Dynasty Management, LLC v. UMG Recordings, Inc. ( 2018 )

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 17-14922
Non-Argument Calendar
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D.C. Docket No. 1:16-cv-20511-KMW
DYNASTY MANAGEMENT, LLC,
Plaintiff - Appellant,
versus
UMG RECORDINGS, INC.,
AUGUST ALSINA,
SHEILA SANDERS,
NNTME MUCO, LLC.,
HENRY LEE,
DONALD ALBRIGHT,
Defendants - Appellees.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(December 21, 2018)
Before MARCUS, WILSON, and DUBINA, Circuit Judges.
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PER CURIAM:
Plaintiff/Appellant Dynasty Management Group, LLC (“Dynasty”) appeals
several orders, including: a Fed. R. Civ. P. 12(b)6 motion to dismiss that the
district court granted for two of the initial 11 defendants, a separate order of
dismissal as a sanction for other defendants, a vacating of a previously-entered
default judgment against those same defendants, and an appeal of the district
court’s finding of diversity jurisdiction. The dispute centers on hip-hop artist and
defendant August Alsinsa’s alleged breach of contract with his former
management company, Dynasty, as well as interference claims against Alsina’s
subsequent managers and co-defendants. The issues on appeal are straightforward,
but several questionable decisions by Dynasty’s counsel in the district court have
led to multiple complaint revisions, a previous appeal to the Eleventh Circuit
resulting in a limited remand, and a lengthy record on appeal. In short, the facts
and the law are simple, but the procedural history is complicated. Nevertheless,
after reading Dynasty’s brief1 and reviewing the record, we affirm the district
court’s orders in their entirety.
1
Appellees did not file an appellate brief.
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I. BACKGROUND
A. Factual history
The following facts come exclusively from the third and final amended
complaint (“FAC”). Alsina is a 26-year-old hip-hop artist currently embroiled in a
dispute with his former manager, Dynasty. Alsina has apparently enjoyed a fairly
rapid rise to stardom. As recently as 2014, he was winning BET Awards and
performing as the opening act for Usher. However, this dispute centers on the
contracts Alsina made during his rise to fame in 2009, when he would have been
around age 16-17.
At the time, he entered into a very broad management agreement with
Dynasty for them to provide his managerial services. In short, Dynasty would
provide exclusive management services and efforts to procure employment for
Alsina, in exchange for 15% of Alsina’s revenue that derived from these efforts.
Shortly thereafter, a Dynasty executive, realizing that Dynasty was outlaying
substantial financial resources to promote Alsina, made an oral contract with
Alsina that gave Dynasty exclusive ownership of creative works that Alsina
created with Dynasty’s money if Alsina breached the original agreement. Pursuant
to that understanding, Dynasty bankrolled Alsina’s production of two singles,
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including one named “That Boy,” 2 in an effort to attract the interest of major
record producers such as Universal or Baluga Heights.
Approximately six weeks after the original agreement, Alsina quit
responding to Dynasty’s communications, but Dynasty continued to work toward
securing Alsina a record deal. Meanwhile, Dynasty alleges, Alsina had entered
into an agreement with Henry Lee and Donald Albright, d/b/a NNTME, to provide
similar managerial services. Shortly thereafter, NNTME secured a $3 million deal
with Universal. Dynasty claims that it contacted Lee and Albright to inform them
that it represented Alsina. Dynasty now sues NNTME, Lee, and Albright for one
count of tortious interference with an advantageous business relationship and one
count of tortious interference with a contractual relationship. Dynasty also sues
Alsina and his mother Sheila Sanders, who guaranteed his contract when Alsina
was a minor, for breach of contract.
B. Procedural history
Although the underlying factual dispute is unremarkable, the case enjoys an
extensive procedural history, as Dynasty’s counsel has amended the complaint four
times, the district court issued sanctions dismissing the case, and the Eleventh
2
The FAC lists the single as “That Boy,” although consultation with YouTube reveals
that the actual title is “I’m That Boy.”
4
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Circuit remanded a jurisdictional question. In one of its final orders in this case,
the district court accurately described the procedural history as “tortured,” even as
the case does not present especially complex facts or legal questions. (DE 128).
Because the district court has already provided a full narrative of the case in the
above-referenced order, we will limit our recitation of the procedural history to the
parts relevant to this appeal.
