A-Plus Janitorial & Carpet Cleaning v. Employers' Workers' Compensation Ass'n

• Decision Date: 08 April 1997
• Docket Number: E-T,No. 83227,E-Z,A-PLUS,N-R,83227
• Citation: 936 P.2d 916,1997 OK 37
• Parties: JANITORIAL & CARPET CLEANING, an Oklahoma sole proprietorship; A.R.K. Ramos Foundry & Manufacturing Company, Inc., an Oklahoma corporation; Acura Neon, Inc., an Oklahoma corporation; Alpine Trucking, Inc., an Oklahoma corporation; Anderson Mechanical Inc., an Oklahoma corporation; Beeson Mechanical Contractors, Inc., an Oklahoma corporation; Bigby Companies, an Oklahoma partnership; Bridgeman Electric, Inc., an Oklahoma corporation; Carpet Masters Incorporated, an Oklahoma corporation; Cleo Weaver, Inc., an Oklahoma corporation; Computer Power Technologies, a division of Wiley Electric, Inc., an Oklahoma corporation; Craig County Farm Supply, an Oklahoma general partnership;ech, Inc., an Oklahoma corporation;Stop, Corp., a Kansas corporation; Stop, Inc., an Oklahoma corporation; EMTEC Pest Control, Inc., an Oklahoma corporation; Gasoline Marketing, Inc., an Oklahoma corporation; George Mayer, Inc., an Oklahoma corporation; Griffith Petroleum Management Corporation, an Oklahoma corporation; Hardwall Fabricators, Inc., an Oklahoma corporation; Jack Griffith Petroleum Products, Inc., an Oklahoma corporation; LaFaver Fiberglass Corporation, an Oklahoma corporation; Miami Stone, an Oklahoma corporation; Miller Glass Company, an Oklahoma corporation;Industries, Inc., an Oklahoma corporation; Oklahoma Ice Company, Inc., an Oklahoma corporation; Oklahoma Leather Products, Inc., an Oklahoma corporation; Ottawa County Farm Supply, an Oklahoma partnership; Peevy Construction Company, Inc., an Oklahoma corporation; Roto Hammer Company, an Oklahoma corporation; Sam Robinson, d/b/a Sam Robinson Signs and d/b/a Signa Outdoor Advertising; Standard Machine & Welding Works, an Oklahoma sole proprietorship; Total Marine Services, an Oklahoma corporation; Townley Dairy Company, an Oklahoma corporation; Tulsa Overhead Door Co., Inc., an Oklahoma corporation; Valet Wash And Lube Centers, Inc., an Oklahoma corporation; Wiley Electric, Inc., an Oklahoma corporation, Plaintiffs-Appellants,
• Court: Oklahoma Supreme Court

