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Information Dock Analytics LLC v. Coughlin

United States District Court, D. New Mexico

March 22, 2019

INFORMATION DOCK ANALYTICS LLC, a Delaware Series Limited Liability Company; INFORMATION DOCK ANALYTICS LLC PROTECTED SERIES SHORT; INFORMATION DOCK ANALYTICS LLC PROTECTED SERIES MID; INFORMATION DOCK ANALYTICS LLC PROTECTED SERIES LONG; INFORMATION DOCK ANALYTICS LLC PROTECTED SERIES ISLAND; and INFORMATION DOCK ANALYTICS LLC PROTECTED SERIES MUTLI, Plaintiffs,
v.
MICHAEL COUGHLIN and M. KAY COUGHLIN, Defendants.

          MEMORANDUM OPINION AND ORDER

         This matter comes before the Court on Defendants Michael and M. Kay Coughlin's (the Coughlins) Motion to Dismiss Plaintiffs' Complaint, filed May 29, 2018. (Doc. 17). The Coughlins move to dismiss this case for lack of subject matter jurisdiction pursuant to the abstention doctrine announced in Younger v. Harris, 401 U.S. 37 (1971). (Id.) Plaintiffs Information Dock Analytics LLC (IDA), Information Dock Analytics LLC Protected Series Short (Series Short), Information Dock Analytics LLC Protected Series Mid (Series Mid), Information Dock Analytics LLC Protected Series Long (Series Long), Information Dock Analytics LLC Protected Series Island (Series Island), and Information Dock Analytics LLC Protected Series Multi (Series Multi) (collectively, Plaintiff-LLCs) filed their Response on June 12, 2018. (Doc. 20). The Coughlins filed their Reply on June 26, 2018. (Doc. 22). Having considered the briefing, the record, and the applicable law, the Court grants in part the Coughlins' Motion to Dismiss Plaintiffs' Complaint (Doc. 17).

         I. Standard of Review

         Motions to dismiss for lack of subject matter jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(1), generally take two forms: facial attacks on the complaint's allegations as to subject matter jurisdiction, which question the sufficiency of the complaint; and factual attacks on subject matter jurisdiction, which challenge the facts upon which subject matter jurisdiction depends. Holt v. United States, 46 F.3d 1000, 1002-03 (10th Cir. 1995) (explaining two types of challenges to subject matter jurisdiction). Younger abstention is jurisdictional in nature. Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 100 n.3 (1998). Motions to dismiss predicated on abstention doctrines constitute factual attacks on subject matter jurisdiction. Hill v. Whetsel, 2007 WL 963216, at *1 n.2 (W.D. Okla. Mar. 28, 2007); Cole v. Olympus Health Care Ctr., Inc., 2004 WL 838043, at *4 (D. Conn. Mar. 8, 2004). “When reviewing a factual attack on subject matter jurisdiction, a district court may not presume the truthfulness of the complaint's factual allegations[, and] has wide discretion to allow . . . other documents . . . to resolve disputed jurisdictional facts . . . .” Holt, 46 F.3d at 1003 (internal citations omitted).

         II. Background and Procedural History [1]

         Nonparties Al Luckett (Luckett Sr.) and Christina McCarthy (McCarthy), husband and wife, collect art and artifacts. They have purportedly amassed over 3, 000 items, now allegedly owned by the Plaintiff-LLCs. This federal lawsuit turns on ownership of the art and artifacts. McCarthy owns a 10% membership interest in each of the Plaintiff-LLCs, while the couple's son, Jonathon Luckett (Luckett Jr.), owns the remaining 90% membership interest in the Plaintiff-LLCs. Luckett Sr., allegedly, does not own any membership interest in the Plaintiff-LLCs.

