CASS JV, LLC et al v. Host International, Inc. et al
Filing
23
MEMORANDUM OPINION AND ORDER by Judge Charles R. Simpson, III on 12/14/12 denying 9 Motion to Remand; denying 10 Motion for Attorney Fees; granting 15 Motion for Leave to file a sur-reply; granting 17 Motion for Leave to file a supplemental brief. cc:counsel (DAK)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
CASS JV, LLC, et al.
PLAINTIFFS
v.
CIVIL ACTION NO. 3:12-CV-359
HOST INTERNATIONAL, INC., et al.
DEFENDANTS
MEMORANDUM OPINION AND ORDER
Currently pending before the court are a motion by the plaintiffs to remand this action to the
Jefferson County, Kentucky, Circuit Court (DN 9); a motion by the plaintiffs for attorneys fees (DN
10); a motion by the defendants for leave to file a sur-reply (DN 15); and a motion by the defendants
for leave to file a supplemental brief (DN 17). Each of the four motions has been fully briefed, and
the motions are ripe for resolution.
On April 22, 2011, plaintiff CASS JV, LLC (“CASS”) filed this action in the Jefferson
County Circuit Court against defendants Host International, Inc. (“Host”) and GW Tinsley, LLC.
The dispute in this case concerns a joint venture partnership between Host and CASS to operate food
and beverage concession facilities at Louisville International Airport. According to the complaint,
CASS contributed significant additional capital to the partnership pursuant to an oral contract with
Host, in exchange for which Host agreed to bid on a new concession at the airport with CASS.
However, when the airport authority subsequently issued an invitation for proposals for a new
concession – a Chili’s restaurant – Host made a bid for it with a different joint venture partner, GW
Tinsley, LLC, even as Host remained in its existing partnership with CASS. CASS brought claims
against Host for breach of fiduciary duty, breach of contract, breach of oral contract, and unjust
enrichment. CASS also brought a claim against both Host and GW Tinsley, LLC for conspiracy.
Host and GW Tinsley, LLC filed answers to the initial complaint.
On May 21, 2012, over one year after CASS filed its initial complaint against Host and GW
Tinsley, LLC, the state court granted leave for CASS to file a supplemental and amended complaint,
which was deemed filed that day. The supplemental and amended complaint added Charles
Nathaniel Alexander (“Alexander”) as a plainitff and George William Tinsley, Sr. (“George
Tinsley”), the Tinsley Family Concessions, Inc. (“Tinsley Concessions”), and Host-TFC-RSL, LLC
(“Host-TFC-RSL”) as defendants, while removing as a defendant GW Tinsley, LLC. In addition to
reiterating the claims brought against Host in the original complaint, the plaintiffs brought the
following newly-added claims: violation of the Kentucky Civil Rights Act against Host; unjust
enrichment against Host-TFC-RSL; and conspiracy and aiding and abetting breach of fiduciary duty
against George Tinsley and Tinsley Concessions.
On June 28, 2012, the defendants removed the case to this court based on diversity
jurisdiction. The plaintiffs then filed a motion to remand the action, contending that the notice of
removal was untimely and that there was not complete diversity of citizenship at the time of
removal. The plaintiffs also filed a motion for attorney fees for improper removal of the case to this
court. The defendants filed a response to those motions and the plaintiffs filed a reply. The
defendants then moved for leave to file a sur-reply. Next, the defendants moved for leave to file a
supplemental brief in opposition to the plaintiffs’ remand motion. Initially, the court will grant the
latter two motions and accept the defendants’ sur-reply and supplemental brief. We thus turn to the
issue of the propriety of the defendants’ removal of the action to this court.
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Federal courts have original jurisdiction over matters between citizens of different states
where the amount in controversy exceeds $75,000, exclusive of interest and costs. 28 U.S.C. § 1332.