Early in the litigation, Dynasty obtained a Clerk’s default against defendants
Sanders, Alsina, Albright, and NNTME for failing to respond to allegations in the
amended complaint.3 (DE 27, 34). Several months later, NNTME and Lee filed a
motion to dismiss, claiming they were not served until long after Dynasty had
obtained the Clerk’s default against NNTME. The court deferred ruling on this
motion, and Dynasty eventually filed an unopposed motion for leave to file a
second amended complaint, against these same defendants, out of time. The court
entered an omnibus order granting the motion to dismiss, vacating the Clerk’s
defaults, granted the motion for leave to file the second amended complaint, and
accepted the second amended complaint. It also ordered Dynasty to file a motion
for final default judgment against these defendants or show cause as to why those
3
In the course of this litigation, Dynasty has filed a complaint, an amended complaint, a
second amended complaint, and a third/final amended complaint. The district court refers to the
last one as the final complaint, while Dynasty usually refers to it as the third complaint.
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claims should not be dismissed for failure to prosecute. Pursuant to this order,
NNTME and Lee filed separate motions to dismiss the second amended complaint.
Dynasty did not respond to this, but incorrectly requested an extension to respond
to the now-moot motion to dismiss the amended complaint. With that, the court
granted the defendants’ motion to dismiss the second amended complaint and
dismissed the remaining claims for failure to prosecute. The court then gave
Dynasty two more weeks to file a final amended complaint. (DE 63).
Lee and NNTME filed a motion to dismiss the final amended complaint,
which alleged two counts of tortious interference, and the district court granted this
motion on September 6, 2017 (DE 127). The district court found that Dynasty
failed to plead either of the interference claims with enough specificity to support a
claim for relief. Dynasty’s allegation that it reached out to the defendants to
inform them that Dynasty represented Alsina was insufficient because it did not
establish that the defendants had the requisite knowledge of the existence of the
business relationship or contract, much less that the original agreement between
Dynasty and Alsina was exclusive. More fatally, Dynasty also failed to allege
how the defendants intentionally interfered with the business relationship, or how
the defendants induced Alsina into breaching his contract with Dynasty.
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That same day, the court conducted a sua sponte review of the record, and
disposed of the remaining claims against Alsina, Sanders, and Donald Albright.
(DE 128). (By then, the rest of the original 11 defendants had already been
dismissed for various reasons that are not challenged on appeal). Noting that
Dynasty’s counsel had repeatedly failed to comply with court orders and local
rules throughout the course of the litigation up to that point, the district court found
that Dynasty was simply unable to prosecute this action, and therefore, all
remaining claims should be dismissed as sanctions pursuant to Fed. R. Civ. P.
41(b) and the court’s inherent authority to manage its docket.
This appeal followed, but not before hitting a jurisdictional hurdle: After
Dynasty filed its notice of appeal, the Eleventh Circuit issued a jurisdictional
question to the parties. It noted that the citizenship of some of the defendants had
not been adequately addressed in the pleadings, and requested that the parties
explain how potential jurisdictional defects could be clarified or cured. Dynasty
responded that it had insufficient information to determine the parties’ diversity,
and urged the court to vacate all the relevant orders and remand the case to state
court. Instead, a previous Eleventh Circuit panel remanded the case to the district
court to determine the citizenship of all the parties to the case at the time of
removal. On remand, the district court carefully analyzed the citizenship of all the
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parties using a variety of sources, and found that the parties were completely
diverse. (DE 137). This court issued a notice of probable jurisdiction, and this
appeal ultimately followed.
II. ISSUES
There are four issues on appeal:
(1) Whether the district court erred in granting the motion to
dismiss the plaintiff’s claims of tortious interference against
defendants Lee and NNTME.
(2) Whether the district court erred in dismissing claims against
defendants Alsina, Sanders, and Albright as a sanction.
(3) Whether the district court erred in vacating a prior default
judgment against defendants Alsina, Sanders, and Albright.
(4) Whether the district court erred in determining on limited
remand that diversity jurisdiction existed between the parties at
the time of removal.
III. STANDARDS OF REVIEW
This appeal utilizes several standards of review. First, “[t]o survive a
motion to dismiss, a complaint must contain sufficient factual matter, accepted as
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true, to state a claim for relief that is plausible on its face.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007)). A claim has facial possibility when the plaintiff’s allegations allow a
court to “draw [a] reasonable inference that defendant is liable for [the] misconduct
alleged.” Id. When reviewing a motion to dismiss, a court must construe the
complaint in the light most favorable to the plaintiff and take the factual allegations
therein as true. Brooks v. Blue Cross & Blue Shield of Fla. Inc., 116 F.3d 1364,
1369 (11th Cir. 1997).
