Big Red Box LLC v. Square Inc et al

Filing 215

ORDER AND OPINION finding the court lacks subject matter jurisdiction and therefore REMANDS Plaintiff's conversion claim against Tye Grisel to state court. As a result, the court declines to rule on Tye Grisel's [1 63] Motion to Dismiss which shall be a matter for the state court. The court affirms the Magistrate Judge's reasoning in the 178 Report and Recommendation but declines to rule on the Report since Plaintiff's subsequent dismissal of all but one of the defendants left the court without subject matter jurisdiction. Signed by Honorable J. Michelle Childs on 9/16/2020. (lbak)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION
Big Red Box, LLC,

)
)
Plaintiff,
)
)
v.
)
)
William Tye Grisel,
)
)
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Defendant.
)
___________________________________ )

Civil Action No.: 3:18-cv-00758-JMC

ORDER AND OPINION

This matter is before the court pursuant to Defendant William Tye Grisel’s (“Tye Grisel”)
Motion to Dismiss (ECF No. 163). For the reasons set forth below, the court finds that it lacks
subject matter jurisdiction over the case and therefore declines to rule on Tye Grisel’s Motion to
Dismiss.
I.

RELEVANT BACKGROUND

On March 19, 2018, Plaintiff Big Red Box, LLC (“Plaintiff”) filed this case against
Defendants Square Inc. (“Square”), American Express Company (“AMEX”), Joe Grisel, G5
Marketing Solutions, LLC (“G5”), John Doe Bank, and Tye Grisel, alleging claims for aiding and
abetting, conversion, civil conspiracy, unfair trade practices, and violation of the Racketeer
Influenced and Corrupt Organizations “RICO” Act, 18 U.S.C. §§ 1961-1968. (ECF No. 1.) The
Complaint alleged that Tye Grisel defrauded Plaintiff of at least $1,049,996.97 while working for
Plaintiff. (Id. at 2 ¶¶ 10-13.) It also contended that the other Defendants were complicit in the
fraud. (Id. ¶ 13.) Plaintiff originally asserted jurisdiction on the basis of federal question under

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As discussed infra, Plaintiff dismissed its claims against American Express Company, Branch
Banking & Trust Co., G5 Marketing Solutions, LLC, Square Inc., and Joe Grisel. (ECF Nos. 39,
141, 184, 210, 211.)
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28 U.S.C. § 1331 and violation of a federal commerce regulation under 28 U.S.C. § 1337. (Id. at
2 ¶ 9.)
Plaintiff subsequently filed its First Amended Complaint (ECF No. 18) on May 29, 2018.
It dismissed its claims against AMEX on August 8, 2018, and substituted Branch Banking & Trust
Co. (“BB&T”) for John Doe Bank on March 12, 2019. (ECF Nos. 39, 97.) Plaintiff then filed its
Second Amended Complaint (ECF No. 100) on March 19, 2019.
On August 7, 2019, Plaintiff filed its Third Amended Complaint against Defendants
Square, Joe Grisel, G5, BB&T, and Tye Grisel. (ECF Nos. 135, 149 (unredacted).) The Third
Amended Complaint asserted claims for:
1. Aiding and abetting breach of fiduciary duty against Square, BB&T, G5, and
Joe Grisel,
2. Conversion against Square, BB&T, G5, Joe Grisel, and Tye Grisel,
3. Money had and received against Square and BB&T,
4. Unjust enrichment against Square and BB&T,
5. Negligence against Square and BB&T, and
6. Unfair trade practices under S.C. Code Ann. § 39-5-10 (1971) against Square,
BB&T, and G5. (ECF No. 149 at 22-27 ¶¶ 110-149.)
In its Third Amended Complaint, Plaintiff continued to assert subject matter jurisdiction on the
basis of federal question and violation of a federal commerce regulation. (ECF No. 149 at 2 ¶ 10.)
Plaintiff later dismissed its claims against BB&T on August 26, 2019. (ECF No. 141.)
In response to Plaintiff’s Third Amended Complaint, Square filed a Motion to Dismiss
(ECF No. 155), Joe Grisel filed a Motion to Dismiss (ECF No. 162), and Tye Grisel filed a Motion
to Dismiss (ECF No. 163). The Magistrate Judge considered their Motions to Dismiss in a Report
and Recommendation (“Report”) filed on January 22, 2020. (ECF No. 178.) In the Report, the
Magistrate Judge recommended that this court grant in part and deny in part Square’s Motion to
Dismiss (ECF No. 155), grant in part and deny in part Joe Grisel’s Motion to Dismiss (ECF No.
162), and deny Tye Grisel’s Motion to Dismiss (ECF No. 163). (Id. at 2.) The Magistrate Judge
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recommended dismissing Plaintiff’s claims for aiding and abetting against Square and Joe Grisel
because the allegations in the Third Amended Complaint did not suggest the existence of a
fiduciary relationship between Tye Grisel and Plaintiff. (Id. at 14-20.) The Magistrate Judge also
suggested dismissing Plaintiff’s claims for conversion, negligence, and unfair trade practices
against Square. (Id. at 44.) She reasoned that Plaintiff failed to allege that Square improperly
retained funds, owed Plaintiff a duty, or had procedures that created a potential for repetition of
unfair and deceptive acts. (Id. at 22-25, 29-42.) In addition, the Magistrate Judge recommended
allowing Plaintiff’s claims for unjust enrichment against Square and conversion against Joe and
Tye Grisel to proceed. (Id. at 44.) She concluded that Plaintiff sufficiently alleged that Square
realized a benefit from Plaintiff and that Joe and Tye Grisel converted funds belonging to Plaintiff
without Plaintiff’s permission. (Id. at 21-22, 25-29.)
After the Magistrate Judge filed her Report, Plaintiff dismissed its claims against G5,
Square, and Joe Grisel. (ECF Nos. 184, 210, 211.) As a result, the court denied Square’s Motion
to Dismiss (ECF No. 155) and Joe Grisel’s Motion to Dismiss (ECF No. 162) as moot on
September 11, 2020. (ECF Nos. 212, 213.) Due to the dismissals, Plaintiff’s claim for conversion
against Tye Grisel is the only remaining claim in the case.
II.

