Prytania Media LLC v. Netease, Inc.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

PRYTANIA MEDIA LLC ET AL CIVIL ACTION

VERSUS NO. 25-0464

NETEASE, INC ET AL SECTION “B”(4)

ORDER AND REASONS

Before the Court are plaintiffs, Prytania Media LLC, Prytania Media Corp, Annie Stain,

and William “Jeff” Strain’s motion to remand (Rec. Doc. 10), the defendants’ opposition to motion

to remand (Rec. Doc. 14), the plaintiffs’ reply (See Rec. Doc. 15), plaintiffs’ response to Court

Order Rec. Doc. 24 (Rec. Doc. 27), and defendants’ reply to plaintiffs’ response to Court Order

Rec. Doc. 24 (Rec. Doc. 28-2). Accordingly,

IT IS ORDERED that plaintiff’s motion to remand is GRANTED, remanding this case

to the Civil District Court for the Parish of Orleans, State of Louisiana.

IT IS FURTHER ORDERED that all other motions and request for oral arguments

are DISMISSED AS MOOT, deferring to the state court's consideration of same on remand if it

so deems necessary. See, e.g., Rec. Docs. 19 and 20.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

This business dispute arises from alleged defamation, violations of the Louisiana Unfair

Trade Practices Act (“LUTPA”), LA. STAT. ANN. § 51:1401.1, et seq., tortious interference with

business relations and negligence. See generally Rec. Doc. 2-1. Filed on January 3, 2025, in the

Civil District Court for the Parish of Orleans, the suit contends that in late 2022, Mr. and Mrs.

Strain, through Prytania Media Corporation, opened an independent game development studio—

Crop Circle Games—with a twenty percent share investor, NetEase. Rec. Doc. 2-1 at 3 ¶7-9. To

ensure its interests, NetEase appointed Mr. Han as its representative onto the Crop Circle Board

of Directors, as well as other NetEase representatives who attended and contributed to business

and Board meetings. Id. Crop Circle Games (“Crop Circle”) also hired a former NetEase

employee to help manage the studio. Id. It is through these NetEase’s and Crop Circle’s

representatives, including Han and the other manager, that the Strains allege there was a disclosure

of false confidential information regarding Crop Circle Games’ operations to third parties. Id. at

2-1 ¶10.

“As set out in the [a]mended [p]etition, Prytania Media and its founders’ reputation and

business prospects were irreparably damaged by the unlawful and defamatory rumors concocted

and disseminated by [d]efendants.” Rec. Doc. 10-1 at 6. Plaintiffs assert that the defendants have

admitted to making these alleged false statements. Rec. Doc. 2-1 at 4¶¶15, 119, 120, and 123.

These alleged acts of defamation caused plaintiffs ascertainable losses, including business

opportunities, goodwill, reputation, and esteem in the industry. See Rec. Doc. 2-1.

Pursuant to an agreement between the parties, defendants NetEase and Han accepted

service of the petition on February 28. 2025. Rec. Doc. 2 at 3 ¶8. On March 10, 2025, defendants

timely removed the case to federal court which they further assert has jurisdiction through 28

U.S.C. § 1332(a)(3). See Rec. Doc. 2. At the time of removal Plaintiff then filed its motion to

remand, which is currently before the Court. Rec. Doc. 10. The defendants oppose, arguing

improper joinder, Rec. Doc. 14, to which plaintiffs reply. Rec. Doc. 15.

LAW AND ANALYSIS

Removal Standard

Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am.,

511 U.S. 375, 377 (1994); Halmekangas v. State Farm Fire and Cas. Co., 603 F.3d 290, 292 (5th

Cir. 2010). Defendants may remove a state court action to federal court if original jurisdiction

exists. See 28 U.S.C. § 1441(a); Syngenta Crop Prot., Inc. v. Henson, 537 U.S. 28, 34 (2002).

“Original jurisdiction, in non-maritime claims, lies where the conditions of 28 U.S.C. §§ 1331

[federal question] or 1332 [diversity] are satisfied.” Halmekangas, 603 F.3d at 292 (alteration in

original) (internal quotations and citation omitted). A “plaintiff’s properly pleaded complaint

governs the jurisdictional inquiry.” See Smith v. Barrett Daffin Frappier Turner & Engel, L.L.P.,

735 F. App’x 848 (5th Cir. 2018); see also Voice of the Experienced v. Cantrell, No. CV 23-5067,

2023 WL 6994209 (E.D. La. Oct. 24, 2023) (citing Hart v. Bayer Corp., 199 F. 3d 239, 243 (5th

Cir. 2000) (citation omitted)).

The removing party bears the burden of showing that federal jurisdiction exists, and that

removal was proper. See, e.g., Baker v. Hercules Offshore, Inc., 713 F.3d 208 (5th Cir. 2013)

(citing Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002)). In

assessing whether removal was appropriate, the Court is guided by the principle that “removal

statute should be strictly construed in favor of remand.” Manguno, 276 F.3d at 723. Furthermore,

remand is appropriate if the Court lacks subject matter jurisdiction, and “doubts regarding whether

removal jurisdiction is proper should be resolved against federal jurisdiction.” Acuna v. Brown &

Root Inc., 200 F.3d 335, 339 (5th Cir. 2000) (citing Willy v. Coastal Corp., 855 F.2d 1160, 1164

(5th Cir. 1988)). Furthermore, as “jurisdictional facts are determined at the time of removal . . .

post-removal events do not affect that properly established jurisdiction.” Louisiana v. Am. Nat’l

Prop. & Cas. Co., 746 F.3d 633, 636 (5th Cir. 2014) (citing Grupo Dataflux v. Atlas Global Grp.,

L.P., 541 U.S. 567, 569-70 (2004)). However, “[i]f a [court] lacks subject matter jurisdiction,

remand is permitted at any time before final judgment.” Falgout v. Mid. State Land & Timber Co.,

No. 08-5088, 2009 WL 2163152, at *2 (E.D. La. July 16, 2009) (Lemelle, J.) (citing 28 U.S.C. §

1447(c) and Doddy v. Oxy USA, 101 F.3d 448, 456 (5th Cir. 1996)).