A grant of a 12(b)6 motion to dismiss will be reviewed de novo, also abiding
by the district court’s obligation to accept the plaintiff’s factual allegations as true
and construing the complaint in the light most favorable to the plaintiff. Glover v.
Liggett Group, Inc., 459 F.3d 1304, 1308 (11th Cir. 2006).
An involuntary dismissal under Fed. R. Civ. P. 41(b) for want of prosecution
will be reviewed under an abuse-of-discretion standard. A district court cannot
impose a dismissal with prejudice unless there is “clear record of delay or
contumacious conduct by the plaintiff.” Morewitz v. West of Eng. Ship Owners
Mut. Protection and Indem. Ass’n (Luxembourg), 62 F.3d 1356, 1366 (11th Cir.
1995).
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While Dynasty argues that the vacating of the clerk’s defaults (the third
issue on appeal) should be reviewed for abuse of discretion, the trial court actually
dismissed those claims under its powers to dismiss claims for want of prosecution.
Therefore, this issue will also be reviewed under the abuse-of-discretion standard.
Finally, the district court’s order on the jurisdictional questions will be
reviewed de novo, although factual findings will only be reviewed for clear error.
Architectural Ingenieria Siglo XXI, LLC v. Dominican Republic, 788 F.3d 1329,
1337 (11th Cir. 2015).
IV. DISCUSSION
1. Dismissal of tortious interference claims
Dynasty first argues that the district court incorrectly dismissed its two
remaining claims against Lee and NNTME for tortious interference with a business
relationship and tortious interference with a contractual relationship. Those claims
lack merit. As Dynasty itself notes, under the Twombly and Iqbal standard, “a
formulaic recitation of the elements of a cause of action will not do.” (Brief for
Appellant at 11).
A claim for tortious interference with a business relationship contains four
elements: that the plaintiff had a business relationship (not necessarily evidenced
by an enforceable contract), that the defendant had knowledge of this relationship,
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that the defendant intentionally and unjustifiably interfered with the relationship,
and that the plaintiff suffered damages. A claim for tortious interference with a
contractual relationship contains the same elements, except that the plaintiff must
establish the actual existence of a contract, and that the defendant procured the
contract’s breach.
Unfortunately for Dynasty, its final amended complaint and its brief provide
nothing more than a “formulaic recitation,” which the district court already
rejected. Its brief then goes on to simply re-quote everything that Dynasty alleged
in its final amended complaint, without offering any responses to the defects noted
by the district court in its order dismissing these claims.
The district court, on the other hand, found the complaint lacking, noting
that the complaint’s allegations failed to allege with specificity that the defendants
knew of Dynasty’s contractual or business relationship with Alsina. Although the
complaint noted that Dynasty contacted defendants Lee and Albright to inform
them that Alsina was Dynasty’s client, that allegation fails to establish when the
defendants would have learned about the Dynasty-Alsina relationship, and that
their agreement was exclusive. By extension, the complaint could not show how
the defendants interfered with Dynasty’s business relationship or contract.
Without more details about the defendants’ knowledge of the Dynasty-Alsina
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relationship, the complaint also failed to demonstrate how the defendants could
induce Alsina into breaking his agreement, or otherwise interfere with the business
relationship.
Dynasty offers nothing new to challenge the findings of the district court,
instead opting to recite the same allegations it leveled in its complaint that the
district court fully considered. Because Dynasty effectively offers no new
arguments on appeal, and because the district court correctly noted deficiencies
under the Twombly/Iqbal standard, we affirm this aspect of the district court’s
order.
2. Dismissal of claims as sanctions
Dynasty next argues that the trial court erred when it dismissed Dynasty’s
claims against defendants Alsina, Sanders, and Albright as a sanction for
Dynasty’s failure to prosecute. Although this section of the Dynasty’s argument is
not entirely clear, Dynasty’s primary argument appears to be that dismissal as a
sanction, being one of the most severe sanctions available for a trial judge, may
only be utilized where there is “a clear record of delay or willful contempt and
lesser sanctions would be insufficient.” (Brief at 17, citing Kilgo v. Ricks, 983 F.2d
189, 192 (11th Cir. 1993). Citing Eleventh Circuit precedent that dismissal as a
sanction is an appropriate way to punish the litigant, and not just its counsel, for
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the litigant’s shortcomings, Dynasty further argues that the district court failed to
provide an explanation as to why lesser sanctions would be inadequate. (Brief at
18, citing Phipps v. Blakeney, 8 F.3d 788, 791 n. 6 (11th Cir. 1993).
