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Bracciale v. Valdez

United States District Court, M.D. Florida, Tampa Division

September 18, 2017



          Charlene Edwards Honeywell, United States District Judge.

         This matter comes before the Court upon the Plaintiffs' Emergency Motion to Remand, Motion for Attorneys' Fees under 28 U.S.C. § 1447(c) and Motion for Expedited Briefing Schedule (Doc. 6), and Defendants' response in opposition (Doc. 12). In the motion, Plaintiffs state that this Court lacks subject matter jurisdiction over the case because the claims in the Complaint do not arise under federal law. The Court, having considered the motion and being fully advised in the premises, will grant-in-part Plaintiffs' Emergency Motion to Remand, Motion for Attorneys' Fees under 28 U.S.C. § 1447(c) and Motion for Expedited Briefing Schedule.

         I. BACKGROUND

         The Complaint, one of many between the parties, involves a dispute between Stephen Bracciale and Saint Anton Capitol, LLC (“SAC”) and Pedro Valdez and National Sourcing, Inc. (“NSI”). NSI is a Service-Disabled Veteran Owned Small Business (“SDVOSB”) which provides a variety of services to government agencies. Doc. 2 at ¶ 9. The relationship between the parties and the underlying documents sued upon as described in the Complaint (and the related actions) are as follows.

         NSI employed Bracciale under a Consulting Agreement through July 18, 2017, to assist in marketing, business development, client relations, training, operations, and contract support. Id. at ¶ 12. Valdez terminated Bracciale as a consultant and employee, locked him out of the NSI offices, and removed him as a signer on the NSI bank account. Id. at ¶ 13. Bracciale contends that he is chiefly responsible for the business and infrastructure that has led to NSI's success. Id. at ¶ 11.

         In 2011, NSI hired Valdez to assist in recruiting and hiring of employees. Id. at ¶ 16. In April 2013, to maintain its status as a SDVOSB, Valdez became a director and officer of NSI, and purchased 51% of NSI's shares from the former interim owner. Id. at ¶ 16. To finance this transaction, Valdez entered into the following agreements: a Promissory Note for $5.1 million dollars from Valdez to SAC (a company owned by Bracciale) agreeing to pay ten interest-only payments of $153, 000 every six months to SAC with a final balloon payment of $5.1 million due April 1, 2018; a Security Agreement for $5.1 million (which Valdez and NSI granted to SAC to secure the Promissory Note) which includes as security Valdez's pledge of his shares and NSI's grant of its collateral; and a Stock Pledge Agreement between Valdez and SAC in connection with the Promissory Note and Security Agreement. Id. at ¶ 18. Bracciale also entered into financing agreements with NSI including a $1 million Note and Security Agreement and a $575, 000 Note and Security Agreement. The Complaint alleges that Valdez and NSI have defaulted on their obligations and that Valdez is causing irreparable harm to NSI. See id. at § D. The Complaint includes claims for default on the Valdez Promissory Note and breach of fiduciary duty against NSI and Valdez. Id. at ¶¶ 35-40, 42-47.

         a. The Valdez State Action

         On July 18, 2017, Valdez filed a state court complaint styled Pedro Valdez, et al. v. Stephen Bracciale, et al., case No. 17-CA-6700 in the Thirteenth Judicial Circuit Court in and for Hillsborough County, Florida (the “Valdez State Action”) requesting declaratory relief regarding the ambiguities in the Valdez Promissory Note, seeking equitable accounting on the Valdez Promissory Note, and alleging claims for conversion, fraud, and conspiracy against Bracciale and other parties. See Doc. 6-1. That same day Valdez changed the locks to NSI's offices and fired Bracciale as a consultant to NSI. Doc. 6 at 3. Bracciale served Valdez with default notices and filed an Emergency Motion for Appointment of Receiver. See Doc. 6-2. On August 4, 2017, the state court held a hearing on the Emergency Motion for Appointment of Receiver and ordered the appointment of a consultant to oversee the work of NSI's forensic accountant. See Doc. 6-4. It also continued the evidentiary hearing to August 28, 2017. Doc. 6 at 3. On August 16, 2017, Valdez voluntarily dismissed the case without prejudice. See Doc. 6-5.

