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JMCB, LLC v. The Board of Commerce & Industry

United States District Court, M.D. Louisiana

December 5, 2017




         This matter comes before the Court on three motions: (1) Sabine Pass Liquefaction, LLC's (“SPL's”) Motion to Reconsider Order and Vacate Plaintiff's Notice of Voluntary Dismissal or, in the Alternative, Motion to Intervene (the “Motion to Intervene”) (Doc. 22); (2) the Consolidated Motion for Clarification of the Complaint Pursuant to Federal Rule of Civil Procedure 12(e) or 12(f) and Motion for Joinder of Party Pursuant to Federal Rule of Civil Procedure 12(b)(7) and 19 (the “Motion for Clarification” and “Motion to Join”) (Doc. 23) filed by Defendants, the Board of Commerce and Industry (the “Board”) and the Louisiana Department of Economic Development (the “LDED”) (collectively, the “State Defendants”); and (3) the Motion to Dismiss Certain Claims Pursuant to Federal Rule of Civil Procedure 12(b)(6) (the “Motion to Dismiss”) (Doc. 14) by the State Defendants. All three motions are opposed (Docs. 20, 30, 31), and reply memoranda have been filed (Doc. 25, 39, 41). Oral argument is not necessary. The Court has carefully considered the law, the facts in the record, and the arguments and submissions of the parties and is prepared to rule.

         For the following reasons, the Motion to Intervene and Motion to Join are granted. SPL will be joined in this action, either as a necessary and indispensable party under Fed.R.Civ.P. 19 or by intervention (of right or permissive) under Rule 24. The Motion for Clarification is also granted in that Plaintiff is required to file an amended complaint within twenty-eight (28) days of this order to clarify the allegations against all parties. For that reason, the Motion to Dismiss is denied without prejudice; the State Defendants can re-urge these arguments, if necessary, after the Plaintiff has filed its amended complaint.

         I. Relevant Factual and Procedural Background

         Article VII, Section 21(F) of the Louisiana Constitution of 1974 provides that the Board, with approval from the governor, “may enter into contracts for the exemption from ad valorem taxes of a new manufacturing establishment or an addition to an existing manufacturing establishment, on such terms and conditions as the [B]oard, with the approval of the governor, deem in the best interest of the state.” (Doc. 1-2 at 2 (quoting La. Const. art. VII, § 21(F)).) The constitutional provision specifically defines “manufacturing establishment” and “addition to a manufacturing establishment” as follows:

The terms “manufacturing establishment” and “addition” as used herein mean a new plant or establishment or an addition or additions to any existing plant or establishment which engages in the business of working raw materials into wares suitable for use or which gives new shapes, qualities or combinations to matter which already has gone through some artificial process.

(Id. (quoting La. Const. art. VII, § 21(F)).) Additionally, LDED regulations govern the administration of the exemption. (Doc. 1-2 at 2-3.)

         Plaintiff alleges in its Class Action Petition (“Petition”) that it “currently owns property (land) in Cameron Parish which is subject to ad valorem taxes for which no exemption is available.” (Doc. 1-2 at 7.) The Petition further claims that SPL applied for and entered into a contract with the State Defendants for the above tax exemptions. (Doc. 1-2 at 3-5.) According to the Petition, a LDED worksheet recommending approval during the process stated that the contract amount was $6 billion and that the “ad valorem tax was $1, 447, 200, 000”. (Doc.1-2 at 4.)

         Plaintiff now prays for a judgment declaring that the contract between the State Defendants and SPL is, for certain reasons, “an improper act of the Board in violation of . . . Article VII, Section 21(F), and declaring that the Contract is null and void and without legal effect[.]” (Doc. 1-2 at 12-13.) Specifically, Plaintiff asserts that SPL submitted an application to LDED that said “that it was applying for an exemption under the ‘addition to an existing manufacturing establishment' provision of [Article VII, § 21(F)], when, in fact, SPL did not have an existing manufacturing plant or establishment of any kind at the project location at the time the Board considered its Application”. (Doc. 1-2 at 7-8.) Plaintiff also alleges that SPL's facility does not satisfy the definition of “manufacturing establishment” or “addition” detailed above. (Doc. 1-2 at 9.)

