United States District Court, W.D. North Carolina, Charlotte Division
ROBERT J. CONRAD, Jr., District Judge.
THIS MATTER comes before the Court on Defendant's "Motion to Dismiss and/or Change Venue, " (Doc. 8), Plaintiff's "Motion to Remand, Motion for Award of Costs and Fees and Supporting Memorandum of Law, " (Doc. 12), and the parties' associated briefs and exhibits. See Docs. 9, 15-19.
Under 28 U.S.C. § 636(b)(1)(B), this matter was designated to the Magistrate Judge to consider and recommend disposition in these motions. In a Memorandum and Recommendation ("M&R") filed August 27, 2014, the Magistrate Judge recommended that Plaintiff's Motion to Remand be granted; Plaintiff's Motion for Award of Costs and Expenses be denied; and Defendant's Motion to Dismiss be denied. Plaintiff filed Objections to the M&R of the Magistrate Judge on September 15, 2014, and Defendant filed a Reply to Plaintiff's Objections on October 2, 2014. It is ripe for review.
Plaintiff Electrolux Home Products, Inc. ("Electrolux") is a Delaware corporation with its national headquarters in Charlotte, North Carolina. Defendant Tarheel Plastics, LLC ("Tarheel") is a North Carolina corporation with its principal place of business in Lexington, North Carolina. Defendant Crestmark Bank ("Crestmark") is a Michigan banking corporation with its principal place of business in Detroit, Michigan.
According to Plaintiff's Complaint, Tarheel contracted with Electrolux to provide certain plastic parts to Electrolux plants in North Carolina, South Carolina, and Mexico during 2008. Crestmark and Tarheel are parties to various agreements in connection with loans by Crestmark to Tarheel. The loans were secured by first priority security interests in all of Tarheel's personal property, including accounts receivable, inventory and equipment.
In 2013, Tarheel ceased its operations and Electrolux demanded that Tarheel return all of its manufactured plastics parts, proprietary tooling and molds, and resin stocks. Crestmark objected to Electrolux taking possession of these items based upon its position as a secured creditor of Tarheel. In order to avoid plant closures, Electrolux entered into an Accommodation Agreement with Crestmark on October 4, 2013. The Agreement required Electrolux to pay Crestmark $100, 000 and deposit $332, 000 in escrow with Crestmark's attorney (the "Jaffe firm").
On October 24, 2013, Tarheel filed for Chapter 7 bankruptcy in the Middle District of North Carolina. Electrolux was not listed in Tarheel's schedules as a creditor or included in the Creditor Matrix. Consequently, Electrolux was unaware of Tarheel's bankruptcy. Crestmark was listed as a secured creditor and included in the Creditor Matrix. Despite entering into the Accommodation Agreement, Crestmark refused to allow Tarheel to return Electrolux's resin stocks. Crestmark also refused a setoff against Tarheel's invoices.
On February 28, 2014 Electrolux filed the instant action against Tarheel and Crestmark in Mecklenburg County Superior Court. Electrolux stated claims against Tarheel for breach of contract and declaratory relief related to the resin stocks, valued in excess of $210, 000.00, as well as possible offsets. Electrolux sued against Crestmark for declaratory relief, tortious interference with contract, and unfair and deceptive trade practices.
Electrolux served Crestmark with process on March 3, 2014. Crestmark participated in the state court proceedings, including the filing, briefing, and arguing of a substantive motion to dismiss, which was denied. On March 11, 2014, Electrolux filed its Motion for Consent of Trustee to Retroactive Relief from Stay in the Bankruptcy Court seeking "relief from automatic stay of 11 U.S.C. § 362(a), nunc prop tunc as of February 24, 2014, to pursue litigation in the courts of the State of North Carolina." The Court granted the Motion on March 17, 2014.
On June 5, 2014, Crestmark removed the case to this Court alleging that its Notice of Removal was timely under 28 U.S.C. §§ 1441 and 1446 because it "has learned that Electrolux fraudulently included Tarheel as a sham' defendant in order to destroy diversity." (Doc. 1 ¶ 29). On June 12, 2014, Crestmark filed its "Motion to Dismiss and/or Change Venue, " (Doc. 8). On June 25, 2014, Electrolux filed its "Motion to Remand, Motion for Award of Costs and Fees, and Supporting Memorandum of Law, " (Doc. 12).
Electrolux alleges that Crestmark's Notice of Removal was untimely and that the mere fact that Tarheel is out of business or even in bankruptcy does not make it a "sham" defendant. Electrolux also seeks an award of costs and expenses, including attorneys' fees, pursuant to 28 U.S.C. § 1447(c). Crestmark argues that its Notice of Removal was timely and that it was not until Electrolux filed it's Brief in Opposition to Crestmark's Motion to Dismiss in Mecklenburg County Superior Court that it was able to conclude that Tarheel was a "sham" defendant. The Magistrate Judge recommended that this Court grant in part and deny in part Plaintiff's Motion and to deny Defendant's Motion.
II. STANDARD OF REVIEW
The Federal Magistrate Act provides that a district court "shall make a de novo determination of those portions of the report or specific proposed findings or recommendations to which objection is made." 28 U.S.C. § 636(b)(1); Camby v. Davis, 718 F.2d 198, 200 (4th Cir. 1983). De novo review is not required by the statute when an objecting party makes only general or conclusory objections that do not direct the court to a specific error in the magistrate judge's recommendations. Orpiano v. Johnson, 687 F.2d 44 (4th Cir. 1982). Further, the statute does not on its face require any review at all of issues that are not the subject of an objection. Thomas v. Arn, 474 U.S. 140, 149 (1985); Camby, 178 F.2d at 200. ...