City of Dayton, Ohio v. A.R. Environmental, Inc. et al

Filing 104

ORDER DISMISSING PENLAND'S PRO SE THIRD-PARTY CLAIMS AGAINST STEVE RAUCH, INC., MICHAEL CROMARTIE, MARK MUELLER, WILLIAM O'CONNELL, MICHAEL JOHNSON, AND AMERICAN CONTRACTING SERVICES, INC.; AND DENYING DEFENDANT PENLAND'S PRO SE MOTIONS ( 69 , 93 , 95 , 97 , 100 ). Signed by Magistrate Judge Michael J. Newman on 9/18/2012. (sc1) Modified on 9/18/2012 to correct Judge (sc1).

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
CITY OF DAYTON,

:
Case No. 3:11-cv-383

Plaintiff,
-vs-

:

Magistrate Judge Michael J. Newman
(Consent Case)

A.R. ENVIRONMENTAL, INC., et al.,
Defendants.

:

ORDER DISMISSING PENLAND’S PRO SE THIRD-PARTY CLAIMS AGAINST
STEVE RAUCH, INC., MICHAEL CROMARTIE, MARK MUELLER, WILLIAM
O’CONNELL, MICHAEL JOHNSON, AND AMERICAN CONTRACTING SERVICES,
INC.; AND DENYING DEFENDANT PENLAND’S PRO SE MOTIONS (DOCS. 69, 93,
95, 97, 100)

This consent case (see doc. 30) was initiated in October 2011 by Plaintiff City of Dayton
(“City”) against Defendants A.R. Environmental, Inc. (“A.R.”), Alex Penland (the alleged
incorporator, primary shareholder and President of A.R.) (“Penland”), and Unknown John and Jane
Doe Employees, Officers, and Shareholders of A.R. Doc. 1. The lawsuit arises out of three
contracts between the City and A.R. to perform asbestos surveys, asbestos remediation, and
demolition activities on properties located in Dayton. See id. The City claims that A.R. failed to
comply with the terms of these contracts, and also violated federal, state and local laws and
regulations. See id. To that end, the City asserts causes of action against Defendants under the
Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”), 42 U.S.C.
§ 9613(b), et seq., as well as related breach of contract and tort claims (i.e., unjust enrichment,
negligence, nuisance, and fraud). See id. In turn, Penland, proceeding pro se, filed counterclaims
against the City. See docs. 8, 12, 33. (The Court has already dismissed Penland’s counterclaims in a

previous Order, however. See doc. 64.) Penland has also filed pro se third-party claims against
eleven individuals and entities. See docs. 12, 33, 41.
Throughout this litigation, Penland has attempted, and continues to attempt, to represent A.R.
in his pleadings. The Court has advised him – both orally during the scheduling conference and in
writing, see docs. 34, 44 – that he cannot represent A.R., a corporation, because he is not a licensed
attorney. See Rowland v. Cal. Men’s Colony, 506 U.S. 194, 217 (1993); Gerber v. Riordan, 649 F.3d
514, 516 (6th Cir. 2011). Further, because no attorney ever appeared or otherwise pled on behalf of
A.R., a default judgment was entered against A.R. pursuant to Rule 55 on May 22, 2012.1 See doc.
66. This matter is now before the Court upon multiple motions related to Penland’s third-party
claims.
I. Penland’s Pro Se Third-Party Claims
Six Third-Party Defendants have filed motions to dismiss Penland’s pro se third-party
claims:2 Steve Rauch, Inc. (“SRI”) (docs. 47, 92);3 Michael Cromartie, Michael Johnson, Mark
Mueller and William O’Connell (doc. 72); and American Contracting Services, Inc. (“ACS”) (doc.
75). Penland has not filed responsive memoranda to these dismissal motions.
To survive these motions to dismiss pursuant to Civil Rule 12(b)(6), Penland’s third-party
claims “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v.

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A.R.’s statutory agent waived service on behalf of A.R. See doc. 5. However, no attorney ever appeared or
otherwise pled on behalf of A.R.; nor was there ever a response to the Court’s sua sponte Show Cause Order
to A.R. See doc. 44.
2
In this case, Penland has filed a Third Party Complaint (doc. 12), an Amended Third Party Complaint (doc.
33), and a Second Amended Third Party Complaint (doc. 41) (which incorporated his earlier pleading (doc.
8)) against eleven individuals and entities. He has since moved to amend his third-party claims several more
times. See docs. 69, 94, 100.
3
Steve Rauch, Inc. technically filed two motions to dismiss. It filed its initial dismissal motion on April 30,
2007 (doc. 47). Then, on July 9, 2012, it renewed its motion to dismiss in response to Penland’s motion to
amend his Third-Party Complaint (doc. 92).

