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relying on general contract principles to interpret a forum-selection clause designating Ohio state or federal courts as exclusive forums for action “arising out of or relating to” a confidentiality agreement, and finding under facts presented that a Pennsylvania action for breach of a separate management contract was outside scope of that clause
Summary of this case from Hous. & Redevelopment Ins. Exch. v. Guy Carpenter & Co.Opinion
CIVIL ACTION NO. 03-3498
September 8, 2003
ORDER-MEMORANDUM
AND NOW, this day of September, 2003, upon consideration of Defendant's Motion to Dismiss and supporting Memorandum of Law (Docket No. 5) and Plaintiff's Response thereto (Docket No. 7), IT IS HEREBY ORDERED that the Motion is DENIED pursuant to Federal Rule of Civil Procedure 12 ("Rule 12").
Plaintiff brought this diversity action for damages resulting from Defendants' breach of a contract between Plaintiff and Defendants. The contract at issue stemmed from the creation of Expedient Title, LLC ("Expedient") by Defendants, who relied on a $90,000 loan from Plaintiff to fund the company's initial operating costs. Compl. ¶ 9-11. On behalf of a company known as Toner Organization, Plaintiff entered into a management agreement with Defendants on October 7, 1999, under which Defendants were not only obligated to repay the $90,000 loan to Plaintiff, but also were required to pay 30% of Expedient's net profits to Plaintiff for the remainder of the contract term. Compl. ¶ 14.
The management contract provides that its terms remain in effect until (1) the contract is terminated by Plaintiff; (2) Defendants pay Toner the sum of $1 million; or (3) ten years elapse from the execution of the contract.
Defendants, both of whom serve as principals and members of Expedient with primary responsibility for the company's day-to-day business and financial affairs, repaid the $90,000 loan to Plaintiff by 2001. Compl. 1 15-16. For some time thereafter, Defendants purportedly paid Plaintiff 30% of Expedient's net profits, as required by the management contract. Compl. ¶ 16. Before the end of 2001, however, Defendants ceased paying Plaintiff his contractual share of Expedient's net profits, and Plaintiff thereafter received only nominal payments from Defendants in connection with Expedient's 2002 earnings. Compl. ¶ 28. Defendants have refused to make any payments to Plaintiff from Expedient's net profits in 2003. Id. Instead, Defendants have allegedly used the Expedient profits owed Plaintiff to satisfy their personal expenses. Compl. ¶ 26.
Plaintiff filed the instant Complaint seeking relief for Defendant's alleged breach of the management contract. Defendants moved to dismiss the Complaint under Rule 12(b) based on the provisions of a forum selection clause, and for lack of standing and failure to join a necessary party. Each ground for dismissal is considered in turn.
Defendants initially contend that this Court should dismiss the Complaint based on a forum selection clause contained in a separate confidentiality agreement entered into by Plaintiff and Expedient on February 4, 2003. Specifically, Defendants rely on language in the confidentiality agreement vesting state and federal courts located in Columbus, Ohio with exclusive jurisdiction "in any action arising out of or relating to this [confidentiality] Agreement." Mot. to Dismiss Attach. No. 1. Defendants assert that Plaintiff's claims are properly subject to the confidentiality agreement and therefore the forum selection clause contained therein must be honored by this Court.
Defendants' argument, however, is misplaced because the present lawsuit arises under the management agreement, not the confidentiality agreement. As such, the forum selection clause of the confidentiality agreement has no application to the present lawsuit. See Cottman Transmission Sys., Inc. v. Martino, 36 F.3d 291, 293 (3d Cir. 1994) (refusing to consider choice of venue provision in contract under which lawsuit did not arise). Accordingly, Defendants' motion to dismiss based on the forum selection clause in the confidentiality agreement is denied.
Defendants next argue that the Complaint should be dismissed because Plaintiff does not have standing to assert the claims alleged in the Complaint. Specifically, Defendants contend that the management agreement, which Plaintiff merely executed on behalf of Toner Organization, was never properly assigned to Plaintiff. As such, Defendants maintain that Plaintiff has no enforceable rights under the management contract, thus warranting dismissal of the Complaint under Rule 12(b)(6).
When determining a Motion to Dismiss pursuant to Rule 12(b)(6), the Court may look only to the facts alleged in the complaint and its attachments. Jordon v. Fox, Rothschild, O'Brien Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994). The Court must accept as true all well-pleaded allegations in the complaint and view them in the light most favorable to the Plaintiffs. Angelastro v. Prudential-Bache Securities, Inc., 764 F.2d 939, 944 (3d Cir. 1985). A Rule 12(b)(6) motion will be granted when Plaintiffs cannot prove any set of facts, consistent with the complaint, which would entitle them to relief. Ransom v. Marrazzo, 848 F.2d 398, 401 (3d Cir. 1988).
Standing has three elements: injury, a causal connection between the injury and the conduct complained of, and the likelihood that the injury would be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). The Complaint alleges that Plaintiff now exclusively holds the rights under the management agreement in his individual capacity. The Complaint further asserts that Plaintiff has been injured because he has not received a substantial portion of the 2001-2003 Expedient net profits owed him under the management agreement, and that his injury was caused by Defendants' refusal to pay Plaintiff according to the terms of the contract. The Complaint also alleges that Plaintiff's injury can be redressed by the award of damages to Plaintiff, disgorgement of profits unjustly retained by Defendants, and the imposition of a constructive trust on profits owed by Defendants to Plaintiff. Accordingly, Plaintiff has standing to prosecute this suit and Defendant's motion to dismiss for lack of standing pursuant to Rule 12(b)(6) is denied.
Defendants finally argue, pursuant to Rule 12(b)(7), that the Complaint should be dismissed for failure to join Expedient as a party under Federal Rule of Civil Procedure 19 ("Rule 19"). Rule 19 provides as follows:
(a) Persons to be Joined if Feasible. A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in the person's absence complete relief cannot be accorded among those already parties. . . .
Fed.R.Civ.P. 19(a). When determining whether a party should be joined pursuant to Rule 19(a), the Court first examines "whether complete relief can be accorded to the parties to the action in the absence of the unjoined party." Drysdale v. Woerth, Civ.A.98-3090, 1998 WL 966020, at *3 (E.D. Pa. Nov. 18, 1998). The purpose of Rule 19(a)(1) is "to avoid partial or hollow relief" because "the interests that are being furthered here are not only those of the parties, but also that of the public in avoiding repeated lawsuits on the same essential subject matter." Id. (citing Fed.R.Civ.P. 19 Advisory Committee's Notes). The moving party has the burden of showing why an absent party should be joined pursuant to Rule 19.Raytheon Co. v. Continental Cas. Co., 123 F. Supp.2d 22, 33 (D. Mass. 2000). "The moving party may present, and the Court may consider, evidence outside of the pleadings" with respect to this issue. Id.
Defendants argue that joinder of Expedient is necessary because the relief sought by Plaintiff relates directly to Expedient and its operations. This argument, however, is misplaced. Plaintiff's lawsuit is predicated on the management agreement, to which Expedient is not a party. Complete relief can be accorded to Plaintiff by the named Defendants, who alone executed the management agreement with Plaintiff. Accordingly, Defendants' Motion to Dismiss pursuant to Rule 12(b)(7) is denied.