Lotus Industries LLC et al v. Duggan et al
ORDER DECLINING to Exercise Supplemental Jurisdiction Over Detroit Development Authority's Counterclaims and Count VIII of Plaintiffs' Complaint. Signed by District Judge Laurie J. Michelson. (KJac)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
LOTUS INDUSTRIES LLC, et al.,
Case No. 16-14112
Honorable Laurie J. Michelson
Magistrate Judge Anthony P. Patti
MICHAEL DUGGAN, et al.,
ORDER DECLINING TO EXERCISE SUPPLEMENTAL JURISDICTION OVER
DETROIT DEVELOPMENT AUTHORITY’S COUNTERCLAIMS AND
COUNT VIII OF PLAINTIFFS’ COMPLAINT
Plaintiffs operate the Centre Park Restaurant and Bar in the Harmonie Park section of
downtown Detroit. Defendant Detroit Development Authority (“DDA”) is redeveloping this area
and sought development proposals. Plaintiffs say that DDA deemed their proposal untimely.
Plaintiffs then publicly complained about the bidding process. According to Plaintiffs,
Defendants retaliated by sending Detroit police to harass their patrons. Plaintiffs also believe that
Detroit’s mayor and police chief have singled out their restaurant because the owners are
African-American and most of the patrons are African American. Plaintiffs thus brought this
lawsuit asserting, among other claims, that Defendants retaliated against them in violation of the
First Amendment and treated them differently in violation of the Equal Protection Clause. (See
generally R. 31.)
DDA counterclaimed. Plaintiffs operate their restaurant pursuant to a lease agreement
with DDA. DDA claims that Plaintiffs have breached that lease by not paying rent, by selling too
much liquor, and by not allowing them to conduct an audit. (See generally R. 38.) The DDA has
brought a seven-count counterclaim against Plaintiffs. (R. 38.)
All seven of DDA’s claims arise under state law. And there is not complete diversity
among the parties in this case. So this Court would only have jurisdiction over DDA’s claims if
they are “so related to” Plaintiffs’ federal claims that “they form part of the same case or
controversy under Article III of the United States Constitution.” 28 U.S.C. § 1367(a).
It is not obvious that this is so. True, Plaintiffs allege that Defendants never attempted to
evict them for lease violations until after they filed this lawsuit. (R. 31, PID 373.) But Plaintiffs’
claims primarily arise from Defendants’ conduct during and after the bid process. This is not the
same factual bases that forms DDA’s counterclaims: DDA’s claims are based on whether
Plaintiffs sold too much liquor, failed to pay rent, or failed to comply with DDA’s audit attempt.
The Court thus has some concerns that it lacks the authority to adjudicate DDA’s counterclaims.
See Blakely v. United States, 276 F.3d 853, 861 (6th Cir. 2002) (“Claims form part of the same
case or controversy when they derive from a common nucleus of operative facts.” (internal
quotation marks omitted)).
But assuming this Court had power to adjudicate DDA’s claims, this Court would decline
to do so. “Section 1367 grants a district court broad discretion to decide whether to exercise
jurisdiction over state-law claims that are ‘so related to claims in the action within such original
jurisdiction that they form part of the same case or controversy.’” Gamel v. City of Cincinnati,
625 F.3d 949, 951 (6th Cir. 2010) (quoting 28 U.S.C. § 1367(a)); see also 28 U.S.C. § 1367(c)
(“The district courts may decline to exercise supplemental jurisdiction over a claim . . . if . . . in
exceptional circumstances, there are . . . compelling reasons for declining jurisdiction.”). “In
determining whether to retain jurisdiction over state-law claims, a district court should consider
and weigh several factors, including the values of judicial economy, convenience, fairness, and
comity.” Gamel, 625 F.3d at 951 (internal quotation marks omitted).
These factors favor dismissing DDA’s counterclaims. First, as discussed, there does not
seem to be significant overlap in the facts underlying Plaintiffs’ claims and the facts underlying
DDA’s claims. And the legal theories do not much overlap: Plaintiffs’ claims are primarily based
on retaliation and disparate treatment under the Constitution while DDA’s claims are based on
contract language. Further, there is (as a result of today’s remand) a state court lawsuit where
DDA has asserted that Plaintiffs have violated terms of the lease. Plaintiffs and DDA
acknowledge that the claims asserted in the state case are the same as those asserted in the
counterclaim in this case (as well as Count VIII of the First Amended Complaint). See Complaint
(R. 1) and Show Cause Response (R. 5), City of Detroit Downtown Development Authority v.
Lotus Industries, LLC, No. 17-12148 (E.D. Mich. filed June 27, 2017). That case must be in state
court—it cannot be removed and consolidated with this case. As such, if this Court were to
exercise supplemental jurisdiction over DDA’s counterclaims, there would be parallel state and
federal litigation over the very same issues. This is not efficient for the parties or the courts.
Accordingly, the Court DISMISSES WITHOUT PREJUDICE DDA’s counterclaims. It
follows that this Court DENIES AS MOOT DDA’s motion for a temporary restraining order. (R.
47, 48, 50.) It also follows that this Court will not resolve any issues arising out of DDA’s
counterclaims (e.g., the production of discovery related to those counterclaims).
In addition, the Court DISMISSES WITHOUT PREJUDICE Count VIII of Plaintiffs’
First Amended Complaint, as that claim is essentially a mirror image of DDA’s counterclaims
(Plaintiffs seek a declaration that Plaintiffs did not breach the lease). It follows that this Court
will not resolve any issues arising out of Count VIII (e.g., the production of discovery related to
s/Laurie J. Michelson
LAURIE J. MICHELSON
U.S. DISTRICT JUDGE
Dated: July 19, 2017
CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing document was served upon counsel of record
and any unrepresented parties via the Court=s ECF System to their respective email or First Class
U.S. mail addresses disclosed on the Notice of Electronic Filing on July 19, 2017.
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