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Management Registry, Inc. v. Cloud Consulting Partners, Inc.

United States District Court, W.D. Kentucky, Louisville Division

September 18, 2019



          Joseph H. McKinley Jr., Senior Judge

         This matter is before the Court on Defendant’s Motion to Dismiss and, in the Alternative, Motion for Transfer of Venue [DN 6] and Plaintiff’s Motion to Remand [DN 7]. Fully briefed, these matters are ripe for decision. For the following reasons, Defendant’s Motion to Transfer Venue is GRANTED and Plaintiff’s Motion to Remand is DENIED.

         I. Background

         Plaintiff Management Registry Inc. (“MRI”) is a business, incorporated in Kentucky with its principal place of business in Louisville, Kentucky, that provides employees for employers in various industries. [DN 1-2 ¶¶ 1–2]. Defendant Cloud Consulting Partners, Inc. (“CCP”) is a business, incorporated in California with its principal place of business in Rancho Mirage, California, that provides human resources management services. [Id. ¶¶ 3–4]. In March 2017, MRI contacted CCP about services that CCP could potentially provide to MRI to increase MRI’s efficiency. [Id. ¶ 5]. At the end of April 2017, MRI and CCP executed a Master Consulting Services Agreement and Statement of Work (the “Agreement”) which was authored by CCP. [Id. ¶¶ 6–7].

         In pertinent part, the Agreement required that “any dispute or claim arising under this Agreement between the Parties shall first be referred to mediation administered by the American Arbitration Association at its Los Angeles, California hearing location before resorting to arbitration.” [Id. ¶ 8; DN 1-2 at 26]. Further, the Agreement stated that it would “in all respects, be interpreted, construed, enforced and governed by and under the laws of the State of California.” [DN 1-2 at 28].

         Under the Agreement, CCP was to provide MRI with remote services. MRI alleges that CCP failed to deliver a laundry list of services that were assured under the Agreement. [Id. ¶ 24]. Further, MRI claims that CCP issued fraudulent invoices requesting payment for services never rendered. [Id. ¶¶ 18, 20, 25]. MRI, under the mistaken belief that the contracted services had been performed, paid CCP-$80, 000 between two invoices. [Id. ¶¶ 20, 25]. On March 8, 2018, MRI contacted CCP directly and notified CCP that substantial services were not performed. [Id. ¶ 22].

         On March 26, 2019, MRI filed a civil against CCP in the Jefferson Circuit Court, Jefferson County, Kentucky. MRI asserts five causes of action against CCP: Conversion (Count I), Breach of the Duty of Loyalty (Count II), Fraud, Deceit, and Misrepresentation (Count III), Unjust Enrichment (Count IV), and Common Law Fraud (Count V). [Id. ¶¶ 30–57]. MRI seeks at least $80, 000 in compensatory damages in addition to other categories of damages. [Id. at 13]. On May 6, 2019, CCP filed a Notice of Removal in the Western District of Kentucky-CCP removed the action based on diversity jurisdiction. [DN 1]. Three days later, CCP filed its Motion to Dismiss and, in the Alternative, Motion for Transfer of Venue. [DN 6]. Thereafter, MRI filed both an opposition to CCP’s Motion as well as a Motion to Remand. [DN 16; DN 7].

         II. Motion to Remand

         MRI filed a Motion to Remand claiming that CCP’s removal was improper. [DN 7]. The Court addresses this Motion first as it concerns the Court’s ability to consider subsequent issues.

         As a preliminary matter, a civil case brought in a state court may be removed by a defendant to federal court if it could have been brought there originally. 28 U.S.C. § 1441(a). In order for a defendant to remove a case to federal court based upon diversity jurisdiction, there must be complete diversity of citizenship both at the time the case is commenced and at the time that the notice of removal is filed. See Jerome–Duncan, Inc. v. Auto–By–Tel L.L.C., 176 F.3d 904, 907 (6th Cir. 1999); 28 U.S.C. § 1332(a). “The party invoking federal court jurisdiction-in this case, [Defendant], as removing party-has the burden of demonstrating by competent proof that the complete-diversity and amount-in-controversy requirements are met.” Cleveland Housing Renewal Project v. Deutsche Bank Trust Co., 621 F.3d 554, 559 (6th Cir. 2010) (citing Hertz Corp. v. Friend, 559 U.S. 77 (2010)).

