argue that Hillcrest is

entitled to enforce the contractual rights that Deltro asserts against EPS. Because

Deltro seeks no relief against Hillcrest, and because Hillcrest has no real interest in

the outcome of this suit, Hillcrest is only a nominal party to this suit whose consent

is not required for removal and whose citizenship is not determinative of the presence

of complete diversity or applicability of the in-forum defendant rule.

Denying that Hillcrest is a nominal party, Deltro argues that Deltro is seeking

to invalidate through this action EPS’s lien on the property. According to Deltro,

doing so would directly implicate Hillcrest’s interests in that same property (by

removing an encumbrance), thereby giving Hillcrest a real interest in this suit. (Reply

in Supp. of Mot. to Remand, Doc. 21, #250). But beyond reciting the amount of the

lien, Deltro does not explain how the existence of that lien, or Deltro’s efforts in this

suit to invalidate it, gives Hillcrest a real interest in the dispute between Deltro and

EPS.

In the Court’s view, Deltro’s attempt to rely on the lien here is problematic

both on the facts and on the law. Start with the facts. At the time of the removal, the

general contractor had replaced the lien with a bond that apparently does not include

recourse against Hillcrest, thereby obviating any interest that Hillcrest otherwise

might have had. But more importantly, on the legal front, in this action Deltro is

seeking to invalidate EPS’s lien on property in which Hillcrest has an interest.

Measured from Hillcrest’s perspective, that result, if anything, represents a benefit,

not a harm. Thus, even if the Court were to assume that Hillcrest has some interest

that may be affected by the outcome of this suit (which, to be clear, Deltro has not

established), the Court concludes that, as a legal matter, the appropriate course

would be to treat Hillcrest as a plaintiff, rather than a defendant, for purposes of

assessing diversity. See American Land Investments, 2017 WL 2927318, at *5 (courts

determining whether complete diversity exists need not accept plaintiff’s alignment

of parties) (citing City of Indianapolis v. Chase Nat. Bank of City of New York, 314

U.S. 63, 69 (1941), and Grand Cnty. Deposit Bank v. McCampbell, 194 F.2d 469, 471–

72 (6th Cir. 1952)). And if Deltro and Hillcrest are treated as co-plaintiffs for

jurisdiction purposes, complete diversity is satisfied.

Separately, Deltro argues that, because an Ohio statutory provision required

Deltro to join Hillcrest, Hillcrest is a necessary party, and thus cannot be a “nominal

party.” But, even if Ohio Rev. Code § 2721.12(A) requires Hillcrest’s joinder in this

action, an issue the Court does not reach, the Court rejects the argument that any

party whose joinder is mandated by a state statute necessarily “counts” for diversity

purposes. Long settled case law suggests just the opposite—that parties named only

to satisfy state pleading rules typically are treated as nominal parties whose

citizenship does not count in the complete diversity analysis. See McNutt, for Use of

Leggett v. Bland, 43 U.S. 9, 14 (1844) (cited in Lincoln, 546 U.S. at 92 (2005)); compare

Prudential Real Est. Affiliates, Inc. v. PPR Realty, Inc., 204 F.3d 867, 873 (9th Cir.

2000) (citizenship of party “merely joined to perform the ministerial act of conveying

the title if adjudged to the complainant” should be disregarded) (quoting Walden v.

Skinner, 101 U.S. 577, 588–89 (1879)). Here, Hillcrest by all indications was named

as a party solely to satisfy the pleading requirements of Ohio’s declaratory judgment

statute. Therefore, Hillcrest is presumptively a nominal defendant whose citizenship

and consent should not be considered in determining whether there is federal removal

jurisdiction. Deltro has offered nothing that overcomes that presumption here.

Finally, Deltro argues that Deltro may have claims against Hillcrest, including

a claim for enforcement of a lien that it might reassert against Hillcrest in the future,

as well as an unjust enrichment claim. (Reply in Supp. of Mot. to Remand, Doc. 21,

#250). But even assuming this is so, the mere fact that a plaintiff could pursue claims

against a defendant does not affect the analysis of that defendant’s status as a real

or nominal party. Rather, what matters is whether the plaintiff is in fact pursuing

those claims in the action at issue. Mortenson, 526 F. App’x at 508. Here, Deltro did

not pursue any claims for relief against Hillcrest in its Complaint, nor did it present

any factual allegations that would support such claims. (Doc. 4). If Deltro wishes to

avoid federal jurisdiction based on Hillcrest’s alleged liability to Deltro in connection

with this dispute, then Deltro would at least need to seek and receive leave of this

Court to amend its Complaint to add whichever causes of action against Hillcrest

Deltro might wish to pursue. At this time, the Court expresses no opinion on whether

that would be appropriate, or whether such post-removal conduct would change the

jurisdictional analysis. Cf. 28 U.S.C. § 1447(e) (joinder of non-diverse party, if

permitted, requires remand). For present purposes it is enough to say that the case

currently includes no such claims, and that is the final nail in the coffin on Deltro’s

argument that Hillcrest destroys complete diversity.

Because Hillcrest is a nominal party (or even if it is instead properly treated

as are-aligned co-plaintiff for diversity purposes), two results follow. First, its consent

is not required for removal. Second, its citizenship is not considered, at least not on

the defendant’s side of the “v.”, for purposes of complete diversity or the in-forum

defendant rule. Therefore, because Deltro (which is a foreign entity) is completely

diverse from EPS (which is a citizen of Missouri), federal jurisdiction is proper, and

there was no defect in EPS’s original Notice of Removal (Doc. 1).3 And, because the

Court denies Deltro’s Motion to Remand (Doc. 16), the Court also finds that there was

an objectively reasonable basis for removal and thus denies Deltro’s request for

attorneys’ fees. Ud. at #210).

CONCLUSION

Accordingly, the Court DENIES Deltro’s Motion to Remand (Doc. 16). Because

the Court finds no defect in EPS’s Notice of Removal (Doc. 1), the Court also DENIES

AS MOOT EP%S’s Motion to Amend/Correct Notice of Remeval (Doc. 20).

SO ORDERED.

October 29, 2021

DATE DOUGLAS R. COLE

UNITED STATES DISTRICT JUDGE

3 As noted, to the extent that Hillcrest is instead treated as a re-aligned plaintiff for diversity

purposes, the same result holds, as both Deltro and Hillcrest are foreign entities, and EPS is

a citizen of Missouri.

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