Smoky Mountain Knife Works, Inc v. Forward Motion Media, LLC (TV2)

Filing 52

MEMORANDUM OPINION AND ORDER, the Court finds that it lacks subject matter jurisdiction over this case and that remand is appropriate. Accordingly, this case is hereby REMANDED to the Circuit Court for Sevier County, Tennessee. All outstanding motions are DENIED as moot. The Clerk of Court is DIRECTED to close this case. Signed by Chief District Judge Thomas A Varlan on 4/10/15. (ADA)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
SMOKY MOUNTAIN KNIFE WORKS, INC.,
Plaintiff,
v.
FORWARD MOTION MEDIA, LLC, and
ANDREW T. PARROTT,
Defendants.

)
)
)
)
)
)
)
)
)
)

No.: 3:13-CV-448-TAV-CCS

MEMORANDUM OPINION AND ORDER
This civil action is before the Court on the Renewed Motion for Summary
Judgment [Doc. 32] filed by defendant Forward Motion Media, LLC (“FMM”). Plaintiff
has responded in opposition [Doc. 36], and defendant FMM has replied [Doc. 41].
Defendant Andrew Parrott recently filed an answer in this case [Doc. 51], but he has not
responded to the motion for summary judgment. Upon review of the record, the Court
concludes that it lacks subject matter jurisdiction. 28 U.S.C. § 1447(c); see Fed. R. Civ.
P. 12(h)(3). Therefore, the Court will remand this case to the Circuit Court for Sevier
County, Tennessee. 28 U.S.C. § 1447(e).
I.

Background
This case involves an “Internet Marketing Agreement” that plaintiff and defendant

FMM entered into in September 2011 [Doc. 30 p. 2; Doc. 31 p. 1–2; Doc. 43]. Plaintiff
brings claims against defendants under Tennessee law, alleging that defendant FMM is
liable for misrepresenting the services that it would provide under the agreement and for

breaching it, and that defendant FMM and defendant Parrott are liable for unjust
enrichment [Doc. 30 p. 5].
Plaintiff initiated its lawsuit on June 27, 2013, in the Circuit Court for Sevier
County, Tennessee [Doc. 1-1]. The original complaint named only defendant FMM as a
defendant [Doc. 1-1 p. 4]. Defendant FMM was served with process on or about July 10,
2013 [Doc. 1 p. 1]. According to the allegations in the original complaint, plaintiff is a
Tennessee corporation with its principal address in Sevierville, Tennessee, and defendant
FMM is a Florida limited liability company whose registered agent, Paul Pederson,
resides in Indian Rocks Beach, Florida [Doc. 1-1 p. 4]. On July 31, 2013, defendant
FMM removed the case to federal court, invoking the Court’s diversity jurisdiction [Doc.
1 p. 1].
On November 21, 2014, plaintiff moved to amend its complaint in order to join
Andrew Parrott as a defendant [Doc. 23]. In accordance with the Court’s local rules,
plaintiff attached a proposed amended complaint to its motion [Doc. 23-1]. E.D. Tenn.
R. 15.1. In the proposed amended complaint, plaintiff alleged that Mr. Parrott is a citizen
of Tennessee and a resident of Knox County, Tennessee [Id. at p. 1]. In support of its
motion, plaintiff stated that it sought to join Mr. Parrott as a defendant after identifying
causes of action against him through the discovery process [Doc. 23 p. 1–2]. Plaintiff
further stated that Mr. Parrott is “a necessary party and his joinder will not deprive this
Court of subject-matter jurisdiction” [Id. at p. 2].

2

Defendant FMM did not object to the proposed joinder. After the time for filing a
response had passed, Magistrate Judge Shirley granted plaintiff’s motion [Doc. 27].
Plaintiff filed its previously proposed amended complaint as its first amended complaint
on December 29, 2014 [Doc. 30].

Defendant FMM timely answered the amended

complaint, admitting that plaintiff is a Tennessee corporation and that defendant FMM is
a Florida limited liability company, and stating that plaintiff’s allegation that defendant
Parrott is a citizen and resident of Tennessee “require[s] no response” [Doc. 31 p. 1]. In
connection with its Renewed Motion for Summary Judgment [Doc. 32], defendant FMM
filed an affidavit of defendant Parrott in which Mr. Parrott avers that he is a citizen of the
State of Tennessee residing in Knox County, Tennessee [Doc. 32-2 p. 1]. Defendant
Parrott, for his part, admits each of the citizenship allegations in plaintiff’s amended
complaint [Doc. 51 p. 1]. None of the parties have raised jurisdiction as an issue.
II.

