HARRELL & SUMNER CONTR. CO. v. Peabody Petersen Co.

• Decision Date: 13 May 1976
• Docket Number: No. 73-24-CIV-M.,73-24-CIV-M.
• Citation: 415 F. Supp. 573
• Parties: HARRELL AND SUMNER CONTRACTING COMPANY, INC. (a Georgia Corporation), Plaintiff, v. PEABODY PETERSEN CO., an Illinois Corp. et al., Defendants. PEABODY PETERSEN CO., Defendant and Third-party Plaintiff, v. EVANS CONSTRUCTION COMPANY, a division of Moore Pipe and Springler Co., a corp. and St. Paul Fire and Marine Insurance Company, etc., Third-party Defendants.
• Court: U.S. District Court — Northern District of Florida

415 F. Supp. 573

HARRELL AND SUMNER CONTRACTING COMPANY, INC. (a Georgia Corporation), Plaintiff, v. PEABODY PETERSEN CO., an Illinois Corp. et al., Defendants.

PEABODY PETERSEN CO., Defendant and Third-party Plaintiff, v. EVANS CONSTRUCTION COMPANY, a division of Moore Pipe and Springler Co., a corp. and St. Paul Fire and Marine Insurance Company, etc., Third-party Defendants.

No. 73-24-CIV-M.

United States District Court, N. D. Florida, Marianna Division.

May 13, 1976.

Kunes & Kunes, Tifton, Ga., Robert J. Ritter, Miami, Fla., for plaintiff.

Lawrence M. Watson, Jr., Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P. A., Orlando, Fla., for defendant and third-party plaintiff Peabody.

Dewey R. Villareal, Jr., John J. McLaughlin, Tampa, Fla., for defendant Orofino.

Cecil G. Costin, Jr., Port St. Joe, Fla., for Federal Ins. Co. and Peabody Petersen.

Lynn C. Higby, Isler, Higby, Brown & Smoak, Panama City, Fla., for St. Joe Paper Co.

Benjamin W. Redding, Panama City, Fla., for Sverdrup & Parcel Assoc., Inc., and Register & Cummings Engineers, Inc.

Robert J. Kelly, Tallahassee, Fla., for Evans Const. Co. and St. Paul Fire and Marine Ins. Co., third-party defendants.

William J. Rish, Port St. Joe, Fla., for City of Port St. Joe.

ORDER GRANTING MOTION TO DISMISS

STAFFORD, District Judge.

On November 20, 1974, this court ruled that diversity jurisdiction over the present action had been properly invoked. Lack of subject matter jurisdiction, however, can be raised at any time. Rule 12(h)(2), (3), Fed.R.Civ.P. The vehicle for re-examination of this court's subject matter jurisdiction is the motion of Sverdrup and Parcel Associates filed January 6, 1975. In its order of March 8, 1976, the court requested the parties to re-brief this crucial issue. Briefs were received, hearing on the motion was heard in Marianna on March 16, and supplemental briefs were submitted. After careful study of all briefs and examination of the applicable case and statutory authorities, the court is compelled to reverse its earlier ruling and to conclude that it lacks jurisdiction in the instant cause.

The pertinent facts are these. In 1972, the City of Port St. Joe (City) entered a contract with Peabody Petersen Co. (Peabody) for the construction of a wastewater treatment plant at Port St. Joe, Florida. Peabody is an Illinois contractor with its principal place of business in Orlando, Florida. Peabody subcontracted with Harrell and Sumner Contracting Company, Inc. (Harrell) and Tackett Construction Company, Inc. (Tackett) as joint venturers to perform excavation work on the wastewater treatment plant. Harrell is a Georgia corporation; Tackett is a Florida corporation.

