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Orpheum Property, Inc., v. Coscina

United States District Court, E.D. Louisiana

May 29, 2018

ORPHEUM PROPERTY, INC.
v.
COSCINA, ET AL.

         SECTION “L” (2)

          ORDER AND REASONS

          ELDON E. FALLON, United States District Judge

         Pending before the Court is Defendants Alfred Coscina and AF Coffee Inc.'s motion for reconsideration, Rec. Doc. 19, of this Court's March 28, 2018 Order and Reasons, which denied Defendants' motion to dismiss for lack of jurisdiction and request to transfer venue. In the alternative, Defendants also request a certification for interlocutory appeal to the Fifth Circuit on the issue of jurisdiction. Plaintiff Orpheum Property, Inc. opposes Defendants' motion. Rec. Doc. 21. Having considered the parties' arguments, submissions, and applicable law, the Court now issues this Order and Reasons.

         I. BACKGROUND

         A. Factual History

         This 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.

         This 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.

         After 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. Id.

         Additionally, 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.

         By 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. Therefore, on July 5, 2017, Plaintiff 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.

         B. Procedural History

         In response to this lawsuit, Defendants filed a motion to dismiss for 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. See Rec. Doc. 9.

         On March 28, 2018, the Court denied Defendants' motion on all grounds. Rec. Doc. 16. First, the Court agreed with Defendants that Coscina Brothers, a Louisiana citizen, should be a defendant for jurisdictional purposes. Nonetheless, the Court recognized that joinder of Coscina Brothers as a defendant would destroy diversity jurisdiction under U.S.C. § 1332(c)(1) because both Orpheum and Coscina Brothers are Louisiana citizens. The imperative question then became whether Coscina Brothers was an indispensable party that must be joined under Rule 19(b). After examining the contours of Rule 19(b), the Court found that Coscina Brothers need not be joined as a party because none of the existing parties would be prejudiced in its absence. Thus, diversity jurisdiction remained intact.

         Second, and pertinent to Defendants' instant motion for reconsideration, the Court held that it has personal jurisdiction over Defendants Mr. Coscina and AF Coffee. Applying Fifth Circuit jurisprudence on personal jurisdiction, the ...


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