1. Procedural Requirements for Removal

28 U.S.C. §1446(b) states “notice of removal of a civil action . . . shall be filed within 30

days after the receipt by the defendant, through service or otherwise, of a copy of the initial

pleading setting forth the claim for relief upon which such action or proceeding is based.” Here,

plaintiffs filed their original petition for damages in the State Court on January 3, 2025. Rec. Doc.

2 at 2¶1. On February 20, 2025, plaintiffs filed an Amended Petition for Damages in the State

Court. Rec. Doc. 2 at 2¶4. Prior to this amendment, plaintiffs had only issued service on defendant

Crop Circle Corporation. Rec. Doc. 2 at 2¶3. Nevertheless, all defendants, except Crop Circle,

accepted service of the petition and citation on February 28, 2025, and timely filed for removal to

this Court on March 10, 2025. Rec. Doc. 2 at 2¶8. Thus, defendants’ removal was timely.

Additionally, for proper removal, all served defendants are required to join in the removal

of an action to federal court. See 28 U.S.C. §§ 1441, 1446(b)(2)(A); see also Gettv Oil Corp. v.

Ins. Co. of N. Am., 841 F.2D 1254, 1262-63 (5th Cir. 1988). Here, defendants asserted that “taking

into account all properly joined parties, the Court has diversity pursuant to 28 U.S.C. § 1332(a)(3)

(“The district courts shall have original jurisdiction of all civil actions where the matter in

controversy . . . is between . . . citizens of different States and in which citizens or subjects of a

foreign state are additional parties.”). Rec. Doc. 2 at 3¶9. Thus, the question of whether Crop

Circle’s was properly joined becomes crucial to determining if procedurally this was a proper

removal. If Crop Circle is improperly joined, because all other defendants joined in the notice of

removal, removal is proper. See Rec. Doc. 2.

Service of Process is also considered when determining whether removal was proper.

Defendants assert that Crop Circle’s was improperly served and therefore remand must be denied.

See Rec. Docs. 14, 28-2. Though removal is a question of federal law, proper service is defined by

state law. FED. R. CIV. P. 4(e); City of Clarksdale v. BellSouth Telecomms., Inc., 428 F.3d 206, 210

(5th Cir. 2005). In Louisiana, several code articles govern service of process on corporations. LA.

CODE CIV. PROC. ANN. art. 1261 defines the method under Louisiana law for service of process on

a corporation as “service of citation or other process on a domestic or foreign corporation is made

by personal service on any one of its agents for service of process.” Article 1261 further provides:

[i]f the corporation has failed to designate an agent for service of process, if there

is no registered agent by reason of death, resignation, or removal, or if the person

attempting to make service certifies that he is unable, after due diligence, to serve

the designated agent, service of the citation or other process may be made by any

of the following methods:

(1)By personal service on any officer, or director, or on any person named

as such in the last report filed with the secretary of state.

(2) By personal service on any employee of suitable age and discretion at

any place where the business of the corporation is regularly conducted.

(3) By service of process under the provisions of R.S. 13:3204, if the

corporation is subject to the provisions of R.S. 13:3201.

LA. CODE CIV. PROC. ANN. art. 1261(B). If service is unable to be made under Article 1261, “after

diligent effort, ‘then the service may be made personally on the secretary of state, or on a person

in his office designated to receive service of process on corporations.’” LA. CODE CIV. PROC. ANN.

art. 1262.

On June 11, 2025, the Court issued an Order requesting for plaintiffs to “file into the record

the return of service of process” for Crop Circle. Rec. Doc. 22. Plaintiffs responded to that Order

providing they had previously served Crop Circle through the Louisiana Secretary of State. Rec.

Doc. 23 at 1. Defendants, in their opposition to the remand, have asserted that plaintiff Jeff Strain

is the registered agent for service for Crop Circle. Rec. Doc. 14 at 5; Rec. Doc. 28-2 at 4. Thus,

because plaintiffs did not conduct service of process through plaintiff Jeff Strain, defendants argue

that the service of process on Crop Circle is ineffective and therefore all properly joined parties

are diverse. Rec. Docs 14 and 28.

“The party making service has the burden of demonstrating its validity when an objection

to service is made.” Scroggins v. Sw. Elec. Power Co., No. CV 24-1568, 2025 WL 1570975, at *2

(W.D. La. June 3, 2025) (citing River Healthcare, Inc. v. Baylor Miraca Genetics Lab’ys, LLC,

No. CV-22-135-JWD-SDJ, 2023 WL 2542332 (M.D. La. Mar. 16, 2023) (quoting Holly v. Metro

Transit Auth., 213 F.App’x 343, 344 (5th Cir. 2007))). The plain language of the federal rules and

Louisiana law do not allow for service on a corporation through the Secretary of State unless

“diligent effort” has been made to adhere to proper service under Article 1261. LA. CODE CIV.

PROC. ANN. art. 1262. As plaintiffs have not refuted that plaintiff Jeff Strain is Crop Circle’s

registered agent, nor they given any justification for their lack of diligent effort to conduct service

in adherence of Article 1261, the Court would not be remiss in finding that plaintiffs had failed to

satisfy the burden of demonstrating that service on Crop Circle was proper. Jeff Strain being a

plaintiff, in the instant matter, does not excuse plaintiffs’ failure to properly effect service of

process pursuant to Louisiana law.

Nonetheless, this procedural mechanism is unlikely to create the complete diversity

jurisdiction desired by defendants. Under Federal Rule of Civil Procedure 4(m), if the plaintiff

demonstrates “good cause” for the failure to properly effect service, dismissal is improper. FED.