LEGAL STANDARD

The Magistrate Judge’s Report is made in accordance with 28 U.S.C. § 636(b)(1) and Local
Civil Rule 73.02 for the District of South Carolina.

The Magistrate Judge makes only a

recommendation to this court, which has no presumptive weight. See Mathews v. Weber, 423 U.S.
261, 270-71 (1976). The responsibility to make a final determination remains with this court. Id.
at 271. The court reviews de novo only those portions of a Magistrate Judge’s Report and
Recommendation to which specific objections are filed and reviews those portions which are not

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objected to for clear error, including those portions to which only “general and conclusory”
objections have been made. See Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310, 315 (4th
Cir. 2005); Camby v. Davis, 718 F.2d 198, 200 (4th Cir. 1983); Orpiano v. Johnson, 687 F.2d 44,
47 (4th Cir. 1982).

The court may accept, reject, or modify, in whole or in part, the

recommendation of the Magistrate Judge or recommit the matter with instructions. See 28 U.S.C.
§ 636(b)(1).
Federal courts are courts of limited jurisdiction. Exxon Mobil Corp. v. Allapattah Servs.,
Inc., 545 U.S. 546, 552 (2005). Since there is no presumption that a federal court has jurisdiction,
a plaintiff must affirmatively allege facts providing the court with jurisdiction in the complaint.
Pinkley, Inc. v. City of Fredrick, Md., 191 F.3d 394, 399 (4th Cir. 1999); Fed. R. Civ. P. 8(a)
(complaint must provide “a short and plain statement of the grounds for the court’s jurisdiction”).
A court may consider whether it has subject matter jurisdiction on its own initiative at any stage
of litigation. Arbaugh v. Y&H Corp., 546 U.S. 500, 506 (2006); see also Brickwood Contractors,
Inc. v. Datanet Eng’g, Inc., 369 F.3d 385, 390 (4th Cir. 2004) (“[Q]uestions of subject-matter
jurisdiction may be raised at any point during the proceedings and may (or, more precisely, must)
be raised sua sponte by the court.”).
III.

ANALYSIS

The court finds that Plaintiff’s dismissal of the majority of its claims necessitates an inquiry
into the court’s subject matter jurisdiction.
A. Federal Question Jurisdiction
Federal question jurisdiction requires the plaintiff to show that the case is one “arising
under the Constitution, laws, or treaties of the United States.” § 1331. A case “aris[es] under”
federal law within the meaning of § 1331 if “a well-pleaded complaint establishes either that

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federal law creates the cause of action or that the plaintiff’s right to relief necessarily depends on
resolution of a substantial question of federal law.” Empire Healthchoice Assur., Inc. v. McVeigh,
547 U.S. 677, 690 (2006) (citing Franchise Tax Bd. of Cal. v. Construction Laborers Vacation
Trust for Southern Cal., 463 U.S. 1, 27-28 (1983)).
Federal question jurisdiction does not exist in this case because Plaintiff’s conversion claim
does not “aris[e]” under federal law. Conversion is a tort created by South Carolina law, not
federal law. See e.g., Bank of New York v. Sumter Cty., 691 S.E.2d 473, 479 (S.C. 2010). The
Third Amended Complaint also does not allege that Plaintiff’s right to relief hinges on the
resolution of a question of federal law. (ECF No. 149 at 23-24 ¶¶ 119-123.)
B. Diversity Jurisdiction
Diversity jurisdiction requires complete diversity of parties at the time the complaint is
filed and an amount in controversy in excess of $75,000. 28 U.S.C. § 1332(a); Athena Auto. Inc.
v. DiGregorio, 166 F.3d 288, 290 (4th Cir. 1999). Complete diversity exists when none of the
plaintiffs share citizenship with any of the defendants. Owens-Illinois, Inc. v. Meade, 186 F.3d
435, 440 (4th Cir. 1999) (citing Carden v. Arkoma Assocs., 494 U.S. 185, 187 (1990)). For
purposes of diversity, a limited liability company is a citizen of every state in which its members
are citizens. Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 121 (4th Cir. 2004). The
plaintiff bears the burden of establishing complete diversity. Hertz Corp. v. Friend, 559 U.S. 77,
96 (2010).
Complete diversity is not present in this case because Plaintiff and Tye Grisel are both
citizens of South Carolina. Plaintiff is a “limited liability company whose members and nerve
center are in Columbia, South Carolina” while Tye Grisel resides in Lexington, South Carolina.

