Inge et al v. Walker et al
Filing
78
Memorandum Opinion and Order Denied 20 Motion to Remand to State Court filed by Peyton Inge. For the reasons stated above, the Court concludes that it may not remand the entire case, has supplemental jurisdiction over the remaining state-law claims, and will continue to exercise such supplemental jurisdiction. Therefore, Plaintiff's Motion to Remand and Request for Attorneys' Fees. (Ordered by Judge Jane J Boyle on 9/15/2016) (ndt)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
PEYTON INGE, INDIVIDUALLY AND
ON BEHALF OF THE CENTRAL
MOTORCYCLE ROADRACING
ASSOCIATION,
Plaintiff,
v.
WALTER WALKER, TED PHILLIPS,
JOHN ORCHARD, STEVEN
MCNAMARA, JAMES DUGGER, TY
HOWARD, ERIC FALT, CENTRAL
MOTORCYCLE ROADRACING
ASSOCIATION, NANCY SELLECK,
BILL SYFAN, and TOM ANDERSON,
Defendants.
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CIVIL ACTION NO. 3:16-CV-0042-B
MEMORANDUM OPINION AND ORDER
Before the Court is Plaintiff’s Motion to Remand and Request for Attorneys’ Fees. Doc. 20.
For the following reasons, the Court DENIES Plaintiff’s Motion.
I.
BACKGROUND
A.
Factual History
According to Plaintiff Peyton Inge (Inge), “[t]his lawsuit is a textbook example of what
happens when good old boys encounter an individual who dares question how hundreds of thousands
of dollars in nonprofit corporation cash are accounted for.” Doc. 20-1, Pl.’s Fourth Am. Pet. and Req.
for Declaratory Relief ¶ 17 [hereinafter Pet.]. In reality, it is a case about a former member of a
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nonprofit motorcycle hobby club, Inge, who accused a number of current and former club directors
of violating the Racketeer Influenced and Corrupt Organizations Act (RICO) and committing
several state law torts. Id. ¶¶ 20, 53–79.
The Central Motorcycle Roadracing Association (Corporation or CMRA) is a 650-member,
Texas-based 501(c)(7) nonprofit corporation that (1) issues motorcycle race licenses to allow
motorcyclists to participate in races across the country; and (2) hosts its own motorcycle races. Id.
¶¶ 3, 21–22. The Corporation is governed by a seven-person Board of Directors (Board), that,
according to Inge, is supposed to conduct annual elections for two to three of its seven seats. Id. ¶
24. In practice, however, Inge alleges it operates more like a cabal in that directors return for multiple
terms and engage in nefarious schemes, including: failing to make board meetings and financial
records readily available to members, embezzling money,1 engaging in insider deals,2 and
manipulating elections.3
As to the electoral fraud specifically, Inge points to Defendant Nancy Selleck’s behavior
during the CMRA’s 2014 election where she allegedly did the following:
[Former Secretary] Selleck used her position as Secretary and Administrator of the
CMRA’s website and computer forum to intentionally suggest that [Inge] committed
certain nefarious acts in an effort to injure [his] reputation and expose [him] to
public hatred, ridicule, contempt, reputational damage, and financial injury . . . [and]
1
Specifically, Inge asserts that two defendants, Nancy Selleck (Selleck) and Bill Syfan (Syfan),
deposited more than $50,000 into personal bank accounts. Doc. 20-1, Pet. ¶ 53.
2
See id. ¶¶ 30–31, 57.
3
Id. ¶¶ 25, 35–36
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to throw the election [to another candidate] because she was afraid [Inge] would
win.
Id. ¶ 36 (footnote omitted). Inge then noticed discrepancies in previous election results that favored
Selleck-supported candidates, including Selleck’s husband, Syfan. Id. ¶ 37. Specifically, Inge alleges
that Selleck has been responsible for mainlining membership lists, mailing election ballots to noneligible voters, and failing to mail ballots to some eligible voters. Id. ¶ 37. After discovering these
discrepancies, Inge brought them to the attention of Board member James Dugger (Dugger),
suggested someone may have manipulated the ballots, and requested that the Board conduct a
private audit. Id. ¶ 38. Dugger and/or fellow Board member John Orchard (Orchard) refused to
conduct an audit. Id. ¶ 39. Undeterred, Inge posted a series of questions directed toward the Board
on the CMRA website, asking about the ballot discrepancies and about inconsistencies regarding
previous CMRA tax returns. Id. ¶ 40. Selleck answered his questions but her answers “enraged” the
other Defendants, some of whom allegedly (1) began to publically ridicule Inge; (2) decided, behind
the scenes, to terminate his race license; and (3) schemed to leak certain information that would
jeopardize Inge’s membership in the organization. Id. ¶¶ 41–42.
