Thornton & Roshon Properties, Inc. v. Taylor Building Products, Inc. et al

Filing 25

OPINION AND ORDER denying 12 Motion to Dismiss for Lack of Jurisdiction. The Court notes that National Fire identified other alleged indispensable parties but did not support their assertion of indispensability with any argument or facts to satisfy its burden as the moving party. Accordingly, defendants motion to dismiss (doc. 12) is DENIED. Signed by Judge James L Graham on 12/4/2013. (ds)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION

Thornton & Roshon Properties, Inc.,
Case No: 2:13-cv-00309
Plaintiff,
Judge Graham
v.
Taylor Building Products, Inc., et al.,
Defendants.

OPINION AND ORDER
Plaintiff Thornton & Roshon Properties, Inc. (“Thornton”) brings this action against
defendants Taylor Building Products, Inc. (“Taylor Building”), Chubb Group of Insurance
Companies (“Chubb”), Great Northern Insurance Company (“Great Northern”), CNA Solution,
Inc. (“CNA”), National Fire Insurance of Hartford (“National Fire”) for breach of insurance
contracts and a lease agreement relating to the Plaintiff’s real property. This matter is before the
court on the motion of National Fire to dismiss under Rule 12(b)(7) of the Federal Rules of Civil
Procedure for failure to join necessary parties. National Fire argues that the necessary parties, if
joined, would destroy this Court’s diversity jurisdiction.
I.

Factual Allegations

Plaintiff in this action is Thornton & Roshon Properties, Inc., an Ohio corporation based
in Lancaster, Ohio and is the owner of commercial real property situated at 3010 ColumbusLancaster Road, Lancaster, Ohio. A factory or plant is located on the property. Defendant
Taylor Building is a Michigan corporation that has done business in the state of Ohio and was
the lessee of the Plaintiff’s real property. Defendant Chubb, a New Jersey corporation, and
Defendant Great Northern, an Indiana corporation, provided property insurance to the Plaintiff’s
real property via an insurance policy with Taylor Building from December 1, 2010 through
December 1, 2011. Defendant CNA, an Illinois corporation, provided property insurance to the

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Plaintiff’s real property via an insurance policy with Taylor Building from December 2, 2011
through August 31, 2012. Defendant National Fire, an Illinois corporation, provided property
insurance to the Plaintiff’s real property via an insurance policy with Taylor Building from
December 2, 2011 through August 31, 2012.
This action arises out of storm damage to Plaintiff’s commercial building. Plaintiff
alleges that a series of severe storms in the winter of 2011 caused substantial damage to the
building. Great Northern had issued an insurance policy for the building for the period of
December 1, 2010 to December 1, 2011. Plaintiff was listed as a loss payee, and it made a claim
based upon the damage from the severe storms.
The complaint further alleges that Taylor Building breached its lease for failing to return
the property located at 3010 Columbus-Lancaster Road in as good condition as it was when it
assumed the lease in September 2005. Plaintiff alleges that the property lost more than $600,000
in value due to Taylor Building removing fixtures upon vacating the building, the damage done
by the winter storms, and Taylor Building failing to pay more than $25,000 in real estate taxes it
owed.
In addition to the policy with Great Northern, Taylor Building also had an insurance
policy with Chubb from December 1, 2010 to December 1, 2011. Taylor Building submitted a
claim for the damage from the severe winter storm. Rather than issue the check for that damage
to the Plaintiff (the designated loss payee), both Chubb and Great Northern allegedly breached
their duty by issuing the check for $63,000 to Defendant Taylor Building.
After its policy with Chubb and Great Northern ended on December 1, 2011, Taylor
Building obtained a different insurance policy from CNA and National Fire for the period after
December 1, 2011. A windstorm in June 2012 caused additional severe damage to the roof of
the building, which led to water leaking into the interior of the building. The Plaintiff obtained
estimates that indicated it would cost $750,000 to replace the roof. CNA and National Fire, on
the other hand, allegedly attempted to get the Plaintiff to agree to a $175,000 roof repair. The
Plaintiff refused to agree to such a condition. Instead, the insurance companies allegedly issued
a check to Taylor Building in the amount of $63,000.
On April 3, 2013, the Plaintiff filed this action with this Court. Plaintiff alleged seven
counts against five defendants: Count I – breach of lease agreement against Taylor Building for
failure to return the premises in the same condition as at the commencement of the lease; Count
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II – conversion against Taylor Building for removal of fixtures from the real property belonging
to Plaintiff; Count III – breach of insurance contract against Taylor Building, Chubb and Great
Northern for failure to issue a check to the Plaintiff as the loss payee; Count IV – breach of
insurance contract against Taylor Building, CNA and National Fire for coercing the Plaintiff into
accepting a repair company and failure to issue a check to the Plaintiff as the loss payee; Count
V – breach of insurance contract against CNA and/or National Fire for failure to timely provide
insurance coverage resulting in additional damage to the building; Count VI – breach of
insurance contract against CNA and/or National Fire for failure to provide insurance coverage on
the building; and, Count VII – breach of lease agreement against Taylor Building for failure to
pay real estate taxes on the property. On May 21, 2013, Plaintiff and CNA entered into a
stipulation of partial dismissal pursuant to Fed. R. Civ. P. 41(a).
II.

