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Lamar Advantage GP Company, LLC v. Joyce

United States District Court, M.D. Pennsylvania

October 12, 2017

LAMAR ADVANTAGE GP COMPANY, LLC and LAMAR CENTRAL OUTDOOR, LLC Plaintiffs
v.
GERARD JOYCE Defendant

          MEMORANDUM OPINION

          ROBERT D. MARIANI UNITED STATES DISTRICT JUDGE

         I. Procedural History

         The issue that has been placed before this Court is whether the action of Plaintiffs, Lamar Advantage GP Company, LLC, and Lamar Central Outdoor, LLC, (hereinafter "Lamar" or "the Lamar Plaintiffs") must be dismissed pursuant to Federal Rule of Civil Procedure 19 for failure to join Landmark Infrastructure Holding Company, LLC, Bank of America, N.A., and Wilmington Trust National Association, who are the assignees of certain leases between Defendant Joyce, as lessor, and Lamar, as the assignee of Chancellor Media Corporation. For the reasons that follow, the Court finds that the assignees of Joyce are indispensable parties whose joinder would destroy complete diversity as among the parties to this action, therefore requiring that Lamar's complaint, and the entirety of the action, be dismissed.

         In order to engage in the required analysis of this issue, the procedural history of this case must be recounted.

         On July 3, 2013, Lamar filed suit against Gerard Joyce, individually, Lofts at the Mill, LP, and Lofts GP, LLC (Doc. 1).

         On July 31, 2013, the action against Lofts at the Mill, LP and Lofts GP, LLC, was dismissed without prejudice pursuant to a stipulation between the Plaintiff and all Defendants (Doc. 10).

         On November 4, 2013, this Court granted Lamar's Motion for Leave to File an Amended Complaint in this case. (Doc. 20). Defendant Joyce then moved to dismiss the Amended Complaint. (Doc. 23). The matter was fully briefed and this Court, by Order dated June 16, 2014 (Doc. 33) denied Defendant's motion to dismiss. In the Memorandum Opinion accompanying this Court's Order, the Court referenced the allegations of Lamar's Amended Complaint, specifically that on October 23, 1998, Chancellor Media Corporation ("Chancellor") and Defendant Joyce entered into a Settlement Agreement and Mutual Release ("Agreement") (Doc. 32, at 2). The Settlement Agreement and Mutual Release whose provisions were alleged in the Amended Complaint to have been breached, is of record in this case (Doc. 85-2).

         Paragraph 2D of that Agreement provides as follows:

Joyce agrees not to compete with Chancellor, either separately or in association with others, as an owner, employee, manager, operator, principal, partner, officer, director, share-holder, consultant, representative, agent, investor or private individual in connection with any outdoor advertising business in the greater Scranton/Wilkes-Barre Pennsylvania area and the greater Hartford-Connecticut area for a period of thirty (30) years from the date of this Agreement. The greater Scranton/Wilkes-Barre area shall mean the counties of Lackawanna, Luzerne, Wayne, Pike, Wyoming, Susquehanna, Monroe, Carbon and Schuylkill. For purposes of this Agreement, outdoor advertising business shall mean the construction, ownership and/or leasing of bulletins and poster panels, including the sale of advertising on the same and the leasing of land for the purposes of construction or maintaining bulletins and poster panels, except as contemplated in this Agreement. Notwithstanding the foregoing, Joyce shall not be prohibited from: (i) constructing, owning and leasing a sign structure and outdoor advertising thereon on property owned by Joyce between Exits 55 and 56 on Interstate 81 which structure will be a 660' setback structure; and (ii) purchasing properties on which bulletin boards or poster panels are located at the time of such purchase, provided that the pre-existing lease agreements for such bulletins or poster panels, in effect at the time of such purchase shall remain in effect, for a period of thirty (30) years from the date of Joyce's purchase of such property and shall be honored by Joyce for the said thirty (30) year period (this language is understood by the parties to expressly include the rental amounts as stated in such preexisting leases at the time of Joyce's purchase of any such property); or (iii) owning not more than five percent (5%) of the outstanding shares of any publicly-held corporation engaged in the outdoor advertising business. For purposes of this subsection 2D, the term Joyce shall include any corporation, partnership or other business entity in which Joyce has an ownership interest.

