Free Answering Brief in Opposition - District Court of Delaware - Delaware

Case 1:08-cv-00144-SLR

Document 13

Filed 05/12/2008

Page 1 of 11

IN THE UNITED STATES DISTRICT COURT DISTRICT OF DELAWARE ST. PAUL MERCURY INSURANCE COMPANY, Plaintiff, v. GREEN PARK FINANCIAL, LP, and WOODLARK PROPERTIES III, LP, WOODLARK ENTERPRISES, III, INC., Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

Case No. 08-144 (SLR)

PLAINTIFF ST. PAUL MERCURY INSURANCE COMPANY'S MEMORANDUM OF LAW IN SUPPORT OF ITS OPPOSITION TO WOODLARK PROPERTIES III, LP AND WOODLARK ENTERPRISES, III, INC.'S MOTION TO DISMISS Plaintiff St. Paul Mercury Insurance Company ("St. Paul"), by its undersigned attorneys, submits this opposition to Woodlark Properties III, LP and Woodlark Enterprises III, Inc.'s ("Woodlark") Motion to Dismiss for improper venue and failure to join necessary and indispensable parties. INTRODUCTION Eight lawsuits (the "Underlying Actions") were instituted against Woodlark and Alex Vence, Jr. ("Vence") in the Circuit Court of Cabell County, West Virginia, relating to a fire at the Emmons Jr. and Emmons Sr. apartment buildings owned by Woodlark and managed by Woodlark's employee, Vence, in Huntington, West Virginia. Woodlark and Vence filed a thirdparty complaint against Green Park Financial, LP ("Green Park") seeking indemnity and/or contribution for any liability they may have in the Underlying Actions. The basis for their

{08110/0/00395625.DOCv1}

WM1A 821522v1 05/12/08

Case 1:08-cv-00144-SLR

Document 13

Filed 05/12/2008

Page 2 of 11

alleged claim against Green Park is that in connection with the origination of a mortgage for Woodlark, Green Park recommended a building inspector to Woodlark. Woodlark alleges that the building inspector, who it has also sued in a third-party claim, did not accurately advise it of the condition of the buildings. Green Park is a named insured on St. Paul primary and umbrella commercial general liability policies (the "Policies) that were in effect at the time of the fire. Although the Policies contain a Financial Professional Services exclusion that specifically excludes coverage for liability arising out of "mortgage operations," St. Paul is defending Green Park against the thirdparty complaint pursuant to a reservation of rights. St. Paul also, however, filed this declaratory judgment action seeking a declaration that it has no defense or indemnity obligation to Green Park in view of the Financial Services Exclusion. St. Paul named Green Park and Woodlark as defendants. Woodlark is incorporated in Delaware with its principal place of business in New York, and Green Park is a District of Columbia corporation that regularly conducts business in Delaware. On April 30, 2008, Woodlark moved to dismiss, arguing that venue is improper and that Vence and all of the plaintiffs in the Underlying Action are necessary and indispensable parties. For the reasons set forth below, Woodlark's motion to dismiss should be denied.

STANDARD OF REVIEW In deciding a motion to dismiss for improper venue under Fed.R.Civ.P. 12(b)(3), the moving party has the burden of proving that venue is improper. See Albright v. Gord, Civ. A. No. 02-304, 2002 WL 1765340, *3 (D.Del. July 31, 2002) (citing Myers v. American Dental Ass'n, 695 F.2d 716, 724 (3d Cir.1982)). "[I]n ruling on defendant['s] motion the plaintiff's

{08110/0/00396260.DOCv1}

WM1A 821522v1 05/12/08

2

Case 1:08-cv-00144-SLR

Document 13

Filed 05/12/2008

Page 3 of 11

choice of venue should not be lightly disturbed." Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir.1995) (citations omitted). In reviewing a motion to dismiss under Fed.R.Civ. P.12(b)(7) for failure to join an indispensable party, the court must accept all allegations in the complaint as true and draw all reasonable inferences therefrom in favor of the non-moving party. See Jurimex Kommerz

Transit G.M.B.H. v. Case Corp., 65 Fed. Appx. 803, 805 (3d Cir.2003). It is the movant's burden to prove that a non-party is indispensable to the adjudication of the action. Fed. Home Loan Mortgage Corp. v. Commonwealth Land Title Ins. Co., No. 92-5255, 1993 WL 95494, at *5 (E.D.Pa. March 31, 1993). Woodlark has the burden of proving that either venue is improper or that indispensable parties have not been joined. Woodlark has failed to meet either of those burdens, and its motion to dismiss should be denied. ARGUMENT I. Venue is Proper in the U.S. District Court for Delaware Venue is Proper Under 28 U.S.C. §1391(a)(1) The Court's jurisdiction in this matter is based solely on diversity of citizenship. In a diversity action, 28 U.S.C. §1391(a)(1) provides that venue is proper in "(1) a judicial district where any defendant resides, if all defendants reside in the same State . . " For purposes of the venue statute, "a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. . ." 28 U.S.C. §1391(c). Because Woodlark and Green Park are subject to personal jurisdiction in this Court, venue in this Court is proper.

{08110/0/00396260.DOCv1}

WM1A 821522v1 05/12/08

3

Case 1:08-cv-00144-SLR

Document 13

Filed 05/12/2008

Page 4 of 11

Woodlark is a Delaware corporation, with a registered agent for service in the state, and is therefore subject to the jurisdiction of this Court. Green Park is a foreign corporation that regularly does business in Delaware, and is therefore subject to personal jurisdiction in Delaware under 10 Del.C. §3104, which provides that "a court may exercise personal jurisdiction over any nonresident . . . who in person or through an agent . . . (4) . . . regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from services, or things used or consumed in the State."1 Thus, both Woodlark and Green Park are subject to the personal jurisdiction of this Court, and venue lies here under 28 U.S.C. §1391(a)(1). In its motion to dismiss, Woodlark incorrectly contends that all defendants do not reside in the same state, and therefore that 28 U.S.C. §1391(a)(1) is inapplicable. (Motion to Dismiss at 7). For reasons that are unclear, Woodlark assumes that the plaintiffs in the Underlying Actions and Vence are defendants in this case, although they are not. Woodlark then argues that venue is improper under §1391(a)(1) because all defendants do not reside in Delaware. Woodlark's conclusion ­ that venue is improper under §1391(a)(1) ­ is wrong because its actual premise ­ that Vence and the West Virginia plaintiffs are defendants ­ is wrong. Woodlark's arguments regarding the application of 28 U.S.C. §1391(a)(2) are irrelevant, as venue is proper under §1391(a)(1), and Woodlark's §1392(a)(2) argument requires no further response.

