Vision En Analisis Y Estrategia, S.A. et al v. Andersen et al

Filing 98

OPINION AND ORDER re: 4 MOTION to Dismiss for Lack of Jurisdiction . filed by Karl Andersen, Stavanger Holdings, Ltd., Hedmark Capital, Ltd., 22 MOTION to Dismiss for Failure to Join Necessary Parties. filed by Karl Andersen, Stavanger Holdings, Ltd., Hedmark Capital, Ltd., 62 MOTION to Dismiss for Lack of Jurisdiction . filed by Erwin Legal, P.C., David Mickelson Insurance Services, Christopher R. Erwin, 81 MOTION to Dismiss for F ailure to Join Necessary Parties and for Insufficient Service of Process. filed by Meyer Gertner, PW Insurance Agency Corp., Leon Lowenthal, 6 MOTION to Amend/Correct to Remove Non-Diverse Defendants In Amended Complaint As a Matte r of Course In Order to Preserve Diversity Jurisdiction. filed by Capitaliza-T, Sociedad De Responsabilidad Limitada De Dapital Variable, Vision En Analisis Y Estrategia, S.A. For the foregoing reasons, defendants Andersen, Gertner, Lowenthal , and PW's motion to dismiss for failure to join an indispensable party pursuant to Rule 12(b)(7) is GRANTED and defendants' other motions to dismiss are moot. The Clerk of the Court is directed to close these motions(Docket Nos. 4, 6, 22, 62, and 81) and this case. SO ORDERED. (As further set forth within this Order.) (Signed by Judge Shira A. Scheindlin on 7/24/2015) (ajs)

usocsoNY

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

-DOCUMENT
X ll £LECl1l{)IQCALLY FU.ED \'
DOC#:
i

DKm flL£D: 2Jtfr
VISION EN ANALISIS Y ESTRATEGIA,
S.A. DE C.V., a Mexican Corporation, and
CAPITALIZA-T, SOCIEDAD DE
RESPONSABILIDAD LIMITADA DE
CAPITAL VARIABLE, a Mexican
Cotporation,

OPINION AND ORDER
14-cv-8016 (SAS)

Plaintiffs,
- against KARL ANDERSEN, KENNETH A.
LANDGAARD, ARTHUR L. BOWEN,
WILLIAM C. COYLE, RANDY W.
BAGLEY, BROCK BAGLEY, DAVID
MICKELSON INSURANCE SERVICES,
ERWIN LEGAL, PC, CHRISTOPHER R.
ERWIN, PW INSURANCE AGENCY
CORP., LEON LOWENTHAL, and MEYER
GERTNER,
Defendants.

-----------------------------------------------------

--- X

SHIRA A. SCHEINDLIN, U.S.D.J.:
I.

INTRODUCTION
Plaintiffs Vision en Analisis y Estrategia, S.A. de C.V. ("Vision") and

Capitaliza-T, Sociedad de Responsabilidad Limitada de Capital Variable
("Capitaliza"), bring this diversity action against numerous defendants alleging
-1-

J\

their involvement and acts of "fraud, breaches of fiduciary duties, and other
tortious acts" during the "sale, management, and disposition" of plaintiffs' interests
in a life insurance policy. 1 Various defendants have filed motions to dismiss on
grounds that include: lack of subject matter jurisdiction, failure to join necessary
parties, lack of personal jurisdiction, and insufficient service of process. For the
reasons that follow, defendants Andersen, Gertner, Lowenthal, and PW's motion to
disqiiss for failure to join an indispensable party pursuant to Rule 12(b)(7) is
granted and defendants' other motions to dismiss are moot.

II.

BACKGROUND 2
A.

Parties
Plaintiff corporations Vision and Capitaliza are incorporated with

their principal places of business in Mexico. 3 Plaintiffs were shareholders in
Tran.en Capital Alternative Investment Fund, Ltd. ("Tranen"), a private investment
fund in the secondary insurance market. 4 Tranen was managed by Tranen Capital

Plaintiffs' Memorandum of Law in Support of Motion for Leave to
Amend Their Complaint at 1.
2

The facts are drawn from the Amended Complaint ("Compl.").

