Neill Corporation v. TSP Consulting, LLC, No. 2:2015cv00964 - Document 34 (E.D. La. 2015)
Court Description: ORDER denying 11 Motion to Remand; denying 11 Motion to Realign the Parties. Signed by Judge Jay C. Zainey. (jrc)
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Neill Corporation v. TSP Consulting, LLC Doc. 34 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA NEILL CORPORATION CIVIL ACTION VERSUS NO: 15-964 TSP CONSULTING, LLC, ET AL. SECTION: "A" (3) ORD ER The following m otion is before the Court: Co m bin e d Mo tio n to Re align th e Partie s an d Mo tio n to Re m an d ( Re c. D o c. 11) with supplem ental m em orandum in support (Rec. Doc. 24), filed by third-party defendant/ counter-claim ant Beauty Basics, Inc. ("BBI") and plaintiff/ defendant-in-counterclaim Neill Corporation ("Neill Corp."). Defendant, counter-claim ant, and third-party plaintiff TSP Consulting, LLC ("TSPC") opposes the m otion (Rec. Docs. 13 & 32; Opposition & Sur-reply). The m otion, subm itted for consideration on May 20 , 20 15, is before the Court on the briefs without oral argum ent. Neill Corp. and TSPC were parties to a Consulting Agreem ent (Rec. Doc. 1-1 Exhibit A). Three other Neill entities also were parties to the contract: Neill Technologies, Inc., BBI, and Vital Inform ation System s, Inc. (Id. Consulting Agreem ent at 1). Collectively referenced in the contract as "the Neill Com panies," all of these entities are Louisiana corporations. (Id.). The parties confected the Consulting Agreem ent so that the Neill Com panies could benefit from the expertise and services of Thom as C. Petrillo, the principal of TSPC. (Id.). Petrillo's expertise lies in helping others in the beauty industry to becom e m ore successful. (Rec. Doc. 2, TSPC Answer, Counterclaim , and Third-party Dem and ¶ 36). The parties do not dispute that TSPC is a citizen of Florida, which is where Petrillo resides. Plaintiff Neill Corp. initiated this action in state court against defendant TSPC. The petition is one for declaratory relief only. Neill Corp. wants the Court to declare inter alia that Dockets.Justia.com certain of Petrillo's actions constitute "Material Actions" under the Consulting Agreem ent that are not subject to cure. (Rec. Doc. 1-1, Petition for Declaratory J udgm ent). According to TSPC, Neill Corp. is trying to m anufacture cause in order to prem aturely term inate the Consulting Agreem ent without penalty. (Rec. Doc. 2, TSPC Answer, Counterclaim , and Third-party Dem and ¶¶ 56-57). TSPC rem oved the action to this Court on the basis of diversity jurisdiction. In its Answer, TSPC asserted a counterclaim and third-party dem and which included additional parties: Neill Technologies, Inc., BBI, Vital Inform ation System s, Inc., and Edwin H. Neill, III. (Id. at 8-9). Neill Corp. now m oves to rem and the case to state court for lack of subject m atter jurisdiction. Neill Corp.'s argum ents in support of rem and are prem ised on the contention that third-party defendant BBI's principal place of business is actually in Florida and not Louisiana. Neill Corp. argues that because TSPC is a Florida citizen, TSPC destroyed subject m atter jurisdiction when it third-partied BBI into the case. Neill Corp. urges the Court to realign the parties in a m anner that would destroy diversity jurisdiction. Diversity jurisdiction exists when the m atter in controversy exceeds the sum or value of $ 75,0 0 0 and is between citizens of different states. 28 U.S.C. § 1332(a)(1). Section 1332(a)(1) requires that the parties be com pletely diverse in citizenship. See Getty Oil Corp. v. Ins. Co. of N. Am ., 841 F.2d 1254, 1258 (5th Cir. 1988) (citing Straw bridge v. Curtiss, 7 U.S. 267 (180 6)). In other words, all plaintiffs m ust have a different citizenship from all defendants. Id. Neill Corp. is the party that initiated suit. Neill Corp. apparently did not consider the other Neill Com panies, who were also parties to the Consulting Agreem ent, to be necessary to the proceedings because it did not join them in the action. Thus, the suit involved only a Louisiana plaintiff and a Florida defendant—com pletely diverse parties. Pursuant to § 1332(a) 2 a federal court would therefore have original subject m atter jurisdiction over the action as filed.1 The case was therefore properly rem oved to federal court under the general rem oval statute, 28 U.S.C. § 1441(a)-(b). Neill Corp.'s contention that TSPC destroyed diversity jurisdiction by bringing BBI into the case is m eritless regardless of BBI's citizenship. Because the Court had original subject m atter jurisdiction over the action filed by Neill Corp., the supplem ental jurisdiction statute, 28 U.S.C. § 1367(a) provides an express grant of jurisdiction over TSPC's counter-claim s and third-party dem ands, which are part of the sam e case or controversy as Neill Corp.'s declaratory action. Even m ore im portantly, § 1367(b) of the statute expressly perm its