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Tenenbaum v. Bialick

United States District Court, D. Minnesota

August 15, 2019

Stan Tenenbaum and One-Eighty Ventures, Ltd., Plaintiffs,
v.
Paul Bialick; Texas Ski Ranch Holdings, LP; Texas Ski Ranch, LP; B&B Burgers, LLC; and CMA Holdings Inc., Defendants.

          ORDER REMANDING TO STATE COURT

          WILHELMINA M. WRIGHT, UNITED STATES DISTRICT JUDGE

         Before the Court are Plaintiffs' motion to remand for lack of subject-matter jurisdiction, (Dkt. 14), and Defendants' motion to dismiss for lack of personal jurisdiction, (Dkt. 3). For the reasons addressed below, Plaintiffs' motion is granted and this matter is remanded to Hennepin County District Court.

         BACKGROUND

         Plaintiffs are Stan Tenenbaum, a Minnesota resident, and One-Eighty Ventures, Ltd, a Minnesota financial consulting firm in which Tenenbaum is the sole shareholder. Defendants are Paul Bialick and four of his companies-Texas Ski Ranch, LP (TSR); Texas Ski Ranch Holdings, LP (TSR Holdings); B&B Burgers, LLC; and CMA Holdings Inc. Bialick is a Texas resident and a principal officer in TSR, TSR Holdings, B&B Burgers, and CMA Holdings. TSR is a Texas limited partnership that operates a sports facility located in Texas. TSR is wholly owned by TSR Holdings, which is also a Texas limited partnership. At the time of the events giving rise to this litigation, B&B Burgers, a Texas limited liability company, owned and operated Burger King fast food franchises in Texas. CMA Holdings, a Texas corporation, owns the Texas real estate where one of the Burger King restaurants is located. The parties agree that Tenenbaum is a partner at TSR and TSR Holdings, but they dispute whether Tenenbaum is a member of B&B Burgers or CMA Holdings.

         Plaintiffs allege that Tenenbaum, through One-Eighty Ventures, entered into a Consulting Agreement in April 2008 with TSR, B&B Burgers, and CMA Holdings.[1]Under the Consulting Agreement, Plaintiffs would provide financial consulting services in exchange for $2, 000 per month in compensation, a 10 percent equity interest in both B&B Burgers and CMA Holdings, and a 5 percent equity interest in TSR.

         Plaintiffs allege that the parties to the Consulting Agreement amended the agreement's compensation structure in June 2008. Under their compensation structure, Tenenbaum was required to submit “incentive fee forms” when One-Eighty Ventures completed qualifying work. Plaintiffs allege that the amended Consulting Agreement contemplates that Tenenbaum could become an equal partner in B&B Burgers and CMA Holdings and that, if he did so, Tenenbaum no longer would be required to submit incentive fee forms.[2]

         Plaintiffs allege that they provided financial consulting services pursuant to the Consulting Agreement over the following years and submitted corresponding incentive fee forms. And Plaintiffs contend that, as a result of Tenenbaum's efforts, he “triggered earning a 50% partner interest” in B&B Burgers and CMA Holdings. Believing that he was an equal partner, Tenenbaum stopped submitting incentive fee forms to B&B Burgers and CMA Holdings. But, Plaintiffs allege, Tenenbaum continued to submit incentive fee forms for the work he performed for TSR during this time.

         The working relationship between the parties to the Consulting Agreement continued in this manner until 2018, when Tenenbaum and Bialick decided to sell the Burger King franchises and properties that B&B Burgers and CMA Holdings owned. On March 26, 2018, Tenenbaum received an email from an attorney at B&B Burgers and CMA Holdings stating that Tenenbaum is not a “member, manager, shareholder, director, officer or agent of either CMA Holdings or B&B Burgers.” Tenenbaum contends that Bialick “froze him out” of subsequent business negotiations. In response to the March 26, 2018 email, Tenenbaum began submitting incentive fee forms to B&B Burgers and CMA Holdings again. Plaintiffs assert that Defendants have “refused to acknowledge or pay any amounts due” for the incentive fees submitted to B&B Burgers and CMA Holdings and have “stopped paying” the TSR incentive fees.

         Plaintiffs filed a complaint in Hennepin County District Court on January 8, 2019, alleging claims for breach of contract, promissory estoppel, unjust enrichment, account stated, breach of fiduciary duties, and violations of Minnesota statutes. Defendants removed the case to federal district court on diversity jurisdiction grounds. Plaintiffs now seek to remand the case to Hennepin County District Court. Defendants oppose Plaintiffs' motion to remand and move to dismiss the case for lack of personal jurisdiction.

         ANALYSIS

         Before the Court are Plaintiffs' motion to remand to Hennepin County District Court and Defendants' motion to dismiss for lack of personal jurisdiction. Because Plaintiffs' motion addresses a threshold issue, subject-matter jurisdiction, Plaintiffs' motion is addressed first. See Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 578 (1999) (explaining that, generally, a federal court addresses subject-matter jurisdiction questions before personal jurisdiction questions).

         I. Motion to Remand

         Plaintiffs move to remand this case for lack of diversity jurisdiction. Plaintiffs are Minnesota citizens. And the parties agree that two Defendants-TSR and TSR Holdings- also are Minnesota citizens. But Defendants argue that, because TSR and TSR Holdings were fraudulently joined, the Minnesota citizenship of TSR and TSR Holdings does not defeat complete diversity between Plaintiffs and Defendants. Plaintiffs counter that TSR, at least, is a proper party, and TSR's Minnesota citizenship divests this Court of subject-matter jurisdiction.

         After a case is removed from state court, a federal court must remand the case “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction.” 28 U.S.C. § 1447(c) (emphasis added); accord In re Atlas Van Lines, Inc., 209 F.3d 1064, 1066 (8th Cir. 2000). The burden of proving federal jurisdiction always remains “on the party seeking to establish it.” Great Rivers Habitat All. v. Fed. EmergencyMgmt. Agency, 615 F.3d 985, 988 (8th Cir. 2010). All doubts ...


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