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Rocky Mountain Chocolate Factory, Inc. v. DJRJ, LLC

United States District Court, D. Colorado

April 7, 2016

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC., a Delaware Corporation, Plaintiff,


William J. Martínez United States District Judge

This is a lawsuit for declaratory judgment brought by Plaintiff Rocky Mountain Chocolate Factory, Inc. (“RMCF”) against Defendants DJRJ Enterprises, LLC, DJRJ Corporate, LLC, and DJRJ, LLC (collectively, “DJRJ”). (ECF No. 1.) Currently before the Court is DJRJ’s Motion to Dismiss, or in the Alternative, Motion to Stay or Transfer to the Northern District of Oklahoma. (ECF No. 17.) For the reasons explained below, the Motion is granted in part. Specifically, the Court will stay and administratively close this matter in deference to a similar motion pending in the United States District Court for the Northern District of Oklahoma.


A. The First Colorado Case[1]

On August 25, 2015, an entity named U-Swirl, Inc., and another named U-Swirl International, Inc. (collectively, “U-Swirl”) filed a lawsuit against DJRJ in U-Swirl’s hometown of Durango, Colorado (La Plata County District Court). (ECF No. 1-1.) U-Swirl’s complaint briefly described a transaction by which it purchased certain assets from DJRJ, and U-Swirl accused DJRJ of breaching a part of the asset purchase agreement related to trades of allegedly restricted stock. (Id. ¶¶ 6-18.) U-Swirl sought damages and declaratory judgment that it no longer owed defendants a $2 million payment that might otherwise be due under the asset purchase agreement. (Id. at 6.)

DJRJ is an Oklahoma resident, and removed U-Swirl’s lawsuit to this Court on September 29, 2015, invoking jurisdiction under 28 U.S.C. § 1332(a) (“First Colorado Case”). (ECF No. 1.) The following day, DJRJ answered U-Swirl’s complaint and asserted a counterclaim for breach of the asset purchase agreement. (ECF No. 10 ¶¶ 27-30.) DJRJ also asserted a third-party complaint against RMCF’s Colorado subsidiary (“RMCF-Colorado”), claiming that U-Swirl is RMCF-Colorado’s alter ego. (Id. ¶¶ 16-26, 31-39.)

U-Swirl never answered DJRJ’s counterclaim, and RMCF-Colorado never answered DJRJ’s third-party claim. On November 12, 2015, however, U-Swirl voluntarily dismissed its claims against DJRJ, explaining that it had “determined it is not in [its] best interest to presently pursue [its] claims . . . . Should facts develop to support those claims thru the legal process, then U-Swirl may reassert said claims or others depending on the evidence.” (ECF No. 30 ¶ 3.) Given this, the only remaining claims were DJRJ’s counterclaim against U-Swirl, and DJRJ’s third-party claim against RMCF-Colorado.

The parties sought and received numerous extensions to facilitate potential settlement, and in particular, a mediation scheduled for January 12, 2016. (ECF No. 35 ¶ 1.) On January 13, 2016, DJRJ filed a notice of voluntary dismissal of its pending claims, thus terminating the First Colorado Case. (ECF Nos. 42, 44, 45.)

B. The Metastasis[2]

January 13, 2016, turned out to be a busy day for the parties. On that same date, DJRJ filed a new lawsuit in the Northern District of Oklahoma. (See DJRJ, LLC et al. v. U-Swirl, Inc. et al., No. 4:16-cv-00021-GKF-FHM (“Oklahoma Case”).) DJRJ named U-Swirl and RMCF as defendants. (See id.) RMCF is a Delaware corporation based in Durango. (ECF No. 17-7 ¶ 2.) DJRJ apparently concluded that RMCF, rather than RMCF-Colorado, is the true parent of U-Swirl, and reasserted the claims that had been pending in the First Colorado Action (breach of contract and alter ego).

RMCF likewise filed a new lawsuit-this lawsuit-on January 13. (ECF No. 1.) RMCF requests declaratory judgment against DJRJ that U-Swirl is not RMCF’s alter ego. (Id. ¶ 20.) RMCF did not include U-Swirl as a party to this lawsuit. U-Swirl, however, filed its own lawsuit against DJRJ in the District of Colorado on January 13, asserting essentially the same claims as in the First Colorado Case, i.e., damages for stock manipulation and declaratory judgment of no further obligation under the asset purchase agreement. (See U-Swirl, Inc. et al. v. DJRJ et al., No. 16-cv- 0089-CBS, ECF No. 1.) U-Swirl did not name RMCF as a party to that action.

The record is not clear regarding the precise time on January 13 that DJRJ filed the Oklahoma Action. However, DJRJ claims, and RMCF does not dispute, that DJRJ filed the Oklahoma Action after dismissing the First Colorado Case and before RMCF and U-Swirl filed their actions. (ECF No. 17 at 5-6.)

DJRJ has now brought its instant Motion, requesting that this Court dismiss, stay, or transfer this lawsuit to avoid duplication with the Oklahoma Case. (ECF No. 17.) RMCF has brought a similar motion in the Oklahoma Case, seeking to transfer the claims against it to this lawsuit. (Oklahoma Case, ECF No. 15.) RMCF has also moved ...

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