In response to Defendants’ behavior, Inge requested that the Board partially audit the
CMRA’s 2014 election results, disclose financial records and meeting minutes, and apologize to the
CMRA “for their verbal abuse,” presumably of him. Id. ¶ 44. Rather than comply, Defendants hired
an attorney, as they believed a “member” had threatened to sue the CMRA and was being
uncooperative. Id. ¶ 44. Defendants allegedly stated that Inge’s intent was to “destroy the CMRA.”
Id. ¶ 46. Defendants spread the “malicious falsities” that Inge’s allegations were false in order to
convey to the organization that Inge was a “sue-happy malcontent.” Id. ¶¶ 47, 49. These statements
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apparently reached beyond CMRA members to Inge’s colleagues at his law firm. Id. ¶ 47. One
defendant, Orchard, separately emailed all 650 CMRA members and “misrepresent[ed] facts about
[Inge] and [his] goals”; according to Inge, Orchard also posted that email to the CMRA forum. Id.
¶ 50. Inge alleges that a few days after Orchard’s email was sent, a group of racers voiced their
disagreement with Orchard’s posts, at which point Orchard locked the thread, and Defendants voted
to revoke Inge’s license—without the required hearing—based on his posted questions. Id. ¶ 51.
B.
Procedural History
On December 17, 2014, Inge sued Defendants in the 191st Judicial District Court of Dallas
County Texas. Doc. 1-8, Pl.’s Orig. Pet. Over the course of the next year, Inge amended his petition
multiple times, and the parties engaged in a slew of discovery disputes. See Doc. 1, Notice of
Removal. On December 17, 2015, one year after he filed his initial petition, Inge filed his Fourth
Amended Petition and Request for Declaratory Relief, the now-operative pleading in this case. Doc.
20-1, Pet. There, Inge brought the following claims: (1) a RICO claim against Walker, Orchard,
McNamara, Selleck, Syfan, and Anderson (Doc. 21-1, Pet. ¶¶ 53–60); (2) a shareholder derivative
action and related ultra vires claims against Phillips, Orchard, McNamara, Dugger, Howard, Falt,
Selleck and Syfan (Id. ¶¶ 61–64); (3) general “individual harm” allegations against Phillips, Orchard,
McNamara, Dugger, Howard, Falt, Selleck, and Syfan (Id. ¶ 65); (4) slander and libel claims against
all Defendants (Id. ¶¶ 66–76); (5) a breach of contract claim against the CMRA (Id. ¶¶ 77–78), and,
finally, (6) a conspiracy claim against all Defendants except the CMRA (Id. ¶ 79). Inge also
requested that each Defendant answer his Requests for Disclosure “within fifty (50) days of service
of this First Amended Petition and Requests for Disclosure on Defendants” (Id. ¶ 80); and asked for
declaratory relief (Id. ¶¶ 81–82) and damages (Id. ¶ 82).
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On January 7, 2016, Defendants removed the case to this Court (Doc. 1, Notice of Removal)
and, approximately two weeks later, Inge moved to remand it back to state court. Doc. 20, Pl.’s Mot.
to Remand and Req. For Att’y Fees [hereinafter Mot. to Remand]. Defendants then responded to
Inge’s Motion, and Inge replied in turn. Doc. 32, Defs.’ Resp.; Doc. 43, Pl.’s Reply. Inge’s Motion is
now ready for review.
II.
LEGAL STANDARD
Motions for remand are governed by 28 U.S.C. § 1447(c), which provides that “[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) (2012). When considering a motion to remand, “[t]he
removing party bears the burden of showing that federal jurisdiction exists and that removal was
proper.” Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002).
The federal removal statute, 28 U.S.C. § 1441(a), permits a defendant to remove to federal
court any civil action that falls within the original jurisdiction of the district courts. District courts
“have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the
United States.” 28 U.S.C. § 1331. This, however, raises “significant federalism concerns” because
removal effectively “deprive[s] the state court of an action properly before it.” Gasch v. Hartford
Accident & Indem. Co., 491 F.3d 278, 281 (5th Cir. 2007) (quoting Carpenter v. Wichita Falls Indep.