R.CIV. P. 4(m). To establish good cause, a plaintiff bears the burden of demonstrating “at least as

much as would be required to show excusable neglect.” Sims v. Landrieu Concrete & Cement

Indus. LLC, No. 18-9932, 2020 wl 2617867, at *2 (E.D. La. May 24, 2020) (Milazzo, J.) (quoting

Winters v. Teledyne Movible Offshore, Inc., 776 F.2d 1304, 1306 (5th Cir. 1985)). “Simple

inadvertence or mistake of counsel or ignorance of the rules usually does not suffice.” Id. (quoting

Winters, 776 F.2d at 1306). Being that courts have discretion, we would likely adhere to the

“general rule” which provides that “when a court finds [ ] service is insufficient but curable, it

generally should quash the service and give the plaintiff an opportunity to re-serve the defendant.”

Rhodes v. J.P. Sauer & Sohn, Inc., 98 F.Supp.2d 746, 750 (W.D. La. Apr. 4, 2000) (quoting

Gregory v. United States Bankruptcy Court, 924 F.2d 1498, 1500 (10th Cir. 1991)). Thus, this

insufficient service would be likely be corrected, making Crop Circle a properly joined in-state

defendant, defeating diversity jurisdiction.

Lack of Subject Matter Jurisdiction

1. Diversity Jurisdiction

Federal diversity jurisdiction under 28 U.S.C. § 1332 exists where there is complete

diversity of citizenship of the parties, and where the amount in controversy exceeds the sum or

value of $75,000.00, exclusive of interest and costs. 28 U.S.C. § 1332(a). Complete diversity

means “all persons on one side of the controversy [must] be citizens of different states than all

persons on the other side.” MidCap Media Fin., L.L.C. v. Pathway Data, Inc., 929 F.3d 310, 313

(5th Cir. 2019). The citizenship of a natural person is determined to be the state in which they are

domiciled. Coury v. Prot, 85 F.3d 244, 248 (5th Cir. 1996). Non-natural persons are also required

to adhere to the rules of diversity. Regarding the determination of citizenship of non-natural

persons, such as corporations, the corporation’s state of incorporation or the state in which the

corporation’s principal place of business is located establishes its citizenship. Midcap Media Fin.,

L.L.C., 929 F.3d at 314 (quoting 28 U.S.C. § 1332(c)(1)). Unlike a corporation, a limited liability

company’s citizenship is not established by its state of organization. For the purposes of § 1332(a),

"the citizenship of a limited liability company is determined by the citizenship of all of its

members.” Est. of Fennelly v. Wells Fargo Bank, Nat’l Ass’n, No. CV 20-684-SDD-EWD, 2020

WL 7319417, at *2 (M.D. La. Dec. 11, 2020) (citing Harvey v. Grey Wolf Drilling Co., 542 F.3d

1077, 1080 (5th Cir. 2008)). To properly allege the citizenship of a limited liability company, a

party must identify each of the members and their citizenship. Id. (citing 28 U.S.C. § 1332(a) and

(c)).

Per the record, plaintiffs Annie Strain and Jeff Strain are natural persons domiciled in

Louisiana, making these plaintiffs citizens of Louisiana for diversity jurisdiction. Rec. Docs. 10,

14 at 6, and 15. Regarding Prytania Media Corporation, plaintiffs assert that the corporation was

incorporated in Delaware and maintains its principal place of business in Louisiana. Rec. Doc. 2-

1 at 2¶3. Thus, Prytania Media Corporation is a citizen of Delaware and Louisiana. Being that

Prytania Media LLC is owned 100% by Prytania Media Corp, it is also considered a citizen of

Delaware and Louisiana. Rec. Doc. 2-1 at 2¶3.

Defendant NetEase Inc. is a corporation organized in the Cayman Islands with its principal

place of business in the People’s Republic of China, making it a foreign citizen. See Rec. Doc. 2

at 5¶22. Defendant NetEase Interactive Entertainment Pte. Ltd. is stated to be a Singapore private

limited company with its principal place of business in Singapore. Rec. Doc. 14 at 6. Thus, for

purpose of diversity, NetEase Interactive Entertainment Pte. Ltd. is a foreign citizen. Id. Defendant

NetEase Information Technology Corporation is a “California corporation with its principal place

of business in California,” and therefore, a California citizen. Id. “Defendant Han Chenglin is a

natural person, a permanent resident of Singapore, and a citizen of the People’s Republic of

China,” thus, is a foreign citizen. Id. Despite Crop Circle Games Corporation, being owned 75%

by plaintiffs and 25% by NetEase and its affiliates, its citizenship is determined to be Delaware

and Louisiana, as it was incorporated in Delaware and has a principal place of business in

Louisiana. Rec. Doc. 2-1 at 1¶2.

Plaintiffs, in their motion to remand, argue they have a viable claim against all defendants

and that Crop Circle’s non-diverse citizenship cannot be disregarded based on improper joinder.

Rec. Doc. 10-1 at 8-20. Defendants, Han Chenglin, NetEase Interactive Entertainment Pte. Ltd.,

Netease Inc., and NetEase Information Technology Corporation argue remand is inappropriate as

the in-state defendant, Crop Circle, was improperly joined, and that these pleadings are nothing

but an attempt to change the narrative surrounding the closure of plaintiffs’ entities. See Rec. Doc.

14 Defendants assert that plaintiffs’ claims lack even arguable merit and will soon be dismissed

for several reasons, including insufficient pleadings. Rec. Doc. 14 at 3.