Motion to Dismiss

A.

Standard of Review

The district courts may exercise jurisdiction over an action between “citizens of different
states” where the matter in controversy exceeds the sum or value of $75,000. 28 U.S.C. §
1332(a)(1). It is well settled that diversity of citizenship requires complete diversity between all
plaintiffs on one side and all defendants on the other side. See Caterpillar, Inc. v. Lewis, 519
U.S. 61, 68, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996). When parties attempt to evade the complete
diversity rule by failing to name persons or entities that have an interest in the litigation, Federal
Rules of Civil Procedure 12(b)(7) and 19 address the problem by providing guidance on joinder
of parties needed for proper adjudication.
Defendant National Fire has moved for dismissal under Fed. R. Civ. P. 12 (b) (7) for
failure to properly join a required party under Rule 19. Rule 19 provides:
(a) Persons Required to Be Joined if Feasible.
(1) Required Party. A person who is subject to service of process and whose
joinder will not deprive the court of subject-matter jurisdiction must be joined as a
party if:
(A) in that person's absence, the court cannot accord complete relief
among existing parties; or
(B) that person claims an interest relating to the subject of the action and is
so situated that disposing of the action in the person's absence may:
(i) as a practical matter impair or impede the person's ability to
protect the interest; or
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(ii) leave an existing party subject to a substantial risk of incurring
double, multiple, or otherwise inconsistent obligations because of
the interest.
(2) Joinder by Court Order. If a person has not been joined as required, the court
must order that the person be made a party. A person who refuses to join as a
plaintiff may be made either a defendant or, in a proper case, an involuntary
plaintiff.
(3) Venue. If a joined party objects to venue and the joinder would make venue
improper, the court must dismiss that party.
(b) When Joinder Is Not Feasible. If a person who is required to be joined if feasible
cannot be joined, the court must determine whether, in equity and good conscience, the
action should proceed among the existing parties or should be dismissed. The factors for
the court to consider include:
(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:
(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.
(c) Pleading the Reasons for Nonjoinder. When asserting a claim for relief, a party must
state:
(1) the name, if known, of any person who is required to be joined if feasible but
is not joined; and
(2) the reasons for not joining that person.
(d) Exception for Class Actions. This rule is subject to Rule 23.
Fed.R.Civ.P. 19.
Thus, a party that is required shall be joined unless joinder is not feasible. When
determining whether a party is indispensable, and thus required, under Rule 19, the court must
use a three-part test. Laethem Equipment Co. v. Deere & Co., 485 Fed.Appx 39, 43–44 (6th Cir.
2012) (citing Glancy v. Taubman Centers, Inc., 373 F.3d 656, 666 (6th Cir. 2004)). First, the
court must determine whether the party is a necessary one under Rule 19(a).

