Bates et al v. Laminack et al
Filing
41
ORDER 38 MOTION to Dismiss, 20 MOTION to Dismiss Plaintiffs' Original Complaint, 22 MOTION to Dismiss 1 Complaint, 35 MOTION to Dismiss for Lack of Jurisdiction ( Plaintiff's Amended Complaint due by 4/9/2013.)(Signed by Judge Nelva Gonzales Ramos) Parties notified.(mserpa, )
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
FRANK BATES, et al,
Plaintiffs,
VS.
RICHARD N LAMINACK, et al,
Defendants.
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§ CIVIL ACTION NO. 2:12-CV-00387
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§
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§
ORDER
All of the Defendants, through four essentially identical motions and two joinders
in previously filed motions, seek dismissal, abstention, or abatement of this action. D.E.
20, 21, 22, 30, 35, 38. Plaintiffs have responded. D.E. 32, 34, 36, 40. And one set of
Defendants has replied. D.E. 37. Because the motions are the same or similar and have
overlapping issues, and in the interest of judicial efficiency and economy, the motions
will be addressed jointly and the arguments will be considered globally.
As set out in detail below, the Court rules as follows on Defendants’ challenges:
1. The Court DENIES the Fed. R. Civ. P. 12(b)(1) request to dismiss for lack of
jurisdiction;
2. The Court ORDERS Plaintiffs to amend their Complaint and DENIES without
prejudice the Fed. R. Civ. P. 12(b)(7) request to dismiss for failure to join
indispensable parties;
3. The Court DENIES the Fed. R. Civ. P. 12(b)(1) request to abstain;
4. The Court DENIES the Fed. R. Civ. P. 9(b) request to dismiss for inadequate
pleading of fraud;
5. The Court DENIES the Fed. R. Civ. P. 12(e) request for more definite
statement;
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6. The Court DENIES the Fed. R. Civ. P. 12(f) request to strike immaterial and
scandalous allegations; and
7. The Court GRANTS the requested stay of proceedings pursuant to the
Defendants’ plea in abatement based upon Tex. Bus. & Comm. Code § 17.505.
I. Rule 12(b)(1) Jurisdiction
Plaintiffs filed this case directly in the United States District Court and have
predicated federal jurisdiction on diversity of citizenship under 28 U.S.C. § 1332.
Diversity jurisdiction requires both diversity of citizenship among plaintiffs and
defendants and an amount in controversy exceeding $75,000, exclusive of interest and
costs. In Defendants’ challenges to this Court’s subject matter jurisdiction, they argue
both: (1) lack of diversity at the time the Complaint was filed and the impropriety of
dismissals to cure diversity of citizenship; and (2) an insufficient amount in controversy.
A. Diversity of Citizenship Exists
According to the Plaintiffs’ Complaint, Stacie Taylor, a citizen of Alabama, was
sued as a Defendant. D.E. 1, p. 7. As an Alabama citizen, Ms. Taylor is not diverse in
citizenship from at least nine of the Plaintiffs. Summons was issued to Ms. Taylor, but
the docket does not reflect service on her or a voluntary appearance. D.E. at 01/17/2013.
Pursuant to Fed. R. Civ. P. 41(a)(1)(i), Plaintiffs sought and obtained an Order1 allowing
them to dismiss Ms. Taylor. D.E. 18, 19.
Defendants now argue that the dismissal of Ms. Taylor is ineffective to cure
jurisdiction because jurisdiction must be evaluated only at the time the case is filed, citing
Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 571 (2004) and Capron v.
1
No order was required under the circumstances. Rule 41(a)(1)(i).
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Van Noorden, 6 U.S. 126 (1804). As a corollary, Defendants contend that amending a
complaint to drop a non-diverse defendant is improper. ConnectU LLC v. Zuckerberg,
482 F.Supp.2d 3, 19 (D. Mass. 2007), rev’d on other grounds, 552 F.3d 81 (1st Cir.
2008).
Defendants’ jurisdictional challenge is incorrect. First, Capron, is inapposite in
that it addresses whether parties have the power to consent to jurisdiction where it does
not otherwise exist. That issue is not before the Court. Both Grupo Dataflux and
ConnectU recite the time-of-filing rule as the general rule for evaluating diversity
jurisdiction. Both cases, however, recognize that a well-established exception to that
general rule exists with respect to the dismissal of a non-diverse, dispensable party:
• “Exceptions to the general rule are extremely limited as, for example,
the ability of a court to dismiss a nondiverse, dispensable party in order
to cure a jurisdictional defect. See, e.g., Grupo, 541 U.S. at 572, 124
S.Ct. 1920; Newman–Green, [Inc. v. Alfonzo-Larrain, 490 U.S. 826,]
832, 109 S.Ct. 2218 [(1989)].” ConnectU, supra at 15.
• “Caterpillar [Inc. v. Lewis, 519 U.S. 61, 117 S.Ct. 467, 136 L.Ed.2d
437 (1996)], broke no new ground, because the jurisdictional defect it
addressed had been cured by the dismissal of the party that had
destroyed diversity. That method of curing a jurisdictional defect had
long been an exception to the time-of-filing rule. ‘[T]he question always
is, or should be, when objection is taken to the jurisdiction of the court
by reason of the citizenship of some of the parties, whether . . . they are
indispensable parties, for if their interests are severable and a decree
without prejudice to their rights may be made, the jurisdiction of the
court should be retained and the suit dismissed as to them.’ Horn v.
Lockhart, 17 Wall. 570, 579, 21 L.Ed. 657 (1873).” Grupo Dataflux,
541 U.S. at 572.
The reason that the post-filing changes in Grupo Dataflux and ConnectU did not
cure diversity jurisdiction was because they were changes within a party—not the
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wholesale dismissal of a non-diverse party. In Grupo Dataflux, the plaintiff was a
partnership suing a Mexico corporation. The citizenship of the partnership depended
upon the citizenship of its partners. A withdrawal of the non-diverse partners from the
partnership during the course of the proceeding, however, was not permitted to cure
diversity jurisdiction just as an individual’s change of citizenship during the pendency of
a proceeding will not alter the jurisdiction that attached at the time of filing. Grupo
Dataflux, 541 U.S. at 571. In other words, jurisdiction that depends upon the condition of
a party at the time of filing does not change simply because that condition later changes.
Id. at 571-72. Otherwise, parties could continually destroy jurisdiction throughout the
pendency of a case by simply moving around the country.
The relevant issue in ConnectU was the citizenship of the parties, including a
limited liability company whose membership changed and an individual whose
citizenship as a college student on the move was difficult to pin down. Both of those
issues involved the “condition” on which citizenship is determined.
There was no
dismissal of either party. Thus ConnectU is only helpful insofar as it does acknowledge
that there is an exception to the time-of-filing rule for dismissals of parties.
The Court may dismiss a non-diverse party in order to cure a jurisdictional
defect. Grupo Dataflux, 541 U.S. at 567; Newman-Green, 490 U.S. at 836-37. “The
time-of-filing rule has one well-established exception. A district court can dismiss a
dispensable nondiverse party pursuant to Fed.R.Civ.P. 21 to cure a jurisdictional defect at
any point in the litigation, including after judgment has entered.”