1

According to its website, Green Park conducts business in 43 states, including Delaware, and recently developed a housing community in Smyrna, Delaware.

{08110/0/00396260.DOCv1}

WM1A 821522v1 05/12/08

4

Case 1:08-cv-00144-SLR

Document 13

Filed 05/12/2008

Page 5 of 11

II.

The Underlying Plaintiffs and Vence Are Not Necessary or Indispensable Parties to the Coverage Action A. Analysis Under Fed.R.Civ. P. 19

Woodlark next argues that this case should be dismissed under Fed.R.Civ.P.19 because the West Virginia plaintiffs and Vence are necessary and indispensable parties. Woodlark's Rule 19 argument, like its venue argument, is based on an incorrect premise. Specifically, Woodlark asserts that Vence and the West Virginia plaintiffs are "necessary" parties, when the applicable law plainly demonstrates that they are not. Rule 19 requires a two-step analysis to determine whether joinder of a particular party is required for the action to proceed. First, the court must determine whether the party is

"necessary" under Rule 19(a). If so, and the party cannot be joined in the action because doing so would defeat subject matter jurisdiction, then the court must determine if the party is "indispensable" under Rule 19(b). Johnson & Johnson v. Coopervision, Inc., 720 F. Supp. 1116, 1121 (D.Del. 1989). The court should only dismiss the action if it finds that the party is "indispensable." Id. Determining whether a party is necessary and indispensable requires a factspecific, flexible analysis by the court. Provident Tradesmens Bank v. Patterson, 390 U.S. 102 at 118, 88 S.Ct. 733, 742 (1968). Vence and the underlying plaintiffs are not necessary parties to this action because their interest in it is limited to a financial interest in its outcome. Liberty Mutual Insurance Company v. Treesdale, Inc. 419 F.3d 216(3d Cir. 2005). Therefore, they cannot be indispensable under Rule 19(b). Janney Montgomery Scott, Inc. v. Shepard Niles, Inc., 11 F.3d 399, 404 (3d

Cir.1993). See also, Spring-Ford Area School Dist. v. Genesis Ins. Co., 158 F.Supp. 2d 476, 483 (E.D.Pa. 2001) (finding that where a party is not necessary under Rule 19(a), it cannot, by

{08110/0/00396260.DOCv1}

WM1A 821522v1 05/12/08

5

Case 1:08-cv-00144-SLR

Document 13

Filed 05/12/2008

Page 6 of 11

definition, be indispensable under Rule 19(b)). Because Vence and the West Virginia plaintiffs are neither necessary nor indispensable, Woodlark's motion to dismiss should be denied. B. Vence and the West Virginia Plaintiffs are Not Necessary Parties Under Rule 19(a)(1) A party is necessary to an action when: (A) (B) in that person's absence, the court cannot accord complete relief among existing parties; or that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may: (i) as a practical matter impair or impede the person's ability to protect the interest; or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.

Fed.R.Civ.P. 19(a)(1). See also Remington Arms Co. v. Liberty Mut. Ins. Co., 748 F. Supp. 1057, 1064 (D.Del. 1990), citing Johnson & Johnson v. Coopervision, Inc., 720 F. Supp. 1116 (D.Del. 1989). Vence and the underlying plaintiffs do not fit within any of the categories identified by the Rule, and are therefore not necessary parties to this case. a. Complete Relief Can be Afforded Among the Existing Parties

This Court is capable of according complete relief to St. Paul, Woodlark and Green Park without the joinder of Vence and the underlying plaintiffs. For purposes of Rule 19(a)(1)(A), completeness is determined on the basis of those who are already parties. Angst v. Royal Maccabees Life Ins. Co., 77 F.3d 701, (3d Cir. 1996); 3A Moore's Federal Practice 19.07-1[1] at 93-98 (2d ed. 1989). The potential effect a court's decision may have on non-parties is

immaterial to the question of whether complete relief can be afforded to those who are parties. General Refractories Co. v. First State Ins. Co., 500 F.3d 306 (3d Cir. 2007).

{08110/0/00396260.DOCv1}

WM1A 821522v1 05/12/08

6

Case 1:08-cv-00144-SLR

Document 13

Filed 05/12/2008

Page 7 of 11

St. Paul seeks a declaration that it is not obligated to defend and/or indemnify Green Park in the Underlying Actions. To afford the parties complete relief, the Court is required to interpret the Policies and determine if the third-party claims against Green Park are potentially covered under them. The absence of Vence and the underlying plaintiffs will not prevent the Court from providing St. Paul with the relief it seeks: an interpretation of the terms and conditions of the Policies. See Remington Arms Co. v. Liberty Mut. Ins. Co., 748 F. Supp. 1057, 1065 (D.Del. 1990) (finding that the absence of a parent company and its excess insurers in a declaratory judgment action did not prevent the court from providing an interpretation of the terms and conditions of policies issued to the subsidiary and its insurers). In Alcoa, Inc. v. Alcan Inc., 495 F.Supp.2d 459 (D.Del. 2007), this Court considered whether a city that ordered environmental remediation was a necessary party to an action between potentially responsible parties alleging indemnity obligations against each other. This Court held that the city was not a necessary party, finding that "the City's actions need not be evaluated by the court in order to fashion the declaratory relief plaintiff has requested." Alcoa, Inc. v. Alcan Inc., 495 F.Supp.2d at 465. Similarly, although the West Virginia plaintiffs' claims may have led to this action, their participation is not necessary under Rule 19(a)(1)(A) to determine the contractual obligations between St. Paul and Green Park. Because complete relief can be granted to St. Paul, Woodlark and Green Park, Vence and the West Virginia plaintiffs are not necessary parties under Rule 19(a)(1)(A). b. Impairment to Rights of Vence and The West Virginia Plaintiffs i. A Mere Financial Interest in the Result is Not Enough

