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BRIARPATCH LTD., L.P. v. PATE

January 20, 2000

BRIARPATCH LIMITED, L.P. AND GERARD F. RUBIN, PLAINTIFFS,
V.
STEPHEN V. PATE, DEFENDANT.



The opinion of the court was delivered by: Sweet, District Judge.

  OPINION

Plaintiffs Briarpatch Limited L.P. ("Briarpatch" or the "Partnership") and Gerard F. Rubin ("Rubin") (collectively, "Plaintiffs") have moved, pursuant to Rule 19, Fed.R.Civ.P., and 28 U.S.C. § 1447(e), to amend their complaint, add necessary parties, and remand the action to the Supreme Court of the State of New York, New York County. Defendant Stephen V. Pate ("Pate") has moved, pursuant to Fed. R.Civ.P. 12(b)(2), to dismiss the complaint for lack of personal jurisdiction. For the reasons set forth below, Plaintiffs' motion will be granted. Because the action will be remanded for lack of subject matter jurisdiction, Pate's motion to dismiss will not be addressed.*fn1

The Parties

Plaintiff Briarpatch is a limited partnership.

Plaintiff Rubin is the sole limited and winding up partner of Briarpatch.

Defendant Pate is a Texas resident and citizen.

Background and Prior Proceedings

A "briar" (or "brier") is "a plant . . . with a woody thorny or prickly stem" or "a mass or twig of these." Webster's New Collegiate Dictionary 138 (1977). A "briarpatch" is thus a kind of thorny, tangled thicket, an apt metaphor for the jurisdictional thicket the instant motion requires this Court to chop through.*fn2

Briarpatch was formed on January 1, 1994 between Rubin, as sole limited partner, and five general partners — Briarpatch Construction Corp., Briarpatch Film Corp., Briarpatch Releasing Corp., Briarpatch Theater Corp., and Sansho Company, Inc. (the "General Partners") — for the primary purpose of developing motion pictures or stage plays from certain literary properties. The General Partners were incorporated under New York law, each had its principal place of business in New York, and each at all times was owned and controlled by Robert Geisler ("Geisler") and John Roberdeau ("Roberdeau"), who were at all times the directors and key officers of the General Partners. Each of the General Partners was dissolved by proclamation of the Secretary of State of New York at various dates between June 24, 1992 and September 24, 1997.

In December 1998, Plaintiffs filed suit in New York Supreme Court against Geisler and Roberdeau (the "1998 New York Action"), alleging causes of action for fraud and fraudulent concealment, breach of fiduciary duty, conversion and trover, unjust enrichment, and an accounting with respect to the misappropriation and diversion by Geisler and Roberdeau of rights, properties, receipts, remuneration, and opportunities belonging to the Partnership.

On March 1, 1999, Judge Gammerman issued a preliminary injunction (the "March 1, 1999 Injunction") in favor of Plaintiffs in the 1998 New York Action. The injunction found that the Partnership's projects included, among other things, "The Thin Red Line," "The White Hotel," "The English Speaker," and "Sansho the Bailiff." Geisler and Roberdeau were enjoined from transferring, pledging, hypothecating, or otherwise disposing of any rights to or in the projects. A copy of the transcript of the March 1, 1999 hearing was filed by Plaintiffs with and recorded in the United States Copyright Office on March 19, 1999 at volume 3422, pages 454-55.

On July 12, 1999, following a five day trial, Judge Tompkins issued a decision (the "July 12 New York State Court Decision") finding for Plaintiffs on their fraud and fraudulent concealment, breach of fiduciary duty, and conversion and misappropriation claims. Judge Tompkins also found that as of January 1, 1994, the Partnership became the beneficial owner of all rights to "The Thin Red Line," "The White Hotel," "The English Speaker," "Sansho the Bailiff," "Secret Friends," and "Sunday in the Park with George," (the "Projects") that all rights acquired thereafter with respect to the Projects also belonged to the Partnership, and that those rights had vested.