Parties do not dispute that this Court would have jurisdiction for 28 U.S.C. § 1332 purposes

were Crop Circle’s citizenship disregarded. Further, all parties acknowledge that the amount in

controversy is valued over $75,000. Rec. Docs. 2 and 10. Accordingly, the issue of whether this

Court holds diversity jurisdiction in this matter turns on whether Crop Circle was improperly

joined.

a) Improper Joinder - Defendant Crop Circle Games Corporation

The doctrine of improper joinder “entitle[s] a defendant to remove a case to a federal forum

unless an in-state defendant has been properly joined.” Mumfrey-Martin v. Stolthaven New

Orleans, Nos. 12-2539, 12-2543, 12-2546, 2013 WL 4875088, at *3 (E.D. La. Sept. 10, 2013)

(Lemelle, J.) (quoting Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en

banc), cert. denied 544 U.S. 992 (2005)). Because the doctrine of improper joinder is a narrow

exception to the rule of complete diversity, the burden of demonstrating improper joinder is a

heavy one, belonging to the removing party. Id. (citing In re 1994 Exxon Chemical Fire, 558 F.3d

378 (5th Cir. 2009)). “A defendant is improperly joined if the moving party establishes that (1) the

plaintiff has stated a claim against a diverse defendant that he fraudulently alleges is nondiverse,

or (2) the plaintiff has not stated a claim against a defendant that he properly alleges is nondiverse.”

See Int’l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 199 (5th Cir.

2016) (citing Smallwood, 385 F.3d at 573) (internal quotation marks and citation omitted)

(emphasis added); see also Ross v. Citifinancial, Inc., 344 F.3d 458, 461 (5th Cir. 2003). Because

Crop Circle is, in fact, nondiverse, only the latter issue is pertinent to this review. Rec. Doc. 2-1 at

1¶2

Here, the defendants have the burden of establishing that the plaintiffs have failed to state

a claim against Crop Circle. Therefore, the test for improper joinder is “whether the defendant has

demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant,

which stated differently means that there is no reasonable basis for the district court to predict that

the plaintiff might be able to recover against an in-state defendant.” Smallwood, 385 F.3d at 573

(citing Travis v. Irby, 326 F.3d 644,648 (5th Cir. 2003)). If any of the plaintiffs’ claims are viable,

diversity jurisdiction is inappropriate. See Williams, 18 F.4th at 814 (citing Grassi v. Ciba-Geigy,

Ltd.¸894 F.2d 181, 182-85 (5th Cir. 1990) (“collecting cases and stating that, under Supreme Court

precedent, ‘the colorable assignment of a complete cause of action to defeat removal [is] effective

to give the state court exclusive jurisdiction’” and “no authority has as yet been given [federal

courts] to take jurisdiction of a case by removal from state court when a colorable assignment has

been made to prevent such a removal . . . resort can only be had to the state courts for protection

against the consequences of such an encroachment on the rights of a defendant.”)). Consequently,

it is against the Fifth Circuit’s established approach to permit a party to remove a case and then

sever a diversity-destroying defendant that has viable claims against it. Williams, 18 F.4th at 815.

The sufficiency of a plaintiff’s state court petition for purposes of the improper joinder analysis

is measured under federal court pleading standards. Int’l Energy Ventures Mgmt., L.L.C. v. United

Energy Grp. Ltd., 818 F.3d 193, 208 (5th Cir. 2016). There are two methods for determining the

viability of plaintiffs’ claims against an in-state defendant. Mumfrey-Martin, 2013 WL 4875088,

at *3 (citing Smallwood, 385 F.3d at 573). The first method provides that the Court “may conduct

a Rule 12(b)(6)-type analysis, looking initially at the allegations of the complaint to determine

whether the complaint states a claim under state law against the in-state defendant.” Id. (citing

Smallwood, 385 F.3d at 573). “The Rule 12(b)(6) analysis necessarily incorporates the federal

pleading standard articulated in Bell Atlantic Corp. v. Twombly: ‘To pass muster under Rule

12(b)(6), [a] complaint must have contained enough facts to state a claim to relief that is plausible

on its face.’” Int’l Energy Ventures Mgmt., L.L.C., 818 F.3d at 200 (citing Reece v. U.S. Bank Nat’l

Ass’n, 762 F.3d 422, 424 (5th Cir. 2014) (quoting Bell Atl.Corp. v. Twombly, 550 U.S. 544, 547

(2007))). From these well-pleaded factual allegations, which are assumed to be true, the court then

determines whether they “plausibly give rise to an entitlement of relief.” Ashcroft v. Iqbal, 556

U.S. 662, 678-79 (2009). “[A] single valid cause of action against in-state defendants (despite the

pleading of several unavailing claims) requires remand of the entire case to state court.” Gray ex

rel. Rudd v. Beverly Enterprises-Mississippi Inc., 390 F. 3d 400, 412 (5th Cir. 2004).

Where a plaintiff misstates or omits discrete facts, there is a second method a district court, in

its discretion, may utilize. See Int’l Energy Ventures Mgmt., L.L.C., 818 F.3d at 207. In this

method, the district court would “pierce the pleadings and conduct a summary judgment type

inquiry.” Id. (citing Smallwood, 385 F.3d at 573). A summary inquiry is limited to the

identification of discrete and undisputed facts. Smallwood, 385 F.3d at 573-74 (5th Cir. 2004). In

either analysis, the Court must resolve all contested factual issues and ambiguities of state law in

favor of the plaintiff. Johnson v. Singh, No. 6:25-CV-00471, 2025 WL 2105371 (W.D. La. June

26, 2025), report and recommendation adopted, No. CV 6:25-0471, 2025 WL 2005019 (W.D. La.

July 17, 2025) (citing Guillory v. PPG Indus., Inc., 434 F.3d 303, 308 (5th Cir. 2005)).

“[A] court may choose to use either one of these two analyses, but it must use one and only

one of them, not neither or both.” Int’l Energy Ventures Mgmt., L.L.C., 818 F.3d at 207. Here, the

second one—piercing the veil—is unnecessary. Thus, we will conduct our analysis with the first

one. Therefore, if the plaintiffs have stated enough facts to state a claim for relief that is plausible

on its face, then this case will be remanded. In their notice of removal defendants acknowledge

plaintiffs’ “claims for: 1) defamation, 2) unfair trade practices, 3) tortious interference with

business relations, and 4) negligence against defendants and Crop Circle.” Rec. Doc. 2 at 4¶12.

