ELITE OIL FIELD ENTERPRISES, INC., а Colorado corporation, Plaintiff - Appellee, v. GARRETT REED, individually and as trustee of Ventana Investment Trust; REILLY REED, an individual; ELEMENT SERVICES, LLC, a Colorado limited liability company; JHENNA DAWN REED, an individual; REEDESIGN CONCEPTS, LLC, a Colorado limited liability company; ROBERT KUBISTEK, an individual, Defendants - Appellants, and BOND R. BAIAMONTE, an individual, Defendant.
No. 19-1406
United States Court of Appeals for the Tenth Circuit
November 3, 2020
PUBLISH. FILED United States Court of Appeals Tenth Circuit November 3, 2020 Christopher M. Wolpert Clerk of Court. Appeal from the United States District Court for the District of Colorado (D.C. No. 1:19-CV-00539-RBJ).
Submitted on the briefs:*
Jordan D. Factor, James Helfrich, and Brentоn L. Gragg, Allen Vellone Wolf Helfrich & Factor P.C., Denver, Colorado, for Appellant.
Robert Bernhoft, The Bernhoft Law Firm, S.C., Austin, Texas, for Appellee.
Before TYMKOVICH, Chief Judge, BRISCOE, and MURPHY, Circuit Judges.
Defendants Garrett Reed, Reilly Reed, Element Services, LLC, Jhenna Reed, Reedesign Concepts, and Robert Kubistek seek to appeal from the district court‘s order remanding this case from federal district court to Colorado state court due to lack of subject matter jurisdiction. Plaintiff Elite Oil Field Enterprises, Inc. (Elite) has moved to dismiss the appeal for lack of appellate jurisdiction. Having reviewed the motion to dismiss and the record on appeal, we conclude that we lack subject matter jurisdiction over this appeal. We therefore grant Elite‘s motion and dismiss the appeal.
I
Factual background
Plaintiff Elite is a Colorado corporation that was formed in March of 2012 by Reilly Reed (Reilly) and Dustin Tixier (Tixier). Elite was formed to provide roustabout services for the oil field industry. Immediately aftеr its formation, Elite in turn formed two subsidiary corporations: Elite Oil Field Services, Inc. and Elite Oil Field Equipment, Inc.
The organizational meeting of Elite took place in early April of 2012 at its principal place of business in Lamar, Colorado. Tixier accepted a 75% ownership interest in Elite, while Reilly accepted a 25% ownership interest in Elite. Tixier, Reilly, and an individual named Jason Whisenand were elected as the directors and officers of Elite.
At some рoint after the formation, Reilly became upset that he only had a 25% ownership interest in Elite and believed that he was entitled to a 50% share in Elite.
In September of 2013, Reilly, Tixier and Whisenand met at Elite‘s Greeley, Colorado office. During the meeting, the three men allegedly discussed the value of Reilly‘s 25% ownership interest in Elite. Following the meeting, Reilly and Tixier allegedly exchanged proposals regarding the possibility of Reilly becoming a 50% owner of Elite. No such agreement was ever reached, however.
Elite‘s gross revenues grew dramatically between 2012 and 2015, rising from approximately $1,062,241 in 2012 to over $10 million in 2015. Reilly perceived himself, rather than Tixier, as responsible for this growth.
In Junе of 2016, Garrett allegedly sent an email to Reilly stating, in part, “I just don‘t think there‘s a way you‘re getting to your money without destroying Elite.” Id. at 17.
At some point thereafter, Garrett and Reilly allegedly devised a scheme for Reilly to form surreptitiously a competing company known as Element Services, LLC (Element), and for Element to improperly lure away Elite‘s customers and employees with the intent of economically harming Elite and rendering Elite unable to continue its opеrations at the level it had achieved.
In July of 2016, Reilly allegedly registered Element with the Colorado Secretary of State and listed himself as the sole member of Element. Garrett allegedly counseled and advised Reilly regarding the formation of Element. The address that Reilly listed for Element was Reilly‘s home address in Eaton, Colorado, and the same address that Garrett used for his own business, TriSpoke Technologies, LLC. Not long after Element‘s registration, Garrett allegеdly paid Reilly $450,000 to acquire an interest in Element.