3

See Compl.

4

See id.

~

~~

37-38.

5.
-2-

Ltd. ("Tranen Capital"). 5 The two Tranen corporations were incorporated in the
British Virgin Islands. 6
The Tranen entities were founded in 2008 by defendants Kenneth A.
Landgaard ("Landgaard") and Arthur L. Bowen ("Bowen"). 7 Landgaard is a
resident of Minnesota and Bowen is a resident of Massachusetts. 8 Karl Andersen
("Andersen") is a New York resident who was the Chief Investment Analyst at
Tranen Capital during the relevant period. 9 Andersen is also the sole shareholder
and manager of Stavanger Holdings, Ltd. ("Stavanger"), a corporation incorporated
under the laws of Brunei. 10 Additionally, Andersen is the co-founder and Chief
Analyst of Hedmark Capital, Ltd. ("Hedmark"), a Bermuda-registered company
with offices in Latin American, Singapore, and the United Kingdom. 11 Hedmark is
"domiciled and operates" in New York. 12

5

See id.

6

See id.

7

See id.

8

See id.

~~

63, 70-71.

9

See id.

~~

39-40.

JO

See id.

~~

42, 44.

11

See id.

~~

54-55.

12

Id.

~

~

170.

56.
-3-

Defendants Randy W. Bagley ("R. Bagley") and Brock Bagley ("B.
Bagley"), as the founders and managers of The Leo Group, LLC ("Leo"),
facilitated the transfers of assets from original owners to Tranen. 13 William C.
Coyle ("Coyle") acted as an escrow agent in the "transfer of each and every
policy/asset that Tranen purchased." 14 Coyle, R. Bagley, and B. Bagley reside in
Indiana. 15 David Mickelson Insurance Services ("Mickelson") is a California
investment advisor, life settlement broker, life settlement agent/provider. 16
Mickelson helped to find the policies that Leo would then acquire to transfer to
Tranen. 17
Erwin Legal PC ("Erwin Legal") is "located and maintains its
principal place of business" in Califomia. 18 Christopher R. Erwin ("Erwin")
resides in Califomia. 19 PW Insurance Agency Corp. ("PW") is a New York life

13

See id.

14

Id.

15

See id.

~~

16

See id.

~

109.

17

See id.

~

171c.

~

~

171 b.

17ld.
84, 97-98.

18

Defendants Andersen, Hedmark, and Stavanger' s Memorandum of
Law in Support of Motion to Dismiss for Lack of Subject Matter Jurisdiction at 6.
19

See id.
-4-

insurance agency with its principal place of business in New York. 20 Leon
Lowenthal ("Lowenthal") is a resident of New York and the Chief Executive
Officer of PW. 21 Meyer Gertner ("Gertner") is also a New York resident. 22
B.

Overview of Plaintiffs' Allegations

Plaintiffs' claims revolve around the purchase of a life insurance
policy in the secondary market. Plaintiffs allege that defendants, in varying
capacities, engaged in a coverup as to the "true nature of the ... value, rights,
and/or interests that [plaintiffs] held in the [p]olicy." 23 Furthermore, plaintiffs
allege that defendants' actions caused the policy to lapse and their interest to
become worthless. 24
In 2008, the Aron Feuereisen Trust ("Trust") transferred the beneficial
interest in a life insurance policy to Leo. 25 Gertner was the original trustee of the
Trust. 26 Lowenthal acted as an agent for Feuereisen to find him a buyer and

20

See Compl.

21

See id.

~

147.

22

See id.

~

152.

23

Id.

24

See id.

~

30.

25

See id.

~~8,

26

See id.

~

~

~

146.

4.

189.

