Trade Well International v. United Central Bank
Filing
17
ORDER denying 7 Motion to Dismiss for Lack of Jurisdiction. Signed by District Judge William M. Conley on 9/30/2013. (voc)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
TRADE WELL INTERNATIONAL,
Plaintiff,
OPINION AND ORDER
12-cv-701-wmc
v.
UNITED CENTRAL BANK,
Defendant.
In this suit, Trade Well International seeks replevin of furnishings and equipment that
it leased to a hotel in Wisconsin Dells, Wisconsin. These items passed into defendant United
Central Bank’s possession when it foreclosed on and purchased the hotel. Trade Well
International contends that the personal property -- which was merely leased by the hotel’s
previous owner -- was not or should not have been part of the purchase. In response, United
Central Bank filed a motion to dismiss on three grounds, the primary of which is that Trade
Well International failed to join indispensable parties who also claim an interest in the
furnishings and decorations. The court agrees with United that the additional parties should
be joined, but finds that that joinder would not defeat diversity jurisdiction. Rather than
dismiss the case, therefore, it will simply order plaintiff to join those parties.
1
BACKGROUND1
On February 22, 2010, plaintiff Trade Well International (“Trade Well”) entered into
a four-year hotel equipment lease agreement with Dells Estate LLC (“DEL”). Trade Well
agreed to supply sheets, linens, furniture, light fixtures, and A/V equipment to DEL’s hotel in
Wisconsin Dells, Wisconsin.
The hotel property was subject to a mortgage note, the obligations of which DEL was
ultimately unable to meet.
On November 10, 2010, defendant United Central Bank
(“United”) filed a foreclosure action in Sauk County Circuit Court, case no. 10-CV-1239. On
July 31, 2012, United purchased the hotel at a judicially-authorized sheriff’s sale.
Along with its foreclosure claim, United asserted a claim against DEL and another
entity, Dells Lodging Operator, Inc. (“DLO”), for replevin of the personal property located
within the hotel. DLO filed an answer and affirmative defenses to the replevin action,
alleging as a sixth affirmative defense that “personal property belonging to [DLO] remains in
the [hotel] property and [DLO] is entitled to retrieve said personal property.” (Dkt. #9-1.)
On February 23, 2012, DLO’s legal counsel sent a request to United’s counsel asking for
permission to enter the hotel and remove all, or a substantial part, of its property. As for
1
Pursuant to Federal Rule of Civil Procedure 12(b)(7), United moves to dismiss this action
for failure to join a party under Rule 19. In ruling on a Rule 12(b)(7) motion, the court must
accept the complaint’s allegations as true, but it also may consider extrinsic evidence outside
the pleadings. See Davis Cos. v. Emerald Casino, Inc., 268 F.3d 477, 479–480 & n.2 & 4 (7th
Cir. 2001). For purposes of the facts listed below, the court refers to the allegations in the
complaint, as well as all adequately-supported extrinsic evidence supplied by the parties.
2
DEL, it is unclear whether it formally answered United’s replevin claim, but at some point
during the litigation its principal, Umar F. Paracha, indicated to United that DEL intended to
contest United’s claim of ownership of this personal property.
On the day of the sheriff’s sale, Trade Well entered the picture by serving United with
a written demand for return of the hotel furnishings and equipment. United refused to
return the property, which prompted this litigation.
OPINION
I.
Dismissal for Failure to Join a Necessary Party
United moves to dismiss the case under Federal Rule of Civil Procedure 12(b)(7),
arguing that (1) DEL and DLO are parties who must be joined; and (2) their joinder would
defeat diversity jurisdiction. The court agrees with the first of these arguments, but not the
second.
Federal Rule of Civil Procedure 19(a) controls whether DEL and DLO are “required
parties” to this action. The Rule states in pertinent part:
(a) Persons Required to Be Joined if Feasible.
(1) Required Party. A person who is subject to service of
process and whose joinder will not deprive the court of
subject-matter jurisdiction must be joined as a party if:
(A) in that person’s absence, the court cannot accord
complete relief among existing parties; or
3
(B) that person claims an interest relating to the subject
of the action and is so situated that disposing of the
action in the person’s absence may:
(i) as a practical matter impair or impede the
person's ability to protect the interest; or
(ii) leave an existing party subject to a substantial
risk of incurring double, multiple, or otherwise
inconsistent obligations because of the interest.
Fed. R. Civ. P. 19(a)(1); see Thomas v. United States, 189 F.3d 662, 667 (7th Cir. 1999).
DEL and DLO qualify as “required parties” under the criteria set forth in
subparagraphs (B)(i) and (ii) above. The affidavits submitted by United’s counsel indicate
that both entities asserted ownership rights in the disputed personal property at some point
during the state replevin action. While Trade Well suggests that one or both of the entities
have since dissolved and are unable to continue to assert their rights, the court must assume
at this point that they still maintain a claim upon the property. As this litigation will
determine which of the present parties has a possessory right to the furnishings and
equipment, the outcome may “impair or impede” DEL’s or DLO’s ability to protect their
interests -- particularly if they have claims against one or more of the present parties.
Similarly, the competing claims to the property between Trade Well, United, DLO
and DEL poses a risk of exposing one of the two present parties to inconsistent legal
obligations. If Trade Well or United loses the replevin action against DEL or DLO in state
court, and also loses the replevin action in this case, it may be bound by conflicting
judgments to the extent that it owes the property to multiple parties at the same time.
4
Having found that DEL and DLO are required parties, the court “must order” that
they be made parties to this case. See Fed. R. Civ. P. 19(a)(2) (“If a person has not been
joined as required, the court must order that the person be made a party. A person who
refuses to join as a plaintiff may be made either a defendant or, in a proper case, an
involuntary plaintiff.”). Joinder does not, however, defeat the court’s diversity jurisdiction.