On October 14, 2016, Reilly, allegedly as part of the scheme to harm Elite, filed a civil lawsuit in the District Court of Weld County, Colorado (the Weld County Action), against Elite, Elite‘s two subsidiaries, Tixier, Tixier‘s wife, and Whisenand. In that lawsuit, Reilly alleged, in pertinent part, that Tixier, Tixier‘s wife, and Whisenand conspired to alter Elite‘s corporate documents so that Reilly would own only 25% of the total outstanding corporate stock rather than the originally agreed upon 50%. Elite filed counterclaims against Reilly and other third-party defendants, including the same defendants that Elite ultimately named in this action in its amended complaint, for conversion (of tools and equipment owned by Elite), civil theft (of the same tools and equipment), replevin (again of the same tools and equipment), unjust enrichment, constructive trust, aiding and abetting a breach of fiduciary duty, and civil conspiracy.
Garrett allegedly assisted Reilly in a numbеr of ways in carrying out the scheme to harm Elite. This allegedly included (a) providing funding for Element, (b) advising Reilly concerning how to use Element to usurp Elite‘s business opportunities, (c) advising Reilly to fabricate billing issues with Elite‘s customers as a means of sabotaging Elite‘s relationships with its customers, (d) advising Reilly to fabricate a false narrative to Elite‘s employees and customers that Elite was going out of business and that a receiver was going to be appointed, (e) advising Reilly tо fabricate a false narrative that Tixier was stealing from Elite and engaging in
On December 21, 2018, Reilly filed a second, separate lawsuit in the District Court of Prowers County, Colorado (the Prowers County Action), asserting claims against Tixier, Tixier‘s wife, and Whisenand. The claims asserted by Reilly were similar in nature to certain of the claims that Reilly had previously asserted in his Weld County Action and that were dismissed by the court overseeing the Weld County Action.
On January 7, 2019, the defendants in the Prowers County Action filed a motion for transfer and consolidation with the Colorado Panel on Consolidated Multidistrict Litigation, seeking to consolidate the Prowers County Action with the Weld County Action based on common issues of fact and law.
Procedural background
On January 21, 2019, Elite filed a civil action against Garrett, both individually and in his capacity as trustee of the Ventana Investment Trust, in the District Court of Weld County, Colorado. In its first claim for relief, Elite alleged that Reilly breached his duty of loyalty to Elite by successfully soliciting customers and employees of Elite to join Element, and that Garrett knowingly aided and abetted Reilly‘s misconduct. In its second claim for relief, Elite alleged that Reilly breached his fiduciary duties to Elite by using Elite‘s assets to usurp Elite‘s corporate opportunities and that Garrett aided and abetted Reilly‘s misconduct. Elite‘s third claim for relief alleged that Garrett and Reilly intentionally interfered with valid contractual relations between Elite and its customers and employees. Elite‘s fourth claim for relief alleged that Reilly tortiously interfered with Elite‘s prospective business advantages with its customers and employees, and that Garrett knowingly aided and abetted Reilly‘s misconduct. Elite‘s fifth claim for relief alleged a civil conspiracy between Garrett and Reilly to benefit Reilly and economically devastate Elite. Elite‘s sixth and final claim for relief alleged thаt Elite was entitled to the imposition of a constructive trust with respect to Garrett‘s interests in Element.
On February 22, 2019, Garrett removed the case to the United States District Court for the District of Colorado on the basis of diversity jurisdiction. More specifically, Garrett alleged in his petition for removal that there was complete diversity of citizenship between himself, a California resident, and Elite, a Colorado corporation. Shortly after removal, Garrеtt moved to dismiss the complaint for lack of personal jurisdiction.
On March 25, 2019, Elite filed an amended complaint. The amended complaint
On March 26, 2019, the district court denied Garrett‘s motion to dismiss as moot due to the filing of the amended complaint. Shortly thereafter, Garrett moved to dismiss the amended complaint for lack of personal jurisdiction.