A civil case brought in state court may be removed by a defendant to federal court if the case could
have been brought in federal court originally. 28 U.S.C. § 1441(a). It is the burden of the defendant
seeking to remove the case to prove the requirements for diversity jurisdiction. Rogers v. Wal-Mart
Stores, Inc., 230 F.3d 868, 871 (6th Cir. 2000).
The court begins with the issue of the timeliness of the removal. 28 U.S.C. § 1446(b) states:
The notice of removal of a civil action or proceeding shall be filed within thirty days
after the receipt by the defendant, through service or otherwise, of a copy of the
initial pleading setting forth the claim for relief upon which such action or
proceeding is based, or within thirty days after the service of summons upon the
defendant if such initial pleading has then been filed in court and is not required to
be served on the defendant, whichever period is shorter.
If the case stated by the initial pleading is not removable, a notice of removal may
be filed within thirty days after receipt by the defendant, through service or
otherwise, of a copy of an amended pleading, motion, order or other paper from
which it may first be ascertained that the case is one which is or has become
removable, except that a case may not be removed on the basis of jurisdiction
conferred by section 1332 of this title more than 1 year after commencement of the
action.1
In Brierly v. Alusuisse Flexible Packaging, Inc., 184 F.3d 527 (6th Cir. 1999) the Sixth Circuit
examined both the thirty-day limitation and the one-year limitation contained in the statute. In that
case, the Sixth Circuit held “that a later-served defendant has 30 days from the date of service to
remove a case to federal district court, with the consent of the remaining defendants.” Brierly, 184
F.3d at 533. As to the one-year statute of limitations, the Sixth Circuit held that under the plain
1
28 U.S.C. § 1446 was amended effective January 6, 2012, but the amendments apply only
to cases commenced on or after the effective date. This case was commenced prior to that date.
Thus, the version of the statute quoted in the main text is applicable here.
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language of the statute, “the one-year limitation on removal of diversity cases applies only to those
that were not initially removable.” Id. at 535.
The holdings in Brierly are sufficient for this court to find that the defendants timely filed
the notice of removal. The initial complaint was filed by CASS against just two defendants: Host
and GW Tinsley, LLC. According to that complaint, CASS is a limited liability company. For
purposes of determining its citizenship, a limited liability company is treated like a partnership and
takes the citizenship of its members. Delay v. Rosenthal Collins Group, LLC, 585 F.3d 1003, 1005
(6th Cir. 2009). CASS’s sole member, Charles Alexander, is a citizen of Kentucky, making CASS
a citizen of Kentucky. GW Tinsley, LLC, is also a limited liability company; its member, George
Tinsley, is a citizen of Florida, meaning that GW Tinsley, LLC is a Florida citizen. Lastly, Host is
a corporation, which takes the citizenship of its state of incorporation and the state where it
maintains its principal place of business. 28 U.S.C. § 1332(c)(1). Host is a Delaware corporation and
its principal place of business is in Maryland. Thus, there was complete diversity at the time the
initial complaint was filed, since neither of the initial two defendants was a citizen of the same state
of which the sole plaintiff was a citizen. Accordingly, under the holding of Brierly that “the one-year
limitation on removal of diversity cases applies only to those that were not initially removable,” the
one-year limitation does not apply here. 184 F.3d at 535.
