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NutriQuest, LLC v. Ameriasia Import LLC

United States District Court, D. Minnesota

February 4, 2019

NUTRIQUEST, LLC, Plaintiff,
v.
AMERIASIA IMPORTS LLC; YING LI, a/k/a OLIVIA LI; YANBIN SHEN; PROFOUND SOLUTIONS, INC.; and JENNA XU, Defendants.

          ORDER ON REPORT AND RECOMMENDATION

          Nancy E. Brasel United States District Judge

         This matter is before the Court on Plaintiff NutriQuest LLC's Motion for Order Holding Defendants in Contempt [ECF No. 128], which alleges that the Defendants AmeriAsia Imports LLC, Ying Li, Yabin Shen, Profound Solutions, Inc., and Jenna Xu violated the terms of the Rice County District Court's Order Modifying Temporary Restraining Order [ECF No. 12] issued prior to this case's removal to federal court. [ECF No. 130.] In a Report and Recommendation dated October 17, 2018, United States Magistrate Judge Katherine Menendez[1] recommended the Court deny the motion because the temporary restraining order (“TRO”) had expired prior to the alleged violation. [ECF No. 191.] The Plaintiff objected to the R&R. [ECF No. 198.] For the reasons set forth below, the Court overrules the Plaintiff's objections, accepts the R&R, and denies the Motion for Order Holding Defendants in Contempt.

         BACKGROUND

         In October 2017, the Plaintiff sued the Defendants for tortious interference in Rice County District Court, claiming the Defendants interfered with its exclusive supply contracts for an ingredient used in patented animal-feed technology [ECF No. 2 ¶¶ 42- 47.] The Plaintiff also sought an ex parte TRO, which the state court granted on October 26, 2017, preventing the Defendants from interfering with their supply contracts and selling, moving, or otherwise disposing of the ingredient. [ECF No. 4 at 5.]

         The Rice County court then held an evidentiary hearing on November 9, 2017 to determine whether to extend the TRO and issue a preliminary injunction. (Id.) At the conclusion of testimony that day, the court left the TRO in place and continued the evidentiary hearing to November 30, 2017 to allow for more testimony. [ECF No. 143 (“11/9 Tr.”) at 105:5-20.] At the continued hearing on November 30, the court heard additional testimony [ECF No. 144 (“11/30 Tr.”)] and decided to modify the terms of the TRO. [ECF No. 12.] It dissolved a portion of the TRO with respect to one container of the ingredient but held “[t]he remaining provisions of the TRO remain in effect until further Order of this Court.” (Id. at 2-3.)

         Before the court issued any subsequent orders, however, the Defendants removed this case to federal court, filing a Notice of Removal on February 9, 2018. [ECF No. 1.] Plaintiff now alleges that in June 2018, it learned the Defendants had violated the state court TRO. [ECF No. 130 at 5-6.] In July 2018, Plaintiff filed this Motion for Order Holding Defendants in Contempt, asking the Court to require the Defendants to pay the cost of bringing the motion along with other sanctions. [ECF No. 128.] The Defendants do not deny moving or selling the ingredient in violation of the state court's order, but rather contend the TRO expired in February 2018 when the case was removed. [ECF No. 140 at 4.] Magistrate Judge Katherine M. Menendez issued a Report and Recommendation recommending the Court dismiss the Motion for Order Holding Defendants in Contempt [ECF No. 191], and Plaintiff objected. [ECF No. 198.]

         ANALYSIS

         Plaintiff argues that the R&R improperly recommends that the state court TRO expired after this case was removed to federal court. If a party objects to a magistrate judge's report and recommendation, the Court “shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.” 28 U.S.C. § 636(b)(1). In this case, Plaintiff must demonstrate that the Defendants violated a court order. “A party seeking civil contempt bears the initial burden of proving, by clear and convincing evidence, that the alleged contemnors violated a court order.” Chicago Truck Drivers v. Bhd. Labor Leasing, 207 F.3d 500, 505 (8th Cir. 2000) (citation omitted).

