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Turbine Powered Technology LLC v. Crowe

United States District Court, W.D. Louisiana, Lafayette Division

August 12, 2019

Turbine Powered Technology LLC
Crowe et al

          Terry A Doughty, Judge



         Before the undersigned by referral from the district judge is Plaintiff, Turbine Powered Technology LLC's (“TPT”), Motion to Remand [Rec. Doc. 14], an Opposition Memorandum filed by Defendant David Crowe (“Crowe) [Rec. Doc. 28] and a Reply thereto, filed by TPT [Rec. Doc. 32]. Based on the foregoing, the undersigned recommends that the motion be granted.


         The Petition initiating this action was originally filed by TPT on November 7, 2016, in the 16th Judicial District Court for the Parish of St. Mary, State of Louisiana, Docket No. 130379-F (“State Court Case”). The Petition set forth multiple causes of action under Louisiana law including breach of contract, breach of fiduciary duty, tortious interference with a business relationship and violations of the Louisiana Uniform Trade Secrets and Unfair Trade Practices Acts against the named defendants, David Crowe (“Crowe”), Kenneth Braccia (“Braccia”), Kent Ellsworth (“Ellsworth”), AZTT, LLC, AZTT, Inc., all residents of the state of Arizona, Advanced Turbine Services, LLC (“ATS”) and Turbine Integrated Power Systems, LLC (“TIPS”), residents of the state of Connecticut, and Donald "Danny" Foley and George Jackson, residents of the state of Louisiana, (collectively referred to as “Defendants”). No. claims were alleged under federal statutes or law. R. 18-4.

         TPT filed an Application for a Temporary Restraining Order (“TRO”) and for Preliminary Injunction with the Petition. Id. The state court granted the TRO against Defendants and conducted a preliminary injunction hearing on January 3, 2017. Affidavits of Long Arm Service on defendants Ellsworth and AZTT, LLC were filed into the record. Affidavits of Long Arm Service in the record on defendants AZTT, Inc., ATS and TIPS indicated these defendants refused Long Arm Service. Also, Crowe was served with the preliminary injunction. While none of the Defendants were present at the hearing, the state court judge held that they were properly served and granted the preliminary injunction on January 5, 2017 against defendants Ellsworth, Braccio, AZTT, LLC, AZTT, Inc., ATS and TIPS.[1] R 14-2. The injunction enjoined and enjoins Crowe from, among other things, “[t]he use or conveyance of any and all licenses related to software and/or hardware for industrial turbine controls for T-55 and TF40 engines…” and “[u]sing T-55 and TF40 digital engine controls on the Team Vesco racing project.” R. 14-2, at ¶¶ (b) and (q).

         While the case was pending in state court, Defendants filed multiple motions contending various exceptions including a motion to dissolve the preliminary injunction. Following a full day of hearings on the motions, the state judge denied some motions and took others, including the Defendants' motion to dissolve the preliminary injunction, under advisement. The court indicated a ruling would issue by July 15, 2017.

         On March 13, 2017, Crowe, Braccio, AZTT, Inc. and ATS filed a lawsuit in this Court against TPT, Marine Turbine Technology (“MTT”)-TPT's sister company, and Mr. Ted McIntyre, personally, as the owner of both companies. See, Arizona Turbine Technology et al v. Turbine Powered Technology et al, Civil Action No. 6:17-00386. Defendants included claims for defamation under Louisiana law, Louisiana Unfair Trade Practices, defamation and three claims for unfair competition under Arizona law, as well as a claim for conspiracy. Specifically, Defendants alleged that TPT, as the plaintiff in the State Court Case, was defaming them and engaging in other allegedly inappropriate business practices. Id.

