JACKSON, Miss. (Legal Newsline) - Plaintiffs were engaged in “classic fraudulent joinder” by naming a long-defunct company in a lawsuit over an apartment fire in order to keep the case in their preferred venue, the Mississippi Supreme Court ruled, reversing a trial judge who thought the company lived on under another name.
Betty Harris sued Community Park Apartments and Alpha Management after a fire that left John Harris dead and Betty and Kevin Gooden injured. Her lawyers filed the suit in Hinds County, home to the city of Jackson, because state records listed CPA as being based there.
Alpha Management moved to change venue either to Madison County, where Alpha is based, or Pike County, where the fire occurred. Alpha also said CPA sold the property in 1975 and ceased doing business soon thereafter. Judge Adrienne Annett Hooper-Wooten was skeptical, however, since the warranty deed had only the signature of the grantor, CPA, and the grantee was similar-sounding Community Park Associates.
CPA’s lawyer, who had signed the 50-year-old deed, said CPA and Community Park Associates were separate entities with no investors in common. But Judge Hooper-Wooten said she found it “difficult to believe that the warranty deed shows that this was not a straw man’s action” between related companies. She refused to transfer venue and made an entry of default against CPA.
The defendants sought interlocutory appeal and the Mississippi Supreme Court reversed in a June 1 decision.
“This is classic fraudulent joinder—naming as defendant an entity against which no liability can be imposed nor any recovery obtained just to establish venue,” the court ruled. ”CPA was solely named to deprive Alpha Management of being sued in its own county.”
The trial judge made two legal errors, the court said. First was calling the deed invalid because the grantee didn’t sign it. Mississippi law only requires the grantor to sign a deed, the court ruled. “There is no credible evidence to suggest Community Park Associated never accepted title to the apartment complex,” the court said.
Second, Judge Hooper-Wooten ignored paperwork and other evidence showing CPA and Community Parks Associates were separate businesses, including that none of the people who incorporated CPA were partners of Community Park Associates. Even if the same people were involved, the court said, Mississippi law would treat them as separate entities.
“To rule that CPA did not sell the property in 1975 was clear error,” the court ruled. “Rather, the undisputed evidence shows that CPA sold the apartment complex in 1975 and ceased to do business—forty-six years before the deadly fire.”
The court also rejected plaintiff arguments CPA could still be liable for negligence in the design and construction of the apartments. Unfortunately, the plaintiff didn’t include that claim in her original lawsuit and even if she had, the current owner had decades to fix any problems that might have led to the fire, the court said.
Justice Kenneth Griffis dissented, saying the majority overstepped their authority by reversing the trial judge’s entry of dismissal before it had been resolved into a final judgment.
“We respectfully suggest Justice Griffis misses the big picture and the practical reality that a company that had not owned the property—or even operated for over four decades—would not likely timely answer a lawsuit against it,” the court said.