Rothgeb v. Axis Grp. Holdings, LLC
| Decision Date | 25 February 2013 |
| Docket Number | No. 3:12-cv-00138 - JEG,3:12-cv-00138 - JEG |
| Parties | JOHN ROTHGEB and GLEN MEYERS, Plaintiffs, v. AXIS GROUP HOLDINGS, LLC; AXIS CONSULTANTS HOLDINGS, LLC d/b/a AXIS CONSULTANT SERVICES, LLC; AKASAS, LLC; LQM VENTURES, LLC; WILLIAM DOLLARD; PAUL TANTILLO; JORDAN GITTERMAN; STEVEN FRIEDMAN; UNKNOWN ENTITIES 1-10; DOES 1-10; and ABR KEOKUK, LLC, Defendants. |
| Court | United States District Courts. 8th Circuit. United States State District Court of Southern District of Iowa |
Before the Court are both a Motion to Remand and a Motion to Strike brought by Plaintiffs John Rothgeb and Glen Meyers (collectively, Plaintiffs). Defendants Axis Group Holdings, LLC, Axis Consultant Holdings, LLC d/b/a Axis Consultant Services, LLC, Akasas, LLC, LQM Ventures, LLC (LQM Ventures), William Dollard, Paul Tantillo, Jordan Gitterman, Steven Friedman (Friedman), Unknown Entities 1-10, Does 1-10, and ABR Keokuk, LLC (ABR Keokuk) (collectively, Defendants) resist. The Court finds no hearing is necessary in the resolution of this motion, which is fully submitted and ready for disposition.
It is undisputed by the parties that Plaintiffs initially formed and wholly owned ABR Keokuk in 2010. After its formation, Plaintiffs allege that "[t]hrough a series of subsequent actions and transactions that were purposefully crafted to hide [Defendants'] purpose and not disclosed, discussed, voted upon, or otherwise approved pursuant to Iowa law, [Plaintiffs'] ownership of ABR Keokuk was diluted by [the other Defendants]." Compl. ¶ 25, ECF No. 1-2. Plaintiffs further aver they have twice demanded information from the LLC defendants to explain the events that occurred in relation to ABR Keokuk, a request with which no defendant has complied.
On October 10, 2012, Plaintiffs filed their Complaint in the Iowa District Court for Lee County against Defendants alleging breach of fiduciary duties, fraud, oppression of minority shareholders, breach of contract, unjust enrichment and/or quantum meruit, conversion, civil conspiracy, and seeking judicial dissolution and a complete accounting of ABR Keokuk. LQM Ventures and Friedman (the Removing Defendants) removed the action to this Court on November 30, 2012, asserting that this Court had diversity jurisdiction over the matter.1 The Removing Defendants contend that complete diversity exists despite ABR Keokuk's status as a citizen of Iowa as ABR Keokuk is properly a plaintiff and has been fraudulently added to the action to defeat diversity. Specifically, the Removing Defendants aver that ABR Keokuk was formed and owned by the Plaintiffs, that the Plaintiffs have levied no specific allegations against ABR Keokuk, and the Plaintiffs have not sought to recover from ABR Keokuk, thus ABR Keokuk should be realigned as a plaintiff or disregarded as fraudulently joined to the action.
On December 20, 2012, Plaintiffs filed their Motion to Remand arguing the Court lacks jurisdiction for two reasons: (1) complete diversity does not exist as ABR Keokuk is properly joined, and (2) the Removing Defendants have not properly alleged the citizenship of the LLC defendants thereby failing to establish diversity. On February 12, 2013, having resisted Plaintiffs' Motion to Remand, the Removing Defendants filed an Amended Notice of Removal. On February 18, 2013, Plaintiffs filed a Motion to Strike the Amended Notice of Removal as untimely.
"[D]efendant[s'] removal of a case to federal court is appropriate 'only if the action originally could have been filed there.'" Junk v. Terminix Int'l Co., 628 F.3d 439, 444 (8th Cir. 2010) (quoting In re Prempro Prods. Liab. Litig., 591 F.3d 613, 619 (8th Cir. 2010)), cert. denied, 132 S. Ct. 94 (2011). Diversity jurisdiction requires an amount in controversy that exceeds $75,000, see 28 U.S.C. § 1332, and "complete diversity, that is where no defendant holds citizenship in the same state where any plaintiff holds citizenship." Cascades Dev. of Minn., LLC v. Nat'l Specialty Ins., 675 F.3d 1095, 1098 (8th Cir. 2012) (internal quotation marks omitted) (quoting Junk, 628 F.3d at 445). After removal, plaintiffs "may move to remand the case," which the Court must do if it "concludes that it does not have subject matter jurisdiction." Junk, 628 F.3d at 444. "The removing defendant[s] bear[] the burden of establishing federal jurisdiction by a preponderance of the evidence . . . ." Skoda v. Lilly USA LLC, 488 F. App'x 161, 162 (8th Cir. 2012) (per curiam) (citing In re Prempro, 591 F.3d at 620). "All doubts about federal jurisdiction should be resolved in favor of remand to state court." Block v. Toyota Motor Corp., 665 F.3d 944, 948 (8th Cir. 2011) (quoting In re Prempro, 591 F.3d at 620).