Sch. Dist., 44 F.3d 362, 365 (5th Cir. 1995)). As a result, the removal statute must be strictly
construed, and “any doubt about the propriety of removal must be resolved in favor of remand.” Id.
at 281–82; see also Manguno, 276 F.3d at 723.
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III.
ANALYSIS
Applying the above standard, for the reasons that follow, the Court concludes that
Defendants’ removal of this action to federal court was proper, and that the Court will continue to
exercise supplemental jurisdiction over Plaintiff’s remaining state-law claims. Contrary to Plaintiff’s
assertions, the Court does not have the authority to remand the entire case back to state court, as
Plaintiff’s RICO claim gives this Court original jurisdiction. Furthermore, as also addressed below,
the Court finds that the factors embodied in 28 U.S.C. § 1367 as well as judicial economy, fairness,
convenience, and comity militate in favor of exercising supplemental jurisdiction over the remaining
state-law claims.
A.
Remanding the Entire Case
Inge argues that this Court should decline to exercise jurisdiction over his RICO claim and
instead remand the entire case because (1) Texas has concurrent jurisdiction and (2) the parties
have already engaged in discovery and related disputes for over a year, so remanding the case would
“permit Defendants to re-litigate novel issues of law.” Doc. 21, Br. in Supp. of Pl.’s Mot. to Remand
¶ 2 [hereinafter Pl.’s Brief].
Defendants counter that exercising federal question jurisdiction is not discretionary in federal
courts, and therefore, district courts cannot remand live, federal claims to state court.4 Thus, because
Inge’s RICO claim is live and properly removed, the Court does not have discretion to remand the
4
Doc. 32, Defs.’ Resp. 3 (citing Poche v. Texas Air Corps, Inc., 549 F.3d 999, 1005 (5th Cir. 2008),
Blankenship v. Weinstein & Riley, P.S., No. 3:10-CV-1821-G, 2011 WL 2713698, at *2–3 (N.D. Tex. July 12,
2011); May v. Apache Corp., 870 F. Supp. 2d 454, 458 (S.D. Tex. 2012); Palomino v. Miller, No.
3-06-CV-0932-M, 2006 WL 2661127, at *2 (N.D. Tex. Sept. 14, 2006)).
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entire case back to state court. Doc. 32, Defs.’ Resp. 3. For this reason, Defendants argue the Court
should deny Inge’s motion and refuse to remand this case. Id.
Inge replies with a set of general propositions, including the fact that Congress intended to
restrict, rather than expand, removal jurisdiction in amending §1441(c). Doc. 34, Pl.’s Reply ¶ 2.
Inge further disputes Defendants’ argument by citing several cases, including Metro Ford Truck Sales,
Inc. v. Ford Motor Co., for the proposition that “[c]ourts that have considered the meaning of the
new § 1441(c) have decided overwhelmingly that the provision now permits them to remand the
entire action, federal claims and all, if the state law claims predominate.”5
Defendants have the better argument here. This Court has no authority to remand Inge’s
RICO claim, and therefore it cannot remand the entire case. While the court in Metro Ford did
indeed find that “the new § 1441(c) permits courts to remand an entire action, or distinct claims,
both state and federal, if state law predominates,”6 the Laurents Court held that district courts lack
authority to remand claims that confer removal jurisdiction. See Laurents v. Arcadian Corp., No. 9441183, 1995 WL 625394, at *2 (5th Cir. Oct. 4, 1995) (“Although [a] district court has discretion
to remand state law claims that were removed along with one or more federal question claims, it may
not remand the component claims that are conclusively deemed to have arisen under federal law, absent a
defect in the removal procedure or circumstances rendering the retention of jurisdiction
‘inappropriate.’”) (emphasis added). Insofar as Metro Ford and Laurents conflict, Laurents controls.
See Poche, 549 F.3d at 1005 (“To the extent Laurents conflicts with the later-decided Metro Ford, we
5
Doc. 34, Pl.’s Reply ¶¶ 2–3 (citing Metro Ford Truck Sales, Inc. v. Ford Motor Co., 145 F.3d 320, 328
(5th Cir. 1998); Jones v. Belhaven College, 98 F. App’x 283, 284 (5th Cir. 2004)).
