Tom & Jerry, Inc. v. Mullis Business Technologies, LLC
Filing
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MEMORANDUM AND ORDER sustaining 13 Plaintiff's Motion to Remand. Signed by District Judge Kathryn H. Vratil on October 24, 2024. (mls)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
TOM & JERRY, INC.,
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Plaintiff,
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v.
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MULLIS BUSINESS TECHNOLOGIES, LLC,
)
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Defendant.
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____________________________________________)
CIVIL ACTION
No. 24-2254-KHV
MEMORANDUM AND ORDER
On May 10, 2024, in the District Court of Wyandotte County, Kansas, plaintiff filed suit
against defendant seeking a declaratory judgment. On June 14, 2024, defendant removed the case
to federal court based on diversity jurisdiction. See Defendant Mullis Business Technologies,
LLC’s Notice Of Removal (Doc. #1). This matter comes before the Court on Plaintiff’s Motion
To Remand (Doc. #13) filed July 12, 2024. For reasons stated below, the Court sustains plaintiff’s
motion.
Legal Standard
Federal courts have limited jurisdiction and may only exercise jurisdiction when
specifically authorized to do so. Marcus v. Kan. Dep’t of Revenue, 170 F.3d 1305, 1309 (10th
Cir. 1999). Therefore, the law imposes a presumption against jurisdiction. Basso v. Utah Power
& Light Co., 495 F.2d 906, 909 (10th Cir. 1974). For the Court to have subject matter jurisdiction
under 28 U.S.C. § 1332, complete diversity must exist between plaintiff and defendant, and the
matter in controversy must exceed the sum or value of $75,000, exclusive of interest and costs.
28 U.S.C. § 1332(a); Middleton v. Stephenson, 749 F.3d 1197, 1200 (10th Cir. 2014). Defendant
may remove the case to federal court only if plaintiff could have originally brought the action in
federal court. See 28 U.S.C. § 1441(a). The Court is required to remand “[i]f at any time before
final judgment it appears that the district court lacks subject matter jurisdiction.” 28 U.S.C.
§ 1447(c).
The Court evaluates the propriety of removal from state court based on the complaint at
the time of removal. Pfeiffer v. Hartford Fire Ins. Co., 929 F.2d 1484, 1488–89 (10th Cir. 1991).
As the party asserting jurisdiction, defendant bears the burden of proving jurisdiction exists and
must allege “a short and plain statement of the grounds for removal,” 28 U.S.C. § 1446(a),
including “a plausible allegation that the amount in controversy exceeds the jurisdictional
threshold.” Dart Cherokee Basin Operating Co. v. Owens, 574 U.S 81, 89 (2014). Where plaintiff
contests defendant’s allegations regarding the amount in controversy, both sides may present
evidence and the Court must decide by a preponderance of the evidence whether defendant has
satisfied the amount-in-controversy requirement. See id. at 88.
Plaintiff’s motion to remand is premised upon its view that defendant had failed to
“plausibly allege” that the case might be worth more than $75,000. Plaintiff states that if the Court
allows defendant to submit evidence, plaintiff will challenge such evidence and demonstrate that
the amount in controversy does not exceed $75,000.
Both sides have presented evidence on the amount in controversy, so the Court does not
decide the motion to remand based solely on the pleadings—although it would reach the same
conclusion, for slightly different reasons, on the pleadings alone.
Factual Background
I.
Plaintiff’s Complaint
Plaintiff’s Petition For Declaratory Judgment (Doc. #1-1) filed June 14, 2024, (hereinafter
the “complaint”) alleges as follows:
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On May 16, 2017, Tom & Jerry, Inc. (a Kansas corporation) and Mullis Business
Technologies, LLC (a Colorado limited liability company) entered into a services agreement under
which defendant would help plaintiff win government contracts for audiovisual services.1 Petition
(Doc. #1-1), ¶ 12. Under the agreement, plaintiff agreed to pay defendant (1) 15 per cent of profits
on any equipment sales for solicitations which defendant brought to plaintiff; (2) six per cent of
profits on any equipment sales for solicitations which plaintiff gave to defendant; and (3) three per
cent of total profits from solicitations which defendant wrote that did not contain equipment sales.
