La Casa Homes of NC, Inc.

Filing 50

MEMORANDUM OPINION AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE signed by MAG/JUDGE L. PATRICK AULD on 11/9/11, Plaintiffs' Motion to Dismiss and Motion for Expedited Oral Argument (Docket Entry 40 ) be DENIED. (Law, Trina)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

BOBBY G. SLATE; SLATE MARKETING
INC.; SLATE RETAIL SYSTEMS, INC.;
LA CASA HOMES OF NC, INC.; LA CASA
REAL ESTATE DEVELOPMENT, LLC;
LA CASA REAL ESTATE & INVESTMENT
OF SC, LLC; LA CASA REAL ESTATE
AND INVESTMENT, LLC; THE COMMONS
AT ARCHDALE, INC.; PALMETTO SHORES
OF COLUMBIA, INC.; LA CASA HOMES,
INC.; and BLYTHEWOOD RESIDENTIAL
DEVELOPMENT, INC.,
Plaintiffs,
v.
RHONDA L. BYRD; JOSEPH BYRD;
CHARLES D. WASHINGTON; QUINCY
WASHINGTON; JOHN S. WASHINGTON;
B23 HOLDINGS, LLC; ASCOTT KELLY
GROUP OF NC, INC.; ASCOTT KELLY
HOSPITALITY GROUP, INC.; AK
HOLDINGS I, LLC; AK HOLDINGS II,
LLC; AK HOLDINGS SC I, LLC;
WINDSOR HOLDINGS I, LLC; ELLISON
& HOWELL PROPERTIES, INC.;
QUINTONELI DEVELOPMENT, INC.;
BYRD SERVICES, INC.; and SOUTHERN
COMMUNITY BANK AND TRUST,
Defendants.

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1:09CV852

MEMORANDUM OPINION AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
This

case

comes

before

the

undersigned

United

States

Magistrate Judge on Plaintiff’s Motion to Dismiss and Motion for
Expedited Oral Argument.

(Docket Entry 40.)

For the reasons that

follow, the Court should deny the instant motion.

Background
Plaintiff Bobby Slate and various Plaintiff entities commenced
this action in Forsyth County Superior Court, filing a Complaint
against

Defendants

Rhonda

L.

Byrd,

Joseph

Byrd,

Charles

D.

Washington, Quincy Washington, John S. Washington and B23 Holdings,
LLC alleging various claims under state law arising from Defendant
Rhonda

Byrd’s

“scheme

to

embezzle

funds

and

property

from

plaintiffs and convert them to her own use, benefit and enjoyment,
or

to

that

of

other

defendant Joseph Byrd.”

family

members,

especially

her

(See Docket Entry 1-2 at 3.)

husband

Plaintiffs

subsequently amended their Complaint to include Defendant Southern
Community Bank and Trust.

(See Docket Entry 3.)

In response to

Plaintiffs’ Amended Complaint, Defendants each filed answers (see
Docket Entries 4-10), in which Defendants Rhonda L. Byrd and
Charles

D.

Washington

included

counterclaims

for

intentional

infliction of emotional distress (see Docket Entry 6 at 4-5; Docket
Entry 8 at 4-5).
Plaintiffs thereafter filed a Second Amended Complaint in
Forsyth County Superior Court. (See Docket Entry 12.)

In said

Complaint, Plaintiffs, in addition to adding further defendants and
claims, alleged violations of 18 U.S.C. §§ 1341, 1343, 1344,
1962(a) and 1962(c) and sought relief under Section 1964(c) of the
Racketeer Influenced and Corrupt Organizations Act.
70-76.)

(See id., ¶¶

Defendants petitioned for removal to this Court under 28

U.S.C. § 1331 on the basis that the action arises under the laws of
the United States.