         b. The Valdez Federal Action

         On August 16, 2017, NSI and Valdez filed a federal court complaint, styled National Sourcing, Inc., et al., v. Stephen Bracciale, et al., case no. 8:17-cv-1950-36JSS in the Middle District of Florida, Tampa Division, against Bracciale, SAC, and others (the “Valdez Federal Action”) (referred to in the motion as the “NSI Action” and in the response as the “First Filed Action”). See Doc. 6- 5. The Valdez Federal Action alleges claims for a breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and fraudulent inducement pursuant to Florida Statutes and requests declaratory relief pursuant to 28 U.S.C. §§ 2201-2202. See Doc. 6-5. It alleges that after Valdez missed some payments on the Valdez Promissory Note, Bracciale threatened to default him, so NSI terminated the Administrative Services Agreement, Consulting Agreement, and Bracciale's employment with NSI on July 18, 2017. Doc. 6-5 at ¶¶ 47-48. The Valdez Federal Action alleges federal question jurisdiction by asserting that there is a present and actual controversy regarding the Administrative Services Agreement, Security Agreement and the Valdez Promissory Note, id. at ¶¶ 69-71; because they are void as illegal and unenforceable by purportedly violating 13 C.F.R. § 124.106, 38 C.F.R. § 74.4, and by virtue of overpaying and vesting control of NSI to Bracciale as a non-veteran. Id. at ¶ 71.

         c. The State Court Action

         On August 18, 2017, Bracciale and SAC filed the Verified Complaint and Demand for Injunctive Relief (the “Complaint”) against Valdez and NSI alleging breach of a promissory note and breach of fiduciary duty.[1] See Doc. 6-6. On August 21, 2017, Bracciale and SAC filed a Verified Emergency Ex Parte Motion for Temporary Injunction (the “Emergency Motion”) to enjoin Valdez and NSI from conducting business operations and to request that the court temporarily appoint an additional signatory to the NSI bank account. See Doc. 6-9.

         In the Emergency Motion, the Plaintiffs alleged that Valdez locked Bracciale out of NSI's offices and was incurring liabilities on behalf of NSI by secretly relocating its offices, hiring three additional employees, neglecting NSI accounts payable, withdrawing funds from NSI accounts, giving himself a 64% raise, and making misrepresentations about NSI's financial accounts, among other things. Id. at 2.

         On August 23, 2017, the state court entered an ex parte Temporary Restraining Order (the “TRO”) without notice and without bond which took effect immediately. See Doc. 6-11. It restrained and enjoined Valdez, NSI, and all individuals or entities working with them from withdrawing or moving funds, charging credit accounts, entering into agreements, and incurring liabilities, among other things. Doc. 6-11 at 2. Ultimately, it ordered Valdez and NSI not to “[c]omitt[] any acts that would jeopardize the ongoing operations of NSI.” Id. The state court set a hearing date for the TRO on August 28, 2017, at 3:30 p.m. and ordered that it would remain in full force and effect up to and including August 29, 2017, unless modified or extended by order of the state court. Id.

         d. The Notice of Removal

         On August 25, 2017, Valdez and NSI filed a Notice of Removal, which removed the State Court Action to this Court. Doc. 1. In their Notice of Removal, Defendants state that this Court has subject matter jurisdiction over the action because it involves a federal question. Specifically, they assert that because the regulations regarding NSI's certification as a SDVOSB under the Small Business Act (“SBA”) are at issue in the Valdez Federal Action, which is the first-filed case, it implicates a federal question in this case. Defendants allude to the eligibility requirements for the Veteran's Administration (“VA”) SDVOSB contracting program as set forth in 13 C.F.R. §§ 121, 125 and 38 C.F.R. § 74. Id. at ¶¶ 7-8.