Both sides agree that: (1) DEL and DLO are Wisconsin-headquartered local corporations
and thus are solely citizens of Wisconsin; (2) Trade Well, incorporated and headquartered in
Pakistan, is solely a citizen of Pakistan; and (3) United, incorporated and headquartered in
Texas, is solely a citizen of Texas. Diversity jurisdiction is, therefore, destroyed only if DLO
and DEL are arrayed on opposite sides of the caption, one as plaintiff and one as defendant,
but that would seem an improper alignment.
From the limited evidence provided by the parties, it appears that DEL and DLO are
allies, DLO having taken over operation of the hotel from DEL in exchange for a fee. Neither
DEL nor DLO appear to claim an absolute right to the property vis-a-vis plaintiff Trade Well,
but only a right against all other parties, based on the temporary ownership interest granted
by a four year lease with Trade Well. Thus, Trade Well, DEL and DLO share a common
interest in keeping the property out of the hands of United. Accordingly, they should all be
arrayed as plaintiffs in this action, with United the sole defendant.2
2
If, after the parties are joined, it becomes apparent that the interests represented by DEL
and DLO are so at odds that they belong on opposite sides of the caption, the court will then
5
The court will order Trade Well to join DEL and DLO as co-plaintiffs by filing an
amended complaint bearing the signatures of attorneys representing all three parties. If this
is not possible because DEL and/or DLO refuse to join, Trade Well must serve these parties
with a summons and complaint, naming them as involuntary plaintiffs. If service is not
possible because one or both of these parties no longer exists, Trade Well must show proof of
this.
II.
Dismissal Because this Action Would “Negate State Court Litigation”
United’s second argument in favor of dismissing this case is that Trade Well’s claims
must be brought in state court. On page four of its brief in support of its motion to dismiss,
United asserts that “Trade Well’s remedy is . . . to file a motion to intervene in the State
Court Action . . . . To allow otherwise would, among other things . . . (1) negate the litigation
and settlement efforts previously undertaken in the State Court Action; and (2) de facto
supplant [United’s] decision where to commence its action.” (Dkt. #8 at 4.) If United
means to say that the Minnesota case has reached a judgment that has claim or issuepreclusive effect against Trade Well, it needs to develop this argument further before the
court will recognize it. If, on the other hand, United means to say that there cannot be
parallel ongoing actions on the same claims in state and federal court, it is simply mistaken.
consider a motion to (1) dismiss for lack of subject matter jurisdiction or (2) to dismiss one of
those parties.
6
III.
Motion to Dismiss for Failure to Follow Court Rules
United also contends that Trade Well has twice failed to comply with federal and local
procedural rules. First, United asserts that the case must be dismissed because Trade Well
has not filed a corporate ownership statement. Federal Rule of Civil Procedure 7.1 provides
that a “nongovernmental corporate party must file 2 copies of a disclosure statement that: (1)
identifies any parent corporation and any publicly held corporation owning 10% or more of
its stock; or (2) states that there is no such corporation.” This court has developed a
corporate ownership statement form that goes beyond the requirements of the Federal Rules
of Civil Procedure, requiring all parties to disclose (1) the identity of any publicly owned
parent corporation or affiliate, and (2) the identity of any publicly owned corporation with a
financial interest in the outcome of the case. (See Court’s docket entry on 9/27/2012.)
United correctly points out that Trade Well has failed to file its Corporate Ownership
Statement. Trade Well responds that it did, in fact, file its form on September 27, 2012.
Since this form does not appear in the docket, Trade Well will have to try again: it will have
14 days from the date of this order to (re)file the disclosure electronically.
Second, United says that when Trade Well sent a request to waive service of process,
it failed to include a postage-paid return envelope as required by Federal Rule of Civil
Procedure 4(d), and failed to serve (or provide along with a request for waiver of service) a
copy of the magistrate consent form, briefing guidelines, and blank corporate ownership
statement issued by this court with the summons. The court has never encountered a motion
to dismiss for failure to comply with any of these technical requirements, probably because
7
most sensible attorneys recognize that this oversight obviously does not merit the drastic
sanction of dismissal. However, all parties are expected to follow the rules of this court.
Therefore, the court will order Trade Well to send United one blank envelope stamped for
First Class mail within the United States. The other deficiencies have not prejudiced
defendant in any way, so further sanctions are unnecessary or appropriate.
IV.
Motion for Additional Time
Finally, United requests additional time to file a responsive pleading in the event that
this court denies its motion to dismiss. United articulates no sound basis for this request,
which would normally be denied and an answer due in ten (10) days pursuant to Federal
Rule of Civil Procedure 12(a)(4)(A). United is automatically allowed 10 days to answer after
the court rules on this motion, which should be plenty of time. In this case, however, the
motion has been rendered moot by plaintiff’s obligation to file and serve an amended
complaint, triggering a new deadline for defendant to answer.
ORDER
IT IS HEREBY ORDERED that:
(1) defendant United Central Bank’s motion to dismiss (dkt. #7) is DENIED;
(2) plaintiff is ordered to file and serve an amended complaint within 30 days
naming DEL and DOL as plaintiffs or involuntary plaintiffs as set forth
above;
8
(3) defendant’s request for additional time to answer is DENIED as moot;
(4) plaintiff Trade Well International must file its corporate disclosure
statement on the docket within 14 days;
(5) plaintiff Trade Well International is ordered to send defendant or its
counsel a blank envelope stamped for First Class mail within the United
States within 14 days; and
(6) a new trial schedule is to be established in this matter promptly.
Entered this 30th day of Setember, 2013.
BY THE COURT:
/s/
___________________________________________
WILLIAM M. CONLEY
District Judge
9
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?