152.
-5-

Mickelsen acted as an agent for Tranen and Leo. 27 In 2011, Andersen contacted
plaintiffs, offering them the full rights in the policy. 28 Leo acted as plaintiffs' agent
in the acquisition of the policy. 29 Plaintiffs then transferred funds to Coyle, who
transferred funds to Leo and Tranen. 30 In 2012, plaintiffs sought to sell their
interest in the policy and retained Andersen to do so. 31 In his efforts to resell the
policy, Andersen entered into a sub-broker agreement with Erwin Legal in May
2012. 32 Erwin advised Andersen that a premium payment was due on the policy. 33
Erwin recommended that plaintiffs solicit the sale of the policy and that they make
the required premium payment. 34 Mickelson began searching for potential buyers
of the policy at Erwin's request. 35 In October 2012, plaintiffs were told for the first
time that they did not have full ownership of the policy, and in November they

27

See id.

~~

28

See id.

~

196.

29

See id.

~

198.

30

See

id.~

200.

31

See id.

~~

32

See id.

~

239.

33

See id.

~

250.

34

See id.

~

254.

35

See id.

~

266.

148a, 191a.

237-238.

-6-

were told that the policy had lapsed. 36 Plaintiffs then attempted to reinstate the
policy, but were unsuccessful. 37

III.

LEGAL STANDARDS
A.

Subject Matter Jurisdiction

Federal courts have limited jurisdiction and may not entertain matters
over which they do not have subject matter jurisdiction. 38 Section 1332 of Title 28
of the United States Code confers subject matter jurisdiction to the federal district
courts, giving them original jurisdiction over cases, in relevant part, "where the
matter in controversy exceeds $75,000, exclusive of interest and costs in between .
. . (2) citizens of a State and citizens or subjects of a foreign state[.]" 39 "The
general rule requiring complete diversity between opposing parties is explicit and
unequivocal."40 "[T]he presence of aliens on two sides of a case destroys diversity
jurisdiction. " 41
36

See id.

ifif 268-269, 295.

37

See id.

if 317g.

38

See Wynn v. AC Rochester, 273 F.3d 153, 157 (2d Cir. 2001).

39

28 U.S.C. § 1332(b)(2).

40

International Shipping Co., S.A., v. Hydra Offshore, Inc., 875 F.2d
388, 391 (2d Cir. 1989).
41

Corporacion Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d
786, 790 (2d Cir. 1980) (citation omitted). Accord Mentor Ins. Co. (UK.) Ltd. v.
-7-

B.

Rule 12(b)(1) Motion to Dismiss
Federal Rule of Civil Procedure 12(b)(l) allows a party to assert by

motion the defense that a court lacks subject-matter jurisdiction to hear a claim. 42
"The plaintiff bears the burden of proving subject-matter jurisdiction by a
preponderance of the evidence." 43 Courts also have an "independent obligation to
establish the existence of subject-matter jurisdiction."44 In considering a motion to
dismiss for lack of subject-matter jurisdiction, the court must assume the truth of
material facts alleged in the complaint. 45

C.

Rule 12(b)(7) Motion to Dismiss
"Rule 19 'sets forth a two-step test for determining whether the court

Brannkasse, 996 F.2d 506, 512 (2d Cir. 1993) ("[T]he alignment of alien
corporations as both plaintiffs and defendants defeats the allegation of diversity
jurisdiction[.]").
42

See Fed. R. Civ. P. 12.

