Martin-Evans et al v. Chesapeake Appalachia, LLC et al
Filing
32
MEMORANDUM OPINION AND ORDER GRANTING 19 DEFENDANTS' MOTION TO DECLARE ENTRY OF DEFAULT BY STATE COURT VOID, VACATING THE ENTRY OF DEFAULT BY THE STATE COURT AND ENJOINING THE STATE COURT FROM FURTHER PROCEEDINGS. Accordingly, the entry of de fault entered by the state court is VACATED and the state court is hereby ENJOINED from further proceedings in state court action docketed as Civil Action No. 15-C-149 in the Circuit Court of Ohio County, West Virginia while this civil action remains pending before this Court. Signed by Senior Judge Frederick P. Stamp, Jr. on 11/2/2015. (copy to counsel of record via CM/ECF; copy to Clerk of Circuit Court of Ohio County, WV via US Mail) (nmm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
LADONNA MARTIN-EVANS, individually,
and STACEY D. EVANS, individually
and as power of attorney for
LADONNA MARTIN-EVANS,
Plaintiffs,
v.
Civil Action No. 5:15CV87
(STAMP)
CHESAPEAKE APPALACHIA, LLC, an
Oklahoma limited liability company,
and DONALD J. SCHRECKENGOST a/k/a
D.J. SCHRECKENGOST, individually
and as an agent, employee and/or
representative of defendant,
CHESAPEAKE APPALACHIA, LLC,
Defendants.
MEMORANDUM OPINION AND ORDER
GRANTING DEFENDANTS’ MOTION TO DECLARE
ENTRY OF DEFAULT BY STATE COURT VOID,
VACATING THE ENTRY OF DEFAULT BY THE STATE COURT AND
ENJOINING THE STATE COURT FROM FURTHER PROCEEDINGS
I.
Background
The plaintiffs planned to enter into a leasehold agreement
with defendant Chesapeake Appalachia, LLC (“Chesapeake”).
That
contract was allegedly negotiated and entered into with the help of
defendant Donald Schreckengost (“Schreckengost”).
The plaintiffs
alleged that defendant Schreckengost was an employee or agent of
Chesapeake.
Before
finalizing
the
leasehold
agreement
with
Chesapeake, the plaintiffs negotiated into right of way agreements
with Appalachia Midstreams Services, LLC.
However, the plaintiffs
contended that after entering into those right of way agreements,
Chesapeake no longer sought to enter into the leasehold agreement.
As a result, the plaintiffs entered into right of way agreements
under the belief that they would be in a leasehold agreement with
Chesapeake, which the plaintiffs claimed Chesapeake revoked its
acceptance of that agreement.
Initially, the plaintiffs asserted four counts: (1) breach of
contract; (2) fraud and/or constructive fraud; (3) estoppel; and
(4) unjust enrichment, in addition to punitive damages.
The
parties then filed the following motions: (1) the plaintiffs’
motion to remand; (2) Chesapeake’s partial motion to dismiss; and
(3) defendant Schreckengost’s motion to dismiss.
This Court then
entered a memorandum opinion and order denying the plaintiffs’
motion to remand, granting defendant Schreckengost’s motion to
dismiss, granting Chesapeake’s partial motion to dismiss, and
denying as moot Chesapeake’s motion to strike/file a sur-reply.
ECF No. 28.
Therefore, based on this Court’s most recent ruling, the only
remaining count in this civil action is the plaintiffs’ breach of
contract
claim
against
Chesapeake.
At
issue
now
is
the
defendants’1 motion to declare the entry of default by the state
1
Although the only remaining defendant is Chesapeake, the
motion at issue appears to be filed by all the defendants.
Therefore, this Court will refer to the defendants collectively.
2
court2 void and to enjoin the state court from further proceedings
as to this civil action.
The defendants claim that four days after the removal of this
civil action, the Circuit Court of Ohio County entered a default
against them.
Allegedly, the state court did so because the
defendants did not respond to the complaint in state court.
The
defendants claim that they properly removed the civil action under
28 U.S.C. § 1446(d). The defendants point out that the state court
received the notice of removal, but nonetheless entered a default.
More specifically, the record shows that the defendants filed their
notice of removal on July 9, 2015.
The state court received a copy
of the notice of removal on July 10, 2015.
ECF No. 19 Ex. 1.
However, the state court entered a default on July 14, 2015, which
was after the civil action was removed and after the state court
received the notice of removal.
