The opinion of the court was delivered by: Judge Caputo
Two motions are presently before the Court. Third Party Defendant Invacare Corporation ("Invacare") moves to dismiss Third Party Plaintiff Dylewski's Third Party Complaint, (Doc. 8), pursuant to Federal Rules of Civil Procedure 12(b)(5) & (6) and moves to strike pursuant to Federal Rule of Civil Procedure 11(a). (Doc. 17.) Additionally, Third Party Defendants Mobility Products Unlimited, LLC and John Ward ("Moving Defendants") seek to dismiss the Third Party Complaint, (Doc. 8), pursuant to Federal Rules of Civil Procedure 12(b)(1) & (6). (Doc. 29.) Third Party Defendant Thomas Donahue also joins in the Moving Defendants' Motion to Dismiss. (Doc. 32.) For the reasons detailed below, the Court will grant both motions.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332.
On January 22, 2008, Pride Mobility Products Corporation ("Pride"), a Pennsylvania corporation, filed a complaint against Mobility Products Unlimited, LLC ("MPU"), a Florida limited liability company, and John and Teresa M. Ward, Florida residents. (Pride Mobility Complaint, Doc. 30, Ex. A.) Therein, they allege as follows.
In 1996, MPU began conducting business with Pride, developing a good working relationship and coming to agreements on invoice payments. (Id. ¶¶ 8, 9.) On May 18, 2005 an MPU manager, John Ward, entered into a Guaranty and Suretyship Agreement with Pride in order to continue the entities' business relationship and to secure future payments. (Id. ¶ 10.) In this agreement John Ward would "unconditionally guarantee to PRIDE the prompt and punctual payment of all sums dues from DEBTOR to PRIDE as well as any damages including collection fees and legal expenses that may arise in consequence of the failure of DEBTOR to make such payments when due." (Id.) On August 3, 2005, Teresa M. Ward, in order to continue the business relationship between MPU and Pride, entered into a Guaranty and Suretyship Agreement containing this same language.
MPU consistently failed to make timely payments as agreed under payment plans offered by Pride. (Id. ¶ 12.) In April 2007, because of a large outstanding debt owed by MPU to Pride, MPU's President, Tom Donahue entered into an oral payment agreement under which MPU would make weekly payments of ten thousand dollars ($10,000) on the company's outstanding debt. (Id. ¶ 13.) In addition to these payments, Donahue agreed that MPU would make prompt payment for current orders from Pride, with interest on the remaining balance accruing at a rate of eighteen percent (18%) per annum. (Id.) MPU consistently failed to make the agreed upon ten thousand dollar ($10,000) payments towards the outstanding debt. (Id. ¶ 14.)
Between June 21, 2005 and December 10, 2007, MPU ordered and received delivery of equipment from Pride. On December 12, 2007, Pride sent a letter to John and Teresa M. Ward demanding payment in full on MPU's outstanding account balance, pursuant to the Guaranty and Suretyship Agreements of May 18, 2005 and August 3, 2005. (Id. ¶ 16.) When Pride filed its complaint in January 2008, MPU owed Pride an outstanding balance of one million, sixty-two thousand, nine hundred forty-five dollars and twenty-one cents ($1,062,945.21). (Id. ¶ 17.)
In its January 22, 2008 Complaint, Pride presented four claims including (1) breach of contract by MPU (Count I), (2) unjust enrichment by MPU (Count II), (3) breach of Guaranty and Suretyship Agreement by John Ward (Count III), and (4) breach of Guaranty and Suretyship Agreement by Teresa M. Ward (Count IV). (Pride Mobility Complaint, Doc. 30, Ex. A.)