Standard of Review
Federal courts are courts of limited jurisdiction, and therefore, may only hear cases

over which they have subject matter jurisdiction. Kokkonen v. Guardian Life Ins. Co. of
Am., 511 U.S. 375, 377 (1994). “[D]efects in subject matter jurisdiction cannot be
waived by the parties and may be addressed by a court on its own motion at any stage of
the proceedings.” Owens v. Brock, 860 F.2d 1363, 1367 (6th Cir. 1988) (citing Fed. R.
Civ. P. 12(h)(3)). In cases that have been removed from state court, “[i]f at any time
before final judgment it appears that the district court lacks subject matter jurisdiction,
the case shall be remanded.” 28 U.S.C. § 1447(c).
3

III.

Analysis
“Diversity of citizenship, the basis for jurisdiction in the present case, exists only

when no plaintiff and no defendant are citizens of the same state.” Curry v. U.S. Bulk
Transp., Inc., 462 F.3d 536, 540 (6th Cir. 2006) (quoting Jerome-Duncan, Inc. v. AutoBy-Tel, LLC, 176 F.3d 904, 907 (6th Cir. 1999)) (internal quotation marks omitted). In
general, diversity of citizenship is determined at the time that a lawsuit is filed in federal
court. Id. (citing Smith v. Sperling, 354 U.S. 91, 93 n.1 (1957)). Thus, once diversity has
been established, subsequent joinder of a dispensable non-diverse party ordinarily will
not divest a federal court of subject matter jurisdiction. See Freeport-McMoRan, Inc. v.
K N Energy, Inc., 498 U.S. 426, 428 (1991) (per curiam) (noting the “well-established
rule that diversity of citizenship is assessed at the time the action is filed”).
But Congress has placed additional limits on its grant of diversity jurisdiction in
cases that have been removed from state court. “If after removal the plaintiff seeks to
join additional defendants whose joinder would destroy subject matter jurisdiction, the
court may deny joinder, or permit joinder and remand the action to the State court.” 28
U.S.C. § 1447(e). Accordingly, a federal court loses diversity jurisdiction over a case
that has been removed when the court permits the addition of a non-diverse party. Curry,
462 F.3d at 541; Casas Office Machines, Inc. v. Mita Copystar Am., Inc., 42 F.3d 668,
673–75 (1st Cir. 1994); see also Blackburn v. Oaktree Capital Mgmt., LLC, 511 F.3d
633, 635 (6th Cir. 2008) (“The district court’s order granting plaintiff’s motion to amend
allowed plaintiffs to join non-diverse defendants, thereby destroying diversity
4

jurisdiction.”). It does not matter under § 1447(e) whether the added party is dispensable
or indispensable. Curry, 462 F.3d at 542 n.4; Casas, 42 F.3d at 674.
Here, the parties agree on the pleadings that plaintiff is a Tennessee corporation.
Therefore, plaintiff is a citizen of Tennessee for the purpose of establishing diversity
jurisdiction. 28 U.S.C. § 1332(c)(1). Additionally, plaintiff has pleaded, while defendant
FMM has submitted in fact and defendant Parrott has admitted, that defendant Parrott is a
citizen of Tennessee.

The magistrate judge had the authority to review and grant

plaintiff’s motion to join Mr. Parrott as a defendant, which the magistrate judge
exercised. 28 U.S.C. § 636(b)(1)(A); E.D. Tenn. Standing Order 13-02 (August 16,
2013). Consequently, the Court’s diversity jurisdiction was destroyed when plaintiff
joined defendant Parrott with permission. See Curry, 462 F.3d at 541 (“The district
court’s failure to remand and instead its decision to maintain Priddy and Susman as
nondiverse defendants deprived the district court of subject-matter jurisdiction to enter its
judgment below.”).
In deciding whether to permit joinder that would destroy diversity,1 district courts
in this circuit generally consider: “(1) the extent to which the purpose of the amendment
is to defeat federal jurisdiction; (2) whether the plaintiff has been dilatory in seeking
1

