Opinion
CASE NO. 8:02CV447
December 3, 2003
MEMORANDUM AND ORDER
This matter is before the Court on the Motion to Dismiss the Third-Party Complaint (Filing No. 90) filed by the Third-Party Defendants. The motion is supported by a brief. (Filing No. 91.) The Third-Party Plaintiff, Continental Casualty Company ("CCC") filed a brief and evidence in opposition to the motion. (Filing Nos. 114, 115.) The Plaintiff, Leasing Innovations, Inc. ("LII"), also filed a brief and evidence opposing the motion. (Filing Nos. 116, 117.)
Matters outside the pleadings may be considered, as it is presumed that the motion is filed pursuant to Federal Rule of Civil Procedure 12(b)(1). However, the consideration of those materials does not convert the motion to one for summary judgment. Harris v. P.A.M. Transport, Inc., 339 F.3d 635, 638 n. 4 (8th Cir. 2003).
FACTUAL BACKGROUND
On September 17, 2002, LII's initial federal suit was transferred, pursuant to 28 U.S.C. § 1404(a), from the District of Massachusetts to the District of Nebraska. (Filing No. 45.) The transfer resulted in the filing of the instant action. (Filing No. 1.)
At the time of the transfer, already pending was an action in the District Court of Douglas County, Nebraska, involving LII as a defendant and, as plaintiffs, several persons who appear as Third-Party Defendants in the instant case. (Filing No. 117, Ex. 52.) The Nebraska state court action now involves the following claims: misrepresentation; negligent misrepresentation; fraud; breach of contract; and negligence. (Filing No. 115, Affidavit of Scott A. Calkins ("Calkins Aff."), Ex. 1.)
The named plaintiffs in the state court action are: Roger Frakes and Judy Frakes; Joel Anderson and Mischel Anderson; Oscar Curtis and Betty Curtis; Maurice Pierce and Deborah Pierce; Douglas Dewitt and Kimberly Dewitt; Roger Frakes and Kylynne Frakes; Betty Heaton; Lester Lantis and Viola Lantis; Mike Mardi and Marge Mardi. (Filing No. 117, Ex. 52.)
In this action, the original Complaint was dismissed as against those individual Defendants who later appeared as Third-Party Defendants. (Filing No. 62.) The basis for the dismissal was LII's concession that it failed to allege the necessary amount in controversy and, therefore, subject matter jurisdiction was lacking. (Filing No. 59.)
The 244-paragraph Amended Complaint, including the required amount in controversy, alleges twelve breach-of-contract claims arising out of various lease bonds. (Filing No. 80.) Following is a brief summary of the factual allegations resulting in the twelve similar claims. It is alleged that CCC, an insurance bonding company, issued lease bonds to numerous lessees. The various lease agreements concern the leasing of public internet kiosks from Vendor Leasing Financial Services, Inc. ("Vendor Leasing"). The kiosks were to be supplied by Uniglobe Multimedia, Inc. ("Uniglobe"). The individual lessees wrote checks to Vendor Leasing. CCC issued riders to the various bonds, changing the obligee from Vendor Leasing to LII. Vendor Leasing assigned to LII all rental payments, claims and rights to monies due under the leases. LII made advance payments to Uniglobe for the kiosks, which triggered the individuals' obligations to make lease payments. The kiosks were never delivered, and the individuals stopped making their lease payments. LII demanded that the individuals honor their obligations under the leases, but the individuals refused. LII then demanded that CCC pay the amounts owed, but CCC has not done so. LLI alleges that, because it has fulfilled all of its conditions precedent to making claims under the various leases, LII is entitled to recover the amounts owed from CCC under the lease bonds. (Filing No. 80.)
The persons, appearing later in the case as Third-Party Defendants, are: Joel T. Anderson; Bettie L. Curtis; Oscar B. Curtis, d/b/a O.B.'s Hillbilly Acres ("Obs"); Roger S. Frakes and Mary Kylynn Frakes, d/b/a M. Kylynn Frakes ("Kylynn"); Lester Lantis and Viola Lantis, d/b/a Levi Services ("Levi"); Maurice Stanton Pierce and Deborah Diane Pierce, d/b/a Pierceco ("Pierceco"); B.B. J. Electric, Inc. ("BB J"); Douglas G. Dewitt and Kimberley M. Dewitt, d/b/a Double D's Co. and then as DKCO ("DKCO"); Martin J. Fisher and Saralyn Jane Fisher, d/b/a Jackson's Designs ("Jackson's"); Roger C. Frakes and Judy Frakes, d/b/a Roger and Judy Enterprises and R J Enterprises ("R J"); Betty Jean Heaton, d/b/a Kiosk Ventures ("Ventures"); and Marge A. Mardi and Mike D. Mardi, d/b/a MD MA ("MD MA"). (Filing No. 80.)
In the Third-Party Complaint, CCC alleges that this Court has supplemental jurisdiction over the third-party claims under 28 U.S.C. § 1367 because the third-party claims "arise out of and are . . . related to the claims" set out in LII's Amended Complaint. (Filing No. 87, ¶ 3.) The essence of the Third-Party Complaint is that the Third-Party Defendants executed general agreements of indemnity in favor of CCC to cover any loss or expense as a result of bonds issued to the Third-Party Defendants in connection with the lease contracts for the kiosks. CCC alleges in its Third-Party Complaint that, if LII recovers any sums against CCC, then the Third-Party Defendants are liable to CCC for those sums under the indemnity agreements, or alternatively under the general principle of suretyship. CCC also requests attorney fees and costs associated with this action. (Filing No. 87.)