43

Al-Khazraji v. United States, 519 Fed. App'x 711, 713 (2d Cir. 2013)
(citing Liranzo v. United States, 690 F.3d 78, 84 (2d Cir. 2012) (quotation marks
omitted)).
44

Jn re Standard & Poor's Rating Agency Litig., 23 F. Supp. 3d 378,
385 (S.D.N.Y. 2014).
45

See Hijazi v. Permanent Mission ofSaudi Arabia to United Nations,
403 Fed. App'x 631, 632 (2d Cir. 2010).
-8-

must dismiss an action for failure to join an indispensable party."'46 The court
begins by determining whether a party is "required to be joined if feasible" under
Rule 19(a). 47 Rule 19(a) provides that a party must be joined ifthe court "cannot
accord complete relief among existing parties," or if proceeding would impede the
absent party's interest or expose the present parties to "double, multiple, or
otherwise inconsistent obligations."48
If a party is necessary under Rule 19(a), the court must determine

whether joinder of that party is feasible in the face of jurisdictional or other
concems. 49 If joinder is infeasible, but the court determines that a party is
indispensable under Rule 19(b), then the court must dismiss the action. 50 Rule
19(b) states that a court should, in determining whether a party is indispensable,
consider:
(1) the extent to which a judgment rendered in the person's
absence might prejudice that person or the existing parties; (2) the
extent to which any prejudice could be lessened or avoided by:
46

Berkeley Acquisitions, LLC v. Mallow, Konstam & Hager, P.C., No.
09 Civ. 2319, 09 Civ. 3771, 2009 WL 2191118, at *3 (S.D.N.Y. July 20, 2009)
(quoting Viacom Int'!, Inc. v. Kearney, 212 F.3d 721, 724 (2d Cir. 2000)).
47

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

48

Id.

49

See Berkeley Acquisitions, 2009 WL 2191118, at *4.

50

See id.
-9-

(A) protective provisions in the judgment; (B) shaping the relief;
or (C) other measures; (3) whether a judgment rendered in the
person's absence would be adequate; and (4) whether the plaintiff
would have an adequate remedy if the action were dismissed for
nonjoinder. 51
IV.

DISCUSSION
A.

The Original and Amended Complaints
1.

This Court Did Not Have Subject Matter Jurisdiction Over
the Original Complaint

Plaintiffs original Complaint alleges that this Court has subject
matter jurisdiction over this case pursuant to Section 1332 of Title 28 of the United
States Code. 52 In response to the Complaint, Andersen, Stavanger, and Hedmark
filed a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule
l 2(b )( 1) because there were alien parties on each side of the case. A corporation is
a chizen of "every state and foreign state by which it has been incorporated" and
where it has "its principal place of business." 53 The plaintiff corporations are both
citizens ofMexico. 54 The Complaint named Stavanger and Hedmark as

51

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

52

See Compl.

53

28 U.S.C. § 1332(c)(l).

54

See Compl.

~

35.

~~

37-38.
-10-

defendants. Stavanger is a citizen of Brunei. 55 Hedmark is registered in Bermuda,
but is "domiciled and operates" in New York, 56 making Hedmark a citizen of both
Bermuda and New York. Because plaintiffs and two defendants are aliens, the
original Complaint did not meet the complete diversity requirement for subject
matter jurisdiction.

2.

Plaintiffs Have Amended Their Complaint as a Matter of
Course

In any event, shortly after the defendants moved to dismiss for lack of
subject matter jurisdiction, plaintiffs amended the Complaint as a matter of course,
dismissing Stavanger and Hedmark as parties. Accordingly, defendants' motion to
dismiss for lack of subject matter jurisdiction is moot. Federal Rule of Civil
Procedure 15(a) states that a plaintiff may amend its "pleading once as a matter of
course" and that otherwise leave to amend should be "freely given when justice so
requires." 57 Defendants filed their motion to dismiss for lack of subject matter
jurisdiction prior to service. Plaintiffs filed the Amended Complaint within 21
days of the 12(b)(I) motion to dismiss. This makes their amendment timely under
Rule 15(a), which states that "a party may amend its pleading once as a matter of

55

See id.

56

Id.

57

Fed. R. Civ. P. 15(a).

~~

~~

41, 44.

53, 54.

-11-

course within ... 21 days after service of a motion under Rule 12(b)[.]"58
Accordingly, plaintiffs have amended their Complaint as a matter of course and
Stavanger and Hedmark have been dismissed.

C.

