Stellar J Corporation v. Unison Solutions, Inc. et al

Filing 34

ORDER denying 18 Defendant Unison's Motion to Dismiss; denying 21 Defendant Argonaut's Motion to Dismiss; granting 22 Motion for Leave to Amend Complaint. Counsel is instructed to e-file the Amended Complaint. Signed by Judge Ronald B. Leighton.(DN)

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1 HONORABLE RONALD B. LEIGHTON 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA 7 8 STELLAR J CORPORATION, CASE NO. C12-5982-RBL 9 Plaintiff, ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS AND GRANTING PLAINTIFF’S MOTION TO AMEND 10 v. 11 12 13 UNISON SOLUTIONS, INC., and ARGONAUT INSURANCE COMPANY, (Dkt. #18, 21, 22) Defendants. 14 Plaintiff Stellar J Corporation sued Unison Solutions, Inc. and Argonaut Insurance 15 Company, alleging breach of contract and bad faith. Both Unison and Argonaut move to 16 dismiss. In response, Stellar J moves to amend its complaint. The Motions to Dismiss are 17 DENIED, and the Motion to Amend is GRANTED. 18 I. FACTS 19 In April 2009, Klickitat Public Utility District contracted with Applied Filter Technology 20 to provide equipment and services for Klickitat PUD’s landfill gas cleaning project. AFT, 21 however, was unable to obtain a bond for the project. With Klickitat PUD’s consent, AFT 22 assigned its contract with Klickitat PUD to Stellar J. AFT remained obligated to perform work 23 for Klickitat PUD’s project under this agreement. 24 1 1 In May 2009, AFT contracted with Unison to provide equipment for the project. A 2 month later, Unison obtained a bond from Argonaut, which required Argonaut to pay AFT and 3 Stellar J if Unison failed to provide the necessary equipment under the May agreement. 4 Stellar J sued Unison and Argonaut, alleging that Unison and Argonaut failed to perform 5 their contractual obligations under the May agreement and that Argonaut acted in bad faith by 6 refusing to pay on its bond. Unison and Argonaut move to dismiss Stellar J’s claims against 7 them, arguing that Stellar J 1) did not sufficiently plead diversity jurisdiction, 2) failed to join 8 necessary and indispensable parties (Klickitat PUD and AFT), and 3) has failed to state a claim. 9 Stellar J moves to amend its complaint to clarify its allegations about the parties’ 10 citizenship, and to include a claim against Argonaut under Washington’s Insurance Fair Conduct 11 Act. Argonaut opposes the motion, arguing Stellar J’s IFCA amendments would be futile. 12 13 14 15 II. DISCUSSION 1. Unison and Argonaut’s Motions to Dismiss are Denied. a. Stellar J Sufficiently Pled Diversity Jurisdiction in its Complaint. Unison and Argonaut argue Stellar J did not sufficiently plead diversity jurisdiction under 16 28 U.S.C. § 1332, because Stellar J did not include both the state of incorporation and the 17 principal place of business for all of the corporate parties in its complaint. Def.’s Mot., Dkt. #18 18 at 5; Def.’s Mot., Dkt. #21 at 4. Unison and Argonaut, however, do not actually dispute the 19 existence of diversity jurisdiction, which is clearly met in this case—the parties are diverse and 20 the amount in controversy exceeds $75,000. See 28 U.S.C. § 1332. 21 Stellar J’s complaint sufficiently established the parties’ citizenship. The complaint 22 states Stellar J is a Texas corporation with a principal place of business in Washington. Compl., 23 24 2 1 Dkt. #1 at 1–2. The complaint also states Unison is an Iowa corporation and Argonaut is an 2 Illinois corporation. Compl., Dkt. #1 at 2. 3 Even if Stellar J’s allegations of citizenship were not sufficient, Stellar J moves to amend 4 its complaint to further clarify the parties’ citizenship. Pl.’s Mot., Dkt. #22 at 5–6. Thus, the 5 sufficiency of diversity jurisdiction in the original complaint is moot, and Unison and Argonaut’s 6 Motions to Dismiss on this basis are DENIED. 