         They assert that the SBA and SDVOSB regulations both require that a corporation qualified as a SDVOSB have at least 50% of the aggregate of all stock outstanding and at least fifty-one percent of each class of voting stock outstanding unconditionally owned by one or more service-disabled veterans. Id. at ¶ 9. They also assert that the regulations require that the management and daily business operations for the corporation be controlled by one or more service-disabled veterans. See id. at ¶ 10-12. Defendants argue that because the Complaint's allegations regarding NSI's SDVOSB status include that NSI must be operated by an officially designated service-disabled veteran, and that Valdez fulfills that role for NSI, the documents upon which the Plaintiffs sue are “directly controlled by the limitations and dictates of the SBA and the VA SDVOSB regulations.” Doc. 1 at ¶ 15.


         Removal of cases to federal court is governed by 28 U.S.C. § 1441, which provides in part that “[e]xcept as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction may be removed by the defendant or the defendants to the district court of the United States for the district and division embracing the place where such action is pending.” Id. at § 1441(a). Federal district courts are courts of limited jurisdiction. See Morrison v. Allstate Indem. Co., 228 F.3d 1255, 1260- 61 (11th Cir. 2000). Parties seeking to invoke subject matter jurisdiction must show that the underlying claim is based upon either diversity jurisdiction (cases in which the parties are of diverse citizenship and “the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs”), or the existence of a federal question (i.e., “a civil action arising under the Constitution, laws, or treaties of the United States”). See 28 U.S.C. §§ 1331-1332.

         Removal jurisdiction is construed narrowly with all doubts resolved in favor of remand. See Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 411 (11th Cir. 1999); Pacheco de Perez v. AT & T Co., 139 F.3d 1368, 1373 (11th Cir. 1998). “A removing defendant bears the burden of proving proper federal jurisdiction.” Leonard v. Enter. Rent a Car, 279 F.3d 967, 972 (11th Cir. 2002) (citing Williams v. Best Buy Co., 269 F.3d 1316, 1319-20 (11th Cir. 2001)). In assessing whether removal is proper, the district court considers “only the limited universe of evidence available when the motion to remand is filed-i.e., the notice of removal and accompanying documents. If that evidence is insufficient to establish that removal was proper or that jurisdiction was present, neither the defendants nor the court may speculate in an attempt to make up for the notice's failings.” Lowery v. Ala. Power Co., 483 F.3d 1184, 1213-15 (11th Cir. 2007), cert. denied, 553 U.S. 1080, 128 S.Ct. 2877, 171 L.Ed.2d 812 (2008).

         Where the alleged basis for federal jurisdiction is a federal question under 42 U.S.C. § 1331, as it is in this case, the removing defendant has the burden of demonstrating the action “aris[es] under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. The federal question at issue “must appear on the face of the plaintiff's well-pleaded complaint.” Cmty. State Bank v. Strong, 651 F.3d 1241, 1251 (11th Cir. 2011). “The presence or absence of federal-question jurisdiction is governed by the ‘well-pleaded complaint rule, ' which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). “The rule makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law.” Id.

         There are exceptions to the well-pleaded complaint rule. In general terms, removal is improper if based solely upon a plaintiff's allegation of an anticipated defense or if based upon a defendant's responsive pleading.” Lazuka v. FDIC, 931 F.2d 1530, 1534 (11th Cir. 1991) (citing Merrell Dow Pharmaceuticals Inc. v. Thompson, 478 U.S. 804, 808, 809 n. 6 (1986)). Also “when a federal statute wholly displaces the state-law cause of action through complete pre-emption, ” the state claim can be removed. Beneficial Nat. Bank v. Anderson, 539 U.S. 1, 8 (2003); Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 9-10 (1983). This is so because “[w]hen the federal statute completely pre-empts the state-law cause of action, a claim which comes within the scope of that cause of action, even if pleaded in terms of state law, is in reality based on federal law.” Id. And the “artful-pleading” doctrine provides exceptions to the well-pleaded complaint rule. Under one of these exceptions, even if it appears from the complaint that only state-law causes of action are actually pleaded, a federal question will be inferred where “the vindication of a right under state law necessarily turn[s] on some construction of federal law.” Merrel Dow, 478 U.S. at 808. Under this analysis, “in limited circumstances, federal-question jurisdiction ...

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