TechINT Solutions Group, LLC v. Sasnett
Filing
169
MEMORANDUM OPINION. Signed by Judge Elizabeth K. Dillon on 6/17/2019. (jv)
6/17/2019
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
HARRISONBURG DIVISION
TECHINT SOLUTIONS GROUP, LLC,
Plaintiff,
v.
BRANDON SASNETT, et al.,
Defendants.
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s/ J. Vasquez
Civil Action No. 5:18-cv-00037
By: Elizabeth K. Dillon
United States District Judge
MEMORANDUM OPINION
At a June 11, 2019 hearing, the court heard argument on a number of pending motions,
ruled on some of them, and took some of them under advisement. In this opinion, the court
addresses two of the motions that it took under advisement: defendant Red Six LLC’s motion to
dismiss for lack of jurisdiction (Dkt. No. 129) and defendant Scott Crino’s motion to dismiss for
lack of jurisdiction (Dkt. No. 131).1 These two defendants were added by an amended
complaint; previously, the only defendant had been Brandon Sasnett. Both motions are premised
on the assertion that Red Six’s addition to the case destroys the court’s diversity jurisdiction.
Red Six, which is a limited liability company, has the citizenship of all of its members.
Cent. W. Va. Energy Co. v. Mountain State Carbon, LLC, 636 F.3d 101, 103 (4th Cir. 2011).
Plaintiff TechINT Solutions Group, LLC (TechINT) conceded at the hearing that one of Red
Six’s members, Conrad A. Dreby, is a Virginia citizen, thus making Red Six a citizen of
Virginia, in addition to other states. Because TechINT also is a Virginia citizen, Red Six’s
presence in the case would destroy complete diversity, the only proffered basis for this court’s
subject-matter jurisdiction.
1
In the same document, Crino moves to dismiss for failure to state a claim under Rule 12(b)(1). That
portion of his motion will be addressed by separate order.
Based on this, Red Six argues that the entire case should be dismissed for lack of subjectmatter jurisdiction. In particular, it contends that it is an indispensable party and that dismissal
of the case is required. Red Six’s counsel also suggested at the hearing that, alternatively, the
court could dismiss Red Six and Crino and leave Sasnett as a defendant, although counsel
admitted that he had no cases stating that the court had authority to dismiss a diverse party in
addition to the nondiverse one.2
For its part, TechINT contends that Red Six is not an indispensable party. It asserts that
the court should exercise its discretion under Rule 21 of the Federal Rules of Civil Procedure and
simply drop Red Six from the case and allow the remaining claims to go forward against Sasnett
and Crino, both of whom are diverse from TechINT.3 For the reasons discussed herein, the court
agrees with TechINT. Thus, it will grant the motions to dismiss insofar as they seek the
dismissal without prejudice of Red Six. Crino will remain as a defendant.
I. BACKGROUND
In broad terms (and as set forth in the allegations of the Amended Complaint), this case
involves claims by an employer, TechINT, against its former employee, Sasnett, who left its
2
As a practical matter, that seems to be a good option. That is, Red Six is clearly not indispensable as to
the claims against Sasnett, but because of its close relationship with Crino, Red Six’s indispensability as to Crino is
a somewhat closer call. Nonetheless, the court concludes that Red Six is not indispensable, as discussed herein, and,
in any event, the court has not found any authority expressly allowing it to dismiss a diverse party because of its
relationship with a dispensable nondiverse party. To the contrary, in the cases discussing a court’s options under
these circumstances, most address the proposition as a binary choice—either dismissal of the entire case or
dismissal of the nondiverse party/parties only. E.g., Hardaway v. Checkers Drive-In Rests., Inc., 483 F. App’x 854,
855 (4th Cir. 2012). Indeed, the court has not found any cases where the court declined to dismiss the entire case
but instead dismissed one or more diverse parties in addition to the dismissal of the nondiverse party.
3
This issue often comes up in a case where there is a pending motion for leave to amend and the court is
considering whether to allow the addition of new parties. In this case, the court granted leave to amend to add Red
Six and Crino (Order, Dkt. No. 119), but it did so before Red Six and Crino had the full fourteen days to oppose the
motion for leave, which they say they would have done. (See Defs.’ Reply to Pl.’s Opp’n to Defs.’ Mot. for Stay 2,
Dkt. No. 153.)
