U.S. Beverage, Inc. et al v. Supreme, L.L.C. et al

Filing 27

MEMORANDUM OPINION AND ORDER GRANTING the 2 motion to remand; REMANDING this case to the Circuit Court of Montgomery County, Alabama; directing the Clerk to take appropriate steps to effect the remand; further ORDERING plfs' 26 motion for scheduling conference is DENIED as moot. Signed by Hon. Chief Judge Mark E. Fuller on 8/6/10. (Attachments: # 1 civil appeals checklist). Certified copy mailed to Circuit Court Clerk.(djy, )

U . S . Beverage, Inc. et al v. Supreme, L.L.C. et al

D o c . 27

IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF ALABAMA N O R T H E R N DIVISION U .S . BEVERAGE, INC., et al., P l a i n t if f s , v. S U P R E M E , L.L.C., et al., D e f e n d a n ts . ) ) ) ) ) ) ) ) )

C A S E NO. 2:09-cv-1071-MEF (W O - DO NOT PUBLISH)

M E M O R A N D U M OPINION AND ORDER I . INTRODUCTION D e f en d a n t Supreme Manufacturing Company, Inc. ("Supreme Manufacturing") rem o v ed this case from the Circuit Court of Montgomery County, Alabama ("Montgomery C irc u it Court"). (Doc. #1). It was docketed in this Court as case number 09-cv-1071. The p la in tif f s U.S. Beverage, Inc. ("U.S. Beverage"), Grady Dowling Kittrell ("Kittrell"), and T h o m a s Going Clark, III ("Clark") jointly filed a motion to remand. (Doc. #2). All d e f en d a n ts oppose this motion. (Doc. #23). For the reasons set forth in this Memorandum O p in io n and Order, the motion to remand will be GRANTED. I I . PROCEDURAL BACKGROUND A . Supreme Manufacturing v. U.S. Beverage, et al. O n October 15, 2008, Supreme Manufacturing sued U.S. Beverage, Kittrell, and Clark f o r breach of contract in a diversity action in this Court, docketed as case number 08-cv-832

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("0 8 cv 8 3 2 " ). (08cv832 Doc. #1). On February 25, 2009, U.S. Beverage, Kittrell, and Clark f ile d a counterclaim, bringing nine counts against Supreme Manufacturing: (1) false labeling in violation of the Lanham Act, (2) false advertising in violation of the Lanham Act, (3) b re a ch of contract, (4) breach of express warranty, (5) breach of implied warranty of m e rc h a n ta b ility, (6) breach of implied warranty of fitness for a particular purpose, (7) fraud, (8) negligent misrepresentation, and (9) unjust enrichment.1 (08cv832 Doc. #18). O n June 8, 2009, U.S. Beverage filed its Suggestion of Bankruptcy, stating that it had f iled a petition for relief under Chapter 11 of United States Code Title 11 ("Chapter 11") in th e United States Bankruptcy Court for the Middle District of Alabama, and therefore, 0 8 c v 8 3 2 "is stayed by the operation of Title 11 U.S.C. § 362 as to" U.S. Beverage. (08cv832 D o c . #27). Supreme Manufacturing responded, arguing that the Court should dismiss U.S. B e v era g e without prejudice. (08cv832 Doc. #29). The Court agreed and dismissed U.S. B e v e ra g e without prejudice from 08cv832 on June 25, 2009. (08cv832 Doc. #30). The C o u rt noted that any party may petition to reinstate U.S. Beverage within sixty days after any a c tio n taken by the Bankruptcy Court entitling that party to seek reinstatement. Id. O n June 30, 2009, U.S. Beverage moved for the Court to reinstate it as a party to

Supreme Manufacturing moved to strike this counterclaim, arguing that the counts were all compulsory counterclaims filed out-of-time without leave of court. (08cv832 Doc. #19). The Court found that the counterclaims were not compulsory and denied Supreme Manufacturing's motion. (08cv832 Doc. #25). Furthermore, the Court noted that, even if the counterclaims were compulsory, it would still allow the defendants to amend their pleadings under Federal Rule of Civil Procedure 13(f) (since abrogated) "to prevent multiplicity of lawsuits and promote judicial efficiency." Id. -2-