         When an action is removed to federal court, “[a]ll injunctions, orders, and other proceedings had in such action prior to its removal shall remain in full force and effect until dissolved or modified by the district court.” 28 U.S.C. § 1450. In Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers Local No. 70 of Alameda County, the United States Supreme Court considered how long a state TRO may last under § 1450 once a case is removed to federal court. The Court held:

An ex parte temporary restraining order issued by a state court prior to removal remains in force after removal no longer than it would have remained in effect under state law, but in no event does the order remain in force longer than the time limitations imposed by Rule 65(b), measured from the date of removal.

415 U.S. 423, 439-40 (1974). Thus, while TROs in Minnesota state court may remain in effect until the parties have a hearing on a preliminary injunction, see Minn. R. Civ. P. 65.01, TROs in federal court expire 14 days after removal. Fed.R.Civ.P. 65(b)(2).

         Plaintiff argues that the state court's December 1, 2017 order extending and modifying the TRO is not subject to the time limitations in Rule 65(b)(2) and Granny Goose because the December 1 order was issued after notice, a hearing, and a full opportunity to be heard on the merits, and thus should be treated as a preliminary injunction in federal court. In doing so, however, Plaintiff mischaracterizes the nature of order at issue in this case-the original ex parte TRO issued on October 26, 2017. [See ECF No. 4 at 4 (noting “Petitioner has adequately demonstrated the need for an ex parte Temporary Restraining Order per Rule 65.01.”).] That order was issued without notice or a hearing and thus falls squarely under the Court's ruling in Granny Goose. The December 1 order at issue here merely dissolved one of the restrictions and preserved the status quo on the remaining restrictions until the court could issue a preliminary injunction order. [ECF No. 12.] The December 1 order did nothing to convert the TRO into a preliminary injunction. Because the order at issue is still an ex parte TRO, it is clearly subject to the time limitations in Rule 65(b) and the Court's precedent in Granny Goose.

         Closer analysis on the full record supports this conclusion. The state court definitively considered the December 1, 2017 order to be a TRO. The order is captioned as “Order Modifying Temporary Restraining Order, ” and included no new findings of fact or conclusions of law. [ECF No. 12] It provided no additional analysis of the applicable law regarding preliminary injunctions in Minnesota. See Dahlberg Bros., Inc. v. Ford Motor Co., 137 N.W.2d 314, 321-22 (Minn. 1965). Moreover, the state court judge made comments during the November 30, 2017 hearing to indicate he was extending and modifying the ex parte TRO order before ordering an additional briefing schedule. [11/30 Tr. at 44:20-45:15.] The state court thus clearly intended the December 1, 2017 order to modify the existing ex parte TRO, not to convert it to a preliminary injunction. As an “ex parte temporary restraining order issued by a state court prior to removal, ” Plaintiff's TRO must not “remain in force longer than the time limitations imposed by Rule 65(b).” Granny Goose, 415 U.S. at 439-40. Therefore, the TRO expired 14 days after removal-long before the alleged violation.

         This conclusion is buttressed by persuasive reasoning in cases where courts have applied Rule 65(b)(2) and Granny Goose to TROs issued even with some notice prior to removal. See, e.g. Rural Media Grp., Inc. v. Performance One Media, LLC, No. 8:09CV447, 2010 WL 273979, at *2-3 (D. Neb. Jan. 13, 2010) (holding that a state TRO remained a TRO in federal court despite notice to the parties); Carrabus v. Schneider, 111 F.Supp.2d 204, 210 (E.D.N.Y 2000) (“[T]here is no reason to believe that a state court TRO issued on notice, and in anticipation of a preliminary injunction hearing, is exempt upon removal to the federal forum from the Rule 65 time limitation that clearly does govern an ex parte TRO in the same circumstances.”). See also, Chicago United Indus., Ltd. v. City of Chicago, 445 F.3d 940, 946 (7th Cir. 2006) (“The proper interpretation of the ‘without notice' language in Rule 65(b) is that the rule imposes additional restrictions on temporary restraining orders issued without notice, but imposes the 20-day limit on all TROs.”) (emphasis in ...


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