Bio–tec Envtl. Llc v. Adams

792 F.Supp.2d 1208

BIO–TEC ENVIRONMENTAL, LLC, a New Mexico Limited Liability Company, and John Lake, Plaintiffs,

v.Samuel ADAMS, Joy Evans, Nevin Bahadirli, James Rooney, Carl Doellstedt, and John/Jane Does 1–10, Defendants.

No. CIV 11–0236 JB/ACT.

United States District Court, D. New Mexico.

May 31, 2011.

J. Douglas Foster, Geoffrey D. Rieder, Travis G. Jackson, Foster, Rieder & Jackson, P.C., Albuquerque, NM, for Plaintiffs.Charles A. Armgardt, Modrall Sperling Roehl Harris & Sisk, P.A., Albuquerque, NM, for Defendants Samuel Adams and Nevin Bahadirli.Henry M. Bohnhoff, Andrew G. Schultz, Rodey Dickason Sloan Akin & Robb, P.A., Albuquerque, NM, Corey M. Shapiro, Anthony T. Eliseuson, William M. Gantz, SNR Denton U.S., LLP, Chicago, IL, for Defendants James Rooney and Carl Doellstedt.Marcus E. Garcia, Law Office of Marcus E. Garcia, Albuquerque, NM, for Defendant Joy Evans.

MEMORANDUM OPINION AND ORDER

JAMES O. BROWNING, District Judge.

THIS MATTER comes before the Court on: (i) the Plaintiffs' Expedited Motion to Remand, filed March 28, 2011 (Doc. 14); (ii) the Defendants James Rooney's Carl Doellstedt's Motion to file a Surreply, filed April 20, 2011 (Doc. 30); (iii) the Plaintiffs' Motion to Extend Briefing Schedule on “Other Motions” Pending Ruling on Motion to Remand, filed March 30, 2011 (Doc. 17); and (iv) the Joint Motion to Seal Court Record, filed March 28, 2011 (Doc. 24). The Court held a hearing on May 18, 2011. The primary issues are: (i) whether the Plaintiffs fraudulently joined Defendants Samuel Adams and Nevin Bahadirli to destroy diversity jurisdiction; (ii) whether the Court should remand this case to the Second Judicial District Court, County of Bernalillo, state if New Mexico for lack of subject-matter jurisdiction; (iii) whether the Court should award the Plaintiffs costs and expenses pursuant to 28 U.S.C. § 1447(c); (iv) whether the Court should grant Rooney and Doellstedt leave to file a surreply; (v) whether the Court should stay briefing on other motions pending the Court's decision on the Motion to Remand; and (vi) whether the Court should seal court records to protect alleged trade secrets. The Court concludes that the Plaintiffs did not fraudulently join Adams and remands this case to the Second Judicial District Court for lack of subject-matter jurisdiction. The Court will not award costs and expenses, because the Defendants' removal was not objectively unreasonable. The Court grants Rooney and Doellstedt leave to file a surreply. The Court stays briefing, because remanding this case to state court may alter the import and applicable standards, or eliminate some motions. The Court will seal certain records to preserve the status quo and allow the state court to resolve whether information is trade secret.

FACTUAL BACKGROUND

This action involves a business dispute arising out of Adams' decision to terminate his membership interest in Plaintiff Bio–Tec Environmental, LLC, and create his own company. Bio–Tec Environmental brought this lawsuit alleging Adams, one of its two founders and Senior Vice President of Marketing and Sales, breached his fiduciary duties and committed other alleged torts when he severed his relationship with Bio–Tec Environmental and started his own business that allegedly competes with Bio–Tec Environmental. See Amended Complaint for Damages and Injunctive Relief for Breach of Fiduciary Duty, Civil Conspiracy, Intentional Interference with Contract, Interference with Prospective Advantage, Unfair Trade Practices, Misapropriation [sic] of Trade Secrets in Violation of Uniform Trade Secrets Act, Spoiliation [sic] of Evidence and Unjust Enrichment (dated January 4, 2011), filed March 18, 2011 (Doc. 6–1 at 2) (“Amended Complaint”). The Plaintiffs further allege that Defendant Nevin Bahadirli “traveled extensively with defendant Adams on [Bio–Tec Environmental]'s expense account,” Amended Complaint ¶ 5, at 2, and that she “call [ed] on customers and business contacts of [Bio–Tec Environmental] at a time when Adams was still employed and owed fiduciary duties to [Bio–Tec Environmental],” id. ¶ 28, at 6. The Plaintiffs further allege that “Bahadirli knew, or reasonably should have known, that her expenses were being paid by [Bio–Tec Environmental], yet accepted the payment and was thereby unjustly enriched.” Amended Complaint ¶ 29, at 6.

