United States District Court, E.D. Missouri, Eastern Division
MEMORANDUM AND ORDER
A. ROSS UNITED STATES DISTRICT JUDGE
matter is before the Court on Defendants' Motion to
Dismiss. (Doc. 39.) The motion is fully briefed and ready for
disposition. (Docs. 40, 49, 54.) Also before the Court are a
motion by Plaintiff law firm Davis & Garvin, LLC's
("D&G") Motion to Sever (Doc. 63), which
Defendants oppose (Doc. 67), and a motion by Plaintiffs to
take judicial notice (Doc. 61), which Defendants do not
oppose. Finally, Plaintiffs move for leave to file a second
amended complaint. (Doc. 82.) Defendants oppose. (Doc. 85.)
2015, Plaintiff SLEC, LLC, acquired an option to purchase the
Ashley Power Plant in St. Louis, Missouri, from Trigen-St.
Louis Energy Corporation. SLEC and Plaintiff Michael
Becker hired Plaintiff law firm Davis &
Garvin, LLC ("D&G") to represent SLEC
throughout the "negotiation, acquisition and
closing" of the purchase "and such matters related
thereto." (Doc. 25-1 at ¶ 11.) SLEC signed a fee
agreement with D&G that called for hourly compensation
plus reimbursement for costs and expenses (the "Fee
Agreement"). SLEC then formed Defendant Ashley Energy,
LLC, ("Ashley") for the purpose of buying the power
plant and assigned to it SLEC's purchase option. SLEC
directed D&G to represent Ashley as the buyer.
2016, SLEC began communicating with Defendant Power
Investments, LLC ("PI"), a Nevada corporation,
about financing the purchase of the power plant in exchange
for equity in its ownership. Pl's only member is
Defendant Mason Miller, a lawyer living in Kentucky. PI
obtained a term sheet from a private equity firm called Arena
Investors, LP, and thereafter SLEC and Becker, represented by
D&G, entered into a Membership Interest Purchase
Agreement ("MIPA") with PI. (Doc. 44.) PI agreed to
purchase SLEC's entire ownership interest in
Ashley-including the right to purchase the power plant-in
exchange for two payments totaling $1.7 million.
(Id.) In addition, the MIPA provided for the release
by PI of a separate, personal loan it had made to Becker.
August 10, 2017, Ashley, whose sole member at this point was
PI, closed on the acquisition of the power plant. As the sole
person authorized to access Ashley's bank account, Becker
transferred nearly $480, 000 to Miller and his Kentucky law
firm Defendant Miller Wells, which represented PI in the
purchase. Ashley borrowed approximately $8.5 million from
Arena Investors to buy the plant.
the sale of the power plant, the parties began arguing over
money. In the weeks following the purchase, PI made two cash
payments to Becker and delivered an unexecuted copy of the
note for his personal loan, marked "paid in full,"
which together represented the full amount of the initial
payment due under the MIPA. Since then, no other payments
have been made.
argue that Defendants still owe the full amount of the second
payment as well as legal fees for work D&G performed on
behalf of Ashley Energy. Around the same time, Defendants
came to believe that Plaintiffs had misrepresented the
financial state of the power plant and that Becker had
misused loan funds.
October 19, 2017, D&G partner Dan Davis emailed Miller,
seeking to informally resolve their dispute. (Doc.
60-1.) He stated that, if the parties
could not find a resolution by 5:00 p.m. on October 26, 2019,
he intended to file the attached draft petition.
(Id.) The next day, Miller responded, thanking Davis
for his willingness to informally resolve the matter,
expressing his hope that they could do so, and closing with
"Litigation is just going to get messy, and I'd
prefer to spend my time making the steam plant a
success." (Doc. 60-2.) Then, on October 25, 2017, the
day before Davis's stated deadline for an informal
resolution, PI sued SLEC and Becker in Kentucky state court,
advancing claims of fraud and unjust enrichment (the
"Kentucky Action"). (See Doc. 15 at 2.)
