Beef Products, Inc. et al v. American Broadcasting Companies, Inc. et al

Filing 74

ORDER granting 60 Motion to Remand to State Court. Certified copy of Order mailed to State Court Clerk. Signed by U.S. District Judge Karen E. Schreier on 6/12/2013. (KC)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
BEEF PRODUCTS, INC.;
BPI TECHNOLOGY, INC.; and
FREEZING MACHINES, INC.,
Plaintiffs,
vs.
AMERICAN BROADCASTING
COMPANIES, INC.;
ABC NEWS, INC.;
DIANE SAWYER;
JIM AVILA;
DAVID KERLEY;
GERALD ZIRNSTEIN;
CARL CUSTER; and
KIT FOSHEE,
Defendants.

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

CIV. 12-4183-KES

ORDER GRANTING PLAINTIFFS’
MOTION TO REMAND

Plaintiffs Beef Products, Inc. (BPI), BPI Technology, Inc. (BPI Tech), and
Freezing Machines, Inc. (FMI) (collectively, “plaintiffs”) originally brought this
action on September 13, 2012, in the Circuit Court of Union County, South
Dakota. Defendants1 removed the action to this court on October 24, 2012, on
the basis of diversity jurisdiction. Docket 1 at 2. Plaintiffs now move to remand
this action back to the Circuit Court of Union County, South Dakota, arguing
that diversity jurisdiction does not exist. Defendants resist the motion and

1

At times in this opinion the court may use the term “defendants” when
only referring to an action by one defendant. This is done for simplicity and
should not be taken to mean that all of the defendants acted collectively
throughout the relevant time period.

simultaneously move to dismiss all claims asserted by BPI Tech and FMI,
arguing that they are not real parties in interest. For the following reasons, the
court grants plaintiffs’ motion to remand.
BACKGROUND
BPI is in the business of producing, distributing, and selling lean beef
products and is incorporated in Nebraska. BPI Tech is in the business of
developing technology and processing mechanisms for producing meat products
from raw materials and provides technological support, sales and marketing
services, and administrative services in connection with the sale of lean beef
products. BPI Tech is incorporated in Delaware. FMI is in the business of
developing equipment, systems, recipes, and processing mechanisms used in
the production of meat products and also owns patents on equipment used in
preparing lean beef products. FMI is also incorporated in Delaware. All three
plaintiffs are involved with the production of lean finely textured beef (LFTB).2
BPI, BPI Tech, and FMI are all owned by the Roth family.
Of the named defendants in this action, the most relevant for purposes of
this motion are American Broadcasting Companies, Inc. and ABC News, Inc.
Both of these defendants are in the news business, and both are incorporated in
Delaware.

2

Whether all three plaintiffs are “producers” of LFTB is heavily disputed
by the parties. Because the court’s ruling on plaintiffs’ motion is made
independent from this determination, the court abstains from making any such
determination.
2

In the spring of 2012, defendants published a series of news reports about
LFTB. Plaintiffs claim that these news reports included false and disparaging
statements about LFTB as well as false and disparaging statements about each
plaintiff. Plaintiffs also claim that they each suffered financial and reputational
harm as a result of defendants’ actions.
Based on these claims, plaintiffs brought a civil action in the Circuit Court
of Union County, South Dakota, on September 13, 2012, alleging claims for
defamation, product disparagement, and tortious interference with business
relationships. Defendants then removed the case to this court on October 24,
2012, asserting that the court has diversity jurisdiction. In the notice of
removal, defendants claim that BPI Tech and FMI are not real parties in interest,
and their citizenship should not be considered in determining whether diversity
jurisdiction exists. Plaintiffs now move to remand this action back to the Circuit
Court of Union County, South Dakota, arguing that BPI Tech and FMI are real
parties in interest, and thus, their citizenship must be considered for purposes
of determining diversity jurisdiction.
LEGAL STANDARD
“A defendant’s removal of a case to federal court is appropriate only if the
action originally could have been filed there.” Junk v. Terminix Int’l Co., 628 F.3d
439, 444 (8th Cir. 2010) (internal quotations omitted). Following removal, a
“plaintiff may move to remand the case if the district court lacks subject matter
jurisdiction.” Id. “The defendant bears the burden of establishing federal
jurisdiction by a preponderance of the evidence.” In re Prempro Prods. Liab. Litig.,
3

