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Simon v. Regal Investment Advisors LLC

United States District Court, W.D. Virginia, Charlottesville Division

April 28, 2017

ROLAND H. SIMON, et al., Plaintiffs,
v.
REGAL INVESTMENT ADVISORS LLC, et al., Defendants.

          MEMORANDUM OPINION

          Hon. Glen E. Conrad Chief United States District Judge.

         Plaintiffs Roland H. Simon, Carlos R. Ayers, Earl Richard Brownlee, II, and Jan Main Thomas filed this action against Regal Investment Advisors LLC ("RIA") and four individual defendants in the Circuit Court for the County of Albemarle, seeking monetary damages for alleged violations of state and federal law. RIA and three of the individual defendants (collectively, the "Regal Defendants") removed the case to this court on the grounds of federal question and diversity jurisdiction. The plaintiffs have moved to remand the case to state court on the basis that the fourth individual defendant, James Martin Barnes, did not timely consent to removal. The court held a hearing on the plaintiffs' motion to remand on March 22, 2017. For the following reasons, the court will grant the motion and remand the case to state court.

         Background

         The plaintiffs are retired employees of the University of Virginia. In the 1980s, Barnes introduced himself to the plaintiffs as a University-approved financial advisor. Each of the plaintiffs became a client of Barnes and allowed him to manage their retirement accounts. In 2014, while working for RIA, Barnes allegedly defrauded the plaintiffs by convincing them to invest in a North Carolina site development and construction company known as Triton Sitework Development ("Triton"). Unbeknownst to the plaintiffs, Barnes was a part owner of Triton, and the company was "already undergoing bankruptcy" at the time Barnes convinced them to invest in it. Compl.¶ 54, Docket No. 1-1. As a result of Barnes'actions, the plaintiffs "lost the entirety of their principal investment totaling $1, 808, 802, " as well as the "income stream" promised by Barnes. Id. at ¶72.

         In November of 2016, the plaintiffs filed suit against the Regal Defendants and Barnes in the Circuit Court for the County of Albemarle, asserting claims for breach of contract, negligence, breach of fiduciary duty, fraud, and violations of state and federal securities laws. At the time the action was filed, none of the defendants resided in Virginia. Accordingly, on November 30, 2016, the plaintiffs served the defendants through the Secretary of the Commonwealth, pursuant to Virginia Code § 8.01-329(C). On December 1, 2016, the Secretary of the Commonwealth forwarded the complaint and summons by certified mail to the defendants. The Regal Defendants, each of whom resides in Michigan, received the certified mail on or around December 6, 2016. On December 16, 2016, the Secretary of the Commonwealth filed Certificates of Compliance in the Circuit Court, which triggered the defendants' time to file responsive pleadings under § 8.01-329(C).

         On December 23, 2016, the Regal Defendants removed the case to this court. In their notice of removal, the Regal Defendants alleged, "upon information and belief, " that Barnes had "not yet been properly served with process." Notice of Removal ¶ 27, Docket No. 1. They further alleged, "upon information and belief, " that even if Barnes had been properly served with process, "he would consent to the removal of the State Court Action to this Court." Id. at ¶ 28.

         On January 23, 2017, the plaintiffs timely moved to remand, asserting that Barnes had been properly served with process, and that the removal was procedurally defective for lack of consent by all defendants. See 28 U.S.C. § 1447 ("A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal under section 1446(a).").

         On January 26, 2017, the Regal Defendants filed a "notice of Barnes' consent to removal and supplemental notice of removal." Supp'l Notice, Docket No. 17. The supplemental notice was accompanied by a January 26, 2017 email from an attorney in North Carolina expressing Barnes' consent.[1] See Supp'l Notice Ex. A, Docket No. 17-1 ("As NC Counsel for Defendant James Martin Barnes, please accept this email as his consent to the removal of this matter to U.S. District Court for the Western District of Virginia, Charlottesville Division.").

         The plaintiffs subsequently moved to strike the supplemental notice on the basis that it was filed more than 30 days after Barnes was served with process. In response to the plaintiffs' filing, the Regal Defendants submitted an affidavit from Barnes, in which he explained that he was not currently residing at the address in Durham, North Carolina where the summons and complaint had been mailed. Barnes asserted that he came into possession of the summons on December 24, 2016, but did not receive a copy of the complaint until December 28, 2016. Barnes Affid. ¶¶ 5-7, Docket No. 28-1.