Plaintiff brings this action on behalf of itself and as representatives of the following class:
Any and all individuals and businesses that own property in Cameron Parish, State of Louisiana that is subject to ad valorem taxation, and any and all Cameron Parish governmental bodies that are entitled to receive Cameron Parish ad valorem property taxes, as of October 12, 2016.
Specifically excluded from the class are Sabine Pass Liquefaction, LLC, its successors and assigns, and all members of the judiciary, their spouses, and their immediate family members.

(Doc. 1-2 at 10-11.)

Plaintiff originally named SPL as a defendant. (Doc. 1-2.) After the suit was removed
(Doc. 1), Plaintiff filed a notice of dismissal of SPL pursuant to Fed.R.Civ.P. 41(a)(1)(A)(i)
(Doc. 16), which this Court granted on April 5, 2017. (Doc. 17.) The instant motions have followed.

         II. Discussion

         A. Motion to Intervene and Motion to Join

         1. Introduction and Summary

         SPL and the State Defendants essentially ask that SPL be allowed to join this case, either as a necessary party under Fed.R.Civ.P. 19 or through intervention (either of right or permissive) under Rule 24. State Defendants and SPL thus request that the Court vacate its earlier order allowing Plaintiff to dismiss SPL.

         Plaintiff argues that, when it filed its notice of voluntary dismissal, no order was necessary; the notice acted automatically and by operation of law. According to Plaintiff, that notice of voluntary dismissal in effect bars SPL from joining the action.

         Putting aside the questions of whether the notice of dismissal operated automatically without the need for the order (which it does, Yesh Music v. Lakewood Church, 727 F.3d 356, 362 (5th Cir. 2013) (citations omitted)) and the question of whether the Court can vacate that notice (which it can, id. at 362-63), the first key question before the Court is whether a necessary or indispensable party can be joined despite a notice of dismissal. The short answer is it can. The second critical question is whether SPL must or can be joined under Rules 19 or 24. The Court finds that joinder is required under either provision based on the plain language of the rules and relevant case law.

         2. Effect of Notice of Voluntary Dismissal

         In short, the Court rejects the Plaintiff's argument that its notice of voluntary dismissal prevents SPL from re-joining the litigation. Plaintiff cites American Cyanamid Co. v. McGhee, 317 F.2d 295 (5th Cir. 1963), among others, for the proposition that “a dismissal under Rule 41(a)(1)(A)(i) is ‘a matter of right running to the plaintiff and may not be extinguished or circumscribed by adversary or court.' ” (Doc. 31 at 2 (quoting McGhee, 317 F.2d at 297).) But the “single issue [in McGhee] [was] whether a voluntary dismissal by order of court after an initial voluntary dismissal of the same suit by notice in a state court bars the filing of a third suit in federal court under the provisions of Rule 41(a)[.]” Id., 317 F.2d at 296. McGhee contained no discussion of indispensable parties.

         Plaintiff is correct that it has an interest in controlling the case, but, under Rule 19, this is not the only issue in play:

         As the Fifth Circuit indicated in Schutten v. Shell Oil Company, [421 F.2d 869 (5th Cir. 1970)], the essence of Rule 19 is to balance the rights of all those whose interests are involved in the action.

The plaintiff has the right to “control” his own litigation and to choose his own forum. This “right” is, however, like all other rights, “defined” by the rights of others. Thus the defendant has the right to be safe from needless multiple litigation and from incurring avoidable inconsistent obligations. Likewise the interests of the outsider who cannot be joined must be considered. Finally there is the public interest and the interest the court has in seeing that insofar as possible the litigation will be both effective and expeditious. [Id. at 873.][1]

         7 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1602 (3d ed. 2017). Wright & Miller thus recognizes: “Compulsory joinder is an exception to the general practice of giving plaintiff the right to decide who shall be the parties to a lawsuit.” Id. “Although a court must take cognizance of this traditional prerogative in exercising its discretion under Rule 19, plaintiff's choice will have to be compromised when significant countervailing considerations make the joinder of particular absentees desirable.” Id. “[T]hese factors include: “(1) the interests of the present defendant; (2) the interests of potential but absent plaintiffs and defendants; [and] (3) the social interest in the orderly, expeditious administration of justice.” Id. Thus, Plaintiff's attempt to have its notice of dismissal trump all other considerations is directly contrary to these principles, all of which weigh strongly in favor of SPL joining the case.

