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LaBarge Realty, LLC v. Sand Development, LLC

United States District Court, E.D. Missouri, Eastern Division

May 9, 2019

LABARGE REALTY, LLC, et al., Plaintiffs,
v.
SAND DEVELOPMENT, LLC, et al., Defendants.

          MEMORANDUM AND ORDER OF REMAND

          JOHN A. ROSS UNITED STATES DISTRICT JUDGE

         This matter is before the Court on the following motions: Plaintiffs' Motion to Remand (Doc. No. 6); Defendants SanD Development, LLC, LaBarge Coating, LLC and David Kersting's 12(b)(5) Motion to Dismiss and Defendants Suzanne Pawlow, David Kersting and LaBarge Coating, LLC's 12(b)(3) Motion to Dismiss and Defendants' Motion to Transfer Venue Pursuant to the First-Filed Rule (Doc. No. 11); and subject to Defendants' pending Rule 12(b) motions, Defendants' Motion to Dismiss and Alternatively Defendants' Motion to Transfer and Consolidate Pursuant to the First-Filed Rule and Further Alternatively to Consolidate under Local Rule 4.03 (Doc. No. 19). The motions are fully briefed and ready for disposition.

         I. Background

         This lawsuit arises out of a decades-long business relationship between the parties. Plaintiff LaBarge C&R, LLC ("C&R") is a holding company owned by Pierre LaBarge that in turn owns 100% of Plaintiff LaBarge Realty, LLC ("Realty"), whose only asset is real property located in Houston, Texas. C&R and Realty are Missouri limited liability companies. Defendants Suzanne Pawlow ("Pawlow") and David Kersting ("Kersting") are officers of both C&R and Realty and members and managers of Defendant SanD Development, LLC ("SanD"), a Texas limited liability company. Defendant LaBarge Coating, LLC ("Coating") is a Missouri limited liability company whose sole member is SanD. Coating is a pipe coating, processing and storage business that operates on Realty's property in Texas (the "Sheldon Property") pursuant to a lease agreement (the "Sheldon Lease"). Pawlow is a citizen of Illinois; Kersting is a citizen of Missouri.

         On September 14, 2018, SanD and Coating (the "Texas plaintiffs") filed suit against C&R, Realty, and their owner Mr. LaBarge (the "Texas defendants") in Texas state court alleging twelve causes of actions arising out of the Sheldon Lease as well as other agreements (the "Texas lawsuit"). C&R and Realty were served with process on September 28, 2018.

         On October 9, 2018, Realty and C&R filed this action in the Circuit Court of St. Louis County, Missouri against SanD, Pawlow, Kersting, and Coating asserting claims for breach of fiduciary duty, fraud, tortious interference with business expectancy, unjust enrichment, breach of the implied covenant of good faith and fair dealing, rescission and declaratory relief (the "Missouri lawsuit").

         On October 22, 2018, the Texas defendants (Plaintiffs herein) removed the Texas lawsuit to the Southern District of Texas and then moved to dismiss and/or transfer the case to the Eastern District of Missouri pursuant to a forum selection clause.

         On November 8, 2018, Pawlow removed the Missouri lawsuit to this Court based on diversity of citizenship of the parties. Plaintiffs move to remand pursuant to the "forum defendant rule," 28 U.S.C. § 1441(b)(2)[1], arguing this Court lacks jurisdiction because they named SanD, Kersting, and Coating, all Missouri defendants. Defendants maintain the forum defendant rule does not apply because they were not served at the time of removal, citing Horton v. Conklin. 431 F.3d 602, 604 (8th Cir. 2005).

         On December 4, 2018, Defendants filed their motion to dismiss for improper service pursuant to Rule 12(b)(5) and improper venue pursuant to Rule 12(b)(3) and motion to transfer this case to the Southern District of Texas pursuant to the "first-filed" rule.

         On December 17, 2018, the Southern District of Texas transferred the Texas lawsuit to the Eastern District of Missouri, where it was assigned to District Judge Hamilton, No. 18-CV-2090 JCH. Defendants have now moved to dismiss, stay or transfer the instant action based on the "first-filed" rule. Alternatively, Defendants seek consolidation of the two cases pursuant to Rule 42 and Local Rule 4.03. Plaintiffs do not oppose consolidation.

         Defendants urge the Court to delay ruling on Plaintiffs' Motion to Remand and Defendants' Motion to Dismiss and Motion to Transfer until after it rules on Defendants' Motion to Dismiss, and Alternatively, Defendants' Motion to Transfer and Consolidate Pursuant to the First-Filed Rule, and Further Alternatively to Consolidate Under Local Rule 4.03. (Doc. No. 29 at 2). Because the Court must be satisfied that it has jurisdiction before it turns to the merits of the parties' other legal arguments, Carlson v. Arrowhead Concrete Works, Inc., 445 F.3d 1046, 1050 (8th Cir. 2006), the Court will address Plaintiffs' motion to remand first.

         II. Legal Standard

         "Removal statutes are strictly construed, and any doubts about the propriety of removal are resolved in favor of state court jurisdiction and remand." Madderra v. Merck Sharpe & Dohme Corp., No. 4:11CV1673, 2012 WL 601012, at *1 (E.D. Mo. Feb. 23, 2012) (quoting Manning v. Wal-Mart Stores East, Inc., 304 F.Supp.2d 1146, 1148 (E.D. Mo. 2004)). The party seeking removal and opposing remand has the burden of establishing jurisdiction by a preponderance of the evidence. Id. (citing Central Iowa Power Co-op. v. Midwest Indep. Transmission Sys. Operator, Inc., 561 F.3d 904, 912 (8th Cir. 2009T). See also Nicely v. Wyeth, Inc., No. 4:11CV338 CDP, 2011 WL 2462060 at *2 (E.D. Mo. Jun. 17, 2011).

         The forum defendant rule, 28 U.S.C. § 1441(b), makes diversity jurisdiction in a removal case narrower than if the case was originally filed in federal court by the plaintiff. Brake v. Reser's Fine Foods, Inc., No. 4:08CV1879 JCH, 2009 WL 213013, at *1 (E.D. Mo. Jan. 28, 2009) (citing Hurt v. Dow Chem. Co., 963 F.2d 1142, 1145 (8th Cir. 1992) (referencing the 28 U.S.C. § 1441(b) limitation on defendants in the forum State)). Under § 1441(b), a defendant can remove a case based on diversity jurisdiction "only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." See Lincoln Prop. Co. v. Roche,546 U.S. 81, 90 (2005); Horton, 431 F.3d at 604 (quoting 28 U.S.C. § 1441(b)); Pecherski v. General Motors Corp., 636 F.2d 1156, 1160 (8th Cir. 1981) (28 U.S.C. § 1441(b) "further limits jurisdiction based on diversity of citizenship by requiring that no joined and served defendants be a citizen of the state in which the action was initially brought"). Federal courts lack diversity jurisdiction over a removed case in which one of the defendants is a citizen of the forum state. Hinkle v. Norfolk ...


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