Target Strike, Inc. v. Marston & Marston, Inc. et al

Filing 298

REPORT AND RECOMMENDATIONS re 288 Motion to Sever, filed by Texas Research, Limited Liability Company, ADDKO, Inc., William Shaffer, Lou Kost Holdings, Ltd, William J. Hartley, L.K. & C.A., Inc., 281 Motion to Remand to State Court filed by Target Strike, Inc., be DENIED; 292 Motion for Hearing filed by Target Strike, Inc. DENYING as moot. Signed by Judge Nancy Stein Nowak. (mailed on 7/1/2011 by certified mail, or sent via electronic transmittal)(rg)

UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION

TARGET STRIKE, INC.,

§
§
Plaintiff,
§
§
v.
§
§
MARSTON & MARSTON, INC.;
§
MARSTON ENVIRONMENTAL, INC.; §
CLIFFORD R. “KIP” WILLIAMS;
§
GOLD REEF INTERNATIONAL, INC.; §
GOLD REEF OF NEVADA, INC.;
§
CRANDELL ADDINGTON;
§
SADIK AL-BASSAM;
§
RICHARD CRISSMAN CAPPS;
§
LOU B. KOST, JR.;
§
PAUL STROBEL;
§
PANTHER RESOURCES, INC.;
§
PANTHER RESOURCES
§
PARTNERS LLLP;
§
MEXIVADA MINING CORPORATION; §
& OTHER UNKNOWN DEFENDANTS §
ACTING IN CONCERT WITH THE
§
ABOVE NAMED DEFENDANTS,
§
§
Defendants.
§
§
§
***************************************

1

CIVIL ACTION NO.
SA-10-CV-0188-OLG (NN)

CLIFFORD R. “KIP” WILLIAMS;
RICHARD CRISSMAN CAPPS; and
PAUL STROBEL;

§
§
§
§
Counter-Plaintiffs,
§
§
v.
§
§
TARGET STRIKE, INC.; and
§
GOLD RESOURCES OF
§
NEVADA, LLC (GRN I).
§
§
Counter-Defendants. §
§
§
***************************************
§
CRANDALL ADDINGTON;
§
SADIK AL-BASSAM;
§
LOU B. KOST, JR.;
§
LOU KOST HOLDINGS, LTD.;
§
RESURRECTION CANYON, INC., f/k/a §
PANTHER RESOURCES, INC.;
§
RESURRECTION CANYON, LLLP, f/k/a §
PANTHER RESOURCES
§
PARTNERS, LLLP; ADDKO, INC.;
§
TEXAS RESEARCH, LLC; and
§
L.K. & C.A., INC.,
§
§
Counter-Plaintiffs,
§
§
v.
§
§
TARGET STRIKE, INC, and
§
GOLD RESOURCES OF
§
NEVADA, LLC (GRN I),
§
§
Counter-Defendants. §

2

***************************************
RESURRECTION CANYON, LLLP, f/k/a §
PANTHER RESOURCES
§
PARTNERS, LLLP,
§
§
Counter-Plaintiff,
§
v.
§
§
TARGET STRIKE, INC. and
§
GOLD RESOURCES OF
§
NEVADA, LLC (GRN I),
§
§
Counter-Defendants. §
§
***************************************
CLIFFORD R. “KIP” WILLIAMS,
§
RICHARD CRISSMAN CAPPS, and
§
PAUL STROBEL,
§
§
Counter-Plaintiffs,
§
v.
§
§
TARGET STRIKE, INC. and
§
GOLD RESOURCES OF
§
NEVADA, LLC (GRN I),
§
§
Counter-Defendants. §
TWELFTH REPORT AND RECOMMENDATION
TO:

Honorable Orlando Garcia
United States District Judge
This report and recommendation addresses plaintiff Target Strike’s motion to

remand this case (docket entry # 281). After considering the motion and the applicable
legal principles, I recommend denying the motion.

