Thrive Systems et al v. Stephenson et al

Filing 20

MEMORANDUM DECISION denying as moot 3 Motion for Protective Order ; denying as moot 8 Motion to Vacate ; granting in part and denying in part 13 Motion to Remand to State Court ; granting in part and denying in part 13 Motion for Attorney Fees ; striking the hearing set for 01/10/2013. Signed by Judge Ted Stewart on 12/27/2012. (asp)

IN THE UNITED STATES COURT FOR THE DISTRICT OF UTAH
NORTHERN DIVISION

THRIVE SYSTEMS, INC., THRIVE
NATIONAL CORPORATION, and
GRANDVIEW CORPORATE CENTRE,
LLC,
Plaintiffs,

MEMORANDUM DECISION AND
ORDER ON MOTION TO REMAND
AND FOR ATTORNEY FEES

vs.

J. HOYT STEPHENSON, JOSEPH
STEPHENSON, KIM STEPHENSON
SMITH, SETH SMITH, CHASE
CONSTANTINO, KERBY BARKER, and
JOHN and JANE DOES I-X

Case No. 1:12-CV-198 TS

Defendants.

This matter is before the Court on Plaintiffs Thrive Systems, Inc., Thrive National
Corporation, and Grandview Corporate Centre’s Motion to Remand and for Attorney Fees.1 For
the reasons discussed below, the Court will grant in part and deny in part Plaintiff’s Motion.

1

Docket No. 13.
1

I. BACKGROUND
Plaintiffs filed their Complaint in this action on or about September 17, 2012, in the
Second District Court for the State of Utah. Defendants then removed the case to this Court on
September 24, 2012, arguing that this Court has diversity jurisdiction to hear this case pursuant
to 28 U.S.C. § 1332. Although the parties agree that Defendant Chase Constantino
(“Constantino”) is domiciled in Utah, Defendants argue that his presence in this suit does not
destroy complete diversity because he was fraudulently joined as a defendant.
On October 24, 2012, Plaintiffs filed their Motion to Remand and for Attorney fees,
arguing that the Court lacks subject matter jurisdiction to hear this case because Defendant J.
Hoyt Stephenson is domiciled in Utah, and Constantino was properly joined as a Defendant.
Plaintiffs also argue that they are entitled to attorney fees because Defendants’ removal of this
case was objectively unreasonable.
This is not the first case before this Court involving Stephenson’s domicile. On June 14,
2012, this Court dismissed one such related case because Stephenson was domiciled in Utah and
the Court therefore lacked diversity jurisdiction.2 The Honorable David Sam also held that
Stephenson was domiciled in Utah on September 13, 2012,3 and again, in a separate case, on
September 14, 2012.4

2

Middleton v. Stephenson, 2012 WL 2224451, at *6 (D. Utah June 14, 2012).

3

Memorandum Decision and Order, Stephenson v. Omni Health & Fitness Club of
Mobile, LLC, No. 1:12-CV-100, (D. Utah Sept. 13, 2012), ECF No. 45.
4

Order on Motion to Remand, Metronomics, Inc. v. Stephenson, No. 1:12-CV-106, (D.
Utah Sept. 14, 2012), ECF No. 19.
2

II. DISCUSSION
A.

STEPHENSON’S DOMICILE
Plaintiffs first argue that because this Court has previously determined that Stephenson

was domiciled in Utah, the principles of issue preclusion prevent Defendants from re-litigating
that issue in this case.
Generally speaking, issue preclusion applies when the following four requirements are
met:
(1) the issue previously decided is identical with the one presented in the action in
question, (2) the prior action has been finally adjudicated on the merits, (3) the
party against whom the doctrine is invoked was a party, or in privity with a party,
to the prior adjudication, and (4) the party against whom the doctrine is raised had
a full and fair opportunity to litigate the issue in the prior action.5
“There is an important exception to the general rule that a final adjudication on the merits is a
prerequisite to issue preclusion. It has long been acknowledged that ‘[t]he principles of res
judicata apply to questions of jurisdiction as well as to other issues.’”6 “In particular, dismissals
for lack of jurisdiction ‘preclude relitigation of the issues determined in ruling on the jurisdiction
question.’”7

5

Park Lake Res. Ltd. Liab. v. U.S. Dep’t of Agric., 378 F.3d 1132, 1136 (10th Cir. 2004)
(quoting Dodge v. Cotter Corp. 203 F.3d 1190, 1198 (10th Cir. 2000)).
6