Laethem

Equipement Co., 485 Fed.Appx. at 43. Second, if the court determines that the party is, indeed,
necessary, the court must decide if the joinder of that party will deprive the court of subject
matter jurisdiction. Id. at 43. And third, if joinder of the party is not feasible because it would
eliminate the court’s ability to hear the case, the court must analyze the factors outlined in Rule
19(b) to determine whether the court should—in equity and good conscience—dismiss the case
because the absent party is indispensable. Id. at 43–44. Thus, a party is only required to be
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joined under Rule 19 if “(1) it is necessary, (2) its joinder cannot be effected, and (3) the court
determines that it will dismiss the pending case rather than proceed in the case without the
absentee.” Id. at 44.
If the Court determines that a party is not “necessary” under Rule 19(a), “joinder, as well
as further analysis, is unnecessary.” Local 670, et. al. v. International Union, et. al., 822 F.2d
613, 618 (6th Cir. 1987). The initial burden is on the moving party to establish that a party is
necessary for purposes of Rule 19(a). Boles v. Greenville Housing Authority, 468 F.2d 476, 478
(6th Cir. 1972). When the moving party does not meet its burden, dismissal is not proper under
Rule 19. Id.
B.

Analysis

In applying Rule 19, a party is necessary if one of two conditions is met: (1) in the party’s
absence, the court cannot accord complete relief among existing parties, Fed.R.Civ.P. 19
(a)(1)(A); or, (2) if the party claims an interest relating to the subject of the action and disposing
of the action in the party’s absence may (i) as a practical matter impair or impede the party’s
ability to protect the interest; or (ii) leave an existing party subject to substantial risk of incurring
multiple or otherwise inconsistent obligations because of the interest, Fed.R.Civ.P. 19(a)(1)(B).
Laethem Equipment Co., 485 Fed.Appx. at 44.
Thus, a party being necessary is based on either: (1) the court being unable to provide
complete relief among existing parties without the absent party; or (2) the absent party claiming
an interest in the action. Complete relief, for purposes of determining whether a party is
necessary is determined as “between persons already parties, ‘and not as between a party and the
absent person who joinder is sought.’” Id. (quoting School Dist. Of Pontiac v. Secretary of U.S.
Dept. of Educ., 584 F.3d 253, 265 (6th Cir. 2009)).
In the present case, National Fire states that The Premium Glass Company, Inc.
(“Premium Glass”), an Ohio corporation, is a necessary party that Plaintiff failed to join.
National Fire provides two reasons that Premium Glass is necessary: (1) the Plaintiff included
Premium Glass in an earlier-filed state court action that was voluntarily dismissed without
prejudice but concerned the same events at issue here, and (2) Premium Glass was an original
party to the lease. National Fire points out that in the Plaintiff’s state court action it joined
Premium Glass; but, when bringing the current action before this Court the Plaintiff failed to join
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Premium Glass. Additionally, National Fire argues that Premium Glass is necessary because it is
a party to the original lease. Thus, for purposes of the Motion before the Court, the second part
of Rule 19(a)(1)’s necessary party analysis is not relevant—as Premium Glass is not claiming an
interest in the matter. The analysis, then, must revolve around whether complete relief can be
given among the existing parties.
National Fire correctly notes that Premium Glass is a party to the lease at dispute in the
existing action. Generally, parties to a lease are necessary for an action. See National Union
Fire Ins. Co. of Pittsburgh, PA v. Rite Aid of South Carolina, Inc., 210 F.3d 246, 251–252 (4th
Cir. 2000). Yet, the courts have long held that meaningful relief can be granted even in the
absence of certain parties that possess some type of interest in an action. See, e.g., Cunningham
v. Macon & B.R. Co., 109 U.S. 446, 456–457 (1883); Smith v. United Bhd. Of Carpenters, 685