(Doc. 85-2 at 4-5).

         Joyce moved to dismiss Lamar's Amended Complaint on a single basis - that the Agreement bars competition only with Chancellor, not Joyce. (Doc. 24, at 8).

         This Court denied Joyce's motion to dismiss on the following basis:

Since the Amended Complaint alleges that the Agreement contains a successors and assigns clause (Paragraph 7B), Plaintiff satisfactorily pleads that Agreement obliges Defendant to comply with its provisions, including the non-compete clause of paragraph 2D, for the benefit of Plaintiff as the successor and assignee of Chancellor.

(Doc. 32 at 5).

         Lamar filed a Second Amended Complaint on December 23, 2014. (Doc. 55). Attached to the Second Amended Complaint is a document entitled "Intercompany Transfer and Assignment." (Doc. 55-1, Ex. K). That agreement recites that as of August 11, 1999, "Lamar Media Corp. acquired (directly or indirectly) ownership of all subsidiaries of the Chancellor Sellers then holding outdoor advertising assets (collectively, 'Chancellor Outdoor Subsidiaries'), and as a result Lamar Media Corp. acquired all outdoor advertising assets and operations of the Chancellor Outdoor Subsidiaries located in the Scranton, Pennsylvania metropolitan area (collectively 'Chancellor's Scranton Area Outdoor Assets')". Lamar Central Outdoor, LLC, as assignor, then assigned all of its "right, title and interest in, to and under Chancellor's Scranton Area Outdoor Assets (and the Agreement), to" Lamar Advantage GP Company assignee. (Id.).

         The assignment between Lamar Central Outdoor, LLC, and Lamar Advantage GP Company, LLC, was undertaken because a prior, written assignment between these parties had not been located and according to this transfer agreement "Lamar Media Corp. desires that Assignor perfect the assignment of the Chancellor's Scranton Area Outdoor Assets (including the Joyce agreement) to Assignee herein." [Id.).

         As to the claims of Lamar that Joyce had violated the non-compete provisions of the Settlement Agreement and Release entered into by Joyce and Chancellor which had been assigned to Lamar, Lamar filed a motion for partial summary judgment on January 22, 2015. (Doc. 58). Previously, Joyce had filed a motion for summary judgment on September 26, 2014. (Doc. 38). These motions were referred to Magistrate Judge Carlson for a Report and Recommendation ("R&R").

         Judge Carlson issued his R&R on August 28, 2015. (Doc. 66). Judge Carlson recommended that "Lamar's motion for summary judgment (Doc. 58) be granted but only insofar as it seeks a legal judgment that it is the successor-in-interest to Chancellor and entitled to seek enforcement of its rights under the 1998 Settlement Agreement." (Id. at 23). In all other respects, Judge Carlson recommended that Lamar's motion be denied and that, likewise, the motion for summary judgment of Joyce also be denied.[1]

         This Court, by Order dated September 15, 2015 (Doc. 67), and in the absence of objections from either plaintiffs or defendant, adopted the R&R, granted plaintiffs' motion for partial summary judgment insofar as it sought a judicial determination that the plaintiffs are legally entitled to seek enforcement of the Settlement Agreement that provides the basis for this action. This Court further ruled that "[a]s a matter of law, Plaintiffs have standing to enforce their rights under the 1998 Settlement Agreement as successor-in-interest to Chancellor's rights." (Id. at 2). The plaintiffs' motion was denied in all other respects and the defendant's motion for summary judgment was likewise denied.

         By Order dated September 23, 2015, trial was scheduled to begin in this case on February 22, 2016, and a final pretrial conference was set for February 12, 2016. (Doc. 70). In accordance with this Court's scheduling order, the parties filed pre-trial memoranda on February 8, 2016. (Docs. 91, 94).

