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STI Oilfield Services, Inc. v. Access Midstream Partners, L.P.

United States District Court, M.D. Pennsylvania

June 21, 2018

STI OILFIELD SERVICES, INC., Plaintiff,
v.
ACCESS MIDSTREAM PARTNERS, LP, et al., Defendants.

          MEMORANDUM OPINION

          Robert D. Mariani United States District Judge.

         I. Introduction & Procedural History

         This matter concerns a dispute over a series of contracts for the construction of natural gas pipelines in Northeast Pennsylvania. Plaintiff, STI Oilfield Services, Inc., initiated this diversity action on December 4, 2013, with the filing of a Complaint. (Doc. 1). The Complaint alleged that Defendants, Access Midstream Partners, LP., Appalachia Midstream Services, LLC, Chesapeake Energy Corporation, and Chesapeake Operating, Inc., were liable to Plaintiff under a variety of theories including breach of contract, unjust enrichment, quantum meruit, promissory estoppel, fraud, and the Pennsylvania Contractor and Subcontractor Payment Act ("CASPA"), 73 P.S. § 501 et seq. (Doc. 1). After a Motion to Dismiss and two Motions for Summary Judgment were resolved, the following claims remained pending: (1) a breach of contract claim against Chesapeake Energy Corporation and Chesapeake Operating (collectively the "Chesapeake Defendants"), (Count I); (2) a claim under the CASPA against the Chesapeake Defendants, (Count V); (3) a breach of contract claim against Access Midstream Partners and Appalachia Midstream Services (collectively the "Access Defendants"), (Count VI); and (4) a claim under the CASPA against the Access Defendants, (Count X). (Docs. 1, 50, 125, 127).

         A jury trial was scheduled to commence on October 30, 2017, to resolve the remaining claims. (Doc. 132). Then, on July 19, 2017, more than three and a half years after this matter was commenced, Defendants filed a Motion to Dismiss for Lack of Subject Matter Jurisdiction. (Doc. 135). On September 1, 2017, after partially briefing the Motion, the case was stayed to allow the parties to engage in private mediation. (Docs. 145, 146). After mediation proved unsuccessful, the parties finished briefing the Motion to Dismiss. This Motion is presently pending before the Court and is now ripe for resolution. For the reasons that follow, the Court will grant in part and deny in part Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction and, as a result, dismiss this action in its entirety.

         II. Background

         Through the present Motion, Defendants primarily contend that there is not complete diversity between Plaintiff and the Access Defendants. Defendants assert that Access Midstream Partners is a publicly-traded master limited partnership. Master limited partnerships "are limited partnerships or limited liability companies whose ownership interests, called 'common units, ' are publicly traded." Grynberg v. Kinder Morgan Energy Partners, LP., 805 F.3d 901, 903-04 (10th Cir. 2015). "[T]he citizenship of partnerships and other unincorporated associations is determined by the citizenship of its partners or members." Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 420 (3d Cir. 2010); see also Grynberg, 805 F.3d at 906 (holding that the citizenship of a master limited partnership is determined by the citizenship of all unitholders).

         According to Defendants, Access Midstream Partners has 187, 000, 000 outstanding common units, (Doc. 151 at 6), and 40% of its limited partnership is held by the public, (Doc. 135-1 at ¶ 4). Defendants also assert that 4, 600 unit holders "used a State of Texas business or residential address." (Id. at ¶ 5). From this, Defendants argue that Access Midstream Partners is a citizen of Texas for diversity jurisdiction purposes and thus is not diverse from Plaintiff, who is also a citizen of Texas. (Doc. 140 at 5-8).

         The Motion further contends that Appalachia Midstream Services, LLC, is also a citizen of Texas for diversity citizenship purposes. (Doc. 140 at 8-9). As the Third Circuit has explained,

the citizenship of an LLC is determined by the citizenship of its members. And as with partnerships, where an LLC has, as one of its members, another LLC, "the citizenship of unincorporated associations must be traced through however many layers of partners or members there may be" to determine the citizenship of the LLC.