Robert Mullis is the sole member of Mullis Business Technologies, LLC. In March of
2020, in a separate agreement, plaintiff hired Mullis to help manage plaintiff’s corporate security
program. Between October of 2020 and June of 2022, plaintiff paid the LLC more than $820,000,
which included personal compensation for Mullis.
On June 15, 2022, Mullis resigned his employment, and the LLC terminated its agreement
with plaintiff. Even though the LLC no longer performed services for plaintiff, it is entitled to
compensation for ongoing government contracts. It demands amounts that far exceed the scope
of the agreement.2
In October of 2023, defendant submitted Invoice Two related to the so-called
MARFORRES project. Invoice Two sought (1) 50 per cent of plaintiff’s total profits for the base
year; and (2) three per cent of plaintiff’s total profits for Option Years One and Two. The invoice
did not include dollar figures—it stated that the total amount sought was “TBD.” Plaintiff alleges
1
In the complaint, the parties quote the agreement, but neither party has attached a
copy of the agreement to any pleading. Similarly, neither party has submitted documents which
purport to justify their damage calculations or allegations regarding the amount in controversy.
2
The complaint does not specifically state the amount that defendant is seeking.
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that the MARFORRES project involves equipment sales, and that plaintiff (not defendant)
identified this business opportunity, so defendant is only entitled to six per cent of profit on
equipment sales—rather than three per cent of total profit. Plaintiff alleges that it does not owe
defendant anything, however, because it paid defendant 50 per cent of total profit as a bonus for
the base year, which was hundreds of thousands of dollars more than it owed defendant under the
agreement.3
Invoice Three sought compensation of 15 per cent of profit on equipment sales related to
the so-called MARFORSOUTH project. Like Invoice Two, Invoice Three did not demand a
specific dollar figure; it stated that the total amount was “TBD.” Plaintiff alleges that it (not
defendant) identified this business opportunity, so defendant is only entitled to six per cent of profit
on equipment sales, which totals $1,176.92.
As noted, the complaint does not allege the amount of profits which plaintiff received on
either project or set forth relevant calculations of payments. Plaintiff merely alleges that it owes
no further compensation for the MARFORRES project, and only owes $1,176.92 on the
MARFORSOUTH project.
Plaintiff holds a Facility Security Clearance (“FCL”) under the National Industrial Security
Program, which is administered by the Defense Counterintelligence and Security Agency. An
FCL is required for government contractors to bid on solicitations that involve access to classified
information during contract performance. Without an FCL, plaintiff cannot maintain existing
3
Defendant does not dispute that plaintiff paid it 50 per cent of total profit for the
base year, but defendant disputes that it was a “bonus.” Defendant claims that plaintiff owes 50
per cent of total profit for all three years under the employment agreement. This position is not
consistent with Invoice Two, which demanded only 15 per cent of total profit for the base year and
three per cent of total profit for Option Years One and Two.
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contracts that involve access to classified information—including the contracts that are the subject
of this dispute—or bid on such solicitations in the future.
In March of 2024, defendant mailed to plaintiff Amended Invoices Two and Three. The
Amended Invoices demanded the same unquantified categories of payment but also threatened to
report the overdue invoices under the Security Executive Agent Directive 3 (“SecEA Directive”),
and possibly cause plaintiff to lose its national security eligibility.
II.
Allegations In Notice Of Removal And Counterclaim
Defendant’s notice of removal alleges that plaintiff seeks injunctive relief that could exceed
a valuation of $75,000, and that hundreds of thousands of dollars of debts and compensation are
at issue. See Notice Of Removal (Doc. #1). In support, defendant states that plaintiff paid the
LLC more than $820,000 between October of 2020 and June of 2022. Defendant does not show
how these past payments are relevant to the current amount in controversy or specifically state the
amount that it is seeking.
Defendant has filed a counterclaim for breach of contract, unjust enrichment and
promissory estoppel, which alleges that plaintiff agreed to pay the LLC 50 per cent of its total
profits and that it has been harmed—and that plaintiff has wrongly benefitted—in an amount which
exceeds hundreds of thousands of dollars. The counterclaim, however, omits any reference to a
specific amount in controversy and does not allege a dollar figure that defendant is seeking. See
Answer And Affirmative And Other Defenses To Plaintiff’s Petition For Declaratory Judgment
And Counterclaims (Doc. #10) filed July 5, 2024.