a defendant in TSPC's position to assert those claim s against a non-diverse party even though a plaintiff in Neill Corp.'s position could not necessarily do so. Neill Corp.'s position in this case is squarely at odds with the Fifth Circuit's decision in State National Insurance Co. v. Yates, 391 F.3d 577 (5 th Cir. 20 0 4), which recognizes that the constraints on bringing supplem ental claim s against additional parties in diversity cases only apply to actual "plaintiffs," not to defendants who act as plaintiffs by asserting counterclaim s or third-party dem ands. Yates irrefragably establishes that TSPC could bring BBI into the lawsuit under the aegis of the supplem ental jurisdiction statute without destroying diversity jurisdiction.2 1 The Court recognizes that § 1332(a) also has an am ount in controversy requirem ent. Neill Corp. has never suggested that the am ount in controversy underlying its declaratory judgm ent action does not exceed $ 75,0 0 0 nor could it plausibly do so in light of the ram ifications attendant upon a court granting declaratory relief in its favor. (Rec. Doc. 2, TSPC Answer, Counterclaim , and Third-party Dem and ¶¶ 56-57). 2 TSPC only pleads diversity jurisdiction to support its claim s against Neill Corp. and the additional parties. (Rec. Doc. 2, TSPC Answer, Counterclaim , and Third-party Dem and ¶ 33). Of course, diversity jurisdiction is contingent upon citizenship. But § 1367(b) clearly applies to give the Court supplem ental jurisdiction over TSPC's claim s against additional parties regardless of citizenship. The Court has found no authority for the proposition that TSPC inadvertently waived supplem ental jurisdiction by failing to expressly invoke § 1367(a) in the jurisdictional section of its responsive pleading. 3 Further, this case is not appropriate for realignm ent of the parties. Neill Corp.'s and BBI's interests are aligned which is why it is not surprising that both entities appear on the receiving end of TSPC's claim s for relief. But TSPC is not a "partner in litigation" with respect to any of the parties against whom it has asserted claim s.3 See City of Indianapolis Gas Co. v. Chase Nat'l Bank, 314 U.S. 63, 75 (1974). Sim ply stated, TSPC properly rem oved Neill Corp.'s declaratory action and the Court continues to have jurisdiction over it. Therefore, the sole basis upon which Neill can obtain rem and to state court is if BBI is a Rule 19 required party to Neill Corp.'s claim s against TSPC, and if BBI is a citizen of Florida. Neill has devoted an inordinate am ount of argum ent to the citizenship issue but BBI's citizenship is only m aterial to the analysis if BBI is a required party with respect to Neill's action for declaratory relief. The Court is persuaded that it is not. Rule 19 of the Federal Rules of Civil Procedure, entitled Required J oinder of Parties, governs whether a nonparty m ust be joined in a suit. The principles that a court uses to determ ine when persons or entities m ust be joined are stated in subdivision (a) of the rule. Rule 19(a) provides: ( a) Pe rs o n s Re qu ire d to Be Jo in e d if Fe as ible . ( 1) Re qu ire d Party. A person who is subject to service of process and whose joinder will not deprive the court of subject-m atter jurisdiction m ust be joined as a party if: ( A) in that person's absence, the court cannot accord com plete relief am ong existing parties; or 3 Perhaps Neill Corp.'s m isplaced reliance on the concept of realignm ent was driven by TSPC's odd choice of bringing BBI into the case as a third-party defendant rather than as an additional defendant on the counterclaim against Neill Corp. Rule 14 allows third-party practice against a nonparty when the defendant believes that the nonparty m ay be liable to the defendant for all or part of the claim against the defendant. Fed. R. Civ. Pro. 14(a)(1). TSPC's claim s against BBI are not of this nature but regardless of the procedural device used to bring BBI into the case, the jurisdictional analysis is not affected. 4 ( B) that person claim s an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence m ay: ( I) as a practical m atter im pair or im pede the person's ability to protect the interest; or ( ii) leave an existing party subject to a substantial risk of incurring double, m ultiple, or otherwise inconsistent obligations because of the interest. Fed. R. Civ. Pro 19(a). The Rule instructs that nonjoinder even of a required person does not always result in dism issal. Republic of the Philippines v. Pim entel, 553 U.S. 851, 862 (20 0 8). If joinder of the nonparty is required but not feasible, then the standards laid out in subdivision (b) of the rule apply. Id. The burden of proof under Rule 19 is on the proponent of joinder. See In re Enron Corp. Sec., Deriv. & ERISA Litig., No.MDL-1446, 20 0 8 WL 744823, at *6 (S.D. Tex. Mar. 19, 20 0 8) (citing 7 Charles Alan Wright, et al., Fed. Prac. & Pro. § 160 9 (3d ed. 20 0 1)). Neill