(See Docket Entry 1 at 3.)
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Plaintiffs timely

filed Plaintiffs’ Motion for Remand (Docket Entry 22), which was
denied by way of United States District Court Judge Thomas D.
Schroeder’s

adoption

of

the

Memorandum

Opinion,

Order,

and

Recommendation of United States Magistrate Judge Wallace W. Dixon
(see Docket Entries 38, 49).
Plaintiffs now “move the court for an order voluntarily
dismissing this action without prejudice and for expedited oral
argument,” subject to certain conditions.

(See Docket Entry 40.)

Said conditions include:
(1) “That this matter, when re-filed in state court, will
return to the same procedural and discovery posture occupied
on November 3, 2009, the day before the action was removed to
federal court” (id. at 2);
(2) “That all discovery, including documentary discovery and
depositions, produced as a part of this action may be used in
the re-filed action” (id.); and
(3) “That the receiver currently overseeing the personal and
business

activities

of

various

individual

and

corporate

defendants, pursuant to an order of the Superior Court of
Forsyth

County,

North

Carolina,

remain

in

place

pending

resolution of the re-filed action in North Carolina state
courts” (id.).
Defendants objected to Plaintiffs’ motion by way of Defendants
Rhonda and Joseph Byrd and Charles and John Washington’s Response
in Opposition to Plaintiffs’ Motion to Dismiss (Docket Entry 44)
and Southern Community Bank and Trust’s Response to Plaintiffs’
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Motion to Dismiss and Motion for Expedited Oral Argument (Docket
Entry 47).

Plaintiffs did not file a reply.

(See Docket Entries

dated Dec. 8, 2010, to present.)
Discussion
Defendants contend that, under Fed. R. Civ. P. 41(a)(2),
Plaintiffs’ instant Motion fails in light of their objection. (See
Docket Entry 44 at 1; Docket Entry 47 at 2.)

This argument has

merit.
Fed. R. Civ. P. 41(a)(2) provides in relevant part:
Except as provided in Rule 41(a)(1), an action may be
dismissed at the plaintiff’s request only by court order,
on terms that the court considers proper. If a defendant
has pleaded a counterclaim before being served with the
plaintiff’s motion to dismiss, the action may be
dismissed over the defendant’s objection only if the
counterclaim
can
remain
pending
for
independent
adjudication.
As the cross-referenced provisions of Fed. R. Civ. P. 41(a)(1)
afford no basis for dismissal on the instant facts, the success of
Plaintiffs’

instant

Motion

depends

on

whether

Defendants’

counterclaims “can remain pending for independent adjudication,”
Fed. R. Civ. P. 41(a)(2), if the Court grants the requested
dismissal.

This question, in turn, requires a determination

regarding whether Defendants’ counterclaims have an independent
jurisdictional basis.
Accordingly, the Court must first decide whether Defendants’
counterclaims are compulsory or permissive.

Professors Wright and

Miller have explained the effect of this determination on an
analysis under Fed. R. Civ. P. 41(a)(2) as follows:

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Ordinarily the defendant’s counterclaim can stand on its
own and dismissal can be granted on the plaintiff’s
claims
without
affecting
adjudication
of
the
counterclaim. If the counterclaim is compulsory, it is
settled
that
the
district
court
has
ancillary
jurisdiction,
which
is
now
called
supplemental
jurisdiction under Section 1367 of Title 28 of the United
States Code, to decide it even though the plaintiff’s
claim is dismissed. If the counterclaim is permissive, it
ordinarily will require independent grounds of subject
matter jurisdiction in order to remain pending. The rule
prohibits
dismissal
when
the
counterclaim
lacks
independent grounds of jurisdiction, such as when it is
a set-off, or in other unusual circumstances in which the
counterclaim would fail if the plaintiff’s claim were
dismissed.
9 Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure, § 2365 (3d ed.) (footnotes omitted).

A compulsory

counterclaim is described under Fed. R. Civ. P. 13(a)(1) as a claim
that “(A) arises out of the transaction or occurrence that is the
subject matter of the opposing party’s claim; and (B) does not
require adding another party over whom the court cannot acquire
jurisdiction.”

In

contrast,

a

permissive

counterclaim “that is not compulsory.”

counterclaim

is

a

Fed. R. Civ. P. 13(b).