Phipps acknowledges that the district court can make the requisite
explanation for its sanctions either explicitly or implicitly, and that litigants can be
punished for their lawyer’s failings “only as a last resort.” Id. The only fact-
specific defense that Dynasty advances is that, “apparently, Judge Williams
believed the case was not progressing fast enough, even though the docket reveals
an armada of activity.” (Brief for Appellant at 17). The docket does indeed reveal
an armada of activity, but the heart of the issue, which the district judge adequately
explains, is that the activity fails to comply with specific orders and instructions
that the district court was issuing to Dynasty. (DE 128 at 9). The district judge
spends nearly four pages detailing exactly how, over the previous year, Dynasty
had continually failed to respond to court orders and instead repeatedly advanced
arguments that the district court had already rejected. (DE 128 at 9). In deeming
that Dynasty did not prosecute its case, the district court also noted that Dynasty
had not pursued any discovery despite the existence of a Scheduling Order and a
past discovery deadline.
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Dynasty fails to offer any explanation for the defects that the district court
notes, which implicitly – if not explicitly – explains why the district court found
the sanction of dismissal to be appropriate for this case. Dynasty was on notice by
the district court that its “armada of [docket] activity” was failing to advance the
case in the court-prescribed manner, and furthermore, that Dynasty was willfully
failing to obey court orders, especially when the court noted the deficiencies on
numerous occasions throughout the process. Given the district court’s findings,
and Dynasty’s failure to meaningfully rebut them, the sanctions do not rise to an
abuse of discretion, and we affirm this aspect of the district court’s order.
3. Vacating the partial default judgments
Dynasty argues that, in addition to erring when dismissing the case against
Alsina, Sanders, and Albright, the district court further erred by vacating the
defaults that Dynasty had obtained against them. Presenting this argument as the
third issue in Dynasty’s brief is a bit confusing, as the default, and subsequent
vacating thereof, actually occurred before the district court dismissed the claims as
a sanction, discussed above.
Pursuant to Fed. R. Civ. P. 55(a), Dynasty successfully obtained a clerk’s
default against the defendants early on in the litigation. (DE 27, 32). Dynasty
attempts to contest the setting aside of the default under Fed. R. Civ. P. 55(c) by
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arguing that the district court lacked good cause. Upon closer review of the record,
however, this is not the applicable standard. As the district court noted in its
October 5, 2016 order, the district court had previously ordered Dynasty to either
file a motion for final default judgment against these defendants pursuant to Fed.
R. Civ. P. 55(b)(2), or show cause as to why these claims should not be dismissed
for failure to prosecute. (DE 63). Dynasty did neither; therefore, the district court
dismissed those claims. Contrary to Dynasty’s claim, then, this court does not
review the propriety of setting aside the default, which never happened in the
district court, but instead reviews the validity of the dismissal of the claims for
failure to prosecute under the abuse of discretion standard. Consequently,
Dynasty’s legal authorities, which discuss the legal standards when the party in
default is moving for relief under Fed. R. Civ. P. 55(c), are inapposite in this
scenario. (Brief for Appellant at 19, citing Compania Interamericana Export-
Import, S.A. v. Compania Dominicana de Aviacion, 88 F.3d 948, 951 (11th Cir.
1996) and Coon v. Grenier, 867 F.2d 73, 76 (1st Cir. 1989)).
On a motion for reconsideration, Dynasty’s counsel attempted to have the
dismissal reversed on the grounds of excusable neglect, per Fed. R. Civ. P.
60(b)(1). Dynasty’s counsel attempted to explain that he never received the court’s
order to show cause because he did not understand that he needed to click a
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hyperlink on the federal filing system’s website to read the text of the court’s
order. The district judge described this request as “beyond preposterous,” and
promptly denied the motion to reconsider. (DE 73 at 3). More problematically,
however, was the fact that before filing the motion for reconsideration, Dynasty
had already filed the final amended complaint containing the same claims against
Alsina, Sanders, and Albright, and the district court had accepted it. As the district
court later noted in one of its final orders, this procedural posturing effectively
resulted in Dynasty’s motion for reconsideration asking the district court to revisit
moot issues. (DE 128 at 5).