Zambelli Fireworks Mfg. Co., 592 F.3d at 420 (quoting Hart v. Terminex Int'l, 336 F.3d 541, 543 (7th Cir. 2003)). Defendants assert that Appalachia Midstream Services has only one member, Access MLP Operating, L.L.C., which itself also has only one member, Access Midstream Partners. Thus, Defendants argued that Appalachia Midstream Services has the same citizenship as Access Midstream Partners and thus is not diverse from Plaintiff. (Doc. 140 at 8-9).

         In its opposition, Plaintiff did not dispute the fact that it is not diverse from the Access Defendants. (Doc. 144 at 2). Nevertheless, relying on Kaplan v. Industrial Risk Insurers, 86 F.R.D. 484 (E.D. Pa. 1980), Plaintiff proposed that the Court allow it to (1) dismiss the Access Defendants and (2) proceed only against all of Access Midstream Partners' diverse limited partners. (Doc. 144 at 5-10). On May 15, 2018, after holding a conference call with the parties, this Court set a deadline for Plaintiff to file a Motion for Leave to Amend its Complaint. (Doc. 159). Then, in a letter dated June 11, 2018, Plaintiff notified the Court that, due to an unforeseen legal issue, Plaintiff would not seek to amend its Complaint and was therefore abandoning its arguments based on Kaplan v. Industrial Risk Insurers. (Doc. 162).

         III. Discussion

         Pursuant to 28 U.S.C. § 1332, district courts have subject matter jurisdiction over "all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between ... citizens of different States." 28 U.S.C. § 1332(a)(1). "This statute and its predecessors have consistently been held to require complete diversity of citizenship. That is, diversity jurisdiction does not exist unless each defendant is a citizen of a different State from each plaintiff." Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978) (emphasis in original) (footnote omitted). As it is undisputed that Plaintiff is not diverse from the Access Defendants, the Court lacks subject matter jurisdiction over this action. With that issue resolved, the Court turns to the two secondary matters raised in Defendants' Motion to Dismiss: (1) whether the Access Defendants are dispensable parties such that the claims against the Chesapeake Defendants should proceed in federal court; and (2) whether this Court should vacate all prior orders and judgments entered in this action. The Court will address each of these issues in turn.

         A. Dispensability of the Access Defendants

         Although the presence of the Access Defendants destroys diversity and divests this Court of subject matter jurisdiction, it does not necessarily follow that the entire case must be dismissed. Under Federal Rule of Civil Procedure 21, "the court may at any time, on just terms, add or drop a party." Although this rule is generally concerned with misjoinder of parties, "it is well settled that Rule 21 invests district courts with authority to allow a dispensable nondiverse party to be dropped at any time, even after judgment has been rendered." Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 832, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989); see also CGB Occupational Therapy, Inc. v. RHA Health Servs. Inc., 357 F.3d 375, 382 n.6 (3d Cir. 2004) ("[l]t is well established that courts, both district and circuit alike, have the power under Fed.R.Civ.P. 21 to dismiss dispensable parties to the suit in order to preserve diversity"). "A district court has broad discretion in deciding whether to sever a party pursuant to Federal Rule of Civil Procedure 21." Slater v. Hoffman-La Roche Inc., 771 F.Supp.2d 524, 529 (E.D. Pa. 2011).

         Defendants argue that the Access Defendants are dispensable parties, and, consequently, the Court should dismiss the claims against the Access Defendants but proceed with the claims against the Chesapeake Defendants. (Doc. 140 at 10-12). Defendants primarily rely on the fact that Plaintiffs claims against the Chesapeake Defendants are separate and distinct from Plaintiffs claims against the Access Defendants. That is, the claims against the Chesapeake Defendants involve a specific set of contracts- the "Rome" and "Oilcan" contracts-and Plaintiff has not alleged that the Access Defendants were involved with those contracts.

         Plaintiff, on the other hand, argues that the Access Defendants are indispensable parties. (Doc. 144 at 10-13). Plaintiff notes that many of the witnesses in this case have information concerning the claims against both the Chesapeake Defendants and the Access Defendants. Plaintiff also argues that at times it is unclear whether a particular individual worked for the Chesapeake Defendants or the Access Defendants. Further, Plaintiff contends that it will suffer ...


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