United States District Court, E.D. Louisiana
ORPHEUM PROPERTY, INC.
COSCINA, ET AL.
ORDER AND REASONS
E. FALLON, United States District Judge.
before the Court is Defendants Alfred Coscina and AF Coffee
Inc.'s motion to dismiss or transfer. Rec. Doc. 9.
Defendants request the Court to dismiss the case based on
numerous grounds, including Plaintiff Orpheum Property,
Inc.'s alleged failure to join a necessary party, lack of
subject matter jurisdiction, lack of personal jurisdiction,
improper venue, and failure to file a Rule 23.1 verification
required for a derivative action. Alternatively, Defendants
request the case be transferred to the District of Hawaii.
Having considered the parties' arguments, submissions,
and applicable law, the Court now issues this Order and
derivative action arises from allegations of corporate
mismanagement and fraudulent activities, inter alia,
asserted by Plaintiff Orpheum Property, Inc.
(“Orpheum”) against Defendants Alfred F. Coscina
(“Coscina”) and Mr. Coscina's individual
company, AF Coffee, Inc. (“AF Coffee”). Plaintiff
Orpheum is a Delaware corporation with its principal place of
business in New Orleans, Louisiana. Rec. Doc. 1 at 2. Orpheum
appears as a derivative plaintiff as the sole member of
Coscina Brothers Coffee Company, LLC (“Coscina
Brothers”). Rec. Doc. 1 at 2. Defendant Alfred Coscina
is a resident of Hawaii and was President/Chief Operating
Officer of Coscina Brothers before his termination in 2016.
Rec. Doc. 1 at 2. Mr. Coscina's company, AF Coffee, is a
Hawaii corporation with its principal place of business in
Hawaii, and has been named as a defendant in the instant
litigation. Rec. Doc. 1 at 2.
chronicle began seven years ago. In January 2011, Defendant
Alfred Coscina formed Coscina Brothers, a company that
produced coffee products, in Honolulu, Hawaii. Rec. Doc. 1 at
3. In March 2011, Rampant Leon Financial Corporation
(“RLFC”), a Louisiana corporation with offices in
New Orleans purchased Coscina Brothers from Mr. Coscina.
Id. As part of the transaction, Mr. Coscina agreed
to continue working at Coscina Brothers as its
President/Chief Operating Officer. Id. In March
2013, RLFC sold Coscina Brothers to Orpheum, a Louisiana
corporation and the Plaintiff in this case. Id. Once
again, Mr. Coscina agreed to stay with the company as its
President/Chief Operating Officer. Id.
the 2011 transaction, however, Plaintiff asserts that
Defendant Mr. Coscina began to undermine the business and
finances of Coscina Brothers. Id. at 4. According to
Plaintiff, in June 2011, Mr. Coscina formed his own company,
AF Coffee, to import and export coffee products. Id.
Plaintiff claims that Mr. Coscina never informed it of this
action. Moreover, Plaintiff alleges that Mr. Coscina began
using his new company to broker green (raw) coffee beans that
Coscina Brothers had previously purchased directly from local
vendors. Id. Plaintiff further asserts that Mr.
Coscina then directed Coscina Brothers to purchase the green
coffee beans directly from AF Coffee at a higher price.
Plaintiff claims that Mr. Coscina wrongfully used Coscina
Brothers' funds to benefit AF Coffee. Id.
According to Plaintiff, Mr. Coscina opened a new bank account
in January 2015-in the name of Coscina Brothers-without
informing Orpheum. Id. at 5. Plaintiff asserts that
this account was in fact used to pay invoices for AF Coffee.
Id. Plaintiff further claims Mr. Coscina began
sending invoices in November 2015 from AF Coffee to customers
of Coscina Brothers for products sold by Coscina Brothers.
Id. Plaintiff represents that these customers were
unaware that the companies-Coscina Brothers and AF
Coffee-were separate and unrelated, and therefore sent their
payments to AF Coffee instead of Coscina Brothers.
Id. In late-2015, Plaintiff became aware that Mr.
Coscina was allegedly selling coffee beans from AF Coffee to
Coscina Brothers' customers in order to deprive the
company of income. Id. at 6.
spring 2016, Plaintiff avers that Coscina Brothers was unable
to pay its operating expenses and rent. Id. Mr.
Coscina was subsequently terminated from his position as
President/Chief Operating Officer of Coscina Brothers.
Id. Plaintiff asserts that due to the actions of Mr.
Coscina, Coscina Brothers stopped operating in June 2016.
Rec. Doc. 1 at 6. Nonetheless, Plaintiff states that Mr.
Coscina continues to take advantage of Coscina Brothers'
business and reputation. Rec. Doc. 1 at 6. For instance,
according to Plaintiff, Mr. Coscina took over Coscina
Brothers' website and rebranded it for AF Coffee. Rec.
Doc. 1 at 6. Accordingly, Plaintiff has filed the instant
derivative action as the sole shareholder and member of
Coscina Brothers Coffee Company, LLC, seeking to recover
damages it suffered as a result of Mr. Coscina's alleged
fraudulent scheme. Rec. Doc. 1 at 1.
response to Plaintiff's complaint, Defendants have filed
the instant motion to dismiss or transfer. The Court
addresses Defendants' arguments for dismissal below.
the Court is Defendants' motion to dismiss or transfer.
Defendants argue that Plaintiff's claims should be
dismissed based on (1) failure to join a necessary party, (2)
lack of subject matter jurisdiction, (3) lack of personal
jurisdiction, (4) improper venue, and (5) failure to file a
Rule 23.1 verification required for a derivative action. Rec.
regarding their arguments based on failure to join a
necessary party and lack of subject matter jurisdiction,
Defendants argue that Plaintiff failed to add Coscina
Brothers as a necessary party and defendant to this
derivative action under Federal Rule of Civil Procedure 23.1.
