Cedar Rapids Lodge & Suites, LLC v. JFS Dev. Inc.
| Decision Date | 06 January 2012 |
| Docket Number | No. 09-CV-175-LRR,09-CV-175-LRR |
| Parties | CEDAR RAPIDS LODGE & SUITES, LLC et al., Plaintiffs, v. JFS DEVELOPMENT, INC., f/k/a JCS DEVELOPMENT, INC., et al., Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
I. INTRODUCTION....................................... 2
II. PROCEDURAL HISTORY................................. 2
III. SUBJECT MATTER JURISDICTION......................... 3
IV. SUMMARY JUDGMENT STANDARD......................... 5
V. RELEVANT FACTUAL BACKGROUND ....................... 6
VI. ANALYSIS.......................................... 12
VII. CONCLUSION ....................................... 25
I. INTRODUCTION
The matter before the court is Defendant Lightowler Johnson Associates, Inc.'s "Motion for Summary Judgment" ("Motion") (docket no. 133).
II. PROCEDURAL HISTORY
On December 3, 2009, Plaintiffs filed an eighty-seven-page, eighteen-count Complaint (docket no. 1). The Complaint arises from the development of an AmericInn hotel ("Hotel") in Cedar Rapids, Iowa. Plaintiffs allege that the former governors of the Hotel fraudulently induced them to invest in the Hotel and proceeded to mishandle the financing, construction and/or management of the Hotel.
Lightowler Johnson Associates, Inc. ("Lightowler") is only named in Count VII of the Complaint.1 See Complaint at 71. Count VII alleges that Lightowler was negligent in, among other things, providing plans and specifications that did not comply with standards and regulations and failing to provide proper oversight during the construction phase. On February 12, 2010, Lightowler filed an Answer (docket no. 42) to the Complaint, claiming that it did not breach any duties to Plaintiffs and asserting affirmative defenses. On July 15, 2011, Lightowler filed the Motion, arguing that Plaintiffs did not file their claim against Lightowler within the applicable statute of limitations and again asserting that it did not breach any duties of care. On September 15, 2011, Plaintiffs filed a Resistance (docket no. 151) to the Motion, and, on September 26, 2011, Lightowler filed a Reply (docket no. 159). On November 7, 2011, United States Magistrate Judge Jon S. Scoles granted Plaintiffs leave to file a supplemental resistance, see Order (docket no. 184), which Plaintiffs filed the same day, see Supplemental Resistance (docket no. 185). On November 14, 2011, Lightowler filed a Reply (docket no. 186) to the Supplemental Resistance. OnDecember 8, 2011, the undersigned held a telephonic hearing during which the parties argued specific issues raised in the Motion. See Hearing Minutes (docket no. 201). Kevin Visser and Robert Miller represented Plaintiffs. Kevin Caster and Dana Oxley represented Lightowler. Ted Vosburg appeared personally and was represented by Michael Mellaney for the purpose of the pending Motion to Withdraw Reference. John Seibert appeared personally and unrepresented. The Motion is now fully submitted and ready for decision.
III. SUBJECT MATTER JURISDICTION
The court has federal question jurisdiction over Plaintiffs' claims against Defendants John F. Seibert, Ted Vosburg and JFS Development, Inc. (f/k/a JCS Development, Inc.) ("JFS Development") arising under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962 (a)-(c). Although Lightowler is not a defendant in Plaintiffs' RICO claims, the court has supplemental jurisdiction over Plaintiffs' state law claim against Lightowler. Pursuant to 28 U.S.C. § 1367(a):
[I]n any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.