Stavanger and Hedmark Are Not Indispensable Parties
Plaintiffs' Amended Complaint raises a new issue, however.

Defendant Andersen and former defendants Stavanger and Hedmark argue that
Stavanger and Hedmark are indispensable parties under Rule 19. 59 For the reasons
set forth below, Stavanger and Hedmark are not indispensable parties and may be
dismissed in order to preserve diversity and subject matter jurisdiction.
In the Amended Complaint, plaintiffs allege that Stavanger and
Hedmark were merely the "alter ego[ s]" of Andersen. 60 Plaintiffs assert, however,
that their claims against Andersen are not based on an alter ego theory, but rather
on Andersen's "personal involvement ... in tortious conduct" against plaintiffs. 61
Plaintiffs argue that it is not necessary to pierce the corporate veil in order to assess

58

Fed. R. Civ. P. 15(a)(l)(B).

59

See Defendant Andersen's Memorandum of Law in Support of
Motion to Dismiss for Failure to Join Necessary Parties at 6.
60

Compl.

~~

49, 60.

61

Plaintiffs' Memorandum of Law in Opposition to Defendant
Andersen's Motion to Dismiss for Failure to Join Necessary Parties ("Pl. Mem.")
at 2.
-12-

Artdersen's direct liability. 62 It is true that
[w]here a plaintiff asserts tort claims such as for fraud or
fraudulent misrepresentation, there is no need to pierce the
corporate veil in order to hold corporate officers or employees
individually liable for their own acts of fraud ... Instead, [a]
corporate officer is individually liable for fraudulent acts or false
representations of his own, or in which he participates, even
though his actions in such respect may be in furtherance of the
corporate business. 63
Thus, in determining whether Stavanger and Hedmark are indispensable parties, it
is first necessary to assess whether plaintiffs' claims rely on an alter ego theory or
solely on Andersen's allegedly tortious actions.
The Amended Complaint mentions Stavanger and Hedmark
throughout. Plaintiffs allege that "Hedmark is merely the alter ego of Andersen
because Hedmark is heavily influenced by Andersen[,]" and "Andersen controlled
and directed Hedmark as he saw/sees fit[.]" 64 Similarly, plaintiffs claim that
"Stavanger is merely the alter ego of Andersen because in actuality Stavanger is
heavily influenced by Andersen." 65 In any event, looking at the substance of

62

See id. at 7.

63

White v. National Home Prof., Inc., No. 09 Civ. 4070, 2010 WL
1706195, at *5 (S.D.N.Y. Apr. 21, 2010) (quotation marks and citations omitted)
(emphasis added).
64

Compl. ifif 60-61.

65

Id

if 49.
-13-

plaintiffs' claims, they are based on Andersen's actions whether "operating either
individually or through" Stavanger or Hedmark. 66 Any mention of Stavanger or
Hedmark is directly tied to Andersen's involvement in the sale of the policy and
alleged fraudulent activity or misrepresentations. Thus, it is not necessary to pierce
the corporate veil in order to assess Andersen's allegedly tortious conduct and
direct liability.
Even assuming that Stavanger and Hedmark are necessary parties
under Federal Rule of Civil Procedure 19(a), their presence in the case destroys
complete diversity and this Court's subject matter jurisdiction. Federal Rule of
Civil Procedure 21 "allows a court to drop a nondiverse party at any time to
preserve diversity, provided that the nondiverse party is not indispensable." 67
Thus, it is necessary to assess whether Stavanger and Hedmark are indispensable
parties under Rule 19(b).
The Second Circuit has repeatedly held that a "district court should
take a flexible approach under Rule 19(b) when deciding whether parties are

Id. iii! 26, 29, 68, 77, 94, 102, 112, 131-132, 135, 173, 178, 238, 243,
245,271-272,302,351,362,364-365,367-369,374,375-380,390,403,407,
422,424,425,430,434-436,444,446,448-453,455-459,463,482,484-490,
511-512,514-519,524,585,587,658,659,670,671,686, 704, 716, 744.
66

67

CP Solutions PTE, Ltd. v. General Elec. Co., 553 F.3d 156, 159 (2d
Cir. 2009) (internal quotation marks omitted).