2

Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable for
the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). While pro se pleadings should be
“liberally construed” and “held to less stringent standards than formal pleadings drafted by lawyers,”
Williams v. Curtin, 631 F.3d 380, 383 (6th Cir. 2011), pro se plaintiffs must still satisfy basic
pleading requirements, and courts are not compelled to conjure up facts to support conclusory
allegations. See Clark v. Johnston, 413 F. App’x 804, 817 (6th Cir. 2011); Wells v. Brown, 891 F.2d
591, 594 (6th Cir. 1989).
Rule 14 allows a defendant to assert a third-party claim against a non-party “who is or may
be liable to it for all or part of the claim against it.” Fed. R. Civ. P. 14(a)(1). The Sixth Circuit has
explained when third-party pleading under Rule 14 is proper:
The purpose of Rule 14 is to permit additional parties whose rights may be affected
by the decision in the original action to be joined so as to expedite the final
determination of the rights and liabilities of all the interested parties in one suit.
Dishong v. Peabody Corp., 219 F.R.D. 382, 385 (E.D. Va. 2003); see also Nova
Prods., Inc. v. Kisma Video, Inc., 220 F.R.D. 238, 240 (S.D.N.Y. 2004)(“The
underlying principle behind impleader is to promote judicial efficiency by permitting
the adjudication of several claims in a single action, and thus to eliminate circuitous,
duplicative actions.”)(citations and internal quotations omitted).
Third-party pleading is appropriate only where the third-party defendant’s liability to
the third-party plaintiff is dependent on the outcome of the main claim; one that
merely arises out of the same set of facts does not allow a third-party defendant to be
impleaded. A defendant attempting to transfer the liability asserted against him by
the original plaintiff to the third-party defendant is therefore the essential criterion of
a third-party claim. Correlatively, a defendant’s claim against a third-party defendant
cannot simply be an independent or related claim, but must be based upon the
original plaintiff’s claim against the defendant. See Stiber v. United States, 60 F.R.D.
668, 670 (E.D. Pa.1973)(“Under Rule 14, the liability of the third-party must be
dependent on the outcome of the main claim.”). Rule 14(a) does not allow a thirdparty complaint to be founded on a defendant’s independent cause of action against a
third-party defendant, even though arising out of the same occurrence underlying
plaintiff’s claim, because a third-party complaint must be founded on a third party’s
actual or potential liability to the defendant for all or part of the plaintiff’s claim
against the defendant. United States v. Olavarrieta, 812 F.2d 640, 643 (11th Cir.
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1987).
Am. Zurich Ins. Co. v. Cooper Tire & Rubber Co., 512 F.3d 800, 805 (6th Cir. 2008).
A. Steve Rauch, Inc. (SRI)
First before the Court is SRI’s unopposed motion to dismiss Penland’s third-party claims
against it. See docs. 47, 92. Liberally construing Penland’s pleadings, the Court identifies one thirdparty claim against SRI: tortious interference with a contract between the City of Dayton and A.R.
Environmental, Inc. See doc. 8 at PageID 118-20; doc. 33 at PageID 278-82. This is not a proper
third-party claim – i.e., where “[a] defendant [is] attempting to transfer the liability asserted against
him by the original plaintiff to the third-party defendant” – but rather an independent cause of action
against SRI. See Am. Zurich Ins. Co., 512 F.3d at 805. Accordingly, SRI’s unopposed dismissal
motions (docs. 47, 92) are GRANTED; Penland’s third-party claim against Steve Rauch, Inc. is
DISMISSED; and the Clerk is ORDERED to terminate Steve Rauch, Inc. as a party on the docket
of this matter.
B. City Employees
The same analysis applies in ruling on the unopposed motion of Third-Party Defendants
Michael Cromartie, Mark Mueller, William O’Connell and Michael Johnson (collectively “City
Employees”) to dismiss Penland’s third-party claims against them. Doc. 72. Liberally construing
Penland’s pleadings, it appears he asserts claims for breach of contract, unjust enrichment, and
tortious interference with a contract against the City Employees. See docs. 8, 12, 33. Specifically,
he alleges they wrongfully terminated the City’s contract with A.R.; forced A.R. to use a “nonlegitimate” subcontractor; and failed to compensate A.R. for its work. See id. Further, Penland
alleges these actions constituted racial discrimination, asserting claims under Sections 1981, 1983
and 1985, and Title VI. See id.
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Again, these are independent causes of actions against the City Employees, and therefore not
proper third-party claims under Rule 14. Accordingly, the City’s Employees’ motion to dismiss
(doc. 72) is GRANTED; Penland’s third-party claims against Third-Party Defendants Michael
Cromartie, Mark Mueller, William O’Connell and Michael Johnson are DISMISSED; and the Clerk
is ORDERED to terminate Michael Cromartie, Mark Mueller, William O’Connell and Michael
Johnson as parties on the docket of this matter.
C. American Contracting Services, Inc. (ACS)
Also before the Court is an unopposed motion of ACS to dismiss Penland’s pro se third-party
claims against it. Doc. 75. Penland apparently claims that ACS owes him a duty to indemnify
and/or defend him in this lawsuit. See doc. 41. He does not indicate how this duty was established,
i.e., that there is a contract obligating ACS to indemnify/defend him. Rather, his only support for
this claim is a conclusory statement that ACS is his “surety agent.”4 See id. This fact alone is
insufficient to state a claim for indemnification and/or duty to defend. Cf. Wagner-Meinert, Inc. v.
EDA Controls Corp., No. 06-3777, 2007 U.S. App. LEXIS 4879, at *7-8 (6th Cir. Feb. 23, 2007)
(affirming dismissal of indemnification claim for failure to state sufficient facts to show that a duty
to indemnify existed). Therefore, ACS’s motion to dismiss (doc. 75) is GRANTED;
Defendant/Third-Party Penland’s third-party claims against Third-Party Defendant American
Contracting Services, Inc. are DISMISSED; and the Clerk is ORDERED to terminate American
Contracting Services, Inc. as a party on the docket of this matter.

