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Royal Merchant Holdings LLC v. Traeger Pellet Grills LLC

United States District Court, D. Utah, Central Division

June 14, 2019

ROYAL MERCHANT HOLDINGS, LLC, Petitioner,
v.
TRAEGER PELLET GRILLS, LLC, Respondent.

          DEE BENSON JUDGE.

         REPORT AND RECOMMENDATION TO DISMISS CASE FOR LACK OF SUBJECT MATTER JURISDICTION AND ORDER DENYING AS MOOT (1) ROYAL MERCHANT HOLDINGS, LLC'S PETITION TO COMPEL COMPLIANCE WITH ARBITRAL SUBPOENA (ECF NO. 2), AND (2) TRAEGER PELLET GRILLS, LLC'S SHORT FORM DISCOVERY MOTION TO QUASH OR MODIFY ARBITRAL SUBPOENA (ECF NO. 12)

          EVELYN J. FURSE United States Magistrate Judge.

         On February 15, 2019, Petitioner Royal Merchant Holdings, LLC (“Royal”) initiated this action against Respondent Traeger Pellet Grills, LLC (“Traeger”) by filing a Petition to Compel Compliance with Arbitral Subpoena (“Petition”) (ECF No. 2). Royal petitions the Court, under 9 U.S.C. § 7 (“Section 7”) of the Federal Arbitration Act (“FAA”), for an order compelling Traeger to comply with an arbitral subpoena seeking testimony and the production of documents in an arbitration to which Traeger is not a party. (See id.) In the Petition, Royal asserts that the Court has subject matter jurisdiction over the action because “the claims in the arbitration arise under federal law.” (Id. ¶ 5.) Subsequently, on March 20, 2019, Traeger filed a Short Form Discovery Motion to Quash or Modify Arbitral Subpoena (“Motion to Quash”), asking the Court to quash or modify the subpoena since it already produced documents to Royal and claims it did so based on an understanding that Royal would seek no further discovery from Traeger in connection with the arbitration (ECF No. 12).

         On April 2, 2019 the undersigned[1] held a hearing on the pending Motions (ECF No. 20). At the hearing, the undersigned raised the issue of whether the Court had subject matter jurisdiction over this action. The undersigned ordered Royal to submit additional briefing on subject matter jurisdiction by April 5, 2019 and indicated that Traeger could respond by April 11, 2015 if it elected to do so. (Id.) Royal submitted a Supplemental Memorandum Regarding Jurisdiction (“Supplemental Memorandum”) on April 5, 2019 (ECF No. 21). In the Supplemental Memorandum, Royal acknowledged that the FAA does not create independent federal question jurisdiction but asserts that the Court has subject matter jurisdiction over this action because the parties are diverse, and the amount in controversy in the underlying arbitration exceeds $75, 000. (Id. at 2-5.) After receiving the Supplemental Memorandum, the undersigned ordered Royal to disclose the names and citizenship of its members since the assertion that “Royal's members are domiciled in and therefore are citizens of Florida and Tennessee" failed to allow the undersigned to assess independently the citizenship of those parties (ECF No. 22). Royal submitted its Supplemental Memorandum Regarding Citizenship of Royal Merchant Holdings, LLC (“Supplemental Memorandum re Citizenship”) on April 9, 2019 (ECF No. 23). On April 11, 2019, Traeger filed a Notice indicating it would not file a response (ECF No. 24).

         Having reviewed the Supplemental Memorandum, the other filings on the docket, and relevant case law, the undersigned finds that the Court does not have subject matter jurisdiction over this action. Royal does not present any controlling authority that would require the Court to look to the underlying arbitration to determine the amount of controversy in this case and fails to meet its burden to show that the amount in controversy in this case exceeds $75, 000.

         Further, the Court finds Royal's concerns regarding enforcement of the subpoena unwarranted. Royal would not have to enforce the subpoena in Florida, where the arbitration is taking place. Utah law allows parties to enforce subpoenas arising from out-of-state arbitrations in state court. See Utah Code § 78B-11-118(7) (“The court may enforce a subpoena or discovery-related order for the attendance of a witness within this state and for the production of records and other evidence issued by an arbitrator in connection with an arbitration proceeding in another state . . .”). Therefore, as set forth in more detail below, the undersigned RECOMMENDS the District Judge DISMISS this case for lack of subject matter jurisdiction.

