Solar Eclipse Inv. Fund VII v. T-Mobile U.S., Inc.

SOLAR ECLIPSE INVESTMENT FUND VII, LLC et al., Plaintiffs, v. T-MOBILE USA, INC., INTERNATIONAL SPEEDWAY CORPORATION, MARSHALL & STEVENS, INC., Defendants.

No. 20-25257-Civ-GAYLES/TORRES

United States District Court, S.D. Florida

February 16, 2021

REPORT AND RECOMMENDATION ON PLAINTIFFS' MOTION TO REMAND

EDWIN G. TORRES United States Magistrate Judge

This matter is before the Court on Solar Eclipse Investment Fund VII LLC's et al., (“Plaintiffs”) motion to remand this action back to Florida state court. [D.E. 7]. T-Mobile USA, Inc. (“T-Mobile”) and International Speedway Corporation (“ISC”) (collectively, “Defendants”) filed separate responses in opposition on January 28, 2021 [D.E. 20-21] to which Plaintiffs filed their replies on February 4, 2021. [D.E. 24-25]. Therefore, Plaintiffs' motion is now ripe for disposition. After careful consideration of the motion responses, replies, relevant authorities, and for the reasons discussed below, Plaintiff's motion to remand should be GRANTED as to ISC and DENIED as to T-Mobile.^[1]

I. BACKGROUND

Plaintiffs are a group of investment funds that poured hundreds of millions of dollars into an enterprise that purported to manufacture and deploy mobile solar generators (“MSGs”). Jeff and Paulette Carpoff (the “Carpoffs”) and their company - DC Solar Distribution Inc. and its related entities (“DC Solar”) - were the central figures that orchestrated a $2.5 billion dollar Ponzi scheme to provide a temporary source of electrical power to customers. DC Solar offered investment opportunities to third party investors to purchase and lease the MSGs in return for valuable tax and financial benefits.

Plaintiffs paid approximately 30% of the sale price for each MSG between 2011 and 2018 (worth approximately $45, 000 each) as a down payment and issued a promissory note to DC Solar for the remaining amount. Plaintiffs leased the MSGs back to DC Solar and then DC Solar leased the MSGs to third parties, such as T-Mobile and ISC. T-Mobile used the MSGs as emergency power for cellular towers and ISC used them to power light stands at its racetracks. Plaintiffs were attracted to these investments, in part, because DC Solar had long-term lease agreements with these Defendants. This allowed for an accurate valuation of the MSGs, provided Plaintiffs with revenue to pay off the promissory notes, and showed that DC Solar had reputable business partners.

However many of the MSGs that DC Solar purported to manufacture never existed. The Carpoffs and several other co-conspirators used DC Solar as a vehicle to defraud Plaintiffs and other investors. And to date, some co-conspirators have been charged with, and pled guilty to, federal charges. DC Solar is now part of bankruptcy proceedings pending in the United States Bankruptcy Court for the District of Nevada.

T-Mobile is a publicly traded wireless network operator incorporated in Delaware with a principal place of business in Washington State. A T-Mobile employee, Alan Hansen (“Mr Hansen”), began T-Mobile's relationship with the Carpoffs in 2012 when the company looked to save money on backup generators during power outages. T-Mobile started to rent MSGs from DC Solar in 2014 pursuant to short-term as-needed agreements. In September 2015, DC Solar presented T-Mobile with a lease contract that required the latter to lease 1, 000 MSGs at a rent of $1, 100 per month for ten years (the “T-Mobile Lease”). This contract, over its lifespan, required T-Mobile to pay more than $130 million over ten years. Mr. Hansen signed the lease on behalf of T-Mobile. Plaintiffs allege, that prior to the signing T-Mobile knew it would not honor the agreement and would instead continue to only rent MSGs on a short-term as-needed basis. Plaintiffs claim that T-Mobile and DC Solar used the lease to induce them to invest in MSGs.

ISC, on the other hand, is a Florida corporation that operates as a motorsports promoter. The company owns and operates thirteen motorsports facilities, including the Daytona International Speedway. In 2016 and 2017, ISC entered into three separate ten-year agreements with DC Solar to sublease MSGs, which required ISC to pay DC Solar $150 million dollars over ten years (the “ISC Subleases”). Each ISC Sublease named one of the Plaintiffs as a third-party beneficiary to the agreement and contained a provision that there were no other agreements between ISC and DC Solar. However, unbeknownst to Plaintiffs, ISC and DC Solar entered into addendums for each ISC Sublease that allowed ISC to terminate the agreements in their entirety at its convenience. In addition, the addendums each contained a promise from DC Solar that it would enter into sponsorship agreements with several affiliates of ISC. As a result, DC Solar and ISC affiliates entered into five sponsorship agreements that required DC Solar to pay the ISC affiliates $7.5 million dollars per year. Plaintiffs claim that these sponsorship agreements were concealed.