F.2d 164, 166 (6th Cir. 1982) (“Ideally, all . . . parties would be before the court. Yet Rule 19
calls for a pragmatic approach. . . . [T]he entire suit should not be dismissed if meaningful relief
can still be accorded.”). Thus, the “essence of Rule 19 is to balance the rights of all those who
interests are involved in the action.” Glancy, 373 F.3d at 665.
Premium Glass is an Ohio corporation—complete with its own corporate filings,
provided by National Fire in their brief, with the Ohio Secretary of State—that was a party to the
lease at issue. The original lease in this action was executed in 1994 between the Plaintiff and
Thornton Art Glass, Inc. Pl. Compl. Exh. A. In 1999, Thornton Art Glass assigned the lease to
Premium Glass. Pl. Compl. Exh. B. A 2006 Memo Agreement stipulated that Taylor Building
would assume the “absolute right to manage, use, or sublet” the property for the benefit of its
Premium Glass division. Pl. Compl. Exh. D. Premium Glass, then, is a party to the lease at
question. But as memorialized in an agreement between the Plaintiff and Taylor Building,
Taylor Building became party to—and assumed control of—the lease at issue. Further, the
Plaintiff’s Complaint alleges nothing against Premium Glass but specifically alleges breach and
misconduct by the parent company Taylor Building.
For purposes of Rule 19, the initial burden rests with the moving party to establish that a
party is necessary. Boles, 468 F.2d at 478. When the moving the party fails to meet that burden,
dismissal under Rule 19 is not proper. Id. In the present case, National Fire articulates two
reasons that Premium Glass is necessary: (1) its inclusion in the Plaintiff’s state court action, and
(2) it was a party to the lease and insurance contracts. Neither reason articulated by National
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Fire is persuasive. That Plaintiff chose to name Premium Glass as a defendant in an earlier suit
does not make Premium Glass a necessary party here. That is, Plaintiff’s earlier litigation
decision as to who to name as a defendant is not a substitute or proxy for which parties are
necessary under Rule 19(a)(1). The correct inquiry under Rule 19(a)(1) is whether the court can
accord complete relief “between persons already parties” and not between a party and the absent
person. Laethem Equipment Co., 485 Fed.Appx. at 44.
While the general rule is that a party to a lease is necessary, Rule 19 should be applied
prudently and pragmatically so that entire suits are not dismissed if meaningful relief can still be
accorded. In this case, the Plaintiff does not allege that Premium Glass breached the lease but
that Taylor Building, which assumed the lease and is the parent of Premium Glass, breached the
lease. Specifically, the Complaint alleges that it was Taylor Building who breached the lease by
failing to return the property in suitable condition and by removing fixtures. The Complaint
contains no allegations from which an inference could be drawn that Premium Glass participated
in the alleged breaches or is otherwise liable for Plaintiff’s loss, and National Fire has failed to
demonstrate why Premium Glass’s presence would be necessary for the court to accord complete
relief. Similarly, the Complaint contains no allegations that support an inference that Premium
Glass somehow participated in the alleged breaches of the insurance contracts or is otherwise
liable for Plaintiff’s loss.
The Court finds that meaningful relief can be accorded without Premium Glass and that
Premium Glass is therefore not a necessary party for the purposes of Rule 19. Because Premium
Glass is not a necessary party under Rule 19, joinder and further analysis are not necessary. See
Local 670, 822 F.2d at 618.
III.

Conclusion

The Court notes that National Fire identified other alleged indispensable parties but did
not support their assertion of indispensability with any argument or facts to satisfy its burden as
the moving party. Accordingly, defendant’s motion to dismiss (doc. 12) is DENIED.

s/ James. L. Graham
JAMES L. GRAHAM
United States District Judge
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