         Defendant Joyce's pre-trial memorandum made several assertions, including that Joyce took no action that violated the terms of the non-compete provisions set forth in the Settlement Agreement and Mutual Release. (Doc. 94, at 6-8). Joyce also presented his contentions that he did not engage in a material breach of the non-compete provisions of the Settlement Agreement and Mutual Release. (Id. at 8-11).

         In addition, Joyce responded to the position taken by the plaintiffs that it was their intention to rescind the Settlement Agreement and to terminate the Site Leases and Facility Lease entered into as part of the Settlement Agreement by Joyce and Chancellor, with Chancellor's interest having been assigned to Lamar. [Id. at 11-13). Lamar had contended that Joyce's violation of the non-compete provisions of the Agreement constituted a material breach which excused Lamar from further performance under the Agreement. In response, Joyce argued that the site leases and facility lease had been assigned by Joyce or his companies to entities, who, if joined as defendants, would destroy complete diversity as between the plaintiffs and Joyce, and thus deprive the Court of jurisdiction. Joyce's pre-trial memorandum stated in part:

However, if Plaintiffs establish a material breach of the Agreement and if they elect to rescind the Agreement, it is anticipated that they may seek to have the Site Leases and the Scranton Facility Lease ("Facility Lease") declared void. The Court does not have jurisdiction over such a claim since its determination implicates indispensable parties that are not parties to this litigation. Joyce's interests under some of the Site Leases and the Facility Lease have been assigned to third parties ("Third Party Assignees") and were assigned to Third Party Assignees at the time of filing this action and Plaintiffs were aware of the same.

(Id. at 12).

         The issue of the non-joinder of indispensable parties having been raised by Joyce, the Court, at the pretrial conference, engaged in a discussion of the issue with counsel for the parties. At the pretrial conference, an attempt was made to identify the entities to which Joyce had assigned the Site Leases and Facility Lease. Among the assignments which were identified as being currently in effect were assignments to Bank of America and Landmark Dividend. Counsel for Lamar confirmed Lamar's position that if it were successful in this action, it intended to terminate the Site Leases and Facility Lease which Joyce had assigned to Bank of America and Landmark Dividend. Counsel for Joyce described the nature and purpose of these assignments as follows:

Mr. Weinschenk: Landmark Dividend is probably a private equity company that purchases billboards, long-term leases from individuals and gives them cash. They take an assignment of that lease for the remainder of the term, and then when the term is up, the lease goes back to the original --
The Court: So Landmark fully expects they would get the benefit of that lease over its term.
Mr. Weinschenk: That's correct.

(Off. Pretrial Tr., Feb. 12, 2016, at 10).

         After extended discussion as to the application of Federal Rule of Civil Procedure 19, as well as a discussion of Lamar's knowledge of the assignment of these leases occurring after the commencement of this litigation (id. at 10-15), the Court inquired as to whether Lamar would agree that the leases which had been assigned to the non-diverse third parties would be unaffected by any verdict or judgment in Lamar's favor. Counsel for Lamar did not agree to such an approach:

The Court: ... But in any event, my suggestion here would be that we have to postpone this trial and allow you to join these people. I really do not see a way out of that, other than you committing - it would have to be, again, formally on the record, perhaps, even in documentary form from your client -.-that these leases would be unaffected by any verdict or judgment in your favor.
Mr. McDonough: No.
The Court: And you can't do that.
Mr. McDonough: We can't do that.

(Id..at15).

         This Court's Order entered February 12, 2016 (Doc. 99), immediately following the pretrial conference, summarizes the issue of joinder of the non-diverse third party assignees as raised in the defendant's pretrial memorandum and as discussed at the pretrial conference. The Order granted Plaintiff thirty days "to make a determination of all assignees of the Lamar-Joyce leases who shall be joined as Defendants in this matter, as well as to identify any other indispensable parties, who shall likewise be joined ('the Supplemental Discovery Period')." (Id. at ¶ 2).