6
Metro Ford Truck Sales, 145 F.3d at 328.
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are bound to follow Laurents.”) (citing United States v. Walker, 302 F.3d 322, 324–25 (5th Cir. 2002)
(noting “this circuit’s rule that one panel may not overrule a prior panel opinion and the earlier
precedent controls”)). Thus, because Inge’s RICO claim was what conferred removal jurisdiction
upon this Court (see Doc. 1, Notice of Removal 3) this Court is without authority to remand that
claim, and therefore it cannot remand the entire case.
B.
Supplemental Jurisdiction over Inge’s Remaining State-Law Claims
As the Court has determined it cannot remand Inge’s RICO claim, and therefore cannot
remand the entire case, the relevant inquiry becomes whether the Court should sever and remand
Inge’s remaining state law claims.7 A federal court may exercise supplemental jurisdiction over all
claims, including state-law claims, if they are “so related to claims in the action within such original
jurisdiction that they form part of the same case or controversy under Article III of the United States
Constitution.” 28 U.S.C. § 1367(a). But even if a court has supplemental jurisdiction, it may still
decline to exercise it over some claims after considering four statutory factors and four common law
factors. Id. § 1367(c); Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988). For the reasons that
follow, the Court concludes that it does have supplemental jurisdiction over Inge’s state law claims
and declines to sever the state law claims.
1.
Does Supplemental Jurisdiction Exist Here?
A plaintiff’s claims are part of the same case or controversy as a claim with original
jurisdiction if they “derive from a common nucleus of operative fact.” United Mine Workers of Am.
7
Inge’s remaining state-law claims that he argues should be remanded are derivative claims arising
from a duty of good faith and ultra vires violations; slander and libel; breach of contract; and conspiracy. Doc.
21, Pl.’s Br. ¶ 6.
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v. Gibbs, 383 U.S. 715, 725 (1966). In other words, if they are “considered without regard to their
federal or state character, a plaintiff’s claims are such that he would ordinarily be expected to try
them all in one judicial proceeding.” Id.
Inge, argues that this Court does not have supplemental jurisdiction over his state-law claims.
Doc. 20, Mot. to Remand ¶ 12. Inge supports his argument by asserting (1) Defendants failed to
identify a basis for supplemental jurisdiction in their Notice of Removal (2) Defendants failed to
identify a “common nucleus of operative fact” between the RICO claim and the state-law claims; and
(3) the elements of Inge’s RICO claim arise out of distinct sets of operative facts.” Doc. 21, Pl.’s Br.
¶ 5. Inge does not elaborate upon those arguments.
Defendants address only Inge’s contention that the RICO claim and state-law claims do not
arise out of a “common nucleus of operative fact.” Doc. 32, Def.’s Resp. 4. Defendants note how
Inge expressly incorporated his RICO claim into several of his state-law claims in the petition.8
Furthermore, several facts alleged in relation to the RICO claim are identical to facts alleged with
the derivative, ultra vires, and “individual harm” claims. These include Inge’s allegations regarding
“decisions about producing the CMRA’s books and records; the use and oversight of the CMRA’s
credit or debit cards; and alleged insider dealing and other wrongful conduct relating to the alleged
relationship between the CMRA and LSTD.” Doc. 32, Def.’s Resp. 5.
Regarding Inge’s other state-law claims for defamation, conspiracy, and breach of contract,
8
Inge incorporated the alleged RICO violation into his shareholder derivative and ultra vires claims
by listing the relevant RICO statute, 18 U.S.C. § 1964(c), within the list of alleged wrongs for those causes
of action. Doc. 32, Def.’s Resp. 4 (citing Pl.’s Pet. ¶¶ 61, 64). Furthermore, Inge “re-alleged” all acts and
omissions identified within the shareholder derivative and ultra vires claims under the “individual harm”
claims; therefore, Inge considered a violation of the RICO statute an “individual harm.” Id. (citing Pl.’s Pet.
¶ 65).
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Defendants argue that the facts underlying these claims are similar to those underlying the RICO
claim. Doc. 32, Def.’s Resp. 5–6. In Inge’s RICO claim, he alleges that Defendants’ behavior of
conspiring to cover up fraud, planning to slander Inge, and engaging in extreme defamation
constituted a violation of RICO. Doc. 20-1, Pet. ¶¶ 58–59. Conduct alleged as part of the RICO
claim also overlaps with conduct alleged as part of the breach of contract claim because both describe
Defendants’ refusal to produce CMRA’s books and records. Id. ¶¶ 59, 77. Besides these specific
factual similarities, all of Inge’s claims are based generally on the alleged misconduct by Defendants
taken in relation to the CMRA. See id. ¶¶ 53–79.