591 F.3d 613, 620 (8th Cir. 2010). “All doubts about federal jurisdiction should
be resolved in favor of remand to state court.” Id. If the defendant fails to meet
its burden of establishing federal jurisdiction, the district court “must” remand
the case. Junk, 628 F.3d at 444.
DISCUSSION
Defendants argue that subject matter jurisdiction exists on the basis of
diversity jurisdiction because BPI Tech and FMI are not real parties in interest
and should not be considered for purposes of determining diversity of
citizenship. This court “does not have diversity jurisdiction unless there is
diversity between all plaintiffs and all defendants.” Iowa Pub. Serv. Co. v. Med.
Bow Coal Co., 556 F.2d 400, 403-04 (8th Cir. 1977). See also Cascades Dev. of
MN, LLC v. Nat’l Specialty Ins., 675 F.3d 1095, 1098 (8th Cir. 2012) (“Diversity
jurisdiction requires complete diversity, that is where no defendant holds
citizenship in the same state where any plaintiff holds citizenship.”) (internal
quotations omitted). If a “nondiverse plaintiff is not a real party in interest, and
is purely a formal or nominal party, his or its presence in the case may be
ignored in determining jurisdiction.” Id. at 404. But if a nondiverse plaintiff is a
real party in interest, “the fact that his joinder was motivated by a desire to
defeat federal jurisdiction is not material.” Id. Accordingly, the issue here is
whether either BPI Tech or FMI is a real party in interest because complete
diversity does not exist if either plaintiff is a real party in interest.3

3

Plaintiffs BPI Tech and FMI and defendants American Broadcasting
Companies, Inc. and ABC News, Inc. are all Delaware corporations.
4

“A real party in interest is the person who, under governing substantive
law, is entitled to enforce the right asserted.” Cascades, 675 F.3d at 1098 (citing
Iowa Pub. Serv. Co., 556 F.2d at 404). In this diversity case, the governing
substantive law is the law of South Dakota.4 See Erie R.R. Co. v. Tompkins, 304
U.S. 64, 78 (1938) (“Except in matters governed by the Federal Constitution or
by acts of Congress, the law to be applied in any case is the law of the state.”).
Both BPI Tech and FMI allege claims for defamation, product
disparagement, and tortious interference. Because BPI Tech’s claims for
defamation are dispositive of plaintiffs’ motion to remand, the court focuses its
analysis exclusively on those claims.
To determine whether BPI Tech is a real party in interest with respect to
its defamation claims, the court must decide whether BPI Tech is “entitled to
enforce” its defamation claims. Cascades, 675 F.3d at 1098 (citing Iowa Pub.
Serv. Co., 556 F.2d at 404). Under South Dakota law, “[e]very person is obligated
to refrain from infringing upon the right of others not to be defamed.”5 SDCL 2011-1. Thus, any person who is defamed, or at least believes he or she has been
defamed, may bring a civil action against the party who allegedly did the

4

The parties agree that South Dakota’s substantive law controls this
diversity case.
5

“To determine whether the requirement that the action be brought by
the real party in interest has been satisfied, the court must look to the
substantive law creating the right being sued upon to see if the action has been
instituted by the party possessing the substantive right to relief.” 6A Charles A.
Wright, Arthur R. Miller, & Mary K. Kane, Federal Practice & Procedure § 1544,
484 (2010).
5

defaming. In this case, BPI Tech is alleging that defendants defamed BPI Tech
by making false statements about BPI Tech’s product and by making statements
that implied false facts about BPI Tech itself. Docket 1-2 at 14-15.
Because BPI Tech is alleging that defendants defamed BPI Tech, the court
finds that BPI Tech is entitled to enforce its defamation claims and is a real
party in interest. BPI Tech is not bringing its defamation claims on behalf of
another party, e.g., BPI or FMI. See, e.g., Hanna Mining Co. v. Minnesota Power &
Light Co., 573 F. Supp. 1395, 1398 (D. Minn. 1983) (indicating that a party may
not be a real party in interest if they are attempting to “usurp” another person’s
cause of action). Nor have defendants indicated that BPI Tech assigned its right
to bring a defamation claim to another person, or even that BPI Tech received its
right through an invalid assignment. See, e.g., Johnson Int’l Co. v. Jackson Nat’l
Life Ins. Co., 19 F.3d 431, 437 (8th Cir. 1994) (“The real party in interest is the
party holding the right sought to be enforced, not necessarily the party who will
ultimately benefit from recovery.”); Cascades, 675 F.3d at 1099 (indicating that
a party who receives the right to enforce an indemnification through an invalid
assignment would not be a real party in interest). In all likelihood BPI Tech is
the only real party in interest with respect to BPI Tech’s claims for defamation
because it is unlikely that a separate person or entity would be able to bring a
defamation claim on the basis that BPI Tech was defamed.6
6