Id. at Exs. 1 and 2.
Because the
state court lost jurisdiction upon removal, the defendants believe
that the post-removal entry of default must be deemed void.
Further, the defendants request that this Court enjoin the state
court from proceeding any further in this civil action.
In response, the plaintiffs first argue that the defendants
improperly and untimely removed this civil action.
2
Next, they
Although the parties use the phrase “default judgment,” it
appears that the state court entered a default. It does not appear
that a default judgment has been entered. Thus, this Court will
refer to the state court’s action as an entry of default rather
than a default judgment.
3
believe the doctrine of unclean hands prohibits this Court from
granting the defendants’ motion.
Further, the plaintiffs contend
that the doctrine under Rooker v. Fidelity Trust Co., 263 U.S. 413
(1923) and District of Columbia Court of Appeals v. Feldman, 460
U.S. 462 (1983) (“Rooker-Feldman doctrine”), further precludes this
Court from awarding the defendants the relief they seek.
II.
Applicable Law
A defendant may remove a case from state court to federal
court in instances where the federal court is able to exercise
original jurisdiction over the matter.
28 U.S.C. § 1441.
Federal
courts have original jurisdiction over primarily two types of
cases: (1) those involving federal questions under 28 U.S.C.
§ 1331, and (2) those involving citizens of different states where
the
amount
in
controversy
exceeds
$75,000.00,
interests and costs pursuant to 28 U.S.C. § 1332(a).
exclusive
of
However, if
federal jurisdiction arises only by virtue of the parties’ diverse
citizenship, such an action “shall be removable only if none of the
. . . defendants is a citizen of the State in which such action is
brought.”
Tomlin
v.
Office
of
Law
Enforcement
Tech.
Commercialization, Inc., 5:07CV42, 2007 WL 1376030, at *1 (N.D. W.
Va. May 7, 2007).
The party seeking removal bears the burden of
establishing federal jurisdiction.
See In re Blackwater Security
Consulting, LLC, 460 F.3d 576, 583 (4th Cir. 2006); Mulcahey v.
Columbia Organic Chems. Co., Inc., 29 F.3d 148, 151 (4th Cir.
4
1994); Marler v. Amoco Oil Co., 793 F. Supp. 656, 658-59 (E.D.N.C.
1992).
Removal jurisdiction is strictly construed, and if federal
jurisdiction is doubtful, the federal court must remand.
Hartley
v. CSX Transp., Inc., 187 F.3d 422 (4th Cir. 1999); Mulcahey, 29
F.3d at 151.
Under 28 U.S.C. § 1446(b), a “petition for removal of a civil
action shall be filed within 30 days after the receipt by the
defendant, through service or otherwise, of a copy of the initial
pleading[.]”
Moreover, when removal is effected, “the State court
shall proceed no further unless and until the case is remanded.”
28 U.S.C. § 1446(d) (2012).
As stated by the United States Court
of Appeals for the Fourth Circuit, “the statute deprives the state
court of further jurisdiction over the removed case and that any
post-removal actions taken by the state court in the removed case
action are void ab initio.” Ackerman v. ExxonMobil Corp., 734 F.3d
237, 249 (4th Cir. 2013) (emphasis added) (internal citations
omitted).
In accordance with that bar on further state court
proceedings of the removed case, “a federal court may enjoin the
continued prosecution of the same case in state court after its
removal.”
Lou v. Belzberg, 834 F.2d 730, 740 (9th Cir. 1987).
The power to enjoin a state court in such a situation is
derived from the exceptions under the Anti-Injunction Act, found
under 28 U.S.C. § 2283.
The Act states that a “court of the United
States may not grant an injunction to stay proceedings in a State
5
court except as expressly authorized by Act of Congress, or where
necessary in aid of its jurisdiction, or to protect or effectuate
its judgments.”
28 U.S.C. § 2283 (2012).
The Supreme Court of the
United States has stated that the Act “is an absolute prohibition
[] against enjoining state court proceedings, unless the injunction
falls within one of the three specifically defined exceptions.”
Atlantic Coast Line R. Co. v. Brotherhood of Locomotive Engineers,
398 U.S. 281, 286 (1970).
Those specifically defined exceptions
are the following: “(i) the express provisions of another act of
Congress authorizing such an order; (ii) necessity in aid of the
federal court’s jurisdiction[;] and (iii) the need to protect or
effectuate the federal court’s judgments.”