Inge’s argument centers primarily on the difference in the elements necessary to prove his
RICO claim versus his state-law claims rather than any distinction in the underlying facts. Doc. 34,
Pl.’s Reply ¶ 5. But the Court dismisses the proposition that if multiple causes of action have
“distinctly different” elements there can exist no common nucleus of operative fact. At least one
district court within this Circuit has explicitly rejected the same argument in accordance with United
Mine Workers of America. See Schuchart & Assocs. v. Solo Serve Corp., SA-81-CA-5, 1983 WL 1147,
at *21 (W.D. Tex. June 28, 1991) (deeming unpersuasive the argument that supplemental
jurisdiction does not exist if elements of proof are entirely different even when the underlying facts
“arise from the same series of events”).
Following this line of reasoning, and focusing on the underlying facts as opposed to the
elements of proof, the Court concludes that the RICO claim and the state-law claims are derived
from the same “common nucleus of operative fact” such that Inge “would ordinarily be expected to
try them all in one proceeding.” United Mine Workers of Am., 383 U.S. at 725.
As the Court has concluded that it does have supplemental jurisdiction, Inge’s reference to
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the mandatory severance provision of 28 U.S.C. § 1441 is inapposite. Doc. 20, Mot. to Remand ¶
12; Pl.’s Br. ¶ 4. Section 1441(c)(2) mandates severance and remand of certain claims upon removal.
This provision, however, applies only in cases where an action involves (1) a federal question claim
and (2) a claim that “was not within the original or supplemental jurisdiction of the district court or
a claim that has been made nonremovable by statute.” Id. § 1441(c)(2). While the case involves a
federal question claim, this Court has supplemental jurisdiction over the remaining state-law claims.
Thus, the mandatory severance provision does not apply.
2.
Should the Court Decline to Exercise Supplemental Jurisdiction?
Even if the Court has the power to assert supplemental jurisdiction over a party’s state-law
claims, “[t]hat power need not be exercised in every case in which it is found to exist.” United Mine
Workers of Am., 383 U.S. at 726. The Court, instead, “may decline to exercise supplemental
jurisdiction” based on its discretionary consideration of various statutory and common law factors.
28 U.S.C. § 1367(c); Carnegie-Mellon Univ., 484 U.S. at 3570. The statutory factors and common
law factors are weighed and considered together. Enoch v. Lampasas Cnty, 641 F.3d 155, 160 (5th
Cir. 2011). No specific factor, though, is dispositive. Parker & Parsley Petroleum Co. v. Dresser Indus.,
972 F.2d 580, 587 (5th Cir. 1992).
i.
Statutory factors
The relevant statutory factors a court considers when determining whether to exercise its
supplemental jurisdiction over a claim are whether (1) “the claim raises a novel or complex issue of
State law, (2) the claim substantially predominates over the claim or claims over which the district
court has original jurisdiction, (3) the district court has dismissed all claims over which it had original
jurisdiction, or (4) in exceptional circumstances, there are other compelling reasons for declining
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jurisdiction.” 28 U.S.C. § 1367(c). Inge’s arguments for why this Court should decline to exercise
its supplemental jurisdiction are related to the first, second, and fourth factors: Inge argues that his
state law claims present novel and complex state law issues, that his state law claims predominate
over his RICO claim, and that failing to remand would allow defendants to re-litigate issues already
litigated in state court. Doc. 21, Mot. to Remand ¶ 6. As this Court is not dismissing the RICO
claim, over which it has original jurisdiction, the third factor will not be addressed.
a.
Whether claims involve a novel or complex issue of state law
Regarding the first § 1367(c) factor, the Court declines to recognize Inge’s state-law claims
as novel or complex. The Fifth Circuit has determined that a Texas state-law claim is novel when
there is no guidance from the Supreme Court of Texas. See Enochs, 641 F.3d at 159. Further, if
substantive state law is not necessary to determine the matter, or if the state law is easily applied, the
state-law claims will not be considered novel or complex. Brookshire Bros. Holding, Inc. v. Dayco
Prods., Inc., 554 F.3d 595, 603 (5th Cir. 2009); Mendoza v. Murphy, 532 F.3d 342, 346 (5th Cir.