Woodlark argues that Vence and the West Virginia plaintiffs are necessary parties under Rule 19(a)(1)(B)(i) because, according to Woodlark, they have a significant and material interest

{08110/0/00396260.DOCv1}

WM1A 821522v1 05/12/08

7

Case 1:08-cv-00144-SLR

Document 13

Filed 05/12/2008

Page 8 of 11

in the action that would be impaired if the action were to proceed without them. (Motion to Dismiss at 3-4). Woodlark asserts that a decision finding no insurance coverage for Green Park would impair Vence's ability to satisfy a judgment rendered in the Underlying Actions, and would prejudice the West Virginia plaintiffs recovery in the Underlying Actions. (Motion to Dismiss at 4). Woodlark's argument is essentially that Vence and the West Virginia plaintiffs are necessary parties in this case because they have a financial interest in Green Park's ability to pay a judgment. The Third Circuit specifically rejected this argument in Liberty Mut. Ins. Co. v. Treesdale, Inc., supra. Treesdale involved a declaratory judgment action between an insurer and its insured, a manufacturer who had been sued for its production of asbestos-containing side boards and rings. The injured plaintiffs in the underlying action attempted to intervene in the coverage action, alleging that they were necessary parties under Rule 19(a)(1)(B)(i).2 The court held that the injured plaintiffs were not necessary parties because their interest did not relate to the subject matter of the action. The court held that "under [Rule 19(a)(1)(B)(i)], a party is only "necessary" if it has a legally protected interest, and not merely a financial interest, in the action." Treesdale, 419 F.3d at 230, citing Spring-Ford Area School District v. Genesis Ins. Co., 158 F.Supp.2d at 483. The Third Circuit found that the underlying plaintiffs had no legally protected interest, as they were merely concerned with being able to collect on a judgment they might obtain against the insured. Likewise, Vence and the West Virginia plaintiffs do not have a legally protected interest in this case. They are not parties to the Policies and are not otherwise named as insureds under the Policies. Woodlark's motion alleges no more than a financial interest by Vence and the West
2

The opinion references Fed.R.Civ.P. 19(a)(2)(I), which is numbered 19(a)(1)(B)(i) under the current Rule.

{08110/0/00396260.DOCv1}

WM1A 821522v1 05/12/08

8

Case 1:08-cv-00144-SLR

Document 13

Filed 05/12/2008

Page 9 of 11

Virginia plaintiffs in the outcome of this case. The Third Circuit has clearly held that such an interest is insufficient to make a party "necessary" under Rule 19(a)(1)(B)(i). ii. Woodlark Will Protect the Proposed Parties' Interests

The interests of Vence and the West Virginia plaintiffs in this case are identical to the interest of Woodlark: each has an interest in Green Park securing insurance coverage to respond to a judgment against it. Even in their absence as parties the interests of Vence and the West Virginia plaintiffs are protected by Woodlark. Woodlark's claim that Vence's interests would not be protected in this case is contradicted by Vence and Woodlark's combined efforts in the Underlying Actions. Vence is Woodlark's employee. He is sued in the Underlying Actions only in that role. He and Woodlark are represented by the same lawyer in the Underlying Actions. They are aligned in their defense of the Underlying Actions and in their third-party complaint against Green Park. If Vence were joined to this case, he presumably would be represented by the same counsel as Woodlark just as he is in the West Virginia action. Joining Vence would make no practical difference to the course or outcome of this case. It is worth noting that the West Virginia plaintiffs have not sued Green Park in the Underlying Actions. Their interest is in whether Woodlark, not Green Park, has insurance coverage. In Remington Arms Co. v. Liberty Mut. Ins. Co., 748 F. Supp. 1057 (D.Del. 1990), the Delaware District Court found that a parent corporation was not a necessary party to a declaratory judgment action brought by its subsidiary company against its insurers. The court stated that the parent corporation's interest was identical to the subsidiary's: both wished the subsidiary to have insurance to cover the underlying environmental claims against it. Remington

{08110/0/00396260.DOCv1}

WM1A 821522v1 05/12/08

9

Case 1:08-cv-00144-SLR

Document 13

Filed 05/12/2008

Page 10 of 11

Arms Co. v. Liberty Mut. Ins. Co., 748 F. Supp. at 1064. Likewise, Woodlark has not identified any interest of Vence or the West Virginia plaintiffs that is distinguishable from its own, and that would not, as practical matter, be protected by Woodlark's participation in this case. Other jurisdictions have similarly held that when identical interests exist between two parties, and one of the parties will sufficiently represent those interests, the other party is not necessary to the litigation. See, e.g., Southeastern Sheet Metal Joint Apprenticeship Training Fund v. Barsuli, 950 F.Supp. 1406, 1414 (E.D.Wis.1997) (impairment may be minimized if the absent party is adequately represented by another party in the suit with virtually identical interests who would be advancing virtually the same legal and factual positions.") (citation omitted); Aetna Cas. & Sur. Co. v. Namrod Dev. Corp., 140 B.R. 56, 61-62 (S.D.N.Y.1992) (absent corporate defendant not necessary because it was "adequately represented" by named defendants who were the absent party's controlling shareholders); National Union Fire Ins. Co. v. Mason, Perrin & Kanovsky, 709 F.Supp. 411, 414 (S.D.N.Y.1989) (if present defendants will raise all arguments that absent parties would raise, absent parties' interests are adequately represented.). c. Substantial Risk of Multiple or Inconsistent Obligations

Woodlark finally argues that, under Rule 19(a)(1)(B)(ii), St. Paul's failure to join Vence and the West Virginia plaintiffs poses a substantial risk that Woodlark will incur multiple or inconsistent judgments. Specifically, Woodlark reasons that a finding of no coverage by this Court would be inconsistent with a finding that Woodlark is liable in the Underlying Action. (Motion to Dismiss at 4-5). Woodlark's reasoning simply doesn't follow. This Court's decision concerning insurance coverage will be separate and distinct from any liability decision made in the Underlying Actions: one relates to liability and the other to

{08110/0/00396260.DOCv1}

WM1A 821522v1 05/12/08

10

Case 1:08-cv-00144-SLR

Document 13

Filed 05/12/2008

Page 11 of 11

insurance coverage.