Standard Microsystems
Corp. v. Texas Instruments, Inc., 916 F.2d 58, 60 (2d Cir. 1990)
(citing Brotherhood of Locomotive Engineers, 398 U.S. at 287-88).
Such exceptions are narrowly viewed, and if any doubts exist about
whether a federal injunction should be issued against state court
proceedings,
those
doubts
“should
be
resolved
in
favor
of
permitting the state courts to proceed in an orderly fashion to
finally determine the controversy.”
In re Diet Drugs, 282 F.3d
220, 233 (3d Cir. 2002).
III.
Discussion
As indicated earlier, the defendants seek to have this Court
vacate the entry of default based on the proper removal of this
civil action.
More specifically, the defendants assert that the
6
timely removal of this civil action bars the state court from
proceeding further for want of jurisdiction.
believe
that
this
Court
proceeding further.
should
enjoin
the
The defendants
state
court
from
The plaintiffs, however, argue that the
defendants’ removal was untimely and improper. The plaintiffs then
attempt to invoke the doctrine of unclean hands and the RookerFeldman doctrine.
This Court will first examine whether it may
enjoin the state court from further proceedings and whether it may
vacate the entry of default, and then turn to the plaintiffs’
assertions.
A.
Power to Enjoin State Courts
As stated earlier, when removal is effected, “the State court
shall proceed no further unless and until the case is remanded.”
28 U.S.C. § 1446(d) (2012).
That restriction under the statute
means that “the statute deprives the state court of further
jurisdiction over the removed case and that any post-removal
actions taken by the state court in the removed case action are
void ab initio.”
Ackerman, 734 F.3d at 249 (emphasis added)
(internal citations omitted).
Based on that restriction placed on
state courts, “a federal court,” under very narrow and limited
circumstances, “may enjoin the continued prosecution of the same
case in state court after its removal.” Belzberg, 834 F.2d at 740.
Such a power to enjoin, however, is tempered by the AntiInjunction Act, found under 28 U.S.C. § 2283.
7
The Act “is an
absolute prohibition [] against enjoining state court proceedings,
unless the injunction falls within one of the three specifically
defined exceptions.” Brotherhood of Locomotive Engineers, 398 U.S.
at 286 (emphasis added). Those specifically defined exceptions are
the following: “(i) the express provisions of another act of
Congress authorizing such an order; (ii) necessity in aid of the
federal court’s jurisdiction[;] and (iii) the need to protect or
effectuate the federal court’s judgments.”
Texas Instruments,
Inc., 916 F.2d at 60 (citing Brotherhood of Locomotive Engineers,
398 U.S. at 287-88).
At issue in this civil action is the “expressly authorized”
exception.
That exception authorizes a federal court to enjoin
state-court proceedings if an Act of Congress creates “a specific
and uniquely federal right or remedy, enforceable in a federal
court of equity, that could be frustrated if the federal court were
not empowered to enjoin a state court proceeding.”
Foster, 407 U.S. 225, 237 (1972).
Mitchum v.
The directive under 28 U.S.C.
§ 1446(d), which states that “the State court shall proceed no
further,” has been held to be such an express authorization, and
thus, a permissible exception for issuing an injunction. Ackerman,
734 F.3d at 250.3
3
It should be noted that some courts apply the “necessary in
aid of jurisdiction” exception in the removal context. See, e.g.,
1975 Salaried Retirement Plan for Eligible Employees of Crucible,
Inc. v. Nobbers, 968 F.2d 401, 407 (3d Cir. 1992). Regardless of
which exception is applied, the phrase at issue in the removal
8
Based on the law discussed above, it is clear that this Court
has the power to enjoin the state court from proceeding in this
civil action. However, “[w]hen an exception to the Anti-Injunction
Act is present, a district court may issue an injunction, but it is
not
required
to
do
so
.
.
.
whether
proceedings is always discretionary.”
to
enjoin
state-court
Ackerman, 734 F.3d at 252
(emphasis in original) (internal citations omitted).
Nonetheless,
under the discretion possessed by this Court, an injunction should
be issued. The state court was without jurisdiction to proceed any
further.
According to the representations of the parties, the
state court entered a default against the defendants four days
after the removal of this civil action.
ECF No. 19 Exs. 1 and 2.
The removal statute is clear that once removal is effected, the
state court “shall proceed no further unless and until the case is
remanded.”
28
U.S.C.
§
1446(d).