Nor does the thirty-day limitation preclude removal of this case. The supplemental and
amended complaint filed on May 21, 2012 added three defendants to the case: George Tinsley;
Tinsley Concessions; and Host-TFC-RSL. The notice of removal states that CASS served the
supplemental and amended complaint upon the defendants on May 29, 2012. Thirty days later, on
June 28, 2012, the defendants removed the case. Thus, while it would have been untimely for Host
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to remove since it had been named a defendant in the initial complaint, the remaining defendants
removed within thirty days of first being served with a complaint naming them as defendants.2
The plaintiffs argue that George Tinsley and Tinsley Concessions were not new parties that
had the ability to remove the case. The plaintiffs note that George Tinsley was the member of GW
Tinsley, LLC, which was named in the original complaint, as well as the President and Director of
Tinsley Concessions. The plaintiffs contend that those facts “effectively” rendered both George
Tinsley and Tinsley Concessions parties to the original litigation. However, KRS § 275.010(2)
provides, “A limited liability company is a legal entity distinct from its members.” Accordingly,
there is no basis for finding that when the plaintiffs served GW Tinsley, LLC with the initial
complaint naming it as a defendant, that action also made George Tinsley a party, much less that it
made a corporation of which George Tinsley was the President and Director a party. Instead, as
separate legal entities from GW Tinsley, LLC, George Tinsley and Tinsley Concessions were
entitled to remove within 30 days of being served with the supplemental and amended complaint
that, for the first time, named them as parties to this action.
Having found that the removal was timely, the court turns to the question of whether the
requirements of diversity jurisdiction have been met. Initially, the parties do not dispute that the
amount in controversy requirement is met. The parties also have no dispute that both plaintiffs –
CASS and Alexander – are citizens of Kentucky, that defendant Host is a citizen of both Delaware
and Maryland, that defendant George Tinsley is a citizen of Florida, and that Tinsley Concessions
is a citizen of Florida, since that is both its state of incorporation and the state where its principal
place of business is located. The focus of the dispute centers on defendant Host-TFC-RSL.
2
Although Host could not have timely removed, Brierly provides that Host could still
consent to removal by the other defendants. See Brierly, 184 F.3d at 533 n.3.
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In its notice of removal, the defendants stated that Host-TFC-RSL is a limited liability
company that has three members: Host, Tinsley Concessions, and RD Services, LLC (“RD
Services”). They further stated that RD Services has two members, Doris and Ryan Bridgman, both
of whom were citizens of Kentucky, making RD Services a citizen of Kentucky. Thus, the
defendants acknowledge in the notice of removal that Host-TFC-RSL is a citizen of Delaware and
Maryland (Host), Florida (Tinsley Concessions), and Kentucky (RD Services). Acknowledging that
Host-TFC-RSL’s citizenship in Kentucky would destroy diversity, the defendants argued in the
notice of removal that the plaintiffs had no colorable cause of action against Host-TFC-RSL, and
thus its citizenship should be ignored.
In their motion to remand, the plaintiffs disputed the notion that they had no colorable cause
of action against Host-TFC-RSL. After the briefing was completed on the motion to remand, the
defendants sought to file a supplemental brief. In the supplemental brief, the defendants stated that
it had come to their attention that they were mistaken in stating in the notice of removal that RD
Services was a member of Host-TFC-RSL. The defendants contended that, in light of the fact that
RD Services was not a member of Host-TFC-RSL, the latter was not actually a citizen of Kentucky,
and thus complete diversity between the plaintiffs and the defendants existed.
The court begins with the question of the membership of Host-TFC-RSL. With its
supplemental brief, Host-TFC-RSL submitted evidence which shows the following: in 2010, Host
won a contract to operate concessions at the Louisville International Airport. The contract required
that Host partner with a certified Airport Concession Disadvantaged Business Enterprise
(“ACDBE”). On August 12, 2010, Host, Tinsley Concessions, and RD Services entered into a
written agreement to form Host-TFC-RSL to operate the concessions pursuant to Host’s contract.
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Although Tinsley Concessions and RD Services were not yet certified as ACDBEs at the time HostTFC-RSL was formed, the agreement contemplated that both Tinsley Concessions and RD Services
would seek and maintain certification as ACDBEs. Because Host anticipated that RD Services
would obtain its ACDBE certification first, the agreement provided that Host would have a 65%
stake in Host-TFC-RSL and RD Services would own 35% of it, while, at the outset, Tinsley
Concessions would not have an ownership stake. Instead, Tinsley Concessions would have an option
to purchase an 18% stake from RD Services once it obtained ACDBE certification.