Corp. has not m et its burden of establishing that BBI's joinder as a plaintiff is required. First, assum ing arguendo that BBI is a citizen of Florida, the only relevant joinder question vis à vis subject m atter jurisdiction and rem and is whether BBI's presence as a coplaintiff to Neill Corp.'s declaratory judgm ent action is required. Adding BBI to the suit in any other posture does not affect diversity jurisdiction. But Neill Corp. is the party that initiated this litigation and it nonetheless declined to join any of the other Neill Com panies as coplaintiffs even though all of the com panies, including BBI, are represented by the sam e attorneys. Obviously Neill Corp. believed when it filed suit in state court that it could obtain the declaratory relief that it sought without adding any other parties. Argum ents m ade by a party eager to flee a federal forum are always scrutinized carefully but that is particularly true where a party is im plicitly challenging its own litigation strategy. 5 Second, Neill Corp. does not address the governing Rule 19 standards instead taking the position that they are irrelevant because of a "stipulation" by TSPC that BBI is indispensable to this action. (Rec. Doc. 24 at 11). TSPC stated as follows in the Affirm ative Defenses section of its Answer: The Neill Corporation has failed to join in d is p e n s a b le parties to its Petition for Declaratory J udgm ent. Neill Corporation seeks to have the Court interpret the Consulting Agreem ent and enter a declaratory judgm ent as to the m eaning of certain of its provisions, and yet Neill Corporation has failed to join all of the parties to the Consulting Agreem ent as parties. Am ong the in d is p e n s a b le parties that Neill Corporation has failed to join are Neill Technologies, Inc., Beauty Basics, Inc., and Vital Inform ation System s, Inc. Pursuant to Section 12.13 of the Consulting Agreem ent, each of these com panies "shall be jointly and severally liable to m ake all paym ents owed by any Neill Com pany under this Agreem ent . . . ." Any declaratory judgm ent interpreting the Consulting Agreem ent will necessarily affect their rights and interests.4 Rec. Doc. 2; Answer, Counterclaim , and Third-party Dem and ¶ 16 (em phasis added). J ust as Neill Corp. ignored Rule 19, TSPC ignores this potentially troublesom e statem ent. But contrary to Neill Corp.'s position, the foregoing paragraph is not a "stipulation" and it does not control the Court's analysis because it is contrary to Rule 19's governing standards. If TSPC had m ade the sam e contentions in support of a Rule 12(b)(7) m otion to dism iss, the Court would have rejected them , at least insofar as Neill Corp.'s original action for declaratory relief is concerned. Turning to Rule 19's standards, the Court can afford O'Neill Corp. the com plete declaratory relief that it sought when it filed suit on its own. The declaratory relief sought is very narrow and specific. Naturally BBI and the other Neill Com panies have an interest in the outcom e of the action but those other entities are not so situated that disposing of Neill Corp.'s request for declaratory relief as prayed for in their absence would im pair or im pede their 4 The Court notes that TSPC uses the term "indispensable" in its pleading yet takes Neill Corp. to task for using such an "outdated designation" in its briefing. (Rec. Doc. 32; Sur-reply at 10 ). 6 interest. This contract case does not involve a situation where the obligees (the Neill Com panies) are all unrelated to each other—to the contrary all of the Neill Com panies appear to be owned in m ajority by the sam e individuals. According to the Louisiana Secretary of State's website, all of the Neill Com panies share an address in Ham m ond, Louisiana, and all of the com panies were created long before TSPC was form ed and entered into a consulting arrangem ent with them . The outcom e of Neill Corp.'s declaratory judgm ent action does not affect any of the other com panies' obligations with respect to the contact. In fact, the Consulting Agreem ent is structured such that all of the Neill Com panies are sim ilarly situated vis à vis TSPC and each other. Moreover, it is clear from BBI's Answer that its position with respect to the allegations that Neill m akes in its petition for declaratory relief is the sam e. (Rec. Doc. 10 ; BBI's Answer and Affirm ative Defenses to Third-Party Com plaint and Counterclaim ). In short, BBI is not a required party with respect to O'Neill's petition for declaratory relief, which is the only relevant inquiry. BBI's citizenship is therefore a m oot issue. Accordingly, and for the foregoing reasons; IT IS ORD ERED that the Co m bin e d Mo tio n to Re align th e Partie s an d Mo tio n to Re m an d ( Re c. D o c. 11) is D EN IED . J une 22, 20 15 _______________________________ J AY C. ZAINEY UNITED STATES DISTRICT J UDGE 7
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