-14-

indispensable" to an action. 68 Additionally, the Second Circuit has held that "very
few cases should be terminated due to the absence of nondiverse parties unless
there has been a reasoned determination that their nonjoinder makes just resolution
of the action impossible. " 69 In applying the Rule 19(b) factors, defendants argue
that Stavanger and Hedmark will be prejudiced if the action continues in their
ab~ence

because if plaintiffs are successful "in proving their case ... the Absent

Corporate Entities for whom [the individual defendants] worked will likewise be
tarred and feathered as fraudsters-by-association." 70 But in this case, an assessment
of Andersen's direct liability is possible without necessarily implicating Stavanger
and Hedmark. Although Stavanger and Hedmark certainly retain interests in their
reputations, any potential prejudice against them is speculative and would not
make resolution of the case impossible. This is not the type of "immediate and
serious" prejudice that Rule 19(b) was intended to cover. 71 Furthermore, a

68

Universal Reinsurance Co. v. St. Paul Fire & Marine Ins. Co., 312
F.3d 82, 87 (2d Cir. 2002) (citation and quotation marks omitted).
69

Id. (internal quotation marks omitted).

70

Defendant Andersen's Reply Memorandum in Support of His Motion
to Dismiss for Failure to Join Necessary Parties at 5.
71

Fed. R. Civ. P. 19(b) Advisory Committee Note to 1966 amendment
(noting that courts should consider whether the prejudice would be "immediate and
serious, or remote and minor"). See also CP Solutions, 553 F.3d at 159.
-15-

judgment rendered in Stavanger and Hedmark's absence would be adequate.
Although the plaintiffs would have an alternative remedy in state court if the action
was dismissed, a review of the factors and circumstances of the case in "equity and
good conscience" directs this Court's conclusion that Stavanger and Hedmark are
not indispensable. 72

D.

Tranen and Leo Are Indispensable Parties
Despite the Court's conclusion that Stavanger and Hedmark are not

indispensable, the case must nonetheless be dismissed because Tranen and Leo are
indispensable parties. For the reasons set forth below, defendants Andersen,
Gertner, Lowenthal, and PW's motion to dismiss pursuant to Rule 12(b)(7) is
granted.
Plaintiffs once again argue that their claims are not based on an alter
ego theory, but instead on the individual tortious conduct of the officers and
directors of Tranen and Leo. 73 Even if these arguments are accepted, Tranen and
Leo are otherwise necessary parties as they are directly implicated throughout the
Amended Complaint. Defendants argue that plaintiffs' claims in the Amended
Complaint center around Tranen and Leo as "the real players in the fraudulent

72

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

73

Pl. Mem. at 2.
-16-

scheme." 74 Indeed, it is beyond cavil that Tranen's and Leo's conduct is
highlighted in the Amended Complaint and would play a role in the disposition of
this case. For example, the Amended Complaint states, "Tranen depended on a
fraudulent scheme to generate its cash flows," and further that "Tranen failed to
comply with the terms of the August 2011 Contract and the July 2011
Assignment." 75 The Amended Complaint also asserts Leo's direct participation in
the scheme, making claims such as, "[t]he conduct of Leo, B. Bagley, R. Bagley,
and Coyle was conscious, willful and/or wanton, reckless and grossly negligent." 76
Under Rule 19(a), a party is deemed necessary ifthe court "cannot
accord complete relief among existing parties," or if proceeding would impede the
absent party's interest or expose the present parties to "double, multiple, or
otherwise inconsistent obligations." 77 Here, proceeding without Tranen and Leo
would impede their interests as their conduct is largely the focus of the litigation.
Plaintiffs argue that defendants Bowen, Landgaard, B. Bagley, and R. Bagley can

74

Defendants Gertner, Lowenthal, and PW' s Memorandum of Law in
Support of Motion to Dismiss for Failure to Join Necessary Parties and Insufficient
Service of Process at 7.

ifif 175, 215.