III.
Affidavits Submitted By The Parties
The parties have presented evidence relating to the amount in controversy:
Defendant submits the declaration of Robert Mullis, which states that plaintiff asked the
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LLC to lead its audiovisual business line, orally offering to split the total profits 50-50 between
plaintiff and defendant. See Declaration Of Robert Mullis (Doc. #17-1) filed August 2, 2024.
Mullis agreed, and between October of 2020 and June of 2022, plaintiff paid the LLC more than
$400,000 relating to audiovisual work.
Mullis states that Invoices Two and Three are subject to the 50-50 profit-sharing
agreement, and defendant believes its 50 per cent share of total profit exceeds $300,000 because
the unpaid contract values are equivalent to the contract values that resulted in previously paid
profit distributions of more than $400,000.4
Mullis admits, however, that in an effort to
“compromise and simply finish any dealings” (including Invoices Two and Three, plus his
compensation and invoices for four future contracts), defendant offered to settle the disputes at a
“very steep discount” for $35,000. Id., ¶ 17.
Plaintiff submits the declaration of its president, Tom Houlehan, which states that plaintiff
realized approximately $737,950 in total profit for the base year of the MARFORRES project
(Invoice Two), and paid defendant $368,975 (50 per cent of base year profits) as a bonus. See
Tom Houlehan Declaration (Doc. #20-1) filed August 16, 2024. Houlehan states that on the
MARFORRES project, plaintiff realized $46,368.73 in profits in Option Year One and $43,470.57
in profits in Option Year Two, and that for the MARFORSOUTH project (Invoice Three), plaintiff
realized $19,615.36 in profits on equipment sales.5 Since plaintiff already paid defendant 50 per
Defendant apparently assumes that plaintiff’s profit on the two projects at issue is
comparable to plaintiff’s profit on previous projects that resulted in payments to defendant of more
than $400,000.
4
5
In its Reply In Support Of Motion To Remand (Doc. #20) filed August 16, 2024,
plaintiff states that it realized a total profit of $19,615.36 for the MARFORSOUTH project. It is
therefore unclear whether the $19,615.36 is the total profit on equipment sales, the overall total
profit or both for the MARFORSOUTH project (Invoice Three).
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cent of its total profit for the base year of the MARFORRES project,6 the parties only dispute
$109,454.66 in total profit for the two invoices.7
Because 50 per cent of $109,454.66 is
$54,727.33, plaintiff asserts that is the maximum amount in controversy.8
Analysis
Plaintiff requests a declaratory judgment that (1) it does not owe defendant further
compensation based on total profit on the MARFORRES project (Invoice Two);9 (2) plaintiff only
owes defendant $1,176.93 (six per cent of the $19,615.36 profit) on equipment sales for the
MARFORSOUTH project (Invoice Three); and (3) the disputed amounts in Invoices Two and
Three are not “debts” for purposes of the SecEA Directive. Defendant removed the case to federal
court based on diversity jurisdiction.
Plaintiff argues that the Court should remand this matter to state court because the amount
in controversy is less than $75,000. Because plaintiff contests defendant’s allegation of the amount
in controversy, the Court considers whether defendant has proven by a preponderance of the
6
The parties dispute whether the 50 per cent payment was a bonus to the LLC or was
payable under Mullis’ oral employment agreement with plaintiff. Defendant claims that under the
employment agreement, plaintiff agreed to pay the LLC 50 per cent of total profit.
Plaintiff’s profit for Option Year One of the MARFORRES contract ($46,368.73),
plus plaintiff’s profit for Option Year Two of the MARFORRES contract ($43,470.57), plus
plaintiff’s profit for the MARFORSOUTH project ($19,615.36) equals $109,454.66.
7
8
The parties dispute whether plaintiff owes defendant six percent of profit on
equipment sales or 50 per cent of total profit, so plaintiff is showing the calculation of 50 per cent
of total profit, which is the maximum amount at stake.
9
For the MARFORRES project, plaintiff alleges it owes defendant no further
compensation. Plaintiff paid defendant a “bonus of $368,975”—50 per cent of overall profit for
the base year—which greatly exceeds what plaintiff believes it owes defendant—six per cent of
profit on equipment sales for the project.
