Sovereign Int'l, Inc. v. Minturn

• Decision Date: 12 June 2020
• Docket Number: Case No. 4:20-cv-00298-SRB
• Parties: SOVEREIGN INTERNATIONAL, INC. Plaintiff, v. JOHN MINTURN, MPH GROUTING LLC, WILLIAM HUDNALL, ANTHONY PONTIER, and MPHLEX LLC, Defendants, ANTHONY PONTIER and MPHLEX LLC, Counterclaimants/Third-Party Plaintiffs, v. SOVEREIGN INTERNATIONAL, INC., Counterclaim Defendant, and NICO GROBLER, DEON VAN DYK, RELBORGN PTY LTD. and TRIOMVIRI PTY LTD., Third-Party Defendants.
• Court: U.S. District Court — Western District of Missouri

SOVEREIGN INTERNATIONAL, INC. Plaintiff, v. JOHN MINTURN, MPH GROUTING LLC, WILLIAM HUDNALL, ANTHONY

PONTIER, and MPHLEX LLC, Defendants,ANTHONY PONTIER and MPHLEX LLC,Counterclaimants/Third-Party Plaintiffs, v. SOVEREIGN INTERNATIONAL, INC., Counterclaim Defendant,andNICO GROBLER, DEON VAN DYK,RELBORGN PTY LTD. and TRIOMVIRI PTY LTD., Third-Party Defendants.

Case No. 4:20-cv-00298-SRB

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MISSOURI WESTERN DIVISION

June 12, 2020

ORDER

Before the Court is Plaintiff's Motion to Remand. (Doc. #19). For the reasons stated below, the motion is GRANTED. The case is hereby remanded to the Circuit Court of Jackson County, Missouri. The Clerk of the Court is directed to mail a certified copy of this Order to the Clerk of the Circuit Court of Jackson County, Missouri, as required by 28 U.S.C. § 1447(c).

I. BACKGROUND

This case arises from the alleged violation of a non-compete agreement between Plaintiff Sovereign International, Inc. ("Sovereign") and Defendant John Minturn ("Minturn"), a former Sovereign executive. Sovereign, a company specializing in the manufacture and application of subsurface grouting products, employed Minturn as an executive until December 2017. At some point in 2018, Sovereign learned Minturn was engaging in conduct it considered to be a breach of an existing non-compete agreement. Rather than file suit, Sovereign and Minturn executed a settlement agreement on April 18, 2018 (the "Settlement Agreement"), which also incorporated a confidentiality, intellectual property assignment, non-solicitation, and non-competition agreement (the "Restrictive Covenant Agreement").

A complicated series of events transpired following the execution of the Settlement Agreement, an abbreviated version of which is detailed below. In early 2019, Minturn formed MPH Grouting, LLC, ("MPH Grouting") along with William Hudnall ("Hudnall") and Anthony Pontier ("Pontier"). MPH Grouting allegedly began to engage in business that directly competed with Sovereign and purportedly violated terms contained within the Settlement Agreement. At one point, MPH Grouting tried to procure from Sovereign a release of Minturn from the various restrictive obligations contained in the Settlement Agreement, an effort Sovereign characterizes in its briefing as an "extortion attempt." (Doc. #20, p. 7). Sovereign subsequently filed suit in Missouri state court against Minturn in May 2019, seeking, inter alia, a declaration that the terms of the 2018 Settlement Agreement were enforceable and that prohibited Minturn from operating his planned subsurface grouting business. As the suit proceeded in state court, Hudnall and Pontier organized a new subsurface grouting business, MPHlex LLC ("MPHlex"), that appeared to be in direct competition with Sovereign. Upon learning of MPHlex's formation, Sovereignmoved to amend its petition to add Pontier, Hudnall, MPHlex, and MPH Grouting as defendants and assert additional claims against them. The state court judge granted the motion to amend and deemed Sovereign's second amended petition¹ filed as of February 7, 2020.

In its second amended complaint, Sovereign sought relief for: (1) Count I: Breach of Contract (against Minturn); (2) Count II: Tortious Interference (against Hudnall, Pontier, MPH Grouting, and MPHlex); (3) Count III: Civil Conspiracy to Breach the Restrictive Covenant Agreement (against all Defendants); (4) Count IV: Civil Conspiracy to Tortuously Interfere with the Restrictive Covenant Agreement (against Hudnall, Pontier, MPH Grouting, and MPHlex); (5) Count V: Misappropriation of Trade Secrets (against all Defendants); (6) Count VI: Preliminary and Permanent Injunction (against all Defendants); (7) Count VII: Declaratory Judgment (against Minturn); and (8) Count VIII: Breach of Fiduciary Duty (against Minturn). After Sovereign's second amended complaint was deemed filed, both Pontier and MPHlex's then-counsel agreed to accept service for the amended complaint on February 26, 2020, in exchange for an extension of their answer deadline. Hudnall, acting pro se, agreed to accept service under the same terms. Counsel for Sovereign agreed to extend the deadline to answer the second amended complaint to April 14, 2020.