Although the procedural posture of this portion of the appeal is not entirely
clear, since Dynasty’s final amended complaint effectively superseded the
dismissal, this particular issue on appeal is moot, and for the same reasons
discussed above, we conclude that the district court did not abuse its discretion in
dismissing these claims.
4. Existence of diversity jurisdiction
Finally, Dynasty advances two challenges to the district court’s earlier
determination that the parties were completely diverse for purposes of determining
diversity jurisdiction. First, Dynasty argues that UMG’s proffering of residency to
prove diversity jurisdiction errs by elevating residency to the same status as state
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citizenship/domicile. Because UMG’s 4 Notice of Removal claims that all but one
of the parties are “residents” or “incorporated” of/in certain states, Dynasty cannot
be certain that these parties are United States citizens. Second, Dynasty says that
UMG’s exhibits attached to the pleadings are unverified, and therefore cannot be
used to establish diversity.
As a preliminary matter, the only legal authority Dynasty cites in this portion
of its brief is three cases from the Seventh, Eighth, and Eleventh Circuits for the
general precautionary proposition that federal courts should view removal attempts
with a presumption toward remand if jurisdictional matters contain any
uncertainty. Dynasty does not back its substantive arguments with legal authority,
although the arguments remain equally meritless.
As the trial court noted, the Eleventh Circuit has previously stated that
“Citizenship is equivalent to domicile for purposes of diversity jurisdiction.” (DE
137 at 6, citing McCormick v. Aderholdt, 293 F.3d 1254, 1257–58 (11th Cir.
2002)).
4
UMG was one of the initial 11 defendants who initially removed the case to federal
court, although they later settled with Dynasty. On remand, the district court asked them to
defend their removal of the case, and they obliged, even though by then they had settled out of
the case.
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Dynasty’s first argument – that UMG’s averments of residency are
insufficient to establish citizenship – is moot in light of the district court’s earlier
order on remand. (DE 137). Although Dynasty may be correct in noting that
UMG’s removal notice would have been cleaner had it alleged the parties’
citizenship rather than residency, the district court’s order examines record
evidence and explicitly makes findings of citizenship with regards to each party in
its conclusions. The district court found that each party was a citizen of a State
other than Florida, with the exception of two later-dismissed parties who were
British citizens. Thus, the district court cured any potential defects in the pleadings
that may have initially conflated residency and citizenship.
As to Dynasty’s second argument, it fails to cite any case or rule of civil
procedure that requires jurisdictional pleadings to be verified. In fact, in its order,
the trial court cites two cases holding that courts may still examine the entirety of
the records before them in search of any evidence that diversity jurisdiction exists.
(“Where no motion to amend the pleadings is filed, the Court may still examine the
entire record ‘for the purpose of curing a defective averment of citizenship.’”) (DE
137 at 7, citing Sun Printing & Publishing Assoc. v. Edwards, 194 U.S. 377, 382
(1904) and Williams v. Best Co., Inc., 269 F.3d 1316, 1320 (11th Cir. 2001)). This
court does have precedent rejecting jurisdictional allegations when made in the
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form of one self-serving statement in a brief. Travaglio v. American Exp. Co., 735
F.3d 1266, 1269 (11th Cir. 2013) (“[T]o find defective jurisdictional allegations
could be cured based exclusively on a plaintiff’s self-serving argument about her
own citizenship in a brief would be tantamount to permitting her to create
jurisdiction simply by saying so.”). Dynasty, however, fails to cite any Eleventh
Circuit precedent refuting the district court’s basic observation that it has wide-
ranging authority to examine the entire record in search of evidence supporting
diversity jurisdiction.
In this case, the district court found ample evidence of jurisdiction, using the
procedure mentioned above. The district court spent five pages in its order
detailing extensive evidence from a variety of sources, including business records,
addresses listed in court filings, and sworn statements, just to name a few sources,
in concluding that complete diversity existed among the parties. (DE 137 at 8).
Although Dynasty is correct in noting that not every defendant’s domicile is
specified in a verified pleading, Eleventh Circuit precedent is also clear that the
district court did not err in concluding that diversity jurisdiction existed when
ample evidence existed in the record to show that the parties were diverse at the
time of removal. Therefore, we affirm the district court’s order that the parties
were completely diverse for purposes of subject matter jurisdiction.
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V. CONCLUSION
Because Dynasty’s arguments in this appeal are all meritless, we affirm the
district court’s orders.
AFFIRMED.
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