As noted by the Delaware District Court, Rule 19 "protects against

situations in which there are two court orders and compliance with one might breach the other." Remington Arms Co. v. Liberty Mut. Ins. Co., 748 F. Supp. at 1067. Since any order this Court enters will address insurance coverage, not liability, compliance with this Court's order could not breach any order entered in the Underlying Action concerning liability. This action poses no threat to Woodlark of inconsistent judgments.

CONCLUSION For the reasons set forth, Woodlark's motion to dismiss should be denied. Respectfully submitted, FOX ROTHSCHILD LLP /s/ Neal J. Levitsky, Esquire Neal J. Levitsky, Esquire (No. 2092) Seth A. Niederman, Esquire (No. 4588) 919 N. Market Street, Suite 1300 Wilmington, DE 19801 (302) 622-4200 Attorneys for Plaintiff St. Paul Mercury Insurance Company OF COUNSEL: Lee H. Ogburn, Esquire Kramon & Graham, P.A. One South Street, Suite 2600 Baltimore, MD 21202-3201 (410) 752-6030 Dated: May 12, 2008

{08110/0/00396260.DOCv1}

WM1A 821522v1 05/12/08

11

Case 1:08-cv-00144-SLR

Document 13-2

Filed 05/12/2008

Page 1 of 18

Not Reported in F.Supp.2d Not Reported in F.Supp.2d, 2002 WL 1765340 (D.Del.) (Cite as: Not Reported in F.Supp.2d, 2002 WL 1765340)

Page 1

[2] Federal Courts 170B Albright v. W.L. Gord & Associates, Inc. D.Del.,2002. Only the Westlaw citation is currently available. United States District Court, D. Delaware. Robert ALBRIGHT, et al., Plaintiffs, v. W.L. GORE & ASSOCIATES, INC., Defendant. No. 02-304-GMS. July 31, 2002. Former employees brought discrimination claims against former employer under the Age Discrimination in Employment Act, (ADEA), Americans with Disabilities Act, (ADA), and Title VII of the Civil Rights Act. Former employer moved to dismiss for improper venue. The District Court, Sleet, J., held that: (1) employer did not waive its defense of improper venue by participating in pretrial mediation; (2) venue was improper in the District of Delaware; and (3) case would be transferred to District of Maryland. Motion granted. West Headnotes [1] Federal Courts 170B 95

74

170B Federal Courts 170BII Venue 170BII(A) In General 170Bk74 k. Particular Actions. Most Cited Cases Venue was improper in the District of Delaware with regard to former employees' claims against former employer under the ADEA, the ADA, and Title VII, even though some documents related to plaintiffs' employment were in Delaware, where the alleged discrimination took place in Maryland rather than Delaware, and plaintiffs would not have worked in Delaware in the absence of the alleged discrimination. Civil Rights Act of 1964, § 706(f)(3), 42 U.S.C.A. § 2000e-5(f)(3); Americans with Disabilities Act of 1990, § 2 et seq., 42 U.S.C.A. § 12101 et seq.; Age Discrimination in Employment Act of 1967, § 2 et seq, 29 U.S.C.A. § 621 et seq. . [3] Federal Courts 170B 74

170B Federal Courts 170BII Venue 170BII(A) In General 170Bk95 k. Objections, Waiver and Consent. Most Cited Cases Employer did not waive its defense of improper venue by participating in pre-trial mediation with former employees asserting various discrimination claims, where mediation took place nearly seven months prior to filing of complaint, and federal rules of civil procedure clearly implied that employer's obligation to raise venue defense did not arise until filing of complaint, and terms of parties' tolling agreement specifically stated that parties preserved all applicable defenses. Fed.Rules Civ.Proc., Rule 12(h), 28 U.S.C.A.

170B Federal Courts 170BII Venue 170BII(A) In General 170Bk74 k. Particular Actions. Most Cited Cases When ADEA claims are presented simultaneously with an ADA or Title VII claim, the lawsuit must be filed in the judicial district where venue is proper for both claims. Age Discrimination in Employment Act of 1967, § 2 et seq, 29 U.S.C.A. § 621 et seq.; Civil Rights Act of 1964, § 706(f)(3), 42 U.S.C.A. § 2000e-5(f)(3); Americans with Disabilities Act of 1990, § 2 et seq., 42 U.S.C.A. § 12101 et seq. [4] Federal Courts 170B 133

170B Federal Courts 170BII Venue 170BII(B) Change of Venue 170BII(B)3 To What District Action May Be Transferred 170Bk133 k. Particular Determinations. Most Cited Cases After federal district court in Delaware determined

