New England Wood Pellet v. New England Pellet

• Decision Date: 30 October 2009
• Docket Number: Civil No. 09-cv-123-JL.
• Citation: 419 B.R. 133,2009 DNH 165
• Parties: NEW ENGLAND WOOD PELLET, LLC v. NEW ENGLAND PELLET, LLC, Jason Tynan, and Steven Zaczynski.
• Court: U.S. District Court — District of New Hampshire

419 B.R. 133

2009 DNH 165

NEW ENGLAND WOOD PELLET, LLC v. NEW ENGLAND PELLET, LLC, Jason Tynan, and Steven Zaczynski.

Civil No. 09-cv-123-JL.

United States District Court, D. New Hampshire.

October 30, 2009.

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Michael C. Harvell, James S. Lamontagne, Sheehan Phinney Bass & Green, Manchester, NH, for New England Wood Pellet, LLC.

Lawrence A. Vogelman, Nixon Raiche Vogelman Barry & Slawsky PA, Manchester, NH, for New England Pellet, LLC, Jason Tynan, and Steven Zaczynski.

ORDER

JOSEPH N. LAPLANTE, District Judge.

This case comes before the court on a motion to remand and a cross-motion to transfer. Plaintiff New England Wood Pellet, LLC ("NEWP") sued defendant New England Pellet, LLC ("NEP") and two of its principals in Cheshire County Superior Court, asserting claims that, according to the complaint, "arise[] out of a reseller relationship" between the companies. Within one month, however, NEP had filed for Chapter 11 bankruptcy protection in the Bankruptcy Court for the District of Connecticut, where it has its principal place of business. In re New Eng. Pellet, LLC, No. 09-20030, 2009 WL 47503 (Bankr.D.Conn. Jan.8, 2009). The defendants subsequently removed NEWP's lawsuit to this court, invoking its "original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(b).

NEWP then moved to remand, arguing that, first, this court lacks original jurisdiction under § 1334(b) and, second, even if jurisdiction exists, this court should nevertheless remand the case on equitable grounds under 28 U.S.C. § 1452(b) or decline to exercise supplemental jurisdiction under 28 U.S.C. § 1367(c) as to the claims against NEP's principals. The defendants responded by objecting to NEWP's motion and making their own cross-motion to transfer the case to the United States District Court for the District of Connecticut under 28 U.S.C. §§ 1404(a) or 1412.¹ For the reasons set forth below, the court denies the motion to remand and grants the motion to transfer.

I. Applicable legal standard

"[A] motion to remand a case back to state court following its removal to federal court involves a question of subject-matter jurisdiction. ... In the course of this inquiry, the removing party bears the burden of persuasion." BIW Deceived v. Local S6, Indus. Union of Marine & Shipbuilding Workers, 132 F.3d 824, 830-31 (1st Cir. 1997). The court must decide NEWP's remand motion before deciding the defendants' transfer motion, because "`[t]ransfer ... is possible only if venue is proper in the [transferor] forum and federal jurisdiction existed there. If subject matter jurisdiction is lacking, there is no power to do anything with the case except dismiss' or remand it." Marotta Gund Budd & Dzera LLC v. Costa, 340 B.R. 661, 663 n. 2 (D.N.H.2006) (quoting 15 Charles Alan Wright, Arthur R. Miller and Edward H. Cooper, Federal Practice & Procedure § 3844, at 332 (2d ed.1984 & 2005 supp.)).²

Where, as here, a subject-matter jurisdiction challenge comes at the pleadings stage, a court may consider the allegations in the pleadings as well as any other materials before it. See Aguilar v. ICE, 510 F.3d 1, 8 (1st Cir.2007); 14C Charles Alan Wright, Arthur R. Miller, Edward H. Cooper, Richard D. Freer, Joan E. Steinman, Catherine T. Struve, Vikram David Amar, § 3739, at 834-35 (4th ed.2009) ("whether an action should be remanded to state court must be resolved by the district court with reference to the complaint, the notice of removal, and the state court record at the time the notice of removal was filed") (footnote omitted). The court may also take judicial notice of developments in other courts, see, e.g., Aguilar, 510 F.3d at 8 n. 1; Marotta, 340 B.R. at 663 n. 3, such as other actions between the same parties and NEP's bankruptcy proceeding. The following facts are drawn from those materials.

II. Background

NEWP, a limited liability company with its principal place of business in Jaffrey, New Hampshire, manufactures and sells wood pellets for burning in wood stoves and the like as a source of heat. NEP, a limited liability company with its principal place of business in Enfield, Connecticut, operated as a distributor of wood pellets from the time of its formation in early 2007 to the time of its bankruptcy in early 2009. NEP was founded by defendant Stephen Zaczynski who, even before that time, had been buying wood pellets from NEWP and reselling them to consumers and other dealers in Connecticut and Massachusetts. As Zaczynski's business grew, he obtained necessary capital from an acquaintance, defendant Jason Tynan. Upon NEP's formation, Zaczynski, who resides in Suffield, Connecticut, and Tynan, who resides in Longmeadow, Massachusetts, became its only members.