Ravenswood
Investment Co. v. Avalon Correctional Services, 651 F.3d 1219, 1223 (10th Cir. 2011).
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The Defendants’ motions are DENIED with respect to their argument that diversity
jurisdiction does not exist based on the citizenship of the parties.
B. The Amount in Controversy is Sufficient
1. The Standard of Review and Applicable Law
Defendants challenge Plaintiffs’ satisfaction of the amount in controversy
requirement. D.E. 20, pp. 12-17. Defendants are correct that Plaintiffs must satisfy the
$75,000 threshold individually and not as a group or class.2 E.g., Rangel v. Leviton Mfg.
Co., 2012 WL 884909 (W.D. Tex. March 14, 2012) (citing Snyder v. Harris, 394 U.S.
332, 335, 89 S.Ct. 1053 (1969)). If Plaintiffs’ good faith allegations of injury support the
required amount, then Defendants must show—to a legal certainty—that Plaintiffs cannot
actually meet the threshold with their causes of action. St. Paul Reinsurance Co. v.
Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998) (citing St. Paul Mercury Indem. Co. v.
Red Cab Co., 303 U.S. 283, 288, 58 S.Ct. 586, 590 (1938)).
The “good faith” requirement goes to the claims made and does not require that
Plaintiffs plead a particular sum certain. See generally, Huber v. Taylor, 532 F.3d 237,
246 (3d Cir. 2008).
The standard by which the Court reviews the complaint for
indication of the necessary amount in controversy is whether the amount is “likely” to
exceed $75,000 based on the types of claims alleged and the nature of the damages
sought. Allen v. R&H Oil & Gas Co., 63 F.3d 1326, 1335-36 (5th Cir. 1995).
Defendants identify one statement in Plaintiffs’ jurisdictional statement as the only
statement on the amount of damages claimed. That statement is, “[T]he amount in
2
Plaintiffs do not contest this proposition.
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controversy exceeds $100,000.” D.E. 1, p. 8. However, in a much later reference to
“each Plaintiff,” they recite that each seeks “the maximum allowable amount of actual
damages that exceed the jurisdictional limits of this court.” D.E. 1, p. 49. In addition,
they request a 40% contingency fee on any recovery, exemplary damages without regard
to statutory cap, and treble damages under the DTPA. Id. at 49-50. Last, they seek
disgorgement of fees and expenses paid to the Defendants. Id. at 50.
As a preliminary matter, the Defendants do not dispute that the Plaintiffs’ causes
of action, if proven to be factually correct, do support the categories of damages claimed.
Compensatory damages are a natural remedy for each claim. Their claims also carry the
potential of exemplary or additional damages.
Internat’l Bankers Life Ins. Co. v.
Holloway, 368 S.W.2d 567, 584 (Tex. 1963) (fraud and civil conspiracy); Brosseau v.
Ranzau, 81 S.W.3d 381, 396-97 (Tex. App.—Beaumont 2002, pet. denied) (breach of
fiduciary duty); Tex. Civ. Prac. & Rem. Code § 41.003(a)(1) (common law fraud, malice,
and gross negligence); Tex. Bus. & Comm. Code § 17.50(b)(1) (intentional violation of
DTPA).
There is no question that punitive or exemplary damages are included in
calculating the amount in controversy. Bell v. Preferred Life Assurance Soc’y, 320 U.S.
238, 240-41 (1943); Dow Agrosciences LLC v. Bates, 332 F.3d 323, 326 n.3 (5th Cir.
2003), vacated on other grounds, 544 U.S. 431 (2005); Huber, supra at 244. Likewise,
statutory attorney’s fees (available under the DTPA and for a breach of contract action)
are included in the calculation of the amount. Missouri State Life Ins. Co. v. Jones, 290
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U.S. 199, 202 (1933); Foret v. Southern Farm Bureau Life Ins. Co., 918 F.2d 534, 537
(5th Cir. 1990).
2. Plaintiffs’ Theories Support the AmountIn-Controversy Requirement.
Plaintiffs contend that they should be treated as presumptively suffering from
silicosis based on the diagnosis of the medical professionals Defendants selected,
meaning that they should be considered eligible for any available recovery from
wrongdoers who caused silicosis at the rates available to silicosis victims. D.E. 1, pp. 835. Alternatively, if they do not have silicosis and cannot recover as silicosis victims,
they sue for damages that include mental anguish suffered as a result of being told that
they had silicosis when, in fact, they did not have the disease. Id. at 35-48. Plaintiffs
may retain federal jurisdiction if either of their avenues for recovery states a claim in
excess of $75,000 for each claimant. “Where a complaint proceeds on two alternative
theories, only one of which satisfies the amount-in-controversy requirement, jurisdiction
has been sustained.” Bankers Life & Cas. Co. v. Namie, 341 F.2d 187, 189 n.2 (5th Cir.
1965).
a.
The Non-Silicosis Track
Defendants have posed detailed challenges to the amount in controversy under the
first scenario in which the Plaintiffs are silicosis sufferers. In contrast, Defendants have
not squarely addressed the second scenario in which Defendants are alleged to have
intentionally misled Plaintiffs into believing that they have a life-threatening disease.
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Addressing the second scenario first, the Plaintiffs have alleged the following with
respect to damages:
• After being told of their incurable silicosis diagnosis, Plaintiffs
prepared for the worst. D.E. 1, p. 36.
• Plaintiffs suffered severe mental anguish and distress. Id.
• Many Plaintiffs became depressed and mentally distraught. Id.
• Plaintiffs were unable to live their normal lives without the thought
of impending doom, including a decline through a crippling disease
with as little as two years to live. Id. at 37, 43-44.
• Plaintiffs suffered fright, horror, mental breakdowns, worry, and
stress that no reasonable person could expect to endure without
undergoing unreasonable suffering. Id. at 44-45.
• They became distant from family and friends. Id. at 37.
• Many made funeral arrangements. Id.
• Many were unable to obtain health or life insurance. Id.
• Defendants generated approximately $30 million in attorney’s fees
and hundreds of thousands in medical fees at the expense of the
Plaintiffs’ well-being. Id. at 40.
• Plaintiffs are entitled to treble damages and attorney’s fees pursuant
to the DTPA. Id. at 42-43.
• Plaintiffs are entitled to punitive damages without statutory limit.
Id. at 45.
To exceed the statutory cap on punitive damages even if no economic damages are
shown, Plaintiffs are pleading damages exceeding $200,000. Tex. Civ. Prac. & Rem.
Code § 41.008 ($200,000 is the statutory cap where there are no economic damages and
noneconomic damages are less than that amount). Under the DTPA provisions allowing
treble damages, each Plaintiff’s compensatory damages—including mental anguish
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damages—must be approximately $13,500 or more3 to come within federal jurisdiction
once added to a 40% contingent attorney’s fee. Tex. Bus. & Comm. Code § 17.50(b)(1).
Defendants have not suggested that Plaintiffs are, as a matter of law, ineligible for any of
these remedies or that their allegations are not made in good faith.
It is not unusual for courts to find such allegations sufficient to establish the
amount-in-controversy for diversity jurisdiction.
The Fifth Circuit has held that
allegations of mental anguish and punitive damages in unspecified amounts can satisfy
the required threshold. In re 1994 Exxon Chemical Fire, 558 F.3d 378, 387-88 (5th Cir.