Page 916

936 P.2d 916

1997 OK 37

A-PLUS JANITORIAL & CARPET CLEANING, an Oklahoma sole proprietorship; A.R.K. Ramos Foundry & Manufacturing Company, Inc., an Oklahoma corporation; Acura Neon, Inc. an Oklahoma corporation; Alpine Trucking, Inc., an Oklahoma corporation; Anderson Mechanical Inc., an Oklahoma corporation; Beeson Mechanical Contractors, Inc., an Oklahoma corporation; Bigby Companies, an Oklahoma partnership; Bridgeman Electric, Inc., an Oklahoma corporation; Carpet Masters Incorporated, an Oklahoma corporation; Cleo Weaver, Inc., an Oklahoma corporation Computer Power Technologies, a division of Wiley Electric Inc., an Oklahoma corporation; Craig County Farm Supply, an Oklahoma general partnership; E-Tech, Inc., an Oklahoma corporation; E-Z Stop, Corp., a Kansas corporation; E-Z Stop, Inc., an Oklahoma corporation; EMTEC Pest Control Inc., an Oklahoma corporation; Gasoline Marketing, Inc., an Oklahoma corporation; George Mayer, Inc., an Oklahoma corporation; Griffith Petroleum Management Corporation, an Oklahoma corporation; Hardwall Fabricators, Inc., an Oklahoma corporation; Jack Griffith Petroleum Products, Inc., an Oklahoma corporation; LaFaver Fiberglass Corporation, an Oklahoma corporation; Miami Stone, an Oklahoma corporation; Miller Glass Company, an Oklahoma corporation; N-R Industries, Inc., an Oklahoma corporation; Oklahoma Ice Company, Inc., an Oklahoma corporation; Oklahoma Leather Products, Inc., an Oklahoma corporation; Ottawa County Farm Supply, an Oklahoma partnership; Peevy Construction Company, Inc., an Oklahoma corporation; Roto Hammer Company, an Oklahoma corporation; Sam Robinson, d/b/a Sam Robinson Signs and d/b/a Signa Outdoor Advertising; Standard Machine & Welding Works, an Oklahoma sole proprietorship; Total Marine Services, an Oklahoma corporation; Townley Dairy Company, an Oklahoma corporation; Tulsa Overhead Door Co., Inc., an Oklahoma corporation; Valet Wash And Lube Centers, Inc., an Oklahoma corporation; Wiley Electric, Inc., an Oklahoma corporation, Plaintiffs-Appellants, v. THE EMPLOYERS' WORKERS' COMPENSATION ASSOCIATION, an unincorporated group self-insurance association; American Citizens Insurance Agency, Inc., an Oklahoma corporation; Bomford, Couch & Wilson, an Oklahoma business trust; Commerce Insurance Agency, Inc., an Oklahoma corporation; Rich & Cartmill, Inc., an Oklahoma corporation; Bill Kelley, d/b/a Bill Kelley Insurance Agency; Sturdivant Insurance Agency, Inc., an Oklahoma corporation; United General Agency, Inc., an Oklahoma corporation; Carris Agency, Inc., an Oklahoma corporation; Al M. Snipes General Insurance, Inc., an Oklahoma corporation; Associated Underwriters, Inc., an Oklahoma corporation; Bill Beckman Company, an Oklahoma corporation; and The Employers Insurance Agents Group, a/k/a The TEWCA Agents Group, an unincorporated association, Defendants-Appellees.

No. 83227.

Supreme Court of Oklahoma.

April 8, 1997.

Cleve W. Powell, Northcutt, Clark, Gardner, Hron and Powell, Ponca City, for Appellants.

Clark O. Brewster John W. Anderson, Jr., Brewster, Shallcross & DeAngelis, Tulsa, for Appellee, The Employers' Workers' Compensation Association.

William C. Devinney, Oklahoma City, for Appellees, The Employers Insurance Agents Group and Associated Underwriters, Inc.

William J. Bergner, Debra L. Chionopoulos, Walker, Ferguson & Ferguson, Oklahoma City, for Appellees, American Citizens Insurance Agency, Inc., Commerce Insurance Agency, Inc., United General Agency, Inc., Carris Agency, Inc., Al M. Snipes General Insurance, Inc. and Bill Beckman Company.

John R. Paul, Suzanne Hale Costin, Lori Moon Kastner, Richards, Paul, Richards & Siegel, Tulsa, for Appellee, Sturdivant Insurance Agency, Inc.

Scott B. Wood, Barkley, Rodolf & McCarthy, Tulsa, for Appellee, Rich & Cartmill, Inc.

John B. Stuart, Wagner, Stuart & Cannon, Tulsa, for Appellee, Bomford, Couch & Wilson.

OPALA, Justice.

The dispositive issue on certiorari is whether the trial court erred in dismissing the plaintiffs' claims. We answer in the affirmative.

I THE ANATOMY OF LITIGATION

The plaintiffs/appellants are former members [plaintiffs, former or ex-members] of The Employers' Workers' Compensation Association [TEWCA], an unincorporated workers' compensation group self-insurance association organized under the authority of 85 O.S.1991 § 149.1. ¹ TEWCA, formed in 1986, is comprised of employers who have united together for pooling their workers' compensation liabilities. Upon joining TEWCA (and for each renewal year) an employer agrees to be jointly and severally liable for the workers' compensation liabilities (of all group members) incurred during the current calendar year. The liability, once assumed, continues even after an employer leaves TEWCA.

At the time TEWCA was formed, several independent insurance agents [the Agents] created their own unincorporated association, the TEWCA Agents Group [the Agents Group or Group]. The Agents Group members were the sole approved and authorized marketing representatives for TEWCA. In furtherance of the Group's objectives, the agents solicited the plaintiffs and many other employers to join TEWCA.