         The Order further granted Plaintiffs an additional thirty days "from the expiration of the Supplemental Discovery Period ... within which to effect the joinder of all indispensable parties." (/of. at ¶ 3).

         Finally, the February 12, 2016, Order of this Court provided that within sixty days of the date of the Order, "Plaintiff shall submit of record a report of any assignee or other indispensable party whose joinder will deprive the Court of its jurisdiction. If any such indispensable parties exist, the parties shall have fourteen (14) days from the date on which Plaintiff submits its report to file briefs in support of their respective positions as to 'whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed, ' Fed.R.Civ.P. 19 (b), pursuant to Federal Rule 19 and applicable case law." (Id. at ¶ 4).

         By Order dated March 4, 2016, the Supplemental Discovery Period was extended to April 14, 2016, and Plaintiffs were granted until May 14, 2016 "to effectuate the joinder of indispensable parties" as well as "to submit a report to the Court identifying the assignees and/or indispensable parties whose joinder will deprive the Court of its jurisdiction in this matter." (Doc. 102, at ¶¶ 2, 3). The parties were further granted 14 days from the date Plaintiffs submitted the aforementioned report to file briefs on the issue of whether, "in equity and good conscience, the action should proceed among the existing parties or should be dismissed .. ."(Id.. at¶4).

         On May 10, 2016, the Lamar Plaintiffs moved to amend their Second Amended Complaint to permit the addition of certain "Joyce affiliated entities" who were identified as Lofts at the Mills, LP., Lofts GP, LLC, AMB Investments of Pennsylvania, Inc. and May Acquisition, LLC. (Doc. 104). Thus, the Lamar Plaintiffs sought leave to file the Third Amended Complaint attached to their motion (Doc. 104-1).

         Lamar's motion seeking leave to file a Third Amended Complaint, alleged:

The Lamar Entities now seek to include the parties which it previously stipulated to dismiss without prejudice, as well as AMB Investments of PA, Inc., (a closely held Joyce entity) as well as May Acquisition, an entity recently formed by Joyce and an assignee of a site lease subject to the 1998 Settlement Agreement. These joinders will not destroy this Honorable Court's jurisdiction and will permit a merits determination as to the issues which have been pending in this Court for nearly three years.

(Doc. 104, at ¶ 12).

         In that same motion, the Lamar Plaintiffs asserted that "Joyce had also made an assignment of the lease payments for the Scranton facility lease which was at issue in this litigation on February 24, 2015. The assignment of the facility lease was to Bank of America, N.A. Bank of America, N.A. in turn assigned its interest in the leases and rents subject to the 1998 Settlement Agreement to Wilmington Trust, National Association on August 5, 2015." (Id. at ¶ 9). The Lamar Plaintiffs, however, did not seek in their motion for leave to file a Third Amended Complaint leave to add Bank of America, Landmark Infrastructure Holdings Company, LLC ("Landmark") or the Wilmington Trust.

         Lamar Plaintiffs, in their brief in support of their motion to file a Third Amended Complaint (Doc. 107) offered:

The entry of an Order to permit the filing of the Third Amended Complaint will accomplish the objectives and conform with the procedure outlined by this Honorable Court in its February 12, 2016 Order. Consistent with that Order, Lamar will advise the Court as to the assignees not sought to be joined that will deprive this court of its jurisdiction. Under this procedure, this court can retain jurisdiction in order to make the requisite finding under F.R.C.P. 19(a) and F.R.C.P. 19(b), if necessary.

(Id. at 6).

         The filing by the Lamar Plaintiffs of a motion for leave to file a Third Amended Complaint without joining the non-diverse third party assignees of Joyce prompted this Court to issue an Order on May 23, 2016. (Doc. 112). In that Order, this Court noted that "the submissions thus far from Plaintiffs have not complied with the framework set forth in the Court's Order for identifying the 'assignee or other indispensable party whose joinder will deprive the Court of its jurisdiction [i]f any such indispensable parties exist.'" [Id. at 1). The Court's Order continued:

Until the issue of the necessary joinder of any indispensable party is resolved, the Court will not consider Plaintiffs' Motion to Add Additional Parties (Doc. 104) in that a review of the documents submitted reveals no attempt to join any indispensable party listed in Plaintiffs letter to the Court on May 13, 2016.