Two days later, on October 27, 2017, Plaintiffs filed suit in
Missouri state court, arguing that Defendants had breached
the MIPA and Fee Agreement (the "First Missouri
Suit"). (Doc. 15 at 1.)
removed the First Missouri Suit to this Court on November 22,
2017. (Doc. 1 in SLEC, No. 4:17-cv-02751-JAR
[hereinafter SLEC II). On December 5, 2017, the
Fayette Circuit Court of Kentucky entered a default judgment
in the Kentucky Action. (SLEC I, Doc. 1.) Roughly
one month later, Defendants moved to dismiss the First
Missouri Suit on the grounds that Plaintiffs failed to state
a claim and that four of the five counts were barred by res
judicata based on the default judgment in Kentucky state
court. (SLEC I, Docs. 19, 20.) On May 14, 2018,
Plaintiffs filed a motion in the First Missouri Suit to
voluntarily dismiss Count I of their complaint and, that same
day, this Court granted Defendants' motion and dismissed
the remaining claims without prejudice. (SLEC I,
Docs. 32, 33.) In the interim, Plaintiffs had filed a motion
to set aside the default judgment in the Kentucky Action.
(See SLEC I, Doc. 29 at 1-2.)
22, 2018, the Fayette Circuit Court granted Plaintiffs'
motion to set aside the default and reinstated the Kentucky
Action. (See Doc. 15 at 2.) Becker subsequently
removed the suit to the Eastern District of Kentucky on July
24, 2018, and moved to dismiss for lack of personal
jurisdiction. (See Doc. 15 at 2.)
30, 2018, Plaintiffs filed suit a second time in Missouri
state court, alleging breach of contract and fraudulent
conveyance and seeking to pierce the corporate veil and to
force the imposition of a constructive trust. (Doc. 8.)
Defendants removed to federal court on August 20, 2018, and
the case is now before this Court. (Doc. 1.)
interim, the District Court of the Eastern District of
Kentucky dismissed the Kentucky Action for lack of personal
jurisdiction. See Power Investments, LLC v. SLEC,
LLC, No. 18-6098 (6th Cir. June 20, 2019). PI appealed.
Id. On June 20, 2019, the Sixth Circuit Court of
Appeals issued an opinion reversing the district court's
dismissal, finding that Becker's contacts with Miller and
Miller Wells were sufficient to subject him to suit in
Kentucky. Id. The case was remanded to the Eastern
District of Kentucky and is currently stayed pending the
outcome of this motion to dismiss. (See Doc. 60-4.)
Defendants argued that all of Plaintiffs' claims are
barred by the express language of the Fee Agreement or MIPA,
or else fail on their merits as a matter of law.
(Id.) In their supplemental briefing, Defendants add
that, since the Kentucky Action has been reinstated, this
Court need not reach the merits and can instead dismiss this
case under the first-filed doctrine or the
compulsory-counterclaim rule. (Doc. 59.)
survive a motion to dismiss under Rule 12(b)(6), "a
complaint must contain sufficient factual matter, accepted as
true, to 'state a claim to relief that is plausible on
its face.'" Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). A claim is facially plausible
"when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant
is liable for the misconduct alleged." Id.
(citing Twombly, 550 U.S. at 556). "While a
complaint attacked by a Rule 12(b)(6) motion to dismiss does
not need detailed factual allegations, a plaintiffs
obligation to provide the 'grounds' of his
'entitle[ment] to relief requires more than labels and
conclusions, and a formulaic recitation of the elements of a
cause of action will not do." Twombly, 550 U.S.
at 555, 127 S.Ct. 1955 (alteration in original) (citations
omitted). "When ruling on a motion to dismiss [under
Rule 12(b)(6)], the district court must accept the
allegations contained in the complaint as true and all
reasonable inferences from the complaint must be drawn in
favor of the nonmoving party." Young v. City of St.
Charles, 244 F.3d 623, 627 (8th Cir. 2001).
argue that this Court should dismiss Plaintiffs' suit
before reaching the merits because the Kentucky Action
established federal jurisdiction in the Eastern District of
Kentucky before Plaintiffs filed suit in this district. (Doc.
59 at 3-8.) "To conserve judicial resources and avoid
conflicting rulings, the first-filed rule gives priority, for
purposes of choosing among possible venues when parallel
litigation has been instituted in separate courts, to the
party who first establishes jurisdiction." Nw.
