Derby Capital, LLC et al v. Trinity HR Services, LLC et al

Filing 59

MEMORANDUM OPINION & ORDER granting 47 Motion to Dismiss for Lack of Jurisdiction. Signed by Senior Judge Thomas B. Russell on 8/20/2013. cc:counsel (KJA)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
LOUISVILLE DIVISION
CIVIL ACTION NO. 3:12-CV-00850
DERBY CAPITAL, LLC, et al.

Plaintiffs

v.
TRINITY HR SERVICES, LLC, et al.

Defendants

MEMORANDUM OPINION AND ORDER
This matter is before the Court upon Defendant Trinity HR Services, LLC’s
(Trinity/Delaware) “Motion to Decline Supplemental Jurisdiction.” (Docket No. 47.)
Plaintiffs Derby Capital, LLC (Derby Capital), and Derby Capital JOB, LLC (Derby
JOB) (collectively “Plaintiffs”), have responded, (Docket No. 49), and Trinity/Delaware
has replied, (Docket No. 57). For the reasons that follow, Trinity/Delaware’s Motion
will be GRANTED, and Plaintiffs remaining claims will be DISMISSED without
prejudice.
BACKGROUND
Plaintiffs initially filed this action in this Court on December 21, 2012, (see
Docket No. 1), and thereafter filed a “First Amended and Verified Complaint”
(Amended Complaint) on February 12, 2012, (see Docket No. 26). In their ten-count
Amended Complaint, Plaintiffs alleged a total of nine counts against various
combinations of Defendants LEED HR, LLC, and Michael K. Schroering (collectively,
the “Schroering Defendants”), and Defendants Trinity/Delaware, Trinity HR, LLC,
Judson Wagenseller, Brandon Simmons, and Tiffany Simmons (collectively, the

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“Wagenseller Defendants”). Plaintiffs also alleged a claim in Count X against General
Employment Enterprises, Inc. (GEE), and an unnumbered claim against the United
States Securities and Exchange Commission (SEC). A more thorough background
summary of Plaintiffs’ various claims has been recited previously in the Court’s
Opinions at Docket Nos. 40, 42, and 43; in the interest of brevity, it will not be repeated
again here.
In separately entered Opinions, the Court previously granted GEE’s and the
SEC’s respective motions to dismiss, thereby dismissing those Defendants from this
action. (See Docket Nos. 40 & 42.) Thereafter, by Memorandum Opinion and Order of
June 7, 2013, the Court granted the Schroering Defendants’ Motion to Dismiss pursuant
to Fed. R. Civ. P. 12(b)(6). (Docket No. 43, at 55.) By that same Order, the Court
granted in part and denied in part the Wagenseller Defendants’ Motion to Dismiss,
thereby dismissing all of the Plaintiffs’ claims against these Defendants with the
exception of their state law breach-of-contract claims (Counts I & II of their Amended
Complaint) against Trinity/Delaware. (Docket No. 43, at 55.) Plaintiffs moved for
reconsideration of the Court’s June 7 Opinion, (Docket No. 46), and the Court denied
that motion.