         On April 10, 2017, ATS filed a Complaint for Damages in this Court against TPT c1aiming breach of contract, unjust enrichment and detrimental reliance under Louisiana law arising from the same contractual relationship that TPT had sued upon in the State Court Case, Advanced Turbine Services, LLC v. Turbine Powered Technology LLC, Civil Action No. 17-00510. TPT filed a Motion to Consolidate 17- 00510 with 17-00386 based upon commonality of the parties and the claims in the State Court Case. ATS opposed the motion. On July 24, 2017, the Court granted the motion consolidating the cases.

         While Defendants were filing the above federal cases in this Court, the State Court Case continued to be litigated. Before the state court issued its ruling on the remaining exceptions and the motion to dissolve the preliminary injunction, on June 22, 2017, Defendants filed a Notice of Removal of the State Court Case to the 16th JDC on the grounds that there was federal question jurisdiction based on patent law as well as diversity jurisdiction. The case was assigned to then District Judge Rebecca F. Doherty as Civil Action No. 17-cv-00801. A week later, on June 29, 2017, Defendants again filed a motion to dissolve the preliminary injunction entered in state court, this time in the federal court case. On July 17, 2017, Judge Doherty denied the motion as premature. TPT filed a Motion to Remand two days later, arguing the case should be remanded for lack of subject matter jurisdiction as the parties were not diverse in citizenship and no questions of federal law pertained to the case. The Motion to Remand was assigned to the undersigned judge for report and recommendation. On July 24, 2017, Defendants filed a Motion to Vacate the State Court Judgment. The Motion to Vacate was set before Judge Doherty.[2]

         Thereafter, on August 17, 2017, Eco-Stim Energy Solutions Inc. (“Eco-Stim”), an oil-field service company, with which Crowe and his companies was associated as a contractor, filed a declaratory judgment lawsuit against McIntyre, TPT, MTT and MTT Properties, LLC, in the Southern District of Texas. See, Eco-Stim Energy Solutions Inc V. McIntyre et al, 4:17-cv-02531. Eco-Stim had been served with a copy of the preliminary injunction against Crowe, AZTT, Inc. and AZTT, LLC. Eco-Stim's lawsuit alleged that it had been wrongly threatened and accused by defendants, McIntyre and TPT, of violating their patent, trade secret and intellectual property rights. In the complaint, Eco-Stim cited testimony from the State Court Case involving the motion to dissolve the injunction as well as the June 22, 2017 removal of Civil Action No. 17-cv-00801. Eco-Stim further cited and quoted the lawsuit in this Court filed by AZTT and Crowe, 17-cv-00386. Throughout the lengthy complaint Eco-Stim's allegations criticized and vilified McIntyre, while supporting the actions of Crowe and AZTT. Ultimately, Eco-Stim complained that McIntyre's actions caused it to suffer inter alia lost profits and lost business opportunities.

         On February 27, 2018, U.S. District Judge Nancy Atlas, Southern District of Texas, transferred Eco-Stim, 4:17-cv-02531, to this Court stating that the Texas lawsuit involved claims that “substantially overlap with the Louisiana cases” and therefore the lawsuit should be decided by the Louisiana court. Judge Atlas further considered the defendants' motion to stay the case in favor of related first-filed cases in Louisiana. Judge Atlas agreed and ordered that the case should be stayed or consolidated into the already consolidated cases Civil Action Nos. 17-cv-00386 and 17-cv-00510. Upon transfer, the case became Civil Action No. 18-cv-00249 in this Court. On August 16, 2018, the case was stayed and administratively closed pending adjudication of the State Court Case.

         On February 9, 2018, before Judge Atlas transferred the Texas lawsuit, Defendants filed an “Emergency Motion to Reassign Case and Dissolve Preliminary Injunction” in Civil Action No. 17-00801, demanding, “If the Court does not act on Defendants' Emergency Motion by [February 23, 2019], Defendants will consider the Emergency Motion denied and will seek immediate relief before the appropriate Federal Court of Appeals.”