2009). In the Exxon Chemical Fire case, the amount-in-controversy requirement was met
by pleading individual and familial suffering, injuries to physical and mental health,
including emotional distress and mental anguish from the knowledge of exposure to a
hazardous substance, expenses incurred by reason of illness caused by the nuisance, fear
and apprehension of further exposure to, and impact from, hazardous chemicals,
economic and financial harm, loss of enjoyment of life and peaceful use of property, and,
other consequential, incidental, general, and special damages as well as punitive
damages.
In Dean v. Accenture Federal Services, LLC, 2011 WL 6355298, *3 (W.D. Tex.
Dec. 19, 2011), the plaintiff sued for disability discrimination and retaliation in his
employment. He did not ask for economic damages, but did plead for mental pain and
anguish, inconvenience, emotional pain and suffering, and loss of enjoyment of life,
3
To determine what compensatory damages plus treble (or punitive) damages plus a 40% contingency fee would
amount to $75,000 a simple mathematical equation reveals the answer. Where “X” is compensatory damages, the
formula would be: X + 3X + 4X(.40) > $75,000. X = ~$13,500.
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along with attorney's fees. The court held that those allegations were sufficient to satisfy
the amount in controversy. Id. (the factual allegations included that the plaintiff had been
hospitalized and medically treated for his mental issues). See also, Whitmire v. Bank
One, N.A., No. Civ. A. H–05–3732, 2005 WL 3465726, at *3 (S.D. Tex. Dec. 16, 2005)
(economic damages of $15,370.50, together with unspecified mental anguish, treble
damages, and attorney's fees, revealed an amount in controversy over $75,000).
Defendants have not argued that, to a legal certainty, Plaintiffs cannot each prove
damages exceeding $75,000 on their individual claims for mental anguish, punitive
damages, and attorney’s fees. The Court holds that a compensatory damage figure of
$13,500 is supported by the facts alleged and that, when added to potential treble
damages or exemplary damages and attorney’s fees, could exceed $75,000. Because the
Plaintiffs can meet their amount-in-controversy requirement on one of two alternate
theories, diversity jurisdiction has attached and the Court DENIES the motions in that
respect.
b.
The Silicosis Track
Additionally, Plaintiffs have demonstrated that their pleadings trigger the
necessary amount in controversy on their first theory in which they are afflicted with
silicosis and were entitled to payment from certain settlement funds or from silicosis
defendants. They have pled the following with respect to their damages:
• Plaintiffs were charged $650 for “free” silicosis screening. D.E. 1, p. 11.
• Defendants were mandated to withdraw from all cases referred by N&M, so
any fees and expenses on those cases should be disgorged to Plaintiffs. Id., pp.
11-12.
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• There was a total of $55 million in global settlements with Moldex, 3M, Air
Liquide, Halliburton, and Clemtex. D.E. 1, p. 13. Defendants wrongfully
retained the funds for their own use and caused Plaintiffs to incur unnecessary
interest and costs. Id.
• Defendants charged 3% “general” expenses without proper authorization,
including expenses incurred in the unrelated Mississippi litigation. Id. at 14.
A “huge” number of those expenses were client-specific, but were improperly
billed to the general expense line item. Id. at 15.
• Overhead in the form of a $60,000 database was charged to clients, even
though it was never used on the cases. Id. at 15.
• Excessive travel expenses, including first class airfaire, private jet expenses,
expensive dinners, alcohol, and cigars, and additional days of travel expenses
over and above the days needed for litigation activities were billed to the
clients. Id. at 16.
• Clients were charged for expert witnesses with up-front fees of $20,000, when
the witnesses were not qualified to render useful opinions and, in fact, did not
contribute to any settlement. Id. at 16.
• Defendants caused clients to release related claims that would have entitled
them to higher amounts in settlements. Id. at 16-17.
• Defendants entered into an improper aggregate settlement with 3M for $26
million. Id. at 17.
• Defendants caused claims to be dismissed before settlements were executed for
clients that may include Plaintiffs. Id. at 17.
• Plaintiffs’ cases were lost by Defendants failing to respond to silicosis
defendants’ motions for summary judgment. Id. at 17-18.
• Defendants caused Plaintiffs to lose the settlement with Sanstorm (a/k/a Air
Liquide) for $5.25 million due to a failure to process the settlements. Id. at 18.
• Defendants caused Plaintiffs to lose the settlement with Moldex for $2.25
million for failure to timely process it. Id. at 18-19.
• Defendants caused Plaintiffs to lose bankruptcy claims against Halliburton for
failure to timely file the claims. Id. at 19.
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• Sanctions awarded to the silicosis defendants from counsel were billed to the
Plaintiffs as litigation expenses. Id. at 20.
• Fees and expenses that were returned by withdrawing attorneys were not
refunded to Plaintiffs in a timely manner. Id. at 20.
• Claim amounts that had been withheld by the bankruptcy court in the
Halliburton case were retained and not timely refunded by Defendants to
Plaintiffs. Id. at 21.
• Plaintiffs seek treble damages and attorney’s fees pursuant to the DTPA. Id. at
32.
• Plaintiffs seek punitive and/or exemplary damages without any statutory limit.
Id. at 34.
Other than complaining of Plaintiffs’ “vague generalities” (D.E. 20, p. 14),
Defendants’ challenge to these allegations is based upon a mathematical view of an
isolated recitation of damages: the $55 million total settlements figure. Defendants,
noting that they represented 3,000 claimants, suggest that the average recovery ($18,333)
is insufficient to meet the jurisdictional requirement.
Accepting the Defendants’
methodology and as demonstrated above, that amount of economic damages, combined
with treble or punitive damages4 and attorney’s fees would certainly meet the $75,000
threshold. Thus Defendants’ mathematical perspective has not demonstrated that the
Plaintiffs as a matter of law cannot reach the required amount in controversy.
While attorney’s fees must be available by statute or contract in order to be
included in the amount-in-controversy calculation,5 Plaintiffs have alleged breach of
contract and DTPA causes of action, both of which include statutory recovery of
4
Exemplaries must bear some relationship to compensatories. However, no set rule or ratio exists to determine an
amount over which the award cannot go. Alamo Nat’l Bank v. Kraus, 616 S.W.2d 908, 910 (Tex. 1981). A one-tothree ratio is well within a justifiable relationship.
5
Foret, supra at 537.
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attorney’s fees. Tex. Civ. Prac. & Rem. Code § 38.001; Tex. Bus. & Comm. Code §
17.50(d). Defendants dispute the right of Plaintiffs’ to include attorney’s fees in this
action because they did not comply with the presentment requirements of the statutes
governing the award of those fees. See Tex. Civ. Prac. & Rem. Code § 38.002; Tex. Bus.
& Comm. Code § 17.505(a).
Neither of the presentment requirements permanently precludes the award of
attorney’s fees under the respective statutes if the lawsuit is filed prior to presentment.
