NutriQuest, LLC v. AmeriAsia Import LLC et al
Filing
269
ORDER ACCEPTING REPORT AND RECOMMENDATION 191 . Based on the foregoing, and on all the files, records, and proceedings herein, the Court OVERRULES Plaintiff's objections 198 , and the Report and Recommendation 191 is ACCEPTED. IT IS HEREBY ORDRERED THAT Plaintiff's Motion for Order Holding Defendants in Contempt 128 is DENIED. (Written Opinion) Signed by Judge Nancy E. Brasel on 2/4/2019. (KMW)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
NUTRIQUEST, LLC,
Plaintiff,
v.
AMERIASIA IMPORTS LLC; YING LI,
a/k/a OLIVIA LI; YANBIN SHEN;
PROFOUND SOLUTIONS, INC.; and
JENNA XU,
Defendants.
Case No. 18‐CV‐390 (NEB/KMM)
ORDER ON REPORT AND
RECOMMENDATION
This matter is before the Court on Plaintiff NutriQuest LLC’s Motion for Order
Holding Defendants in Contempt [ECF No. 128], which alleges that the Defendants
AmeriAsia Imports LLC, Ying Li, Yabin Shen, Profound Solutions, Inc., and Jenna Xu
violated the terms of the Rice County District Court’s Order Modifying Temporary
Restraining Order [ECF No. 12] issued prior to this case’s removal to federal court. [ECF
No. 130.] In a Report and Recommendation dated October 17, 2018, United States
Magistrate Judge Katherine Menendez1 recommended the Court deny the motion
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Plaintiff Nutriquest LLC, in its Objections to the R&R, inaccurately refers to Magistrate Judge
Menendez as “the Magistrate” or “Magistrate Menendez.” (See, e.g., ECF No. 198 at 2). The
Court takes this opportunity to remind counsel that under the Judicial Improvements Act of
1990, Pub. L. No. 101‐650, 104 Stat. 5089 (1990), a magistrate judge’s proper title is that of
United States Magistrate Judge, rather than simply “magistrate.” See Ruth Dapper, A Judge by
Any Other Name? Mistitling of the United States Magistrate Judge, 9 FED. CTS. L. REV. (Fall
2015).
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because the temporary restraining order (“TRO”) had expired prior to the alleged
violation. [ECF No. 191.] The Plaintiff objected to the R&R. [ECF No. 198.] For the reasons
set forth below, the Court overrules the Plaintiff’s objections, accepts the R&R, and denies
the Motion for Order Holding Defendants in Contempt.
BACKGROUND
In October 2017, the Plaintiff sued the Defendants for tortious interference in Rice
County District Court, claiming the Defendants interfered with its exclusive supply
contracts for an ingredient used in patented animal‐feed technology [ECF No. 2 ¶¶ 42–
47.] The Plaintiff also sought an ex parte TRO, which the state court granted on October
26, 2017, preventing the Defendants from interfering with their supply contracts and
selling, moving, or otherwise disposing of the ingredient. [ECF No. 4 at 5.]
The Rice County court then held an evidentiary hearing on November 9, 2017 to
determine whether to extend the TRO and issue a preliminary injunction. (Id.) At the
conclusion of testimony that day, the court left the TRO in place and continued the
evidentiary hearing to November 30, 2017 to allow for more testimony. [ECF No. 143
(“11/9 Tr.”) at 105:5–20.] At the continued hearing on November 30, the court heard
additional testimony [ECF No. 144 (“11/30 Tr.”)] and decided to modify the terms of the
TRO. [ECF No. 12.] It dissolved a portion of the TRO with respect to one container of the
ingredient but held “[t]he remaining provisions of the TRO remain in effect until further
Order of this Court.” (Id. at 2–3.)
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Before the court issued any subsequent orders, however, the Defendants removed
this case to federal court, filing a Notice of Removal on February 9, 2018. [ECF No. 1.]