         The plaintiffs subsequently requested and obtained leave to depose Barnes regarding the statements contained in his affidavit. On March 17, 2017, three days before the scheduled deposition, the Regal Defendants filed a corrected affidavit from Barnes. In the corrected affidavit, Barnes explained that his sister was residing at the address in Durham where the summons and complaint had been mailed. On December 24, 2016, while visiting his sister, Barnes was given a stack of mail that had been sent to her residence. However, Barnes did not open the mail at that time. Over the next few days, Barnes received additional items that had been mailed to his sister's address. On December 28, 2016, Barnes opened a package that contained the complaint filed in the Circuit Court for the County of Albemarle. Barnes indicated in the corrected affidavit that he does "not know when the summons or complaint first came into [his] possession." Barnes Corrected Affid. ¶ 14, Docket No. 32-1. At the conclusion of the corrected affidavit, Barnes noted that he had suffered a series of debilitating losses in recent years, which had led him to seek treatment from physical and mental health care providers. Barnes also stated that he "did and do[es] consent to the removal" of the action to federal court. Id. at ¶ 20.

         Barnes was deposed on March 20, 2017. During the deposition, Barnes initially testified that the envelope containing the summons and complaint was "physically handed" to him on December 24, 2016. Barnes Dep. 45 Docket No. 34; see also id. at 45-46 ("I received both documents on the same day, opened and read both documents four days later, on the 28th."). However, Barnes later testified that he was not absolutely certain as to when he received the summons and complaint. See Id. at 74-75 ("When I was asked by my attorney, ... [m]y answer to her was no, I can't swear definitively that I had received that package ... on December 24th. I can't."). He made clear, however, that the summons and complaint were contained in the same envelope, and that he received them on the same day. See Id. at 45 ("I didn't receive [the summons and complaint] on two separate days. I received both documents on the same day."); 14. at 50 (indicating that "the envelope" containing the summons and complaint was given to him on the 24th of December, but that he did not "open[] it" until the 28th") (emphasis added); Id. at 78 (discussing when he became aware of "the existence of the package" and "the contents contained within that package") (emphasis added). At the conclusion of his deposition, Barnes reiterated that he "want[s] [the case] to be in federal court." Id. at 84.

         Standard of Review

         "Federal courts are courts of limited jurisdiction, " which "possess only that power authorized by Constitution and statute." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Accordingly, the court must "presume that a cause lies outside this limited jurisdiction, . . . and the burden of establishing the contrary rests upon the party asserting jurisdiction." Barbour v. Int'l Union. 640 F.3d 599, 605 (4th Cir. 2011) (en banc) (abrogated in part on other grounds by the Federal Courts Jurisdiction and Venue Clarification Act of 2011, Pub. L. No. 112-63, 125 Stat. 758 (Dec. 7, 2011)).

         "Removal statutes, in particular, must be strictly construed, inasmuch as the removal of cases from state to federal court raises significant federalism concerns." Id; see also Dixon v. Coburg Dairy, Inc.. 369 F.3d 811, 816 (4th Cir. 2004) (noting that federal courts "are obliged to construe removal jurisdiction strictly because of the significant federalism concerns implicated") (internal quotation marks omitted). Thus, any doubts about the propriety of removal should be resolved against the federal forum and in favor of remanding the case to state court. Barbour, 640 F.3d at 605; see also Palisades Collections LLC v. Shorts, 552 F.3d 327, 336 (4th Cir. 2008) (emphasizing that courts have a "duty to construe removal jurisdiction strictly and resolve all doubts in favor of remand"); Marshall v. Manville Sales Corp., 6 F.3d 229, 232 (4th Cir. 1993) (recognizing "Congress' clear intention to restrict removal and to resolve all doubts about the property of removal in favor of retained state court jurisdiction").

         Discussion

         In this case, the parties' dispute regarding the propriety of removal boils down to two issues: (1) whether Barnes properly consented to removal; and (2) if not, whether this procedural defect should be deemed cured in light of Barnes' expressed desire to litigate the case in federal court. The court addresses each of these issues in turn and concludes that remand is warranted.

         I. Adequacy of ...


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