3

Procedural background. Target Strike initiated this lawsuit in state court on
February 10, 2010. The defendants removed the case to this court on March 5, 2010.1
Target Strike amended its complaint on April 2, 2010. The amended complaint added a
claim for false designation of origin under 15 U.S.C. § 1125(a),2 added Gold Resources of
Nevada, Inc. (GRN I) as a plaintiff, and stated that a “federal question is raised by the
complaint, giving rise to subject matter under 28 U.S.C. § 1331.” 3
On April 16, 2010, defendants Marston & Marston, Inc. and Marston
Environmental, Inc. (together, Marston) asked for a more definite statement4 and moved
to dismiss.5 Defendants Crandell Addington, Sadik Bassam, and Lou B. Kost (the
Addington defendants) moved to dismiss.6 GRN I filed a complaint on May 7, 2010.7
GRN I’s complaint included a claim for false designation of origin under 15 U.S.C. §
1125(a) and clarified that claim by alleging that the defendants falsely described the

1

Docket entry # 1.

2

Docket entry # 25, ¶¶ 64-67.

3

Docket entry # 25, ¶ 23.

4

Docket entry # 31.

5

Docket entry # 32.

6

Docket entry # 29.

7

Docket entry # 49.

4

origin of a technology known as Metal Miners Plus.8 Defendant Mexivada Mining
Corporation then moved to dismiss on various grounds.9 The court resolved the thenpending motions in favor of the plaintiffs.10
Nine defendants sought to compel arbitration of the plaintiffs’ claims.11 The
motion to compel arbitration was resolved in favor of the plaintiffs.12 On October 4,
2010, the plaintiffs sought to amend their respective complaints to file a single
complaint. The amended complaint — the second amended complaint and the live
complaint in this case — deleted a previously-pleaded claim under the Texas Theft

8

Docket entry # 119, ¶ 69.

9

Docket entry # 60.

10

Docket entry # 72 (denying Martson’s motion for more definite statement
because the amended complaints gave Marston fair notice of the plaintiffs’ claims);
docket entry # 73 (recommending that Marston’s motion to dismiss be denied because
Target Strike’s amended complaint added sufficient detail about reliance on alter ego
liability and because GRN I’s amended complaint identified GRN I’s causes of action);
docket entry # 74 (recommending denying the Addington defendants’ motion to dismiss
because amended pleadings provided sufficient specificity); docket entry # 79 (denying
Marston’s motion to dismiss); docket entry # 80 (denying the Addington defendants’
motion to dismiss); docket entry # 137 (recommending denying Mexivada’s motion to
dismiss); & docket entry # 146 (denying Mexivada’s motion to dismiss).
11

Docket entry # 108.

12

Docket entry # 136 (explaining that the motion to compel arbitration should be
denied because the underlying arbitration agreement did not apply to the parties or the
claims in dispute); docket entry # 146 (denying motion to compel arbitration).

5

Liability Act.13
On November 17, 2010, the plaintiffs sought to remove their case from the jury
docket, arguing that neither side properly requested a jury trial.14 The court denied the
request.15 Discovery was conducted, discovery disputes were resolved, dispositive
motions and pretrial submissions were filed. One of the dispositive motions sought
judgment on the pleadings for the false designation of origin claim.16 In the motion, the
defendants attacked Target Strike’s suggestion that Metal Miners Plus is suspiciously
similar to its Target Forecasting software.17 After conducting discovery on the
capabilities and copyright of Metal Miners Plus, Target Strike voluntarily relinquished
the claim.18 GRN I non-suited its claims,19 leaving Target Strike as the only plaintiff.
After the court entered summary judgment in favor of six defendants20 and

13

Docket entry # 111.

14

Docket entry # 82.

15

Docket entry # 144 (recommending denying motion to withdraw case from jury
docket); docket entry # 150 (denying motion to withdraw case from jury docket).
16

Docket entry # 181.

17

Docket entry # 181, p. 9.

18

Docket entry # 212.

19

Docket entry # 240.

20

Docket entry # 242 (recommending granting motions for summary judgment
filed by William Hartley and William Shaffer); docket entry # 258 (granting motions for
summary judgment and dismissing claims against Hartley and Shaffer); docket entry #

6

excluded Target Strike’s expert,21 and after the undersigned recommended summary
judgment in favor of three other defendants,22 Target Strike moved to remand this case
to state court.23
Target Strike’s motion to remand. Target Strike’s motion can be summarized as
follows: (1) Target Strike maintains no basis existed for removing this case because the
original complaint did not raise a federal question. (2) Target Strike contends that
although it later amended its complaint to add a federal question, relinquishing that
claim left no basis for federal jurisdiction. Resolving the motion requires the district
court to examine three precise points of time. The first point is the time of removal.
Removability. A defendant may remove to federal court “any civil action
brought in State court of which the district courts of the United States have original
jurisdiction.”24 “[R]emoval statutes are to be construed strictly against removal and for