On April 14, 2020, all Defendants answered Sovereign's second amended complaint and raised various counterclaims. Pontier, MPHlex, and Hudnall each raised counterclaims seeking to invalidate three patents licensed to Sovereign by Nico Grobler ("Grobler"), Deon Van Dyk ("Van Dyk"), Relborgn Pty. Ltd. ("Relborgn"), and Triomviri Pty. Ltd. ("Triomviri"), who were also joined to the suit as third-party defendants. That same day—forty-eight days after Pontier, MPHlex and Hudnall accepted service of Sovereign's second amended complaint— Pontier andMPHlex filed a Notice of Removal with this Court, stating that their counterclaims challenging Sovereign's patents are "claims for relief arising under an Act of Congress relating to patents" and render the case removable under 28 U.S.C. § 1454.² On May 8, 2020, Sovereign moved to remand, contending the removal filed by Pontier and MPHLex was untimely and that neither Pontier nor MPHlex have shown cause to extend the removal deadline under § 1454(b)(2). The Court held oral argument on June 9, 2020, on Sovereign's motion to remand and its subsequently filed motion to dismiss for lack of subject matter jurisdiction.

II. LEGAL STANDARD

Generally, defendants to a state court action may remove to federal court "any civil action brought in a State court of which the district courts of the United States have original jurisdiction[.]" 28 U.S.C. § 1441(a). The party seeking removal bears the burden of establishing subject matter jurisdiction. Cent. Iowa Power Coop. v. Midwest Indep. Transmission Sys. Op., Inc., 561 F.3d 904, 912 (8th Cir. 2009). Removal may be challenged by filing a motion to remand. See 28 U.S.C. § 1447(c) ("a motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal"). "[A] district court is required to resolve all doubts about federal jurisdiction in favor of remand." Transit Cas. Co. v. Certain Underwriters at Lloyd's of London, 119 F.3d 619, 625 (8th Cir. 1997) (citation omitted).

Under 28 U.S.C. § 1338, "district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents," and 28 U.S.C. § 1454 authorizes the removal of such claims to federal court. In turn, removal may be based on a counterclaim ifthat claim arises under patent law. See Intellisoft, Ltd. v. Acer Am. Corp., 955 F.3d 927, 934 (Fed. Cir. 2020) (noting that removal under § 1454 "requires that the claim supporting removal must be contained in an operative pleading"); see also Badhwa v. Veritec, Inc., 367 F.Supp.3d 890, 906-07 (D. Minn. 2018) (acknowledging that declaratory judgment counterclaims may be removed under § 1454 if they arise under patent law). Where removal is based solely on § 1454, the action "may be removed by any party and the time limitations contained in [§] 1446(b) may be extended at any time for cause shown." 28 U.S.C. § 1454(b)(1)-(2). The time limitations of § 1446(b) require the removing party to file its notice of removal within thirty days of receiving notice of the pleading that renders the case removable. See 28 U.S.C. § 1446(b) ("The notice of removal of a civil action or proceeding shall be filed within 30 days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based. . . . [I]f the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading . . . from which it may first be ascertained that the case is one which is or has become removable."); Accutrax, LLC v. Kildevaeld, 140 F.Supp.3d 168, 171 (D. Mass. 2015) ("It is clear that § 1454 incorporates the thirty-day removal requirements of § 1446.").

III. DISCUSSION

The parties agree that Defendants Pontier, MPHlex, and Hudnall's declaratory judgment counterclaims arise under patent law and thus may properly serve as the basis for removal under § 1454. Additionally, Pontier, MPHlex, and Hudnall conceded in their suggestions in opposition to remand and during oral argument that removal occurred more than thirty days after Pontier, MPHlex, and Hudnall became aware of the potential patent issues stemming from Sovereign'ssecond amended complaint.³ However, because this case was removed solely based on § 1454, the thirty-day time limitation contained in § 1446(b) "may be extended at any time for cause shown." The parties dispute whether Pontier, MPHlex, and Hudnall have shown cause for an extension under § 1454.

The Eighth Circuit has not decided what constitutes "cause shown" under § 1454(b)(2). The consensus among district courts that have considered the issue is that the removing party bears the burden of putting forth some reason for why the untimely removal should be excused. See, e.g., Andrews v. Daughtry, 994 F.Supp.2d 728, 734 (M.D.N.C. 2014) (collecting cases and finding "cause shown" under § 1454(b)(2) to be analogous with the "good cause" standard of Federal Rule of Civil Procedure 6(b)). While the "cause shown" standard is not a particularly high bar, courts have found that untimely removal due to a party's "oversight, inadvertence, or excusable neglect" is generally insufficient to warrant an extension. Univ. of Ky. Res. Found., Inc. v. Niadyne, Inc., No. Civ. 13-16-GFVT, 2013 WL 5943921, at *10 (E.D. Ky. Nov. 5, 2013); see also SnoWizard, Inc. v. Andrews, No. Civ. A. 12-2796, 2013 WL 3728410, at *6 (E.D. La. July 12, 2013) (finding no cause shown where "nothing ever prevented Defendants from seeking removal...