Union Pacific Railroad Company v. Expert Management Service et al

Filing 26

MEMORANDUM AND ORDER that the Findings and Recommendation of Magistrate Judge F.A. Gossett (Filing No. 23 ) are adopted in their entirety. The Plaintiff's Motion to Amend its Complaint and for Remand (Filing No. 12 ) is granted. The Defendant s' Objection to Magistrate Judge Gossett's Findings and Recommendation (Filing No. 24 ) is overruled. The Plaintiff's Fifth Cause of Action is dismissed without prejudice. This action is remanded to the District Court of Douglas County, Nebraska, for further proceedings. Ordered by Chief Judge Laurie Smith Camp. (Copies mailed as directed) (LAC)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA

UNION PACIFIC RAILROAD COMPANY,
Plaintiff,

8:15CV194

vs.
EXPERT MANAGEMENT SERVICE, DAN
KLAUS, CHAD ARCHIBALD, AND
CHARLES PASQUALE,

MEMORANDUM
AND ORDER

Defendants.

This matter is before the Court on the Findings and Recommendation issued by
Magistrate Judge F.A. Gossett (Filing No. 23) and Plaintiff Union Pacific Railroad
Company’s (“Union Pacific”) Motion to Amend its Complaint and for Remand (Filing No.
12). Defendants Expert Management Service (“EMS”) and Chad Archibald (collectively
“Defendants”) object to the Findings and Recommendation (Filing No. 24), incorporating
their previously filed brief in opposition to the Motion to Remand (Filing No. 20). For the
reasons set forth below, the Findings and Recommendation will be adopted in their
entirety, Plaintiff’s Motion to Amend its Complaint and for Remand will be granted, and
Defendants’ Objection will be overruled.
BACKGROUND
EMS is a former vendor of Union Pacific that provided various products and
services. Union Pacific alleges that it cancelled its contract with EMS upon discovering
that Defendants had engaged in improper billing activity.
Judge Gossett made the following findings of fact, which are uncontested by the
parties. On August 14, 2013, Union Pacific filed this action against EMS, Dan Klaus,

Chad Archibald, Washington Liftruck, and Nancy Smith in the District Court of Douglas
County, Nebraska. (Filing No. 23 at 1.) Union Pacific’s complaint asserted state law
claims for fraudulent concealment, fraudulent misrepresentation, civil conspiracy, and
an accounting.
motions.

(Id.)

The state court held hearings and ruled on multiple pre-trial

(Id. at 3.)

On March 24, 2014, Union Pacific filed a Second Amended

Complaint, dismissing Defendants Washington Liftruck and Nancy Smith from the
action. (Id. at 1.) Thereafter, the parties commenced discovery, and a trial date was set
for November 30, 2015. (Id.)
On May, 28, 2015, Union Pacific filed its Third Amended Complaint. (Id.) This
complaint added Charles Pasquale as a defendant, and asserted a claim under the
Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c).
Based on the new RICO claim, Defendants invoked this Court’s federal jurisdiction, and
removed the suit to this Court on June, 1, 2015. (Filing No. 1.)
Union Pacific now seeks leave to dismiss its RICO claim by filing an amended
complaint. (Filing No. 23 at 2.) Union Pacific argues that following dismissal of the
RICO claim, this Court should remand this matter to state court for adjudication of the
remaining state law claims. (Filing No. 12 at ¶¶ 7–8.) Defendants oppose the Motion to
Remand, arguing that Union Pacific is engaging in “blatant forum shopping” by
removing the federal claim from its complaint, and seeking remand to state court. (See
Filing Nos. 20; 24.) Defendants urge this Court to exercise supplemental jurisdiction
over the state claims.

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STANDARD OF REVIEW
Under 28 U.S.C. § 636(b)(1)(C), the Court must make a de novo determination of
those portions of the findings and recommendation to which Defendants have objected.
The Court may accept, reject, modify, in whole or in part, the Magistrate Judge’s
findings or recommendation. 28 U.S.C. § 636(b)(1).
DISCUSSION
I.

Dismissal of Plaintiff’s RICO Claim
Union Pacific seeks to amend its complaint to dismiss its claim for violations
under RICO. Defendants do not object to the dismissal of the RICO claim through the
filing of an amended complaint.

“[A] party may amend its pleading only with the

opposing party’s written consent or with the court’s leave. The court should freely give
leave when justice so requires.” Fed. R. Civ. P. 15(a)(2). Leave to amend is freely
granted, unless it would prejudice the non-moving party, or if the amendment would be
futile. Friedman v. Farmer, 788 F.3d 862, 869 (8th Cir. 2015) (quoting Hammer v. City
of Osage Beach, 318 F.3d 832, 844 (8th Cir.2003) (quotation omitted)). In the present
case, there is no indication that granting Union Pacific’s leave to amend will result in
undue prejudice to Defendants, or that the amendment would be futile. Therefore,
Union Pacific will be permitted to dismiss its federal claim through the filing of an
amended complaint.

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II.