Not
only
did
this
Court
previously find that removal was timely and properly effected, but
this Court also denied the plaintiffs’ motion to remand.
28.
ECF No.
Upon the removal of this civil action, the state court was
deprived
of
jurisdiction
over
the
removed
case,
and
such
jurisdiction remains deprived while this civil action is pending
before this Court.
Furthermore, as stated above, the relevant
provisions of the removal statute operate as an exception to the
Anti-Injunction Act.
See Vendo Co. v. Lektro-Vend Corp., 433 U.S.
statute is considered an exception to the Anti-Injunction Act.
9
623, 640 (1977).
This Court clearly acknowledges the “principles
of comity, federalism, and equity” that “always restrain federal
courts’ ability to enjoin state proceedings.”
In re Diet Drugs
Prods. Liab. Litig., 369 F.3d 293, 306 (3d Cir. 2004).
In light of
those principles, and the law discussed above, this Court believes
that
an
injunction
should
be
issued,
thus
enjoining
further
proceedings in state court action docketed as Civil Action No.
15-C-149 in the Circuit Court of Ohio County, West Virginia.
B.
Vacating the State Court’s Entry of Default
In addition to enjoining the state court, the defendants
request that this Court vacate the state court’s entry of default.
Generally speaking, federal district courts have the power to set
aside an entry of default by a state court in the following three
situations: (1) “when a state court lacked jurisdiction to make an
entry of default”; (2) “when a state court could have vacated its
own default judgment”; and (3) “when a federal court could have
vacated the entry of default.”
Hawes v. Cart Products, Inc., 386
F. Supp. 2d 681, 689 (D.S.C. 2005) (internal citations omitted).
In this case, the state court lacked jurisdiction to enter a
default.
As discussed earlier, 28 U.S.C. § 1446(d) mandates that
a state court “shall proceed no further” upon an effective removal
of a civil action. Here, the state court entered default four days
after such removal, at which point the removal statute already
deprived the state court of jurisdiction.
10
Because the state court
had no jurisdiction to enter a default, this Court may vacate that
entry. Moreover, the United States Court of Appeals for the Fourth
Circuit has stated that “any post-removal actions taken by the
state court in the removed case action are void ab initio.”
Ackerman, 734 F.3d at 249 (citing South Carolina v. Moore, 447 F.2d
1067,
1072-73
(4th
Cir.
1971);
accord
Polyplastics,
Transconex, Inc., 713 F.2d 875, 880 (1st Cir. 1983)).
Inc.
v.
Therefore,
the post-removal entry of default by the state court in this case
is void.
Thus, the entry of default entered by the state court is
hereby VACATED.
C.
Plaintiffs’ Contentions
As
discussed
contentions.
above,
the
plaintiffs
make
three
primary
First, the plaintiffs believe that the defendants’
removal of this civil action was untimely and improper.
Second,
they argue that the doctrine of unclean hands prohibits the
defendants from obtaining relief.
Third, the plaintiffs contend
that the Rooker-Feldman doctrine prohibits the relief requested by
the defendants.
1.
This Court will discuss those arguments in turn.
The Defendants’ Removal Is Proper and Timely
In its previous memorandum opinion and order, this Court found
that the defendants timely and properly removed this civil action.
ECF No. 28.
Having previously determined that the defendants
properly removed this civil action, this Court will not revisit
this issue.
Moreover, the plaintiffs’ arguments asserted in their
11
response to the motion at issue do not persuade the Court to alter
that prior ruling.
Therefore, for the reasons set forth in this
Court’s prior memorandum opinion and order, the defendants’ removal
is timely and proper.
2.
ECF No. 28.
The Doctrine of Unclean Hands Does Not Apply
The plaintiffs next contend that the doctrine of unclean hands
requires that this Court deny the defendants’ request for equitable
relief.
Under that doctrine, a court is permitted to “withhold
equitable relief from a party who is guilty of willful wrongdoing
in relation to the controversy before it.” Lyon v. Campbell, 33 F.
App’x 659, 665 (4th Cir. 2002) (internal citations and quotations
omitted).
Phrased another way, a court “can deny relief . . . only
when there is a close nexus between a party’s unethical conduct and
the transactions on which that party seeks relief.” In re Uwimana,
274 F.3d 806, 810 (4th Cir. 2001). The application of the doctrine
“is largely under the discretion of the district court.” Campbell,
33 F. App’x at 665 (citing Precision Instrument Mfg. Co. v.
Automotive Maintenance Machinery Co., 324 U.S. 806, 815 (1945)).