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evidence that the amount in controversy requirement is satisfied.10 See Dart, 574 U.S. at 88.
Defendant may prove jurisdictional facts by contentions, interrogatories or admissions in state
court, calculations from the complaint, reference to plaintiff’s informal estimates or settlement
demands, affidavits from experts or any other way. McPhail v. Deere & Co., 529 F.3d 947, 954
(10th Cir. 2008).
The invoices do not show that defendant is seeking any specific dollar amount.11 Mullis
states that (1) defendant is entitled to 50 per cent of the total profits on the MARFORRES and
MARFORSOUTH projects, and (2) he “reasonably believes [defendant’s] 50 percent share of the
profits at issue exceeds $300,000, if not much more, as the unpaid contract values are equivalent
to the contract values that resulted in the previously paid profit distributions” that exceeded
$400,000. Declaration Of Robert Mullis (Doc. #17-1), ¶ 16. Mullis, however, does not credibly
explain his belief that plaintiff owes defendant more than $300,000. Defendant made a settlement
offer of $35,000, which would be irrational if it had a good faith belief that it was entitled to
hundreds of thousands of dollars. This settlement offer included money items for which plaintiff
does not seek a declaratory judgment, such as payments under the employment agreement and
future payments under four additional contracts: AT&T, MFR SATOC, NASA PIKES and AFRC
YRRP. Accordingly, it appears that defendant’s estimate of $300,000 also includes money items
that are not at issue here.
On the other hand, plaintiff has provided evidence that the amount which defendant claims
Because plaintiff challenged defendant’s allegation and defendant failed to prove
by a preponderance of the evidence that the amount in controversy requirement is met, the Court
need not address whether the defendant plausibly alleged the amount in controversy.
10
Likewise, defendant’s allegations in its counterclaim and notice of removal do not
allege the amount it is seeking.
11
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on the two invoices at issue—50 per cent of plaintiff’s total profits—is less than $55,000. Tom
Houlehan Declaration (Doc. #20-1), ¶¶ 10, 14. Plaintiff states that it earned profits of $89,839.3012
on Invoice Two and $19,615.36 on Invoice Three, for a total of $109,454.66. Even if defendant
is entitled to 50 per cent of overall profits, defendant would only be entitled to $54,727.33.
Defendant provides no evidence which disputes Houlenan’s calculation.
The Court
recognizes that plaintiff attached Houlehan’s affidavit to its reply brief. Even so, defendant has
not sought leave to file a surreply to dispute the accuracy of the calculations. Moreover, even if
the Court disregarded Houlehan’s affidavit, defendant has not met its burden of proving by a
preponderance of the evidence that the amount in controversy exceeds $75,000.
Based on the current record, defendant’s theory of jurisdiction is not plausible or supported
by evidence. The invoices in question did not claim a 50-50 split in overall profits on either project
after the first year. Even if plaintiff paid defendant more than $820,000 in the 20 months before
the invoices at issue, that number means nothing. For one thing, it does not distinguish salary to
Mullis from amounts paid and/or payable to the LLC. Defendant has not submitted copies of the
relevant contract or documents on which prior payments were based. Defendant does not explain
“contract values that resulted in the previously paid profit distributions”—an omission which is
quite telling in light of plaintiff’s assertions that profits were front-loaded. Defendant does not
dispute plaintiff’s claim that it offered to settle all past and future disputes for $35,000. While not
dispositive, this evidence, casts serious doubt on the credibility of defendant’s position. It is far
from clear from the face of the petition, or the evidence of record, that defendant’s invoices are for
For the MARFORRES project, only plaintiff’s profits in Option Year One and
Option Year Two are disputed, because plaintiff already paid defendant 50 per cent of its total
profit for the base year.
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payment of any 50-50 profit-sharing agreement. The Court therefore sustains plaintiff’s motion
to remand.
IT IS THEREFORE ORDERED that Plaintiff’s Motion to Remand (Doc. #13) filed
July 12, 2024, is SUSTAINED. The Court directs the Clerk to remand this case to the District
Court of Wyandotte County, Kansas.
Dated this 24th day of October, 2024 at Kansas City, Kansas.
s/ Kathryn H. Vratil
KATHRYN H. VRATIL
United States District Judge
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