259 (recommending summary judgment for defendants Texas Research, LLC; Kost
Holdings, Ltd.; ADDKO, Inc.; and L.K. & C.A., Inc.); docket entry # 278 (granting
summary judgment motion filed by Texas Research, LLC; Kost Holdings, Ltd.; ADDKO,
Inc.; and L.K. & C.A., Inc.).
21

Docket entry # 244 (recommending excluding Target Strike’s damages expert);
docket entry # 270 (excluding Target Strike’s damages expert); docket entry # 284
(explaining why Target Strike should not be permitted to supplement its expert report).
22

Docket entry # 262 (recommending summary judgment in favor of defendants
Crandell Addington, Lou B. Kost, and Sadik Al-Bassam).
23

24

Docket entry # 281.
28 U.S.C. §§ 1441(a) and 1446(a).

7

remand.”25 “To support removal, the defendant bears the burden of establishing federal
jurisdiction over the state-court suit.” 26 “If at any time before final judgment it appears
that the district court lacks subject matter jurisdiction, the case shall be remanded.” 27
Ordinarily, two bases exist for subject matter jurisdiction: federal question
jurisdiction and diversity jurisdiction. Under 28 U.S.C. § 1332, a federal court has
jurisdiction over controversies involving disputes between citizens of different states
where the amount in controversy exceeds $75,000.00. The parties do not dispute the
inapplicability of diversity of jurisdiction.
Under 28 U.S.C. § 1331, a federal court has jurisdiction over controversies
involving questions of federal law. When federal jurisdiction is based on a federal
question, the action must arise “under the Constitution, laws, or treaties of the United
States.”28 The parties disagree about whether this case involved a question arising under
federal law at the time of removal.
Time of removal. The defendants removed this case asserting the case “involves
a federal question under the Federal Copyright Act under 17 U.S.C. §§ 201 and 301(a).” 29

25

Eastus v. Blue Bell Creameries, 97 F.3d 100, 106 (5th Cir. 1996).

26

Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 365 (5th Cir. 1995).

27

28 U.S.C. § 1447(c).

28

28 U.S.C. § 1331.

29

Docket entry # 1, ¶ 5(A).

8

At the time of removal, Target Strike had not explicitly stated a cause of action created
by federal law, but instead, pleaded allegations of the type “Justice Frankfurter called
the ‘litigation-provoking problem,’ — the presence of a federal issue in a state-created
cause of action.”30 Because Target Strike’s original petition had not stated a cause of
action created by federal law, the court must determine whether Target Strike alleged a
claim arising under federal law.
To determine whether Target Strike pleaded a claim arising under federal law, the
district court must look to Target Strike’s original petition because that was the live
complaint at the time of removal.31 “There is no ‘single, precise definition’ of [the
arising-under] concept; rather, ‘the phrase ‘arising under’ masks a welter of issues
regarding the interrelation of federal and state authority and the proper management of
the federal judicial system.’”32 “[A] case may arise under federal law ‘where the
vindication of a right under state law necessarily turned on some construction of federal
law.’”33 “[T]he party who brings a suit is master to decide what law he will rely upon
30

Merrell Dow Pharm. v. Thompson, 478 U.S. 804, 810 (1986).

31

See Air Prods. & Chems. v. Reichhold Chems., 755 F.2d 1559, 1562 (Fed. Cir. 1985)
(“[A] court must review and analyze the plaintiff’s pleadings, with special attention
directed to the relief requested by the plaintiff, in making the determination as to
whether a cause of action arises under the patent laws, or is a cause of action based upon
a licensing agreement.”).
32

Merrell Dow Pharm., 478 U.S. at 808 (citation omitted).

33

Merrell Dow Pharm., 478 U.S. at 808.