Plaintiff now alleges that in June 2018, it learned the Defendants had violated the state
court TRO. [ECF No. 130 at 5–6.] In July 2018, Plaintiff filed this Motion for Order Holding
Defendants in Contempt, asking the Court to require the Defendants to pay the cost of
bringing the motion along with other sanctions. [ECF No. 128.] The Defendants do not
deny moving or selling the ingredient in violation of the state court’s order, but rather
contend the TRO expired in February 2018 when the case was removed. [ECF No. 140 at
4.] Magistrate Judge Katherine M. Menendez issued a Report and Recommendation
recommending the Court dismiss the Motion for Order Holding Defendants in Contempt
[ECF No. 191], and Plaintiff objected. [ECF No. 198.]
ANALYSIS
Plaintiff argues that the R&R improperly recommends that the state court TRO
expired after this case was removed to federal court. If a party objects to a magistrate
judge’s report and recommendation, the Court “shall make a de novo determination of
those portions of the report or specified proposed findings or recommendations to which
objection is made.” 28 U.S.C. § 636(b)(1). In this case, Plaintiff must demonstrate that the
Defendants violated a court order. “A party seeking civil contempt bears the initial
burden of proving, by clear and convincing evidence, that the alleged contemnors
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violated a court order.” Chicago Truck Drivers v. Bhd. Labor Leasing, 207 F.3d 500, 505 (8th
Cir. 2000) (citation omitted).
When an action is removed to federal court, “[a]ll injunctions, orders, and other
proceedings had in such action prior to its removal shall remain in full force and effect
until dissolved or modified by the district court.” 28 U.S.C. § 1450. In Granny Goose Foods,
Inc. v. Brotherhood of Teamsters & Auto Truck Drivers Local No. 70 of Alameda County, the
United States Supreme Court considered how long a state TRO may last under § 1450
once a case is removed to federal court. The Court held:
An ex parte temporary restraining order issued by a state court
prior to removal remains in force after removal no longer than
it would have remained in effect under state law, but in no
event does the order remain in force longer than the time
limitations imposed by Rule 65(b), measured from the date of
removal.
415 U.S. 423, 439–40 (1974). Thus, while TROs in Minnesota state court may remain in
effect until the parties have a hearing on a preliminary injunction, see Minn. R. Civ. P.
65.01, TROs in federal court expire 14 days after removal. Fed. R. Civ. P. 65(b)(2).
Plaintiff argues that the state court’s December 1, 2017 order extending and
modifying the TRO is not subject to the time limitations in Rule 65(b)(2) and Granny Goose
because the December 1 order was issued after notice, a hearing, and a full opportunity
to be heard on the merits, and thus should be treated as a preliminary injunction in federal
court. In doing so, however, Plaintiff mischaracterizes the nature of order at issue in this
case—the original ex parte TRO issued on October 26, 2017. [See ECF No. 4 at 4 (noting
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“Petitioner has adequately demonstrated the need for an ex parte Temporary Restraining
Order per Rule 65.01.”).] That order was issued without notice or a hearing and thus falls
squarely under the Court’s ruling in Granny Goose. The December 1 order at issue here
merely dissolved one of the restrictions and preserved the status quo on the remaining
restrictions until the court could issue a preliminary injunction order. [ECF No. 12.] The
December 1 order did nothing to convert the TRO into a preliminary injunction. Because
the order at issue is still an ex parte TRO, it is clearly subject to the time limitations in Rule
65(b) and the Court’s precedent in Granny Goose.
Closer analysis on the full record supports this conclusion. The state court
definitively considered the December 1, 2017 order to be a TRO. The order is captioned
as “Order Modifying Temporary Restraining Order,” and included no new findings of
fact or conclusions of law. [ECF No. 12] It provided no additional analysis of the
applicable law regarding preliminary injunctions in Minnesota. See Dahlberg Bros., Inc. v.
Ford Motor Co., 137 N.W.2d 314, 321–22 (Minn. 1965). Moreover, the state court judge
made comments during the November 30, 2017 hearing to indicate he was extending and
modifying the ex parte TRO order before ordering an additional briefing schedule. [11/30
Tr. at 44:20–45:15.] The state court thus clearly intended the December 1, 2017 order to
modify the existing ex parte TRO, not to convert it to a preliminary injunction. As an “ex
parte temporary restraining order issued by a state court prior to removal,” Plaintiff’s
TRO must not “remain in force longer than the time limitations imposed by Rule 65(b).”
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Granny Goose, 415 U.S. at 439–40. Therefore, the TRO expired 14 days after removal—long
before the alleged violation.
