Opinion
Civil Action No. 3:03-CV-2774-L.
August 20, 2004
ORDER
Before the court are Defendants' Motion to Dismiss Claims Against Applebaum, Hegi, and Johnson, filed December 30, 2003; Plaintiff's Motion for Non-Suit as to Defendants Pro Parts, Inc., Pro Parts Xpress, Inc., Midwest Undercar Warehouse, Inc., and Stanley Enterprises, Inc., filed January 5, 2004; Plaintiff's Motion to Remand After Non-Suit, filed January 5, 2004; and Defendant General Electric Capital Financial Inc.'s Motion to Dismiss, filed January 29, 2004. After careful consideration of the motions, responses, reply, and the applicable authority, the court grants Plaintiff's Motion for Non-Suit as to Defendants Pro Parts, Inc., Pro Parts Xpress, Inc., Midwest Undercar Warehouse, Inc., and Stanley Enterprises, Inc.; grants Plaintiff's Motion for Remand After Non-Suit; denies without prejudice Defendants' Motion to Dismiss Claims Against Applebaum, Hegi, and Johnson; and denies without prejudice Defendant General Electric Capital Financial Inc.'s Motion to Dismiss. I. Factual Background and Procedural History
Plaintiff Continental Parts Company ("Plaintiff") has filed this lawsuit against Defendants for alleged acts of fraud and conspiracy in connection with Plaintiff's attempt to recover a judgment entered in its favor in a prior lawsuit. The facts giving rise to Plaintiff's claims are as follows.
Defendants are Pro Parts, Inc.; Pro Parts Xpress, Inc.; Midwest Undercar Warehouse, Inc.; Stanley Enterprises, Inc.; Bud Applebaum ("Applebaum"); Frederick B. Hegi, Jr. ("Hegi"); Jim Johnson ("Johnson"); GE Capital Financial, Inc. ("GE Capital"); Wingate Management Limited, LLC, ("Wingate"); O'Reilly Automotive, Inc., ("O'Reilly"); Chuck Sorrentino ("Sorrentino"); Jim Connors ("Connors"); G. Michael Buchen ("Buchen"); and Mark Kirkpatrick ("Kirkpatrick"). The record indicates that Defendants Buchen, Kirkpatrick, Sorrentino, and Connors have not been served with process, and they have not otherwise made an appearance in this action. Accordingly, these four Defendants are not before the court.
Plaintiff sold automotive parts to Dick Smith Enterprises, Inc. ("DSEI"), a wholly owned subsidiary of Defendant Pro Parts Express, Inc. ("Pro Parts Express"). Pro Parts Express is a wholly owned subsidiary of Defendant Pro Parts, Inc. ("Pro Parts"), which is managed by Defendant Wingate Management Limited, LLC. After DSEI refused to pay for parts it purchased from Plaintiff, Plaintiff sued DSEI and recovered a judgment against DSEI totaling $92,140.
On November 12, 2002, DSEI entered into an agreement with Defendant O'Reilly, which provided for the sale of substantially all of DSEI's assets, including its inventory (which included parts sold by Plaintiff to DSEI), to O'Reilly. On November 14, 2002, Plaintiff's Chief Executive Officer, David Mason, Sr., met with Defendant G. Michael Buchen, the Chief Executive Officer of Pro Parts, and others to work out credits and payments that Plaintiff owed to DSEI and that DSEI owed to Plaintiff. Plaintiff was not informed of the agreement between DSEI and O'Reilly at this meeting. Buchen allegedly made representations to Plaintiff's representative that Plaintiff would recover the money DSEI owed it. Thereafter, Plaintiff paid the money it owed to DSEI in the amounts of $130,516.18 and $26,892.11. The transaction between DSEI and O'Reilly was completed in December 2002, at which time DSEI transferred and assigned all of its assets to O'Reilly. The entire purchase price of the inventory, approximately $5.5 million dollars, was allegedly paid directly to Defendant GE Capital, which was at the time a secured creditor of DSEI and its sister companies Defendants Midwest Undercar Warehouse, Inc. and Stanley Enterprises, Inc. As a result of the transaction between DSEI and O'Reilly, Plaintiff has been unable to recover the judgment entered against DSEI in the prior lawsuit.