The Third-Party Defendants filed a Motion to Dismiss the Third-Party Complaint, apparently based on Federal Rule of Civil Procedure 12(b)(1).
DISCUSSION
In support of their Motion to Dismiss, the Third-Party Defendants argue: 1) supplemental jurisdiction is lacking; 2) the Court may dismiss this action in light of the pending "parallel" state court action; and 3) the filing of the state court action presents a "compelling" reason for dismissal. Each argument is discussed below.
Supplemental Jurisdiction 28 U.S.C. § 1367(a) sets out the general rule that, where a court has original jurisdiction, supplemental jurisdiction exists over related claims that form part of the "same case or controversy" within the meaning of Article III of the United States Constitution. 28 U.S.C. § 1367(b) lists exceptions to this general rule. One of the exceptions regards a case in which original jurisdiction is based solely on diversity jurisdiction and in which the exercise of supplemental jurisdiction over a third-party defendant would be inconsistent with the requirements of 28 U.S.C. § 1332. 28 U.S.C. § 1367(b).
The Third-Party Defendants argue that, because the amount in controversy as to each Third-Party Defendant does not meet the $75,000 diversity jurisdictional threshold, supplemental jurisdiction cannot be exercised over those individuals as Third-Party Defendants. The Third-Party Defendants rely on two cases: Paglin v. Saztec Intern, Inc., 834 F. Supp. 1201 (W.D. Mo. 1993); and Radmer v. Aid Ass'n for Lutherans, No. 99-0961-CV-W-9-4, 2000 WL 33910093 (W.D. Mo. 2000). Paglin is distinguishable because the issue is whether Paglin, an indispensable party/Plaintiff, was a "citizen" for purposes of diversity jurisdiction. Paglin has no bearing on a multiple third-party defendant situation involving an amount in controversy. Paglin, 834 F. Supp. at 1203. Similarly, Radmer is inapplicable to the instant question because, rather than addressing the multiple third-party defendant situation, the issue relates to the failure of each individual class action plaintiff to meet the amount in controversy requirement set out in 28 U.S.C. § 1332. Radmer, 2000 WL 33910093, at *2.
The Third-Party Defendants have presented no authority supporting their position. When confronted with a related issue, i.e., whether a third-party claim against a single third-party defendant must independently meet the amount in controversy requirement, the Eighth Circuit declined to address the issue and rather chose to dismiss the third-party action as moot. State of Missouri ex. rel. Pemiscot County v. Western Sur. Co., 51 F.3d 170, 175 n. 3 (8th Cir. 1995). Authority exists indicating that § 1367(b) does not require that third-party claims independently meet the amount in controversy requirement. 6 Charles A. Wright, et al., Federal Practice Procedure § 1444, at 326-27 (2d ed. 1990). Given the lack of authority supporting the Third-Party Defendants' argument together with the language of Federal Rule of Civil Procedure 14(a), the Court finds that this argument does not support dismissal of the Third-Party Complaint.
Rule 14(a) allows for the filing of a third-party complaint where a third-party defendant "is or may be liable to the third-party plaintiff for all or part of the plaintiff's claim against the third-party plaintiff."
Pending "Parallel" State Court Action
The Third-Party Defendants argue, apparently pursuant to 28 U.S.C. § 1367(c), that the Court should dismiss this action in light of a "parallel" state proceeding. The cited statute provides:
The district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if —
(1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction,
(3) the district court has dismissed all claims over which it has original jurisdiction, or
(4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction.28 U.S.C. § 1367(c).
Section 1367(c) does not address the situation involving a parallel state court action. Moreover, the cases cited by the Third-Party Defendants in support of their argument are not on point. The cited cases relate to the issue of staying a federal declaratory action when a parallel state court action is ongoing. [Third-Party] Defendant[s'] Memorandum in Support of Motion to Dismiss Third Party Complaint at 7 (citing Wilton v. Seven Falls Co., 515 U.S. 277 (1995) and Verizon Communications, Inc. v. Inverizon Int'l Inc., 295 F.3d 870 (8th Cir. 2002)). Therefore, the Third-Party Defendants have not submitted relevant authority in support of their argument. The Court also notes that CCC is not a party to the state court action. (Calkins Aff., Exs. 1, 2.)
For these reasons, this action will not be dismissed based on the allegedly parallel pending state court proceeding.
State Court Action Presents a "Compelling" Reason for Dismissal
The Third-Party Defendants argue that this matter should be dismissed pursuant to 28 U.S.C. § 1367(c)(4) because in "exceptional circumstances" a "compelling" reason for dismissal exists, i.e. the filing of the state court action. The Third-Party Defendants recognize that CCC is not a party to the state court suit, and CCC's intervention in the state court action is their suggested solution.
The Third-Party Defendants' argument is a restatement of their argument relating to the pending "parallel" state court action. The Third-Party Defendants have offered no authority in support of their argument, and the Court is unaware of any supporting authority. This action will not be dismissed pursuant to § 1367(c)(4).
CONCLUSION
For the reasons stated above, the Third-Party Defendants' motion to dismiss the Third-Party Complaint will be denied.
IT IS ORDERED that the Motion to Dismiss the Third-Party Complaint (Filing No. 90) filed by the Third-Party Defendants is denied.