KCE Properties, Inc v. Holy Mackerel, Inc et al

Filing 37

MEMORANDUM ORDER re 31 MOTION to Voluntarily Dismiss pursuant to Rule 41(a)(2) filed by KCE Properties, Inc. The parties are hereby INSTRUCTED to file a supplemental memorandum in response to this Show Cause Order no later than Frida y, February 3, 2017, commenting on the matters referenced in this Order. For the convenience of the parties, the upcoming final Pre-trial conference in this case is CANCELED, and all trial-related deadlines are hereby SUSPENDED pending resolution of the threshold jurisdictional issue. Signed by District Judge Mark S. Davis and filed on 1/25/16. (tbro)

UNITED STATES DISTRICT COURT
eastern DISTRICT OF VIRGINIA

Newport News Division
KCE PROPERTIES, INC.,
Plaintiff,

Civil No.

4:16cv42

HOLY MACKEREL, INC.,
and

DANIEL CARPENTER,
Defendants.

MEMORjaiDUM ORDER

This matter is before the Court on a Rule 41(a) (2) motion

for voluntary dismissal filed by Plaintiff, KCE Properties, Inc.

("KCE Inc."), ECF No. 31, and a motion for summary judgment

filed by Defendants, ECF No. 29.
motions

address

the

same

Portions of both pending

threshold

issue:

it

was

recently

discovered that Plaintiff KCE Inc., a California corporation and

the purported owner/landlord of a premises containing a rental

space previously leased by Defendant Holy Mackerel, Inc., is in
actuality not the owner of such premises/building.
same individuals that control KCE Inc.

Rather, the

also control KCE Old

Towne, LCC (^^KCE LLC"), a Virginia company that is the actual
owner of the premises at issue.

KCE LLC, therefore, is the

legal entity that

should have filed

suit.

However,

the

complaint in this case cannot be amended to substitute KCE LLC
for KCE Inc. because doing so would destroy the diversity of
citizenship that this federal case is predicated upon.

While

it

is

undisputed

that

Plaintiff

standing to continue in this case,

KCE

Inc.

lacks

the parties have vastly

differing viewpoints as to the proper procedural path to follow
in order to terminate this action.

Compare Defs' S.J. Memo 5,

ECF No. 30 (indicating that Defendants seek summary judgment not

only based on Plaintiff's lack of standing but also on the
merits),

with Pi's Memo

(admitting

that

in

Plaintiff

Opp'n to S.J.

lacks

2-3,

standing,

summary judgment should be denied).

but

ECF No.

arguing

35

that

Plaintiff opposes a grant

of summary judgement as improper in a case where a plaintiff
lacks

standing,

and Defendant

opposes

a voluntary dismissal

unless this Court predicates such dismissal on Plaintiff paying
Defendants' attorney's fees.

The
12(b)(1)

Court

agrees

motion

to

with

dismiss,

Plaintiff's
rather

than

contention

that

a

summary

Rule

56

a

judgment motion, is the proper procedural vehicle for Defendants
to challenge Plaintiff's lack of standing.
United States,

50 F.3d 299,

304

(4th Cir.

Williams
1995)

(noting the

"differing procedural standards of dismissal under Rule 12(b)(1)

and summary judgment under Rule 56(c)," and holding that because

the United States was not liable for the plaintiff's injury,
"the district court should have dismissed the suit for want of

jurisdiction under Rule 12(b)(1) . • • rather than granting
summary judgment pursuant to Rule 56(c)").

Based on the

uncontested threshold facts in this case that clearly reveal a
laclc of standing, it is improper for this Court to reach the

portions of Defendant's summary judgment motion that seek a
ruling on the merits.

However, for similar reasons, the Court

questions whether a Rule 41(a)(2) motion should be granted in
this

case because

the

dismissal

sought

by Plaintiff is

not

"voluntary," but is instead compelled by this Court's obvious
lack of jurisdiction.^

In light of the above, the parties are hereby instructed to
SHOW CAUSE why the Court should not enter an order:

(1) construing Defendant's motion for summary judgment as a
Rule 12(b)(1) motion to dismiss, as Defendant's first summary

judgment argument attacks Plaintiff's lack of standing, c^
Brickwood Contractors,

Inc. v.

Datanet Eng'g,

In^,

369 F.3d

^ The Court's viewpoint is illustrated by the fact that, to the extent
this Court had jurisdiction to consider Defendants' request for attorney s

fees, and ultimately sought to condition a voluntary dismissal on
Plaintiff's payment of a portion of Defendants' fees, the Court would
typically afford Plaintiff the opportunity to elect between continuing

with the case or being subject to a voluntary dismissal on terms that are
more onerous than that sought by Plaintiff.