Nonetheless, the defendants state that the plaintiffs have not, and are unable to, state a viable claim

against Crop Circle. Rec. Docs. 2 and 14. Defendants argue four reasons for why Crop Circle is

improperly joined. Rec Doc. 14 at 4. First, defendants issue Crop Circle is not liable for Mr. Han’s

alleged conduct under principles of respondeat superior. Rec. Doc. 14 at 11. Second, defendants

claim that plaintiffs cannot recover against Crop Circle as it is defunct. Rec. Doc. 14 at 18. Third,

defendants argue that plaintiffs have no possibility of recovering from Crop Circle as they control

Crop Circle. Rec. Doc. 14 at 21. Regarding this argument, defendants aver that the Strains make

up the majority of Crop Circle’s Board of Directors and currently maintain a seventy percent

ownership of Crop Circle. Id. Therefore, defendants argues that the plaintiffs are attempting to use

a use their corporate forms to cause an injustice—defeat federal jurisdiction through improper

joinder. Id. at 20. The last issue the defendants discuss in their argument for improper joinder deals

with the equally dispositive exception. Defendants inform that Crop Circle can and should be

found to be an improper joinder because the bases for dismissing Crop Circle does not apply

equally to all other defendants. Rec. Doc. 14 at 21.

Liability Under Respondeat Superior Claim

Responding to defendants’ opposition to remand, plaintiffs assert:

[U]nder principles of respondeat superior Crop Circle Games and NetEase and its

affiliates are liable in solido for the actions of their director on the Board of

Directors of Crop Circle Games and employee Mr. Han, and other NetEase

employees, who in defaming Plaintiffs, acted at all relevant times within the course

and scope of their work for Crop Circle and NetEase and its affiliates.

Rec. Doc. 2-3 at 35¶170 (defamation); see also id. at 37¶181 (unfair trade practices); id. at 39¶192

(tortious interference). To specify, plaintiffs amended complaint states Han made “inaccurate and

prejudicial” statements1 about Crop Circle to his co-workers at NetEase when he was a member

of Crop Circle’s Board of Directors. Rec. Doc. 2-3 at 30¶136. Further the amended complaint

states that Han’s actions “received credibility based on the fact that he was a member of the Board

of Directors . . . [and] had unique unfettered access to Crop Circle and, for all purposes relevant to

this matter, spoke as its delegate to the market and other parties about its internal dealings.” Id.

Finally, the amended complaint states after these rumors spread, each of Prytania Media’s studios,

including Crop Circle, became worthless as it could not attract additional investments or investors.

Id. at 30-31. Plaintiffs argue that these claims are enough to plausibly conclude that discovery may

reveal evidence supporting the respondeat superior element of a negligent or tortious act on the

part of an employee.

While employer liability under the doctrine of respondeat superior is a creature of the

common law of agency, in Louisiana, the vicarious liability of employers is based on Civil Code

article 2320. Awanbor v. Williams, 2025-0054, 2025 WL 2206118, at **6 (La.App. 1 Cir. 8/4/25)

(citing Berthelot v. Indovina, 2021-0517 (La.App. 1 Cir. 12/22/21), 340 So.3d 119, 124, writ

1 Plaintiffs include an excerpt from the minutes they allude to in their reply, which they allege, “prove” Han

initiated the rumor that “precipitated this dispute.” Rec. Doc. 2-3 at 28 n.36 (citing to the Minutes of the

Board of Directors of Crop Circle Games (March 7, 2024), p. 8-9 “So I told my coworkers I’m really surprised

that the company is running out of runway so quickly. I am sorry that this leaked to the public market . . .

that’s likely where the second rumor came from”). While it can be argued that this statement does not

constitute an admission, the argument that it is an admission is not a blatant misstatement or omission of

discrete facts, therefore we do not feel that a piercing of the pleadings is necessary.

denied, 2022-00165 (La. 3/15/22), 334 So.3d 394; see also Brasseaux v. Town of Mamou, 1999-

1584 (La. 1/19/00), 752 So.2d 815, 820). Louisiana law states “[m]asters and employers are

answerable for the damage occasioned by their servants and overseers, in the exercise of the

functions in which they are employed.” LA. CIV. CODE ANN. art. 2320. To hold an employer liable

under the doctrine of respondeat superior, a plaintiff must establish (1) “an employer/employee

relationship,” (2) “a negligent or tortious act on the part of an employee,” and (3) “the act

complained of must be committed in the course and scope of employment.” See Lewis v. Walmart

Inc., No. CV 24-1765, 2024 WL 4274332, at *2 (E.D. La. Sept. 24, 2024) (Lemelle, J.) (citing

Bryan v. Diaz, No. 24-1663, 2024 WL 3887001, at *3 (E.D. La. Aug. 21, 2024) (Africk, J.) (citing

Jones v. Maryland Cas. Co., 2018-0552, p.10 (La. App. 4 Cir. 5/11/22), 339 So.3d 1243, 1249)).

“Under [this] doctrine, employers are not liable for the intentional torts or criminal acts of their

employees if those acts are committed outside the scope of their employment.” United States v.

Am. Com. Lines, L.L.C., 875 F.3d 170, 178 (5th Cir. 2017).

First to be determined is whether plaintiff’s claims are enough to conclude he was an

employee of Crop Circle. As the determination of whether a party may be held vicariously liable

for the torts of another depends on whether the tortfeasor is characterized as a servant. Whetstone

v. Dixon, 616 So.2d 764, 770 (La. App. 1 Cir. 4/28/93), writs denied, 623 So.2d 1333 (La. 1993),

and writ denied, 623 So. 2d 1333 (La. 1993). “A servant is defined as one employed to perform

services in the affairs of another and who is subject to the other’s control or right to control with

respect to the physical conduct in the performance of the services.” Price v. North, 2021-0236 (La.