With respect to a contract action, “There is no requirement in the statute that the demand
for payment be made prior to the time suit is filed.” Palestine Water Well Services, Inc.
v. Vance Sand & Rock, Inc., 188 S.W.3d 321, 327 (Tex. App.–Tyler 2006, no pet.) (citing
Gateley v. Humphrey, 151 Tex. 588, 591, 254 S.W.2d 98, 100 (1952) (interpreting the
predecessor statute); Stuckey v. White, 647 S.W.2d 35, 38 (Tex. App.—Houston [1st
Dist.] 1982, no writ) (There is no requirement that a presentment for claim must be made
prior to the time suit is filed to recover attorney's fees, only that the claim is not paid
within 30 days once demand is made.)).
Likewise, under the DTPA, the same statute creating the presentment requirement
includes a remedy if the suit is filed before presentment. DTPA, Tex. Bus. & Comm.
Code § 17.505(d). That remedy is abatement until the 60th day after the Plaintiff makes
the required presentment. DTPA § 17.505(e). All of the Defendants except Michael J.
Lowenberg have filed a plea in abatement. D.E. 20, p. 30; D.E. 21, p. 1; D.E. 30, p. 2;
D.E. 35, p. 34; D.E. 38, p. 35. Because the pleas in abatement are not verified, this action
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was not subject to automatic abatement and the matter will be addressed below. DTPA §
17.505(d).
The Court DENIES the motions to the extent that they challenge the amount in
controversy with respect to the silicosis track.
c.
Plaintiff-Specificity
While the Court has found that a facial review of the pleadings shows that they
satisfy the amount-in-controversy requirement as to “each Plaintiff,” Defendants assert
that Plaintiffs should have to show with particularity how each of them actually qualifies
for each of the remedies that they pled. That requires looking beyond the pleading. The
parties agree that a review of summary judgment-type evidence is appropriate to make
this determination. Hartford Ins. Group v. Lou-Con, Inc., 293 F.3d 908, 910 (5th Cir.
2002) (per curiam); Manguno v. Prudential Property & Casualty Ins. Co., 276 F.3d 720,
723 (5th Cir. 2002).
Plaintiffs offer their Exhibits 8 and 9 to show some evidence of the amount in
controversy for each Plaintiff. The spreadsheet, Exhibit 8, sets out the amount of missed
settlements, the amount of fees and expenses to be disgorged, and interest as damages on
those amounts. The lowest sum was $10,550.58. It cannot be said that, to a legal
certainty, a claim of that amount could not support an exemplary damage award and/or
attorney’s fees that would exceed $75,000 under the allegations in this case.
The only reply that was filed offers two complaints with respect to Plaintiffs’
Exhibit 8. D.E. 37, p. 18. First, it simply disagrees that the sums listed are sufficient to
support total damages exceeding $75,000 already discussed above. Second, it argues that
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the description of damages is still too vague and greater specificity in the pleading should
be ordered. The Court finds that the amount of specificity offered by Plaintiffs at this
point is sufficient to satisfy the jurisdictional requirements. The Court DENIES the
motions to dismiss based on an insufficient amount in controversy.
II. Rule 12(b)(7) Failure to Join Indispensable Parties
Next, Defendants seek a Rule 12(b)(7) dismissal because allegedly indispensable
non-diverse parties must be joined and would therefore destroy jurisdiction.
Rule
12(b)(7) refers to Rule 19 for determining whether a party is indispensable. Such a party
is one whose presence in the lawsuit is required for the fair and complete resolution of the
dispute. HS Resources, Inc. v. Wingate, 327 F.3d 432, 438 (5th Cir. 2003). The burden of
proof on this issue lies with the Defendants as movants. Abbott v. BP Exploration &
Production Inc., 781 F.Supp.2d 453, 461 (S.D. Tex. 2011). Elements of proof are: (1)
the absent party is required for the suit to proceed; (2) that party cannot be joined; and (3)
the suit cannot proceed in equity and good conscience without the absent party. Fed. R.
Civ. P. 19(a), (b).
Indispensability involves prejudice to existing parties if the other party is not
joined, adequacy of relief if awarded against existing parties, and whether the plaintiff
would be left without an adequate remedy if the action is dismissed for nonjoinder. Fed.
R. Civ. P. 19(b). To be an adequate judgment, it must settle the subject dispute in its
entirety. Republic of Philippines v. Pimentel, 553 U.S. 851, 870, 128 S.Ct. 2180, 2193
(2008). Defendants suggest that Stacie Taylor and the law firm, Grenfell, Sledge &
Stevens (GSS), are indispensable parties because they signed up the Plaintiffs to
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prosecute the silicosis claims, referred the Plaintiffs to the Defendants, shared
responsibility for the prosecution of the Plaintiffs’ claims against silicosis defendants, and
shared in attorney’s fees and expenses that are the subject of Plaintiffs’ disgorgement
claims. These contentions raise two indispensability arguments: (1) status as a joint
tortfeasor; and (2) possession of a fund against which Plaintiffs state a claim.
A. Joint Tortfeasors are Not Indispensable
Merely being a joint tortfeasor is not enough to make a party indispensable. “It
has long been the rule that it is not necessary for all joint tortfeasors to be named as
defendants in a single lawsuit.” Temple v. Synthes Corp., Ltd., 498 U.S. 5, 7, 111 S.Ct.
315, 316 (1990). “The Advisory Committee Notes to Rule 19(a) explicitly state that ‘a
tortfeasor with the usual “joint-and-several” liability is merely a permissive party to an
action against another with like liability.’ ” Id. The fact that the existing Defendants may
have some right of reimbursement, contribution, or indemnity against a non-party does
not make the non-party indispensable.
E.g., Nottingham v. General American
Communications Corp., 811 F.2d 873, 880 (5th Cir.), cert. denied, 484 U.S. 854, 108
S.Ct. 158 (1987); Bank of America Nat’l Trust & Savings Ass'n v. Hotel Rittenhouse
Associates, 844 F.2d 1050, 1054 (3d Cir. 1988).
Defendants argue that the Fifth Circuit has established an exception to the joint
tortfeasor rule for parties who are “active participants” in the matters at issue. D.E. 20, p.
8. They refer to Haas v. Jefferson Nat’l Bank, 442 F.2d 394, 398 (5th Cir. 1971). See
also Payan v. Continental Tire N.A., Inc., 232 F.R.D. 587, 589 (S.D.Tex. 2005). In Haas,
the plaintiff sued to enforce his interest in bank shares that, by agreement, had been
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issued in Glueck’s name. When Haas sought to have shares representing his ownership
interest re-issued in his own name, the bank allegedly refused to do so because it claimed
a security interest in the shares related to Glueck’s indebtedness to the bank. The bank
did this despite allegedly knowing that one-half of the shares were owned by Haas.
Glueck was deemed an indispensable party because he was involved in key issues,
including holding the shares in his own name, granting a security interest in the shares
despite Haas’ ownership interest, requesting reissuance and then withdrawing that request
when the bank made its claim to the shares, and then pledging the shares to another bank.
Haas, supra at 395-98. The bank’s liability to Haas could not be determined without
determining who actually owned the shares.
Thus the Haas opinion turns on the
“adjudication of rights to a res” concept rather than creating an exception to the joint
tortfeasor rule of dispensability. As will be discussed further below, this case does not
involve the adjudication of a res as required to make Stacie Taylor or GSS indispensable
parties.