9

and therefore…determine[s] whether he will bring a ‘suit arising under’…the United
States by his declaration or bill.” 34
The original petition complained about the misappropriation of trade secrets.
The alleged trade secrets are the locations of mining opportunities in Nevada
determined by Target Strike’s Target Forecasting technology. Target Strike characterizes
the locations as its proprietary information. Under a cause of action captioned “Texas
Theft Liability Act,” Target Strike alleged that the defendants created a story to cover up
how they learned of the locations of mining opportunities:
Defendants have even fraudulently attempted to explain their possession
of the data, concocting the fiction that they discovered it on their own
through some type of allegedly proprietary software system known as
Metal Miners Plus. The defendants’ attempt to explain their possession of
[Target Strike’s] trade secrets in this manner is nothing but a ruse to
fraudulently conceal their wrongdoing and the injury caused to [Target
Strike]. In truth, Metal Miners Plus was the result of work performed
under the [Target Strike/Marston] consulting agreement, and therefore
constitutes a technology owned by [Target Strike].35

The latter statement asserted ownership of a copyrighted work because Metal Miners
Plus is a copyrighted work owned by certain defendants.
Under 17 U.S.C. § 201, a copyright “vests initially in the author or authors of [a]

34

The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25 (1913).

35

Docket entry # 1, state court papers, p. 14 of Target Strike’s original petition,
imaged as p. 20 of ex. 1.

10

work” and “authors of a joint work are coowners of copyright in the work.” 36 Federal
copyright law provides for civil actions and remedies for a copyright owner.37 Federal
copyright law also reflects Congress’s intent for federal copyright law to preempt state
common law and statutory law equivalent to copyright.38 By asserting ownership of a
copyrighted work — that is, ownership of Metal Miners Plus — Target Strike pleaded a
litigation-provoking problem involving copyright law. By pleading a litigationprovoking problem involving copyright law, Target Strike’s complaint involved a right
arising under federal law. As pleaded, the resolution the Texas-Theft-Liability-Act claim
necessarily turned on the construction of copyright law because Target Strike’s
allegations put the ownership of Metal Miners Plus in dispute. Knowledge of the
complained-about locations would not constitute theft if the defendants acquired the
knowledge by virtue its wholly-owned technology, rather than because of work
provided under the Target Strike/Marston consulting agreement and as a result of
technology owned by Target Strike.
“Although Target Strike now asserts that it “was certainly not invoking the

36

17 U.S.C. § 201(a).

37

17 U.S.C. §§ 501-05.

38

See Daboub v. Gibbons, 42 F.3d 285, 288 (5th Cir. 1995) (“The Copyright Act
expressly preempts all causes of action falling within its scope, with a few exceptions.”).

11

Federal Copyright Act to state a federal claim,” 39 it did not deny a claim under federal
copyright law at the time of removal. Instead, Target Strike acquiesced to the
defendants’ characterization of its allegations, amended its complaint to allege the false
origin of Metal Miners Plus and to assert ownership of Metal Miners Plus,40 and pursued
discovery about the origin and copyright of Metal Miners Plus.41 While Target Strike
relies on its own characterization of the applicable cause of action — that defendant
violated section 31.05 of the Texas Penal Code — as supporting its assertion that it was
not pursuing a copyright claim,42 Target Strike deleted that claim in the second amended

39

Docket entry # 281, p. 4.

40

Docket entry # 119, ¶¶ 68-72.

41

See docket entry # 211, ex. D, pp. 59-61, 261 (on Nov. 15, 2010, Target Strike
deposed Clifford Kip Williams about the copyright for Metal Miners Plus); id., ex. E, pp.
72-75, 167-69, 208-09 (on Nov. 19, 2010, Target Strike deposed Crandell Addington about
the difference in Metal Miners Plus and Target Forecasting, and about the copyright for
Metal Miners Plus); id., ex. F, p. 207, 249-50 (on Dec. 9, 2010, Target Strike deposed Lou
Kost about the creation and marketing of Metal Miners Plus); docket entry # 222, ex. 32,
pp. 46-48 (on Dec. 20, 2010, Target Strike deposed William Hartley about the capabilities
of Metal Miners Plus and whether Hartley discussed Metal Miners Plus with Clifford
Kip Williams, Crandell Addington and Lou Kost). See also docket entry # 216, ex.55
(Target Strike identified Marston’s involvement in the development of Metal Miners
Plus, and the development of any software while providing services to Target Strike, as
subjects for the Marston defendants’ depositions to be held on Dec. 21, 2010).
42

See docket entry # 281, p. 4 (asserting that its conclusion is supported by that
section of its complaint explicitly alleging defendant violated section 31.05 of Texas
Penal Code); docket entry # 1, ex. 1, Target Strike’s original complaint, p. 15, imaged as
p. 21 (cause of action captioned “Violation of Texas Theft Liability Act”).