Pursuant to the discretion possessed by this Court, the
doctrine of unclean hands will not be applied because it is
irrelevant to the motion at issue.
The plaintiffs base the
doctrine’s application on their allegations of fraud set forth in
the complaint.
Based on that alleged fraud, and the defendants’
allegedly improper removal, the plaintiff believes public policy
12
should prevent this Court from granting the defendants’ motion.
Those arguments are insufficient to invoke the doctrine of unclean
hands for two reasons.
First, as the defendants correctly point
out, the motion at issue involves a matter of jurisdiction, not
equity.
Second, even if the doctrine was potentially applicable,
the plaintiffs have not shown the “close nexus” between the
defendants’ allegedly unethical conduct and transactions. Instead,
they have merely reasserted their allegations of fraud and untimely
removal in an attempt to invoke the doctrine.
It should be noted
that this Court not only found that the defendants’ removal was
proper and timely, but also dismissed the plaintiffs’ claims of
fraud against the defendants.4
Therefore, because the plaintiffs
have failed to show that the doctrine should be invoked, the
plaintiffs’ argument cannot prevail.
3.
The Rooker-Feldman Doctrine Does Not Apply
The plaintiffs conclude their argument by asserting that the
Rooker-Feldman doctrine precludes the defendants from “collaterally
attacking” the entry of default by the state court.
That argument is incorrect.
ECF No. 21.
The Rooker-Feldman doctrine provides
that “lower federal courts generally do not have subject-matter
jurisdiction to review state court decisions.”
Shooting Point,
L.L.C. v. Cumming, 368 F.3d 379, 383 (4th Cir. 2004) (internal
4
Indeed, the only remaining claim in this civil action is the
plaintiffs’ breach of contract claim against defendant Chesapeake.
ECF No. 28.
13
brackets and citations omitted).
The doctrine “is confined to
cases of the kind from which the doctrine acquired its name: cases
brought by state-court losers complaining of injuries caused by
state-court
proceedings
judgments
commenced
rendered
and
before
inviting
rejection of those arguments.”
the
district
district
court
court
review
and
Exxon Mobil Corp. v. Saudi Basic
Indus. Corp., 544 U.S. 280, 284 (2005).
Moreover, the doctrine
provides that “only the Supreme Court [of the United States] has
jurisdiction to hear appeals from final state court judgments.”
Bear v. Patton, 451 F.3d 639, 641 (10th Cir. 2006).
“Proper
removal does not constitute an appeal, de facto or otherwise, of
the state court proceedings but a continuation of them.”
Jenkins
v. MTGLQ Investors, 218 F. App’x 719, 723-24 (10th Cir. 2007).
Therefore, the doctrine fails to apply to “a properly removed case
where . . . there is no attack on a separate and final state court
judgment.”
Id.
This Court is unable to see how the Rooker-Feldman doctrine
applies in this case. Here, the defendants properly filed a notice
of removal.
Following that removal, the state court entered a
default, without jurisdiction to do so.
The defendants have not
filed a separate federal action challenging a state court judgment,
which could possibly invoke the Rooker-Feldman doctrine.
In a
situation such as the present one, however, the doctrine is
inapplicable.
See, e.g., Westlake Legal Group v. Yelp, Inc., 599
14
F. App’x 481, 483 (4th Cir. 2015).
Therefore, the plaintiffs’
attempt to invoke the doctrine cannot succeed regarding the motion
at issue.
IV.
Conclusion
For the reasons set forth above, the defendants’ motion to
declare state court default judgment void and to enjoin state court
proceedings (ECF No. 19) is GRANTED.
Accordingly, the entry of
default entered by the state court is VACATED and the state court
is hereby ENJOINED from further proceedings in state court action
docketed as Civil Action No. 15-C-149 in the Circuit Court of Ohio
County, West Virginia while this civil action remains pending
before this Court.5
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein and the Clerk of the
Circuit Court of Ohio County, West Virginia.
DATED:
November 2, 2015
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
5
The rulings contained in this order are not made lightly as
the Court recognizes the boundaries of its jurisdiction and the
long-standing doctrines of comity, federalism, and equity.
However, to rule otherwise and not invoke the above applied
exception to the Anti-Injunction Act would only create or continue
a jurisdictional conflict between the two courts in one factual
situation.
15
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