On February 5, 2008, Pride filed a Complaint in a second action naming Bryan Dylewski as Defendant. (Doc. 1.) Therein, Pride alleges that Dylewski resides at a Florida address, and that on August 25, 2000, in order to continue the business relationship between Pride and MPU, Dylewski entered into a Guaranty and Suretyship Agreement providing that he would "...unconditionally guarantee to PRIDE the prompt and punctual payment of all sums due from DEBTOR to PRIDE, as well as any and all damages that may arise in consequence of the failure of DEBTOR to make such payments when such payments are due." (Compl., Doc. 1, ¶¶ 2, 7.) The remainder of the February 5, 2008 Complaint reiterates many of the allegations contained in the January 22, 2008 Complaint, including the allegation that MPU consistently failed to make timely payments under payment plans offered by Pride and the allegation that MPU owed Pride an outstanding balance in excess of one-million dollars ($1,000,000). (Id. ¶¶ 8-12.) On January 25, 2008, Pride sent Dylewski a letter demanding full payment of MPU's outstanding balance pursuant to the Guarantee and Suretyship Agreement. (Id. ¶ 15.)
The February 5, 2008 Complaint presents a single count against Bryan Dylewski for a breach of the Guaranty and Suretyship Agreement and seeks a judgment in the amount of one million thirty-two thousand, nine hundred seventeen dollars and ninety-one cents ($1,032,917.91).
On April 30, 2008, Bryan Dylewski filed an Answer, Affirmative Defenses, and Third Party Claim. (Doc. 8.) In this document, Dylewski responds to the allegations in Pride's February 5, 2008 Complaint, provides five (5) affirmative defenses, and initiates a third party claim against MPU, John Ward, Thomas Donahue, and Invacare Corporation ("Invacare"). (Id. ¶¶ 8-13.) Third Party Defendant Donahue is a Florida resident, and Third Party Defendant Invacare is an Ohio corporation specializing in manufacture and distribution of medical equipment designed for home use. (Id. ¶¶ 16-18.)
The Third Party Complaint explains that MPU was formed by Dylewski and his uncle in 1996 to engage in the sale and service of medical equipment, primarily power mobility devices such as wheelchairs and scooters. (Id. ¶¶ 20, 21.) During the early years of the company Dylewski signed personal guarantees to insure payment of MPU's debt obligations in effort to develop and grow the business. (Id. ¶ 22.) During this early stage of operation, MPU developed national advertising campaigns, established locations throughout the country, and trained staff to process Medicare claims. (Id. ¶ 23.) In 2004, MPU came under investigation by the Office of the Inspector General, and as a result Dylewski relinquished all management roles at MPU effective July 12, 2005. (Id. ¶ 24.) While Dylewski has maintained a fifty percent (50%) ownership interest in the company, virtually all of the MPU management decisions since his July 2005 relinquishment of duties have been made without Dylewski's knowledge or approval. (Id.) Since July 12, 2005, John Ward has been the sole Manager, the sole Member of the Board of Managers, and the Chief Executive Officer at MPU. (Id. ¶ 25.) Starting in October 2005, Thomas Donahue, who was recommended by Invacare, has served as MPU's President and Chief Operating Officer. (Id. ¶ 26.)
By early 2006, the financial statements of MPU revealed that the company had become insolvent and MPU's liabilities exceeded its assets by approximately twenty-five million dollars ($25,000,000) with Invacare as the company's largest creditor. (Id. ¶¶ 27, 28.) During the period of MPU's insolvency, Invacare has made transfers of cash to MPU at the specific request of Thomas Donahue. (Id. ¶ 29.) These disbursements have been used to cover expenses including payroll and advertising costs. (Id.) By autumn of 2007, Invacare held roughly ninety percent (90%) of MPU's debt and, while it continued to accumulate MPU debt, categorized much of this debt as "bad debt" in Invacare's financial reports. (Id. ¶ 31.)
Defendant and Third Party Plaintiff Dylewski represents that the impact of MPU's debt obligations to Invacare was to make MPU a part of Invacare in all but name and official corporate structure. (Id. ¶ 33.) Invacare is extensively involved in the daily operations at MPU and approves purchases of supplies and equipment, provides funds for operating expenses, and controls what expenses and debts owed by MPU are paid. (Id. ¶ 34.) Dylewski alleges that Invacare's control of MPU's finances is the reason why MPU's debt subject to his Guaranty made on August 20, 2000 has not been paid.