75

Compl.

76

Id.

77

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

if 396.

-17-

defend Tranen's and Leo's interests, if necessary. 78 This argument is countered by
the fact that Bowen and Landgaard are no longer the directors and managers of the
Tranen entities. They were replaced in 2014 by court order. 79 Accordingly,
Bowen and Landgaard may not be able to adequately represent Tranen's current
interests. As for Leo, defendants argue that Leo's interests will not be adequately
represented by B. Bagley and R. Bagley. Defendants argue that because each
defendant is only liable for his own tortious actions he "has an incentive to shift the
liability to his co-defendants, not an incentive to show that the absent corporate
entity is innocent ofwrongdoing." 80 This is the only argument that defendants
offer to show that the interests of B. Bagley, R. Bagley, and Leo are adverse. In
any event, the Court cannot ignore the fact that Leo is a separate legal entity whose
"rights and obligations are at the heart of this case." 81 Because both Tranen's and
Leo's interests would be impeded, they are necessary parties.

78

See Compl. Count XVIII.

79

See id.

~

65.

80

Defendants Gertner, Lowenthal, and PW' s Reply Memorandum of
Law in Further Support of Motion to Dismiss for Failure to Join Necessary Parties
and.Insufficient Service of Process at 4.
81

Rubier v. Unum Provident Corp., No. 04 Civ. 7102, 2007 WL
188024, at *3 (S.D.N.Y. Jan. 25, 2007) (noting that the absent subsidiary defendant
"is still a separate legal entity with separate rights and obligations" and it is those
"rights and obligations that are at the heart of this case").

-18-

Tranen is necessary to this case for the additional reason that it is a
named party to a contract in dispute. Plaintiffs do not deny that Count XVIII of the
Amended Complaint is "dependent on the existence of the contract and its breach
thereof." 82 Instead, plaintiffs argue that it is not a "bright-line rule" that a party to a
contract be included in the action. 83 Even though there is no bright-line rule, the
Second Circuit has held that "if the resolution of the plaintiff's claim would require
the definition of a non-party's rights under a contract, it is likely that the nonparty
is necessary under Rule 19(a)."84 The fact that Tranen is a party to a contract in
dispute certainly weighs in favor of including it as a necessary party to this action.
Combined with the integral role that Tranen and Leo play in the Amended
Complaint, they are necessary parties under Rule 19(a).
However, joinder is not feasible under Rule 19(a). The two Tranen
entities were incorporated in the British Virgin Islands and are aliens for purposes
of diversity jurisdiction. 85 Because plaintiffs' Amended Complaint raises only
state law claims, joinder of the Tranen parties would leave this Court without

82

Plaintiffs' Memorandum of Law in Opposition to Defendant
Andersen's Motion to Dismiss for Failure to Join Necessary Parties at 9.
83

CP Solutions, 553 F.3d at 159.

84

Jones/Um v. Lion Gate Int'/, 299 F.3d 134, 141 (2d Cir. 2002).

85

See Compl.

~

168.
-19-

subject matter jurisdiction over the case. As for Leo, the parties have not provided
sufficient information to determine citizenship. A limited liability company takes
the citizenship of its members. 86 However, the Amended Complaint only provides
information about the citizenship ofR. Bagley and B. Bagley, the founders and
managers of Leo. R. Bagley and B. Bagley are both citizens oflndiana. 87 Because
the Amended Complaint does not provide complete information about the other
members of Leo, citizenship cannot be determined. In any event, since joinder of
at least the Tranen corporations would be infeasible, the Court must determine
whether the parties are indispensable under Rule 19(b).
A weighing of the Rule l 9(b) factors dictates that Tranen and Leo are
indispensable parties. A judgment in this case will prejudice Tranen and Leo, and
the prejudice cannot be avoided. Given their prominence throughout the Amended
Complaint, it is likely that this Court will make findings with respect to Tranen and
Leo without their participation. Although a judgment rendered in Tranen's and
Leo's absence would be adequate,. this factor does not outweigh the prejudice that
the parties will face and the fact that their interests will not be adequately
represented.
86