A district judge is not precluded from reviewing a magistrate judge’s order granting
permission for joinder. See, e.g., Schur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 759–62
(7th Cir. 2009). Additionally, the Supreme Court has suggested as a general proposition that
district courts may dismiss a diversity spoiler pursuant to Rule 21 of the Federal Rules of Civil
Procedure in order to retain subject matter jurisdiction. See Newman-Green, Inc. v. AlfonzoLarrain, 490 U.S. 826, 832 (1989). Assuming without deciding that the Court has the authority
to reverse the magistrate judge’s order in this case, or to otherwise dismiss defendant Parrott, the
Court declines to do so.
5

amendment; (3) whether the plaintiff will be significantly prejudiced if amendment is not
allowed; and (4) any other equitable factors.” Davis v. Owners Ins. Co., 29 F. Supp. 3d
938, 943 (E.D. Ky. 2014) (quoting Cooper v. Thames Healthcare Grp., LLC, 2014 WL
941925, at *2 (E.D. Ky. Mar. 11, 2014)) (internal quotation marks omitted). District
courts also “take into account the original defendant’s interest in its choice of forum.”
Wells v. Certainteed Corp., 950 F. Supp. 200, 201 (E.D. Mich. 1997) (citations omitted).
Ultimately, a district court must “use its discretion and determine if allowing joinder
would be fair and equitable.” City of Cleveland v. Deutsche Bank Trust Co., 571 F. Supp.
2d 807, 823 (N.D. Ohio 2008) (citations omitted) (internal quotation marks omitted).
“Of the relevant factors, the first appears to be of paramount importance.” City of
Cleveland, 571 F. Supp. 2d at 824 (citations omitted). In this case, plaintiff’s purpose in
amending its complaint does not appear to be the defeat of federal jurisdiction. Quite to
the contrary, the record suggests that plaintiff did not even contemplate federal
jurisdiction when moving to join defendant Parrott.
Second, plaintiff has not been dilatory in seeking to join defendant Parrott.
Plaintiff stated in its unopposed motion to amend its complaint that it was moving to join
Mr. Parrott as a defendant after identifying claims against him through the discovery
process.
Third, plaintiff will suffer prejudice if it is not permitted to proceed against
defendant FMM and defendant Parrott in the same case, but the prejudice may not be
“significant.” Plaintiff’s claims against defendant Parrott sound in civil conspiracy [Doc.
6

23 p. 2; Doc. 30 p. 2–4; Doc. 36 p. 9]. In Tennessee, civil conspiracy does not provide a
separate cause of action, but rather, makes each civil conspirator vicariously liable for an
underlying predicate tort committed pursuant to the conspiracy. Watson’s Carpet &
Floor Coverings, Inc. v. McCormick, 247 S.W.3d 169, 179–80 (Tenn. Ct. App. 2007). If
this case were to proceed without defendant Parrott, plaintiff still would be able to seek a
judgment against defendant FMM for the unlawful acts of which it complains.
Nevertheless, plaintiff would be forced bring a separate state action against defendant
Parrott in the event that it could not efficiently or fully recover against defendant FMM.
Fourth, it would not be inequitable to remand this case to the state forum in which
it originated. Plaintiff and defendant FMM may suffer some prejudice if they are forced
to duplicate discovery in state court.

Nevertheless, any such prejudice would be

mitigated by the fact that this case is not complex. Additionally, defendant Parrott has
not yet been afforded discovery, meaning that there would be no duplication of discovery
as to him.
Upon review of the record and consideration of the equities, the Court concludes
that plaintiff should be permitted proceed against defendant FMM and defendant Parrott
in the same case. The attendant consequence of proceeding in such a manner is remand
to state court. 28 U.S.C. § 1447(e).
IV.

Conclusion
For these reasons, the Court finds that it lacks subject matter jurisdiction over this

case and that remand is appropriate. Accordingly, this case is hereby REMANDED to
7

the Circuit Court for Sevier County, Tennessee. All outstanding motions are DENIED
as moot. The Clerk of Court is DIRECTED to close this case.
IT IS SO ORDERED.

s/ Thomas A. Varlan
CHIEF UNITED STATES DISTRICT JUDGE

8