12

complaint,43 after it added the claim under 15 U.S.C. § 1125(a). Deleting the state-law
claim and adding the federal claim reflected Target Strike’s choice to pursue ownership
in a copyrighted work.
Had Target Strike disavowed a federal claim at the time of removal and sought to
remand the case, I would have characterized the quoted language as insufficient to state
a claim arising under federal copyright law 44 and recommended remanding this case.
But instead, Target Strike remained silent about the ground for removal and
affirmatively invoked federal court jurisdiction by adding a federal claim aimed at
ownership of Metal Miners Plus. Target Strike deleted the federal claim only after
conducting discovery about the copyright for Metal Miners Plus.
As the party who brought this lawsuit, Target Strike was the master to decide
what law it would rely upon and therefore determine whether it would pursue a claim
arising under copyright law.45 By choosing not to seek remand and pursuing discovery
on the copyright for Metal Miners Plus, Target Strike admitted that it challenged the
ownership of a copyrighted work and claimed ownership in the Metal Miners Plus,

43

Docket entry # 111 (seeking leave to amend, in part, to delete cause of action
under Texas Theft Liability Act).
44

See Spectrum Creations v. Carolyn Kinder Int’l, 514 F. Supp. 2d 934, 949-950 (W.D.
Tex. 2007) (determining that plaintiff’s claim for trade secret misappropriation based on
the misappropriation of product designs was not preempted by federal copyright law).
45

See The Fair, 228 U.S. at 25.

13

conceding it pursued a claim arising under federal law. Pursuing a claim arising under
federal law established federal jurisdiction at the time of removal.
Time of the first amended complaint. What occurred after removal is
remarkable in retrospect. Target Strike affirmatively invoked this court’s jurisdiction by
amending its complaint to add a claim under 15 U.S.C. § 1125(a).46 The amendment is
the second point in time relevant to the district court’s consideration of the motion to
remand.
Although subject matter jurisdiction cannot be waived,47 courts agree that subject
matter jurisdiction can be cured by the plaintiff’s affirmative action to invoke the
jurisdiction of a federal court. In Moffitt v. Residential Funding Company, the Fourth
Circuit considered subject matter jurisdiction where “the plaintiffs filed amended
complaints in federal court that alleged facts giving rise to federal diversity jurisdiction
under the Class Action Fairness Act of 2005 (“CAFA”),” 48 after their cases were removed
and prior to moving to remand. Without deciding whether subject matter jurisdiction
existed at the time of removal — instead, the court assumed subject matter jurisdiction

46

Docket entry # 25, ¶¶ 64-67.

47

See In re Shell Oil Co. 932 F.2d 1523, 1527 n.7 (5th Cir. 1991) (“[I]t was well
established that a plaintiff could waive objections to removal on any grounds other than
a lack of subject matter jurisdiction by failing to assert such objections prior to engaging
in affirmative conduct in federal court.”).
48

Moffitt v. Residential Funding Co., 604 F.3d 156, 157-58 (4th Cir. 2010).

14

did not exist — the court determined the “plaintiffs independently conferred
jurisdiction on the district court by filing their amended class action complaints [by
alleging facts that clearly gave rise to federal jurisdiction under CAFA] prior to moving
to remand.”49 Other courts have reached the same result.50
Judge Posner, writing for the Seventh Circuit, explained the reasoning for this
result in Bernstein v. Lind-Waldock & Company. In Bernstein, the court determined that the
lawsuit was not removable to federal court at the time of removal, but found an
amended complaint alleging a federal cause of action cured jurisdiction. Judge Posner
reasoned as follows:
[A]fter [the plaintiff’s] motion to remand was denied, he threw in the
towel, as it were, and filed an amended complaint in federal court that
included an unmistakable federal cause of action against the [defendant].
The amended complaint was thus within the original jurisdiction of the
federal district courts and it makes no difference that it was filed only
because [the plaintiff’s] previous suit had improperly been removed. If he
was convinced that the original action was not removable he could have
stuck by his guns and we would have vindicated his position on appeal.
But once he decided to take advantage of his involuntary presence in

49

Moffitt, 604 F.3d at 159-60.