At the time that Host-TFC-RSL was to begin operating the concessions, RD Services had
not yet obtained its ACDBE certification, but Tinsley Concessions had. Therefore, on October 22,
2010, Host, Tinsley Concessions, and RD Services entered into an amended operating agreement.
That agreement provided that if RD Services was not certified as an ACDBE by November 1, 2010,
then Tinsley Concessions “shall obtain the [RD Services] ownership interest in the Company . . .
. Upon certification as an ACDBE, [RD Services] shall have the option to purchase [a 17%]
ownership interest from [Tinsley Concessions].” Thus, under the amended operating agreement, on
November 1, 2010, RD Services and Tinsley Concessions essentially switched places with each
other, so that Tinsley Concessions owned 35% of Host-TFC-RSL and RD Services could purchase
an ownership interest if it was certified as an ACDBE. However, according to an affidavit of Host’s
Vice President and Associate General Counsel, RD Services did not exercise its option to purchase
an ownership interest in Host-TFC-RSL, and thus has no ownership interest in Host-TFC-RSL.
In response to the new evidence concerning Host-TFC-RSL’s members, the plaintiffs
provided this court with a printout from the Kentucky Secretary of State’s website, which states that
RD Services – along with Host and Tinsley Concessions – is a member of Host-TFC-RSL. The
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defendants state in their reply papers that it was “an inadvertent oversight” in the filing of documents
with the Secretary of State that led to RD Services being listed as a member of Host-TFC-RSL. The
defendants submitted to the court a copy of Articles of Correction filed with the Secretary of State
on November 21, 2012, which states as follows:
The Annual Report filed on the 5th day of June, 2012 by the Company contains an
inaccuracy in the listing of the members of the Company, namely that RD Services
LLC was incorrectly identified as a member of the Company. The only members of
the Company are:
•
Tinsley Family Concessions, Inc.
•
Host International, Inc.
These Articles of Correction, in accordance with KRS § 14A.2-090(3), shall be
effective as of the filing date of the corrected Annual Report, that being June 5, 2012.
Additionally, the defendants submitted an updated printout from the Secretary of State’s website,
which no longer shows RD Services as a member of Host-TFC-RSL.
The court finds that the removing defendants have met their burden of showing that the
requirements of diversity jurisdiction, including the requirement of complete diversity between the
plaintiffs and the defendants, has been met. In particular, the evidence presented by the defendants
conclusively shows that, dating back at least to November 1, 2010, RD Services was not a member
of Host-TFC-RSL. Instead, RD Services simply had an option, which it never exercised, to purchase
an ownership interest in Host-TFC-RSL. Because RD Services was not a member of Host-TFC-RSL
at the time that the plaintiffs filed their amended complaint naming Host-TFC-RSL as a defendant
nor was it a member at the time of removal, its citizenship is irrelevant to the citizenship of HostTFC-RSL. And because Host-TFC-RSL is therefore not a citizen of Kentucky, there exists complete
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diversity of citizenship between the plaintiffs and the defendants.3 Thus, the plaintiffs’ motion to
remand will be denied, as will their motion for attorneys fees for improper removal.
For all the reasons stated above and the court being otherwise sufficiently advised, IT IS
HEREBY ORDERED AND ADJUDGED that: (1) the motion of the defendants for leave to file
a sur-reply (DN 15) is GRANTED; (2) the motion of the defendants for leave to file a supplemental
brief (DN 17) is GRANTED; (3) the motion of the plaintiffs to remand the action to state court (DN
9) is DENIED; and (4) the motion of the plaintiffs for attorneys fees (DN 10) is DENIED.
December 14, 2012
3
Because the court has found that complete diversity of citizenship exists even if Host-TFCRSL is a named defendant, it does not consider the defendants’ alternative argument that Host-TFCRSL was frauduletly joined.
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