Trugreen Landcare, L.L.C. v. Scott

• Decision Date: 16 March 2007
• Docket Number: Civil Action No. 3:06-CV-0327-D.
• Citation: 512 F.Supp.2d 613
• Parties: TRUGREEN LANDCARE, L.L.C., Plaintiff-Counterdefendant, v. Kaylyn SCOTT, Individually and d/b/a Professional Research and Referrals, Defendant-Counterplaintiff-Third-Party Plaintiff, v. City of Dallas and Mark Duebner; Third-Party Defendants.
• Court: U.S. District Court — Northern District of Texas

512 F.Supp.2d 613

TRUGREEN LANDCARE, L.L.C., Plaintiff-Counterdefendant, v. Kaylyn SCOTT, Individually and d/b/a Professional Research and Referrals, Defendant-Counterplaintiff-Third-Party Plaintiff, v. City of Dallas and Mark Duebner; Third-Party Defendants.

Civil Action No. 3:06-CV-0327-D.

United States District Court, N.D. Texas, Dallas Division.

March 16, 2007.

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Barbara Ellis Stanley, Helms & Greene, Houston, TX, for Plaintiff-Counterdefendant.

Walter A. Knowles, Law Office of Walter A. Knowles, Dallas, TX, for Defendant-Counterplaintiff-Third-Party Plaintiff.

Charles Estee, Dallas City Attorney's Office, Dallas, TX, for Third-Party Defendants.

MEMORANDUM OPINION AND ORDER

SIDNEY A. FITZWATER, District Judge.

In this removed action, the dispositive question presented is whether the defendant-counterplaintiff-third-party plaintiff has established a viable claim for relief under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 ("RICO"). Concluding that she has not, the court grants plaintiff-counterdefendant's and third-party defendants' motions for summary judgment dismissing the RICO claim and remands the balance of the case to state court.

I

Although this case is somewhat more involved than the following description reflects, this discussion of the background facts and procedural history is sufficient considering the focus of this decision. Plaintiff-counterdefendant TruGreen Landcare, L.L.C. ("TruGreen") sued defendant-counterplaintiff-third-party plaintiff Kaylyn Scott, individually and d/b/a Professional Research and Referrals ("Scott"), in Texas state court, seeking to recover on claims for breach of contract and on a sworn account. Scott later counterclaimed against TruGreen and filed a third-party action against third-party defendant the City of Dallas ("City"), alleging a claim for breach of contract. The City removed the case to this court on the basis (addressed below) that Scott has asserted a claim arising under federal law. Scott did not challenge the removal. About two months after the case was removed, she filed an amended counterclaim and third-party complaint¹ in which she added Mark Duebner ("Duebner"), a City employee, as a third-party defendant and explicitly alleged a claim for relief under RICO against the City, Duebner, and TruGreen. Although Scott's pleadings and summary judgment briefing are not entirely clear, the court assumes that she is asserting a single RICO claim based on an alleged substantive violation of RICO and a RICO conspiracy.

Scott contracted with the City to provide ground and maintenance service for the City Parks and Recreation Department.² Scott did not have equipment or personnel with which to service the City contract, so she entered into a subcontract ("Subcontract") with TruGreen to provide the labor, equipment, supervision, and expertise for the City's ground maintenance. For her services as contractor, Scott received a percentage of the amount invoiced to the City.

Under the terms of the Subcontract, TruGreen was required to provide Scott with a monthly statement and proof of performance setting forth in detail all costs incurred in performing the work for the City. Scott was then to remit TruGreen's invoice to the City for payment. The City would issue a check to Scott, who would, in turn, pay TruGreen.

The Subcontract required that Scott open a lockbox and deposit the payments in the lockbox. From the lockbox, Scott was entitled to her percentage (3%) of the payments received, and TruGreen had the right to the remainder (97%). Instead of opening a lockbox, Scott deposited the City's checks in a business account to which TruGreen was not a signatory.

After the City made several payments from which Scott failed to pay TruGreen its percentage, TruGreen notified the City that it was changing the "remit to" address from Scott's address to TruGreen's address. TruGreen maintains that it notified Scott of this change and asked her to meet TruGreen's branch manager at the bank to open a lockbox account to facilitate disbursement of the funds, but she refused, and instead demanded that the City cancel and reissue to her all checks that had been sent directly to TruGreen. The City contacted TruGreen and asked that the checks be returned. Since TruGreen had not yet endorsed any of the checks, it returned the ones in its possession. TruGreen contends that it did not attempt to cash the checks, and that it retained them only so that it could persuade Scott to open a lockbox. The City reissued the checks, and Scott was eventually paid for all the checks sent to TruGreen.