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employ and was immediately thereafter employed by Red Six, a customer of TechINT’s. Crino
is Red Six’s CEO and the person who communicated with Sasnett regarding his hiring. Shortly
after Sasnett’s hiring by Red Six, TechINT advised Crino that Sasnett had a Services Agreement
that barred him, for a term of two years after his employment with TechINT ended, from
providing the same services TechINT provided to its actual clients and certain prospective clients
and also barred him from soliciting TechINT employees. Even after Crino learned of that
agreement and received a copy of it, Red Six continued to employ Sasnett. TechINT also argues
that Red Six immediately cancelled its own purchase order with TechINT and that Red Six and
Sasnett began doing work for some of TechINT’s clients or prospective clients.
The claims in the complaint are:
Count I:
Count II:
Count III:
Count IV:
Count V:
Count VI:
a breach of contract claim for breach of the Services Agreement
(against Sasnett only);
tortious interference with contract and business expectancies (against
all defendants);
conversion (against Sasnett only);
conspiracy (against all defendants);
breach of fiduciary duty and aiding and abetting breach of fiduciary
duty (against all defendants); and
injunctive relief enforcing the terms of Sasnett’s Services Agreement
and ordering all defendants to “cease any further unlawful activity.”
(Am. Compl., Dkt. No. 120.)
II. DISCUSSION
The court’s analysis must start with a determination of whether Red Six is an
indispensable party. As the Supreme Court has explained,
“[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). Federal Rule of Civil Procedure 21 provides that
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“[p]arties may be dropped or added by order of the court on motion
of any party or of its own initiative at any stage of the action and on
such terms as are just.” By now, “it is well settled that Rule 21
invests district courts with authority to allow a dispensable
nondiverse party to be dropped at any time, even after judgment has
been rendered.” Newman–Green, Inc. v. Alfonzo–Larrain, 490 U.S.
826, 832, 109 S. Ct. 2218, 104 L.Ed.2d 893 (1989).
Grupo Dataflux v. Atlas Glob. Grp., L.P., 541 U.S. 567, 572–73 (2004); see also Hardaway v.
Checkers Drive-In Rests., Inc., 483 F. App’x 854, 855 (4th Cir. 2012) (noting, in similar
circumstances, that the district “court should have determined whether the defendants sought to
be dropped were dispensable parties, whether dropping these defendants would result in diversity
jurisdiction, and whether the remaining defendants would be prejudiced by their dismissal”).
In determining whether Red Six is indispensable, the court looks to four factors:
First, to what extent a judgment rendered in [Red Six’s] absence
might be prejudicial to [Red Six] or those already parties; second,
the extent to which, by protective provisions in the judgment, by the
shaping of relief, or other measures, the prejudice can be lessened
or avoided; third, whether a judgment rendered in the [Red Six’s]
absence will be adequate; fourth, whether [TechINT] will have an
adequate remedy if the action is dismissed . . . .
See Yashenko v. Harrah’s NC Casino Co., LLC, 446 F.3d 541, 552 (4th Cir. 2006) (quoting Fed.
R. Civ. P. 19(b)). The analysis under Rule 19(b) “is not mechanical; rather it is conducted in
light of the equities of the case at bar.” Nat’l Union Fire Ins. Co. of Pittsburgh v. Rite Aid of
S.C., Inc., 210 F.3d 246, 252 (4th Cir. 2000) (citation omitted).
Some general principles are also relevant here. For example, the mere fact of joint and
several liability does not render a party indispensable. E.g., EFA Props., Inc. v. Lake Toxaway
Cmty. Ass’n, No. 1:17cv52, 2018 WL 296036, at *7 (W.D.N.C. Jan. 4, 2018) (collecting
authority); see also S.C. Elec. & Gas Co. v. Ranger Const. Co., 539 F. Supp. 578, 580 (D.S.C.
1982) (“It is generally held that a non-diverse defendant who is a jointly and severally liable tort-
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feasor is not an indispensable party to a diversity action under Rule 19 and may be dismissed by
the court in order for it to retain jurisdiction.”). Similarly, it is generally true that a principal and
its agent are not indispensable parties in a suit against the other. Bausch v. Philatelic Leasing,
Ltd., 728 F. Supp. 1201, 1209 (D. Md. 1990) (“Principals and agents are not, as a general rule,
indispensable parties.”); Willis v. Semmes, Bowen & Semmes, 441 F. Supp. 1235, 1246 (E.D. Va.
1977) (finding that a nondiverse party, who was alleged to be both a joint tortfeasor and an agent
for a diverse defendant, was not an indispensable party). Nor does the fact that Red Six is
alleged to be a co-conspirator or that injunctive relief is sought necessarily render Red Six an
indispensable party. See Lawlor v. Nat’l Screen Serv. Corp., 349 U.S. 322, 330 (1955) (alleged
co-conspirators were joint tort-feasors and not indispensable parties); Georgia v. Pennsylvania R.