2008).
For the majority of Inge’s claims, there is extensive Texas Supreme Court precedent for
guidance.9 As to Inge’s ultra vires claims, Defendants argue that the disposition requires only “a
straightforward application of statutory language.”10 Similarly, resolution of Inge’s breach of contract
claims will largely be based on an application of several sections of Chapter 22 of the Texas Business
9
See, e.g., Neely v. Wilson, 418 S.W.3d 52, 60–61 (Tex. 2013) (outlining the elements of defamation
for both public and private individuals); Insurance Co. of N. Am. v. Morris, 981 S.W.2d 667, 675 (Tex. 1998)
(summarizing and expanding upon the elements of civil conspiracy claims). This Court has also examined
Texas cases that address derivative suits against nonprofit organizations. Bridgewater v. Double DiamondDelaware, Inc., No. 3:09-CV-1758-B, 2011 WL 1671021, at *7–8 (N.D. Tex. Apr. 29, 2011).
10
Citing Tex. Bus. Orgs. Code Ann. § 20.002(c).
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Organizations Code. See Pl.’s Br. ¶ 6. As Inge has alleged state-law claims that have clear guidelines
for application, the claims are not so novel or complex that a state court would be a more appropriate
forum.
b.
Whether state law claims predominate over federal claims
The second 28 U.S.C. § 1367(c) factor concerns whether the state law claims predominate
over the claim giving the federal court original jurisdiction. Inge alleges that his state-law claims
predominate over his RICO claim with no further elaboration. Pl.’s Br. ¶ 6. Defendants disagree and
give three reasons: (1) Inge’s RICO claim incorporates aspects of his state law claims; (2) Inge’s state
law shareholder derivative and ultra vires claims incorporate his RICO claim; and (3) both the RICO
claim and the state law claims are asserted largely against the same defendants. Doc. 32, Defs.’ Resp.
9–10.11 Inge replies by reiterating his conclusory allegation and arguing that because the state-law
claims form the basis of the RICO claim at issue, they predominate. Doc. 34, Pl.’s Reply. ¶ 4.
The Court finds that Inge’s state law claims do substantially predominate. As an initial
matter, the Court acknowledges that § 1367’s standard is not susceptible to bright-line rules. For
example, one court declined to exercise supplemental jurisdiction over a plaintiff’s state law claims
because the claim giving the court original jurisdiction was “the essence of the suit” and the other
claims were only secondary. Lawler v. Miratek Corp., EP-09-CV-252-KC, 2010 WL 743925, at *6
(W.D. Tex. Mar. 2, 2010) (citation omitted). To reach this conclusion, the court compared (1) the
amount of damages the plaintiffs asked for on their federal claim versus the amount they asked for
11
Citing Cooper v. City of Dallas, Tex., 3:13-CV-1330-N-BK, 2013 WL 4675665, at *3 (N.D. Tex.
Aug. 30, 2013); Sturgeon v. Jackson, No. EP-10-CV-244-PRM, 2011 WL 3678472, at *7 (W.D. Tex. Feb. 9,
2011) (declining to remand state claims where state and federal claims were factually interrelated and were
brought against the same defendants).
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on their state claims; and (2) the number of theories of discrimination asserted in their federal claims
versus the number of overlapping defamation counts in their complaint. Id. Needless to say, then,
the process of determining whether state law claims “substantially predominate” over their federal
counterparts is far from an exact science.
Inge has not demanded a specific damages figure, rendering the first Lawler criterion useless
here. See Doc. 20-1, Pet. ¶ 81. The second, however, bears more fruit. Inge offers far more theories
of liability—and brings many more counts—on his state claims, as compared to his RICO claim.
Compare id. ¶¶ 53–60 with id. ¶¶ 61–79. Thus, at first glance, this case may warrant remand. But the
analysis does not end here.