7 8 b. Neither Klickitat PUD nor AFT is an Indispensible Party. Unison and Argonaut also argue that both Klickitat PUD and AFT are necessary and 9 indispensable parties under Federal Rule of Civil Procedure 19, and that Stellar J’s failure to join 10 them requires dismissal under Rule 12(b)(7). Def.’s Mot., Dkt. #18 at 7–9; Def.’s Mot., Dkt. #21 11 at 4–8. 12 First, the Court must determine whether an absent party should be joined as a “necessary” 13 party under Rule 19(a). A party is “necessary” if (a) the Court cannot accord complete relief 14 among the existing parties in that party’s absence; or (b) the absent party claims an interest 15 relating to the subject of the suit and is so situated that disposing of the suit in that party’s 16 absence may: (i) impair or impede an interest as a practical matter, or (ii) leave existing parties 17 subject to a substantial risk of double, multiple, or otherwise inconsistent obligations. Fed. R. 18 Civ. P. 19(a). 19 If a necessary party cannot be joined for practical or jurisdictional reasons, the Court 20 must then determine whether in “equity and good conscience” the suit should be dismissed 21 because the party is “indispensable.” Fed. R. Civ. P. 19(b). An indispensible party is a party 22 whose participation is so important to the case’s resolution that the suit must be dismissed if the 23 absent party’s joinder is not feasible. Id. 24 3 1 Klickitat PUD is neither a necessary nor an indispensable party. First, Klickitat PUD is 2 not a party to the contract at issue in this case. Generally, a nonparty to a commercial contract is 3 not a necessary party to the litigation of rights under that contract. See, e.g., Helzberg’s 4 Diamond Shops, Inc. v. Valley West Des Moines Shopping Center, Inc., 564 F.2d 816, 820 (8th 5 Cir. 1977); Trans Pacific Corp. v. South Seas Enters. Ltd., 291 F.2d 435, 436–37 (9th Cir. 1961). 6 Additionally, Klickitat PUD does not have any obligations under the bond between Unison and 7 Argonaut. Compl., Dkt. #1 at 7–8. Unison and Argonaut’s claims that Klickitat PUD and AFT’s 8 separate contract is legally void are also unpersuasive, and it is far from clear that it would be a 9 defense in any event. See Def.’s Mot., Dkt. #18 at 9; Def.’s Mot., Dkt. #21 at 7–8. 10 AFT, however, is a necessary party. AFT is a party to the contract at issue and has 11 existing obligations under the contract. Compl., Dkt. #1 at 5–6. Accordingly, AFT has an 12 interest in the subject matter of this suit as a potential claimant. 13 While AFT is a necessary party, it is not an indispensable party. AFT can be joined in 14 this lawsuit as a plaintiff without destroying subject matter jurisdiction. The Court has 15 independent diversity jurisdiction over AFT’s claims under 28 U.S.C. § 1332. AFT is 16 headquartered in Washington State. Compl., Dkt. #1 at 2. AFT is therefore diverse from both 17 Unison and Argonaut, and the amount in controversy exceeds $75,000. See 28 U.S.C. § 1332. 18 AFT’s joinder is feasible under Rule 19(a). 19 For these reasons, neither Klickitat PUD nor AFT is an indispensable party requiring 20 dismissal. 21 22 23 24 4 1 2 c. Stellar J Adequately States a Claim. Finally, Unison and Argonaut argue Stellar J fails to state a claim under Article 2 of the 3 Uniform Commercial Code, and thus Stellar J’s claims should be dismissed under Rule 12(b)(6). 4 Def.’s Mot., Dkt. #18 at 10; Def.’s Mot., Dkt. #21 at 8–10. 5 Dismissal under Rule 12(b)(6) is proper when the complaint fails to allege either a 6 cognizable legal theory or sufficient facts under a cognizable legal theory. Shroyer v. New 7 Cingular Wireless Services, Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). Unison and Argonaut 8 argue this case involves a “supply bond” governed by UCC Article 2. Def.’s Mot., Dkt. #18 at 9 10; Def.’s Mot., Dkt. #21 at 9–10. They argue Stellar J must sufficiently plead that it rejected 10 Unison’s goods, and that Stellar J failed to do so. Def.’s Mot., Dkt. #18 at 10; Def.’s Mot., Dkt. 11 #21 at 10. In response, Stellar J argues this case involves a “performance bond” not governed by 12 UCC Article 2, and therefore its failure to plead an element of a UCC claim is irrelevant. Pl.’s 13 Resp., Dkt. #25 at 14. 