© 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case 1:08-cv-00144-SLR

Document 13-2

Filed 05/12/2008

Page 2 of 18
Page 2

Not Reported in F.Supp.2d Not Reported in F.Supp.2d, 2002 WL 1765340 (D.Del.) (Cite as: Not Reported in F.Supp.2d, 2002 WL 1765340)

that venue was improper in that district, court would transfer plaintiffs' discrimination case to the District of Maryland, rather than dismiss the case, where the alleged discrimination occurred in Maryland, and if the purported discriminatory acts had not occurred, the plaintiffs would have continued their employment in Maryland, and the relevant records regarding the hiring, termination, and promotion practices were located in Maryland. 28 U.S.C.A. § 1406(a). MEMORANDUM AND ORDER SLEET, District J. I. INTRODUCTION *1 On April 25, 2002, the plaintiffs filed a complaint against the defendant, W.L. Gore & Associates ("Gore") in the United States District Court for the District of Delaware. The complaint lists a total of eighteen plaintiffs, all of whom are former Gore employees. Each of the plaintiffs alleges that Gore engaged in a pattern and practice of discriminating against older employees in violation of the Age Discrimination in Employment Act of 1967, ("ADEA"), 29 U.S .C. § 621, et seq. Ten of the plaintiffs also allege that the defendant discriminated against them based on their disabilities in violation of the Americans with Disabilities Act of 1991, ("ADA"), 42 U.S.C. § 12101, et seq. Finally, one plaintiff also alleges that the defendant unlawfully discriminated against him based on his race in violation of Title VII of the Civil Rights Act of 1964 ("Title VII"), 42 U.S.C. § 2000e-2, et seq. Presently before the court is the defendant's motion to dismiss for improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3). The defendant contends that according to the relevant venue statutes, venue is improper in Delaware because the plaintiffs worked at Gore's Maryland facility, the allegedly discriminatory acts took place in Maryland, and in the absence of any discrimination, the plaintiffs would have remained employed in Maryland, not Delaware. The plaintiffs counter by arguing that the defendant has waived any objection to venue in Delaware by participating in a mediation held in the District of Delaware. The plaintiffs also contend that waiver notwithstanding, venue is proper in Delaware because documents relevant to the plaintiffs' claims are located in Delaware. The defendant responds by

stating that the defense of improper venue is waived only if not raised in a motion or responsive pleading. Gore therefore argues that it did not waive any objections to venue during the mediation because no complaint had been filed at that time, and therefore the obligation to file a motion or responsive pleading had not yet been triggered. Gore further asserts that the terms of the mediation dictated that neither party would waive any defenses by participating in the mediation. Finally, Gore argues that the Delaware documents are completely irrelevant to the plaintiffs' discrimination claims. Upon review of the facts, the law, and the submissions of the parties, the court concludes that given the plain language of both Rule 12(b)(3) and the tolling agreement, the defendant did not waive its objections to venue. Additionally, the court concludes that under the venue provisions governing Title VII and ADA cases, venue is not proper in the District of Delaware. However, to prevent any prejudice or injustice to the plaintiffs, rather than dismissing this case outright, the court will transfer the case to the District of Maryland because the case could have (and should have) been brought there. The court will now explain the reasoning behind its decision. II. FACTS *2 The defendant Gore is a Delaware corporation. Although Gore's corporate headquarters are located in Newark, Delaware, it also has offices and facilities in Maryland. Each of the eighteen plaintiffs were employed by Gore. Each plaintiff worked at Gore's facility in Elkton, Maryland. The plaintiffs were terminated at various times between 1998 and 2000. The plaintiffs allege they were terminated in violation of their rights under federal law. All eighteen of the plaintiffs allege that Gore engaged in a pattern and practice of age discrimination in violation of the ADEA because Gore had a tendency to fire older employees in favor of retaining more youthful employees. Additionally, ten plaintiffs allege that Gore discriminated against them by terminating them due to their various disabilities in violation of the ADA. Finally, one plaintiff, Gary Johnson, has alleged that he was unlawfully terminated by the defendant based on his race in violation of Title VII. The plaintiffs properly

© 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case 1:08-cv-00144-SLR

Document 13-2

Filed 05/12/2008

Page 3 of 18
Page 3

Not Reported in F.Supp.2d Not Reported in F.Supp.2d, 2002 WL 1765340 (D.Del.) (Cite as: Not Reported in F.Supp.2d, 2002 WL 1765340)

exhausted their administrative remedies at both the state and federal levels before filing the present suit. The plaintiffs filed claims with the Maryland Commission on Human Relations in 1999. The plaintiffs then filed claims with the Equal Employment Opportunity Commission ("EEOC") office in Baltimore, Maryland. In December 2000, while the administrative claims were under consideration, Gore proposed that the parties participate in a mediation. The plaintiffs had been contemplating filing suit in the District of Delaware. Counsel for the plaintiffs wrote a letter to Magistrate Judge Mary Pat Thynge of the District of Delaware on March 2001. That letter expressed the plaintiffs' intent to file in the District of Delaware, but no complaint had yet been filed. Judge Thynge accepted the case for mediation. In anticipation of mediation, and in recognition of the statute of limitations on the plaintiffs' claims would expire if mediation was unsuccessful, the parties had previously entered into a tolling agreement in December 2000. The tolling agreement stated, "This Agreement shall not be considered a waiver of any claims or defenses by Gore or the Gore employees ..." (D.I.1, Ex. E.) The mediation was held in September 2001 in Delaware. The plaintiffs and the defendant participated fully in the mediation. However, the mediation was unsuccessful. The plaintiffs filed their complaint in April 2002. In support of their contention that venue is appropriate in Delaware, the plaintiffs contend that important employment related documents, "including plaintiffs' payroll records and other personal information" are located at Gore's corporate headquarters in Newark, Delaware. More specifically, the plaintiffs assert that the following records are located in Delaware: (1) a letter concerning the accuracy of Gore's employee database; (2) documents regarding Gore's employee stock ownership plan; (3) a memo discussing Gary Jackson's pay and benefits at the time of separation; (4) Gary Jackson's separation paperwork; and (5) the plaintiffs' pay statements and W-2 forms. The defendant does not dispute that these documents are located in Delaware. Rather, Gore contends that all of the documents are irrelevant to the plaintiffs' discrimination claims. Further, the defendants note