         Five days later, on February 14, 2018, the Court completed and issued its 24 page Report and Recommendation recommending that the case be remanded to the 16th JDC. On February 22, 2018, Judge Drell issued an order denying the Emergency Motion to Dissolve the Preliminary Injunction as premature for the reasons set forth in the July 17, 2017 ruling by Judge Doherty. In his order, Judge Drell addressed “the threatening pleadings filed by the attorneys in the motion.” Specifically, Judge Drell stated that counsel “‘threatened' this Court to seek a spurious appeal after counsel frivolously and improperly ‘deemed' a non-ruling by the Court on a specific date as a denial of the motion on its merits.”[3] The following day, February 23, 2018, Judge Drell adopted the Report and Recommendation remanding the case.

         Once the State Court Case was remanded, on March 2, 2018, the state judge issued a Judgment on the various rules to show cause that had previously been heard in June, 2017. On April 2, 2018, the state court issued its reasons for having previously denied Defendants' Motion to Dissolve the Preliminary Injunction and entered a written Judgment so holding. Defendants sought writs to the First Circuit Court of Appeal, which remain pending. R. 14-1, p. 13.

         TPT moved for contempt against Defendants contending they were continuing to do business in violation of the court's preliminary injunction. The state judge conducted a hearing and on April 9, 2018 granted the Motion for Contempt, reserving damages for a future hearing.

         Before the State Court Case was remanded the court issued several orders related to TPT's motions related to Defendants' failure to respond to discovery requests. On February 12, 2019, TPT again filed a Motion for Contempt against Crow and Braccio, AZTT, Inc., AZTT, LLC and ATS for failure to comply with the court's order mandating discovery. After a March 6, 2019 hearing, on March 22, 2019, the court awarded costs and further ordered Crowe and Braccio to pay $100.00/day to the registry of the Court for each day until “full and proper discovery responses as compelled by the Court were produced.”

         Because Defendants failed to comply with the court's orders and judgment on contempt, another Motion for Contempt and Sanctions was filed on March 28, 2019 and a hearing was scheduled to be conducted on May 1, 2019. While these motions were under consideration, on April 14, 2019, Defendants filed a second Notice of Removal of the State Court Case. The removed case was designated 19-00475-the case now before this Court. See, Turbine Powered Technology L L C v. Crowe et al, Civil Action No. 6:19-00475. In their Removal Notice, Defendants contend that this case, including the allegations asserted by TPT and the allegations in Defendants' counterclaims, constitute claims arising in a case commenced by defendant Crowe on April 12, 2019, in the bankruptcy court in the District of Arizona, under Chapter 11 of the United States Code (the “Bankruptcy Code”). See, In re David and Colleen Crowe, United State Bankruptcy Court, Tucson Division, 4:19-bk-04406-BMW (the “Bankruptcy Case”). Defendants contend that the injunction “severely threatens David Crowe's ability to reorganize under Chapter 11.” They further contend, “[t]he claims in this case are inextricably intertwined with the facts concerning the Crowe Chapter 11 case.” R. 28, p. ii.

         On May 15, 2019, TPT filed the instant Motion to Remand this case to the 16th JDC. R. 14. While the motion was pending, Defendant Crowe filed “Debtors' Motion To Enter Into Post-Petition Contract Outside The Ordinary Course Of Business With Team Vesco Racing, ” apparently requesting that the bankruptcy judge allow Crowe to enter into a third party contract related to the technology at issue in the State Court Case injunction. R. 33-1. In its June 20, 2019 Ruling, the bankruptcy court held the following,

[T]he Court in the Louisiana Litigation is in the best position to interpret the injunction ... this court will therefore apply permissive abstention to abstain only from the foregoing narrow issues in order to allow the Louisiana court to make such determination. The debtors may proceed in the state court action to obtain such determination. If debtors choose not to proceed, then the state court action remains stayed as to the debtors.



