Carden v. Klucznik

• Decision Date: 31 March 2011
• Docket Number: Civil Action No. 10–10541–JLT.
• Citation: 775 F.Supp.2d 247
• Parties: William CARDEN, et al., Plaintiffs,v.Joseph J. KLUCZNIK, et al., Defendants.
• Court: U.S. District Court — District of Massachusetts

775 F.Supp.2d 247

William CARDEN, et al., Plaintiffs,

v.Joseph J. KLUCZNIK, et al., Defendants.

Civil Action No. 10–10541–JLT.

United States District Court, D. Massachusetts.

March 31, 2011.

Leon A. Blais, Blais, Parent & Quinn, Mansfield, MA, for Plaintiffs.

Moshe S. Berman, W. Mark Russo, Ferrucci Russo, P.C., Providence, RI, Kevin M. Brill, Newton, MA, for Defendants.

MEMORANDUM

TAURO, District Judge.I. Introduction

Plaintiffs have sued Defendants for tortious interference with contractual and advantageous relations and civil conspiracy.¹ Plaintiffs allege diversity of citizenship as the basis for this court's jurisdiction.² Defendants claim that this court lacks jurisdiction and that Plaintiffs' suit is barred for a variety reasons. Presently at issue is Defendant Christopher Mulhearn's Motion to Dismiss [# 11], Defendants' Motion to Dismiss [# 13],³ Plaintiffs' Motion to Strike Motions to Dismiss and Motion to File Additional Pages Together With Accompanying Memoranda [# 17], and Plaintiffs' Request for Additional Time to File Opposition and Objection to East Providence Defendants' Motion to Dismiss [# 25]. Because this court finds that it lacks subject-matter jurisdiction, it abstains from ruling on these Motions and this action is DISMISSED.

II. Background ⁴

On a motion to dismiss, a court must accept all factual allegations in the complaint as true.⁵ But a court will not accept as true any facts that are “conclusively contradicted by plaintiffs' concessions or otherwise.” ⁶

Plaintiffs ⁷ are the majority shareholders and founding investors in Narragansett Pellet Corporation (“NPC”), an entity presently in bankruptcy. ⁸ Plaintiffs filed a Complaint on March 31, 2010, naming the City of East Providence (“City”), Christopher Mulhearn, a private attorney, and a group of employees for the City: Timothy Chapman, Joseph J. Klucznik, Roberts Powers, and David Rave.⁹ The Complaint contains two counts: (I) tortious interference with contractual and advantageous relations; and (II) civil conspiracy.¹⁰ Plaintiffs allege a prolonged course of conduct by Defendants, mostly occurring in Rhode Island, that led to the “demise” of NPC. ¹¹

The Complaint alleges that this court has jurisdiction because the Parties are diverse and the amount-in-controversy is over $75,000.¹² At the time the Complaint was filed, at least one Plaintiff was a resident of Massachusetts.¹³ The Complaint (inaccurately) stated that Defendant Joseph J. Klucznik was a resident of Rhode Island.¹⁴

Defendants filed Motions to Dismiss arguing, inter alia, that this court lacked personal jurisdiction over Defendants, the action was barred by res judicata, and Plaintiffs lacked shareholder standing.¹⁵ One of the Motions to Dismiss indicated in passing that Defendant Joseph J. Klucznik was a resident of Massachusetts.¹⁶ This court, upon realizing a potential jurisdictional defect, ordered Defendant Klucznik to file an affidavit clarifying the issue of his residency.¹⁷ The Affidavit revealed that Defendant Klucznik has resided in Massachusetts since 2009.¹⁸ Plaintiffs indeed later concluded, “based upon their own investigation,” that Klucznik was in fact a “citizen” of Massachusetts.¹⁹

III. Discussion

A federal court should consider whether it has subject-matter jurisdiction before discussing the merits of a motion or case.²⁰ This holds true even if the parties do not raise the jurisdictional issue. ²¹ If a court determines that it lacks subject-matter jurisdiction, then it “must dismiss the action.” ²²

If a plaintiff sues in federal court and claims that the court has subject-matter jurisdiction because the Parties are diverse,²³ then there must be “complete diversity of citizenship as between all plaintiffs and all defendants.” ²⁴ This requirement means that “diversity does not exist where any plaintiff is a citizen of the same state as any defendant.” ²⁵ In determining the existence of diversity jurisdiction, the citizenship of the parties is “determined with reference to the facts as they existed at the time of filing.” ²⁶

There is, however, an exception. As the Supreme Court has established, “Rule 21 invests district courts with authority to allow a dispensable non-diverse party to be dropped at any time.” ²⁷ The Court has emphasized that this authority should be exercised “sparingly.” ²⁸ The decision to dismiss a non-diverse party is within the discretion of the court.²⁹ The decision to dismiss “revolves largely around whether the non-diverse litigant is a dispensable or indispensable party.” ³⁰ Rule 19(b) provides the appropriate guidance to determine whether a party is indispensable.³¹ Rule 19(b) provides in pertinent part:

[T]he court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed. The factors for the court to consider include:

(1) the extent to which a judgment rendered in the person's absence might prejudice that person or the existing parties;

(2) the extent to which any prejudice can be lessened or avoided by:

(A) protective provisions in the judgment;

(B) shaping the relief; or

(C) other measures;

(3) whether a judgment rendered in the person's absence will be adequate; and

(4) whether the plaintiff would have an adequate remedy if the action were dismissed for non-joinder.³²

These factors are accompanied by four corresponding interests, including the interest in complete, consistent, and efficient settlement of controversies. ³³ The First Circuit has also noted the importance of parties having their liability being determined in a “single proceeding.” ³⁴ A court should additionally consider any potential prejudice to any parties. ³⁵ This court considers these four factors seriatim.

The first factor weighs in favor of this court not exercising its Rule 21 authority. Klucznik is alleged to be a co-conspirator. ³⁶ As a result, he would likely be jointly and severally liable with the other Defendants.³⁷ This fact indicates that Klucznik is not an indispensable party.³⁸ But even if Klucznik may not be indispensable and this court “can” dismiss Klucznik,³⁹ this does not mean it should. Dismissing Klucznik may cause significant prejudice to him and Plaintiffs. Specifically, Plaintiffs ask this court to dismiss Klucznik without prejudice “to an action being brought against him in state court.” ⁴⁰ If this court accepted Plaintiffs' request, then there would be a case remaining in federal court and a dismissed Defendant in state court on the same claims. Given Plaintiffs' indications that Klucznik is both at issue in Plaintiffs' Complaint and subject to another suit, Klucznik would be presented with a dual burden. He would be required to litigate in state court while also being a subject of discovery inquiry in this court. Moreover, the Parties remaining in this court could be subject to a similar type of prejudice. The remaining Defendants' interests may be at stake in a concurrent state action. And the remaining Parties may be required to file claims, conduct discovery, and proceed to trial in multiple forums.⁴¹ They could, therefore, be exposed to prejudice in being forced to litigate in two separate fora “and fight on two fronts.” ⁴² This source of prejudice is only a threat, but a real enough threat for this court to weigh carefully.⁴³

The second factor is indeterminate. Plaintiffs ask this court to dismiss Klucznik without prejudice. But where Klucznik, as a non-diverse party, has not yet had his claims adjudicated, the appropriate inquiry for this court is whether the prejudice to Klucznik from being dismissed is such that the dismissal should be with prejudice to any further suit by Plaintiffs. ⁴⁴ Klucznik has participated in the suit in this court to some degree, such as having a Motion filed on his behalf. Were this court to dismiss him without prejudice, Klucznik could be subject to another suit on the same claims by the same Plaintiffs in state court.⁴⁵ Alternatively, this court could perhaps remedy any potential prejudice by dismissing Klucznik with prejudice. Plaintiffs, however, appear unamenable to such an option by specifically desiring only a dismissal with prejudice to bringing an action in state court. Accordingly, this court considers the third factor.

The third factor strongly weighs in favor of this court not exercising its Rule 21 authority. Given Plaintiffs' indications of bringing an action in state court, the consequences to dropping Klucznik could be complex. If this court dismissed Klucznik, then Plaintiffs could have two cases in two courts. This would create the “potential for inconsistent results on the same issues.” ⁴⁶ Such a result would not promote judicial economy. There is no interest here in preserving a “fully litigated judgment.” ⁴⁷ Instead, there is an interest in preventing prejudice to the Parties and avoiding inconsistent results.

The fourth factor slightly weighs in favor of this court not exercising its Rule 21 authority. This court is attentive to Plaintiffs' choice of forum.⁴⁸ But, even if this action is dismissed, Plaintiffs will still have an available forum in a state court. This court does not merely note the “bare fact that a state court forum is available.” ⁴⁹ Rather, Plaintiffs could likely bring the “ same action, against the same parties” in a state court.⁵⁰ Plaintiffs in fact confirm this point by presenting evidence of a potential suit against Defendant Klucznik in a state court. ⁵¹

This court finds that the four factors together weigh in favor of this court not exercising its Rule 21 authority. The first and third factors are particularly compelling. Dismissing Klucznik at this stage could subject him (and other Parties) to a duplicative “lawsuit before a new judge.” ⁵² Instead, this court chooses to avoid prejudice to any Parties by letting them decide how their liability may best be determined in one proceeding.

IV. Conclusion

There is incomplete diversity in the citizenship of all...