App.1 Cir. 10/18/21), 331 So.3d 959 (citations omitted). Thus, a non-servant, unlike a servant,

contributes to the master’s business, but their actions are not so closely controlled by the master

as to dictate how or when they are to be conducted. Louisiana cases have provided several factors

indicative of a master-servant relationship, including: (1) uncompensated performer; (2) status

within the association; (3) specific mission; (4) intense relationship; (5) control; (6) role of the

master in conferring authority and exercising control; and (7) direct benefit to the association. Id.

(citing Whetstone, 616 So.2d 764 at 770 (quoting Ermet v. Hartford Ins. Co., 559 So.2d at 476

(La. 1990) (“[O]ur jurisprudence has drawn freely from the common law in applying the general

code principles to concrete master-servant problems.”))).

In the plaintiffs’ amended complaint they state, “Han is a NetEase employee [who] also

serve[s] on the Board of Directors of Crop Circle as NetEase IE’s representative director.” Rec.

Doc. 2-3 at 7¶15 (emphasis added). Plaintiffs state that as director, Han “ha[s] the authority to hire

a manager to engage counsel to represent Crop Circle Games in this matter, respond to any request

for indemnity, and to pursue claims against NetEase.” Rec. Doc. 2-3 at 7¶20. Further, plaintiff

asserts that “Han was directly involved in the management of the Louisiana-based company, as

well as the actionable conduct that occurred within the State of Louisiana.” Rec. Doc. 2-3 at 9¶28.

While defendants argue to the contrary stating that Han was a “non-management director who was

never employed by Crop Circle, played no role in its operations, and did nothing beyond sitting

on Crop Circle’s Board of Directors, which met only three times in the company’s history and only

after the company’s financing situation started to become dire.” Rec. Doc. 14 at 13. For this

analysis, plaintiffs’ claims are enough to conclude that discovery may reveal further evidence of

an employment relationship.

Regarding the element of tortious act or conduct by the employee, Plaintiffs claims are

enough to plausibly conclude that discovery may reveal evidence supporting tortious conduct on

behalf of defendant Han. One need only consider one of the torts alleged, defamation, where the

plaintiffs would be required to show “that [Han], with actual malice or other fault, published a

false statement with defamatory words which caused the plaintiff damages.” Zelenak v.

Beauregard Elec. Coop. Inc., No. 2:24-CV-01803, 2025 WL 2025177 (W.D. La. July 18, 2025)

(citing Sassone v. Elder, 626 So.2d 345, 350 (La 1993)). “A pure statement of opinion, which is

based totally on the speaker’s subjective view, and which does not expressly state or imply the

existence of underlying facts, usually will not be actionable in defamation.” Id. (citing Bussie v.

Lowenthal, 535 So.2d 378, 381 (La. 1988)). Nonetheless, “an expression of opinion is actionable

only if it implies the existence of underlying facts ascertainable by a reasonable person with some

degree of certainty, and the implied factual assertions are false, defamatory, made with actual

malice, and concern another.” Id. (citing Fitzgerald v. Tucker, 737 So.2d 706, 717 (La. 1999)).

Accordingly, here plaintiffs’ claims are enough to conclude that discovery may reveal evidence

supporting their allege claim of defamation by Han.

The final issue to determine is whether plaintiffs’ claims are enough to establish that

defendant Han’s alleged tortious conduct occurred within the course and scope of his employment?

Courts’ determination of whether conduct is in the course and scope of employment is a “context-

specific inquiry.” Bryan, 2024 WL 3887001 at *3 (citing Orgeron ex rel. Orgeron v. McDonald,

639 So.2d 224, 226-27 (La. 1994)). “Whether an employee’s conduct is sufficiently employment-

related to impose vicarious liability is a mixed question of law and fact.” Duncan v. Celestine, No.

CV 18-6143, 2019 WL 5067122, at *3 (E.D. La. Oct. 9, 2019) (Feldman, J.) (citing Russell v.

Noullet, 98-816, p.5 (La. 12/1/98), 721 So.2d 868, 871). If the employee is acting within the course

and scope of his employment, “the act ‘is of the kind that he is employed to perform, occurs

substantially within the authorized limits of time and space, and is activated at least in part[] by a

purpose to serve the employer.’” Champagne v. United States, NO, CIV.A. 13-299, 2014 WL

222069 (E.D. La. Jan. 21, 2014) (Fallon, J.) (internal quotations omitted) (citing Timmons v.

Silman, 99-3264 (La. 5/16/00); 761 So.2d 507, 510). Factors that may assist a court in determining

if actions are committed within the course and scope of employment include:

The payment of wages by the employer, the employer’s power of control, the

employee’s duty to perform the particular act, the time and place and purpose of

the act in relation to service of the employer, the relationship between the

employee’s act and the employer’s business, the benefits received by the employer

from the act, the motivation of the employee for performing the act, and the

reasonable expectation of the employer that the employee would perform the act.

Id. (citing Oregon v. McDonald, 93-1353 (La. 7/5/94); 639 So.2d 224, 227).

Here, the parties dispute Han’s scope of employment with Crop Circle. Nonetheless, in

viewing the amended complaint, we see that plaintiffs have alleged defendant Han was speaking

to “NetEase, part owner and investor, regarding Crop Circle.” Rec. Doc. 10-1 at 15 (citing Rec.

Doc. 2-3 at 28¶120). Further, plaintiffs also assert that defendant Han was speaking to “third-party

investors—yet another facet of [defendant] Han’s role as a Crop Circle director.” Id. (citing Rec.

Doc. 2-3 at 30¶136); see also Rec. Doc. 2-3 at 28¶120. The factual matters alleged are enough to

plausibly conclude that discovery may reveal further evidence supporting a finding that defendant

Han was acting within the course and scope of his employment at Crop Circle.

Accordingly, because the plaintiffs have stated more than mere legal conclusions or formulaic

recitations of the elements of respondeat superior liability, it is plausible the factual matter alleged

raises a reasonable basis for the plaintiffs to conceivably recover against all the defendants,

including Crop Circle. See Smallwood, 385 F.3d at 573.

