Brice v. Costo Wholesale Corporation

Background

Walter Brice filed a negligence lawsuit in New York State Supreme Court after alleging that he slipped and fell on November 30, 2022, while walking in a Costco warehouse. He alleged that Alvin Claudio mopped the floor, left it wet, and failed to place warning signs. Brice named Costco Wholesale Corporation and Claudio as defendants.

Brice alleged that he was a citizen of New York and that Claudio was also a New Yorker. The complaint described Costco as a foreign corporation. The defendants removed the case to the U.S. District Court for the Southern District of New York, relying on diversity jurisdiction—the federal court’s authority over certain disputes involving citizens of different states and an amount in controversy exceeding $75,000.

Because Brice and Claudio were both New Yorkers, their citizenship would ordinarily defeat complete diversity. The defendants argued that Claudio had been fraudulently joined, meaning that Brice had named him only to prevent removal and had no possible claim against him. They submitted affidavits and time sheets that they said showed Claudio was not working on the date of the accident and therefore could not have mopped the floor.

Brice moved to send the case back to state court. He submitted a declaration stating that a woman wearing a Costco shirt, whom he encountered in what he believed was the store’s management or customer-service office, told him that Claudio had mopped the floor. Brice also pointed out that a New York state judge had denied the defendants’ earlier motion to dismiss. That judge had ruled that Brice adequately pleaded negligence against both defendants and that the defendants’ documents did not conclusively establish that no claim could be brought against Claudio.

Court’s Analysis

The court explained that the party removing a case bears the burden of showing that federal jurisdiction is proper. To establish fraudulent joinder, the defendants had to prove by clear and convincing evidence either that Brice committed outright fraud in his pleadings or that there was no possibility, based on those pleadings, that he could state a claim against Claudio under New York law.

The court held that the defendants did not meet that demanding standard for two principal reasons. First, the New York state court had already concluded that the complaint adequately pleaded a negligence claim against Claudio and that the defendants’ evidence did not require early dismissal. Second, the federal court was required to resolve disputed factual and legal issues in Brice’s favor when deciding whether fraudulent joinder had been established.

The court rejected the defendants’ argument that Brice’s account of what the Costco employee told him could not be considered because it was hearsay. The court concluded that the statement could qualify as a statement by Costco’s employee about a matter within the scope of the employee’s work. The court stated that Brice’s description of the person, the Costco shirt, the management office, and the subject of the conversation could provide enough circumstantial evidence to treat the statement as a statement attributable to Costco. Any uncertainty about whether the statement was competent evidence had to be resolved in Brice’s favor.

The court emphasized that the remand proceeding was not the place to decide whether Claudio actually worked that day or whether Brice could ultimately prove his negligence claim. Because the parties presented conflicting evidence and the defendants had not shown that recovery against Claudio was impossible, the court found that fraudulent joinder had not been established.

Costs and Expenses

Brice also requested costs and expenses resulting from the removal. The court denied that request. Although the defendants’ removal argument was incorrect, the court found that it was not objectively unreasonable. The defendants had a colorable argument based on their reading of several decisions and had presented substantial factual support. The court also found that the lack of federal jurisdiction was not obvious from the removal papers and that the case did not present unusual circumstances warranting an award of costs or expenses.

Disposition

The court granted Brice’s motion to remand. It directed the Clerk of Court to close the pending motions and return the case to New York State Supreme Court in New York County. The court denied Brice’s application for costs and expenses. The opinion did not decide whether Brice will ultimately prevail on his negligence claims.