         TPT contends that this action must be remanded a second time because (1) Crowe's bankruptcy is “a clear attempt to avoid” the contempt charges he faces in the State Court Case for violating the preliminary injunction order and contempt proceedings are not removable under the principle of federalism; (2) the Rooker-Feldman Doctrine applies to the preliminary injunction in dispute such that this Court lacks subject matter jurisdiction to re-litigate the issue; (3) mandatory and discretionary abstention apply in this “non-core” bankruptcy case; and (4) Crowe's Chapter 11 Petition should be dismiss for cause because Crowe is in bad faith.

         Defendants argue (1) the Motion to Transfer should be decided before the Motion to Remand so that the bankruptcy court can determine whether it wishes to hear Defendants' claims; (2) the Court should not remand the case before the bankruptcy court lifts the automatic stay; (3) mandatory and permissive abstention do not apply; (4) the Rooker-Feldman Doctrine does not apply because “the Defendants are not complaining of injuries caused by a state court judgment.”


         While a defendant has a right to seek subsequent removals after remand, Browning v. Navarro, 743 F.2d 1069, 1079-80 n. 29 (5th Cir.1984), as a general rule, once a case is remanded to state court, a defendant is precluded only from seeking a second removal on the same ground, S.W.S. Erectors, Inc . v. Infax, Inc., 72 F.3d 489, 492 (5th Cir. 1996). Because this matter was previously remanded for lack of diversity jurisdiction and federal question, those issues cannot be re-litigated. Thus, Defendants only ground for removal before the Court is pursuant to 28 U.S.C. § 1334-that David Crowe, one of the eight Defendants in this matter, has now sought bankruptcy protection.


         As to jurisdiction based on Crowe's filing under Chapter 11, Defendants argue that the Court should consider their motion to transfer this matter to the bankruptcy court in the District of Arizona prior to considering the motion to remand.[4] Defendants cite Bayou Steel v. Boltex Mfg. Co., 2003 WL 21276338 (E.D. La. 2003), contending that the circumstances “are the same” as in this case. Defendants state that Bayou Steel supports their position that, “[i]n this situation, there is a strong presumption in favor of transferring to the judicial district of the bankruptcy court.” They assert that the District of Arizona is the court best situated to evaluate the merits of TPT's call for remand or abstention, and therefore, the motion to transfer should be determined first.

         The Court finds that the circumstances in Bayou Steel are not the same as those in the instant case. In Bayou Steel the court addressed a situation in which the plaintiff, Bayou Steel, filed for bankruptcy relief two months before an action was commenced in Louisiana state court against Boltex. Finding there was a “strong presumption” in favor of placing venue in the Northern District of Texas where the bankruptcy proceedings were already pending, the court transferred the case to the Northern District of Texas for referral to the bankruptcy court. Unlike Bayou Steel, in this case Crowe filed for relief in the bankruptcy court in the District of Arizona five (5) years after the State Court Case was filed. See R. 28, p. 7 of Defendants' Opposition Memorandum (“This litigation, or cases closely related to it, have been ongoing since 2014.”).

         TPT argues the majority of courts agree that in a case, such as this one, involving removal of a state court suit to a district where the bankruptcy proceeding is not located, the jurisdictional issues must be addressed before venue or transfer issues. The cases cited by TPT as well as others found in the Court's research support this position. See e.g. Barnett v. Dutch Run-Mays Draft, LLC, 2013 WL 960183, at *6 (S.D.W.Va., 2013) (“the district court to which the action was removed has the right to decide a pending motion to abstain or remand before determining whether venue is proper in the home bankruptcy court”); Regions Bank v. JP Realty Partners, Ltd., 912 F.Supp.2d 604, 611-13 (M.D. Tenn. 2012) (addressing jurisdiction before transfer where bankruptcy case only in initial filing stages); Lennar Corp. v. Briarwood Capital LLC, 430 BR 253, 260-61 (S.D. Fla. 2010); In re Scanware, Inc., 411 B.R. 889, 896 (S.D.Ga., 2009); Frelin v. Oakwood Homes Co., 292 B.R. 369, 379 (Bankr.E.D.Ark.2003); Lone Star Industries. Inc. ...

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