(Id. at 2).

         The letter of counsel for the Lamar Plaintiffs dated May 13, 2016 (Doc. 108) identified "the following potential parties as assignees of Joyce/Lofts/ABM Investments of Pennsylvania, Inc., and May Acquisition, LLC, as assignees of those entities: (1) Landmark Infrastructure Holding Company, LLC; (2) Bank of America, N.A., and (3) Wilmington Trust, National Association, As Trustee for Morgan Stanley Bank of America Merrill Lynch Trust 2015-C24, Commercial Mortgage Pass-Through Certificates, Series 2015-C24."

         The letter further stated that "[t]he Lamar Entities wish to inform the Court that they will submit their brief consistent with the Court's directive which will include analysis under Federal Rule of Civil Procedure 19 as to whether the foregoing parties are indispensable so that the Court can make a determination as to whether it will relinquish jurisdiction in this matter." (Id.).

         Counsel for the Lamar Plaintiffs, by letter dated May 31, 2016 (Doc. 113), identified the non-diverse assignees of Joyce whose joinder, Plaintiffs' counsel acknowledged, would deprive this Court of jurisdiction over this matter. Specifically, Plaintiffs' counsel wrote:

In addition to the above identified indispensable parties, the Plaintiffs identified the following assignees of the Defendants who the Court may also consider to be indispensable parties:
1.Landmark Infrastructure Holding Company, LLC
2.Bank of America, N.A., and
3.Wilmington Trust National Association, as Trustee for Morgan Stanley Bank of America Merrill Lynch Trust 2015-C24, Commercial Mortgage Pass-Through Certificates, Series 2015-C24.
The three assignees identified above are Delaware entities. Therefore, the joinder of any of these entities would deprive the Court of jurisdiction over this matter. For this reason and in accordance with Fed.R.C.P. 19 (a) and (b), the Plaintiffs made no attempt to join any of these three assignees as party Defendants in this matter. However, as required by Fed.R.C.P. 19 (c), the Plaintiffs set forth in their proposed Third Amended Complaint (attached as an Exhibit to their Motion for Joinder) the reasons why they were not attempting to join the three assignees identified above.

(Id.).

         Thereafter, the Lamar Plaintiffs filed a "Memorandum of Law in Opposition to Compulsory Joinder of Parties". (Doc. 114). Defendant Joyce, in turn, filed a brief "in Support of his Position that Dismissal of Plaintiffs' Claims is Merited since Equity and Justice require Joinder of Indispensable Parties that Would Deprive the Court of Jurisdiction." (Doc. 115).

         Following the Court lifting the stay of briefing on Plaintiffs Motion to Add Parties (Doc. 116), Defendant Joyce filed his brief in opposition to Plaintiffs' motion to file a Third Amended Complaint (Doc. 117).

         II. POSITIONS OF THE PARTIES ON THE ISSUE OF WHETHER THE NON-DIVERSE THIRD PARTY ASSIGNEES OF JOYCE ARE INDISPENSABLE PARTIES SUCH THAT THEIR JOINDER WOULD DESTROY DIVERSITY JURISDICTION AND THUS REQUIRE THAT PLAINTIFFS' COMPLAINT BE DISMISSED

         A. The Position of Defendant Joyce

         In his Brief in Support of his Position that Dismissal of Plaintiffs' Claims is Merited since Equity and Justice require Joinder of Indispensable Parties that Would Deprive the Court of Jurisdiction (Doc. 115), Joyce begins by asserting that the Lamar Plaintiffs have made it clear to the Court that they are pursuing rescission of the Settlement Agreement and that "such rescission would result in Plaintiffs' termination of the site leases and facility leases (collectively, the "Leases"), that were contemplated in the Settlement Agreement and eventually entered into with Joyce." [Id. at 1). Quoting Krupa v. Hilcorp Energy I LP, 2014 WL 2506144, at *13 (W.D. Pa. 2014) and Fluent v. Salamanca Indian Lease Authority, 928 F.2d 542, 547 (2d Cir. 1991), for the proposition that "it is well settled that 'in an action to set aside a lease or a contract, all parties who may be affected by the determination of the action are indispensable"', Joyce argues:

If the joinder of any assignee divests the district court of subject matter jurisdiction (i.e., destroy diversity), the court must determine whether "in equity and good conscience" the action should proceed without that party, or whether the court should dismiss it, "the absent person being thus regarded as indispensable." Fed.R.Civ.P. 19(b). If joinder of any of the assignees precludes the Court from exercising diversity jurisdiction then the Court may not properly dismiss that assignee and instead must dismiss the entire action for lack of subject-matter jurisdiction. Second State Enterprises, Inc. v. Mid-Atl. Investments, LLC, 2014 WL 4091846, at *3 (M.D. Pa. August 18, 2014). Put another way, a finding of indispensability under Rule 19(b) necessitates dismissal for lack of subject matter jurisdiction. Gen. Refractories Co. v. First State Ins. Co., 500 F.3d 306, 319 (3d Cir. 2007).

(Doc. 115, at 6-7).

         Defendant Joyce then argues that "each assignee is a party to at least one of the Leases which Plaintiffs seek to invalidate, " and that "[i]f a judgment is granted in Plaintiffs' favor then they intend to terminate the Leases[; t]ermination of the Leases will directly impact the rights of the assignees, who are parties to the Leases." (Id. at 8). Joyce further argues that if the Plaintiffs are successful they will either "simply cease making rental payments pursuant to the Leases or Plaintiffs will notify the assignees of the judgment in this matter and seek to enforce it as to them. Either of these options directly implicates the rights of the assignees and more than likely results in secondary litigation involving Plaintiffs, the assignees, and potentially Joyce." (Id. at 9).

         Joyce further argues that the non-diverse third party assignees of his assignments will be unavoidably prejudiced if this action were to proceed in their absence. Joyce maintains that if Plaintiffs are successful in obtaining the rescission of the Settlement Agreement and the concomitant invalidation of the Leases entered into under the Settlement Agreement, termination of those Leases will be to the prejudice of the assignees whose rights will have been unprotected throughout the litigation. (Id. at 10).

         Joyce also contends that should this Court dismiss this action for lack of complete diversity, the Plaintiffs will have an adequate remedy in state court since the Settlement Agreement is governed by Pennsylvania law and all issues as to necessary and indispensable parties "could be decided in one matter." This, Joyce argues, "eliminates the risk of duplicative or inconsistent litigation." (Id. at 11).

         Similarly, Joyce, in his Brief in Opposition to Plaintiffs' Motion to File a Third Amended Complaint (Doc. 117), asserts that Landmark, Bank of America, N.A., and Wilmington Trust are necessary and indispensable parties under Rule 19 "because they are the present holders of the Leases, and are entitled to be a party to an action where the validity of those Leases is being challenged." (Id. at 4-5). Thus, Joyce argues "because these parties are indispensable and must be joined, such joinder would deprive this Court of jurisdiction." (Id. at 5).

         Joyce also defends the timing of his assertion that the non-diverse third party assignees are indispensable parties, stating first that Lamar proceeded through the discovery phase of this case without ever asserting or otherwise indicating that they intended to seek termination of the Leases if they were successful in their claims that Joyce engaged in a material breach of the Settlement Agreement by violating the non-compete provisions therein. Thus, Joyce argues that he "did not know of any issue that would potentially implicate indispensable parties. Upon the first notification of Plaintiffs' intent to seek rescission of the Settlement Agreement and resultant intent to terminate the Leases, Joyce promptly raised the issue of indispensable parties." (Id. at 5). Joyce also notes that the failure to join a party under Rule 19(b) is a defect that "is so basic that it can ...


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