that all of the relevant documents and potential witnesses (i.e.supervisors, employees, etc.) are employed or located at Gore's Elkton, Maryland facility. III. STANDARD OF REVIEW *3Federal Rule of Civil Procedure 12(b)(3) allows a defendant make a motion to dismiss for improper venue. FED. R. CIV. P. 12(b)(3). Upon such a motion, the district court must determine whether venue is proper according the appropriate statutes. See Reed v. Weeks Marine, Inc., 166 F.Supp.2d 1052, 1054 (E.D.Pa.,2001).See also Kerobo v. Southwestern Clean Fuels Corp., 285 F.3d 531, 538 (6th Cir.2002). The movant has the burden of proving that venue is improper in the selected forum. See Myers v. American Dental Ass'n, 695 F.2d 716, 724 (3d Cir.1982). IV. DISCUSSION The court will first discuss the waiver issue. The court will next consider whether venue is proper in the District of Delaware. Finally, the court will discuss why it is appropriate to transfer the case to the District of Maryland. A. Waiver of the Improper Venue Defense [1] The plaintiffs assert that the defendant has waived any improper venue defense by participating in the September 2001 mediation. The court disagrees for two reasons. First, under a strict construction of the Federal Rules of Civil Procedure, Gore could not have waived its improper venue defense prior to the filing of the complaint. Federal Rule of Civil Procedure 12(h) governs waiver of defenses contained in Rule 12. Rule 12(h) states that the defense of improper venue is waived "if it is neither made by motion under this rule nor included in a responsive pleading ...".SeeFED. R. CIV. P. 12(h)(1). The plain language of Rule 12(h) thus makes clear that the improper venue defense is waived only when the defense is not asserted in a Rule 12 motion to dismiss or a responsive pleading. It goes without saying, however, that the obligation to file a Rule 12

© 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case 1:08-cv-00144-SLR

Document 13-2

Filed 05/12/2008

Page 4 of 18
Page 4

Not Reported in F.Supp.2d Not Reported in F.Supp.2d, 2002 WL 1765340 (D.Del.) (Cite as: Not Reported in F.Supp.2d, 2002 WL 1765340)

motion or a responsive pleading arises only after the complaint has been filed. SeeFed.R.Civ.P. 12(a) (noting that answer or responsive pleading must be filed "within 20 days after " the complaint has been served). In the present case, the September 2001 mediation took place nearly seven months prior to the filing of the plaintiffs' complaint in April 2002. Since the plain language of Rule 12(h) clearly implies that the defendant's obligation to raise the venue defense did not arise until the filing of the complaint, the court finds that the defendant did not waive the venue defense. Statutory construction aside, as a matter of policy, it makes little sense to require defendants to assert the venue defense before a complaint has actually been filed in a specific judicial district. Granted, in the present case, Gore was notified of the plaintiffs' intention to file in Delaware. Nevertheless, in the seven months that passed between the mediation and the filing of the complaint, the plaintiffs could have changed their minds and decided to file elsewhere. Thus, adopting a rule that required defendants to raise venue objections prior to the actual filing of the complaint would require defendants to anticipate changes in their adversaries' litigation strategies. The court finds that such a rule is unnecessary and untenable. See, e.g., Neifeld v. Steinberg, 438 F.2d 423, 425 n. 1 (3d Cir.1971) (noticing of deposition in improper forum did not consistute waiver). *4 The terms of the tolling agreement also compel the court to disagree with the plaintiffs' waiver arguments. The plaintiffs cite Chrysler Capital Corp. v. Woehling, 663 F.Supp. 478, 481 (D.Del.1987), for the proposition that the defendant can waive venue prior to the filing of a complaint by voluntarily submitting to the jurisdiction of another court. Significantly, in Chrysler, the defendant signed a promissory note containing a forum selection clause.Id. at 481.However, just the opposite occurred in the present case. The terms of the tolling agreement specifically state that neither the plaintiff nor the defendant would waive any applicable defenses. The court therefore finds that the terms of the tolling agreement preserved any and all defenses, including improper venue, that Gore might later wish to assert. To hold otherwise would vitiate the terms of the tolling agreement and belatedly deprive the

defendant of a defense that it had every right to believe was properly preserved. For all of the above reasons, the court finds that the defendants did not waive the defense of improper venue. B. Venue is Improper in the District of Delaware. [2] Although Rule 12(b)(3) permits a party to make a motion to dismiss where venue is improper, "the Rules of Civil Procedure do not contain any venue provisions or requirements."Kerobo, 285 F.3d at 538. Rather, "[t]he requirements for venue are set forth by statute."See id.The court must therefore examine the appropriate venue statutes to determine whether venue is appropriate in this district. [3] The plaintiffs assert causes of action under Title VII, the ADEA, and the ADA. Venue for Title VII and ADA claims is governed by 42 U.S.C. § 2002e5(f)(3). Venue for ADEA claims is governed by the general venue statute, 28 U.S.C. § 1391. Although venue for the ADEA claims is covered by a different statute, courts have consistently held that when ADEA claims are presented simultaneously with an ADA or Title VII claim, the lawsuit must be filed in the judicial district where venue is proper for both claims. See Kravitz v. Institute for Intn'l Research, Inc., 1993 WL 453457, at *3 (E.D.Pa. Nov.5, 1993). Therefore, the court will focus its discussion on whether venue is appropriate for the Title VII and ADA claims pursuant to 42 U.S.C. § 2000e5(f)(3).Section 2000e-5(f)(3) states that a Title VII case may be brought in: any judicial district in the State in which the unlawful employment practice is alleged to have been committed, in the judicial district in which the employment records relevant to such practice are maintained and administered, or in the judicial district in which the aggrieved person would have worked but for the alleged unlawful employment practice, but if the respondent is not found within any such district, such an action may be brought within the judicial district in which the respondent has his principal office. 42 U.S.C.2000e-5(f)(3).