Defendants’ argument that Stacie Taylor was an “active participant” who is an
indispensable party further points to Plaintiffs’ allegations of conspiracy based in part on
the element of a meeting of the minds between Taylor and other Defendants. Tri v.
J.J.T., 162 S.W.3d 552, 556 (Tex. 2005).
Given that the Complaint has not been
amended since the voluntary dismissal of Taylor, it is questionable whether Plaintiffs
intend to prosecute their conspiracy claim. The Court therefore ORDERS Plaintiffs to
amend their Complaint to clarify the claims being made against the remaining parties.
The Court DENIES the motion with respect to this issue without prejudice to re-assert the
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claim that Taylor is an indispensable party with respect to any civil conspiracy alleged to
involve her if such a claim remains after the Plaintiffs file their amended complaint.
B. Indispensability Based on Multiple Claims to a Res Does Not Apply.
Defendants claim that Taylor and GSS are indispensable parties because they have
shared in the same fund of fees and expenses sought to be disgorged and because GSS is
currently making a claim to settlement proceeds from a single fund or res, citing New
England Mutual Life Ins. Co. v. Brandenburg, 8 F.R.D. 151, 154 (S.D.N.Y. 1948).
Noting that dismissal for failure to join indispensable parties is disfavored, the
Brandenburg court stated, “Even where there is a single fund or res, the court will ‘strain
hard’ to find interests to be separable so that an action need not be dismissed.” Id.
There is no applicable res with rights being adjudicated by this Court.
The
identified res is the Estate of John M. O’Quinn, Deceased. That is the subject of other
proceedings.
This case will only determine whether the Plaintiffs have a money
judgment in a liquidated amount that will support a claim in the probate case. Therefore,
any claim to a common fund is not present in this case and does not create indispensable
party status.
Defendants recite that they have the right to be safe from needless multiple
litigation and incurring avoidable inconsistent obligations, citing Schutten v. Shell Oil
Co., 421 F.2d 869, 873 (5th Cir. 1970). Schutten involved an eviction of Shell Oil from a
parcel of realty and an accounting of minerals removed from that parcel. Consequently,
there was a single res to be adjudicated, with multiple claimants needing to participate in
order to dispose of the rights to the res in an orderly manner. Here, the multiple Plaintiffs
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(as well as other claimants in other cases) all seek money judgments against the
Defendants that in some respects will be subject to collection against a single res. The
fact that money judgment creditors will have to compete against other creditors to satisfy
their claims against a single debtor’s assets does not trigger indispensable party status in
this case.
To be a necessary and indispensable party, that party must have interests that they
are unable to protect if the case goes forward without them. MasterCard Int’l, Inc. v.
Visa Int’l Service Ass’n, Inc., 471 F.3d 377, 387 (2d Cir. 2006). Some interest and some
adverse effect is insufficient. Id. Local counsel were not considered necessary parties in
Huber v. Taylor, 532 F.3d 237 (3d Cir. 2008). It simply is not necessary to name all joint
tortfeasors in a single lawsuit. Temple v. Synthes Corp., supra. The Court DENIES the
motion with respect to the contention that Taylor and GSS are indispensable parties
because of conflicting claims to a res.
III.
Rule 12(b)(1) Abstention
Defendants claim, and it is undisputed, that another court has been probating the
Estate of John M. O’Quinn, Deceased in Cause No. 392,247 in Probate Court No. 2 of
Harris County, Texas for the last two years and that same court has been adjudicating a
“mirror-image” lawsuit there under the style House v. The O’Quinn Firm, Cause No.
392,247-404. D.E. 20, p. 2. Defendants suggest that the interests of judicial economy
require abstention so that the Plaintiffs in the instant case can be required to join in the
other case where the same or similar issues are being, or will be, tried against the same
Defendants by the same counsel. Defendants argue that the House case has already
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completed a great deal of discovery and that preliminary rulings made in that case may
subject the Defendants to “potentially different and inconsistent results” if this case
proceeds in federal court. D.E. 20, p. 18.
Defendants argue for the application of Colorado River abstention. Colorado
River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236 (1976);
Brown v. Pacific Life Ins. Co., 462 F.3d 384, 394 (5th Cir. 2006). The Colorado River
abstention doctrine is based upon considerations of “(w)ise judicial administration, giving
regard to conservation of judicial resources and comprehensive disposition of litigation.”
Colorado River, 424 U.S. at 817 (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equipment
Co., 342 U.S. 180, 183, 72 S.Ct. 219, 221, 96 L.Ed. 200, 203 (1952)). There, the
Supreme Court allowed for federal abstention in a water rights case when there were
already three concurrent state court cases pending between the same parties.
Acknowledging that a federal court has an “unflagging obligation” to exercise the
jurisdiction given it, the Court allowed for abstention in very limited and “exceptional
circumstances.” Colorado River, 424 U.S. 817-18. “Only the clearest of justifications
will warrant dismissal.” Id. at 819. Courts evaluating a request for Colorado River
abstention must be satisfied that (1) there is a parallel proceeding pending in state court
and (2) “exceptional circumstances” warrant abstention. RepublicBank Dallas, N.A. v.
McIntosh, 828 F.2d 1120, 1121 (5th Cir. 1987); Kelly Investment Inc. v. Continental
Common Corp., 315 F.3d 494, 497 (5th Cir. 2002).
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A. The Proceedings Are Not Parallel
To be parallel, the proceedings must involve the same issues and the same parties.
RepublicBank, supra; American Guarantee & Liability Ins. Co. v. Anco Insulations, Inc.,
408 F.3d 248, 251-52 (5th Cir. 2005). Colorado River does not suggest that a court
abstain from adjudicating the only proceeding pending between the parties that are named
in the federal action. Instead, the nature of this form of abstention is to defer to an
existing state court proceeding already involving the same parties. Here, no existing state
court proceeding is pending between these parties.
While similar issues are being
advanced by Plaintiffs’ counsel against the same defendants in the probate court on
behalf of other clients with other underlying claims, these Plaintiffs are not parties to the
House case. Thus Colorado River abstention fails on the first element of “parallel
proceedings.”
Defendants argue that the Fifth Circuit embraces flexibility in the parallelism
requirement, suggesting that it would approve of abstention here, even though the
Plaintiffs are different parties. Allen v. Louisiana State Board of Dentistry, 835 F.2d 100,
104 (5th Cir. 1988); Wright v. Spindletop Films, LLC, 845 F. Supp. 2d 783, 788 (S.D.
Tex. 2012). In both Allen and Wright, the parties were identical. The only “flexibility”
tolerated was in the issues.
The Wright court relied upon RepublicBank for its representation that the
parallelism requirement was a flexible one. The argument there was that a limited
partnership was sued in one case and the general partners of that limited partnership were
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sued on the same debt in the other. But RepublicBank rejected the proposition that the
parties and issues were sufficiently identical:
It is true that the general subject matter of the two actions is
the same, and that the validity of the promissory note is a
common issue between them. The other issues are disparate,
however, and the parties are not the same. The appellee bank
sued only the limited partnership in Oklahoma, and an issue
there is the enforceability of the mortgage. In our case, the
guarantors are parties and the guaranty agreement is at issue.
RepublicBank, supra at 1121.