In November 1992 TEWCA assessed its present and former members (approximately 1,000 employer-members) for additional contributions to satisfy a deficit of more than $3 million, accumulated during a six-year period (1986 through 1991).

Thirty-seven former TEWCA members brought suit against TEWCA, grounded on breach of contract, constructive fraud and actual fraud; and alternatively against the Agents Group (and its members) for negligence, breach of fiduciary duty, constructive fraud and actual fraud, which induced the plaintiffs to join TEWCA and renew annually their membership in the organization. They pressed for (a) exoneration of their liability for the initial (and any future) assessment, (b) TEWCA's indemnification for any future loss or liability to third persons and (c) recovery of deposits and credits seized by TEWCA in partial satisfaction of the levy.

The trial court dismissed the plaintiffs' first and second amended petitions ² without prejudice to refiling. Its ruling was grounded on the view that the claims pressed are derivative in nature. ³ The third amended petition (in contest here) was challenged by six separate dismissal motions. By order filed February 10, 1994, the trial court (a) dismissed the claims against TEWCA and the Agents Group without leave to amend and (b) dismissed the claims against the other defendants (agents) for failure to state a claim upon which relief can be granted without prejudice to refiling another amended petition. ⁴ Although the trial judge noted at the hearing on the motions that he viewed the claims against TEWCA and the Agents Group as derivative in nature, he refused to specify any grounds for dismissal of the third amended petition other than stating that it was for "failure to state a claim upon which relief may be granted." ⁵ When the plaintiffs failed timely to amend, the defendant agents pressed for a "final order of dismissal." ⁶ The claims against the remaining defendants were dismissed by orders of February 24, 1994 and March 8, 1994. This plaintiffs' appeal is timely prosecuted from the three (February 10, February 24 and March 8) dismissal orders.

The Court of Civil Appeals affirmed the dismissal orders on appeal, concluding that (a) the plaintiffs' claims are derivative in nature and (b) the plaintiffs have alleged no harm peculiar to them, which would dispense with the necessity of bringing a derivative suit--i.e., one pressed by TEWCA itself for the benefit of all interested persons (or by representatives of the association who would adequately represent its interests and those of its members).

The Defendants' Attempt To Disqualify the Plaintiffs' Lawyer

After the parties had filed their supplemental briefs on certiorari, TEWCA moved (some two years after the suit began) to disqualify plaintiffs' counsel for an alleged conflict of interest. We referred that controversy to the trial judge, to sit as this court's special master, for a decision on fact and law issues relating to the claimed conflict. ⁷ The special master found no violation of counsel's ethical responsibilities and concluded that no conflict of interest was in existence. Upon de novo review of the special master's report, on file herein, this court approved the decision and denied the defendants' conflict-of-interest claim. ⁸

II THE MOTION TO DISMISS

A motion to dismiss for failure to state a claim upon which relief may be granted will not be sustained unless it should appear without doubt that the plaintiff can prove no set of facts in support of the claim for relief. ⁹ Conley v. Gibson. ¹⁰ We hold that, for the reasons to be explained in Parts III through VII infra, the plaintiffs' petition alleges facts upon which relief may be available. It is hence sufficient to withstand the defendants' quests for the claims' dismissal.

III

THE FORMER TEWCA MEMBERS HAVE STANDING TO BRING A DIRECT

ACTION AGAINST THE DEFENDANT ASSOCIATIONS AND AGENTS

The defendants (TEWCA, Agents Group and agents) urge that the dismissal should stand because (a) the claims can only be pursued in a derivative action and (b) the plaintiffs lack standing to sue in a representative capacity as they failed to comply with the requirements of 12 O.S.1991 § 2023.1 ¹¹ for pressing a derivative claim. The plaintiffs maintain their claims are personal--not derivative of another entity's legal demand. They are to redress individual harm and can hence be maintained in a direct action.

A.

The Statutory Scheme Governing Group Self-Insurance

Associations and Derivative Actions Pressed On

Behalf of An Unincorporated Association

TEWCA, an unincorporated association of approximately 1,000 members, was organized under the terms of 85 O.S.1991 § 149.1 ¹² as a workers' compensation self-insurance group. That statute (a) permits multiple...