While Defendants’ counterclaims involve similar parties, they
do not “arise[] out of the transaction or occurrence that is the
subject matter of [Plaintiffs’] claim” as required by Fed. R. Civ.
P. 13(a)(1) to qualify as compulsory. Plaintiffs’ claims relate to
events surrounding Rhonda Byrd’s “scheme to embezzle funds and
property from plaintiffs and convert them to her own use, benefit
and enjoyment, or to that of other family members, especially her
husband defendant Joseph Byrd.” (See Docket Entry 1-2 at 3; Docket
Entry

12,

¶

8.)

Defendants’

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counterclaims

are

related

to

Plaintiffs’ claims only in that they involve Defendants’ employment
with Plaintiffs.
Rhonda Byrd’s claim for intentional infliction of emotional
distress alleges that, “[d]uring the course of [her] employment
with Plaintiffs, Bobby G. Slate repeatedly threatened her with
physical violence, humiliation, degradation and ridicule” (Docket
Entry 6 at 4), that said “statements and actions were made with the
express intention of causing [her] humiliation, distress, anxiety
and fear” (id. at 5), and that she “experienced severe emotional
distress as a result of Plaintiff Bobby Slate’s actions for which
she sought medical attention” (id.). Similarly, Charles Washington
alleges

that,

Plaintiffs,

“[d]uring

Bobby

G.

the

Slate

course

of

repeatedly

[his]

employment

threatened

[him]

with
with

physical violence” (Docket Entry 8 at 4), that, “[o]n other
occasions, [Bobby Slate] would intentionally humiliate [him] in
front

of

other

employees

by

kissing,

grabbing,

pinching

and

touching [him] in inappropriate manners” (id.), that these actions
were “made with the express intention of causing [him] great
humiliation, distress, anxiety and fear” (id. at 5), and that he
“experience[d] severe emotional distress as a result of Plaintiff
Bobby Slate’s actions for which he has sought medical attention”
(id.).

Given

the

distinct

factual

Defendants’

counterclaims

as

Defendants’

counterclaims

qualify

circumstances

compared
as

compulsory, under Fed. R. Civ. P. 13.

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to

surrounding

Plaintiffs’

permissive,

claims,

rather

than

As Defendants’ permissive counterclaims would require an
independent basis of subject matter jurisdiction in order to permit
adjudication by the Court absent Plaintiffs’ claims, the Court must
determine whether said counterclaims meet the requirements of
federal question jurisdiction under 28 U.S.C. § 1331 or diversity
of citizenship jurisdiction under 28 U.S.C. § 1332.

They do not.

Claims for intentional infliction of emotional distress, as state
law claims, do not arise “under the Constitution, laws, or treaties
of the United States,”

28 U.S.C. § 1331.

Furthermore, on the

instant facts, complete diversity of citizenship does not exist as
required under 28 U.S.C. § 1332. (See Docket Entry 12.) Plaintiff
Bobby Slate is a resident of Lewisville, Forsyth County, NC, (see
Docket Entry 12, ¶ 1), while “Defendants Rhonda L. Byrd and Joseph
Byrd are residents of Davidson County and defendants Charles D.
Washington, Quincy Washington and John S. Washington are residents
of Forsyth County, NC” (see id., ¶ 4).
Conclusion
No independent jurisdictional basis exists to allow the Court
to adjudicate Defendants’ counterclaims separately from Plaintiffs’
claims.
request

As Defendants have objected to Plaintiffs’ dismissal
(see

Plaintiffs’

Docket

Motion

Entries

to

44,

Dismiss

47),

and

the

Motion

Court
for

should

deny

Expedited

Oral

Argument (Docket Entry 40), pursuant to Fed. R. Civ. P. 41(a)(2).

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IT IS THEREFORE RECOMMENDED that Plaintiffs’ Motion to Dismiss
and Motion for Expedited Oral Argument (Docket Entry 40) be DENIED.

/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge
November 9, 2011

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