Possibility of Recovery from Defunct Corporation

Defendants claim that the non-diverse defendant Crop Circle is a defunct corporation,

which precludes any possibility of plaintiffs’ ability to recover against this entity. The legal status

of a corporation is governed by state law. Gibson v. BP Am. Prod. Co., No. CV 17-1439, 2018 WL

914054 (W.D. La. Jan. 30, 2018), report and recommendation adopted sub nom. Gibson v. BP

Am. Prod. Co., No CV 17-1439, 2018 WL 912277 (W.D. La. Feb. 15, 2018) (citing Vill. of

Montpelier v. Riche, Chenevert & Andress Const. Co., Inc., 43 B.R. 736, 738 (M.D. La. 1984)

(citing inter alia, Gould v. Brick, 358 F.2d 437 (5th Cir. 1966))). “The Courts are split on whether

a plaintiff has a reasonable possibility of recovery against an inactive corporation.” Lowry v. Total

Petrochemicals & Ref. USA, Inc., No. CV 18-0864, 2018 WL 5931146, at *4 (W.D. La. Oct. 26,

2018), report and recommendation adopted, No. CV 18-0864, 2018 WL 5931111 (W.D. La. Nov.

13, 2018). In Beall, the court held that a non-diverse corporation, who had failed to file annual

reports with the Louisiana Secretary of State, was properly joined as the evidence before it simply

indicated that the corporation at issue was an inactive corporation. Beall v. Conoco Phillips Co.,

No. 08-289, 2008 WL 2433579 (M.D. La. June 16, 2008). Whereas, in cases such as Weinstein or

Ashley the court found that removal was appropriate when the corporations in question “[would]

never make an appearance, will never participate, and will never be available for recovery” in

those proceedings. See Ashley v. Devon Energy Corp., No. 14-512, 2015 WL 803136, at *2 (M.D.

La. Feb. 25, 2015); see also Weinstein v. Conoco Phillips, No. 13-919, 2014 WL 868918, at *1

(W.D. La. Mar. 5, 2014).

The evidence adduced by the defendants merely establishes that both defendants and

plaintiffs are actively refusing to act on behalf of Crop Circle. See Rec. Docs. 10, 14, 15. It is

agreed that this method of subterfuge reflects a means of “self-help” and “preposterous” inactivity

by the entirety of Crop Circle’s Board of Directors. However, it goes against precedent and logic

to find that a revocation of incorporation by the Louisiana Secretary of State equates to a finding

of no possibility of recovery, or, improper joinder, especially because Crop Circle has not been

proven to be a “shell with no power or possibility of action.” Rec. Doc. 14 at 19. Defendants stating

that “the Strains appear to have fired all of Crop Circle’s employees and closed its business

operations, while leaving no known assets” is insufficient. Id. While it is troubling to see the

manipulation displayed by these absentee directors, based on the existing record, the defendants

have not established that there are no undistributed assets attributable to Crop Circle.

Plaintiffs’ Ownership and Control of Crop Circle

In their opposition to remand, defendants assert that plaintiffs have no possibility of

obtaining relief against Crop Circle because they control it. Rec. Doc. 14 at 20. Defendants aver

that the Strains “made up the majority of Crop Circle’s Board of Directors.” Rec. Doc. 14 at 21.

“[The Strains] have the power to elect and remove a majority of the members of the Board of

Directors, through their ~70% ownership.” Id. Due to this control, defendants argue that the

plaintiffs are essentially suing their alter ego. Id.at 20. Attempting to support this argument, the

defendants refer to Johnson v. Heublein, Inc. where a Mississippi court was informed in the initial

complaint that defendants-turned plaintiffs, GSE and Walker, and another defendant, Maslowski,

were alter egos of each other. 982 F.Supp. 438, 440 (S.D. Miss. 1997), aff’d, 227 F.3d 236 (5th

Cir. 2000). Upon amendment of the complaint, where GSE and Walker became plaintiffs, it was

axiomatic, that Maslowski was improperly joined and could not be used to defeat diversity. Id. at

444-45. Reasoning for that Court’s finding of improper joinder included plaintiffs’ “failure to serve

this Defendant[] . . . with any pleadings, documents or other papers related to this matter, except

for the service of the Original Complaint.” Id. at 445.

“Courts will apply the alter ego doctrine and hold a parent liable for the actions of its

instrumentality in the name of equity when the corporate form is used as a ‘sham to perpetrate a

fraud.’” Bridas S.A.P.I.C. v. Gov’t of Turkmenistan, 447 F.3d 411, 416 (5th Cir. 2006) (quoting

Pan Eastern Exploration Co. v. Hufo Oils, 855 F.2d 1106, 1132 (5th Cir. 1988)). The alter ego

doctrine only applies if “(1) the owner exercised complete control over the corporation with respect

to the transaction at issue and (2) such control was used to commit a fraud or wrong that injured

the party seeking to pierce the veil.” Bridas S.A.P.I.C. v. Gov’t of Turkmenistan, 345 F.3d 347,

359 (5th Cir. 2003). To prevail, the defendants would have to demonstrate that the plaintiffs used

their control over Crop Circle to commit a fraud or injustice against them.

Here, defendants have not proven their “alter ego” theory. The defendants have failed to

show the plaintiffs used Crop Circle to commit a fraud or injustice against them. Further, while

plaintiffs do own a substantial percentage of the corporation, defendants also control this entity in

that some own thirty percent of Crop Circle, and one, Han, sat on its Board of Directors. Rec. Doc.

14 at 21. Defendants’ comparison of plaintiffs’ actions to those seen in Johnson v. Heublein, Inc.

also fail as plaintiffs have actively pursued their alleged claims against Crop Circle. See Rec. Docs.

10 and 15.