Federal

Practice

and

Procedure § 2366,

pp.

9 C. Wright & A.

547-49

(3d

ed.

2°°^)

(explaining that the plaintiff "has an option not to go forward with a

dismissal if the conditions specified by the court seem too onerous ).

Of

course, in this case. Plaintiff cannot "opt" not to proceed with dismissal
because Plaintiff has no standing and cannot continue to litigate this
case in this Court of limited jurisdiction.

385,

390

(4th

Cir.

2004)

(" [Q] uestions

of

subject-matter

jurisdiction may be raised at any point during the proceedings
and may (or, more precisely, must) be raised sua sponte by the
court");

(2) granting such 12(b)(1) motion and dismissing the case

without prejudice, and without making a merits-based ruling of

any kind, because there is no case or controversy between the
named

parties,

controversy

and there

exceeding

is

$75,000

certainly
as

is

not

an amount

necessary

to

in

support

diversity jurisdiction;^

(3)

ordering both parties to pay their own costs ^

attorney's fees in light of:
based dismissal does

not

(a) the fact that a non-merits

appear to

party" that is entitled to costs;

result

(b)

in a

prevailing

the "American Rule"

requiring that each party pay its own attorney's fees; (c) this
Court's apparent lack of jurisdiction to consider an attorney s
fee motion in a case where subject matter jurisdiction over the
case was lacking from the outset of the litigation, see Samsung
Elecs. Co. V. Rambus, Inc., 398 F. Supp. 2d 470, 481 (E.D. Va.

2005)

(discussing the "settled precept that lack of subject

matter jurisdiction over a substantive claim serves to bar an
2 It is well-established that "the court may consider the evidence beyond

the scope of the pleadings to resolve factual disputes concerning
jurisdiction" and that "dismissal for jurisdictional defects has no res
judicata effect."

Williams, 50 F.3d at 304.

award of attorney's fees where an action was moot at the time of

filing," as contrasted with a case where a court "is divested of
its subject matter jurisdiction over the substantive claim by
virtue of intervening mootness"); and (d) the fact that even if

attorney's fees could be awarded, the current record suggests,

consistent with Plaintiff's counsel's representations on behalf
of KCE Inc.,

that the discovery performed in this case by

Defendants is readily transferable to, and can be utilized in, a

subsequent state-court action filed by KCE LLC, cf^ Davis v. USX
Corp., 819 F.2d 1270, 1276 (4th Cir. 1987)

(indicating that

attorney's fees should not be awarded in a voluntary dismissal
case when federal litigation efforts are readily transferable to
a subsequent state action);^ and

(4) based on the dismissal for lack of jurisdiction: (a)
dismiss Plaintiff's Rule 41(a)(2) motion seeking a "voluntary"

^ While this Court appears to lack jurisdiction to award attorney's fees.

Defendant's argument in support of recovering attorney's fees is grounded
in the contention that Defendants have expended significant resources

litigating a case that Plaintiff should have known from the outset could
not be filed in this Court. Although the Court acknowledges Defendants
position, it notes that the filings before the Court indicate that the
Defendant Daniel Carpenter, a shareholder and officer Iof Defendant Holy
Mackerel, Inc., was also the president of the company that formerly owned
the premises at issue, and who signed the documents transferring such

property to KCE LLC. Accordingly, Plaintiff is not the only party in this
case that should have discovered near the outset of litigation
inc. was not the proper plaintiff.
Notably, the

September of 2015 by "Daniel E. Carpenter" as "president of the Grantor
company not only lists the "Grantee" as "KCE OLD TOWNE, LLC" (rather than
KCE Inc.) but states on its face that KCE OLD TOWNE, LLC is a Virginia
corporation," a fact that would obviously defeat diversity jurisdiction in
this case.

ECF No. 30-6.

dismissal as moot; and (b) dismiss the remainder of Defendant's
summary judgment motion as moot.

The parties are hereby INSTRUCTED to file a supplemental
memorandum in response to this Show Cause Order no later than

Friday, February 3, 2017, commenting on the above matters.
the convenience of the parties,
conference

in

deadlines

are

this

case

hereby

is

the upcoming final Pre-trial

CANCELED,

SUSPENDED

For

and

pending

all

trial-related

resolution

of

the

threshold jurisdictional issue.

The Clerk is REQUESTED to send a copy of this Memorandum
Order to all counsel of record.
IT IS SO ORDERED.

Mark: S.

Davis

UNITED state's DISTRICT JUDGE
Newport News, Virginia

January 5l5 _, 2017