Meanwhile, in August 1997, Pate brought an action in Texas state court (the "Texas Action") against Geisler Roberdeau, Inc., Briarpatch Film Corp., Geisler, and Roberdeau (the "Texas Defendants"). That action arose out of investments made by Pate beginning in 1995 to entities controlled by Geisler and Roberdeau involved in motion picture production. Pate ultimately invested $748,281.81 in these projects. The complaint set forth a two-year scheme by Geisler and Roberdeau to induce Pate to advance these sums for the production of "The Thin Red Line," a feature film. The complaint further alleged that Geisler and Roberdeau misled Pate about the status of the project, then transferred the rights to another entity. Pate brought claims for fraud, breach of contract, unjust enrichment, and other causes of action. The Texas Defendants removed the case to the United States District Court for the Southern District of Texas.

In late 1997, the parties in the Texas Action entered into a settlement agreement, the terms of which included provision of a promissory note by the Texas Defendants in the amount of $1,000,000 (the "Promissory Note"), secured by rights to two film projects, "The English Speaker" and "The White Hotel." The Texas Defendants represented that they had authority to grant a security interest in the collateral to Pate. Pate subsequently filed UCC financing statements with the New York Department of State and the United States Copyright Office in November 1997 recording his security interest in the properties.

The Texas Defendants later breached their obligations under the Promissory Note, which the parties resolved by entering into a consent judgment in the Texas Action in the principal amount of the Note, $1,000,000, which the court entered on July 17, 1999. Pate then sought to realize on the security for the Note, and certain other properties owned by the defendants in the Texas Action. On July 20, 1999, Pate brought an application in Texas federal court seeking a "turnover" of the Texas Defendants' non-exempt property, or, in the alternative, for a judicial foreclosure of Pate's collateral (the "Texas Application").

On July 27, 1999, Plaintiffs filed papers in the Texas Action opposing Pate's requested relief, contending that Pate's security interest was invalid and that plaintiff (in this action) Briarpatch had superior rights to the properties at issue. The Texas district court judge presiding over the action scheduled a hearing on the application for September 17, 1999, expressing a willingness to decide the question of priority. Plaintiffs were unwilling to consent to the Texas court's jurisdiction, however.

Meanwhile, Plaintiffs had filed this action in New York State Supreme Court, New York County, on July 9, 1999, seeking a declaration that Pate did not have any valid interest in the properties at issue in the Texas Action, because the Texas Defendants were not authorized to grant any such interest. However, the limited partnership agreement of Briarpatch Ltd., L.P. gave the General Partners (who were among, or controlled by, the Texas Defendants) the "unrestricted right to sell or assign, and to pledge, mortgage or otherwise hypothecate, any Project, either in whole or in part, without obtaining the consent of Rubin." (Goldin Aff. Exh. 1 Attach. 1 ¶¶ 3.1-3.2.) Rubin also acknowledged in the agreement that "he does not and shall not have any right, title or interest of any kind whatsoever in or to any Project (including, without limitation, any copyrights or any income derived therefrom)" and agreed that the general partners of the partnership could register its copyrights in "such party as Briarpatch in its sole business discretion may determine proper." (Id. ¶¶ 4.1-4.2.)

The Briarpatch Ltd., L.P. partnership agreement also contained a broad arbitration clause, under which "[a]ny controversy, claim, dispute or question arising out of, or in connection with, or in relation to, the validity, interpretation, performance or nonperformance of this Agreement, or any breach thereof, shall be determined and settled by arbitration in New York before a single arbitrator." (Id. ¶ 16.)

On July 22, 1999, Plaintiffs filed an amended complaint in this action, adding citations to the July 12 New York State Court Decision.

On August 16, 1999, Pate removed this action to this Court on the basis of diversity of citizenship.

On August 28, 1999, Plaintiffs filed the instant motion, seeking to add six corporations as defendants: the five General Partners, and Geisler Roberdeau, Inc. (the "New Defendants"). Geisler Roberdeau, Inc., is, like each of the ...


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