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InteliClear, LLC v. Victor

United States District Court, D. Connecticut

May 18, 2017

INTELICLEAR, LLC; A. MARTINHO BARRETTO; JOHN PAUL DEVITO; and GUY T. POWELL, Plaintiffs,
v.
ROBERT J. VICTOR, Defendant.

          RULING DENYING DEFENDANT'S MOTION FOR RECONSIDERATION

          Janet Bond Arterton, U.S.D.J.

         On August 17, 2016, Plaintiff InteliClear ("Plaintiff) filed this action against Defendant Robert J. Victor ("Victor") alleging breach of fiduciary duty (Count One); civil theft in violation of Conn. Gen. Stat. § 52-564 (Count Two); conversion (Count Three); and demanding an accounting of all financial transactions involving InteliClear assets and funds performed by Victor or at his direction (Count Four). On September 1, 2016 Plaintiff filed an amended complaint adding claims for tortious interference with business expectancies (Count Five), and declaratory judgment (Count Six). That same day, Plaintiff filed a Motion [Doc. #11] for an Ex Parte Temporary Restraining Order and Preliminary Injunction.[1] Based on the results of a two-day evidentiary hearing on the Preliminary Injunction held September 12 and 13, 2016, the Court granted in part [Doc. #31] Plaintiffs Motion on October 3, 2016.[2] Defendant now moves [Doc. # 42], pursuant to Local Rule 7(c), for reconsideration of this Court's Ruling Granting Plaintiffs Motion for a Preliminary Injunction (the "Ruling on Injunction"). For the reasons that follow, Defendant's Motion is denied.

         I. Discussion [3]

         A motion for reconsideration "will generally be denied unless the movant can point to controlling decisions or data that the court overlooked in the initial decision or order." D. Conn. L. Civ. R. 7(c). The Second Circuit has held that motions for reconsideration under this Rule "are as a practical matter the same thing as motions for amendment of judgment under Fed.R.Civ.P. 59(e)-each seeks to reopen a district court's decision on the theory that the court made mistaken findings in the first instance." City of Hartford v. Chase, 942 F.2d 130, 133 (2d Cir. 1991). A court may alter or amend a judgment "to correct a clear error of law or prevent manifest injustice." Munafo v. Metro. Transp. Auth., 381 F.3d 99, 105 (2d Cir.2004). In the Second Circuit, the standard for granting a motion for reconsideration "is strict, and reconsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked-matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995).

         Defendant argues that the Court overlooked controlling decisions that, when applied to the facts of this case, require dismissal of the action for lack of subject matter jurisdiction. Moreover, he argues that the Court lacked competent evidence to support the findings in the Ruling on Injunction.[4] (Def.'s Mot. [Doc. # 42] for Reconsideration at 2.) Plaintiff contends that these arguments lack merit, urging that the Court reject Defendant's attempts to "relitigate issues previously decided by the Court and assert new arguments to bolster his previous positions." (Pl's Opp'n at 1-2.)

         A. The Court Properly Determined it had Subject Matter Jurisdiction to Issue the Preliminary Injunction [5]

         Defendant presumes the Court overlooked Steel Co. v. Citizens for a Better Environment, 523 U.S. 83 (1998) and progeny because it was not cited in the Ruling on Injunction, which he claims are controlling authority precluding the Court from assuming jurisdiction in this case. He maintains that instead the Court relied on "outdated precedent"[6] as authority to retain subject matter jurisdiction to issue the Ruling on Injunction. (Def.'s Mot. for Reconsideration at 2.) In Steel Co. the Supreme Court rejected the practice embraced by several courts of appeals of "assuming jurisdiction for the purpose of deciding the merits"-called the "doctrine of hypothetical jurisdiction." 523 U.S. at 94 (internal quotation marks and citations omitted). Under that doctrine, some courts found "it proper to proceed immediately to the merits question, despite jurisdiction objections at least where (1) the merits question is more readily resolved, and (2) the prevailing party on the merits would be the same as the prevailing party were jurisdiction denied." Id. at 93.