On December 17, 2020, Plaintiffs filed a state court complaint [D.E. 1-2] against Defendants in the Eleventh Judicial Circuit in and for Miami-Dade County Florida with three causes of action: (1) fraudulent misrepresentation/concealment, (2) aiding and abetting fraud, and (3) negligent misrepresentation. T-Mobile filed a notice of removal on December 27, 2020, invoking the Court's diversity jurisdiction pursuant to 28 U.S.C. §§ 1332, 1441, 1446 and 1447. [D.E. 1]. On January 7, 2021, Plaintiffs filed a motion to remand this action back to Florida state court. [D.E. 7]. One week later on January 14, 2021, ISC consented to T-Mobile's removal and asserted an additional basis for the Court to exercise federal jurisdiction under 28 U.S.C. § 1334 and 28 U.S.C. § 1452(a). [D.E. 11]. With all responses and replies having been filed, the motion to remand is now ripe for disposition.

II. APPLICABLE PRINCIPLES AND LAW

A. Removal Standard

Federal courts are courts of limited jurisdiction, meaning they only have the power to provide a forum for some, not all, disputes. See Morrison v. Allstate Indemnity Co., 228 F.3d 1255, 1260-61 (11th Cir. 2000) (“Federal courts have limited subject matter jurisdiction, or in other words, they have the power to decide only certain types of cases.”). “A district court can hear a case only if it has at least one of three types of subject matter jurisdiction: (1) jurisdiction under specific statutory grant; (2) federal question jurisdiction pursuant to 28 U.S.C. § 1331; or (3) diversity jurisdiction pursuant to 28 U.S.C. § 1332(a).” Thermoset Corp. v. Bldg. Materials Corp. of Am., 849 F.3d 1313, 1317 (11th Cir. 2017) (citations and internal quotations omitted). “A federal court not only has the power but also the obligation at any time to inquire into jurisdiction whenever the possibility that jurisdiction does not exist arises.” Johansen v. Combustion Eng'g, Inc., 170 F.3d 1320, 1328 n.4 (11th Cir. 1999). “If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.” Fed.R.Civ.P. 12(h)(3); see also Beavers v. A.O. Smith Elec. Prods. Co., 265 Fed.Appx. 772, 777 (11th Cir. 2008) (citations omitted).

“The plaintiff is the master of his complaint and is free to choose federal or state jurisdiction.” Morock v. Chautauqua Airlines, Inc., 2007 WL 1725232, at *1 (M.D. Fla. June 14, 2007) (citing Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987)). A defendant may remove a case from a state to federal court pursuant to 28 U.S.C. § 1441. If a defendant decides to do so, the defendant bears the burden of putting forth sufficient facts supporting the existence of federal jurisdiction. See McCormick v. Aderholt, 293 F.3d 1254, 1257 (11th Cir. 2002); Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 n.4 (11th Cir. 1998). A federal court must determine whether it has subject matter jurisdiction at the time a removal notice is filed. See Poore v. American-Amicable Life Ins. Co., Inc., 218 F.3d 1287, 1290-1291 (11th Cir. 2000).

If a case is removed on the basis of section 1332(a), there must be (1) complete diversity between the parties and (2) there must be an amount in controversy that exceeds $75, 000. See 28 U.S.C. § 1332(a) (“The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs”); see also Matrix Z, LLC v. Landplan Design, Inc., 493 F.Supp.2d 1242, 1245 (S.D. Fla. 2007). In meeting the burden of establishing the amount in controversy, the removing defendant must establish by ‘“[t]he greater weight of the evidence, . . . [a] superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”' Lowery v. Alabama Power Co., 483 F.3d 1184, 1209 (11th Cir. 2007) (quoting Black's Law Dictionary 1220 (8th ed. 2004)). If the removing defendant fails to do so, the court must remand the case back to state court because removal statutes are narrowly construed with uncertainties resolved in favor of remand. See Whitt v. Sherman Int'l Corp., 147 F.3d 1325, 1329 (11th Cir. 1998); see also Morock, 2007 WL 1725232, at *1 (“A federal district court must remand to state court any case [that] lacks necessary jurisdiction or that was removed improperly.”) (citing Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir. 1994)).

B. Fraudulent Joinder Standard

An exception to the complete diversity rule-that a federal court must remand a case to state court if there is not complete diversity between the parties- arises when a plaintiff fraudulently joins a defendant solely to defeat federal jurisdiction. “The burden of...