Equally Dispositive Exception

The defendants appear to argue both that the complaint fails to state a claim for relief

against Han, and that, after plaintiffs have no reasonable basis of recovery against the in-state

defendant. Defendants’ reasoning states that both that plaintiffs have failed to state a claim and the

defendants’ belief that plaintiffs are unable to show that Crop Circle should be held liable for Han’s

actions. Because defendants’ position is that there is no reasonable basis for predicting recovery

against the non-diverse defendant the equally dispositive exception does apply.

When the only proffered justification for improper joinder is that there is no

reasonable basis for predicting recovery against the in-state defendant, and that

showing is equally dispositive of all defendants rather than to the in-state

defendants alone, there is no improper joinder. Rather, in such a case, there is only

a lawsuit lacking merit. In other words, there is no improper joinder if a defense

compels the same result for the resident and nonresident defendants, because this

would simply mean that the plaintiff’s case [is] ill-founded as to all the defendants.

Brown v. James Constr. Grp., No. 3:19-CV-01060, 2019 U.S. Dist. LEXIS 211877, at *7 (W.D.

La. Nov. 20, 2019) (citing Gasch v. Hartford Acc. & Indem. Co., 491 F.3D 278, 283-84 (5th Cir.

2007)).

Here, the removing defendants have not satisfied the heavy burden of demonstrating that

plaintiffs have no possibility of recovering from Crop Circle. Consequently, Crop Circle is a proper

party to the suit, and because the parties are not completely diverse, the Court does not have subject

matter jurisdiction over this case. Accordingly, it is recommended that plaintiffs’ motion to remand

be granted.

Federal Question Jurisdiction

Under 28 U.S.C. § 1331 district courts have original jurisdiction of all civil actions arising

under the Constitution, laws, or treaties of the United States. 28 U.S.C. § 1331. A “plaintiff’s

properly pleaded complaint governs the jurisdictional inquiry.” See Smith v. Barrett Daffin

Frappier Turner & Engel, L.L.P., 735 F. App’x 848 (5th Cir. 2018); see also Voice of the

Experienced v. Cantrell, No. CV 23-5067, 2023 WL 6994209 (E.D. La. Oct. 24, 2023) (citing Hart

v.Bayer Corp., 199 F. 3d 239, 243 (5th Cir. 2000) (citation omitted)). Thus, making the “plaintiff

the master of his complaint” and empowers him to decide whether his case ends up in state or

federal court. Elam, 635 F.3d at 803 (citing Bernhard, 523 F.3d at 551). Were the plaintiff to plead

“only state-law claims, there is no basis for federal-question jurisdiction.” See, e.g., Smith, 735

F.App’x at 852 (citing Elam, 635 F.3d at 803). Nonetheless, if a district court can exercise original

jurisdiction over an action, then a federal court utilizes the procedural mechanisms provided in 28

U.S.C. § 1441 and § 1446. 28 U.S.C. § 1441; 28 U.S.C. § 1446.

Here, defendants argue that this Court may exercise federal question jurisdiction over this

matter because, per the defendants, plaintiffs’ claims involve a federal regulatory violation. Rec.

Doc. 14 at 24. Furthering this argument, defendants compare this matter to BFNO Properties, LLC

v.Housing Authority of New Orleans, where the presiding court found by looking at the totality of

the circumstances, the federal issues raised were sufficient to confer federal question jurisdiction.

Rec. Doc. 14 at 24-25 (citing No. 15-300, 2015 U.S. Dist. LEXIS 50181, at *26-28 (E.D. La. Apr.

16, 2015)). However, there, the issues involved contracts administered under a federal agency

which required terms to adhere to federal laws and regulations. Id. Here, plaintiffs’ claims

reference federal law but does not require interpretation or raise federal issues to confer federal

question jurisdiction. Accordingly, as defendants’ argument regarding federal question jurisdiction

is unpersuasive and because any ambiguities are construed against removal this matter should be

remanded.

Realignment

Defendants assert that diversity jurisdiction would exist if the parties were realigned to reflect

their true interest in this matter. See Rec. Doc. 14 at 22. “In ascertaining the proper alignment of

parties for jurisdictional purposes, courts have a duty to look beyond the pleadings[] and arrange

the parties according to their sides in the dispute. Am. Vehicle Ins. Co. v. Adams, No. 11-CV-229,

2011 WL 4344099, at *2 (M.D. La. Sept. 14, 2011) (citing Griffin v. Lee, 621 F.3D 380, 388 (5th

Cir. 2010)); see also Ashford v. Aeroframe Servs. L.L.C., 907 F.3d 385, 387 (5th Cir. 2018)

(quoting City of Indianapolis v. Chase Nat. Bank of City of N.Y., 314 U.S. 63, 69 (1941)). The

Fifth Circuit has stated that “realignment is to be determined according to the principal purpose of

the suit and the primary and controlling matter in dispute.” Id. (citing Lowe v. Ingalls Shipbuilding,

A Div. of Litton Systems, Inc., 723 F.2d 1173, 1178 (5th Cir. 1984)).

We look to previous 5th Circuit rulings like Zurn Indus., Inc. v. Acton Const. Co. to determine

whether realignment is proper in the instant matter. 847 F.2d 234, 235-236 (1988). In Zurn, an

unpaid subcontractor had to sue its client for reimbursement for services rendered. Id. That same

client was later found to have cross-claims and counterclaims with other defendants included in

the lawsuit. Id. at 236. Nonetheless, the court rejected defendants’ argument that the client was the

“true plaintiff.” Id. at 237, 238. Instead, the court recognized that the primary claim was the

plaintiff’s unpaid labor, and it was found to be of no consequence that the client defendant had

cross-claims against the other defendants or that plaintiff may be aligned with the defendant for

those cross-claims. Id. at 237. The instant matter mirrors Zurn, Crop Circle will likely raise claims

against other defendants, however the plaintiffs’ claims for defamation, unfair trade practices, and

tortious interference are the primary claims, thus realignment is improper. Rec. Doc.10-1 at 4.

New Orleans, Louisiana, this 10th day of September, 2025

________________________________________

SENIOR UNITED STATES DISTRICT JUDGE