Rec. Doc. 9-1 at 6. If Coscina Brothers is added as a
defendant, Coscina Brothers' citizenship is then
determined by the citizenship of its member: Orpheum, a
corporation deemed as a Louisiana citizen for diversity
jurisdiction purposes. According to Plaintiff, adding Coscina
Brothers would thus destroy this Court's subject matter
jurisdiction over the instant action. Id. at 7-8.
Defendants assert this Court lacks personal jurisdiction over
Defendants Coscina and AF Coffee. Rec. Doc. 9-1 at 8.
Defendants claim that neither Mr. Coscina nor AF Coffee has
sufficient minimum contacts with Louisiana to establish
personal jurisdiction; thus, Defendants argue that litigation
in Louisiana is unreasonable. Id. at 8-10.
Defendants claim that venue is improper, asserting that no
substantial events giving rise to the dispute occurred in
Louisiana. Id. at 11. Thus, if Plaintiff survives
jurisdictional challenges, Defendants request, alternatively,
this case be transferred to the District of Hawaii.
Defendants assert that Plaintiff failed to file a Rule 23.1
verification required for derivative actions. Id. at
Federal Rule of Civil Procedure 12(b)(1)
start with the basics, Federal Rule of Civil Procedure
12(b)(1) governs challenges to the court's subject matter
jurisdiction. “A case is properly dismissed for lack of
subject matter jurisdiction when the court lacks the
statutory or constitutional power to adjudicate the
case.” Home Builders Ass'n of Miss., Inc. v.
City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998).
“Courts may dismiss for lack of subject matter
jurisdiction on any one of three bases: (1) the complaint
alone; (2) the complaint supplemented by undisputed facts in
the record; or (3) the complaint supplemented by undisputed
facts plus the court's resolution of disputed
facts.” Clark v. Tarrant County, 798
F.2d 736, 741 (5th Cir. 1986) (citing Williamson v.
Tucker, 645 F.2d 404, 413 (5th Cir.1981)). Furthermore,
a plaintiff bears the burden of demonstrating that subject
matter jurisdiction exists. See Paterson v.
Weinberger, 644 F.2d 521, 523 (5th Cir. 1981).
case, the relevant basis for jurisdiction is diversity
jurisdiction under 28 U.S.C. § 1332. Diversity
jurisdiction exists only when there is complete diversity of
citizenship and the amount in controversy exceeds $75, 000,
exclusive of interests and costs. See 28 U.S.C.
§ 1332(a); Felton v. Greyhound Lines, Inc., 324
F.3d 771, 773 (5th Cir. 2003). Complete diversity
“requires that all persons on one side of the
controversy be citizens of different states than all persons
on the other side.” Harvey v. Grey Wolf Drilling
Co., 542 F.3d 1077, 1079 (5th Cir. 2008) (citing
McLaughlin v. Mississippi Power Co., 376 F.3d 344,
353 (5th Cir. 2004)).
examining a factual challenge to subject matter jurisdiction
under Rule 12(b)(1), which does not implicate the merits of
plaintiff's cause of action, the district court has
substantial authority “to weigh the evidence and
satisfy itself as to the existence of its power to hear the
case.” Garcia v. Copenhaver, Bell &
Assocs., 104 F.3d 1256, 1261 (11th Cir. 1997); see
also Clark, 798 F.2d at 741. Moreover, a court's
dismissal of a case for lack of subject matter jurisdiction
is not a decision on the merits, and the dismissal does not
prevent the plaintiff from pursuing the claim in another
forum. See Hitt v. City of Pasadena, 561 F.2d 606,
608 (5th Cir. 1977).
Federal Rules of Civil Procedure 12(b)(7) & 19
12(b)(7) allows dismissal for “failure to join a party
under Rule 19.” Fed.R.Civ.P. 12(b)(7). Rule 19 provides
for the joinder of all parties whose presence in a lawsuit is
required for the fair and complete resolution of the dispute
at issue. Fed.R.Civ.P. 19(a); Pulitzer-Polster v.
Pulitzer, 784 F.2d 1305, 1308 (5th Cir. 1986)
(“The federal rules seek to bring all persons that may
have an interest in the subject of an action together in one
forum so that the lawsuit can be fairly and completely
disposed of. In accord with this goal, Rule 19 seeks to bring
into a lawsuit all those persons who ought to be there by
requiring joinder.” (citations omitted)). It further
provides for the dismissal of litigation that should not
proceed in the absence of parties that cannot be joined.
Fed.R.Civ.P. 19(b); Pulitzer-Polster, 784 F.2d at
12(b)(7) analysis entails two inquiries under Rule 19. First,
the Court must determine under Rule 19(a) whether a person
should be joined to the lawsuit. Under Rule 19(a), joinder of
a party is necessary if:
(1) in the person's absence complete relief cannot be
accorded among those already parties, or
(2) the person claims an interest relating to the subject of
the action and is so situated that the disposition of the
action in the person's absence may (i) as a practical
matter impair or impede the person's ability to protect
that interest or (ii) leave any of the persons already
parties subject to a substantial risk of incurring double,
multiple, or otherwise inconsistent obligations by reasons of
the claimed interest.
Fed. R. Civ. P. 19(a).
joinder is warranted, then the person will be brought into
the lawsuit. But if such joinder would destroy the
court's jurisdiction, then the court must determine under
Rule 19(b) whether to press forward without the person or to
dismiss the litigation. Id.; see HS Res., Inc.
v. Wingate, 327 F.3d 432, 439 (5th Cir. 2003); see
also 5A Charles Alan Wright & Arthur R. Miller,