Airlines, Inc. v. Am. Airlines, Inc., 989 F.2d 1002,
1006 (8th Cir. 1993) (citing U.S. Fire Ins. Co. v.
Goodyear Tire & Rubber Co., 920 F.2d 487, 488 (8th
Cir. 1990)). Plaintiffs do not dispute that this case
substantially overlaps with the Kentucky Action.
(See Doc. 60.)
a simple analysis of the dates each suit was filed is
sufficient to determine which court should proceed. However,
the rule "yields to the interests of justice, and will
not be applied where a court finds 'compelling
circumstances' supporting its abrogation."
Id. (quoting Goodyear, 920 F.2d at 488.
Courts look for "red flags" that counsel against
honoring the first-filed doctrine. Id. For instance,
when the first-filed suit was initiated after notice that the
other party was planning to sue, courts are suspicious of a
potential race to the courthouse that often indicates
disfavored forum-shopping. Anheuser-Busch, Inc. v.
Supreme Int'l Corp., 167 F.3d 417, 419 (8th Cir.
1999). This suspicion increases when the other party
communicates a specific and imminent date on which it intends
to file suit. See Nw. Airlines, 989 F.2d at 1007. In
addition, courts are leery of first-filed suits for
declaratory judgment, which "may be more indicative of a
preemptive strike than a suit for damages or equitable
argue both red flags are present here: Davis stated his
intention to file suit if the parties could not informally
resolve their issues and provided a specific deadline for
doing so. (Doc. 60-1.) Miller expressed his desire to avoid
litigation and agreed to work towards an informal resolution.
(Doc. 60-2.) Miller then filed suit in Kentucky the day
before Davis's stated deadline without notifying the
Plaintiffs. (Docs. 59-1, 60 at 5.) Plaintiffs filed suit in
Missouri the next day.
Court finds this timeline of events extremely concerning and
suspicious. Not only were Defendants on notice that
Plaintiffs intended to file suit, they knew the exact date
and had a copy of the petition. Additionally, Miller stated
an affirmative intention to avoid litigation and then filed
suit without notifying Plaintiffs that his position had
changed. Finally, Defendants seek a declaratory judgment in
the Kentucky Action, further increasing the Court's
suspicion of a preemptive strike. In short, the Court
believes there are compelling circumstances not to apply the
reply that this suit was initiated nine months after they
filed the Kentucky Action, undermining any claim of a race to
the courthouse. (Doc. 66 at 1.) They note Plaintiffs'
assertion that this suit is a continuation of the First
Missouri Suit, but argue that Plaintiffs' voluntary
dismissal of the First Missouri Suit precludes such
treatment. (Id. at 1-2.) Citing Quickturn Design
Sys., Inc. v. Meta Sys., No. C-96-0881 MHP, 1996 WL
671230 (N.D. Cal. Oct. 31, 1996), and Sandstrom v.
ChemLawn Corp., 904 F.2d 83 (1st Cir. 1990), Defendants
argue that a case voluntarily dismissed "cannot be the
basis of the application of an exception to the first-filed
rule." (Id. at 2.)
Court finds both cited cases distinguishable.
Quickturn involved a patent dispute between
Quickturn Design Systems and Mentor Graphics, among others.
1996 WL 671230, at * 1. First, Mentor filed suit in the
Northern District of California. Id. Then, Quickturn
brought suit in the International Trade Commission.
Id. Mentor voluntarily dismissed the California suit
and almost immediately refiled in the District of Oregon.
Id. Mentor sought to avoid the first-filed doctrine
by claiming the Oregon suit was merely a continuation of the
California suit. Id. In effect, Mentor was arguing
that the Oregon suit was filed before Quickturn's ITC
Mentor, Plaintiffs in this case are not attempting to reach
back past the Kentucky Action and argue that the First
Missouri Suit was the first filed. Instead, they are
asserting that the Court should consider the date of the
First Missouri Suit as evidence supporting their argument
that the first-filed doctrine should not be applied.
is even less like this case. In fact, it does not even apply
the first-filed doctrine. Defendants apparently cite it for
the narrow proposition that "a voluntary dismissal under
Fed.R.Civ.P. 41(a) wipes the slate clean, making any future
lawsuit based on the same claim an entirely new lawsuit
unrelated to the earlier (dismissed) action."