Scott then terminated the Subcontract with TruGreen, stating that she would pay TruGreen in full within 30 days. Scott did not pay TruGreen as promised. Five months after Scott terminated the Subcontract, the City notified Scott that her Contract with the City had been cancelled. The City noted that it was aware that Scott had not paid her subcontractors for services rendered, and it debarred her from doing business with the City for two years. This lawsuit followed.

All parties have filed motions that are pending for decision, Concerning Scott's RICO claim, the City and Duebner move to dismiss for lack of subject matter jurisdiction, and TruGreen, the City, and Duebner move for summary judgment.³ Scott opposes their motions,⁴ and she moves for summary judgment establishing that she is entitled to recover on her RICO claim.

II

The court begins by addressing whether it has subject matter jurisdiction in this case.⁵ Although the parties have not raised this question, the court must notice its own lack of subject matter, jurisdiction sua sponte, if necessary. Kidd v. Southwest Airlines Co., 891 F.2d 540, 546 (5th Cir.1990) ("While neither party argued that the amended complaint provided an adequate basis for federal question jurisdiction, federal courts must address jurisdictional questions sua sponte when the parties' briefs do not bring the issue to the court's attention.").

In this case, plaintiff TruGreen sued defendant Scott in Texas state court, alleging that it was entitled to recover from her on a sworn account, as provided in Tex.R. Civ. P. 185, and for breach of contract. It also sought attorney's fees and damages under state law. Scott later counterclaimed against TruGreen and impleaded the City as a third-party defendant. The City did not remove the case at that time because, as it candidly concedes in its notice of removal, Scott sued it only for breach of contract. "No federal claims or federal issues were stated." Notice of Removal ¶ 4.

The City removed the case, however, after Scott responded to the City's first set of interrogatories. In answers to three interrogatories — not in her state-court third-party petition — Scott stated that the facts and/or law on which she relied to assert that the City had no basis to terminate its contract with her were that the City had acted with bias and prejudice, and had violated federal law, including the United States Constitution, 42 U.S.C. § 1983, RICO, and the Fourteenth Amendment. She also averred that she was entitled to punitive damages because, inter alia, the City had violated law and regulations of federal purchasing policies, and that she was entitled to injunctive relief based on the fact that the City continued to violate 42 U.S.C. § 1983. The City removed this case within a matter of weeks, contending on the basis of these answers — not based on her well-pleaded complaint — that Scott had asserted a claim arising under federal law. Notice of Removal ¶ 6.⁶

The case was not removable, however, on this basis. "Ordinarily, the well-pleaded complaint rule governs federal question jurisdiction. Under the rule, `[r]emoval is not possible unless the plaintiffs "well pleaded complaint" raises issues of federal law sufficient to support federal question jurisdiction.'" Ervin v. Stagecoach Moving & Storage, Inc., 2004 WL 1253401, at *2 (N.D.Tex. June 8, 2004) (Fitzwater, J.) (alteration in original) (quoting Rodriguez v. Pacificare of Tex., Inc., 980 F.2d 1014, 1017 (5th Cir.1993)); see Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 366 (5th Cir.1995) ("A determination that a cause of action presents a federal question depends upon the allegations of the plaintiff's well-pleaded, complaint." (citing Louisville & Nashville R.R. Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908))). The well-pleaded complaint rule makes the plaintiff "the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law." Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). Therefore, even if federal claims are available, the plaintiff may remain in state court by relying exclusively on state law. See id. If, on its face, the plaintiff's state court complaint contains no issue of federal law, there is no federal question jurisdiction. Aaron v. Nat'l Union Fire Ins. Co., 876 F.2d 1157, 1160-61 (5th Cir.1989). A federal claim does not exist simply because facts are available in the complaint to suggest such a claim. See Gemcraft Homes, Inc. v. Sumurdy, 688 F.Supp. 289, 292 (E.D.Tex. 1988); Chavez v. McDonald's Corp., 1999 WL 814527, at *2 (N.D.Tex. Oct.8, 1999) (Fitzwater, J.) (holding that plaintiff had not alleged a federal-law claim even though he referred at one point to exhausting his administrative remedies under federal law, where he otherwise clearly alleged that his claims were based on Texas statutory or common law). Nor is the existence of a federal defense enough to establish federal question jurisdiction. See, e.g., Hart v. Bayer Corp., 199 F.3d 239, 244 (5th Cir.2000) ("Yet the mere fact that a given federal law might `apply' or even provide a federal defense to a state-law cause of action, is insufficient alone to establish federal question jurisdiction.")....