14 The type of bond at issue is a factual question that cannot be resolved at this stage. 15 Further, Stellar J’s complaint sufficiently alleged a legally cognizable breach of contract claim. 16 Stellar J pled a claim based on its performance of a contract, Unison and Argonaut’s breach of 17 that contract, and damages stemming from the breach. The Motions to Dismiss under Rule 18 12(b)(6) are DENIED. 19 2. Stellar J’s Motion to Amend its Complaint is Granted. 20 a. Stellar J Satisfied the Insurance Fair Conduct Act’s Notice Requirement. 21 Under the IFCA, a plaintiff “must provide written notice of the basis for the cause of 22 action to the insurer and office of the insurance commissioner” twenty days before filing an 23 IFCA claim. Wash. Rev. Code § 48.30.015(8)(a). Argonaut argues Stellar J failed to comply 24 5 1 with IFCA’s twenty-day notice requirement by amending its complaint to add an IFCA claim 2 based on facts already in the complaint. Def.’s Opp’n, Dkt. #30 at 3–4. 3 Nothing in the IFCA prevents a plaintiff from amending a complaint to add an IFCA 4 claim—even if the IFCA claim is based on facts already in the complaint. Further, the IFCA 5 only requires notice before an IFCA claim is filed. See Wash. Rev. Code § 48.30.015(8). 6 Stellar J complied with IFCA’s notice requirement for its IFCA claim. In November 7 2012, Stellar J notified Argonaut that it would be seeking remedies under the IFCA. Straus 8 Decl., Dkt. #23 at 1–2. Argonaut did not respond. Straus Decl., Dkt. #23 at 2. After the twenty9 day notice period passed, Stellar J moved to amend its complaint to add an IFCA claim. Pl.’s 10 Mot., Dkt. #22. Thus, Stellar J satisfied IFCA’s notice requirement. 11 12 b. Stellar J is Not Required to Plead Notice for its IFCA Claim. Argonaut also argues Stellar J failed to plead compliance with IFCA’s notice requirement 13 in its Amended Complaint, and therefore the IFCA claim should be dismissed under Rule 14 12(b)(6). Def.’s Opp’n, Dkt. #30 at 4. 15 Stellar J is not required to plead IFCA’s notice requirement in its complaint—Stellar J is 16 only required to satisfy IFCA’s notice requirements. See Wash. Rev. Code § 48.30.015(8). As 17 discussed above, Stellar J satisfied IFCA’s twenty-day notice requirement. Dismissal under 18 12(b)(6) is not warranted, and Argonaut’s motion is DENIED. 19 c. The Court Has Subject Matter Jurisdiction Over Stellar J’s IFCA Claim 20 Finally, Argonaut argues the Court does not have subject matter jurisdiction over Stellar 21 J’s IFCA claim, because the use of “superior court” in the IFCA vests exclusive jurisdiction in 22 Washington State’s Superior Court. Def.’s Opp’n, Dkt. #30 at 6. 23 24 6 1 Countless IFCA cases have been brought in federal district court since the statute’s 2 enactment in 2007. See Pl.’s Resp., Ex. 2, Dkt. #31. As previously discussed, the Court has 3 diversity jurisdiction over this case under 28 U.S.C. § 1332. Argonaut does not cite a single case 4 that would prevent the Court from hearing this case under 28 U.S.C. § 1332, and there is no legal 5 or logical support for this novel claim. 6 7 8 For these reasons, the Court has subject matter jurisdiction over Stellar J’s IFCA claim. III. CONCLUSION For the reasons stated above, the Motions to Dismiss (Dkt. #18, 21) are DENIED, and 9 the Motion to Amend (Dkt. #22) is GRANTED. 10 Dated this 11th day of April, 2013. 12 A 13 RONALD B. LEIGHTON UNITED STATES DISTRICT JUDGE 11 14 15 16 17 18 19 20 21 22 23 24 7

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