The identity of parties required by the parallelism
requirement is not so loose as to overlook the fact that these Plaintiffs are neither parties
nor represented by the parties in the pending state court action.
Defendants quote at length from the opinion in Arkwright-Boston Manufacturers
Mutual Ins. Co. v. City of New York, 762 F.2d 205 (2d Cir. 1985). D.E. 37, p. 8.
However, that was a case in which multiple plaintiffs sought damages for a single
electrical blackout. Here, in contrast, there are at least two groups of Plaintiffs whose
underlying cases were tried in separate proceedings and who may have different
variations in the facts relevant to their contracts, their underlying lawsuits, and their
respective interactions with the Defendants.
Defendants also rely on Forest v. The Gas Co., No. 08-00374, 2008 WL 4657833
(D. Hawaii Oct. 20, 2008). In Forest, three family members were killed in an automobile
accident. A fourth was injured, but survived. The federal court, based on Colorado
River, stayed the wrongful death case brought in the name of one decedent in deference
to a state proceeding brought by the survivor against the same defendant for personal
injuries. While there is a much closer degree of parallelism in that case than we have
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here, it is noteworthy that the federal district court in Forest did not dismiss its case but
only stayed it in the event that the state court proceedings could proceed and perhaps
reduce the number of issues that would have to be tried in federal court.
Defendants assert that the Plaintiffs here are different “in name only” from those
who are litigating in the state probate court. They claim that “a maze of lawsuits”
“fracturing identical claims into multiple proceedings” is unjust.
They suggest that
Plaintiffs are fighting abstention because proceeding separately is a win-win situation for
them: they will argue that they are not bound by any adverse ruling in the probate court
because they were not present and not represented but that they will seek an offensive use
of collateral estoppel based on Probate Court rulings if they are favorable to Plaintiffs.
See Eagle Properties, Ltd. v. Scharbauer, 807 S.W.2d 714 (Tex. 1990) (offensive use of
collateral estoppel in the context of different plaintiffs but same defendants).6
Defendants’ concern regarding the application of collateral estoppel does not
override the Plaintiffs’ right to proceed in the forum of their choice. To make offensive
use of collateral estoppel, Plaintiffs will have to comply with the requirements of that
doctrine. If the law permits it, it is not a reason to abstain. And nothing about that
doctrine nullifies the requirement that this Court comply with the Plaintiffs’ legitimate
invocation of this Court’s jurisdiction. See generally, Colorado River, 424 U.S. at 81718 (obligation to exercise federal jurisdiction); Snap-On Tools Corp. v. Mason, 18 F.3d
1261, 1267-68 (5th Cir. 1994) (deference to a plaintiff’s choice of state or federal forum).
6
Plaintiffs assert that the state court proceeding will have no preclusive effect on this proceeding, citing Lumen
Construction, Inc. v. Brant Construction Co., 780 F.2d 691, 695 (7th Cir. 1985). Until a ripe dispute is presented to
this Court, no decision may be made as to whether a state court decision is binding in this Court.
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The Plaintiffs in this case are not subject to any other court proceeding involving
their claims. Without a pending parallel proceeding, the first requirement for Colorado
River abstention is absent and the motion to abstain is DENIED.
B. Exceptional Circumstances Do Not Exist
Under the second requirement for Colorado River abstention, there are six factors
that a District Court may balance in the exercise of its discretion in determining whether
“exceptional circumstances” call upon the court to decline to exercise federal jurisdiction
when parallel state proceedings have been commenced. Brown, supra. The weighing of
these factors should be balanced heavily in favor of the exercise of jurisdiction. Moses
H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 16 (1983); Black
Sea Investment, Ltd. v. United Heritage Corp., 204 F.3d 647, 650 (5th Cir. 2000). Thus
“neutral” factors may be considered to weigh against abstention. See Murphy v. Uncle
Ben’s, Inc., 168 F.3d 734, 738-39 (5th Cir. 1999). Each factor will be discussed in turn.
1. Jurisdiction over a Res
First is the state court’s assumption of jurisdiction over a res. Here, Defendants
argue that the state probate court’s jurisdiction over the Estate of John M. O’Quinn,
Deceased, is a reason for deferring to the state court. They also argue that a claim of
equitable ownership of specific funds (disgorgement of fees) supplies such a res. Yet the
“res” at issue in Colorado River is a non-fungible property that is the actual subject of the
suit, as in a property title dispute. E.g., Wells Fargo Century, Inc. v. Hanakis, No.
04CV1381, 2005 WL 1523788, 2005 U.S. Dist. LEXIS 17440, *10 n.3 (E.D.N.Y. June
28, 2005). Here, the O’Quinn estate is merely one pool of resources available to the
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Plaintiffs in the event they obtain a judgment upon which they may execute. Moreover,
the John M. O’Quinn Estate represents only one set of Defendants subject to the
Plaintiffs’ claims.
The federal courts have long recognized a probate exception to the exercise of
diversity jurisdiction. E.g., Markham v. Allen, 326 U.S. 490, 494, 66 S.Ct. 296 (1946).
However, the exception is sparingly applied. Federal courts are encouraged to exercise
their jurisdiction when doing so merely establishes a claim that is to be placed in line
with other claims in the probate proceeding—without any attempt to actually dispose of
the probate property or interfere with the will, both of which matters remain in the
probate court’s jurisdiction. Marshall v. Marshall, 547 U.S. 293, 311-12, 126 S.Ct. 1735
(2006). The first factor weighs against abstention.
2. Forum Convenience
Second is whether the federal forum is relatively inconvenient. Defendants argue
that the state proceedings, pending in Houston, are more convenient for the parties,
witnesses, and counsel.
In this regard, Defendants recite that discovery has been
conducted in Houston and would again need to be conducted in Houston. The fact that
this case is pending in Corpus Christi would not make Houston-based discovery less
convenient, as the discovery can take place anywhere and Houston (Harris County)
remains within the territorial jurisdiction of this District. 28 U.S.C. § 124(b). More
importantly, the Fifth Circuit has held that the existence of concurrent proceedings and a
resulting duplication of certain pre-trial and trial matters does not affect the
“inconvenience” factor of Colorado River. Kelly, supra at 498.
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The Executor, anticipating a three- to four-week trial, complains of the
inconvenience of this forum for out-of-town defendants and witnesses. There is no
evidence accompanying the Executor’s Motion or any of the Defendants’ motions to
dismiss that demonstrates the identity of the witnesses involved, their location, or the
extent of inconvenience presented by this forum. The second factor weighs against
abstention.
3. Piecemeal Litigation
Third is the avoidance of piecemeal litigation. Defendants argue that the state
court has already transferred several hundred similar cases to its court, including
claimants from Corpus Christi who previously had claims pending in Nueces County,
Texas, where this Court sits. The probate court has heard many of the issues that will
arise and, Defendants argue, this Court should abstain to avoid inconsistency resulting
from piecemeal litigation. They rely on two Fifth Circuit cases, Black Sea, supra; and
LAC Real Estate Holdings, LLC v. Biloxi Marsh Lands Corp., 320 Fed. Appx. 267 (5th
Cir. 2009), as well as two district court cases in other jurisdictions. The Fifth Circuit
cases establish the parameters for this Court’s analysis.