Fraudulent joinder is a well-settled exception to the complete diversity rule. See In re Prempro Prods., 591 F.3d at 620 (). "Joinder is fraudulent and removal is proper when there exists no reasonable basis in fact and law supporting a claim against the resident defendant[]." Karnatcheva v. JPMorgan Chase Bank, N.A., 704 F.3d 545, 546 (8th Cir. 2013) (quoting Wiles v. Capitol Indem. Corp., 280 F.3d 868, 871 (8th Cir. 2002)).
[T]here is a common thread in the legal fabric guiding fraudulent-joinder review. It is reason. Thus, a proper review should give paramount consideration to the reasonableness of the basis underlying the state claim. Where applicable state precedent precludes the existence of a cause of action against a defendant, joinder is fraudulent.
Filla v. Norfolk S. Ry. Co., 336 F.3d 806, 810 (8th Cir. 2003).
Moreover, this Court "is not bound by the designations assigned to the parties," Andersen v. Khanna, 827 F. Supp. 2d 970, 976 (S.D. Iowa 2011), but must "look beyond the pleadings, and arrange the parties according to their sides in the dispute," Dryden v. Dryden, 265 F.2d 870, 873 (8th Cir. 1959) (quoting City of Indianapolis v. Chase Nat'l Bank, 314 U.S. 63, 69 (1941)); see also Polanco v. H.B. Fuller Co., 941 F. Supp. 1512, 1523 (D. Minn. 1996). The parties must be properly aligned both at the time the case is filed in state court and at the time of removal. Ryan ex rel. Ryan v. Schneider Nat'l Carriers, Inc., 263 F.3d 816, 819 (8th Cir. 2001) (per curiam). A court determines the proper alignment of a party not by mechanical rules but by ascertaining "the principal purpose of the suit, and the primary and controlling matter in dispute." Andersen, 827 F. Supp. 2d at 976 (emphasis omitted) (quoting Dryden, 265 F.2d at 873); see also Fin. Guar. Ins. Co. v. City of Fayetteville, Ark., 749 F. Supp. 934, 942 (W.D. Ark. 1990) (quoting City of Indianapolis, 314 U.S. at 69), aff'd, 943 F.2d 925 (8th Cir. 1991).
Plaintiffs assert that ABR Keokuk has not been fraudulently joined as there remains a reasonable basis in fact and law for the claims brought against ABR Keokuk. This Court must agree. There is no indication in the record that ABR Keokuk was joined to escape complete diversity. See Filla, 336 F.3d at 809 (). Nor are Plaintiffs' claims deficient in a manner generally identified by other courts to support a finding of fraudulent joinder. See, e.g., Block, 665 F.3d at 950 (); Menz v. New Holland N. Am., Inc., 440 F.3d 1002, 1005 (8th Cir. 2006) (); Gurley v. FedEx Ground Package Sys., Inc., 874 F. Supp. 2d 803, 805 (S.D. Iowa 2012) (); Dunbar v. Wells Fargo Bank, N.A., 853 F. Supp. 2d 839, 844 (D. Minn. 2012) (). While Plaintiffs have not alleged an act or omission on the part of ABR Keokuk, they seek both an accounting and its dissolution, which directly affect ABR Keokuk, thus its joinder is not only colorable, it is intuitive.
As argued by Plaintiffs, Iowa case law appears consistent with this result. In Bottoms v. Stapleton, 706 N.W.2d 411, 413 (Iowa 2005), a minority shareholder brought suit against a limited liability company and its majority shareholder alleging breach of fiduciary duty and conversion while seeking judicial dissolution, an accounting, and the appointment of a receiver. The basis of the claim was that the individual defendant "converted certain assets of [the LLC] to his own use, made certain distributions to himself at the expense of Plaintiff and [the LLC], and has refused to fulfill his contractual and fiduciary duties." Id. At issue before the Iowa Supreme Court was the defendants' interlocutory appeal of the district court's holding that the potential for a conflict of interest between the two defendants precluded them from maintaining common counsel. Id. While the court determined "the equitable claims asserted by [the plaintiff] against [the LLC] are merely ancillary to his damage claims against [the individual defendant]," the court did not question the plaintiff's ability to bring suit against the limited liability company. Id. at 417. Ultimately, the court determined that the parties could be jointly represented, although conceding that a conflict could arise, thus the plaintiff could raise his concern again at a later date. Notably, in Bottoms, there was no indication that the defendants were objecting to the LLC's inclusion as a defendant. However, the review of the plaintiff's claim in that case iscertainly indicative that plaintiff's claim is "colorable," as the court...
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