688 F.3d 1154 (9th Cir. 2012), 11-35235, Scotts Co. LLC v. Seeds, Inc.

Docket Nº:11-35235.
Citation:688 F.3d 1154
Opinion Judge:TASHIMA, Circuit Judge:
Party Name:The SCOTTS COMPANY LLC, an Ohio limited liability company, Plaintiff-Appellant, v. SEEDS, INC., a Washington corporation; Millhorn Farms, Inc., an Idaho corporation; Maple Leaf Farms, Inc., a Washington corporation; Tim Freeburg, an Idaho sole proprietor; Mica Creek, Inc., a Washington corporation, Defendants-Appellees.
Attorney:Colin Folawn, Schwabe, Williamson & Wyatt, Seattle, WA, for the plaintiff-appellant. Roger Sandberg, Esser & Sandberg, Pullman, WA, for defendant-appellee Seeds, Inc. Peter C. Erbland, Paine Hamblen, Coer d'Alene, ID, for defendants-appellees Millhorn Farms, Inc., Maple Leaf Farms, Inc., Mica Cre...
Judge Panel:Before: PROCTER HUG, JR., A. WALLACE TASHIMA, and CONSUELO M. CALLAHAN, Circuit Judges.
Case Date:August 10, 2012
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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688 F.3d 1154 (9th Cir. 2012)

The SCOTTS COMPANY LLC, an Ohio limited liability company, Plaintiff-Appellant,

v.

SEEDS, INC., a Washington corporation; Millhorn Farms, Inc., an Idaho corporation; Maple Leaf Farms, Inc., a Washington corporation; Tim Freeburg, an Idaho sole proprietor; Mica Creek, Inc., a Washington corporation, Defendants-Appellees.

No. 11-35235.

United States Court of Appeals, Ninth Circuit.

August 10, 2012

Argued and Submitted April 13, 2012.

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Colin Folawn, Schwabe, Williamson & Wyatt, Seattle, WA, for the plaintiff-appellant.

Roger Sandberg, Esser & Sandberg, Pullman, WA, for defendant-appellee Seeds, Inc.

Peter C. Erbland, Paine Hamblen, Coer d'Alene, ID, for defendants-appellees Millhorn Farms, Inc., Maple Leaf Farms, Inc., Mica Creek, Inc., and Tim Freeburg.

Appeal from the United States District Court for the Eastern District of Washington, Lonny R. Suko, District Judge, Presiding. DC No. 2:10-cv-0327 LRS.

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Before: PROCTER HUG, JR., A. WALLACE TASHIMA, and CONSUELO M. CALLAHAN, Circuit Judges.

OPINION

TASHIMA, Circuit Judge:

Federal courts have broad authority to " look beyond the pleadings, and arrange" — or realign— " the parties according to their sides in the dispute." City of Indianapolis v. Chase Nat'l Bank of N.Y., 314 U.S. 63, 69, 62 S.Ct. 15, 86 L.Ed. 47 (1941) (internal quotation marks omitted). We hold that when a federal court evaluates realigning the parties in a case, it may not consider claims made in a different case.

I.

In September 2007, The Scotts Company (" Scotts" ) and Seeds, Inc. (" Seeds" ) entered into a Supply Agreement that obligated Scotts to buy cleaned and processed Kentucky Bluegrass seed from Seeds. The Supply Agreement allowed Scotts to audit Seeds to ensure Seeds' compliance with the terms of the Agreement. Scotts, an Ohio LLC, brought a diversity action against Seeds, a Washington corporation, in federal district court for breach of this audit provision.1 Shortly after Scotts filed its federal action, Millhorn Farms, Inc., Maple Leaf Farms, Inc., Mica Creek, Inc., and Tim Freeburg (" Growers" ) sued Seeds and Scotts in Washington state court. Maple Leaf Farms and Mica Creek are both Washington corporations. Millhorn Farms is an Idaho corporation and Tim Freeburg, a sole proprietor, is a citizen of Idaho. In their state court complaint, the Growers alleged that in May 2008, Seeds added an addendum to each of their contracts, in which Seeds agreed to pay twenty cents per pound for Kentucky Bluegrass seed above the original contract price. The Growers alleged that Seeds failed to pay this additional twenty cents per pound for the 2009 harvest and that Seeds did not make a scheduled September 2010 payment. In its state court answer, Seeds alleged that it had not paid the Growers because it had not been paid by Scotts. Seeds also filed an amended cross-claim against Scotts for breach of contract and unfair and deceptive business practices.

After the Growers sued Seeds and Scotts in state court, Seeds moved to dismiss this federal action under Federal Rule of Civil Procedure Rule 12(b)(7), contending that the Growers were indispensable parties. In response, Scotts filed an Amended Complaint which added the Growers as defendants. The Amended Complaint sought a declaration that the audit is a condition precedent to Scotts' payment to Seeds, specific performance, and damages caused by Seeds' breaches of contract. It also sought a declaration that Scotts had not materially breached the Growers' contracts and that the Growers may not enforce the Supply Agreement. The Growers did not answer the Amended Complaint.

The Growers and Seeds moved the district court to realign the Growers as plaintiffs and Seeds and Scotts as defendants. Seeds also moved the court, in the alternative, to stay or dismiss the case in favor of the related state court proceedings. The district court granted both motions. The realignment stripped the district court of subject matter jurisdiction because defendant Seeds was not diverse to all of the

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now-plaintiff Growers. The district court alternatively held that it would stay the federal proceedings in favor of the related...

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