Harrell and Tackett allegedly were required to perform extra work on the project for which they were not compensated. This gave rise to an unliquidated claim by Harrell and Tackett against City, Peabody and the engineers (Sverdrup and Parcel Associates, Inc.) whose predecessors in interest had provided the plans and specifications for the project. On July 6, 1973, Tackett assigned all its interest in the claim to Harrell "in consideration of one-half of the net proceeds of any recovery, after payment of attorneys fees and costs" which were to be footed entirely by Harrell during the litigation. Thereafter Harrell brought suit in this court.

Harrell being a Georgia corporation and the defendants being citizens of other states, diversity appears at first blush to be complete. See 28 U.S.C. § 1332. That diversity and the jurisdiction of this court would be destroyed, however, by the joinder of Tackett, whose interests would require its alignment with Harrell as a party plaintiff. It is the position of Sverdrup and Parcel that Tackett is a real party in interest to this lawsuit and that the sole purpose of the assignment from Tackett to Harrell was to create federal diversity jurisdiction in violation of 28 U.S.C. § 1359. Harrell's position is that while the assignment may have created diversity jurisdiction, this was merely an "incidental" result, so that the assignment withstands judicial scrutiny under 28 U.S.C. § 1359. Peabody (a co-defendant who nevertheless joins plaintiff Harrell in striving to keep this case in federal court) has adopted yet a third position. The Tackett assignment, Peabody urges, is not really crucial to the jurisdictional analysis in this case, since the court would have jurisdiction of Harrell's claim even if the assignment had never been made.

The crucial issues, as the court views this case, are these: (1) Would this court have had jurisdiction over the cause absent the assignment, and (2), if not, must the case be dismissed because the Tackett assignment was improperly or collusively made to invoke the jurisdiction of this court?

As to the first of these issues, it must be noted at the outset that Tackett and Harrell were joint venturers.¹ The threshold question is whether Tackett, in the absence of an assignment, would have been an indispensable party to a suit by his co-venturer Harrell in the sense that his joinder would have been required even though diversity would thereby have been destroyed. See Rule 19(b), Fed.R.Civ.P.

The general rule governing joinder of joint venturers is well expressed in 59 Am. Jur.2d Parties, § 103, at 505, 506:

At common law the joinder of parties plaintiff is confined to those having a joint interest in the subject of suit, and joinder of plaintiffs is compulsory where the parties, under the substantive law, are possessed of joint rights. The requirement of joinder of all those jointly interested is also the rule under most statutory provisions. It is the general requirement not only of the common law but of the modern practice statutes and rules of practice as well that a personal action must be joined in by all persons, as plaintiffs, who have a joint interest or are entitled jointly or in common to the right sued upon. This is true whether the action is one ex contractu or one ex delicto, and it is immaterial, when several persons are shown to be jointly interested, in what proportions they may be concerned, or whether they have suffered injury or damages to the same extent. Footnotes omitted

With few exceptions, federal courts have recognized the indispensability (as opposed to the mere necessity) of a joint venturer to a suit by a co-venturer. See Purcel v. Wells, 236 F.2d 469 (10th Cir. 1956); Archer-Daniels-Midland Co. v. Paull, 188 F.Supp. 277 (W.D.Ark.1960). Cf. Bry-Man's, Inc. v. Stute, 312 F.2d 585 (5 Cir. 1963).

It is recognized that these decisions are not necessarily binding in the instant situation. Rule 19(b), which was revised in 1966, permits the court to consider the question of indispensability on a case-by-case basis, taking into account such factors as prejudice and the adequacy of a remedy if the action is dismissed for non-joinder. See generally 7 Wright & Miller, Federal Practice and Procedure, § 1613, at 127. The instant action was originally brought in seven counts, specifically negligence, quantum meruit, fraud, action on subcontract, action on general contract, and action on contract against all defendants. If Tackett were not considered an indispensable party to the federal action, nothing would preclude it from suing in state court on one or more of these theories, with the resultant possibility of multiple and inconsistent verdicts.² Thus, on the basis of the first consideration in Rule 19(b) alone, it is evident that Tackett, in the absence of an assignment, would be considered an indispensable party whose presence would destroy diversity and mandate the dismissal of this action for...