As a corollary to § 1367’s multi-factor supplemental jurisdiction test, courts are prohibited
from “split[ting] apart claims that are too closely interconnected when remanding part of a case to
state court,” even though they may generally “split claims arising from the same nucleus of operative
facts.” Lawler, 2010 WL 743925, at *7 (citing Eastus v. Blue Bell Creameries, L.P., 97 F.3d 100, 105
(5th Cir. 1996) (holding that claims remanded back to state court after a federal-question removal
must be “separate and independent”)). In Eastus, the Fifth Circuit compared the plaintiff’s Family
Medical Leave Act claim—where the plaintiff alleged that the defendant wrongfully fired him in
retaliation for taking family leave—with his intentional infliction of emotional distress claim, which
was also based on the discharge. Eastus, 97 F.3d at 105. There, the court found that the plaintiff’s
federal and state claims were both based upon the plaintiff’s termination, meaning that there was “[a]
single wrong” (the termination), and that “the various claims [asserted in the suit] [were] simply
different theories of recovery.” Id.
Inge’s case is somewhat analogous. The “wrong” Inge alleges he and CMRA suffered is the
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same in both his federal and state claims as they are all based on the alleged misconduct by this
specific group of Defendants taken in relation to the CMRA and Inge. See Pet. ¶¶ 53–79. Some of
the deeds done may vary from claim to claim, but Inge’s allegations stem from his apparent discovery
of Board misconduct and the reactions of Board members to his accusations. Id. As discussed above,
Inge’s RICO claim is based upon certain Board members misappropriating CMRA money, misusing
CMRA debit cards, and engaging in insider deals. Id. ¶¶ 53–60. His state law claims, on the other
hand, are based on allegations that the CMRA failed to produce books and records, engaged in
possible electioneering, and perhaps prevented independent counsel from examining any misdeeds
within the organization. Id. ¶¶ 61–79.
The two groups of activities are, however, intertwined. Logic suggests that misappropriating
money, misusing debit cards, and engaging in insider deals would necessarily lead to a failure to
produce books and records, efforts to manipulate elections, and attempts to prevent independent
counsel from investigating claims. This is common sense. Severing claims that arise from such
intertwined facts risks running afoul of Eastus’s mandate that courts must not remand state law
claims unless they are “separate and independent” from the removed federal question claim. Eastus,
97 F.3d at 105; see also Lawler, 2010 WL 743925, at *7 (“the Court should not split apart claims that
are too closely interconnected when remanding part of a case to state court”). Thus, while what
caused Inge’s “wrongs” might be not be identical across the state and federal claims, the two sets of
causes are so intertwined as to make severing and remanding his state law claims inappropriate.
c.
Whether there are other compelling reasons
Finally, the Court turns to the final statutory factor: whether there are exceptional
circumstances that compel the court to decline jurisdiction. 28 U.S.C. § 1367(c)(4). The Fifth
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Circuit has found such compelling reasons where state-law claims in federal court were identical to
claims pending in state court. Hays Cnty Guardian v. Supple, 969 F.2d 111, 125 (5th Cir. 1992). The
Fifth Circuit has also used the common law factors that are addressed below as a tool to analyze this
factor; if the common law factors weigh heavily in favor of remand, then that itself is a compelling
reason to remand. Enochs, 641 F.3d at 159. This statutory factor of “compelling reasons” is used only
to examine “reasons that override any considerations that might lead to retaining the case.” Welch
v. Jannereth, 496 F. App’x 411, 413 (5th Cir. 2012).
Inge argues that the Defendants’ intent to re-litigate all of the derivative issues previously
litigated in state court creates such a compelling reason. Doc. 21, Mot. to Remand ¶¶ 6, 8.
Defendants, though, refute Inge’s contention and argue: (1) Inge offers no legal support for his
conclusion; (2) Inge, too, has sought re-litigation in federal court on several issues that the state
court decided in Defendants’ favor; (3) Defendants’ challenging Inge’s claims cannot be seen as a
particularly compelling or exceptional circumstance as federal courts are able to modify state court
orders in removed cases; and (4) Defendants have not had the ability to fully litigate over Inge’s
claims as he first brought the RICO claim in an amended petition filed a year after the original
petition. Doc. 32, Defs.’ Resp. 10–12 (citations omitted).12 Inge does not address these arguments
in his reply.
Neither Inge nor Defendants offer case law to support their arguments, save for Defendants
as to their argument that federal courts are permitted to overturn state court orders post-removal.
12
Defendants also argue that, during that year, “the parties . . . pursued extensive discovery and a
handful of preliminary matters,” and that Inge “provides no support for any contention that pursuit of
discovery in state court constitutes an exceptional circumstance or compelling reason for declining
supplemental jurisdiction.” Doc. 32, Defs.’ Resp. 11.