         Additionally, case law shows that the State Defendants and SPL have the stronger argument here. “The exception to [the] general principle [that a Rule 41(a)(1) notice of dismissal can dismiss a single defendant] is that a defendant may not be dismissed if it is an indispensable party whose joinder is required by Fed.R.Civ.P. 19.” Eckinger v. Xpress Glob. Sys., Inc., No. 15-3147, 2016 WL 738206, at *2 (D. Neb. Feb. 23, 2016) (citing Eniola v. Leasecomm Corp., 214 F.Supp.2d 520 (D. Md. 2002)) (finding that defendant at issue was “not a necessary party so as to bar dismissal”). Other cases have discussed the “maxim that Rule 41(a)(1) may not properly be used to dismiss an indispensable party”. Frank v. Trilegiant Corp., No. 10-5211, 2012 WL 214100, at *4-*5 (E.D.N.Y. Jan. 24, 2012) (ordering additional briefing on whether three persons “are indispensable parties under Rule 19, such that their dismissal from the litigation would be improper pursuant to Rule 41(a)(1).”). Still another has observed that, while a plaintiff is “entitled as a matter of course” to voluntarily dismiss himself, “[t]he only barrier to doing so . . . would be a finding of his indispensability under Rule 19”. Smith v. Green Tree Servicing, LLC, No. 09-710, 2010 WL 1050350, at *3 (S.D. W.Va. Mar. 18, 2010) (ultimately concluding that a plaintiff dismissing his action was not an indispensable party).

         One case found that, when plaintiff had voluntarily dismissed an indispensable party, the “obvious and appropriate remedy [wa]s joinder, ” Nogueras-Cartagena v. Rosello-Gonzalez, 182 F.R.D. 380, 385 (D.P.R. 1998) (citation omitted). See also Glob. Detection & Reporting, Inc. v. Securetec Detektions-Systeme AG, No. 08-5441, 2008 WL 5054728, at *1 (S.D.N.Y. Nov. 21, 2008) (“GDR has attempted to moot the motion to dismiss by dismissing Securetec U.S. from the litigation without prejudice, pursuant to Fed.R.Civ.P. 41(a)(1). But this effort fails. Dismissal of a party cannot restore diversity jurisdiction where that party is ‘indispensable' to the litigation.” (citation omitted)).

         Other cases (some of which have been noted above) have recognized this rule but have simply had no need to apply it because the person sought to be dismissed was not an indispensable party. See Haase v. Mallenkrodt, Inc., 415 F.Supp. 889, 890 n. 1 (S.D.N.Y. 1976) (“Since Permutit Company, Inc. is not an indispensable party, its removal is both appropriate and sufficient to assure the requisite diversity among the remaining parties”); Brown v. Texas & P. R. Co., 392 F.Supp. 1120, 1123-24 (W.D. La. 1975) (stating that “[a] federal district court has the power to preserve and perfect is diversity jurisdiction over a case by dropping a nondiverse party providing the nondiverse party is not an indispensable party whose presence in the action is required under Rule 19, ” and finding that it would be an abuse of discretion in that case to prevent plaintiff from exercising the right to remove nondiverse defendant). All of these decisions confirm what Wright & Miller stated: “Compulsory joinder is an exception to the general practice of giving plaintiff the right to decide who shall be the parties to a lawsuit.” Wright & Miller, Federal Practice and Procedure § 1602.

         Plaintiff attacks Eckinger on the grounds that its authority, Enjola, reached the opposite holding, but this is not so. Plaintiff is correct that, in Enjola, two defendants (Leasecomm and Bank) opposed the dismissal of a third defendant (Nworgu) on the grounds that he was a necessary party. Id., 214 F.Supp.2d at 523. In rejecting the argument, the district court explained:

Fed. R. Civ. P. 41(a)(1) states, in pertinent part: “an action may be dismissed by the plaintiff without order of court (i) by filing a notice of dismissal at any time before service of the adverse party of an answer or of a motion for summary judgment, whichever first occurs....” While Leasecomm and Bank seek to oppose this motion to dismiss pursuant to Fed. R. Civ.P. 19(b) on the ground that Nworgu is an indispensable party, Plaintiffs may dismiss Nworgu by right under Rule 41(a)(1) and do not need leave of court to do so. In effect, the dismissal took place when the ...

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