The substance of Defendants’ complaints under the “piecemeal litigation”
category are actually complaints that there will be duplicative litigation regarding
multiple claimants with the same or similar complaints.
As the Black Sea opinion
explained:
Duplicative litigation, wasteful though it may be, is a
necessary cost of our nation's maintenance of two separate
and distinct judicial systems possessed of frequently
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overlapping jurisdiction. The real concern at the heart of the
third Colorado River factor is the avoidance of piecemeal
litigation, and the concomitant danger of inconsistent rulings
with respect to a piece of property. When, as here, no court
has assumed jurisdiction over a disputed res, there is no such
danger.
Black Sea, supra at 650-51 (emphasis in original; footnote omitted). The Fifth Circuit
has been quite consistent in this approach. When the claims are merely duplicative, there
is no “piecemeal litigation” warranting abstention. Evanston Ins. Co. v. Jimco, Inc., 844
F.2d 1185, 1192 (5th Cir. 1988); Kelly, supra at 498. When there is a dispute among
claimants to a single res, abstention is proper.
LAC Real Estate Holdings, supra
(addressing gas royalties on a parcel of marsh land).
Defendants endorse the state court’s sample claimant trial plan, which they claim
has, through appropriate use of its schedule, framed appellate issues and disposed of 131
cases to date. D.E. 21, p. 2. That plan involves selecting certain claimants to try their
claims in advance of the remaining claims. The state court’s consolidation and then refracturing of cases for trial is no argument in favor of abstention here. The third factor
weighs against abstention.
4. Order of Jurisdiction
Fourth is the order in which jurisdiction was obtained by the courts. Clearly, the
House state court proceeding has been pending much longer than the instant case.
However, at no time has the state court proceeding encompassed jurisdiction over these
Plaintiffs and their claims. If this Court were to abstain, then the Plaintiffs would have to
file new claims in state court. Therefore, the probate court’s proceeding should not be
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treated as a “first filed” proceeding in the Colorado River analysis. Kelly, supra at 499.
The fourth factor weighs against abstention.
5. Federal or State Rule of Decision
Fifth is whether and to what extent federal law provides the rule of decision on the
merits.
Defendants argue that Plaintiffs have alleged state law claims and that the
O’Quinn contract provides that it be construed under and in accordance with the laws of
the State of Texas. This argument is not disputed. However, the presence of state law
questions is less weighty in the abstention analysis when the applicable state law is wellsettled, as it is here. Colorado River, 424 U.S. at 815. This factor weighs slightly in
favor of abstention.
6. Protection of Rights
Sixth is the adequacy of the state proceedings to protect the rights of the party
invoking federal jurisdiction—the Plaintiffs here. Defendants claim that the Probate
Court is available for the Plaintiffs’ claims. Yet this presupposes that the Plaintiffs will
be permitted to join the state proceeding at this juncture and that their rights will not be
adversely affected by the fact that the state court has made certain decisions affecting the
cases without Plaintiffs being represented.
The arguments of Defendants suggest that discovery issues, trial logistics, and
even appellate issues have already been determined in that case and there is no indication
that any would be reconsidered upon Plaintiffs’ joinder. The Executor of the Estate of
John M. O’Quinn, Deceased, in separate briefing, also argues for deference to the Texas
probate court because O’Quinn’s Last Will and Testament provides certain defenses to
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the Plaintiffs’ claims.
D.E. 21, p. 2.
This argument actually counsels against the
adequacy of the state court to protect the Plaintiffs’ rights as it appears to be an effort to
gain an advantage for some of the Defendants.
The Fifth Circuit has observed that the ability to redress rights in a state forum, by
itself does not weigh in favor of abstention. At best, it is only neutral. Evanston Ins. Co.,
supra at 1193. Here, the sixth factor weighs against abstention.
C. Abstention is Not Warranted
The mere fact that a state court proceeding is pending does not bar federal
proceedings regarding the same matter in a federal court with jurisdiction. Moses H.
Cone Memorial Hosp., supra at 15. “The crevice in federal jurisdiction that Colorado
River carved is a narrow one. Of all the abstention doctrines, it is to be approached with
the most caution . . . .” Jimenez v. Rodriguez-Pagan, 597 F.3d 18, 27 (1st Cir. 2010).
With only one factor of six weighing in favor of abstention, and then only slightly, the
Court DENIES the motions to abstain.
IV. Rule 12(e) Request for More Definite Statement
Defendants seek an order requiring a more definite statement because the
pleadings are so vague or ambiguous that they cannot reasonably be required to form a
responsive pleading. D.E. 20, p. 23 (quoting Rule 12(e)). This complaint initially targets
Plaintiffs’ fraud pleadings, discussed below. Id. at 24. Also at issue are the damages
pleadings, the allegations as to specific individual conduct for which the O’Quinn
defendants are charged with vicarious responsibility, and “shotgun” pleadings that
incorporate antecedent allegations by reference into new allegations.
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A more definite statement under Rule 12(e) is required when the pleading is so
vague or unintelligible that the defendant cannot adequately plead in response. Mitchell
v. E-Z Way Towers, Inc., 269 F.2d 126, 131-32 (5th Cir. 1959)
Rule 8(a) of the Federal Rules of Civil Procedure requires a
short and plain statement of the claim showing that the
plaintiff is entitled to relief. Pursuant to Rule 8(a), a
complaint will be deemed inadequate only if it fails to (1)
provide notice of circumstances which give rise to the claim,
or (2) set forth sufficient information to outline the elements
of the claim or permit inferences to be drawn that these
elements exist. See General Star Indemnity, Co. v. Vesta Fire
Ins., Corp., 173 F.3d 946, 950. (5th Cir.1999).
Beanal v. Freeport-McMoran, Inc., 197 F.3d 161, 164 (5th Cir. 1999). Rule 8 does not
require exhaustion of all potential complaints or provide a specificity requirement that
can substitute for discovery. Mitchell, supra at 132.
With respect to damages, Defendants complain that the Plaintiffs allege in broad,
conclusory terms that the combined amount in controversy exceeds $100,000.
As
discussed above, the Court has found the allegations sufficient to sustain diversity
jurisdiction and its amount-in-controversy requirement.
As a whole, the damages
allegations outlined above, combined with the liability allegations, provide sufficient
information to the Defendants to formulate an answer and to frame discovery.
With respect to vicarious liability, the Plaintiffs have named the individuals whose
conduct is complained of. In part IX of the Complaint, they state that they seek to
impose vicarious liability through the doctrine of respondeat superior on any law firm
operated by John M. O’Quinn for the conduct of its attorneys acting in the course and
scope of their employment, including but not limited to O’Quinn, Laminack, Pirtle,
30 / 35
Martines, Steed, and Lowenberg. D.E. 48. The Plaintiffs’ pleading is adequately specific
as to both the “superior” and “inferior” parties at issue for their respondeat superior
allegations.
With respect to “shotgun pleadings,” Defendants cite a line of Eleventh Circuit
cases: Liebman v. Deutshe Bank Nat’l Trust Co., 462 Fed. Appx. 876, 879 (11th Cir. Feb.
