Auto Parts Mfg. Miss. Inc. v. King Constr. of Hous., LLC

• Decision Date: 14 June 2017
• Docket Number: CIVIL ACTION NO. 1:11-cv-00251-GHD-SAA.
• Citation: 258 F.Supp.3d 740
• Parties: AUTO PARTS MANUFACTURING MISSISSIPPI INC., a Mississippi corporation, Plaintiff v. KING CONSTRUCTION OF HOUSTON, LLC, a Mississippi limited liability company; Noatex Corporation, a California corporation; and Kohn Law Group, Inc., a California corporation, Defendants
• Court: U.S. District Court — Northern District of Mississippi

258 F.Supp.3d 740

AUTO PARTS MANUFACTURING MISSISSIPPI INC., a Mississippi corporation, Plaintiff

v.KING CONSTRUCTION OF HOUSTON, LLC, a Mississippi limited liability company; Noatex Corporation, a California corporation; and Kohn Law Group, Inc., a California corporation, Defendants

CIVIL ACTION NO. 1:11-cv-00251-GHD-SAA.

United States District Court, N.D. Mississippi, Aberdeen Division, Aberdeen Division.

Signed June 14, 2017.

Martha Bost Stegall, Mitchell, McNutt & Sams, Tupelo, MS, for Plaintiff.

William Lawrence Deas, Liston & Deas, PLLC, Donald Alan Windham, Balch & Bingham, LLP, Jackson, MS, Robert E. Kohn, Kohn Law Group, Inc., Santa Monica, CA, for Defendants.

MEMORANDUM OPINION

Glen H. Davidson, SENIOR U.S. DISTRICT JUDGE

Presently before the Court is Movant Auto Parts Manufacturing Mississippi, Inc. ("APMM")'s¹ motion for the imposition of coercive and compensatory sanctions [328] against Respondent Kohn Law Group, Inc. ("Kohn Law Group").² Kohn Law Group has filed a response, and APMM has filed a reply. In addition, before the Court is Kohn Law Group's motion for a stay pending appeal of any compulsory or coercive sanctions that may be ordered [346]. APMM has filed a response to that motion, and Kohn Law Group has filed a reply. Both of these motions are ripe for review. Upon due consideration, the Court is ready to rule.

I. Factual and Procedural History

Although this complex interpleader action has been closed by reason of settlement since October 20, 2014, the Court finds it necessary to set forth the factual and procedural background.³

APMM entered into a contract with Noatex Corporation ("Noatex") for Noatex to construct an auto parts manufacturing facility in Guntown, Lee County, Mississippi, near Toyota Motor Manufacturing, Mississippi, Inc. in Blue Springs, Mississippi. Noatex subcontracted with King Construction of Houston, LLC ("King Construction"), a Mississippi limited liability company, to provide some materials and labor for the construction.

In the case sub judice , Noatex alleged that APMM owed it money for goods and services that Noatex provided to APMM under the contract. Noatex questioned some of the invoices submitted to it by King Construction pertaining to the subcontract work. In response to this billing dispute between Noatex and King Construction, King Construction notified APMM on September 23, 2011, pursuant to Mississippi's "Stop Notice" Statute, Mississippi Code § 85–7–181, that Noatex owed King Construction $260,410.15 and that King Construction was filing a "Laborer's and Materialman's Lien and Stop Notice" in the Chancery Court of Lee County, Mississippi. The stop notice bound the disputed funds in APMM's hands to secure invoice claims that Noatex allegedly owed to King Construction. See MISS. CODE ANN. § 85–7–181 ("[T]he amount that may be due ... shall be bound in the hands of such owner for the payment in full ...."). King Construction's filing of the stop notice in the lis pendens record of the chancery court had the effect of establishing King Construction's lien priority over the property that was the subject of the dispute. See id. § 85–7–197. APMM later deposited the $260,410.15 in the registry of the Chancery Court of Lee County.

The dispute resulted in three lawsuits, one of which was the case sub judice .⁴

APMM originally filed this action in the Chancery Court of Lee County to determine ownership of the disputed funds subject to King Construction's stop notice, naming both Noatex and King Construction as defendants. In December of 2011, Noatex removed this action to this Court. APMM deposited the money into the Court registry and filed an amended complaint in interpleader [135] naming Kohn Law Group as an additional defendant. APMM then filed a motion to discharge itself as a disinterested stakeholder in the action.

On March 3, 2014, this Court entered an Order [236] and memorandum opinion [237], finding that the action was a 28 U.S.C. § 1335 interpleader in which three parties claimed entitlement to the fund: King Construction on one side and Noatex and Kohn Law Group on the other side. The Court discharged APMM as a disinterested stakeholder in the interpleader action and ordered that King Construction, Noatex, and Kohn Law Group were "enjoined from filing any proceedings against APMM relating to the interpleader fund without an order of this Court allowing the same."See Ct.'s Order Granting APMM's Mot. Dismiss or Discharge Pl. [236] at 1.