4

Even assuming, arguendo, that such a surety agreement exists, contrary to Penland’s apparent belief, ACS
would owe a duty to the City for damages caused by A.R., and would have no duty to indemnify and/or
defend him. “[A] surety agreement is a three-way contract written for the benefit and protection of the
obligee [which, in this case, would be the City]. The surety essentially extends standby credit by agreeing to
answer for the principal’s [A.R.’s] debt or default.” Int’l Fid. Ins. Co. v. Vimas Painting Co., No. 2:07-cv298, 2008 U.S. Dist. LEXIS 27018, at *13-14, 2008 WL 926577, at *5 (S.D. Ohio Apr. 3, 2008) (citing Suver
v. Pers. Ins. Co., 462 N.E.2d 415, 417 (Ohio 1984)).

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II. Penland’s Motions to Amend
Penland has filed two motions for leave to file amend his pleadings. Docs. 69, 100.
A. Penland’s First Motion for Leave to Amend
In the first motion, Penland requests leave to file amended third-party claims and also add a
counterclaim against the City. See doc. 69. Specifically, he seeks to assert § 1983 claims against the
employees of the City, alleging the following acts of racial discrimination/disparate treatment: (1)
forcing him to sign a contract with a “non-legitimate” company, see doc. 69-1 at PageID 443-45; (2)
threatening him, see id. at PageID 445-48; and (3) refusing to pay A.R. for work it completed, see id.
at PageID 448-50. Additionally, Penland seeks to assert a § 1983 counterclaim against the City of
Dayton – alleging similar acts of discrimination. See doc. 69-1 at PageID 450-51.
As the parties have not consented to Penland’s amendment, Rule 15(a)(2) requires him to
obtain the Court’s leave to file his amended pleading. Fed. R. Civ. P. 15(a)(2). A motion for leave
to amend should be denied “if the amendment is brought in bad faith, for dilatory purposes, results in
undue delay or prejudice to the opposing party, or would be futile.” Colvin v. Caruso, 605 F.3d 282,
294 (6th Cir. 2010). “A proposed amendment is futile if the amendment could not withstand a Rule
12(b)(6) motion to dismiss.” Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 420 (6th Cir.
2000).
Here, allowing Penland to amend his third-party claims would be futile because he has not
pled proper third-party claims under Rule 14. Penland is attempting to assert independent causes of
actions against these parties that are not dependent on the outcome of the City’s claims against him.
See Am. Zurich Ins. Co., 512 F.3d at 805. Likewise, it would be futile to amend his pleading to add
a counterclaim against the City. The Court already dismissed this same counterclaim in a previous
Order. See doc. 64 at PageID 424-26. Accordingly, Penland’s motion for leave to file an amended
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third-party complaint and counterclaim (doc. 69) is DENIED.
B. Penland’s Second Motion for Leave to Amend
In his second motion, Penland seeks leave to amend to add another Third-Party Defendant:
Brower Insurance Agency (“Brower”).5 Doc. 100. He claims Brower “has a fiduciary duty to
defend A.R. Environmental, Inc. as the conduct complaint of by the Plaintiff has occurred within the
policy applicable coverage.” Id. (emphasis added). This motion to amend should likewise be
denied because it would be a futile amendment. As explained numerous times throughout this