23, 2012) (“The complaint named numerous individual defendants in addition to several
business entities. The complaint alleged numerous violations of state and federal law, but
did not provide any explanation of how the defendants' actions violated those laws. The
Liebmans also failed to allege why the purported violations entitled them to their
requested relief.”); Davis v. Coca-Cola Bottling Co. Consol., 516 F.3d 955 (11th Cir.
2008) (multiple plaintiffs asserted same global discrimination, harassment, and retaliation
claims against the defendant); Wagner v. First Horizon Pharmaceutical Corp., 464 F.3d
1273, 1279 (11th Cir. 2006) (incorporation by reference followed by bare-bones statement
of cause of action); Anderson v. District Board of Trustees of Central Florida Community
College, 77 F.3d 364, 366 (11th Cir. 1996) (“[I]t is virtually impossible to know which
allegations of fact are intended to support which claim(s) for relief.”).
What makes a pleading a “shotgun” pleading is the inclusion of irrelevant and
unrelated facts not tied to specific causes of action such that the claims made are
indeterminate and the defendant’s task in defending against them is significantly
impaired. See e.g., Abrams v. Ciba Specialty Chemicals Corp., No. 08-0068, 2008 WL
4183344, 2008 U.S. Dist. LEXIS 68897, *26 (S.D. Ala. Sept. 10, 2008). That is not the
case here.
31 / 35
Plaintiffs have alleged sixteen pages of facts for their first set of causes of action,
none of which appear to be or are identified as being irrelevant or unrelated. Then
Plaintiffs refer to the various factual scenarios applicable to each cause of action in a
shorthand form that specifically relates the relevant facts to each claim. Beginning at
page 35 of their Complaint, Plaintiffs allege six pages of facts that apply to their
alternative set of causes of action. Again, those facts are followed by counts that refer in
shorthand to the factual allegations that apply to each claim. These are not objectionable
“shotgun” pleadings and no additional detail is required to make them intelligible.
After thorough review of the Complaint, the Court DENIES the Defendants’
motion for more definite statement.
V. Rule 9(b) Adequacy of Fraud Pleadings
Federal Rules of Civil Procedure, Rule 9(b), requires that pleadings of fraud “state
with particularity the circumstances constituting fraud.”
This heightened pleading
requirement applies to claims that may be pled under other causes of action but which are
based upon acts of fraud, such as certain DTPA claims—unless the application of fraud is
disclaimed. Lone Star Ladies Inv. Club v. Schlotzky's, Inc., 238 F.3d 363, 368 (5th Cir.
2001). The level of specificity generally includes identifying the statement considered
fraudulent, the speaker, when and why the statements were made, and an explanation of
why they are considered fraudulent. Potkin v. IP Axess, Inc., 407 F.3d 690, 696 (5th Cir.
2005).
In particular, Defendants argue that allegations as to them as a group do not satisfy
the pleading requirement, citing Southland Securities Corp. v. InSpire Insurance
32 / 35
Solutions, Inc., 365 F.3d 353, 365 (5th Cir. 2004). Yet, “Multiple defendants’ conduct
may be lumped together if the plaintiff’s allegations elsewhere designate the nature of the
defendants’ relationship to a particular scheme and identify the defendants’ role . . . .”
Bhatia v. Dischino, No. 3:09–CV–1086–B, 2011 WL 3820825, 2011 U.S. Dist. LEXIS
97339, *12 (N.D. Tex. Aug. 29, 2011). The required specificity varies with the context
of the fraud claim. Williams v. WMX Techs., Inc., 112 F.3d 175, 178 (5th Cir. 1997).
The Court has reviewed the Plaintiffs’ Complaint and finds that the pleadings
related to fraud are sufficiently specific to satisfy Rule 9 and to apprise Defendants of the
claims made against them. The motions to dismiss or for more definite statement with
respect to the fraud allegations are DENIED.
VI. Rule 12(f) Immaterial and Scandalous Allegations
Defendants seek an order striking “immaterial, impertinent, or scandalous”
material pursuant to Fed. R. Civ. P. 12(f). A motion to strike is only proper where the
allegations to be stricken have no possible relation to the claims or causes of action.
Augustus v. Board of Public Instruction, 306 F.2d 862, 868 (5th Cir. 1962). All doubts
are resolved against striking the pleadings. Pan American Life Insurance Co. v. Blanco,
311 F.2d 424, 428 n.13 (5th Cir. 1962).
Defendants do not identify any particular allegations as falling into those
“immaterial, impertinent, or scandalous” categories. To the extent that they complain
that the allegations are too vague or incomplete to support the claims against them, the
Court has already ruled against the Defendants. By their motions, then, Defendants are
essentially asking that the facially adequate pleadings against them be stricken because
33 / 35
the nature of the allegations are without merit and, as lacking merit, only besmirch their
reputations.
This is not the type of argument that Rule 12(f) was intended to redress. The Rule
protects a party from the prejudice of unnecessary pleadings. See e.g., S.E.C. v. Lorin,
869 F.Supp. 1117, 1120 (S.D.N.Y. 1994). Given that the pleadings are required in order
to give the Defendants notice of the claims made against them, they are neither
unnecessary nor unduly prejudicial.
Defendants’ motions to strike the Plaintiffs’
pleadings as immaterial, impertinent, or scandalous are DENIED.
VII.
Plea in Abatement
It is undisputed that Plaintiffs did not provide Defendants with a 60-day pre-suit
notification of their DTPA claims as required by DTPA § 17.505(a). Plaintiffs resist this
requirement, asserting that the purpose of the abatement provision is to permit
negotiation and settlement. See Chaparral Texas, L.P. v. W. Dale Morris, Inc., No. H06-2468, 2007 WL 2455295, *5 (S.D. Tex. 2007); Hines v. Hash, 843 S.W.2d 464, 469
(Tex. 1992).
Plaintiffs’ argument continues that there is no prospect of an early
settlement in this case as reflected by the Joint Report of Meeting and Joint Discovery
Plan (D.E. 26, p. 10, para. 13).
The Court, convinced of the salutary purpose of the provision, GRANTS the
Defendants’ motions to abate.
VIII. Orders
For the reasons set out above, the Court ORDERS Plaintiffs to amend their
Complaint on or before April 9, 2013 to eliminate all claims being dismissed pursuant to
34 / 35
the Plaintiffs’ voluntary dismissals of any parties from this case. The Court DENIES
WITHOUT PREJUDICE the Defendants’ motions to dismiss for want of jurisdiction
based on the failure to join an indispensable party pending the Plaintiffs’ timely
amendment of their Complaint. The Court GRANTS the Defendants’ plea in abatement
(with the exception of the other items herein ordered to be filed) and ORDERS the
Plaintiffs to provide the Defendants with the notice required by Tex. Bus. & Comm.
Code § 17.505(a) and ORDERS the Plaintiffs to file with the Court a one-sentence notice
stating, “Plaintiffs provided the DTPA § 17.505(a) notice to Defendants on _______”
filling in the blank with the date notice was given. The Court ABATES this proceeding
until the sixty-first day following the date that the DTPA § 17.505(a) notice was given or
until further order of this Court. The Court DENIES the remainder of the Defendants’
motions (D.E. 20, 21, 22, 30, 35, 38).
ORDERED this 1st day of April, 2013.
___________________________________
NELVA GONZALES RAMOS
UNITED STATES DISTRICT JUDGE
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