Dylewski's Third Party Complaint presents eight (8) counts against MPU, Invacare, and John Ward. Count I asserts that Dylewski, by virtue of his "passive" status in MPU's financial affairs, is entitled to identification from MPU, Invacare and John Ward. (Id. ¶¶ 42-45.) Count II, alternatively, seeks contribution from MPU, Invacare and John Ward for any damages assessed against Dylewski as the result of Pride's complaint. (Id. ¶¶ 46, 47.) Count III presents an action for conversion against Invacare based on the allegations that Invacare transformed MPU into a de facto asset. (Id. ¶¶ 48-54.) Count IV presents an action under Florida law against Invacare for civil theft of Dylewski's ownership in MPU. (Id. ¶¶ 64-65.) Count V, alleges a conspiracy by all Third Party Defendants to unlawfully appropriate Dylewski's business interests in MPU. (Id. ¶¶ 66-72.) Count VI seeks damages against Third Party Defendants Ward and Donahue for a breach of the fiduciary duties owed to Dylewski in their capacity as officers of MPU. (Id. 73-78.) Count VII presents a tort action for interference with a contract against Third Party Defendants Ward and Donahue for their operation of the MPU business. (Id. ¶¶ 79-83). And finally, Count VIII brings an action of unjust enrichment against Third Party Defendant Invacare. (Id. ¶¶ 84-87).
On May 6, 2008, Pride filed a Motion to Consolidate the cases involving MPU, John and Teresa M. Ward, and Bryan Dylewski. (Doc. 9.) The Court granted this motion in an Order dated June 20, 2008. (Doc. 20.) While Plaintiff's consolidation motion was pending before the Court, on June 18, 2008, Third Party Defendant Invacare Corporation filed a Motion to Dismiss Dylewski's Third Party Complaint pursuant to Federal Rules of Civil Procedure 12(b)(5) & (6) and a Motion to Strike pursuant to Federal Rule of Civil Procedure 11(a). On July 28, 2008, Third Party Defendants Mobility Products Unlimited and John Ward filed a Motion to Dismiss Dylewski's Third Party Complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) & (6). (Doc. 29.) Teresa M. Ward, a Defendant in Pride's original action, also joined in this Motion to Dismiss even though she is not named in Dylewski's Third Party Complaint. On July 31, 2008, Third Party Defendant Thomas Donahue joined in the Motion to Dismiss filed by MPU and John Ward on July 28. (Doc. 32.) Both motions have been fully briefed, and on January 9, 2009, the Court heard oral arguments on the parties' motions to dismiss. As they have been thoroughly briefed and argued, these motions are currently ripe for disposition.
Rule 12(b)(6) of the Federal Rules of Civil Procedure provides for the dismissal of a complaint, in whole or in part, for failure to state a claim upon which relief can be granted. Dismissal is appropriate only if, accepting as true all the facts alleged in the complaint, Plaintiff has not plead "enough facts to state a claim to relief that is plausible on its face," Bell Atlantic Corp. v. Twombly, 550 U.S. ----, 127 S.Ct. 1955, 1960, 167 L.Ed.2d 929 (2007), meaning, enough factual allegations "to raise a reasonable expectation that discovery will reveal evidence of" each necessary element. Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008); see also Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993) (requiring complaint to set forth information from which each element of a claim may be inferred). In light of Federal Rule of Civil Procedure 8(a)(2), the statement need only "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Erickson v. Pardus, --- U.S. ----, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007) (per curiam). "[T]he factual detail in a complaint [must not be] so undeveloped that it does not provide a defendant the type of notice of claim which is contemplated by Rule 8." Phillips, 515 F.3d at 232; see also Airborne Beepers & Video, Inc. v. AT&T Mobility LLC, 499 F.3d 663, 667 (7th Cir. 2007).