         MRI does not take issue with the Court’s ability to exercise jurisdiction but instead asserts that CCP failed to timely file the notice for removal. [DN 7; DN 7-1]. As such, MRI argues that remand is appropriate. [Id.]. Under 28 U.S.C. § 1446(b)(1), a defendant shall file a notice of removal within thirty days after receiving the initial pleadings. “In applying 28 U.S.C. § 1446(b) to this case, state law governs the service of process.” Everett v. Am. Life Ins. Co., No. 1:16-CV-00083, 2016 WL 4746214, at *1 (W.D. Ky. Sept. 12, 2016) (citing Murphy Bros., Inc. v. Michetti Pipe Stringing Inc., 526 U.S. 344, 353 (1999)). The crux of the parties’ disagreement hinges on what date service of process was properly executed according to Kentucky law.

         MRI maintains that on March 19, 2019, CCP’s California attorney, Mr. Roman Whittaker, waived formal service upon the corporation by advising that he would serve as the agent for service of process. [DN 7-1 at 6]. Thereafter, on March 26, 2019, MRI filed the Complaint and emailed a copy thereof with the Summons to Mr. Whittaker. [DN 7-3 at 1]. That being the case, MRI argues that CCP’s Notice of Removal, filed May 6, 2019, was outside of the thirty-day timeframe during which a case may be properly removed. [DN 7-1 at 7]. MRI spends much of its Motion arguing that Kentucky law controls effective service of process and that a party may waive service of process by agreement. CCP does not dispute either point. [DN 10 at 5]. However, CCP states that at no point did Mr. Whittaker agree to waive service of process and that MRI has no evidence to the contrary. [DN 10 at 5]. Instead, CCP argues that service of process was not effectuated until either April 16 or April 17, 2019.[1] [Id. at 4]. More pointedly then, the issue is whether CCP agreed to waive service of process in this case.

         MRI failed to provide any evidence of CCP’s waiver of service of process. MRI relies on a single statement from CCP’s California counsel Mr. Whittaker that states: “I may be served as the agent for service of process for [CCP].” [DN 7-2 at 1]. This statement, as is obvious from the text, is nothing more than Mr. Whittaker informing MRI on whom it may serve process. In addition, MRI conveniently leaves out several additional facts which controvert its position. First, MRI takes the position that “[CCP] failed to raise any objection, whatsoever, to receipt of service, nor to the indication contained within the Complaint that [CCP] had, indeed, waived formal service.” [DN 7-1 at 6]. However, the facts prove otherwise. On April 5, MRI stated in an email that Mr. Whittaker had, by his prior statement, agreed to waive service. [DN 10-5 at 2]. Mr. Whittaker thereafter explained what his earlier statement clearly indicated-he served as CCP’s registered agent for service of process and would accept service on its behalf. [Id.]. In no uncertain terms, Mr. Whittaker stated: “I never agreed to accept nor consider your email as proper service.” [Id.]. In response to this clear indication of CCP’s position, MRI thereafter had an additional summons issued that was properly served through Kentucky’s long-arm statute on April 16, 2019.

         Because there is absolutely no evidence of CCP’s agreement to waive service, service was not properly executed on March 26, 2019. Accordingly, CCP’s Notice of Removal, filed on May 6, 2019, was timely. MRI’s Motion to Remand is DENIED.

         III. Motion to Dismiss and, in the Alternative, to Transfer Venue

         CCP moves the Court to dismiss MRI’s claims against it pursuant to Federal Rules of Civil Procedure 12(b)(2), (3), and (6). [DN 6; DN 6-1]. CCP spends nearly eight pages of its memorandum focused on the argument that the parties’ agreement requires arbitration of MRI’s claims against it and thus warrants dismissal. [DN 6-1 at 8–15]. The Court, for reasons that will become clear, first ...

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