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p u rs u e its counterclaims against Supreme Manufacturing. (08cv832 Doc. #32). U.S. B e v e ra g e also asked the Court to refer all of 08cv832 to the Bankruptcy Court handling its p e titio n for relief under Chapter 11. (08cv832 Doc. #33). Supreme Manufacturing opposed b o th motions but only substantively opposed the motion to refer 08cv832 to the Bankruptcy C o u rt, arguing that bankruptcy courts should not hear Lanham Act claims. (08cv832 Doc. # 3 8 ). The Court ordered a status conference for September 4, 2009 to discuss the matter with the parties. (08cv832 Doc. #39). F o llo w in g the status conference, the Court issued an order requiring each party to file a status report. (08cv832 Doc. #40). The Court asked the parties to discuss the possibility o f amending the scheduling order to allow more time for amending pleadings, adding parties, a n d litigating all claims in 08cv832 in this Court, including those brought by and against U.S. B e v e ra g e . Id. The Court noted that any claims against U.S. Beverage and counterclaims by U .S . Beverage in this Court "would not proceed to collection. Upon resolution of this case to a sum certain, the claims involving U.S. Beverage, Inc. would be referred to" the B a n k ru p tc y Court. Id. S u p re m e Manufacturing argued in its status report that all claims in 08cv832 should p roc ee d in this Court, adding that "[a]ny other claims that U.S. Beverage, Inc. or its owners G ra d y Kitrell [sic] and Tom Clark can assert against Supreme Manufacturing, Inc., its wholly o w n e d subsidiary Supreme, LLC, or any other business associates arises out of the business re la tio n s h ip and transactions that form the basis of this lawsuit." (08cv832 Doc. #42). U.S.

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B e v e ra g e , Kittrell, and Clark argued that all claims in 08cv832 should be reinstated and s ta ye d pending the final outcome of the bankruptcy proceedings. (08cv832 Doc. #41). They a d d e d that U.S. Beverage had "significant additional claims" against Supreme M a n u f ac t u rin g , Supreme, L.L.C. ("Supreme"), and others "discovered after this case was f ile d ." Id. They, however, stated that U.S. Beverage believed "that these claims do not arise f ro m a common nucleus of operative facts with the claims at issue in" 08cv832. Id. Instead, " [ t]h e se additional claims relate to an overall course of action by several parties to destroy the business of U.S. Beverage and improperly seize property of U.S. Beverage, both before a n d after the filing of the bankruptcy petition." Id. U.S. Beverage intended "to bring these c a u se s of action in Alabama State Courts and in the Bankruptcy Court." Id. O n October 19, 2009, the Bankruptcy Court ordered a modification of the stay in 0 8 c v 8 3 2 , allowing both the claims against U.S. Beverage and counterclaims brought by U.S. B e v e ra g e to proceed in this Court "other than for enforcement of any money judgment" a g a in st U.S. Beverage. (08cv832 Doc. #43-1). On October 28, 2009, this Court granted U.S. B e v era g e 's motion to reinstate it as a party (08cv832 Doc. #32) only to the extent that U.S. B e v e ra g e was reinstated as a party; the motion was denied in all other respects. (08cv832 D o c . #43). The Court denied U.S. Beverage's motion to refer 08cv832 to the Bankruptcy C o u rt (08cv832 Doc. #33). Id. The Court also denied the motion to stay in the status report f ile d by U.S. Beverage, Kittrell, and Clark (08cv832 Doc. #41). Id. Finally, the Court g ra n ted the motion from Supreme Manufacturing's status report (08cv832 Doc. #42) to