50

See Akin v. Ashland Chem. Co., 156 F.3d 1030, 1036 (10th Cir. 1998) (“After
removal of the case to federal court and the motion to remand was denied, plaintiffs
voluntarily amended their complaint, asserting a cause of action in federal court against
defendants….This court holds that plaintiffs cannot voluntarily invoke, and then
disavow, federal jurisdiction.”); Barbara v. N.Y. Stock Exch, 99 F.3d 49, 56 (2d Cir. 1996)
(“[I]f a district court erroneously exercises removal jurisdiction over an action, and the
plaintiff voluntarily amends the complaint to allege federal claims, we will not remand
for want of jurisdiction.”).

15

federal court to add a federal claim to his complaint he was bound to
remain there. Otherwise he would be in a position where if he won his case
on the merits in federal court he could claim to have raised the federal
question in his amended complaint voluntarily, and if he lost he could
claim to have raised it involuntarily and to be entitled to start over in state
court. He “cannot be permitted to invoke the jurisdiction of the federal
court, and then disclaim it when he loses.” 51
Like the plaintiff in Bernstein, Target Strike took advantage of its involuntary
presence in federal court and added a federal claim. Had Target Strike been convinced
its original petition was not removable it would have stuck by its guns and sought
vindication on appeal. Instead, Target Strike sought the federal court’s help to pursue
ownership of Metal Miners Plus. Target Strike was content with federal court so long as
it obtained favorable rulings on various motions. But once it received unfavorable
rulings, Target Strike sought a remand. Target Strike should not be permitted to invoke
the jurisdiction of the federal court and then disclaim it when it loses.52 Even if subject
matter jurisdiction did not exist at the time of removal, Target Strike cured jurisdiction
by filing an amended complaint and adding a federal claim.

51

Bernstein v. Lind-Waldock & Co., 738 F.2d 179, 185-86 (7th Cir. 1984).

52

Accord Brough v. United Steelworkers of Am., 437 F.2d 748, 750 (1st Cir. 1971)
(“Plaintiff did not proceed simply on the basis of his original theory of recovery,
however. He amended his complaint to add a second count, alleging breach of the
union’s duty of fair representation, a duty that obviously arises under federal law. This
amendment had the effect of curing the defect in the district court’s jurisdiction. Indeed,
had such an amendment been made while the parties were in the state court, the case
would have been immediately removable. Clearly plaintiff cannot be permitted to
invoke the jurisdiction of the federal court, and then disclaim it when he loses.”).

16

Time of filing the motion to remand. Once Target Strike relinquished its federal
claim — the claim for false designation of origin under 15 U.S.C. § 1125(a) challenging
ownership of Metal Miners Plus — the only basis for federal court jurisdiction was
supplemental jurisdiction over Target Strike’s state-law claims. That basis is the present
basis for jurisdiction. As a case presenting only state-law claims, the court may construe
Target Strike’s motion as asking the district court to decline to exercise supplemental
jurisdiction. This question presents the third point in time relevant to the district court’s
consideration of motion to remand — when Target Strike moved to remand this case.
A federal court may exercise supplemental jurisdiction “over…[state-law] claims
that are so related to claims in the action within such original jurisdiction that they form
part of the same case or controversy….”53 A federal court may decline to exercise
supplemental jurisdiction over state-law claims if “the district court has dismissed all
claims over which it has original jurisdiction . . . .” 54 Although federal courts ordinarily
decline to exercise jurisdiction over pendent state-law claims when “all federal claims
are dismissed or otherwise eliminated from a case prior to trial,” this general rule is
neither mandatory nor absolute.55

53

28 U.S.C. § 1367(a).

54

28 U.S.C. § 1367(c)(3).

55

Batiste v. Island Records, 179 F.3d 217, 227 (5th Cir. 1999).

17

Where the resolution of all other claims comes late in an action and substantial
judicial resources have already been expended in the case, declining to exercise
supplemental jurisdiction may be inappropriate.56 In determining whether to exercise
supplemental jurisdiction, “a federal court should consider and weigh . . . the values of
judicial economy, convenience, fairness, and comity in order to decide whether to
exercise jurisdiction over a case brought in that court involving pendent state-law
claims.”57 “If the plaintiff has attempted to manipulate the forum, the court should take
this behavior into account in determining whether the balance of factors to be considered
under the pendent jurisdiction doctrine support a remand in the case.” 58 In this case, the
balance of applicable factors weighs in favor of exercising supplemental jurisdiction.
Judicial economy. The defendants accurately described the consideration of
judicial economy: “[T]he judicial staff, the Magistrate Judge, and this Court have
expended many hundreds of hours…on this litigation….” 59 To remand this case now

56

See Batiste, 179 F.3d at 227 (determining that the district court erred by declining
to exercise supplemental jurisdiction over the plaintiffs’ state law claim where the case
had been pending in the district court for almost three years and the trial was scheduled
to begin one month later; the appellate court found that “the factors of judicial economy,
convenience, and fairness to the parties” required the district court to continue with the
state law claim).
57

Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988).