Id. (quoting Am. Surety Co. v. Baldwin, 287 U.S. 156, 166 (1932)) (alteration in
original).
7

Id. (quoting Matosantos Comm. Corp. v. Applebee’s Int’l Inc., 245 F.3d 1203, 1209
(10th Cir. 2001)).
3

In this case, the parties dispute only the first requirement for issue preclusion: whether the
issue before the Court (Stephenson’s domicile) is identical to the issue already decided in three
prior cases before the Court. Defendants argue that the issue before the Court today differs from
issues previously decided in two respects: (1) the prior cases did not specifically state that
Stephenson was domiciled in Utah, but rather stated that “Stephenson has not carried his burden
of establishing domicile in Wyoming;”8 and (2) citizenship in the prior cases was determined as
of a different date than the date used for determining Stephenson’s citizenship in the current case.
The Court will address these arguments in turn.
Defendants’ first argument fails because the Court’s prior decisions were tantamount to a
finding that Stephenson was domiciled in Utah. In each of the three prior cases, Stephenson bore
the burden of persuading the Court that he was domiciled in Wyoming, instead of Utah. When
Stephenson failed to meet that burden, the implication was that Stephenson was domiciled in
Utah and complete diversity did not exist. Accordingly, each case was dismissed.
Here, Stephenson attempts for the fourth time to persuade this Court that he is domiciled
in Wyoming, instead of Utah. But Stephenson has already had his day in court on this issue, and
the principles of issue preclusion preclude him from having yet another bite at the same apple.
Defendants’ second argument fails because Defendants have failed to show Stephenson’s
domicile changed in the time since the Court found that he was domiciled in Utah. “[D]iversity
of citizenship is assessed at the time the action is filed.”9 Similarly, when a case has been

8

Docket No. 17, at 17.

9

Freeport-McMoRan, Inc. v. K N Energy, Inc., 498 U.S. 426, 428 (1991).
4

removed from state to federal court, “diversity of citizenship is determined as of the time of the
state court filing.”10 The three cases in which Stephenson was determined to be domiciled in
Utah were filed on March 31, 2012; April 13, 2012; and May 7, 2012. Plaintiffs filed their
Complaint in this case on September 17, 2012. Defendants have not called the Court’s attention
to any facts that show a change in Stephenson’s domicile between those dates. Therefore, the
issue of Stephenson’s domicile is the same issue that has already been litigated three times before
and the principles of issue preclusion prevent this Court from hearing it again. As a result, the
Court is without subject matter jurisdiction and this case must be remanded to the state court
from which it was removed.
B.

FRAUDULENT JOINDER
Because the Court finds that Defendant Stephenson’s Utah domicile defeats diversity

jurisdiction, the Court need not reach Defendants’ fraudulent joinder argument.
C.

ATTORNEY FEES
Plaintiffs move the Court to award their costs and attorney fees incurred in litigating their

Motion to Remand and for Attorney Fees. 28 U.S.C. § 1447(c) provides: “An order remanding
the case may require payment of just costs and any actual expenses, including attorney fees,
incurred as a result of the removal.” “[T]he standard for awarding fees should turn on the
reasonableness of the removal.”11 “Absent unusual circumstances, courts may award attorney’s

10

Nat’l Inspection & Repairs, Inc. v. George S. May Int’l Co., 222 F. Supp. 2d 1238, 1242
n.13 (internal quotation marks and citations omitted).
11

Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005).
5

fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for
seeking removal. Conversely, when an objectively reasonable basis exists, fees should be
denied.”12
Although Defendants were unsuccessful in their attempt to remove this case, it appears
that they had an objectively reasonable basis for doing so. Plaintiffs’ request for attorney fees
and costs, therefore, will be denied.
III. CONCLUSION
It is therefore
ORDERED that Plaintiffs’ Motion to Remand and For Attorney Fees (Docket No. 13) is
GRANTED IN PART AND DENIED IN PART. It is further
ORDERED that Defendants’ Motion for Protective Order (Docket No. 3) is DENIED AS
MOOT. It is further
ORDERED that Defendants’ Motion for Order Vacating and Enjoining Enforcement of
State Court Preliminary Injunction (Docket No. 8) is DENIED AS MOOT. It is further
ORDERED that the hearing set in this case for January 10, 2013, is STRICKEN.
The Clerk of the Court is directed to remand this matter to the Second District Court for
the State of Utah and close this case forthwith.

12

Id.
6

DATED December 27, 2012.
BY THE COURT:

_____________________________________
TED STEWART
United States District Judge

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