Remand of Case to State Court
Defendants oppose Union Pacific’s motion to remand this case to state court.1

Amending a complaint after removal to dismiss the claims upon which a court’s federal
question jurisdiction was initially based does not defeat federal jurisdiction. Ching v.
Mitre Corp., 921 F.2d 11, 12 (1st Cir. 1990); see also Quinn v. Ocwen Federal Bank
FSB, 470 F.3d 1240, 1249 (8th Cir. 2006); Lindsey v. Dillard's, Inc., 306 F.3d 596, 598–
99 (8th Cir. 2002) (finding that a federal court retains jurisdiction over pendent state law
claims even after federal claims are dismissed).
Nevertheless, a district court may decline to exercise supplemental jurisdiction
when it “has dismissed all claims over which it has original jurisdiction.” 28 U.S.C.
§ 1367. “Whether to exercise supplemental jurisdiction over a remaining state law claim
is within the court's discretion; however, federal district courts generally should exercise
judicial restraint and avoid state law issues when possible because such claims are
more properly heard by state courts.” Demien Constr. Co. v. O'Fallon Fire Prot. Dist.,
72 F. Supp. 3d 967, 974 (E.D. Mo. 2014) (citing United Mine Workers of America v.
Gibbs, 383 U.S. 715 (1966); Condor Corp. v. City of St. Paul, 912 F.2d 215, 220 (8th
Cir. 1990)). In determining whether to exercise supplemental jurisdiction, a court should
consider judicial economy, convenience, fairness, comity, and whether the plaintiff has
attempted to manipulate the forum. Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 357
(1988). Still, “in the usual case in which all federal-law claims are eliminated before
trial, the balance of factors to be considered . . . will point toward declining to exercise
1

Union Pacific argues that Defendants’ objection fails to specify the particular parts of the
findings and recommendations to which the they object, and the legal basis of the objections as required
by the Court’s local rules. See NECivR 72.2(a). The Court concludes that Defendants’ objection, in
conjunction with their previously filed brief (see Filing No. 20), satisfy NECivR 72.2(a).

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jurisdiction over the remaining state-law claims.” Id. at 350 n.7; see also Streambend
Props. II, LLC v. Ivy Tower Minneapolis, LLC, 781 F.3d 1003, 1016–17 (8th Cir. 2015)
(quoting In re Canadian Import Antitrust Litig., 470 F3d 785, 792 (8th Cir. 2006)).”
In the present case, the balance of factors favors declining supplemental
jurisdiction over Union Pacific’s remaining state law claims.
Judicial economy favors remand. This case was on file in state court for over a
year and a half, during which time the parties conducted extensive discovery and the
state court ruled on multiple motions. In contrast, the case has only been pending in
federal court approximately four months and has had little activity since its removal.
Other than the present motion, there are no motions pending and the Court has not
addressed other substantive issues.
Though convenience and fairness considerations do not heavily favor either
forum, comity also favors remand.

Generally, it is preferable for a state court to

interpret issues of state law, because the state has an interest in enforcing its own law.
Carnegie-Mellon Univ., 484 U.S. at 352; Quinn v. BJC Health Sys., 364 F. Supp. 2d
1046, 1056 (E.D. Mo. 2005). The remaining claims all involve state law. Although
Defendants note that this case involves no novel issues of state law (Filing No. 20 at 4),
this does not warrant deviation from the general rule that state courts should decide
matters arising under state law.

See United Mine Workers, 383 U.S. at 726 (“[I]f

[considerations of judicial economy, convenience and fairness] are not present a federal
court should hesitate to exercise jurisdiction over state claims.”).
Defendants also contend that Union Pacific seeks to amend its complaint merely
to return to its preferred forum. “[The Eighth Circuit] ha[s] repeatedly stated that it is
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inappropriate for a plaintiff to use voluntary dismissal as an avenue for seeking a more
favorable forum.” Thatcher v. Hanover Ins. Grp., Inc., 659 F.3d 1212, 1214 (8th Cir.
2011) (citing Cahalan v. Rohan, 423 F.3d 815, 818 (8th Cir. 2005)). However, this
Court agrees with Judge Gossett’s finding that there is no indication that Union Pacific is
seeking to manipulate the choice of forum. (See Filing No. 23 at 3.) Rather, Union
Pacific notes that remand will almost certainly allow the case to proceed more
expeditiously, both because dismissal of the RICO claim will eliminate the need for
additional discovery and motions, and because the state court has already dealt with
the case extensively. (Filing No. 13 at 5.) Weighing these factors, the Court concludes
that remand to state court is appropriate.
CONCLUSION
Under 28 U.S.C. ' 636(b)(1)(C), the Court has conducted a de novo review of the
record and adopts the Findings and Recommendation in their entirety. Accordingly,
IT IS ORDERED:
1. The Findings and Recommendation of Magistrate Judge F.A. Gossett (Filing
No. 23) are adopted in their entirety;
2. The Plaintiff’s Motion to Amend its Complaint and for Remand (Filing No. 12)
is granted;
3. The Defendants’ Objection to Magistrate Judge Gossett’s Findings and
Recommendation (Filing No. 24) is overruled;
4. The Plaintiff’s Fifth Cause of Action is dismissed without prejudice; and
5. This action is remanded to the District Court of Douglas County, Nebraska,
for further proceedings.

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Dated this 26th day of October, 2015
BY THE COURT:
s/Laurie Smith Camp
Chief United States District Judge

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