58

Cohill, 484 U.S. at 357.

59

Docket entry # 286, p. 1.

18

would not promote judicial economy. Numerous pleadings and orders — 280
documents — were filed in this case before Target Strike moved to remand. The number
of reports and recommendations alone reflects the court’s familiarity with this case. No
court is more familiar with this case than the federal district court.
Despite countless non-dispositive motions and numerous dispositive motions, the
court has efficiently resolved the issues in this case. Remanding this case to state court
would require a state court judge to reach the district court’s level of familiarity with this
case — a level that must be reached without the assistance of law clerks — before
resolving pending matters. Reaching the required level of familiarity would require the
parties to duplicate much of their prior efforts on this case. There is no doubt the district
court is in the best position to resolve pending matters because the district court has
already invested significant judicial resources in this case.
Fifth Circuit “case law is clear that when a district court declines to exercise
jurisdiction over remaining state law claims following the dismissal of all federal-law
claims and remands a suit after investing a significant amount of judicial resources in
the litigation analogous to that invested by the district court in this case, that court has
abused its discretion under 28 U.S.C. § 1367.” 60 In addition, if this case were remanded,
there is a significant risk that Target Strike will attempt to re-litigate in state court

60

Brookshire Bros. Holding v. Dayco Products, 554 F.3d 595, 602 (5th Cir. 2009).

19

rulings made against it by the district court, including those relating to expert testimony
and summary judgment.61 The interest of judicial economy weighs in favor of exercising
supplemental jurisdiction.
Convenience. There is no convenience to be gained from remanding this case to
state court. The state court in which this case is filed was located within blocks of the
location of the district court. Because the locations are the same, remanding this case
would not be more convenient for either parties, witnesses, or evidence. The parties are
already before the federal court; the witnesses have already been deposed under the
Federal Rules of Civil Procedure, and evidence has already been discovered under the
federal discovery rules. The interest of convenience weighs in favor of exercising
supplemental jurisdiction.
Fairness. “The fairness factor concerns the prejudice to the parties that would
arise from dismissal, and it too weighs in favor of dismissal.” 62 No question exists that
22 defendants would be prejudiced by remanding this case at this late date. The

61

Accord Brookshire Bros. Holding, 554 F.3d at 603 (“Finally, one more reason for
reversing the remand order is that, if the order is not reversed, there is a significant risk
that Brookshire will attempt to re-litigate in state court rulings made against it by the
district court, including those relating to choice of law, prescription, breach of implied
warranty, and application of Texas's economic-loss rule, and that this would cause the
flexpipe defendants substantial prejudice.”).
62

Parker & Parsley Petroleum Co. v. Dresser Indus., 972 F.2d 580, 588 (5th Cir. 1992).

20

defendants estimated they have spent over a million dollars on this litigation.63
Remanding this case would unnecessarily increase that cost.
Comity. “Needless decisions of state law should be avoided both as a matter of
comity and to promote justice between the parties, by procuring for them a surer-footed
reading of applicable law.”64 The only issues remaining in this case are issues of statelaw, but those issues are not particularly complex. The case presents no novel questions
of state law and no issue of first impression. The district court is experienced in the
application of state law. The district court can provide the parties with a sure-footed
application of state-law and a jury with sure-footed instructions about state law. At this
point, comity does not weigh in favor of remand.
Manipulation. The proceedings in this case indicate Target Strike seeks to
manipulate the forum. So long as Target Strike prevailed on legal challenges,65 it did not

63

Docket entry # 286, p. 1.

64

United Mine Workers of America v. Gibbs, 383 U.S. 715, 726 (1966).