         The Second Circuit cases Defendant cites which interpret Steel Co. note that courts often used "hypothetical jurisdiction" to avoid a difficult or novel issue regarding jurisdiction in favor of a relatively easy merits question. See Center for Reproductive Law and Policy v. Bush, 304 F.3d 183, 193 (2d Cir. 2002); Fid. Partners, Inc. v. First Trust Co. of N.Y., 142 F.3d 565, 565 (2d Cir. 1998). Consequently, the doctrine was applied only where "the party asserting jurisdiction [lost] on the merits" such that the Court was never required to address the jurisdictional question. See Fid. Partners, 142 F.3d at 565. Therefore, the very concept of "hypothetical jurisdiction, " rejected in Steel Co., assumes that it is possible to make a determination on the facts without having to decide the jurisdictional question. This is not the situation here, as it is clear that under these facts it is impossible to determine the jurisdictional question without also determining the merits.[7]

         Because the Court did not temporarily assume jurisdiction over the case in order to dismiss it on an easier merits question, thus avoiding having to make a difficult jurisdictional determination, Steel Co. was inapposite and therefore not cited in the Ruling on Injunction. See Bush, 304 F.3d at 193; Fid. Partners, 142 F.3d at 565. Instead, the Court found on a preliminary basis that it should retain jurisdiction until it can make the final jurisdictional determination on a fuller factual record. See Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978) ("[W]here issues arise as to jurisdiction or venue, discovery is available to ascertain the facts bearing on such issues."). Since the issue of whether Defendant was properly dissociated is critical for both jurisdiction and the merits determination, it is not possible to bifurcate these two issues, making the hypothetical jurisdiction doctrine, and by extension Steel Co., inapplicable to this case.

         The concern of the Supreme Court and subsequent Second Circuit panels was that courts must adhere to the fundamental principle that "[w]ithout jurisdiction the court cannot proceed at all in any cause. Jurisdiction is the power to declare the law, and when it ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the cause." Steel Co., 523 U.S. at 94 (internal quotation marks and citations omitted); see also Bush, 304 F.3d at 193 ("In Steel Co.... Justice Scalia explained that... a court lacks the authority to rule on a case unless it determines that jurisdiction exists."). What Defendant misses is that this is exactly what the Court is attempting to do-determine whether it has jurisdiction-something it is required to do before it can dismiss the case for lack of such jurisdiction. However, this particular factual situation renders it impossible to make this determination without also addressing the merits of the case, which remain disputed, and thus the Court's only option is to retain jurisdiction until it can adequately decide the jurisdiction issue.

         Consequently, the Court's Ruling followed the course articulated by the First Circuit that "[i]f the plaintiff presents sufficient evidence to create a genuine dispute of material (jurisdictional) facts, then the case proceeds to trial, so that the fact finder can determine the facts, and the jurisdictional dispute will be reevaluated at that point." Torres-Negron v. J &N Records, LLC, 504 F.3d 151, 163 (1st Cir. 2007); see also Valentin v. Hosp. Bella Vista, 254 F.3d 358, 363 (1st Cir. 2001) ("[T]he court must address the merits of the jurisdictional claim by resolving the factual disputes between the parties.").[8] The Court has specifically indicated that it will not decide the merits of the case before determining its jurisdiction. (See Ruling on Injunction at 11 ("[If] Defendant were [later] to prove he was not dissociated, the case would be dismissed for lack of jurisdiction.").)[9]

         This approach was utilized in the sole case the Court was able to locate with an appropriately similar context, Beam v. Beam, No. CIV. 08-CV-236-JL, 2010 WL 882892, at *2 (D.N.H. Mar. 5, 2010). There too, the plaintiff based jurisdiction on diversity and the defendant countered that he remained a member of the LLC, thereby destroying diversity jurisdiction. Beam, 2010 WL 882892, at *2. That court, as here, could not "decide its jurisdiction to hear the case without deciding the case itself, or at least a major part of it" because the "jurisdictional facts [were] inextricably intertwined with the merits of the case." Id. Therefore, the court found it was proper to "defer resolution of the jurisdictional issue until the time of trial or summary judgment." Id. (citing Valentin, 254 F.3d at 363 & n. 3).[10]

         Since Steel Co. and the other cases cited by Defendant were found inapplicable to these particular facts, Defendant has not identified any clear error in the Ruling on Injunction requiring reconsideration of the decision regarding the Court's jurisdiction.[11]

         B. Defendant has not Identified any "Clear Error" in the Court's Finding that There was Sufficient Evidence to ...


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