         Finally, given the undersigned's finding and recommendation to the District Judge the undersigned DENIES AS MOOT (1) Royal's Petition to Compel Compliance with Arbitral Subpoena (ECF No. 2), and (2) Traeger's Short Form Discovery Motion to Quash or Modify Arbitral Subpoena (ECF No. 12).

         RELEVANT BACKGROUND

         Royal initiated this action pursuant to Section 7 of the FAA to enforce a subpoena for testimony and documents issued to Trager in an arbitration. (See Petition, ECF No. 2.) The arbitration involves Royal and its former attorneys, James L. Ferraro and The Ferraro Law Firm, P.A. (“Ferraro”). (Id. ¶ 7; Mot. to Quash 1-2, ECF No. 12.) The arbitration concerns an Ohio malpractice dispute between Royal and Ferraro arising out of a dismissed lawsuit that Royal brought against Traeger. (Mot. to Quash 1, ECF No. 12.) Trager is not a party to the arbitration. (Id.) The arbitration is taking place in Florida, but the subpoena at issue demanded that Traeger appear on February 1, 2019 in Salt Lake City, Utah for a hearing. (Id.; Petition ¶ 7, ECF No. 2; Ex. A to Petition, 1/4/19 Arbitral Subpoena, ECF No. 2-2.) The subpoena commanded Traeger to designate one or more representatives to bring certain documents to the hearing and testify on behalf of Traeger concerning those documents. (Petition ¶ 7, ECF No. 2; 1/4/19 Arbitral Subpoena, ECF No. 2-2.) Trager has not complied with the subpoena and moves the Court to quash or modify it. (Petition ¶ 12, ECF No. 2; Mot. to Quash, ECF No. 12.)

         Prior to the subpoena at issue, Royal issued two other arbitral subpoenas to Traeger. (Mot. to Quash 1-2, ECF No. 12; Ex. A to Pet.'s. Resp. in Opp'n to Mot. to Quash (“Opp'n to Mot. to Quash”), 4/5/17 Arbitral Subpoena, ECF No. 15-1; Ex. C to Opp'n to Mot. to Quash, 9/7/18 Arbitral Subpoena, ECF No. 15-3.) Trager objected to the first subpoena, which requested documents only, on the grounds that the FAA does not permit pre-hearing discovery from non-parties. (Mot. to Quash 1-2, ECF No. 12; Ex. B to Opp'n to Mot. to Quash, Objection to Subpoena, ECF No. 15-2.) As to the second subpoena, which sought documents and testimony relating to damages, Traeger produced thousands of pages of documents in response, along with an affidavit in lieu of live testimony. (Mot. to Quash 2, ECF No. 12; Opp'n to Mot. to Quash 2, ECF No. 15.) Traeger claims it made this production based on Royal's representation that Traeger would not have to produce any other documents or provide live testimony in the arbitration. (Mot. to Quash 2, ECF No. 12.) Royal claims that Traeger did not fully comply with the parties' agreement and that it reserved its right to additional discovery. (Opp'n to Mot. to Quash 2, ECF No. 15.)

         LEGAL STANDARD

         “Federal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute, . . . which is not to be expanded by judicial decree[.]” Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994) (internal citations omitted). “Since federal courts are courts of limited jurisdiction, there is a presumption against our jurisdiction, and the party invoking federal jurisdiction bears the burden of proof.” Penteco Corp. Ltd. P'ship-1985A v. Union Gas Sys., Inc., 929 F.2d 1519, 1521 (10th Cir. 1991); see also Kokkonen, 511 U.S. at 377 (stating that the burden of establishing federal jurisdiction “rests upon the party asserting jurisdiction”).

         “Federal courts ‘have an independent obligation to determine whether subject-matter jurisdiction exists, even in the absence of a challenge from any party,' and thus a court may sua sponte raise the question of whether there is subject matter jurisdiction ‘at any stage in the litigation.' ” 1mage Software, Inc. v. Reynolds & Reynolds Co.,459 F.3d 1044, 1048 (10th Cir. 2006) (quoting Arbaugh v. Y & H Corp.,546 U.S. 500, 506, 513 (2006)); see also State Farm Mut. Auto. Ins. Co. v. Narvaez,149 F.3d 1269, 1271 (10th Cir. 1998) (stating that a court “ ‘must, sua sponte, satisfy itself of its power to adjudicate in every case and at every stage of the proceedings' ” (quoting Tafoya v. U.S. Dept. of Justice, 748 F.2d 1389, 1390 (10th Cir. 1984))). “ ‘A court lacking jurisdiction cannot render judgment but must dismiss the cause at any ...


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