In deciding a motion to dismiss, the Court should consider the allegations in the complaint, exhibits attached to the complaint and matters of public record. See Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993), cert. denied, 510 U.S. 1042 (1994). The Court may also consider "undisputedly authentic" documents where the plaintiff's claims are based on the documents and the defendant has attached a copy of the document to the motion to dismiss. Id. The Court need not assume that the plaintiff can prove facts that were not alleged in the complaint, see City of Pittsburgh v. West Penn Power Co., 147 F.3d 256, 263 (3d Cir. 1998), nor credit a complaint's "bald assertions" or "legal conclusions." Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997).
When considering a Rule 12(b)(6) motion, the Court's role is limited to determining whether the plaintiff is entitled to offer evidence in support of the claims. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The Court does not consider whether the plaintiff will ultimately prevail. See id. The defendant bears the burden of establishing that the plaintiff's complaint fails to state a claim upon which relief can be granted. See Gould Elecs. v. United States, 220 F.3d 169, 178 (3d Cir. 2000).
I. Mobility Products, LLC, John Ward, and Teresa Ward's Motion to Dismiss
Third Party Defendants Mobility Products, John Ward, and Teresa Ward present four main arguments in their motion to dismiss Dylewski's Third Party Complaint. First, they argue that Dylewski has failed to properly invoke this Court's subject matter jurisdiction over his claims against MPU and Ward. Second, these Defendants argue that this Court lacks jurisdiction over Dylewski's third party claims. Third, the Defendants argue that the Court should not exercise supplemental jurisdiction over Dylewski's third party claims. And finally, Defendants argue that Dylewski's Third Party Complaint fails to state a claim upon which relief can be granted. The Court will first consider the Defendants' three arguments concerning this Court's jurisdiction over Dylewski's claims.
In their first jurisdictional argument, the Moving Defendants argue that Dylewski has failed to properly invoke this Court's subject matter jurisdiction over the claims he asserts against Mobility Products and John Ward. The Federal Rules of Civil Procedure provide that any "pleading which sets for a claim for relief, whether an original claim, counterclaim, cross-claim, or third party claim, shall contain (1) a short and plain statement of the grounds upon which the court's jurisdiction depends." Fed R. Civ. P. 8(a)(1). Thus, Dylewski's Third Party Complaint must include such a statement identifying this Court's jurisdiction. The Moving Defendants' argue that his Third Party Complaint provides no such statement, contains no allegations indicating an independent basis upon which this Court may exercise subject matter jurisdiction, and offers only conclusory allegations that jurisdiction and venue are proper and that the Court has diversity jurisdiction over Dylewski's Third Party Complaint.
The Moving Defendants' second jurisdictional argument states that Dylewski's own assertions demonstrate that there is no independent basis for jurisdiction over his Third Party Complaint. This argument has two sub-parts. First, the Moving Defendants argue, and the Court agrees, that Dylewski's claims for indemnification, contribution, unlawful appropriation of business matters, breach of fiduciary duty, and tortious interference do not involve questions of federal law and, thus, do not invoke the Court's federal question jurisdiction. Second, the Moving Defendants argue that this Court lacks diversity jurisdiction over the claims in Dylewski's Third Party Complaint because there is no complete diversity between Dylewski (a Florida citizen), the Wards (also Florida citizens), and Mobility Products (a Florida limited liability company). In order to proceed pursuant to this Court's diversity jurisdiction, Dylewski "must state all party citizenships such that the existence of complete diversity can be confirmed," Chemical Leaman Tank Lines v. Aetna Casualty Ins. & Surety Co., 177 F.3d 210, 222 n.13 (3d Cir. 1999), and the statements of citizenship contained in Dylewski's Third Party Complaint state that both Third Party Plaintiffs and Third Party Defendants are Florida citizens.