         A. Business Entities

         The Plaintiff-LLCs are neither the first nor the only business entities owned, operated, or controlled by Luckett Sr. and McCarthy. In 1997, Luckett Sr. and McCarthy formed Cultural Assets II, LLC (CA2) to hold the art and artifacts they had acquired. Luckett Sr. and McCarthy each owned a 50% membership interest in CA2. In 2001, Luckett Sr. transferred his interest in CA2 to McCarthy, giving her sole membership in the company. McCarthy transferred a 1% membership interest to Luckett Jr. in June 2004. Luckett Sr. continued to serve as an operations manager for CA2.

         McCarthy, Luckett Jr., and longtime family accountant Brian Rowe (Rowe) formed Deadend Investments Limited Partnership (Deadend), a Nevada limited partnership, in December 2004. McCarthy served as the majority partner, holding an 89.1% share, while Luckett Jr. held a 9.9% interest, and Rowe held the remaining 1% interest. At the same time, McCarthy and Luckett Jr. transferred all of CA2's assets to Deadend.

         Things got more complicated in November 2007. McCarthy, Luckett Jr., and Rowe formed Part 1 ST LLC, Part 1 MT LLC, HART LT LLC, and Multi Ethnic LT LLC (all together, Collection LLCS) as Nevada limited liability companies. McCarthy held a 71.1% membership interest in all of the entities, while Rowe and Luckett Jr. held 21% and 7.9% interests, respectively. The members also formed other entities to “facilitate new market research, [perform] intellectual property services associated with the collection, and selling agent services.” (Doc. 1) at ¶ 19.

         Ownership of the Collection LLCs shuffled in December 2012, resulting in Luckett Jr. holding an 80% interest, Rowe holding a 10% interest, and McCarthy holding a 10% interest. By April 2014, the Collection LLCs moved from Nevada to New Mexico, and Rowe surrendered his interest, resulting in Luckett Jr. holding an 89% interest in the Collection LLCs while McCarthy held the remaining 11% interest in the Collection LLCs.

         Luckett Jr. formed the Plaintiff-LLCs in Delaware on October 13, 2017. The Collection LLCs merged into the Plaintiff-LLCs as follows: Part 1 ST LLC merged into Series Short; Part 1 MT LLC merged into Series Mid; Part 1 LT LLC merged into Series Long; HART LT LLC merged into Series Island; and Multi Ethnic LT LLC merged into Series Multi.

         B. The Lawsuits

         This federal lawsuit arises collaterally to a state court proceeding, Coughlin v. Cultural Assets I, LLC, D-101-CV-2012-02707, filed in the First Judicial District Court for the State of New Mexico (State Court Lawsuit). The State Court Lawsuit stems from the following series of events: Luckett Sr. and McCarthy rented a residence from the Coughlins on September 1, 2010, and insisted that the two-year lease be in the name of Cultural Assets 1, LLC (CA1), a business owned and operated at least in part by Luckett Sr. and McCarthy. McCarthy and Luckett Sr. refused to move out of the residence after the lease expired and the Coughlins notified them, on September 20, 2012, that the Coughlins were selling the home. After taking additional steps and executing an offer to buy their house, with the buyer requiring possession of the property by October 31, 2012, the Coughlins filed a Petition by Owner for Restitution in state court-the State Court Lawsuit-on October 1, 2012. The day before the eviction hearing, CA1 filed for bankruptcy, resulting in an automatic stay of proceedings. The sale of the house fell through because the buyers could not take possession by October 31, 2012.

         The automatic stay lifted on December 14, 2012. On December 20, 2012, the State Court entered its order of Partial Default Judgment for Restitution Against Defendants Al Luckett and Christine McCarthy, finding that the automatic stay did not apply to Luckett Sr. and McCarthy, who failed to appear at the eviction hearing. Therefore, the State Court concluded that McCarthy and Luckett Sr. had “no further right to occupancy” to the leased residential property. State Court Lawsuit, Partial Default Judgment for Restitution Against Defendants Al Luckett and Christine McCarthy, filed Dec. 20, 2012. After additional motions practice, the State Court ...


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