On May 13, 2019, all of the new defendants, except for Baiamonte, moved to strike the amended complaint or, in the alternative, to dismiss the amended complaint. Id. at 276. They argued that, “pursuant to
On June 11, 2019, Elite filed a response in opposition to the motion to strike the amended complaint, and also filed its own motion рursuant to
Elite cited the ongoing Weld County Action that had been filed in 2016 by Reilly. Elite noted that it was not until late 2018 that it learned, based upon depositions and related discovery in the Weld County Action, that there was a factual basis for Elite to assert tort claims against Garrett. Elite further noted that on December 21, 2018, it filed in the Weld County Action a notice of intent to join Garrett as a third-party defendant, but that the November 15, 2017 deadline for joining additional parties in the Weld County Action had long passed by the time it discovered
Elite argued in its motion to remand that it “ha[d] a legitimate interest in avoiding a scenario where it [wa]s forced to try the same case in two different courts against the same aiders and abettors and сo-conspirators who were all involved in the same tortious scheme,” and that “[t]he defeat of diversity jurisdiction [wa]s an unavoidable consequence of Elite‘s goal of assuring [that its] claims against Garrett . . . [we]re adjudicated in a single trial with those same claims against” Reilly, Jhenna, Element, Reedesign, Kubistek, and Baiamonte. Id. at 306. Elite further argued that Garrett “ha[d] run to federal court in hopes of avoiding being tried together with his brother and the other aiders and abettors and co-conspirators named in the Weld County Action,” and was “being represented by the same attorneys who represent[ed] his brother, Reilly, in the Weld County Action.” Id. at 306-07. Elite argued that Garrett was attempting “to force Elite to litigate the controversy on two battlefields,” and that “Elite [wa]s vulnerable to having to proceed to trial in the Weld County Action while incurring a duplication of litigation expenses to try the same case arising out of the same facts in federal court.” Id. at 307. Elite argued that “[a] single trial for all of the parties . . . [wa]s necessary in order to avoid the potential of inconsistent allocations of fault that could arise were the case to proceed to trials in different courts.” Id.
Elite also argued in its motion to remand that it had not been dilatory in seeking remand, and it asserted that it would be significantly injured if the case were not remanded and it were forced to litigate the samе set of facts and claims in two different forums.
On September 23, 2019, the district court issued an order granting Elite‘s motion to remand and denying the motion to strike or dismiss the amended complaint. After considering in detail a number of relevant factors, the district court concluded that the amended complaint should not be stricken and, because the amended complaint‘s addition of the new defendants destroyed subject matter jurisdiction, that the action must be remanded to state court. “Weighing most strongly” in support of its conclusion, the district court noted, were “Elite‘s high risk of injury and parallel litigation, and the likely conclusion that Reilly . . . [wa]s a necessary party in the claims against Garrett . . . .” Aplt. Br., Ex. A at 17.
The defendants who filed the unsuccessful motion to strike or dismiss the amended complaint filed a timely notice of appeal.
II
Elite argues in its motion to dismiss that this appeal, in which appellants seek to challenge the district court‘s dеnial of their motion to strike or dismiss the amended complaint, is expressly barred by
Appellants argue in response that
Seсtion 1447 of Title 28, entitled “Procedure after removal generally,” provides, in relevant part, as follows:
(a) In any case removed from a State court, the district court may issue all necessary orders and process to bring before it all proper parties whether served by process issued by the State court or otherwise.
* * *
(c) A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be madе within 30 days after the filing of the notice of removal under section 1446(a). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded. An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal. A certified copy of the order of remand shall be mailed by the clerk to the clerk of the State court. The State court may thereupon proceed with such case.
(d) An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise, except that an order remanding a case to the State court from which it was removed pursuant to section 1442 or 1443 of this title shall be reviewable by appeal or otherwise.
(e) If after removal the plaintiff seeks to join additional dеfendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court.
In 1988, Congress amended
A motion to rеmand the case on the basis of any defect in removal procedure must be made within 30 days after the filing of the notice of removal under [28 U.S.C. §] 1446(a). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.
Id. (quoting § 1016(c)(1), 102 Stat. 4670). “When that version of
Although Congress has continued to tweak the language of
Notably, for purposes of this case, the Supreme Court in Powerex rejected the argument that the phrase “subject matter jurisdiction,” as employed in
Appellants argue, however, that
Having carefully examined these decisions, we find them persuasive and adopt their reasoning as our own. In particular, we agree that Powerex makes clear that “a loss of subject-matter jurisdiction that оccurs after removal falls within the specified grounds of
Notably, appellants do not dispute that the district court‘s allowance of Elite‘s amended complaint destroyed the district court‘s subject matter jurisdiction over the action. Thus, there is no dispute that the district court‘s characterization of its remand order as “resting upon lack of subject-matter jurisdiction . . . was colorable.” Powerex, 551 U.S. at 234.
For all of these reasons, we conclude that
III
Elite‘s motion to dismiss the appeal for lack of appellate jurisdictiоn is GRANTED and the appeal is DISMISSED.