NEP then approached NEWP with a proposal to become the exclusive distributor of its wood pellets in New Jersey and parts of New York, resulting in a written reseller agreement between the parties dated January 2008. While neither side has provided the court with a copy of the agreement, NEWP alleges that it authorized NEP to act as the exclusive reseller of NEWP's premium brand pellets in New Jersey and certain counties in New York, but prohibited NEP from selling those premium pellets elsewhere. NEWP also alleges that the reseller agreement did not apply to its non-premium brand pellets, which NEP remained free to sell anywhere, though the agreement did require NEP to sell at least 10,000 tons of pellets total (including a certain non-premium brand) to retain its status as an exclusive distributor.

The defendants claim that, apart from this agreement, NEWP further promised to provide NEP between 5,000 and 7,000 tons of pellets to sell in Massachusetts and Connecticut and that, in reliance on this promise, NEP "presold" some 4,000 tons of pellets to its customers in those states, i.e., accepted payment for product NEP did not yet have in stock. NEWP acknowledges having "told NEP it thought it would be able to supply 8,000-10,000 tons of pellets," but maintains that it "never made a firm commitment" because the parties "never reached agreement on a set price for a given quantity." NEWP also alleges that it cautioned its resellers, NEP included, "that it was likely that NEWP would be unable to meet all of the demand" so that "they should avoid `preselling' inventory."

In any event, NEWP informed NEP in June 2008 that NEWP would provide only 2,500 tons of non-premium pellets. While NEWP blames this on "an unprecedented and unanticipated increase in demand" for wood pellets caused by a sharp rise in the price of oil, the defendants complain that "NEWP had no difficulty in providing pellets to others" and that its operations manager "bragged" of continuing to sell large quantities of pellets into July. The defendants also claim that NEWP offered NEP additional non-premium pellets to sell in Massachusetts and Connecticut in exchange for relinquishing its exclusive rights to sell premium pellets in New Jersey and New York, which would have enabled NEWP to take direct advantage of rapidly rising pellet prices in that region. The defendants refused to assent to this deal, which they call "commercial blackmail." Eventually, in October 2008, NEWP declared NEP in default of the reseller agreement for, inter alia, allegedly selling premium-brand pellets outside of NEP's exclusive geographic area.

For its part, NEWP alleges (with apparent help from a thesaurus) that it was NEP who "made repeated efforts to persuade, cajole, browbeat, threaten, and otherwise coerce NEWP" into providing more non-premium pellets. These alleged efforts included withholding payment to NEWP for some $396,195 in pellets that had already been delivered to NEP. In any event, NEP did not succeed in obtaining enough pellets to make good on its commitments to its customers, resulting in consumer complaints to the Attorneys General of Massachusetts and Connecticut. They, in turn, brought civil suits against NEP and its principals for violating applicable state consumer protection statutes.³ NEWP also filed three of its own near-simultaneous lawsuits against NEP and its principals in state courts in Connecticut, Massachusetts, and New Hampshire (the instant action).⁴

This lawsuit (like NEWP's Connecticut and Massachusetts actions) asserts a number of claims against NEP. First, NEWP alleges that NEP breached the reseller agreement in a number of ways, including by refusing to pay for the pellets already received, and therefore seeks a declaratory judgment that NEWP has legitimately terminated the agreement, as well as monetary damages in breach of contract for the unpaid $396,195 (counts 1 and 3). Second, NEWP claims that NEP has engaged in violations of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), trademark dilution under N.H.Rev.Stat. Ann. § 350-A:13, and common-law trademark infringement and unfair competition by using the name "New England Pellet," which is confusingly similar to "New England Wood Pellet" (counts 4, 5, and 6). Third, NEWP asserts that NEP's actions amount to unfair or deceptive acts or practices in violation of the consumer protection laws of Connecticut, Conn. Gen.Stat. § 42-110b(a), Vermont, Vt. Stat. Ann. tit. 9, § 2453, and Massachusetts, Mass. Gen. Laws ch. 93-A, § 2— but not New Hampshire (count 7). Fourth, in a count entitled "Individual Liability" (count 4), NEWP asserts that "the corporate veil of NEP should be pierced and Tynan and Zaczynski held personally liable for NEP's obligations to NEWP to the extent that the assets of NEP are insufficient to do so." The complaint does not demand trial by jury.

Immediately upon NEWP's filing of its complaint in the New Hampshire Superior Court, it issued an ex parte attachment against the defendants—a hollow victory, it appears, since they hold no real or personal property in this state. NEP then filed...