United States District Court, D. Arizona
Douglas L. Rayes United States District Judge
have filed a motion to remand, (Doc. 10), a motion to compel
arbitration, (Doc. 13), a request for judicial notice, (Doc.
15), and two motions to expedite, (Docs. 26, 51). All the
motions are fully briefed, and no party has requested
argument. For the reasons stated below, Plaintiffs'
motion to remand is denied, Plaintiffs' motion to compel
arbitration is denied, Plaintiffs' request for judicial
notice is granted in part, and Plaintiffs' motions to
expedite are denied.
lawsuit arises out of the parties' joint management of a
marijuana dispensary. On March 30, 2016, Defendants Rudy
Alarcon and Kristen Abelon met with Plaintiff Green Light
Holdings, LLC (Green Light) to discuss forming Dream Team
Holdings, LLC (Dream Team) to further their joint venture.
The parties executed a Term Sheet, which “set[ ] forth
the terms and conditions of an Operating Agreement of Dream
Team Holdings, LLC[.]” (Doc. 18-1 at 2.) The Term Sheet
noted that the “effective date of the Operating
Agreement . . . shall be the date upon which the
Company's Articles of Organization are filed with the
Arizona Corporation Commission.” (Id.) The
parties agreed that the Term Sheet “represents a
legally binding agreement between the parties hereto
regarding the principle terms of the Members' agreement
to operate the Company, which will be evidenced by a formal
Operating Agreement . . . to be effective upon [the filing of
the Articles of Organization for Dream Team].”
(Id. at 14.) The Term Sheet further provided that
“if an Operating Agreement is not entered into between
the parties, this Term Sheet shall continue in full force and
further negotiations, the parties drafted a Memorandum of
Understanding (MOU), which set forth the steps necessary to
finalize the joint venture. (Id. at 20.) It
explicitly stated: “No Joint Venture or Partnership
Formed.” (Id.) It also contemplated formation
of Dream Team, noting that “Upon execution of the MOU,
the Parties shall form Dream Team Holdings, LLC . . . by
filing the Articles of Organization[.]” (Id.)
Once the MOU is executed, the parties would then prepare and
execute an Operating Agreement, “which shall
substantially reflect the business terms set forth on the . .
. Term Sheet[.]” (Id. at 21.) The parties
never executed the MOU, no Articles of Organization were
filed, and negotiations eventually halted.
April 29, 2016, Green Light brought suit against Defendants
alleging, inter alia, breach of contract and fraud.
The lawsuit named Dream Team as a Plaintiff even though no
articles of organization had been filed with the Arizona
Corporation Commission. On May 9, 2016, Defendants Rudy
Alarcon, Kristen Abelon, and Energy Clinics, LLC (Energy
Clinics) removed the case to federal court on the basis of
diversity jurisdiction. Defendants argue that Dream Team did
not exist at the time Plaintiffs filed their complaint and
assert that Dream Team was created solely for the purpose of
destroying diversity jurisdiction. Defendants also assert
that after negotiations fell through, the parties never
agreed to form Dream Team. On May 11, 2016, Dream Team's
articles of organization were filed by Plaintiffs'
counsel naming Alarcon as a member. On May 27, 2016, Alarcon
filed suit in Maricopa County Superior Court to dissolve
Dream Team, arguing that he never consented to becoming a
member and that Dream Team was fraudulently organized. On May
31, 2016, Plaintiffs moved to compel arbitration and stay the
case, citing an arbitration provision in the Term Sheet.
FOR JUDICIAL NOTICE
request that the Court take judicial notice of Alarcon's
state court complaint seeking to dissolve Dream Team. (Doc.
15.) Plaintiffs argue that the state court complaint alleges
that Dream Team is an Arizona resident, and thus “there
was no evidence or factual basis to justify removal
jurisdiction based on diversity of citizenship” in the
instant case. (Id. at 3.) Plaintiffs claim that this
constitutes Defendants' admission that remand is
appropriate. Plaintiffs also seek sanctions for failing to
inform the Court “that they are no longer contesting
that federal diversity jurisdiction exists.”
(Id. at 5.)
court may judicially notice a fact that is not subject to
reasonable dispute because it . . . can be accurately and
readily determined from sources whose accuracy cannot
reasonably be questioned.” Fed.R.Evid. 201(b)(2).
Courts routinely take judicial notice of proceedings in other
courts “if those proceedings have a direct relation to
matters at issue.” United States ex rel. Robinson
Racheria Citizens Council v. Borneo, Inc., 971
F.2d 244, 248 (9th Cir. 1992) (internal quotation marks
request for judicial notice is granted in part. The state
court proceedings relating to the dissolution of Dream Team
are relevant to this case. As such, the Court will take
judicial notice of Alarcon's state court complaint.
Court will not, however, issue sanctions against Defendants.
Contrary to Plaintiffs' argument, the fact that Alarcon
alleges that Dream Team is a resident of Arizona in the state
court complaint does not undermine Defendants' basis for
removal in the instant case. Defendants do not dispute Dream
Team's citizenship. Instead, they argue that Dream Team
should not be considered for purposes of diversity
jurisdiction because it was not formed at the time of the
complaint and Defendants did not consent to its formation.
Plaintiffs' argument misses the point, and the request
for sanctions is inappropriate.
argue this case must be remanded to Maricopa County Superior
Court because complete diversity does not exist between the
parties. They assert that although Dream Team was not yet
organized at the time the complaint was filed, this defect
was cured by filing the articles of organization two weeks
later. Even if it was not cured, Plaintiffs argue that Dream
Team should be treated as an unincorporated business
association for purposes of diversity jurisdiction.
Alternatively, Plaintiffs argue that even if Dream Team is
not considered for purposes of diversity, complete diversity
still does not exist between the parties.