In his brief in opposition, and in the oral argument held on January 9, 2008, Dylewski urges the Court to consider the procedural history of this case and particularly focuses on the Court's June 20, 2008 Order (Doc. 20) consolidating Pride's case against Dylewski (3:08-cv-0231) with a separate case filed by Pride against Mobility Products, John Ward, and Teresa Ward (3:08-cv-0137). It is Dylewski's contention that the effect of this consolidation was to make him a co-defendant with the Moving Defendants. Under this characterization, Dylewski's claims against MPU, Donahue, and the Wards are not third party claims, but instead, should be viewed as cross claims properly brought pursuant to Federal Rule of Civil Procedure 13. Dylewski supports his argument by citing generally to the Court of Appeals for the Third Circuit's decision in Bergman v. Atlantic City, 860 F.2d 560 (3d Cir. 1988), a case that addressed an issue of whether appellate jurisdiction existed over one action despite the pendency of a consolidated action in the district court. After reviewing how other circuit courts addressed similar issues, the Court of Appeals held that "where two or more actions are consolidated for all purposes of discovery and trial, a judgment in one of those actions is not appealable either until all of the consolidated actions have been resolved, or until the district court grants a motion for certification under Rule 54(b)." Id. at 567.
While the Bergman holding, if broadly construed, may suggest that Dylewski, MPU, Donahue, and John Ward share a co-defendant relationship, the Court believes that the Third Circuit Court of Appeals' decision in Cella v. Togum Constructeur Ensembleir en Industrie Alimentaire, 173 F.3d 909 (3d Cir. 1999), better represents and discusses the issue currently before this Court. In Cella, the Court of Appeals stated that "consolidation is permitted as a matter of convenience and economy in administration, but does not merge the suits into a single cause, or change the rights of the parties, or make those who are parties in one suit parties in another." Id. at 912 (quoting Johnson v. Manhattan Ry. Co., 289 U.S. 479, 496-97 (1933)). "Thus, while a consolidation order may result in a single unit of litigation, such an order does not create a single case for jurisdiction purposes." Id. As a result, the Court "should determine presence or absence of diversity jurisdiction by analyzing each case separately even though cases [have] been consolidated." Id. at 913 (citing Webb v. Just in Time, Inc., 769 F.Supp. 993, 996 (E.D. Mich. 1991)).
Provided this guidance from the Court of Appeals, the Court cannot consider Dylewski and the Moving Defendants as co-defendants when conducting its jurisdictional analysis. Mindful of the original separation of the suits filed by Pride Mobility, the Court cannot confirm the diversity of citizenship between Dylewski and the Moving Defendants required to invoke this Court's jurisdiction pursuant to 28 U.S.C. § 1332. With the absence of both federal question and diversity jurisdiction over Dylewski's third party claims, the Court may appropriately exercise jurisdiction only if those claims sufficiently invoke the Court's supplemental or ancillary jurisdiction established by 28 U.S.C. § 1367.
Section 1367(a) provides that in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.
However, the grant of supplemental jurisdiction is expressly limited by 28 U.S.C. § 1367(b) which states, in relevant part, that:
In any civil action of which the district courts have original jurisdiction founded solely on [the Court's diversity jurisdiction], the district courts shall not have supplemental jurisdiction under subsection (a) over claims by plaintiffs against persons made parties under Rule 14 . . .of the Federal Rules of Civil Procedure . . . when exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section [28 USCS § 1332]. Further, district courts may exercise discretion over their supplemental jurisdiction as provided by 28 U.S.C.§ 1367(c), which states that:
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.
The Third Circuit Court of Appeals has interpreted the provisions of § 1367(a) - (c) and has stated that three requirements must be satisfied before supplemental jurisdiction is appropriate.
"The federal claim must have substance sufficient to confer subject matter jurisdiction on the court." The state and federal claims must derive from a common nucleus of operative facts, and the claims must be such that they would ...