65

Docket entry # 72 (denying Martson’s motion for more definite statement
because the amended complaints gave Marston fair notice of plaintiffs’ claims); docket
entry # 73 (recommending that Marston’s motion to dismiss be denied because Target
Strike’s amended complaint added sufficient detail about reliance on alter ego liability
and because GRN I’s amended complaint identified GRN I’s causes of action); docket
entry # 74 (recommending denying the Addington defendants’ motion to dismiss
because amended pleadings provided sufficient specificity); docket entry # 79 (denying
Marston’s motion to dismiss); docket entry # 80 (denying the Addington defendants’
motion to dismiss); docket entry # 136 (explaining that the motion to compel arbitration
should be denied because the underlying arbitration agreement did not apply to the

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question the jurisdiction of the federal court. After losing legal challenges,66 Target
Strike sought to remand the case. This factor weighs against remand.
Recommendation. Target Strike’s challenge comes too late. Had Target Strike
challenged the basis of removal when this case was removed, and disavowed a claim
arising under federal law, a remand would have been appropriate. As master of its
complaint, Target Strike’s acquiescence to the defendants’ characterization of its original
complaint and its subsequent actions showed Target Strike challenged the ownership of
a copyrighted work. That challenge constituted a claim arising under federal law and
served as a basis for federal-question jurisdiction. Even if subject matter jurisdiction was
lacking at removal, Target Strike cured jurisdiction by quickly amending its complaint
and adding a federal claim. After Target Strike relinquished its federal claim, state-law
claims — over which the court has supplemental jurisdiction — remain. The balance of

parties or the claims in dispute); docket entry # 137 (recommending denying Mexivada’s
motion to dismiss); & docket entry # 146 (denying Mexivada’s motion to dismiss and
denying motion to compel arbitration).
66

Docket entry # 242 (recommending summary judgment in favor of Hartley and
Shaffer); docket entry # 258 (granting motions for summary judgment and dismissing
claims against Hartley and Shaffer); docket entry # 259 (recommending summary
judgment for defendants Texas Research, LLC; Kost Holdings, Ltd.; ADDKO, Inc.; and
L.K. & C.A., Inc.); docket entry # 262 (recommending summary judgment in favor of
defendants Addington, Kost, and Al-Bassam); docket entry # 270 (excluding Target
Strike’s damages expert); docket entry # 278 (granting summary judgment motion filed
by Texas Research, LLC; Kost Holdings, Ltd.; ADDKO, Inc. and L.K. & C.A., Inc.);
docket entry # 284 (explaining why Target Strike should not be permitted to supplement
its expert report).

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applicable factors weighs in favor of exercising supplemental jurisdiction. For these
reasons, I recommend denying Target Strike’s motion to remand (docket entry # 281).
If the court accepts this recommendation, no reason exists to sever the defendants
who have obtained summary judgment. After Target Strike asked for remand, the thusfar prevailing defendants moved for a severance and a final judgment out of abundance
of caution, to preserve the rulings already made in their favor and to avoid additional
defense costs.67 If the court denies the motion to remand, it can deny the defendants’
motion to sever (docket entry # 288) as unnecessary. The court can also deny Target
Strike’s motions for a hearing on its motion to remand (docket entry # 292) as moot.
Instructions for Service and Notice of Right to Object/Appeal. The United
States District Clerk shall serve a copy of this report and recommendation on all parties
by either (1) electronic transmittal to all parties represented by attorneys registered as a
“filing user” with the clerk of court, or (2) by mailing a copy to those not registered by
certified mail, return receipt requested. Written objections to this report and
recommendation must be filed within 14 days after being served with a copy of same,
unless this time period is modified by the district court.68 Such party shall file the
objections with the clerk of the court, and serve the objections on all other parties and the

67

Docket entry # 288, p. 2.

68

28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b).

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magistrate judge. A party filing objections must specifically identify those findings,
conclusions or recommendations to which objections are being made and the basis for
such objections; the district court need not consider frivolous, conclusive or general
objections. A party’s failure to file written objections to the proposed findings,
conclusions and recommendations contained in this report shall bar the party from a de
novo determination by the district court.69 Additionally, failure to file timely written
objections to the proposed findings, conclusions and recommendations contained in this
report and recommendation shall bar the aggrieved party, except upon grounds of plain
error, from attacking on appeal the unobjected-to proposed factual findings and legal
conclusions accepted by the district court.70
SIGNED on June 30, 2011.

_____________________________________
NANCY STEIN NOWAK
UNITED STATES MAGISTRATE JUDGE

69

Thomas v. Arn, 474 U.S. 140, 149-52 (1985); Acuña v. Brown & Root, 200 F.3d 335,
340 (5th Cir. 2000).
70

Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428-29 (5th Cir. 1996).

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