Bayerische Landesbank, New York Branch v. Aladdin Capital Mgmt.
LLC, 692 F.3d 42, 49 (2d Cir. 2012).
87

See Compl.

irir 97-98.
-20-

Finally, plaintiffs have an alternative remedy if the action is dismissed
for nonjoinder. Plaintiffs can file suit against the defendants in state court. In fact,
plaintiffs have already commenced litigation in California against certain
defendants. 88 Plaintiffs argue that although there is a state court forum available,
"dismissal of the action would result in piecemeal litigation, across several
jurisdictions, which would have duplicative efforts within each of the
proceedings."89 In making their argument, plaintiffs rely on the Second Circuit's
decision in CP Solutions PTE, Ltd. v. General Elec. Co., but in that case, the
interest of judicial economy was impacted by the fact that the case had been
litigated for over two years and the parties had conducted discovery. 90 Thus,
disi:nissal at that late stage would have been a waste of judicial resources. The
instant action is not as far advanced. Plaintiffs will not be prejudiced by dismissal
as discovery has yet to commence and a judgment on the merits is not imminent.
Accordingly, Tranen and Leo are indispensable parties. Because their
joinder is not feasible, this case must be dismissed.

88

Plaintiffs' Memorandum of Law in Opposition to Defendants Gertner,
Lowenthal, and PW's Motion to Dismiss for Failure to Join Necessary Parties and
Insufficient Service of Process at 10.
89

Id.

90

See CP Solutions, 553 F.3d at 160.
-21-

V.

CONCLUSION
For the foregoing reasons, defendants Andersen, Gertner, Lowenthal,

and PW's motion to dismiss for failure to join an indispensable party pursuant to
Rule 12(b)(7) is GRANTED and defendants' other motions to dismiss are moot.
The Clerk of the Court is directed to close these motions(Docket Nos. 4, 6, 22, 62,
and 81) and this case.

SO ORDERED:

Shira A. Schelndlin
U.S.D.J.
Dated:

New York, New York
July
2015

Jtt_,

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- Appearances For Plaintiffs:
Cory White, Esq.
Maria C. Georgina Fabian, Esq.
The International Business Law Group LLC
875 N. Michigan Ave. Suite 3100
Chicago, IL 60611
[phone]
John J. Muldoon, III, Esq.
Muldoon & Muldoon, LLC
30 N. Lasalle Street, Suite 2950
Chicago, IL 60602
[phone]

For Defendants Karl Andersen, Kenneth A. Landgaard, PW Insurance
Agency Corp., Leon Lowenthal, and Meyer Gertner:
Ira S. Lipsius, Esq.
Lipsius-Benhaim Law, LLP
80.;02 Kew Gardens Road, Suite 1030
Kew Gardens, NY 11415
[phone]

For Defendants David Mickelson Insurance Services, Erwin Legal, P.C.,
Christopher Erwin:
Anthony Galano, III, Esq.
Jordan Danforth Wolff, Esq.
Ellenoff Grossman & Schole, LLP
15d East 42nd Street, 11th Fl.
New York, NY 10017
[phone]

-23-

Defendants (Pro Se):
Brock Bagley
13114 Franklin Hall Trail
Cail1Ilel, IN 46033
[phone]
Randy Bagley
3109 w 300 s
Tipton, IN 46072
[phone]
Arthur L. Bowen
112 Water Street, Suite 201
Boston, MA 02109
William C. Coyle
7818 Winding Creek Drive
Indianapolis, IN 46236
[phone]
I

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