On October 15, 2003, Plaintiff filed this action against Defendants in the 101st Judicial District of Texas, Dallas County, Texas, alleging that DSEI's failure to timely disclose its pending dissolution, insolvency and inability to repay its debt to Plaintiff, at a time when Plaintiff had a right to offset the funds due DSEI, was an intentional fraudulent act, and that the actions of all Defendants were taken in concert with the intent to defraud Plaintiff and constitute a common law conspiracy to defraud Plaintiff. Plaintiff asserts claims under the Texas Uniform Fraudulent Transfer Act for fraudulent transfer of assets and conspiracy to defraud, and under Texas common law for conspiracy to defraud, assumption of a debt, and declaratory judgment.
Shortly after Plaintiff filed this action in state court, Defendants Pro Parts, Inc., Pro Parts Xpress, Inc., Stanley, and Midwest (collectively "Debtors") filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code; these bankruptcy cases are being jointly administered in the United States Bankruptcy Court for the Northern District of Texas. On November 6, 2003, Debtors filed a Notice and Suggestion of Bankruptcy with the state court. On November 12, 2003, Plaintiff filed a motion to lift stay in the bankruptcy proceeding. On November 14, 2003, Debtors removed this action to this court pursuant to Fed.R.Bankr.P. 9027 and 28 U.S.C. § 1452, contending that it is a matter related to the bankruptcy proceeding. On December 30, 2003, the bankruptcy court denied Plaintiff's motion to lift the stay and ordered Plaintiff to non-suit Debtors.
Plaintiff now moves the court to non-suit the Debtors and remand the action to state court. Defendants Johnson, Applebaum Hegi, and GE Capital move to dismiss Plaintiff's claims against them pursuant to Fed.R.Civ.P. 12(b)(6). The court addresses these motions in turn below.
II. Plaintiff's Motion for Non-Suit
Plaintiff requests that the court non-suit the Debtors from this action. None of the Defendants objects to Plaintiff's motion. The court treats Plaintiff's motion as a notice of voluntary dismissal under Fed.R.Civ.P. 41(a)(1), as the Federal Rules of Civil Procedure do not recognize a "motion to non-suit." Under Rule 41(a)(1), an action may be "dismissed by the plaintiff without order of court (i) by filing a notice of dismissal at any time before service by the adverse party of an answer or of a motion for summary judgment. . . ." The record reflects that none of the Debtors has filed an answer or summary judgment motion in this action; therefore, dismissal under Rule 41(a)(1) is appropriate. Accordingly, Plaintiff's motion is granted, and this action is hereby dismissed without prejudice against Defendants Pro Parts, Inc., Pro Parts Xpress, Inc., Midwest Undercar Warehouse, Inc., and Stanley Enterprises, Inc.
III. Plaintiff's Motion to Remand
Only four Defendants have filed opposition to Plaintiff's motion to remand, namely, Applebaum, Hegi, Johnson and GE Capital.
Debtors removed this action to this court pursuant to Fed.R.Bankr.P. 9027 and 28 U.S.C. § 1452, as a matter related to their bankruptcy cases. The court had jurisdiction over the state claims only through supplemental jurisdiction pursuant to 28 U.S.C. § 1367(a). Now that Debtors have been dismissed from this action, the court has discretion whether to retain jurisdiction over Plaintiff's state law claims against the non-debtor Defendants. See 28 U.S.C. § 1367(c)(3); Rhyme v. Henderson County, 973 F.2d 386, 395 (5th Cir. 1992).
In this case, Plaintiff has not alleged any federal claims. This action was removed to federal court solely because, at the time of removal, it was a matter related to Debtors' bankruptcy cases. Now that Debtors have been dismissed from this lawsuit, the basis for which this court could exercise original jurisdiction no longer exists. In its current posture, this action presents only claims arising under state law against non-debtor Defendants.
The Fifth Circuit has indicated that a district court should not exercise supplemental jurisdiction over a plaintiff's state law claims when all federal claims are dismissed or otherwise eliminated from a case prior to trial. See Batiste v. Island Records, Inc., 179 F.3d 217, 227 (5th Cir. 1999), cert. denied, 528 U.S. 1076 (2000). In determining whether to retain supplemental jurisdiction, the court should consider both the statutory provisions of 28 U.S.C. § 1367(c) and weigh all the relevant factors of judicial economy, convenience, fairness and comity. Id. No single factor is dispositive. Id. In this case, all factors weigh in favor of remand
First, there has minimal activity in the case since its removal. The case is not set for trial, no scheduling order has been issued, and very little, if any, discovery has taken place. Further, the case has not consumed significant judicial resources, and the court has yet to address the merits of any of Plaintiff's state law claims. Further, given that this case is in its early stages, the waste of resources, if any, in prosecuting and defending this action should not be great. Indeed, nothing in the record indicates that the parties have spent a sizeable size of money or time preparing this litigation in federal court. Second, Plaintiff's claims against Defendants rest entirely on state law. Indeed, the strongest consideration here is that state courts are more familiar with, and better equipped to address, the state law causes of action asserted in this action. Third, remand would not be unfair or inconvenient to Defendants. All Defendants conduct business in the State of Texas, and with the exception of one, all have principal places of business in Texas. Under the circumstances, the court determines that in its discretion it should decline to exercise supplemental jurisdiction over this action and remand it to state court.