Sandstrom, 904 F.2d at 86. Even then, the First
Circuit's statement related to the defendants'
acquiescence to jurisdiction in the first suit, not the
timing of the cases. Considering the issue, the court wrote:
Even if we assume, contrary to the record, that there was
some intimation in the course of Sandstrom /that
ChemLawn would not contest personal jurisdiction in Maine,
any such commitment would be irrelevant to the situation in
Sandstrom II. Absent explicit conditions to the
contrary-and there were none here-a voluntary dismissal under
Fed.R.Civ.P. 41(a) wipes the slate clean, making any future
lawsuit based on the same claim an entirely new lawsuit
unrelated to the earlier (dismissed) action. See Hill v.
W. Bruns & Co., 498 F.2d 565, 567 n. 2 (2d Cir.
1974); flower v. Ribicoff, 304 F.2d 427, 428 (6th
Cir.1962); Bryan v. Smith, 174 F.2d 212, 214 (7th
Cir.l949);see also 9 C. Wright & A. Miller,
Federal Practice and Procedure: Civil § 2367 at 186
(1971). Agreements do not automatically survive from one suit
to the next.
Id. As such, Sandstrom is of little help in
solving the particular problem presented in this case, namely
whether Plaintiffs' voluntary dismissal requires the
application of the first-filed doctrine.
also note that courts often find compelling circumstances to
avoid the first-filed doctrine when the second-filed suit is
in a far more convenient forum. This "balance of
convenience" exception applies "where an analysis
under 28 U.S.C. § 1404(a) dictates transfer."
Barry-Wehmiller Companies, Inc. v. Marschke, No.
4:09CV760 TIA, 2009 WL 3698009, at *2 (E.D. Mo. Nov. 2, 2009)
(citing Terra Int'l, Inc. v. Mississippi Chem.
Corp., 922 F.Supp. 1334, 1348-49 (N.D. Iowa 1996),
aff'd, 119 F.3d 688 (8th Cir. 1997)). Section
1404(a) reads: "For the convenience of parties and
witnesses, in the interest of justice, a district court may
transfer any civil action to any other district or division
where it might have been brought... ."
argue that Missouri is the appropriate venue for numerous
reasons: Both suits relate to the sale of a power plant
situated in Missouri and owned by a Missouri LLC whose sole
member was another Missouri LLC; Plaintiffs are two Missouri
LLCs, and a Missouri citizen; the promissory note and deed
involved in the transfer both state that they are to be
interpreted under Missouri law; the trustee of the deed was a
Missouri LLC headquartered in St. Louis; the MIPA is governed
by Missouri law; and Miller is the registered agent for both
the trustee and Ashley, listing two separate St. Louis
addresses. (Doc. 60 at 8) In addition, Plaintiffs note that
the wire transfers at issue in this case were initiated at
Missouri banks and that nearly every potential witness other
than Miller resides in Missouri. (Id.)
Court first notes its concern regarding Plaintiffs'
proposed path forward. If the Court denies Defendants'
motion to dismiss, this case and the Kentucky Action will
proceed as parallel suits with the potential for inconsistent
or even contradictory outcomes. Avoiding that risk is the
very purpose of the first-filed doctrine. Nw. Airlines,
Inc., 989 F.2d at 1006.
said, the Court is somewhat unsympathetic because it believes
that the risk is the result of Defendants' gamesmanship
in filing the Kentucky Action while on notice of, and only
two days before, Plaintiffs' stated intent to bring suit
in Missouri. The Court is not persuaded by Defendants'
arguments regarding the voluntary dismissal of the First
Missouri Suit or the intervening months before this suit was
filed. Put simply, those facts have no bearing on the
propriety of Defendants' conduct, and the Court will not
punish Plaintiffs for relying on Miller's reassurances.
Further, the Court understands that Kentucky Action is
currently stayed pending ...