Wolf v. Bickham, CIVIL ACTION NO. 20-1746
| Decision Date | 30 October 2020 |
| Docket Number | CIVIL ACTION NO. 20-1746 |
| Citation | 498 F.Supp.3d 897 |
| Parties | Ryan WOLF v. Mark BICKHAM |
| Court | U.S. District Court — Eastern District of Louisiana |
Matthew Kepner Brown, Sullivan Stolier, LLC, New Orleans, LA, for Ryan Wolf.
ORDER & REASONS
Before the Court is a motion by defendant Mark Bickham to dismiss pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure for lack of subject-matter jurisdiction and under Rule 12(b)(7) for failure to join a required party.1 Plaintiff Ryan Wolf responds in opposition.2 Having considered the parties’ memoranda, the record, and the applicable law, the Court grants the motion because Solar Lucitania Partners ("SLP") is an indispensable party whose presence as a defendant destroys diversity subject-matter jurisdiction.
This matter concerns a breach of partnership agreement and breach of fiduciary duty by SLP's managing partner. SLP, a general partnership, was formed on or about August 13, 1985, under Arizona law.3 On March 7, 2014, Bickham, a citizen of Louisiana, became a partner in SLP, and, thereafter, was appointed SLP's managing partner by unanimous consent, effective October 28, 2016.4 Wolf, a resident of Minnesota, became a partner in SLP on November 23, 2018, when his father donated to him a 50% stake in the partnership.5
SLP is a single-asset partnership. The asset is property located in Ourem, Portugal ("the property")6 that Wolf alleges has a fair market value of approximately $600,000 and a fair market rental value of approximately $3,000 per month.7 Bickham, as SLP's managing partner, entered into a 40-year lease of the property that sets the rent at $1,000 per year.8 The lessee, Katherine M. Bickham, is Bickham's daughter.9 Wolf filed this suit against Bickham alleging that Bickham's entering into the lease on SLP's behalf amounted to breaches of contract and fiduciary duty because it caused a substantial loss of rental income.10
Bickham argues that SLP is a necessary party under Rule 19(a) of the Federal Rules of Civil Procedure because Wolf is seeking to adjudicate rights that belong to the partnership.11 Bickham further argues that, although SLP is required to be joined as a party plaintiff, joinder is not "feasible" because it would destroy diversity of citizenship and "deprive the court of subject-matter jurisdiction" since the partnership and Bickham are both citizens of Louisiana.12 Thus, contends Bickham, the action cannot "in equity and good conscience" proceed among the existing parties, requiring the action to be dismissed under Rule 19(b).13
In opposition, Wolf, relying on Moss v. Princip , 913 F.3d 508, 519-20 (5th Cir. 2019), argues that SLP's joinder is not required.14 In Moss , the Fifth Circuit held that a lawsuit between partners did not require joinder of the partnership because, under Texas partnership law, a partner could be liable to his other partners for breach of a partnership agreement or violation of partnership duties. Id. at 521. Wolf then argues, based on a treatise's reading of the Louisiana Code of Civil Procedure, that Louisiana law is to like effect, enabling one partner to sue another directly.15 Finally, Wolf argues that, to the extent it may apply, Arizona partnership law authorizes Wolf to sue Bickham directly, without joining SLP as a plaintiff, on claims he did not act in good faith.16
Rule 12(b)(1) of the Federal Rules of Civil Procedure permits a party to challenge a court's subject-matter jurisdiction. "[A] claim is ‘properly dismissed for lack of subject-matter jurisdiction when the court lacks the statutory authority or constitutional power to adjudicate’ the claim." Griener v. United States , 900 F.3d 700, 703 (5th Cir. 2018) (quoting In re FEMA Trailer Formaldehyde Prod. Liab. Litig. , 668 F.3d 281, 286 (5th Cir. 2012) ). The party asserting jurisdiction bears the burden of proving that subject-matter jurisdiction exists. Id. "Lack of subject matter jurisdiction may be found in any one of three instances: (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Ramming v. United States , 281 F.3d 158, 161 (5th Cir. 2001). "A motion to dismiss for lack of subject-matter jurisdiction should be granted only if it appears certain that the plaintiff cannot prove any set of facts in support of his claims entitling him to relief." Sureshot Golf Ventures, Inc. v. Topgolf Int'l, Inc. , 754 F. App'x 235, 235 (5th Cir. 2018) (citing Wagstaff v. U.S. Dep't of Educ. , 509 F.3d 661, 663 (5th Cir. 2007) ). In any event, "a court's dismissal of a case for lack of subject-matter jurisdiction is not a decision on the merits, and the dismissal does not prevent the plaintiff from pursuing the claim in another forum." Orpheum Prop., Inc. v. Coscina, 2018 WL 1518471, at *3 (E.D. La. Mar. 28, 2018) (citation omitted).
In this case, subject-matter jurisdiction is based on diversity of citizenship under 28 U.S.C. § 1332. Diversity jurisdiction exists when the civil action is between citizens of different states and the amount in controversy exceeds $75,000, exclusive of interest and costs. 28 U.S.C. § 1332(a). The diversity of citizenship must be complete, see Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806), which "requires that all persons on one side of the controversy be citizens of different states than all persons on the other side." Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1079 (5th Cir. 2008) (citing McLaughlin v. Miss. Power Co. , 376 F.3d 344, 353 (5th Cir. 2004) ).
Rule 12(b)(7) of the Federal Rules of Civil Procedure requires the dismissal of claims when a plaintiff fails to join a required party to the lawsuit pursuant to Rule 19. " Rule 19 provides for the joinder of all parties whose presence in a lawsuit is required for the fair and complete resolution of the dispute at issue." Orpheum Prop., 2018 WL 1518471, at *3 ( ) . "It further provides for the dismissal of litigation that should not proceed in the absence of parties that cannot be joined." Id. (citations omitted).
Rule 19 Orpheum Prop., 2018 WL 1518471, at *5 ; see also Hood ex rel. Miss. v. City of Memphis, 570 F.3d 625, 628-29 (5th Cir. 2009) ().
A person is a required party whose joinder is necessary under Rule 19(a)(1) if:
Fed. R. Civ. P. 19(a)(1). The party advocating joinder has the initial burden of demonstrating that an absent party is necessary, but "the burden of disputing this initial appraisal falls on the party who opposes joinder." See Pulitzer , 784 F.2d at 1309 ().
If joinder is appropriate under Rule 19(a)(1), but such joinder would destroy the court's jurisdiction, the court must determine whether "in equity and good conscience" the lawsuit can proceed without the absent party or should be dismissed. Fed. R. Civ. P. 19(b) ; see Pulitzer , 784 F.2d at 1309 (). Rule 19(b) directs that a court consider these factors:
No single factor is dispositive. See Gensetix, Inc. v. Bd. of Regents of Univ. of Tex. Sys. , 966 F.3d 1316, 1326 (Fed. Cir. 2020) (). Resolving whether a party is required under Rule 19(b) is a practical, fact-based inquiry, wherein the various harms that the parties and the absentees might suffer are balanced. See, e.g., Hood, 570 F.3d at 628 ; AT&T Commc'n v. BellSouth Telecomm. Inc., 238 F.3d 636, 658 (5th Cir. 2001) ().
Joining a party under Rule 19(b)...
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