Although Defendants have filed motions to dismiss, the motions challenge the propriety of Plaintiff's pleadings, rather than the merits of its claims. These motions have not yet been addressed by the court.
Relying on Batiste, 179 F.3d at 227, Defendants urge the court to retain jurisdiction over the state law claims because they do not involve novel or complex issues; however, this is only one factor that must be balanced with the relevant factors of judicial economy, convenience, fairness and comity. In this case, for the reasons stated previously, the balance of the relevant factors weighs in favor of declining to exercise supplemental jurisdiction over the state claims. Cf. Batiste, 179 F.3d at 227-28 (holding district court abused its discretion in allowing plaintiff to voluntarily dismiss state law claims that did not involve novel or complex issues of state law where case had been pending in district court for almost three years, and the trial was scheduled to begin one month later; the case had produced more than sixteen volumes of record over the course of three years, numerous depositions and discovery disputes, and significant consideration by the district court of multiple motions to dismiss claims or grant of summary judgment.).
Defendant GE Capital also urges the court to retain jurisdiction, contending that the outcome of this case might affect the bankruptcy estate if Plaintiff prevails on the merits of its claims. Defendant GE Capital reasons that the possibility of the impact a state court decision might have on the bankruptcy estate necessitates the court retaining jurisdiction over the state law issues since district courts retain jurisdiction over matters relating to bankruptcy. The court is not persuaded. Defendant's argument is too attenuated and speculative to be legally sound in this instance.
The parties did not address remand under 28 U.S.C. § 1452(b); however, the court concludes that remand is also appropriate under this provision. Under § 1452(b), "[t]he court to which [a] claim or cause of action [related to a bankruptcy case] is removed may remand such claim or cause of action on any equitable ground." 28 U.S.C. § 1452(b). As stated previously, no federal claims have been asserted by Plaintiff in this action. Plaintiff chose to pursue this action in state court and brought claims arising under state law. Absent the Debtors' bankruptcy proceedings, this action would have never been filed in federal court. Now that the parties who removed this action have been dismissed, the court believes that equity dictates remanding the case to the forum where it originated. Accordingly, in the alternative, this action should be remanded on equitable grounds pursuant to 28 U.S.C. § 1452(b).
For the reasons herein stated, the court exercises its discretion and declines supplemental jurisdiction over Plaintiff's state law claims, and remands this action to state court. In the alternative, the court remands this action on equitable grounds under 28 U.S.C. § 1452.
IV. Defendants' Motions to Dismiss
In light of the court's ruling on Plaintiff's motion to remand, the court determines that the issues raised in Defendants' motions should be addressed by the state court. Accordingly, Defendants' motions to dismiss are denied without prejudice. V. Conclusion
Also before the court are Plaintiff's Motion to Abate or Extend Date for Response to Defendants' Motion to Dismiss Claims Against Applebaum, Hegi and Johnson, filed January 12, 2004; and Plaintiff's Motion to Abate or Extend Date for Response to Defendants' Motion to Dismiss Claims Against General Electric Capital Financial, Inc., filed January 12, 2004. In light of the court's ruling on Defendants' motions to dismiss, these motions are denied as moot.
For the reasons herein stated, Plaintiff's Motion for Non-Suit as to Defendants Pro Parts, Inc., Pro Parts Xpress, Inc., Midwest Undercar Warehouse, Inc., and Stanley Enterprises, Inc. is granted, and this action is hereby dismissed without prejudice as to Defendants Pro Parts, Inc.; Pro Parts Xpress, Inc.; Midwest Undercar Warehouse, Inc.; and Stanley Enterprises, Inc. Plaintiff's Motion to Remand after Non-Suit is granted, and this action is remanded to the 101st Judicial District Court, Dallas County, Texas. The court denies without prejudice Defendants' Motion to Dismiss Claims Against Applebaum, Hegi, and Johnson, and denies without prejudice Defendant General Electric Capital Financial Inc.'s Motion to Dismiss. Plaintiff's motions to abate or extend time are denied as moot.