© 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case 1:08-cv-00144-SLR

Document 13-2

Filed 05/12/2008

Page 5 of 18
Page 5

Not Reported in F.Supp.2d Not Reported in F.Supp.2d, 2002 WL 1765340 (D.Del.) (Cite as: Not Reported in F.Supp.2d, 2002 WL 1765340)

*5 The plaintiffs do not dispute that the alleged discrimination took place in Maryland. Neither do the plaintiffs allege that in the absence of the alleged discrimination, they would have continued to work in Delaware. However, the plaintiffs contend that they can nevertheless establish venue in Delaware under 42 U.S.C. § 2000e-5(f)(3) because "employment records relevant to [the discriminatory] practice are maintained and administered" in Delaware. In support of their position, they note that documents relating to the plaintiffs' employment at Gore are located at Gore's corporate headquarters in Delaware. Specifically, the plaintiffs assert that the following records are located in Delaware: (1) a letter concerning the accuracy of Gore's employee database; (2) documents regarding Gore's employee stock ownership plan; (3) a memo discussing Gary Jackson's pay and benefits at the time of separation; (4) Gary Jackson's separation paperwork; (5) the plaintiffs' pay statements and W-2 forms. Although Gore does not dispute that these documents are located in Delaware, it argues that none of the above mentioned documents are relevant to the plaintiffs' claims. The court is constrained to agree with this position. In order to prevail on their claims under Title VII, the ADA, and the ADEA, the plaintiffs must demonstrate that they were discriminated against based on their race, age, or disability. The accuracy of Gore's employee database has little, if any, relevance to whether the plaintiffs were discriminated against. Similarly, the existence of an employee stock ownership plan is not probative of any discrimination by Gore. The plaintiffs' W-2 forms and pay statements might be relevant if the plaintiffs asserted that they were paid less based on their age, race, or disability. However, the gravamen of the plaintiffs' claims is that they were terminated in violation of the applicable law. Therefore, the payroll documents are completely irrelevant as they do not demonstrate that the plaintiffs were wrongfully terminated for any reason. Finally, the documents concerning the plaintiff Jackson's benefits at the time of separation and his other separation paperwork are relevant to demonstrate that he was terminated. Nevertheless, the documents do little to demonstrate why Jackson was terminated. They do not prove that Jackson was terminated based on his race, age, or disability. Thus, the separation documents do not appear to be relevant

to the plaintiffs' claims of discrimination. The court concludes that no discrimination took place in Delaware and that the plaintiffs would not have worked in Delaware in the absence of the alleged discrimination. The court also finds that although certain documents tangentially related to the plaintiffs' employment are located in Delaware, these documents are not relevant to the plaintiffs' discrimination claims. For all of these reasons, the court finds that venue is improper in the District of Delaware pursuant to 42 U.S.C. § 2000e-5(f)(3). C. Venue is Proper in the District of Maryland, and Transfer to that District is in the Interests of Justice. *6[4] Having decided that venue is improper in this district, the court must determine whether the plaintiffs' case will be dismissed or transferred. Where venue has been incorrectly chosen, a district court may dismiss the case, or it may transfer it to the appropriate district "in the interest of justice." 28 U.S.C. § 1406(a). The court finds that although dismissal would be appropriate, transfer of this case is in the interest of justice. If this case is dismissed, the plaintiffs may face a substantial statute of limitations problem, as evidenced by the tolling agreement. The statute of limitations has run, and the plaintiffs will be unnecessarily prejudiced in pursuing their claim. Therefore, the court will transfer, rather than dismiss, the case. Section 1406 states that if a transfer is made, it should be made "to any district or division in which [the case] could have been brought."Id. Turning again to the Title VII venue statute, the court finds that the District of Maryland meets all of the requirements set forth in the statute. The alleged discrimination occurred in Maryland. If the purported discriminatory acts had not occurred, the plaintiffs would have continued their employment in Maryland. Finally, the relevant records regarding the hiring, termination, and promotion practices at the Elkton facility are located in Elkton, Maryland. Consequently, it is clear that this case could have, and should have, been brought in the District of Maryland. Therefore, the court will order that this case be transferred to that district.FN1

© 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case 1:08-cv-00144-SLR

Document 13-2

Filed 05/12/2008

Page 6 of 18
Page 6

Not Reported in F.Supp.2d Not Reported in F.Supp.2d, 2002 WL 1765340 (D.Del.) (Cite as: Not Reported in F.Supp.2d, 2002 WL 1765340)

FN1. The court will not accede to the plaintiffs' request to "transfer" the case back to the District of Delaware because Gore has its principal office in Delaware. Although 42 U.S.C.2000e-5(f)(3) does state that venue is proper in the district where the defendant has its principal office, both the statute and case law imply that this provision is only triggered if venue cannot be found in any other district. See42 U.S.C.2000e-5(f)(3) ("[B]ut if the respondent is not found within any such district, such an action may be brought within the judicial district in which the respondent has his principal office."); Arrocha v. Panama Conal Comm'n, 609 F.Supp. 231, 234 (E.D.N.Y.1985) ("The court may look to the district in which the employer's principal office is located only if venue cannot be laid in one of the other three possible districts specified in the statute.")(emphasis in original). Since it is clear that this case could have been brought in Maryland, the court need not apply the "principal office provision." To rule otherwise would clearly disregard the intent of Congress' statutory scheme. See id.("[T]he venue provision has been held to demonstrate Congress' clear intent `to limit venue to the judicial districts concerned with the alleged discrimination" '). V. CONCLUSION For the foregoing reasons, the court concludes that the defendant did not waive the issue of improper waiver. Moreover, the court finds that venue is improper in the District of Delaware. However, the court finds that dismissal of the case is unwarranted and that transfer is in the interest of justice. Since the court finds that the case could have been brought in the District of Maryland, the court will order that this case be transferred to that district. NOW, THEREFORE, IT IS HEREBY ORDERED that: 1. The defendant's Amended Motion to Dismiss for Improper Venue (D.I.14) is GRANTED. 2. The above-captioned matter is hereby TRANSFERRED to the United States District Court

for the District of Maryland. 3. The defendant's Original Motion to Dismiss for Improper Venue (D.I.6) is DISMISSED as MOOT. 4. The defendant's Motion to Dismiss the Plaintiffs' Pattern or Practice Claims (D.I.9) is DISMISSED as MOOT. D.Del.,2002. Albright v. W.L. Gord & Associates, Inc. Not Reported in F.Supp.2d, 2002 WL 1765340 (D.Del.) END OF DOCUMENT

