Davis v. PMA Companies Inc et al

Filing 25

ORDER denying 14 Defendant's Motion to Dismiss for Lack of Jurisdiction; granting 18 Plaintiff's Motion to Dismiss defendant Midlands Management Company; Midlands Management Corporation terminated.. Signed by Honorable Robin J. Cauthron on 7/22/11. (lg, )

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA

J. MARK DAVIS,
Plaintiff,
vs.
PMA COMPANIES, INC., and
MIDLANDS MANAGEMENT CORP.,
Defendants.

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Case No. CIV-11-359-C

MEMORANDUM OPINION AND ORDER
Plaintiff Mark Davis brought suit against Defendants PMA Companies, Inc. (“PMA”)
and Midlands Management Corp. (“MMC”) alleging breaches of contract and the duty of
good faith as well as wrongful termination. Defendants filed a Motion to Dismiss for lack
of subject matter jurisdiction; Plaintiff responded by filing a Motion to Dismiss Defendant
MMC under Rule 21 of the Federal Rules of Civil Procedure.
BACKGROUND
Plaintiff Davis was a shareholder, founder, director, president, and chief operating
officer of MMC, a corporation that administered various types of compensation claims for
reinsurers, insurers, and self-insurers. (Compl., Dkt. No. 1, at 2.) On October 1, 2007,
Defendant PMA entered into a Stock Agreement with the shareholders of Midlands Holding
Company, the parent company of MMC, which is the parent company for Midlands Claims
Administrators (“MCA”). (Id.) Plaintiff Davis claims that pursuant to this Stock Agreement,
MCA would employ Davis, who would get an earn-out payment based on MCA’s

performance. (Id. at 3.) Under this Stock Agreement, PMA controlled three of five board
of director’s positions in MMC. Also pursuant to this Agreement, MMC and Davis entered
into an Amended and Restated Employment Agreement. (Id.)
Plaintiff alleges that after executing these agreements, Defendant PMA prevented him
from effectively and profitably operating MCA. Specifically, Davis claims that PMA
directed MCA to stop developing software that would be beneficial to its business, and
instead MCA was forced to use outdated software. (Id. at 4.) Plaintiff also claims that PMA
promised MCA access to its software, but MCA did not gain access. As a result of these
actions, Plaintiff alleges, MCA lost over 80% of its revenue, which directly impacted the
value of Plaintiff’s earn-out payment and resulted in his termination. (Id.) Plaintiff Davis
also alleges that PMA violated, and attempted to coerce Plaintiff into violating, employment
and labor laws. Finally, Plaintiff claims that PMA, acting through MMC, repeatedly denied
his requests for action causing damage to MCA’s business and reputation.
DISCUSSION
Under Rule 12(b)(1), a motion to dismiss for lack of subject matter jurisdiction may
take the form of either a facial attack or a factual attack. Muscogee (Creek) Nation v. Okla.
Tax Comm’n, 611 F.3d 1222, 1227 & n.1 (10th Cir. 2010). A facial attack challenges the
court’s jurisdiction by looking only to the factual allegations of the complaint. “A factual
attack goes beyond the factual allegations of the complaint and presents evidence in the form
of affidavits or otherwise to challenge the court’s jurisdiction.” Id. (citing Stuart v. Colo.
Interstate Gas Co., 271 F.3d 1221, 1225 (10th Cir. 2001)).
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Here, Defendants challenge the Court’s jurisdiction based only on the factual
allegations of the Complaint and not on any additional evidence. Accordingly, Defendants
facially attack the Court’s jurisdiction over Plaintiff’s claims, and, therefore, the Court must
look to and accept as true the Complaint’s factual allegations. Holt v. United States, 46 F.3d
1000, 1002 (10th Cir. 1995); Ruiz v. McDonnell, 299 F.3d 1173, 1180 (10th Cir. 2002).
Plaintiff’s Complaint suffers from a procedural defect that must be cured before this
Court has the requisite subject matter jurisdiction. Namely, Plaintiff is suing a nondiverse
party on the basis of diversity subject matter jurisdiction, which he now realizes he cannot
do. Therefore, Plaintiff moves this Court to dismiss the nondiverse party, Defendant MMC,
pursuant to Rule 21 of the Federal Rules of Civil Procedure.
Under Rule 21, “‘[p]arties of course may be dropped in order to achieve the requisite
diversity of citizenship if their presence is not essential to a just and meaningful
adjudication.’” Jett v. Phillips & Assoc., 439 F.2d 987, 989-90 (10th Cir. 1971) (quoting
Oppenheim v. Sterling, 368 F.2d 516, 518 (10th Cir. 1966)). However, a court’s power to
dismiss parties is limited under Rule 19(b), as a court cannot proceed without an
indispensable party. See id. at 989-90. Additionally, courts should “carefully consider
whether the dismissal of a nondiverse party will prejudice any of the parties in the litigation.”
Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 838 (1989).
After reviewing Plaintiff’s Complaint, it seems that Defendant MMC is a dispensable
party. Under Rule 19(b), courts consider four factors when assessing whether a party is
dispensable:
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(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 . . . protective provisions in the
judgment[,] . . . shaping the relief[,] or . . . 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
non-joinder.
Fed. R. Civ. P. 19(b). See Davis ex rel. Davis v. United States, 343 F.3d 1282, 1289 (10th
Cir. 2003) (citing Wichita & Affiliated Tribes of Okla. v. Hodel, 788 F.2d 765, 774 (D.C.
Cir. 1986) (describing the four factors as “not rigid, technical tests, but rather guides to the
overarching equity and good conscience determination”) (internal quotation marks and
citations omitted)).
Here, Plaintiff asserts separate claims against MMC and PMA; resolution of the
dispute between PMA and Davis can be resolved in MMC’s absence. Specifically, Plaintiff
asserts a breach-of-contract claim against PMA pursuant to the Stock Purchase Agreement
and an intentional interference claim against PMA regarding the Employment Agreement.
Despite Defendant’s assertion, resolution of the latter does not require that MMC, as a
contracting party to the Employment Agreement, be a party to litigate that claim. See
Wilspec Techs., Inc. v. DunAn Holding Grp., Co., Ltd., 2009 OK 12, ¶¶ 7-8, 204 P.3d 69,
71-72. Regarding MMC, Plaintiff asserts a breach of the Employment Agreement, not the
Stock Agreement. (See Compl. Dkt. No. 1, at 7.) Additionally, MMC’s absence from the
present action would not be prejudicial to it.
Nor would dismissal of MMC prejudice the parties in the litigation, see NewmanGreen, 490 U.S. at 838, since Davis can pursue his claims against MMC in state court and
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fully adjudicate his claims against PMA in the present action. Because MMC is herein
dismissed from the action pursuant to Rule 21, the parties are diverse and the Court maintains
the requisite subject matter jurisdiction to hear the case.
CONCLUSION
Because the Court finds that MMC’s presence is not essential to a just and meaningful
adjudication, Plaintiff’s Motion to Dismiss Nondiverse Party MMC (Dkt. No. 18) is herein
GRANTED. Accordingly, Defendant’s Motion to Dismiss (Dkt. No. 14) is DENIED.
IT IS SO ORDERED this 22nd day of July, 2011.

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