Co., 324 U.S. 439, 463 (1945) (holding that some alleged conspirators were not indispensable
parties and explaining that “[i]n a suit to enjoin a conspiracy not all the conspirators are
necessary” defendants).
These general principles inform the court’s analysis, but they are not dispositive. See,
e.g., Landress v. Tier One Solar LLC, 243 F. Supp. 3d 633, 645 (M.D.N.C. 2017) (recognizing
the general rule that joint tortfeasors are not indispensable but concluding that the CFO of the
corporate co-tortfeasor was an indispensable party under the facts of that case). Instead, as
noted, the court must focus on the particulars and “the equities” of this specific case. See Nat’l
Union Fire Ins. Co. of Pittsburgh, 210 F.3d at 252.
In focusing on the particulars here, the court notes two important considerations. First,
Crino is a member of Red Six and its CEO, and many, if not all, of his actions were alleged to
have been taken as an agent of Red Six. Additionally, at least some of Red Six’s liability (if not
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all of it—the court is unclear), is premised on respondeat superior/vicarious liability. Thus, the
claims against Crino and Red Six are very closely related.
Second, the court already has entered a preliminary injunction enjoining Sasnett from
violating the non-competition and non-solicitation clauses in his Services Agreement. TechINT
has emphasized that this injunctive relief is significant and important to it and that the final
injunction it seeks is likewise an extremely important part of the relief it is seeking in this action.
Turning now to the first of the four factors set forth in Rule 19(b)—to what extent a
judgment rendered in Red Six’s absence might be prejudicial to Red Six or the other parties—
this factor weighs—at least slightly—in favor of complete dismissal. That is, if the court were to
render a judgment against Crino in Red Six’s absence, there is a potential for some prejudice to
Red Six. In particular, Crino is a member of the limited liability company and its CEO, and they
are represented by the same counsel. Certainly, there is an extremely close association between
the two. As Red Six notes, then, it will likely continue to be involved (as a non-party) in the
litigation before this court and then it would have to litigate in a second forum if TechINT
chooses to re-file in state court.
But this same prejudice will occur in nearly any case where an agent but not his principal
is a party, because the principal has a strong incentive to assist its agent in presenting his best
defenses, at least when the agent acted within the scope of his employment. Despite the fact that
this incentive exists in nearly every such case, the general law nonetheless is that such an agency
relationship alone is insufficient to render one of the parties indispensable. So, while having to
be involved in litigation in two forums is some prejudice to Red Six, it is not sufficient prejudice
to overcome the general rules that neither joint tort-feasors nor principals and agents are
indispensable parties.
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TechINT also argued at the hearing that there was no prejudice to Red Six from the
possibility of having to litigate in two forums because the only issue in a subsequent state-court
action will be whether Crino was acting within the scope of his employment. The court is not
certain that is accurate, for at least two reasons. First, it is unclear to the court whether TechINT
is alleging that Red Six is liable to it only for Crino’s actions or is alleging that Red Six is liable
on some direct theory of liability or vicariously liable for the acts of agents other than Crino.
Second, even if Red Six’s liability is based solely on respondeat superior liability as a result of
Crino’s actions (as TechINT’s counsel seemed to suggest), any subsequent claim against Red Six
likely would be barred if there is a judgment in this case in favor of Crino. Wintergreen
Partners, Inc. v. McGuireWoods, LLP, 698 S.E.2d 913, 915–16 (Va. 2010) (“It is well settled in
Virginia that where a master and servant are sued together in tort, and the master’s liability, if
any, is solely dependent on the servant’s conduct, a verdict for the servant necessarily exonerates
the master.”) (internal quotation marks omitted). But as some courts have held, “a judgment
against the agent is not conclusive in an action against the principal.” E.A. Prince & Son, Inc. v.
Selective Ins. Co. of the Se., 818 F. Supp. 910, 915 (D.S.C. 1993) (citations omitted) (emphasis
in original). Thus, it is at least a possibility that Red Six may be forced to litigate similar issues
both in this case (through its assistance to Crino and efforts to protect its interests) and again in
state court. Because there is a potential for some prejudice, then, the first factor favors dismissal
of the case.