litigation, Penland does not have standing to represent A.R. (a corporation). Further, a default
judgment has already been entered against A.R. Accordingly, Penland’s motion for leave to amend
his third-party complaint to add Brower (doc. 100) is DENIED.
III. Penland’s Other Pending Motions
There are also three pending motions filed by Penland. First, Penland moves to stay
proceedings “until Brower Insurance Agency has been served and has had a chance to respond.”
Doc. 93. This motion (doc. 93) is DENIED AS MOOT because, as explained above, the Court
finds it would be futile to grant him leave to add Brower as a third-party defendant.
Second, Penland filed a motion for relief from the Court’s entry of default judgment against
A.R. Doc. 95. Penland’s motion (doc. 95) is DENIED because he lacks standing. The Court
entered default judgment against A.R. – not him. As he is not a licensed attorney, Penland does not
have standing to represent A.R. See Rowland, 506 U.S. at 217; Gerber, 649 F.3d at 516.
Third, Penland filed a motion asking the Court to reconsider its Order – denying his motion
for leave to amend his third-party complaint to add Brower – based on his failure to comply with

5

This is the second time Penland has moved to amend his third-party complaint to add Brower as a thirdparty defendant. See doc. 94. This motion was initially denied on July 31, 2012 by notation Order for his
failure to advise the Court whether his motion was opposed under S.D. Ohio L.R. 7.3(b).

7

S.D. Ohio L.R. 7.3. Doc. 97. This motion for reconsideration (doc. 97) is DENIED AS MOOT
because Penland subsequently re-filed his motion to add Brower as a third-party defendant, and that
motion was denied herein. See supra.
IT IS THEREFORE ORDERED AS FOLLOWS:
1.

Third-Party Defendant Steve Rauch, Inc.’s motions to dismiss (docs. 47, 92)
are GRANTED; Penland’s third-party claim against Steve Rauch, Inc. is
DISMISSED; and the Clerk is ORDERED to terminate Steve Rauch, Inc. as
a party on the docket in this matter;

2.

The motion to dismiss by Third-Party Defendants Michael Cromartie, Mark
Mueller, William O’Connell and Michael Johnson (doc. 72) is GRANTED;
Penland’s third-party claims against Third-Party Defendants Michael
Cromartie, Mark Mueller, William O’Connell and Michael Johnson are
DISMISSED; and the Clerk is ORDERED to terminate Michael Cromartie,
Mark Mueller, William O’Connell and Michael Johnson as parties on the
docket in this matter;

3.

Third-Party Defendant American Contracting Services, Inc.’s motion to
dismiss (doc. 75) is GRANTED; Defendant/Third-Party Penland’s thirdparty claims against Third-Party Defendant American Contracting Services,
Inc. are DISMISSED; and the Clerk is ORDERED to terminate it as a party
on the docket in this matter;

4.

Penland’s motion for leave to file an amended third-party complaint and
counterclaim (doc. 69) is DENIED;

5.

Penland’s motion for leave to file an amended third-party complaint (doc.
100) is DENIED;

6.

Penland’s motion to stay (doc. 93) is DENIED;

7.

Penland’s motion for relief from judgment (doc. 95) is DENIED; and

8.

Penland’s motion for reconsideration (doc. 97) is DENIED AS MOOT.

s/ Michael J. Newman
United States Magistrate Judge

September 18, 2012

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