This conclusion is buttressed by persuasive reasoning in cases where courts have
applied Rule 65(b)(2) and Granny Goose to TROs issued even with some notice prior to
removal. See, e.g. Rural Media Grp., Inc. v. Performance One Media, LLC, No. 8:09CV447,
2010 WL 273979, at *2–3 (D. Neb. Jan. 13, 2010) (holding that a state TRO remained a TRO
in federal court despite notice to the parties); Carrabus v. Schneider, 111 F. Supp. 2d 204,
210 (E.D.N.Y 2000) (“[T]here is no reason to believe that a state court TRO issued on
notice, and in anticipation of a preliminary injunction hearing, is exempt upon removal
to the federal forum from the Rule 65 time limitation that clearly does govern an ex parte
TRO in the same circumstances.”). See also, Chicago United Indus., Ltd. v. City of Chicago,
445 F.3d 940, 946 (7th Cir. 2006) (“The proper interpretation of the ‘without notice’
language in Rule 65(b) is that the rule imposes additional restrictions on temporary
restraining orders issued without notice, but imposes the 20‐day limit on all TROs.”)
(emphasis in original). While not binding on this court, the reasoning of these cases is
persuasive. When a state court issues a TRO (and not a preliminary injunction), it would
defy logic to give that order a significantly longer lifespan in federal court simply because
the parties received some notice.
Plaintiff argues this case is distinguishable from the cases cited in the R&R because
in those cases, the defendants received informal notice shortly before the courts issued
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the state orders, while here, the Defendants received formal notice and a hearing. Plaintiff
provides no analysis as to why the degree of notice affects the application of Granny Goose
to this case. In fact, a closer look at the Supreme Court’s reasoning suggests the outcome
should be the opposite. The Court in Granny Goose noted that “the judicial contempt
power is a potent weapon. When it is founded upon a decree too vague to be understood,
it can be a deadly one.” 415 U.S. at 444 (citation omitted). Further, “[i]t would be
inconsistent with [that] basic principle to countenance procedures whereby parties
against whom an injunction is directed are left to guess about its intended duration.” Id.
Given the Court’s concern about creating predictable outcomes in this area, this Court
will not draw a distinction between degrees of notice necessary to preclude Rule 65(b)(2)
from applying to a state TRO upon removal in this case.
This Court must make sure there is a clear violation of a court order before
deploying the “potent weapon” of its contempt power. Id. (citation omitted). Courts
should not hold a party in contempt when the underlying order was “unclear or
insufficiently specific to guide that personʹs conduct.” C. Line, Inc. v. City of Davenport, 957
F. Supp. 2d 1012, 1030 (S.D. Iowa 2013). And, as noted in Granny Goose, confusion as to
the duration of the underlying order is a concern sufficient to give a court pause before
holding a party in contempt. 415 U.S. at 444. Here, the state court issued an ex parte TRO,
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which it extended until the preliminary injunction hearing.2 At best, Plaintiff’s arguments
that the state court issued a preliminary injunction serve only to illustrate that the state
court’s order was too unclear to guide the Defendants’ conduct. Without a clear violation
of a court order, this Court will refrain from using its contempt power in this case.
CONCLUSION
Based on the foregoing, and on all the files, records, and proceedings herein, the
Court OVERRULES Plaintiff’s objections [ECF No. 198], and the Report and
Recommendation [ECF No. 191] is ACCEPTED. IT IS HEREBY ORDRERED THAT
Plaintiff’s Motion for Order Holding Defendants in Contempt [ECF No. 128] is DENIED.
Dated: February 4, 2019
BY THE COURT:
s/Nancy E. Brasel
Nancy E. Brasel
United States District Judge
The Plaintiff did nothing upon removal to renew its request for a preliminary injunction
despite receiving the instruction from this Court on February 9, 2018, that “any motion
previously filed in state court must be refiled in compliance with the Federal Rules of
Civil Procedure and the Local Rules of this District,” [ECF No. 28], and despite knowing
the Defendants thought the December 1, 2017 order expired 14 days after removal. As the
R&R aptly noted, “[w]ith that knowledge, NutriQuest’s request for an order holding
AmeriAsia in contempt of court for selling the ingredient when it did rings hollow.”
(R&R at 9.)
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