Kelly v. Powers

          MEMORANDUM

          James K. Bredar, Chief Judge.

         I. Background

         Patrick Kelly ("Plaintiff or "Kelly") instituted this suit in the Maryland Circuit Court for Baltimore City (Case No. 24-C-19-003016) on May 28, 2019. Kelly, individually and derivatively on behalf of Emerald Green Ventures, LLC ("Emerald"), filed claims for inter alia, conversion, unjust enrichment, constructive fraud based upon breach of fiduciary duty, violation of the Maryland Uniform Trade Secrets Act, fraud, and civil conspiracy against John Powers, Meredith Priddy, James Tracy Taylor, Daniel Powers, Brent Berisford, and Rx Remedies, Inc. (collectively, "Defendants"). Defendants removed this action to this Court on the asserted basis of federal question jurisdiction pursuant to 28 U.S.C. §1338, (See Notice of Removal, ECF No. 1.) Pending before the Court is Plaintiffs Motion to Remand (ECF No. 22) and the Defendants' Motion to Dismiss (ECF No. 15). The motions have been briefed (see ECF Nos. 19, 24, 25) and are ripe for disposition. No hearing is necessary. Local Rule 105.6 (D. Md. 2018). Both Plaintiffs Motion to Remand and Defendants' Motion to Dismiss will be denied.

         II. Factual Allegations

         This case presents a relatively straightforward dispute among the parties to a business venture who had a falling out and then one party was left behind. That party, Kelly, now seeks to recover for injuries allegedly suffered as a result of his business partners stealing the business out from under him.

         Kelly and Taylor met in 2015 and collaborated on developing a business utilizing Taylor's expertise in pharmacology and toxicology and extensive research on cannabidiol^[1] ("CBD"). (Mt. to Dismiss at 3, ECF No. 15.) In September 2015, they formed Emerald as an investment vehicle to develop a supply chain for CBD that involved growing hemp plants and processing and manufacturing the CBD oils into marketable consumer products. (Id. at 4.) Kelly held the majority interest and Taylor a minority interest in Emerald. (Compl. at 3.) In 2017, bioRemedies was formed to act as the operating company for the business venture. (Mt. to Dismiss at 4.) Emerald is the majority member of bioRemedies.^[2] bioRemedies grows and sells full-spectrum, CO₂ extracted, hemp-derived CBD products (Compl. at 2), using formulas developed exclusively by Taylor (Mt. to Dismiss at 3.) Taylor originally owned the formulas, but he assigned all of his title and interest to PT Holdings, LLC, an entity that now owns and controls the formulas. (Id. at 3, 11.)

         According to Kelly, business was booming until certain events precipitated the Defendants entering into an illegal conspiracy to freeze Kelly out and to steal control of Emerald and bioRemedies. (Compl. at 3.) Around November 15, 2018, a massive crop failure in Colorado caused significant financial losses to the business.^[3] (Mt. to Dismiss at 5.) Due to the negative impact, Defendants insisted that Kelly inform the investors of Emerald but he refused. (Id.)

         Kelly claims that several employees and officers of Emerald and bioRemedies resigned, and while still working for those companies, incorporated Rx Remedies, a new entity that would operate as a direct competitor of bioRemedies. (Compl. at 3-4.) In the process of starting up Rx Remedies, Defendants allegedly misappropriated funds, assets, intangible assets, customer lists, formulas, etc. and began operating the same or substantially the same business without Kelly.

         Not surprisingly, Defendants tell a different version of events. Defendants claim that Kelly staged an unlawful "coup" within bioRemedies by unilaterally deciding that bioRemedies would focus on hemp agriculture instead of the production of pharmaceutical grade CBD products, and that it would be moving to a new location. (Mt. to Dismiss at 5.) When Defendants were not "on board" with the new business model, Defendants assert that Kelly terminated all bioRemedies' employees except Taylor. Defendants then moved forward, forming and operating Rx Remedies without Kelly.

         III. Standard for Remand

         Because federal courts are courts of limited jurisdiction, a cause of action is presumed to lie outside of that limited jurisdiction, and the burden of establishing otherwise rests upon the party asserting jurisdiction. Barbour v. Int'l Union, 640 F.3d 599, 605 (4th Cir. 2011) (en banc), abrogated on other grounds by 28 U.S.C. § 1446(b)(2)(B). In particular, removal statutes are to be strictly construed, and doubts regarding the propriety of removal should be resolved in favor of remanding the case to state court. Id. Section 1447(c) provides for remand if the District Court lacks jurisdiction over the matter.

         IV. Analysis of Motion to Remand

         Kelly moves to remand this case to the Circuit Court on the ground that his complaint raises no federal claims and all asserted claims are based upon Maryland common law and/or statutory law. He contends that the claims may be resolved without resort to federal law; thus, a federal question is not "necessarily raised" by the complaint and accordingly, this Court lacks subject matter jurisdiction. Kelly further argues that jurisdiction may not be premised upon a federal defense. Burrell v. Bayer Corporation, 918 F.3d 372, 381 (4th Cir. 2019) ("It is not enough that federal law becomes relevant by virtue of a 'defense... anticipated in the plaintiffs complaint."' (quoting Franchise TaxBd. v. Constr. Laborers Vacation Tr., 463 U.S. 1, 13 (1983))).

         Defendants oppose the Motion arguing that the complaint, itself, asserts breach of fiduciary duty, fraud, and civil conspiracy related to, and conversion of, copyrighted material. In the Notice of Removal, Defendants also point to Plaintiffs multiple references to "intangible property, " as well as a letter from Kelly to bioRemedies' investors informing them of an attempt to file unauthorized trademarks on the company name, logo and product names (see ECF No. 3). Last, Defendants ...