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(ECF No. 149 at 1 ¶¶ 1, 3.) Due to the lack of complete diversity, diversity jurisdiction does not
exist in this case.
C. Federal Commerce Regulation Jurisdiction
Section 1337 provides that “district courts shall have original jurisdiction of any civil action
or proceeding arising under any Act of Congress regulating commerce or protecting trade and
commerce against restraints and monopolies[.]” § 1337. It does not support jurisdiction in this
case because conversion arises under state law, not an Act of Congress. See Bank of New York.,
691 S.E.2d at 479.
D. Supplemental Jurisdiction
A federal district court has supplemental jurisdiction over state claims that are “so related”
to claims under the court’s original jurisdiction “that they form part of the same case or
controversy[.]” 28 U.S.C. § 1367(a). However, a district court is not obligated to exercise its
supplemental jurisdiction. Under 28 U.S.C. § 1367(c)(3), a district court can decline to exercise
jurisdiction over a supplemental claim if it has dismissed all claims over which it had original
jurisdiction. Consequently, when a district court dismisses every claim over which it had original
jurisdiction, it can address the remaining pendent state law claims in three ways. The court can
(1) “dismiss the pendent state-law claims without prejudice”; (2) “remand the state-law claims to
the state court”; or (3) “decide the merits of the state-law claims.” Farlow v. Wachovia Bank of
N.C., N.A., 259 F.3d 309, 316-17 (4th Cir. 2001).
A district court has broad discretion in deciding whether to dismiss, remand, or retain a
case after relinquishing all claims over which it had original jurisdiction. See, e.g., United Mine
Workers of America v. Gibbs, 383 U.S. 715, 726 (1966) (stating that supplemental jurisdiction “is
a doctrine of discretion, not of plaintiff’s right”). In determining whether to retain, remand, or

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dismiss pendent state law claims, a district court should consider “the values of judicial economy,
convenience, fairness, and comity.” Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 n.7
(1988). “[I]n the usual case in which all federal-law claims are eliminated before trial, the balance
of factors to be considered under the pendent jurisdiction doctrine—judicial economy,
convenience, fairness, and comity—will point toward declining to exercise jurisdiction over the
remaining state-law claims.” Id. at 350.
Upon consideration of the record, the court observes that the values of judicial economy,
convenience, fairness, and comity weigh in favor of remanding Plaintiff’s conversion claim against
Tye Grisel. Since the case has not progressed past motions to dismiss and little discovery has been
taken, judicial resources would not be unduly duplicated if the claim was remanded to state court.
South Carolina state court would be both a convenient and fair forum for the conversion claim
because Plaintiff and Tye Grisel are both South Carolina citizens. In addition, considerations of
comity support dismissal. The conversion claim has no connection to federal interests or policies
and South Carolina has a strong interest in deciding cases arising under its laws. If the claim were
to proceed to trial, it would also be more appropriate for a state court to try the claim.
Remand is preferable to dismissal in this case because the three-year statute of limitations
for conversion could bar Plaintiff from refiling the claim in state court. See Walsh v. Woods, 594
S.E.2d 548, 551 (S.C. Ct. App. 2004) (the statute of limitations for “a conversion claim is three
(3) years”). Accordingly, the court declines to exercise supplemental jurisdiction over Plaintiff’s
conversion claim against Tye Grisel and remands the claim to state court.
IV.

CONCLUSION

For the foregoing reasons, the court finds that it lacks subject matter jurisdiction and
therefore REMANDS Plaintiff’s conversion claim against Tye Grisel to state court. As a result,

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the court declines to rule on Tye Grisel’s Motion to Dismiss (ECF No. 163) which shall be a matter
for the state court. The court affirms the Magistrate Judge’s reasoning in the Report (ECF No.
178) but declines to rule on the Report since Plaintiff’s subsequent dismissal of all but one of the
defendants left the court without subject matter jurisdiction.
IT IS SO ORDERED.

United States District Judge
September 16, 2020
Columbia, South Carolina

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