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Memphis Equipment Co., Inc. v. Robinson

June 14, 2006

MEMPHIS EQUIPMENT COMPANY, INC., AND THE MEMPHIS EQUIPMENT COMPANY, INC. EMPLOYEE STOCK OWNERSHIP PLAN, INC., PLAINTIFF
v.
THERESA ROBINSON, DEFENDANT



The opinion of the court was delivered by: Sylvia H. Rambo United States District Judge

MEMORANDUM

Before the court is Defendant's motion to dismiss (Doc. 17) Plaintiff's complaint for failure to join a necessary and indispensable person. Additionally, before the court is Plaintiff's motion (Doc. 19) pursuant to the court's March 22, 2006 Order. The parties have briefed the issues and the matters are ripe for disposition. For the reasons that follow, the court will deny Defendant's motion and grant Plaintiff's motion.

I. History

Plaintiff Memphis Equipment Company*fn1 (hereinafter "MEC") is a corporation organized and existing under the laws of Tennessee. (Compl. ¶ 2.) MEC buys, rebuilds, and sells military trucks and parts. (Id. ¶ 6.) Defendant Theresa Robinson is a resident of Pennsylvania and a former employee of MEC. (Id. ¶¶ 3, 22.) Lawrence Scott was formerly the president and a board member of MEC. (Id. ¶ 7.) Francis Miller is Scott's mother and a resident of Tennessee. (Doc. 21 at 1.)*fn2 MEC's instant complaint alleges that Robinson acted in concert with Scott to wrongfully steal and convert MEC monies, to accept the benefits of stolen monies, and to conceal the funds stolen from MEC. (Compl. ¶ 27.) Specifically, MEC alleges that Robinson and Scott utilized MEC Funds to purchase a property located at 11305 Weatherstone Drive, Waynesboro, Franklin County, Pennsylvania, 17268 (hereinafter "the Property"). (Id. ¶ 25.)

In 2003, MEC brought suit against Scott in the United States District Court for the Western District of Tennessee, in an action captioned Max May v. National Bank of Commerce and Lawrence Scott, No. 03-2112 (W.D. Tenn. 2004) (hereinafter the "MEC-Scott Action").*fn3 MEC, in the MEC-Scott Action, alleged that Scott had acted without the approval of the MEC Board of Directors, breached his fiduciary duties as a director and officer of MEC, and wrongfully converted company funds. (Doc. 1, Ex. A.) The District Court of Western Tennessee found that Scott was liable for wrongful conversion of MEC funds and entered judgment in favor of MEC for $172,203.66. The District Court of Western Tennessee also found that MEC was entitled to restitution in the amount of $455,720.78 and $653,951.53 in attorney's fees and costs. (Doc. 30, Ex. B at 37-37; Id., Ex. C.)

MEC's instant complaint alleges that Scott purchased the Property with stolen MEC funds and subsequently put the deed to the Property in Robinson's name. (Id. ¶ 25.) Robinson's motion to dismiss asserts that Robinson and Scott entered into an unwritten agreement that provided that Robinson would act as nurse and caretaker for Miller, and that in return for Robinson's services Scott would purchase the Property collaboratively with Robinson. (Doc. 21 at 2.) Robinson alleges that she signed a mortgage to F&M Bank for $250,000 in connection with the Property. (Id.) Robinson further alleges that Miller contributed certain sums of money to the construction of the home and the payment of the F&M mortgage between 2001 and 2003. (Id. at 3.) According to Robinson, Miller requested that Robinson sign a note and a mortgage for $225,000, which Robinson did in September 2004 (hereinafter the "Miller Mortgage"). (Id.; Doc. 20, Ex. F.)

MEC does not dispute the existence of the Miller Mortgage; however, MEC states that it did not find out about the existence of the Miller Mortgage until after the instant complaint was filed. (Doc. 20 at 2.) On April 6, 2006, MEC filed a complaint in the Pennsylvania Court of Common Pleas captioned Memphis Equipment Company, Inc. and The Memphis Equipment Company, Inc. Employee Stock Ownership Plan, Inc. v. Frances M. Miller, Theresa Robinson and Lawrence Scott, No. 2006-1105 (hereinafter the "Miller State Court Action"). (Doc. 20, Ex. D.) MEC, by way of the Miller State Court Action, seeks to void the Miller Mortgage, an injunction against the dissipation of the Miller Mortgage through the payment of funds to Miller, and a declaration that the Miller Mortgage is a constructive trust for the benefit of MEC. (Id.)

On March 8, 2006, MEC filed a motion requesting that this court issue a temporary restraining order. (Doc. 3.) On March 9, 2006, the court issued a temporary restraining order that enjoined Robinson from selling, transferring, encumbering, or disposing of the Property. (Doc. 5.) On March 21, 2006, the parties submitted a joint stipulation (Doc. 11), which the court adopted in its March 22, 2006 order (Doc. 13). The March 22, 2006 order provided that Robinson would be allowed to sell the property subject to Plaintiff's approval and the fulfillment of certain conditions with respect to the Miller Mortgage. (Id.) Also on March 22, 2006, the court issued a scheduling order (Doc. 14.) that deferred the case mangment conference and provided that MEC and Robinson may submit a motion and supporting brief as to their proposal to address the Miller Mortgage.

Robinson filed the instant motion to dismiss on April 11, 2006, alleging that MEC failed to join Miller, that Miller is a necessary and indispensable party, and that joinder of Miller would destroy the court's diversity jurisdiction. (Doc. 17.) MEC filed a motion pursuant to the court's March 22, 2006 scheduling order on April 14, 2006 (Doc. 19), indicating that MEC had initiated the Miller State Court Action and requested that this court issue an order that the Miller State Court Action was the appropriate way to address the Miller Mortgage. On May 2, 2006, Robinson filed a response to MEC's April 14, 2006 motion. (Doc. 24.) MEC filed a response to Robinson's motion to dismiss on May 2, 2006. (Doc. 26.)

II. Legal Standard

The standard for compulsory joinder is set forth in Federal Rule of Civil Procedure 19, which provides in relevant part that A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in the person's absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may (i) as a practical matter impair or impede the person's ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest.

Fed. R. Civ P. 19(a). If the court finds that the absentee meets either the criteria for 19(a)(1) or 19(a)(2), but that it is not feasible to join the party then the court must look to 19(b) to determine whether the absentee is indispensable to the litigation. 19(b) provides in relevant part that the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed, the absent person being thus regarded as indispensable. The factors to be considered by the court include: first, to what extent a judgment rendered in the person's absence might be prejudicial to the person or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for non-joinder.

Fed. R. Civ. P. 19(b).

The party moving for joinder bears the burden of showing that the absentee is necessary, and in the case where the absentee cannot be joined, that the absentee is indispensable. Fed. Deposit Ins. Corp. v. Beall, 677 F.Supp. 279, 283 (M.D. Pa. 1987) citing 7 Wright, ...


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