The court also considers the possibility that there could be prejudice from inconsistent
judgments against Red Six. It is true, for example, that these proceedings could result in a
finding of Crino’s liability to TechINT, and it is possible that a state court proceeding could
result in a verdict for Red Six on the grounds that Crino did nothing wrong. Additionally, there
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is a slim possibility of a potential for inconsistent injunctions. The court is confident, though,
that, if it finds in favor of TechINT, it can draft any injunctive relief in this case in a way that
will protect or vindicate TechINT’s interests without directly enjoining Red Six. This is so
because the most likely party to be enjoined is Sasnett, who is the person bound by the restrictive
covenants. Overall, though, the court takes those possibilities into account and recognizes that
there is some prejudice to Red Six from not dismissing the whole case. The court sees no
prejudice, however, to TechINT, Crino, or Sasnett.
The second factor is the extent to which, by protective provisions in the judgment, by the
shaping of relief, or other measures, the prejudice can be lessened or avoided. As noted in the
preceding paragraph, the court will craft any injunction to lessen at least some of the potential
prejudice to Red Six. Thus, this factor is either neutral or weighs in favor of dismissing only Red
Six.
With regard to the third factor—whether judgment rendered in Red Six’s absence will be
adequate—TechINT insists that a judgment against only Sasnett and Crino would be adequate,
with an ability to pursue Red Six in state court. TechINT explained its belief that its ability to
recover money damages is probably greater against Crino than against a limited liability
company like Red Six. Additionally, because much of the relief sought in the case is against
Sasnett, TechINT will be able to obtain that relief without Red Six’s presence. Moreover, any
injunction against Crino or Sasnett, even if it cannot bind Red Six as a party, could nonetheless
bind Red Six. An injunction from this court can bind parties and “other persons who are in
active concert or participation with” a party, Fed. R. Civ. P. 65(d)(2), so long as those persons
have “actual notice of [the injunction] by personal service or otherwise.” Thus, TechINT can
obtain adequate relief without Red Six’s presence.
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The fourth factor—whether TechINT will have an adequate remedy if the action is
dismissed for nonjoinder—is significant here. This case has been ongoing, and the parties have
invested significant resources in its prosecution. If the action were dismissed, TechINT could
refile in state court against all parties. Critically, though, it has expended resources in this trial,
including litigating a preliminary injunction. It obtained a preliminary injunction from this
court, and a final injunction is a critical aspect of the relief it seeks. To lose the benefit of the
injunction it already has and to begin the case anew in a new forum would greatly prejudice
TechINT. The court also believes that Sasnett could be prejudiced by a full dismissal because
TechINT almost certainly would refile in state court against him and he would have to litigate
anew, except that he is now pro se, whereas he initially had the benefit of counsel.
Assessing all of the above practicalities together, the court concludes that Red Six is not
an indispensable party and that the case can go forward without it. That does not end the court’s
inquiry, however. The court may, but is not required to, sever a dispensable party and so must
still address whether it should sever Red Six in order to preserve jurisdiction. In deciding
whether severance or dismissal is the proper course, the court must “proceed pragmatically,
examining the facts of the particular controversy to determine the potential for prejudice to all
parties.” National Union, 210 F.3d at 250. Also, courts should consider the “equities” of the
situation in deciding whether to preserve jurisdiction. C.L. Ritter Lumber Co. v. Consolidation
Coal Co., 283 F.3d 226, 230 (4th Cir. 2002); Fed. R. Civ. P. 19(b) (stating court should consider
the issue “in equity and good conscience”).4 The same considerations that led the court to
4
Red Six argues that the court’s authority to dismiss a nondiverse party (as opposed to an entire case)
should be used “sparingly,” but Newman-Green’s reference to “sparingly” clearly refers to the situation where an
appellate court is dismissing nondiverse defendants in the first instance. Martinez v. Duke Energy Corp., 130 F.
App’x 629, 637 (4th Cir. 2005). “It is equally clear that Newman-Green does not direct district courts to ‘sparingly’
exercise” the same authority. Id. (emphasis in original).
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conclude that Red Six is not indispensable also support severing Red Six rather than dismissing
the whole case. In particular, the court finds that the prejudice to TechINT of losing its
preliminary injunction and having to start litigation anew greatly outweighs any potential
prejudice to Red Six.
III. CONCLUSION
For the foregoing reasons, Red Six’s and Crino’s motions to dismiss for lack of
jurisdiction will be granted in part and denied in part. Specifically, they will be granted to the
extent that they seek dismissal of Red Six and will be otherwise denied. The court will take
under advisement Crino’s motion to dismiss for failure to state a claim and will issue a separate
opinion on that portion of his motion. An appropriate order will be entered.
Entered: June 17, 2019.
/s/ Elizabeth K. Dillon
Elizabeth K. Dillon
United States District Judge
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