Defendants direct the court to Campbell v. Jewish Comm. for Pers. Serv.,
271 P.2d 185 (Cal. Dist. Ct. App. 1954), in support of their argument that BPI
Tech is not the real party in interest with respect to BPI Tech’s defamation
claims. But Campbell is a case from the California District Court of Appeals
6

Defendants rely heavily on their assertion that the alleged false
statements are not “of and concerning” BPI Tech in support of their argument
that BPI Tech is not a real party in interest. Defendants claim that the alleged
false statements are only “of and concerning” BPI, and therefore, only BPI can
bring a defamation claim based on the alleged false statements. See Rosenblatt
v. Baer, 383 U.S. 75, 82 (1966) (requiring a finding that the defamatory
statements be “of and concerning” the plaintiff); Brodsky v. Journal Publ’g Co.,
42 N.W.2d 855, 857 (S.D. 1950) (“It must appear that the alleged defamatory
language refers to some ascertained or ascertainable person and that person
must be the plaintiff.”). Defendants further assert that it is for the court to
decide whether the alleged false statements are “of and concerning” BPI Tech.
Based on these assertions, defendants argue that it is “appropriate, therefore,
for this Court to review the alleged statements and determine whether they are
reasonably susceptible to an interpretation that refers to BPI Tech . . . . Indeed,
it is necessary to do so to determine whether those companies, in addition to
[BPI], can claim the status of real parties in interest.” Docket 68 at 30.
Defendants’ argument, however, goes against Eighth Circuit Court of
Appeals precedent. The Eighth Circuit has specifically held that the “fact that a

that is not binding on the court. Furthermore, Campbell is distinguishable from
the facts here. In Campbell, the plaintiff attempted to bring a defamation
lawsuit on behalf of his brother, claiming that he was his brother’s guardian.
271 P.2d at 187. Upon review, the court concluded that the plaintiff was not
his brother’s guardian and thus could not bring a defamation claim on behalf
of his brother. Here, BPI Tech is not attempting to bring a defamation suit on
behalf of another person. BPI Tech claims that defendants defamed BPI Tech.
7

plaintiff’s claim may lack legal or factual merit does not necessarily mean that
he lacks standing to assert the claim as a real party in interest.” Iowa Pub. Serv.
Co., 556 F.2d at 405. Therefore, the court declines defendants’ invitation to
analyze the merits of BPI Tech’s defamation claims for purposes of determining
if BPI Tech is a real party in interest.
Not only does defendants’ argument go against Eighth Circuit precedent,
it also goes against reason. Here, the court needs to determine whether BPI Tech
is a real party in interest to determine whether it has authority to hear this case,
i.e., whether diversity jurisdiction exists. Defendants’ argument, however,
proposes that the court first entangle itself with the facts of the case in order to
make a legal determination about whether BPI Tech’s claim has merit. Put
simply, defendants are suggesting that the court make a determination about
the merits of BPI Tech’s claim before even deciding whether it has the authority
to make such a determination. This is putting the cart before the horse.
Thus, the court finds that BPI Tech is a real party in interest. Because BPI
Tech is a real party in interest, complete diversity of citizenship does not exist
between plaintiffs and defendants.7 Accordingly, it is

7

The Eighth Circuit summarized the scenario here in Iowa Pub. Serv.
Co., 556 F.2d at 406, when it noted:
If under our dual court system a potential plaintiff has
a choice between a state forum and a federal forum, it
is his privilege to exercise that choice subject to legal
limitations, and if he can avoid the federal forum by
the device of properly joining a nondiverse defendant
or a nondiverse co-plaintiff, he is free to do so.
8

ORDERED that plaintiffs’ motion to remand (Docket 60) is granted, and
the Clerk of Court will remand this case to the Circuit Court of Union County,
South Dakota, from which it was removed.
IT IS FURTHER ORDERED that all remaining motions are denied without
prejudice to the moving parties’ rights to raise the motions in state court, if
appropriate.
Dated June 12, 2013.
BY THE COURT:

/s/ Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE

9