Koch Project Sols., LLC v. All. Process Partners

• Decision Date: 22 January 2021
• Docket Number: CIVIL ACTION NO. H-20-3479
• Parties: KOCH PROJECT SOLUTIONS, LLC, Plaintiff, v. ALLIANCE PROCESS PARTNERS, LLC, d/b/a INTERNATIONAL ALLIANCE GROUP, and TRITEN CORPORATION, Defendant(s)
• Court: U.S. District Court — Southern District of Texas

KOCH PROJECT SOLUTIONS, LLC, Plaintiff, v. ALLIANCE PROCESS PARTNERS, LLC, d/b/a INTERNATIONAL ALLIANCEGROUP, and TRITEN CORPORATION, Defendant(s)

CIVIL ACTION NO. H-20-3479

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

January 22, 2021

MEMORANDUM OPINION AND ORDER

Plaintiff, Koch Project Solutions, LLC, ("KPS"), brings this action against defendants, Alliance Process Partners, LLC, d/b/a International Alliance Group ("IAG"), and Triten Corporation ("Triten") (collectively, "Defendants"), asserting claims for declaratory judgment under 28 U.S.C. §§ 2201-2202, arising from "Defendants' public and erroneous allegations that KPS is unlawfully competing with Defendants."¹ Pending before the court is Defendants' Motion to Dismiss or Stay Plaintiff's Declaratory Judgment Action ("Defendants' Motion to Dismiss or Stay") (Docket Entry No. 7), and Plaintiff Koch Project Solutions, LLC's Response in Opposition to Defendants' Motion to Dismiss or Stay ("Plaintiff's Response") (Docket Entry No. 14), in which KPSrequests leave to amend "[i]f the Court is inclined to agree that dismissal is warranted."² For the reasons explained below, Plaintiff will be ordered to supplement the jurisdictional facts stated in Plaintiff's Complaint, Defendants' Motion to Dismiss will be denied, Plaintiff's request to amend will be denied as moot, and Defendants' Motion to Stay will be granted.

I. Factual Allegations

KPS alleges that it was established in April of 2019, and that it offers a variety of services and expertise to clients in multiple industries, including the manufacturing, refining, and energy sectors.³ KPS's leadership includes: Paul Switzer ("Switzer"), President; Price Chumley ("Chumley"), Vice-President for Operations; Antoine Schellinger ("Schellinger"), Senior Vice-President for Business Development; John Burrus ("Burrus"), Vice-President for Project Services; and James Woodard ("Woodard"), Director of Technical Services. KPS alleges that "[a]t some point before working for KPS, these individuals were employed orotherwise retained by one or more Defendants."⁴ KPS alleges that during their respective tenures with defendant Triten, Chumley, Schellinger, Burrus, and Woodard (collectively, the "Former Employees") each signed an agreement setting forth certain post-employment obligations that prohibit them from soliciting or accepting certain business from Triten's customers for a 24-month period following their termination.⁵ KPS alleges that Switzer was a former Triten consultant who signed a "Consulting Agreement" containing post-employment obligations that prohibit him from soliciting business from or encouraging any of 16 named entities to discontinue working with or altering their relationship with IAG for a 12-month period following his termination.⁶ KPS alleges that Switzer and the Former Employees departed Triten for better opportunities — Schellinger in July of 2018, Switzer in May of 2019, Woodard in September of 2019, and Chumley and Burrus in November of 2019.⁷

KPS alleges that in March of 2020 Defendants advised the president of KPS's parent company that they believed KPS wasinvolved in inducing the Former Employees to violate their respective agreements by causing them to solicit or accept business on behalf of KPS in competition with Triten and soliciting other Triten employees.⁸ KPS alleges that

[s]hortly thereafter, in a Texas state court lawsuit, Defendants elevated their objections in a public filing naming KPS's direct and indirect parent companies (Koch Engineered Solutions, LLC, and Koch Industries, Inc.), over whom the state court does not have jurisdiction, as third-party defendants to a lawsuit involving Switzer's individual claim for unpaid compensation owed by Triten and/or IAG under his Consultant Agreement. Despite referring to KPS in their pleadings, Defendants did not name KPS as a third-party defendant but nevertheless still accuse KPS of hiring away the Former Employees to compete for projects that "otherwise would have gone to Triten" by allegedly inducing the Former Employees to violate their Agreements. Further, after being informed that they had sued the wrong party, Defendants declined to amend their pleading to include KPS or omit its parent companies.

Defendants' accusations — which anyone, including potential clients, may now view as a matter of public record on the state court's docket — jeopardize KPS from being awarded projects by former Triten clients, as Defendants have claimed — and will undoubtedly continue to argue — that any such projects were awarded in violation of the Former Employees and Switzer's "non-compete obligations."

