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Hanson v. Randall

United States District Court, W.D. Arkansas, Texarkana Division

April 11, 2018

WARREN HANSON, individually; and SWS ENGRAVING, L.L.C., by and through Warren Hanson, a Member of SWS Engraving, L.L.C. PLAINTIFFS


          Susan O. Hickey, United States District Judge.

         Before the Court is a Motion to Remand filed by Separate Defendant Steven K. Randall (“Randall”). ECF No. 11. Plaintiffs Warren Hanson and SWS Engraving, L.L.C. (collectively “Plaintiffs”) have filed a response in opposition to the motion. ECF No. 21. Randall has filed a reply. ECF No. 23. Separate Defendant Jennifer Randall has filed an Objection to Removal, which incorporates Randall's filings and raises additional concerns regarding the Court's subject matter jurisdiction over this matter. ECF No. 18. The Court finds this matter fully briefed and ripe for consideration. For the reasons explained below, Randall's motion is granted in part and denied in part.[1]

         I. BACKGROUND

         A. Factual Allegations

         Plaintiffs initially commenced this action in the Circuit Court of Hempstead County, Arkansas, on December 20, 2017, seeking damages for multiple state law claims, including breach of fiduciary duty, conversion, conspiracy, fraud, and civil action by a crime victim pursuant to Ark. Code Ann. § 16-118-107. ECF No. 3. Plaintiffs amended their complaint in state court on February 9, 2018, raising substantially similar claims as those asserted in the original complaint, with the exception of an additional request for judicial dissolution pursuant to Ark. Code Ann. § 4-32-902. ECF No. 4. The amended complaint also includes additional facts in support of its claims and is accompanied by the Operating Agreement for SWS Engraving, L.L.C. (“SWS Engraving”), and a felony information concerning charges filed in the Circuit Court of Hempstead County, Arkansas, against Separate Defendant Jennifer Randall (“Jennifer Randall”). Id.

         Plaintiffs' amended complaint alleges that Hanson and Randall were the only members of SWS Engraving, an Arkansas limited liability company with its principal place of business located in Hope, Arkansas. Id. at ¶ 14. According to the amended complaint, Randall hired his wife, Jennifer Randall, in February 2011 to work as the office manager for SWS Engraving. Id. at ¶ 15. The amended complaint further alleges that, during the course of her employment, Jennifer Randall embezzled approximately $150, 000 from the business by forging Hanson's signature on multiple SWS Engraving checks and, in turn, “exchang[ing] the checks from banks, financial institutions, and other goods and services from other vendors.” Id. at ¶¶ 18-20. It is alleged that Hanson maintained sole authority to sign checks on behalf of SWS Engraving. Id. at ¶ 17.

         The amended complaint asserts that Jennifer Randall was subsequently charged with multiple felonies for her alleged embezzlement of company funds, including theft of property and forgery. Id. at ¶ 22. It is alleged that Randall enabled and financially benefited from the embezzlement of company funds by his wife and breached his fiduciary duty by failing to properly hire, supervise, or monitor the activities she performed as an office manager for SWS Engraving. Id. at ¶¶ 23-28. The amended complaint further alleges that the parties have come to “disagree as to the management of the business affairs” of SWS Engraving, which has “obstructed the purposes” of the company and “prevent[ed] it from operating pursuant to [the company's] Operating Agreement.” Id. at ¶¶ 29-32.

         B. Procedural Background

         The Court will next provide a brief recitation of the ensuing state court proceedings to place the instant motion in its proper context. On January 12, 2018, in response to Plaintiffs' original complaint, Randall filed two motions to dismiss and a motion for more definite statement. ECF No. 1-1 at 18. Randall also asserted a counterclaim for judicial dissolution of the company, as well as a counterclaim pursuant to Ark. Code Ann. § 4-32-402(1), which sought to hold Hanson liable for losses the company sustained as a result of his alleged failure to routinely monitor the company's checking account. Id. at 43-46. In addition, Randall's filings asserted a state tort claim of outrage against Hanson and sought the appointment of a receiver to conduct the dissolution and winding up of the company. Id. at 25. On the same date, Randall filed a motion for appointment of a receiver, as well as for a preliminary injunction to “assist the receiver in preserving [the company's] assets and preventing waste during the pendency of [the] proceedings.” Id. at 61. Jennifer Randall filed her answer to the original complaint on January 26, 2018, which did not assert any counterclaims. Id. at 92.

         Notably, on February 13, 2018, Randall filed a motion for a temporary restraining order against Plaintiffs pursuant to the Arkansas Trade Secrets Act, Ark. Code Ann. § 4-75-604. Id. at 152. Randall's motion asserted that Hanson removed several items owned by Randall, including an external hard drive, without his knowledge or permission. Id. at 153. Randall averred that the hard drive contained “computer programs and unique proprietary artwork” that he owned. Id. The motion further asserted that Plaintiffs' counsel admitted that his client took the hard drive and offered to return it once its contents had been deleted. Id.

         On February 13, 2018, the state court issued a temporary restraining order, which ordered Plaintiffs to “immediately cease and desist from attempting to gain possession, control, or otherwise misappropriate any trade secrets owned, or arguably owned, by [Randall], or in which [Randall] individually holds rights of use, including any personal property on which those trade secrets may be maintained or stored, including electronic equipment or devices, and any other forms or tangible or intangible personal property.” Id. at 168. The court scheduled a hearing on the matter for February 22, 2018. Id. In response, Plaintiffs filed a motion to dissolve the temporary restraining order on February 14, 2018. Id. at 169. Plaintiffs subsequently filed a motion on February 16, 2018, which sought a stay of the proceedings pending an appeal of the order. Id. at 183.

         On February 21, 2018, Plaintiffs filed a Notice of Removal in this Court, asserting that this Court has original jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331 (federal courts have original jurisdiction over civil actions arising under federal law) and 1338 (federal courts have original jurisdiction over disputes arising under the Copyright Act). ECF No. 1, p. 2. Plaintiffs' removal petition also claims that this action may be removed pursuant to 28 U.S.C. §§ 1441(a) (defendant may remove civil action brought in state court when federal court has original jurisdiction), 1446(a) (procedure for removal) and 1454(a) (copyright claims removable by any party). Id. at 3.

         In response to Plaintiffs' removal petition, Randall filed the instant motion requesting that the Court abstain from hearing this matter or, alternatively, remand the matter to the Hempstead County Circuit Court. Specifically, Randall urges the Court to abstain from exercising its jurisdiction pursuant to the Younger and Rooker-Feldman abstention doctrines. Randall further contends that the Court should remand this action based on various procedural defects in Plaintiffs' removal petition. In addition, Randall avers that removal was improper because the Court lacks federal question jurisdiction. Randall also seeks an award of attorneys' fees and costs incurred as a result of bringing the instant motion pursuant to 28 U.S.C. § 1447(c). The Court will consider each of the arguments raised in Randall's motion in turn.


         The Court finds that Randall's Younger abstention argument is inapplicable to the case at bar and declines to consider whether the Rooker-Feldman doctrine applies. However, the Court concludes that remand to the Hempstead County Circuit Court is warranted because the Court lacks federal question jurisdiction over this action. In addition, the Court finds that Plaintiffs' basis for removal was ...

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