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p ro c e e d with all claims in 08cv832 in this Court. Id. On November 6, 2009, the Court e n te re d an Amended Scheduling Order so 08cv832 could proceed. (08cv832 Doc. #45). No f u rth e r filings have occurred in 08cv832. B . U.S. Beverage, et al. v. Supreme, et al. O n or about October 19, 2009, U.S. Beverage, Kittrell, and Clark (collectively, " P la in tif f s" ) filed this lawsuit in Montgomery Circuit Court. (Doc. #1-3). Plaintiffs brought c la im s against Supreme, Supreme Manufacturing, John Walker, Patrick Walker, Tom B ro a d w a y ("Broadway"), Ben Carter ("Carter"), Trident Beverage, Inc. ("Trident"), Juice A liv e , Inc. ("Juice Alive"), and other unnamed defendants (collectively, "Defendants"). Id. P la in t if f s brought seven counts, all under state law: (1) defamation and business d is p a ra g e m e n t; (2) tortious interference with contractual and business relations; (3) c o n v e rs io n /th e f t by deception; (4) fraud, misrepresentation, and deceit; (5) civil conspiracy; (6 ) breach of contract/violation of non-compete agreement; and (7) theft and bribery to a c q u ire proprietary information. Id. S u p re m e Manufacturing timely2 removed this suit to this Court pursuant to 28 U.S.C. § 1441 and 1446. (Doc. #1). All Defendants consented to this removal. (Doc. #1-1). P lain tiff s moved to remand. (Doc. #2). I I I . DISCUSSION S u p r e m e Manufacturing claims that removal is proper because the claims brought by Supreme Manufacturing was served Plaintiffs' complaint on October 26, 2009. (Doc. #1-3). It filed its notice of removal on November 23, 2009. (Doc. #1). See 28 U.S.C. § 1446(b). -52

P la in tif f s are compulsory counterclaims to the breach of contract claim brought by Supreme M a n u f a c tu rin g in 08cv832. (Doc. #1). Supreme Manufacturing further argues that this C o u rt has supplemental jurisdiction over Defendants and these claims. Id. Plaintiffs dispute b o th assertions. B o t h sides miss the point. This case consists of non-diverse state law claims. T h e re f o re , the Court only has jurisdiction through consolidation with 08cv832 and the e x e rc ise of supplemental jurisdiction. The twist here is that Plaintiffs are defendants in 0 8 c v 8 3 2 . In 08cv832, the Court allowed motions to amend pleadings and add parties until Ja n u a ry 19, 2010. (08cv832 Doc. #45). Plaintiffs chose not to move to amend their p le a d in g s to add these claims as counterclaims in 08cv832. In fact, they actively decided ag ainst filing these claims as counterclaims in 08cv832 by filing them instead in Montgomery C irc u it Court. Supreme Manufacturing, Plaintiffs' opponent in 08cv832, cannot move to a m e n d the other side's pleadings, which it constructively did by filing its notice of removal o n November 23, 2009, before the deadline for amending pleadings. If , as Supreme Manufacturing argues, these claims are compulsory counterclaims to its breach of contract claim in 08cv832, Plaintiffs are playing a dangerous game. By c h o o s in g to bring them in a separate action, Plaintiffs will have waived these claims entirely. F ed . R. Civ. P. 13(a)(1) ("A pleading must state as a counterclaim" any compulsory c o u n ter c laim s.); Nippon Credit Bank, Ltd. v. Matthews, 291 F.3d 738, 755 (11th Cir. 2002) (s ta tin g that compulsory counterclaims which are not brought are "thereafter barred")

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(q u o tin g Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 469 n.1 (1974)), abrogated on other g r o u n d s by Diamond Crystal Brands, Inc. v. Food Movers Int'l, Inc., 593 F.3d 1249 (11th C ir. 2010). However, that is a question for the Montgomery Circuit Court. This Court will n o t use its supplemental jurisdiction to pull claims from state court for the purpose of d e te rm in in g if they are barred as compulsory counterclaims not brought in a separate federal la w s u it. See 28 U.S.C. § 1367(c)(4) (stating that a district court may decline to exercise s u p p le m e n ta l jurisdiction when there are "compelling reasons" to do so); 28 U.S.C. § 1 3 6 7 (b ) (stating that a district court, in a diversity action, does not have supplemental ju risd ictio n "over claims by persons proposed to be joined as plaintiffs under [Federal Rule o f Civil Procedure] 19" when that would destroy diversity). I V . CONCLUSION F o r the reasons given above, it is hereby ORDERED that the motion to remand (D o c. #2) is GRANTED. This case is REMANDED to the Circuit Court of Montgomery C o u n ty, Alabama. The Clerk is DIRECTED to take appropriate steps to effect the re m a n d . It is further ORDERED that Plaintiffs' Motion for Scheduling Conference (Doc. # 2 6 ) is DENIED as moot. D O N E this the 6th day of August, 2010.

/s/ Mark E. Fuller CHIEF UNITED STATES DISTRICT JUDGE

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