KPS desires to remove the cloud over its name that has been engineered to prevent it from conducting business." In order to clarify the rights and liabilities between the parties, and so that it may conduct business unimpeded, KPS seeks declaratory relief regarding its alleged role in directing the Former Employees and Switzer to violate their post-contractual obligations.⁹

On October 9, 2020, KPS filed this action asserting two causes of action seeking declaratory judgment pursuant to 28 U.S.C. §§ 2201-2202. Count One asserts claims for declaratory judgment as to tortious interference through competition, and seeks

a declaratory judgment that KPS has not tortiously interfered and is not tortiously interfering with: (a) the provisions in Chumley, Burrus, and Woodard's Agreements prohibiting them for soliciting or accepting business of a similar nature to that which Triten provided to its customers; (b) the provision in Schellinger's Agreement prohibiting him from contacting Triten's clients for nine months; and (c) Article 9 of Switzer's Consultant Agreement.¹⁰

Count Two asserts claims for declaratory judgment as to tortious interference by employment, and seeks "a declaratory judgment that KPS has not tortiously interfered with the provisions in the Agreements purporting to prohibit the Former Employees from soliciting, inducing, or attempting to induce any other Triten employee to leave Triten to work for a competitor."¹¹

II. Defendants' Motion to Dismiss for Lack ofSubject Matter Jurisdiction

Defendants argue that this action should be dismissed for lack of subject matter jurisdiction because

KPS has failed to carry its burden to demonstrate this Court's subject matter jurisdiction under either of the two statutes it cites. The Declaratory Judgment Act does not confer jurisdiction and KPS has not carried itsburden to establish diversity jurisdiction under 28 U.S.C. § 1332(a).¹²

KPS responds that the court has diversity jurisdiction, and that it has sufficiently alleged both complete diversity of citizenship, and the requisite amount in controversy.¹³ KPS does not dispute that the Declaratory Judgment Act does not confer subject matter jurisdiction on this court. See Frye v. Andarko Petroleum Corp., 953 F.3d 285, 293 (5th Cir. 2019) ("A claim under the Declaratory Judgment Act is insufficient to confer federal question jurisdiction under 28 U.S.C. § 1331."). See also Skelly Oil Co. v. Phillips Petroleum Co., 70 S. Ct. 876, 879 (1950) (recognizing that "the operation of the Declaratory Judgment Act is procedural only," and that by enacting it, "Congress enlarged the range of remedies available in federal courts but did not extend their jurisdiction").

A. Standard of Review

Federal Rule of Civil Procedure 12(b)(1) governs challenges to the court's subject matter jurisdiction. "A case is properly dismissed for lack of subject matter jurisdiction when the courtlacks the statutory or constitutional. power to adjudicate the case." Home Builders Association of Mississippi, Inc. v. City of Madison, Mississippi, 143 F.3d 1006, 1010 (5th Cir. 1998). "Courts may dismiss for lack of subject matter jurisdiction on any one of three different bases: (1) the complaint alone; (2) the complaint supplemented by undisputed facts in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Clark v. Tarrant County, Texas, 798 F.2d 736, 741 (5th Cir. 1986). Rule 12(b)(1) challenges to subject matter jurisdiction come in two forms: "facial" attacks and "factual" attacks. See Paterson v. Weinberger, 644 F.2d 521, 523 (5th Cir. 1981). A facial attack consists of a Rule 12(b)(1) motion based solely on the pleadings unaccompanied by supporting evidence. Id. A factual attack challenges the existence of subject matter jurisdiction in fact -- irrespective of the pleadings -- and matters outside the pleadings -- such as testimony and affidavits -- are considered. Id. Although Defendants have not cited evidence outside of the pleadings in support of their motion to dismiss for lack of subject matter jurisdiction, because KPS has cited evidence outside of the pleadings in opposition to the Defendants' motion to dismiss, the court will treat the motion as a factual attack, and will not limit its review to whether Plaintiff's Complaint sufficiently alleges jurisdiction. KPS, as the party asserting federal jurisdiction, bears the burden ofshowing that the jurisdictional requirements have been met. Alabama-Coushatta Tribe of Texas v. United States, 757 F.3d 484, 487 (5th Cir. 2014). When facing a challenge to subject matter jurisdiction and other challenges on the merits, courts must consider the jurisdictional challenge before addressing the merits of the case. Id.

B. Analysis

KPS asserts diversity jurisdiction by alleging that

the parties are citizens of different states, and the amount in controversy exceeds $75,000.00 exclusive of interest and costs. KPS is a citizen of Kansas within the meaning of 28 U.S.C. § 1332 because its members are Kansas residents. IAG is a citizen of Texas within the meaning of 28 U.S.C. § 1332 because its members are Texas residents. Triten is a citizen of Texas within the meaning of 28 U.S.C. § 1332 because it is incorporated in Texas and has its principle place of business in

...