Smart Communications Holding, Inc. v. VendEngine, Inc.

District Court, M.D. Tennessee·Decided January 30, 2023·No. 3:21-cv-00053·Unknown

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION

SMART COMMUNICATIONS ) HOLDING, INC., ) ) NO. 3:21-cv-00053 Plaintiff, ) ) JUDGE RICHARDSON v. ) ) VENDENGINE, INC., ) ) Defendant. )

MEMORANDUM OPINION AND ORDER REMANDING TO STATE COURT Pending before the Court is Plaintiff’s Motion to Remand (Doc. No. 14, “Motion”).1 Plaintiff filed a memorandum in support of the Motion (Doc. No. 15). Defendant filed a response (Doc. No. 20, “Response), whereafter Plaintiff filed a reply (Doc. No. 21, “Reply”). For the reasons discussed herein, the Court will grant Plaintiff’s motion. BACKGROUND A. Factual Background2 Plaintiff, Smart Communications Holding, Inc. (“Smart Communications”), is a Florida corporation. (Doc. No. 1-1 at ¶ 2). Defendant, VendEngine is a Tennessee corporation. Id. at ¶ 3. Smart Communications created a postal-mail-elimination system called MailGuard, which allows for efficient mail screening and distribution in detention facilities. Id. at ¶¶ 7-15. Smart

1 Also pending before the Court is Defendant’s Motion to Dismiss (Doc. No. 8). Briefing on the Motion to Dismiss was stayed pending the Court’s resolution of the Motion to Remand. (Doc. No. 17).

2 The Court takes these background facts from the Complaint and, as indicated below, accepts them as true for purposes of the Motion. Communications met with Rutherford County to discuss Rutherford County using MailGuard in its detention center. Id. at 17. Rutherford County instructed its commissary vendor, VendEngine, to work with Smart Communications to effectuate this move. Id. at 18. VendEngine and Rutherford County entered into an agreement, but VendEngine and Rutherford County abruptly ceased communications with Smart Communications after they had received Smart Communications’ s

trade secrets. Id. at 20-23. VendEngine then launched an application called MailRoom that Rutherford County subsequently implemented in its detention facility. Id. at 24. This application has many of the same functions as does Smart Communications’s MailGuard. Id. at 27-29. HLFIP had patented MailGuard (United States Patent No. 10,291,617) and sued Rutherford County in this Court for patent infringement in HLFIP Holdings, Inc. d/b/a Smart Commc’ns IP Holdings v. Rutherford Cty., TN, et al., No. 3:19-cv-00714. B. Procedural Posture Smart Communications instituted this action by filing a complaint (Doc. No. 1-1) against Defendants in Tennessee state court, namely, the Chancery Court of Davidson County. In the

complaint, Smart Communications asserted claims (all under state law) for breach of contract, violation of the Tennessee Uniform Trade Secrets Act, promissory fraud, unfair competition, and to recover attorney’s fees in a related patent infringement case, HLFIP Holdings, Inc. d/b/a Smart Commc’ns IP Holdings v. Rutherford Cty., TN, et al., No. 3:19-cv-00714, (M.D. Tenn. Oct. 21, 2019.). (Doc. No. 1-1 at ¶ 30-73). The last of these claims is of a type (hereinafter, “Pullman claim”) authorized under Pullman Standard, Inc. v. Abex Corp., 693 S.W.2d 336 (Tenn. 1985).3

3 Pullman establishes two kinds of claims, one called “indemnity” and the other called “independent-tort of another.” Engstrom v. Mayfield, 195 Fed. App’x 444, 451 (6th Cir. 2006). The former kind of Pullman claim is available to those who seek indemnification from being forced to defend themselves in litigation. Although the Complaint captions Plaintiff’s Pullman claim as one for “[i]ndemnity,” this claim is actually undeniably of the “independent-tort-of-another” kind because it clearly seeks attorney’s fees allegedly

On January 22, 2021, VendEngine removed the case to this Court under 28 U.S.C. §§ 1441, 1446, and 1454, asserting primarily that this Court has so-called federal-question jurisdiction over this action under 28 U.S.C. § 1331 because Plaintiff’s Pullman claim requires resolution of a question of (federal) patent law. (Doc. No. 1 at ¶¶ 6, 12-15).4 On February 10, 2021, Plaintiff filed the Motion, which seeks to remand this entire action

to state court (and not just all claims other than the Pullman claim, which, as noted in a footnote below, theoretically could be a possibility here). According to Plaintiff, remand pursuant to 28 U.S.C. § 1447 is appropriate because (again according to Plaintiff): (a) the so-called forum- defendant rule bars removal based on diversity jurisdiction when the defendant is a citizen of the forum state, and VendEngine is a citizen of Tennessee; and (b) federal-question jurisdiction is lacking because Plaintiff’s claims all were state-law claims, and the Pullman claim does not “arise under” federal law. (Doc. No. 14 at 1-13). Thereafter, the Response and Reply were filed.

incurred not in defensive litigation, but rather in offensive litigation Plaintiff took against a purported tortfeasor that supposedly injured Plaintiff.

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Smart Communications Holding, Inc. v. VendEngine, Inc., (M.D. Tenn. 2023).

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