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See Doc. 32, Defs.’ Resp. 11. Unlike the court in Hays County Guardian where there were identical
state-law claims pending in state court, here, all state-law claims are currently in federal court.
Furthermore, as discussed below, the common law factors do not favor remand and thus do not offer
any additional compelling reasons to remand. The Court concludes that there are no compelling
reasons that would override a decision to retain the case.
ii.
Common law factors
Besides considering the statutory factors, a court also considers “values of judicial economy,
convenience, fairness, and comity” when determining whether to exercise supplemental jurisdiction
over a removed case. Carnegie-Mellon Univ., 484 U.S. at 350; Mendoza, 532 F.3d at 346. While Inge
does not address the relevant common law factors, Defendants argue that when considered together,
the factors weigh in favor of denying Plaintiff’s Motion to Remand. Doc. 32, Defs.’ Resp. 12–14.
Regarding judicial economy, Defendants argue the factor disfavors remand because both
parties have participated in extensive discovery prior to any substantive rulings. Doc. 32, Defs.’ Resp.
12. In Enochs, the Fifth Circuit determined that the factor of judicial economy favored remand
because the parties had participated in little discovery and had not briefed all the issues when the
court considered remand, so the danger of wasting time or money by duplicated research was not
present. 641 F.3d at 159. Unlike in Enochs, the parties in this lawsuit do run more of a risk of wasting
time and resources as the case has been pending in federal court since January of 2016. Doc. 1,
Removal Notice. The case, however, was in state court for about one year, as it was filed on
December 17, 2014. Id. at 2. The Court finds, then, that this factor is neutral as the parties have
actively litigated in both state and federal court for a substantial period of time.
The next factor, fairness, “concerns the prejudice to the parties that would arise from
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dismissal.” Parker & Parsley, 972 F.2d at 588. Defendants argue that the fairness factor favors
maintaining supplemental jurisdiction because maintaining parallel litigation in two venues would
be more expensive and there is a danger of inconsistent conclusions as many of the federal and state
issues are intertwined. Doc. 32, Defs.’ Resp. 12–13. The Court agrees.
Regarding convenience, Defendants argue that this factor, too, weighs against remand
because both the state court and the federal court are located in Dallas, Texas. Doc. 32, Defs.’ Resp.
at 13. In Enochs, the Fifth Circuit relied on location of the courts to determine the convenience
factor and concluded that the factor weighed in favor of remand because the federal court was not
in the same location as the parties, witnesses, and evidence; the state court, however, was located
near the parties. Enochs, 641 F.3d at 160. When considering convenience in relation to location, the
Court determines that the factor is neutral as the state and federal court are located within the same
city.
The last factor concerns the “important interests of federalism and comity,” where the limited
jurisdiction of the federal court must be considered and how federal courts are “not as well equipped
for determinations of state law as are state courts.” Enochs, 641 F.3d at 160 (citing Parker & Parsley,
972 F.2d at 588–89). The courts in Enochs and Parker & Parsley both found comity to weigh in favor
of remand, but in both cases the court had dismissed every federal claim that gave the court original
jurisdiction. Enochs, 641 F.3d at 158, 160; Parker & Parsley, 972 F.2d at 589. Here, however, the case
still includes a live federal claim that gives the Court original jurisdiction. Thus, the weight usually
given to interests of federalism and comity is not applicable.
As fairness favors retaining supplemental jurisdiction, and the remaining factors of judicial
economy, convenience, and comity are neutral, the Court concludes that the common law factors,
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when considered together, weigh in favor of maintaining supplemental jurisdiction over the
remaining state-law claims. Furthermore, after weighing the statutory and common law factors
together, the Court concludes that they favor retaining jurisdiction. Thus, this Court will continue
to exercise supplemental jurisdiction over Inge’s remaining state-law claims. As the Court will not
be remanding the case, Plaintiff’s additional request for attorneys’ fees under 28 U.S.C. § 1447(c)
is irrelevant because the statute only considers attorneys’ fees in the context of remand.
IV.
CONCLUSION
For the reasons stated above, the Court concludes that it may not remand the entire case,
has supplemental jurisdiction over the remaining state-law claims, and will continue to exercise such
supplemental jurisdiction. Therefore, Plaintiff’s Motion to Remand and Request for Attorneys’ Fees
(Doc. 21) is DENIED.
SO ORDERED.
SIGNED: September 15, 2016.
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