Thus, at present, Plaintiffs are proceeding on two breach-of-contract

claims under Kentucky law against Defendant Trinity/Delaware.
In their Amended Complaint, Plaintiffs claimed federal question jurisdiction
under 28 U.S.C. § 1331 based on their RICO and federal securities fraud claims in
Counts VIII & IX. (Docket No. 26, at 15.) Plaintiffs also claimed supplemental
jurisdiction over their state law claims pursuant to 28 U.S.C. 1367(a). (Docket No. 26,
at 15.) Finally, Plaintiffs asserted that “[p]ursuant to 28 U.S.C. §1332, there is diversity
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of citizenship among the parties and the amount in controversy exceeds $75,000,
exclusive of interest and costs.” (Docket No. 26, at 15.)
Regarding the remaining parties to this action, Plaintiffs’ Amended Complaint
identified the two Plaintiff parties, Derby Capital and Derby JOB, as Kentucky limited
liability companies both having their principal place of business in Louisville,
Kentucky. (Docket No. 26, at 6-7.) Plaintiffs identified Trinity/Delaware as a Delaware
limited liability company also having its principal place of business in Louisville,
Kentucky. (Docket No. 26, at 7.) Plaintiffs averred the Defendants Brandon Simmons
and Tiffany Simmons were the comanagers of Trinity/Delaware and that both Mr. and
Mrs. Simmons were residents of Kentucky. (Docket No. 26, at 7-8.)
Trinity/Delaware now moves the Court, pursuant to Fed. R. Civ. P. 12(b)(1) and
28 U.S.C. § 1367(c), to decline to exercise supplemental jurisdiction over Plaintiffs’
remaining state law claims.
STANDARD
United States District Courts have original federal question jurisdiction “of all
civil actions arising under the Constitution, laws, or treaties of the United States.” 28
U.S.C. § 1331. District Courts also have original diversity jurisdiction over actions
where the amount in controversy exceeds $75,000, exclusive of interests and costs, and
is between citizens of different states. Id. § 1332(a)(1). In order to enjoy diversity
jurisdiction under § 1332, there must be complete diversity among the plaintiffs and
defendants—that is, “no plaintiff and no defendant are citizens of the same state.”
Jerome-Duncan, Inc. v. Auto-By-Tel, L.L.C., 176 F.3d 904, 907 (6th Cir. 1999).
Citizenship, for purposes of diversity, is determined by a person’s domicile. E.g.,
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Kaiser v. Loomis, 391 F.2d 1007, 1009 (6th Cir. 1968); Wilson v. PBI Bank, Inc., 2011
WL 1376709, at *2 (W.D. Ky. April 12, 2011). The citizenship of limited liability
companies is determined by the citizenship of their members, which means “a limited
liability company has the citizenship of each of its members.” Delay v. Rosenthal
Collins Grp., LLC, 585 F.3d 1003, 1005 (6th Cir. 2009).
In addition to federal question and diversity jurisdiction, district courts have
“supplemental jurisdiction over all other claims that are so related to claims in the
action within such original jurisdiction that they form part of the same case or
controversy.” 28 U.S.C. § 1367(a). Thus, a district court is granted jurisdiction to hear
causes of action arising under state law so long as those claims “form part of the same
case or controversy” giving rise to the court's federal question jurisdiction. Although
district courts are granted supplemental jurisdiction under § 1367(a), they may, in their
discretion, decline to exercise that jurisdiction for the reasons listed in § 1367(c).
Specifically, a district court may decline jurisdiction over a supplemental state law
claim where the court “has dismissed all claims over which it has original jurisdiction.”
Id. § 1367(c)(3). The Sixth Circuit instructs that “generally, ‘if the federal claims are
dismissed before trial . . . the state claims should be dismissed as well.’” Landefeld v.
Marion Gen. Hosp., Inc., 994 F.2d 1178, 1182 (6th Cir. 1993) (quoting Taylor v. First of
Am. Bank–Wayne, 973 F.2d 1284, 1287 (6th Cir. 1992)). When deciding whether to
decline jurisdiction under § 1367(c)(3), a district court must weigh several factors and
“should consider the interests of judicial economy and the avoidance of multiplicity of
litigation and balance those interests against needlessly deciding state law issues.” Id.
(citing Aschinger v. Columbus Showcase Co., 934 F.2d 1402, 1412 (6th Cir. 1991)). If a

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district court declines jurisdiction over a supplemental state law claim, it must dismiss
the case if it was originally brought as a federal action.
DISCUSSION
In the instant case, the Court has dismissed Plaintiffs’ claims giving rise to
federal question jurisdiction. Furthermore, it is clear to the Court that diversity does not
exist among the parties. The two members of Trinity/Delaware, Brandon and Tiffany
Simmons, are both citizens of Kentucky. Trinity/Delaware offers evidence that at least
four of the Plaintiff LLCs’ members are also citizens of Kentucky, (Docket No. 47-1), a
point which Plaintiffs do not contest in their Response, (see Docket No. 49). In fact,
Plaintiffs’ entire Response is devoted to convincing the Court why it should exercise its
discretionary supplemental jurisdiction over Plaintiffs’ remaining breach-of-contract
claims. (See Docket No. 49.) The Court declines Plaintiffs’ invitation to do so. It is
very early in this case. No discovery has been conducted, this matter is just now past
the motion to dismiss stage, and there has not been a substantial expenditure of time or
resources into developing the remaining state law claims. Because Plaintiffs’ federal
causes of action have been dismissed, and because the Court finds it lacks diversity
jurisdiction over the parties, pursuant to 28 U.S.C. § 1367(c)(3) the Court will decline to
exercise supplemental jurisdiction over the remaining state law claims and dismiss
those claims without prejudice. To do otherwise would cause this Court to needlessly
decide Kentucky state law issues best reserved for Kentucky courts.

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CONCLUSION
Having considered the parties’ respective arguments and being otherwise
sufficiently advised, for the foregoing reasons;
IT IS HEREBY ORDERED that Defendant Trinity/Delaware’s “Motion to
Decline Supplemental Jurisdiction,” (Docket No. 47), is GRANTED. Pursuant to 28
U.S.C. § 1367(c), the Court declines to exercise supplemental jurisdiction over
Plaintiffs’ remaining breach-of-contract claims in Counts I & II of their Amended
Complaint, and those claims are DISMISSED without prejudice.
IT IS SO ORDERED.
Date:

cc:

August 20, 2013

Counsel

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