PROCEDURAL BACKGROUND

Plaintiffs Bio–Tec Environmental and John Lake filed suit in state court against Defendants Adams and “John/Jane Does 1–10” in November 2010. See Complaint for Damages and Injunctive Relief for Breach of Fiduciary Duty, Civil Conspiracy, Intentional Interference with Contract, Interference with Prospective Advantage, Unfair Trade Practices, Misappropriation of Trade Secrets in Violation of Uniform Trade Secrets Act (dated November 29, 2010), filed March 18, 2011 (Doc. 6–1 at 18). Adams is a New Mexico resident and was served in New Mexico. See Samuel Adams Summons (dated January 3.2011), filed March 18, 2011 (Doc. 6–7 at 27–28) (“Complaint”). Bio–Tec is a New Mexico Limited Liability Company, and Lake is a New Mexico resident. See Complaint ¶ 13, at 1. The Plaintiffs obtained a Temporary Restraining Order against defendant Adams on December 3, 2010 in state court. See Temporary Restraining Order (dated December 3, 2010), filed March 18, 2011 (Doc. 6–2 at 32).

Adams filed a motion to compel arbitration on December 7, 2010. See Defendant's Expedited Motion to Compel Arbitration, Dismiss or Stay Proceedings, Vacate Hearing on Preliminary Injunction, and Vacate Temporary Restraining Order (dated December 7, 2010), filed March 18, 2011 (Doc. 6–2 at 43) (“Motion to Compel Arbitration”). Adams' Motion to Compel Arbitration was based on a provision in the Bio–Tec Environmental Operating Agreement that reads in relevant part:

The Members agree that in the event of any dispute or disagreement solely between or among any of them arising out of, relating to or in connection with this Agreement or the Company or its organization, formation, business or management (“Member Dispute”), the Members shall use their best efforts to resolve any dispute arising out of or in connection with this Agreement by good-faith negotiation and mutual agreement.

....

However, in the event that the Members are unable to resolve any Member Dispute, such parties shall first attempt to settle such dispute through a nonbinding mediation proceeding. In the event any party to such mediation proceeding is not satisfied with the result thereof, then any unresolved disputes shall be finally settled in accordance with an arbitration proceeding.

Defendant James Rooney and Carl Doellstedt's Notice of Removal ¶ 6, at 3, filed March 16, 2011 (Doc. 1) (“Notice of Removal”) (emphasis added).¹ The Plaintiffs filed their Amended Complaint on January 4, 2011, adding Bahadirli, and Defendant Joy Evans, Rooney, and Doellstedt as co-conspirator Defendants. See Amended Complaint at 1. On January 5, 2011, the Plaintiffs responded to Adams' Motion to Compel Arbitration, arguing that, because the claims were between Bio–Tec, which is not a signatory to the arbitration clause, and because the claims were against Adams in his capacity as an employee—and not in his capacity as a member of the limited liability company—the dispute was not a “dispute or disagreement solely between or among” members of Bio–Tec. Plaintiffs' Response in Opposition to Defendant's Motion to Compel Arbitration at 1, 5–7 (dated January 5, 2011), filed March 18, 2011 (Doc. 6–9 at 1). The state court, acknowledging that “there are no New Mexico cases that address the application of an arbitration agreement to an LLC, which separately is not a signatory to the arbitration agreement,” and that “[t]here is a split in ... authority” outside New Mexico, granted Adams' motion to compel arbitration on March 14, 2011, staying the state court case. Order (dated March 14, 2011), filed March 28, 2011 (Doc. 14–1 at 1). The Plaintiffs filed their Notice of Appeal from the state trial court's order compelling arbitration on March 17, 2011. See Doc. 14–2. That same day, the Plaintiffs also filed a motion with the state court to stay the order compelling arbitration, pending the outcome of the appeal to the Court of Appeals of New Mexico. See Expedited Motion to Stay and to Fix Bond (dated March 17, 2011), filed March 28, 2011 (Doc. 14–3).

Bahadirli filed a Motion to Dismiss her as a Defendant on February 15, 2011. See Doc. 6–18 at 23. The Plaintiffs filed A Response in Opposition to Defendant Bahadirli's Motion to Dismiss on March 14, 2011. See Doc. 6–20 at 9. That motion has not been heard and remains pending.

On March 16, 2011, Rooney and Doellstedt filed a Notice of Removal with the Court and in the state court. The Plaintiffs received the Notice of Removal through the mail on March 17, 2011. Rooney and Doellstedt contend that, because the state court granted Adams' Motion to Compel Arbitration, the Court has diversity jurisdiction over this case.

The Plaintiffs move the Court to remand this case to the Second Judicial District Court of New Mexico pursuant to 28 U.S.C. §§ 1446(c)(4) and 1447(c), for lack of diversity jurisdiction under 28 U.S.C. § 1332. The Plaintiffs also request expedited consideration of the motion. Pursuant to 28 U.S.C. § 1447(c), the Plaintiffs further request the Court to award costs and expenses, including attorney fees, incurred as a result of the improper removal.

The Defendants make two assertions to support their claim of diversity jurisdiction—and they must prevail on both assertions to establish jurisdiction: (i) that the original defendant—Adams—was “fraudulently joined,” because the state court ultimately granted his contested motion to compel arbitration; and (ii) that the later-joined defendant—Bahadirli—was fraudulently joined, because “there is no basis in fact or law ... to assert any claims” against her. Defendants James Rooney and Carl Doellstedt...