While the interpleader action was pending, on September 18, 2012, Kohn Law Group commenced the California district court case on the basis of diversity jurisdiction, seeking recovery pursuant to Section 9607(a) and subdivision (3) of the California Commercial Code and characterizing Kohn Law Group as a creditor, Noatex as a debtor, and APMM as the account debtor that allegedly owed Noatex the amount at stake in the interpleader action. This Court notes that in the hearing on APMM's motion to enforce permanent injunction in the case sub judice , this Court took judicial notice of, inter alia , all filings in the California district court case.

The California district court stated in its Order dated December 11, 2012:

Practically speaking, Kohn [Law Group]'s Complaint asks this Court to short-circuit the ongoing Mississippi interpleader action as to this $260,410.15 and award the funds to Kohn [Law Group]. APMM's Motion asks this Court to dismiss (or alternatively to stay) Kohn [Law Group]'s attempt to do so. The Court declines to dismiss the action but will enter a stay ... until the Mississippi interpleader action is resolved.

...

To the extent Noatex is entitled to the $260,410.15, Kohn [Law Group] properly may litigate this lawsuit to collect that amount from APMM. However, given the ongoing Mississippi interpleader action, at this stage the Court will not interject itself to adjudicate the question at the heart of that action—i.e., whether Noatex is entitled to the $260,410.15. A stay of these proceedings in favor of the ongoing Mississippi interpleader action therefore is appropriate. Significantly, if Kohn [Law Group] is joined as a party, the Mississippi court may award Kohn [Law Group] the $260,410.15 as part of the interpleader action. Alternatively, if Kohn [Law Group] is correct, and APMM cannot maintain the interpleader action, then the stay soon may be lifted.

Ct.'s Order [23 in No. 2:12–cv–08063–MWF–MRW] at 3–4, 5. At that time, unquestionably, Kohn Law Group sought recovery related to the interpleader. However, at that time, this Court had not yet entered its permanent injunction.

This Court entered that permanent injunction on March 3, 2014 in its Order discharging APMM as a plaintiff in the interpleader. The Court specifically permanently enjoined "[King Construction, Noatex, and Kohn Law Group] from filing any proceedings against APMM relating to the interpleader fund without an order of this Court allowing the same." See Ct.'s Order Granting APMM's Mot. Dismiss or Discharge Pl. [236] at 1. The validity of this Court's permanent injunction was upheld by the Fifth Circuit Court of Appeals in the published opinion Auto Parts Manufacturing Mississippi, Inc. v. King Construction of Houston, L.L.C. , 782 F.3d 186 (5th Cir.), cert. denied sub nom. Noatex Corp. v. Auto Parts Manufacturing Mississippi Inc., ––– U.S. ––––, 136 S.Ct. 330, 193 L.Ed.2d 230 (2015).

In the case sub judice , Defendants Noatex and Kohn Law Group filed motions to dismiss Kohn Law Group, and this Court granted those motions insofar as the same requested the dismissal of Kohn Law Group as a claimant to the interpleader fund, finding that APMM failed to plead facts that would plausibly show an existing conflict between Kohn Law Group and any other claimant. The Court noted in its memorandum opinion [244] relative to the same that Kohn Law Group had already brought the action in the United States District Court for the Central District of California to enforce its asserted lien against Noatex in the event that this Court found that Noatex had rights in the interpleader fund. Subsequently, the parties entered into an agreement to settle the dispute. Under the terms of the settlement agreement, which is made part of the public record of the case sub judice , see Settlement Agreement & Mutual Release [263–1], the interpleader fund was disbursed as follows: not less than $109,750 to King Construction and not less than $150,660.15 to Noatex with any additional funds in the registry to be distributed equally between King Construction and Noatex. See id. at 6 ¶¶ 2–3.

Despite the fact that this Court entered its permanent injunction on March 3, 2014, Kohn Law Group continued to pursue the California district court case against APMM. On December 3, 2015—one year and nine months after the permanent injunction went into effect—Kohn Law Group filed its first amended complaint in the California district court case. See No. 2:12–cv–08063–MWF–MRW Docket Sheet [328–1] at 3; Kohn Law Grp.'s First Am. Compl. [66 in No. 2:12–cv–08063–MWF–MRW]. After APMM filed a motion to dismiss the first amended complaint in that case, Kohn Law Group filed an opposition to the same. See No. 2:12–cv–08063–MWF–MRW Docket Sheet [328–1] at 4. Subsequently, the parties engaged in discovery. See id.

On April 14, 2016, in the case sub judice , APMM filed a motion to reopen this case and enforce this Court's permanent injunction [282].

In the California district court case, on April 26, 2016, Kohn Law Group filed an ex parte application for a temporary restraining order [93], requesting that the California district court enjoin APMM from filing "duplicative litigation" in Mississippi. The California district court subsequently entered an Order stating that the issue of whether Kohn Law Group's first amended complaint in the California district court case violated said permanent injunction was for this Court to decide, particularly because this Court can enforce its permanent injunction and...