AND NOW, this 7th day of September, 1993, upon consideration of Motion By Plaintiffs, Enza Inc., Salvator Sapienza, and Joanne Sapienza, to Dismiss Defendant We The People, Inc. from the Action Pursuant to Fed. R. Civ. P. 21, Defendants' Motion to Dismiss Complaint for Lack of Subject Matter Jurisdiction or to Set Aside Default Judgment, and the responses thereto, it is hereby ORDERED that the Motion is the Plaintiffs' Motion is DENIED, the Defendants' Motion is GRANTED, the Default Judgment is VACATED, and the Complaint is DISMISSED for lack of subject matter jurisdiction.
This suit arises out of a failed "Do-it-yourself" legal business and the partnership agreement that created it.
The plaintiffs allege in their complaint that on August 10, 1991, the plaintiff Mr. Salvator Sapienza met defendant Michael Yoelson, a representative of defendant We the People, Inc. (WTP) at the Business and Franchise show held at the Valley Forge Convention Center. Compl. P 9. Mr. Yoelson stated that WTP was offering partnerships in the business of operating "We The People Business Centers." Id. P 10. These centers provided lay people with information and forms necessary for executing certain routine legal transactions, such as bankruptcy, uncontested divorces, wills and trusts. Id. Later, Mr. Sapienza met with Yoelson, defendant Lawrence Ballard, and William Ashbury,
another representative of WTP. Id. PP 14-15. At this meeting, he was given a booklet detailing WTP's partnership opportunities and a partnership agreement. Id. P 15.
Subsequent to the meeting, Mr. Sapienza reviewed materials provided by WTP representatives and decided to pursue a partnership with WTP. Id. P 19. However, before he signed the partnership agreement he first consulted with the Better Business Bureau in Tampa, Florida (the principal place of WTP's business). Id. P 20. Mr. Sapienza agreed to enter into the WTP partnership and on September 10, 1991, he mailed a $ 3,000 check to WTP. Id. P 22. On September 17, 1991, plaintiff signed the Partnership Agreement and mailed a $ 37,000 check to WTP. Id. P 23. On September 25, 1991, the plaintiffs received a copy of the Partnership Agreement signed by Defendant Carol Bradley as President of WTP Partners # 2111 Inc. Id. P 24. Because the plaintiffs desired the protection of the corporate form, they incorporated their business by forming Enza Inc., a Delaware corporation. Id. PP 2, 27. On December 10, 1991, a new superseding Partnership Agreement was executed between Enza, Inc. and WTP Partners # 2111 Inc.
Id. P 27, Ex. 6. Defendant Yoelson signed as President of WTP Partners # 2111 Inc. Id. P 27.
The plaintiffs opened their "We the People Business Center." The center ceased operating on April 30, 1993, after numerous difficulties. Id. P 37.
On May 19, 1993, the plaintiffs, Enza Inc., Salvator Sapienza, and Joanne Sapienza, filed suit against the defendants We the People Inc., Lawrence Ballard, Michael Yoelson, and Carol Bradley. Count One of the Complaint asserts a claim for fraudulent misrepresentation against the defendants. Count Two asserts a claim for breach of contract. Diversity jurisdiction, 28 U.S.C. § 1332, is the only basis asserted by the plaintiffs for the court's jurisdiction over this case. However, the complaint asserts that plaintiff Enza, Inc. and defendant We The People, Inc. are both corporations created under the laws of the State of Delaware. Compl. P 2, 3. The defendants failed to answer the complaint. On July 15, 1993, the plaintiffs requested that a default judgment be entered against the defendants. On July 16, 1993, this court entered a default judgment in favor of the plaintiffs and against the defendants.
The statute conferring diversity jurisdiction on the federal courts, 28 U.S.C. § 1332, is to be strictly construed. City of Indianapolis v. Chase National Bank, 314 U.S. 63, 76, 86 L. Ed. 47, 62 S. Ct. 15 (1941). In order to sustain federal jurisdiction based on diversity, all of the parties on one side of the controversy must be citizens of different states from all the parties on other side. Employers Ins. of Wausau v. Crown Cork & Seal Co., 905 F.2d 42, 45 (3d Cir. 1990) (quoting City of Indianapolis, 314 U.S. at 69). The burden of proving diverse citizenship falls on the party, in this case the plaintiff, invoking federal jurisdiction. Lang v. Windsor Mount Joy Mutual Ins. Co., 487 F. Supp. 1303, 1305, (E.D. Pa.), aff'd, 636 F.2d 1209 (3d Cir. 1980). From the face of the complaint, it is clear that the plaintiffs have failed to meet their burden by naming WTP as a defendant.
The question now before this court is whether the court should dismiss the entire suit or whether the court should dismiss just the nondiverse party, i.e. WTP.
A court may dismiss a nondiverse party in order to achieve diversity, even after judgment has been rendered. Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 832, 104 L. Ed. 2d 893, 109 S. Ct. 2218 (1989); Publicker Industries v. Roman Ceramics, 603 F.2d 1065, 1069 (3d Cir. 1979). Rule 21 of the Federal Rules of Civil Procedure provides:
Misjoinder of parties is not ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or of its own initiative at any stage of the action and on such terms as are just. Any claim against a party may be severed and proceeded with separately.