28 U.S.C. § 1367(a).
A federal court has supplemental jurisdiction over all claims in an action, including state law claims, "whenever the federal-law claims and state-law claims in the case derive from a common nucleus of operative fact and are such that [a plaintiff] would ordinarily be expected to try them all in one judicial proceeding." Kan. Pub. Emps. Ret. Sys. v. Reimer & Koger Assocs., Inc., 77 F.3d 1063, 1067 (8th Cir. 1996) (alteration in the original) (quoting Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 349 (1988)) (internal quotation marks omitted). For instance, claims arise from a common nucleus of operative fact when they are "factually interdependent," Myers v. Richland Cnty., 429 F.3d 740,746 (8th Cir. 2005) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 379 (1994)); there is "discernable overlap between the operative facts underlying the federal claims and those underlying the appended state claims," Hunt v. Up N. Plastics, Inc., 980 F. Supp. 1042, 1044 (D. Minn. 1997); or remanding the case to state court would "require duplicative evidence to be presented in both the state and federal forum," Schuster v. Anderson, 378 F. Supp. 2d 1070, 1122 (N.D. Iowa 2005). In Schuster, the court found that it had supplemental jurisdiction over the plaintiffs' state professional negligence claims against their accountants who were also defendants in the underlying RICO claim. 378 F. Supp. 2d at 1119-22. The court reasoned that, because the accountants negligently prepared tax returns and failed to inform the plaintiffs about the tax consequences of high-risk investments and loans and because the same investments were central to the RICO claims, both the state and federal cases would require proof regarding the same investments and loans. Id. at 1122.
The court can still have supplemental jurisdiction even when the defendant is not part of the claim giving rise to the federal question jurisdiction. For example, in Armstrong v. American Pallet Leasing, Inc. , the court declined to dismiss a claim against U.S. Bank for lack of jurisdiction even though the bank was not a defendant in the underlying RICO claims because the bank's misrepresentations were used to facilitate the RICO fraud. 678 F. Supp. 2d 827, 845-47 (N.D. Iowa 2009).
While the facts of this case differ somewhat from those in Schuster and Armstrong in that Lightowler is not a defendant in the RICO claim and Plaintiffs are not alleging intentional wrongdoing beyond negligence against Lightowler, the court finds that it has supplemental jurisdiction over Count VII. "'[I]n trying to set out standards for supplemental jurisdiction and to apply them consistently, we observe that, like unhappy families, no two cases of supplemental jurisdiction are exactly alike.'" Lyon v. Whisman, 45 F.3d 758, 760 (3d Cir. 1995) (quoting Nanavati v. Burdette Tomlin Mem'l Hosp., 857F.2d 96, 105 (3d Cir. 1988)).
Plaintiffs allege that part of the fraud constituting racketeering activities involves Seibert's misrepresentations and fraudulent nondisclosures regarding the Hotel's construction, specifically that the Hotel did not conform to Cedar Rapids code requirements and, consequently, the Hotel was operating without a certificate of occupancy at certain points following construction. See Complaint at ¶¶ 175-181. In their claim against Lightowler, Plaintiffs allege that Lightowler was negligent in failing to design the Hotel according to regulations and failing to properly oversee the general contractor during construction. See id. at ¶¶ 219-223. Therefore, Plaintiffs are alleging that Lightowler's negligence facilitated the alleged RICO fraud. Additionally, the facts of the RICO claim and the state negligence claim are interdependent and would require evidence of the Hotel's construction and regulatory compliance in both state and federal proceedings. Because there is a common nucleus of operative facts between the RICO claim and the negligence claim, the court has supplemental jurisdiction over the claim against Lightowler.
IV. SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "A dispute is genuine if the evidence is such that it could cause a reasonable jury to return a verdict for either party; a fact is material if its resolution affects the outcome of the case." Amini v. City of Minneapolis, 643 F.3d 1068, 1074 (8th Cir. 2011), petition for cert. filed, 80 BNA U.S.L.W. 3321 (U.S. Nov. 14, 2011) (No. 11-609) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 252 (1986)). "[S]elf-serving allegations and denials are insufficient to create a genuine issue of material fact." Anuforo v. Comm'r, 614 F.3d 799, 807 (8th Cir. 2010). "'To survive a motion for summary judgment, the nonmoving party must 'substantiate [its] allegations with sufficient probativeevidence [that] would permit a finding in [its] favor based on more than mere speculation, conjecture, or fantasy.'" Barber v. C1 Truck Driver Training, LLC, 656 F.3d 782, 801 (8th Cir. 2011) (quoting Putman v. Unity Health Sys., 348 F.3d 732, 733-34 (8th Cir. 2003)). The court must view the record in the light most favorable to the nonmoving party and afford it all reasonable inferences. See Schmidt v. Des Moines Pub. Schs. , 655 F.3d 811, 819 (8th Cir. 2011).
V. RELEVANT FACTUAL BACKGROUND
Viewing the evidence in the light most favorable...
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