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Henley Mining, Inc. v. Parton

United States District Court, E.D. Kentucky, Southern Division, London

March 5, 2019

HENLY MINING, INC., Plaintiffs,
v.
DAVID E. PARTON, Defendant.

          MEMORANDUM OPINION & ORDER

          GREGORY F.VAN TATENHOVE UNITED STATES DISTRICT JUDGE

         Plaintiff Henley Mining, Inc., seeks reconsideration of this Court's order invoking Burford abstention in this matter. [R. 11.] Henley Mining asks that this Court amend its previous Order, withdraw abstention, reaffirm the Court's jurisdiction, order Defendant David E. Parton to file his responsive pleading, and restore this action to the active docket. Id. In considering the Motion to Dismiss [R. 7], abstention was raised initially by the Court and not by the parties. Now, with the benefit of full briefing on the issue, and for the reasons stated below, Plaintiff's motion is GRANTED.

         I

         Defendant David Parton and his two brothers were equal owners and directors in three corporations: Parton Bros. Contracting, Inc.; Bud Equipment, Inc.; and Pine Mtn. Security, Inc. [R. 7-1 at 2.] On or around March 2015, David Parton and his brothers closed and consolidated their businesses into Henley Mining, Inc. [R. 7-1 at 2.] The Parton brothers partially dissolved certain corporations by distributing, “a substantial portion of the Corporations' cash and distribution in-kind of certain assets to Defendant and the Brothers.” Id. Mr. Parton strongly disagreed with merging the corporations into Henley Mining and registered his dissenting vote at a Special Shareholders Meeting in October 2016. Id. After the merger, the Corporations paid Mr. Parton what they considered an accurate amount of money pursuant to the Dissenters' Rights Statute, but Mr. Parton challenged the amount owed to him. Id.

         Henley Mining, Inc. filed a Complaint in diversity in this Court seeking a determination of fair value pursuant to Kentucky's Dissenters' Rights Statutes. See Ky. Rev. Stat. Ann. §271B.13-010. In May, 2017, Mr. Parton filed a motion to dismiss the case on the grounds that this Court lacked subject matter jurisdiction. [R. 7.] After considering the motion, applicable law, and the arguments of the parties, the Court elected to abstain from hearing the controversy, invoking the doctrine of Burford abstention. [R. 10.] Now, Henley Mining has moved this Court to reconsider its previous ruling, on the grounds that the Court made a clear error of law. Id.

         II

         A

         A motion to alter or amend a judgment under Rule 59(e) “may be granted if there was ‘(1) a clear error of law; (2) newly discovered evidence; (3) an intervening change in controlling law; or (4) a need to prevent manifest injustice.'” Culver v. CCL Label, Inc., 455 Fed.Appx. 625, 631 (6th Cir. 2012) (quoting Intera Corp. v. Henderson, 428 F.3d 605, 620 (6th Cir. 2005)). The purpose of Rule 59(e) is to allow the district court “to correct its own errors, sparing the parties and appellate courts the burden of unnecessary appellate proceedings.” Howard v. United States, 533 F.3d 472, 475 (6th Cir. 2008) (internal quotation marks omitted). A Rule 59(e) motion, however, “is not an opportunity to re-argue a case, ” and “does not permit parties to reargue a case.” Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 374 (6th Cir. 1998) (citing FDIC v. World Univ. Inc., 978 F.2d 10, 16 (1st Cir. 1992)). Motions to alter or amend a judgment pursuant to Rule 59(e) “are extraordinary and sparingly granted.” Marshall v. Johnson, 2007 WL 1175046, *2 (W.D. Ky. April 19, 2007). Whether to grant or deny a Rule 59(e) motion is within the discretion of the trial court. GenCorp., Inc. v. Am. Int'l Underwriters, 178 F.3d 804, 832 (6th Cir.1999); Spigelman v. Samuels, 2013 WL 1898268, at *2 (E.D. Ky. May 7, 2013).

         B

         Abstention is likewise “extraordinary.” As this Court has noted before, based on principals of federalism and comity, “[a]bstention is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it.” Caudill v. Eubanks Farms, Inc., 301 F.3d 658, 660 (6th Cir. 2002) (internal quotations omitted) (quoting Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 813 (1976)). To abstain under Burford, specifically, this Court must answer two questions in the affirmative. First, does “a case present[] difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar” and second, would the “exercise of federal review of the question in a case and in similar cases [] be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern”? Caudill v. Eubanks Farms, Inc., 301 F.3d 658, 660 (6th Cir. 2002) (internal quotations omitted).

         But in addition to simply answering those questions, the Court must also “balance[] the strong federal interest in having certain classes of cases . . . adjudicated in federal court” against the interests of the State. Cleveland Hous. Renewal Project v. Deutsche Bank Trust Co., et al., 621 F.3d 554, 562 (6th Cir. 2010) (quoting Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 728 (1996)). Diversity jurisdiction, in and of itself, represents a “strong” federal interest that must be weighed against a state's interests. See Id. at 564. “The state interests that may be deemed to outweigh the federal interest must stem from the need to maintain uniformity in the treatment of an essentially local problem, and the need to retain local control over difficult questions of state law bearing on policy problems of substantial public import.” Id. (citing Quackenbush, 517 U.S. at 728). Very rarely does the balance favor abstention. Id.

         In its previous Order invoking Burford abstention, this Court relied heavily on Caudill v. Eubanks Farms to the exclusion of other Sixth Circuit precedent. [See R. 10.] The Court invoked Burford abstention sua sponte and without briefing, and the balancing test articulated in Cleveland Housing was not before the Court. This, Henley Mining contends, amounts to a clear error of law under Rule 59(e). Upon review of the pleadings and applicable law, and with the aid of the briefing [R. 11; R. 12; R. 13] by the parties, this Court agrees that the teaching of the Sixth Circuit cases counsels against abstention.

         Previously, this Court answered only the two questions posed by Caudill before deciding to abstain under Burford; namely does “[the] case present[] difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar” and second, would the “exercise of federal review of the question in a case and in similar cases [] be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern”? Caudill v. Eubanks Farms, Inc., 301 F.3d 658, 660 (6th Cir. 2002) (internal quotations omitted). But having answered those questions in the affirmative, the Court then failed to undergo the necessary balancing test outlined in later case Cleveland Housing v. Deutsche Bank. See Cleveland Hous. Renewal Project v. Deutsche Bank Trust Co., 621 F.3d 554 (6th Cir. 2010). The “clear error of law” asserted by Henley Mining is not that the Court weighed federal and state interests improperly, but that it failed to weigh them at all.

         Had the Court weighed those interests, this Court would have reached a different conclusion, finding that the interests of the federal courts outweigh those of the state of Kentucky. The federal interest at stake is an interest in adjudicating disputes brought before the Court on the basis of diversity jurisdiction. The Sixth Circuit has held that this interest, by itself, amounts to a strong federal interest that, when weighed against the relevant state interest, results in a balance that only rarely favors abstention. See Cleveland Housing, 621 F.3d at 562. As previously noted, “the state interests that may be deemed to outweigh the federal interests must stem from the need to maintain uniformity in the treatment of an essentially local problem, and the need to retain local control over difficult questions of state law bearing on policy problems ...


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