© 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case 1:08-cv-00144-SLR

Document 13-2

Filed 05/12/2008

Page 7 of 18

Not Reported in F.Supp. Not Reported in F.Supp., 1993 WL 95494 (E.D.Pa.), RICO Bus.Disp.Guide 8266 (Cite as: Not Reported in F.Supp., 1993 WL 95494)

Page 1

Federal Home Loan Mortgage Corp. v. Commonwealth Land Title Insurance Company E.D.Pa.,1993. United States District Court, E.D. Pennsylvania. FEDERAL HOME LOAN MORTGAGE CORP. and MortgageLinq Corp. v. COMMONWEALTH LAND TITLE INSURANCE COMPANY, Edward Cavallaro, Continental Title Insurance Company, Elizabeth Kehoe, Lawyers Title Insurance Corp., Markland Title Services, Inc., and Roberta Rankin No. CIV. A. 92-CV-5255. March 31, 1993. MEMORANDUM AND ORDER SHAPIRO. *1 Before the court are three motions to dismiss and two for summary judgment: Defendants Commonwealth Land Title Insurance Company ("Commonwealth"), Markland Title Services, Inc. ("Markland"), and Edward Cavallaro ("Cavallaro") have moved to dismiss; defendants Continental Title Insurance Company ("Continental") and Elizabeth Kehoe ("Kehoe") have jointly moved for summary judgment, and defendant Lawyers Title Insurance Corporation ("Lawyers Title") has moved for summary judgment or in the alternative for dismissal of Count I of the Complaint. Oral argument was heard on December 22, 1992. For the reasons discussed below, all of these motions will be denied. However, the motions claiming insufficient RICO allegations will be denied without prejudice to motions for summary judgment at the conclusion of discovery. The motions based upon the related civil action in New Jersey Superior Court will be denied without prejudice to motions for summary judgment when that action is concluded. I. BACKGROUND In March, 1991, MortgageLinq Corporation

("MortgageLinq"), a Pennsylvania Corporation in the business of making mortgage loans, filed a civil action against defendants it alleged were involved in a scheme of fraudulent mortgage financing involving 24 separate real estate transactions. MortgageLinq Corp., et al. v. Richard Gottfried, et al., U.S.D.C. E.D. Pa. No. 91-CV-1618 (hereinafter "MortgageLinq I "). The Federal Home Loan Mortgage Corporation ("Freddie Mac") was granted leave to intervene as a plaintiff, because MortgageLinq had sold each of the mortgages involved to Freddie Mac.FN1 The plaintiffs and subject real estate transanctions in the present action are the same as those in MortgageLinq I, but none of the present defendants were named parties in MortgageLinq I. The defendants in MortgageLinq I included the mortgage broker submitting the fraudulent mortgage loan applications to MortgageLinq, the mortgage broker's principal, the corporations and persons who participated as purchasers and sellers in the real estate transactions, and appraisers, lawyers, real estate agents, and insurance agents, who were involved in the fraudulent transactions. The present defendants are title companies and their employees, who are alleged to have supervised the closings in furtherance of the fraudulent scheme, and who provided title insurance to MortgageLinq on the individual properties involved. The former MortgageLinq I defendants will sometimes be referred to as the "broker defendants," and the present defendants will sometimes be referred to as the "title company defendants." Of the 30 defendants in MortgageLinq I, 17 either settled with plaintiffs or were dismissed. Judgment was entered in MortgageLinq I in favor of MortgageLinq and Freddie Mac and against the 13 remaining broker defendants on July 21, 1993. While MortgageLinq I was pending, plaintiffs filed an action in New Jersey Superior Court against the present defendants ("N.J. MortgageLinq "). In a series of orders and opinions, Judge Barry M. Weinberg dismissed Lawyers Title, Continental, and Kehoe as defendants in N.J. MortgageLinq under New Jersey's "entire controversy" doctrine. Four title

© 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case 1:08-cv-00144-SLR

Document 13-2

Filed 05/12/2008

Page 8 of 18
Page 2

Not Reported in F.Supp. Not Reported in F.Supp., 1993 WL 95494 (E.D.Pa.), RICO Bus.Disp.Guide 8266 (Cite as: Not Reported in F.Supp., 1993 WL 95494)

company defendants (Commonwealth, Cavallaro, Markland, and Rankin) remain defendants in the pending N.J. MortgageLinq action.FN2 *2 The Complaint charges defendants, corporate and individual, with violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"); misrepresentation; false swearing; conspiracy; negligence; and breach of fiduciary duty. The Complaint also charges the corporate defendants with: negligent supervision of closing; respondeat superior; breach of contract (not as to Lawyers Title); breach of title insurance policies; and bad faith (not as to Markland). The individual defendants are also charged with wrongful notary services. The grounds for the motions under consideration are: (i) insufficient RICO allegations (Continental, Kehoe, Lawyers Title); (ii) lack of in personam jurisdiction and improper venue (Markland); (iii) failure to join an indispensable party (Cavallaro); (iv) claim preclusion based on MortgageLinq I (Commonwealth, Continental, Kehoe, Lawyers Title); and (v) claim preclusion based on N.J. MortgageLinq (Commonwealth, Continental, Kehoe, Lawyers Title). II. DISCUSSION A. RICO Count I of the Complaint alleges violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq.: that defendants have conducted or participated in an enterprise, directly or indirectly, through a pattern of racketeering activity, or aided and abetted such activity, in violation of 18 U.S.C. § 1962(c), and that defendants conspired to conduct or participate in an enterprise, directly or indirectly, through a pattern of racketeering activity, in violation of 18 U.S.C. § 1962(d). Complaint ¶¶ 187, 188. Defendants Continental and Kehoe have moved in the alternative for summary judgment on Count I; defendant Lawyers Title has moved in the alternative for dismissal of Count I. Accepting all allegations in the Complaint as true, and drawing all inferences in favor of plaintiffs, the court cannot say that plaintiffs will be unable to establish entitlement to the relief claimed under

RICO. See H.J. Inc. v. Northwestern Bell, 492 U.S. 229 (1989); Swistock v. Jones, 884 F.2d 755, 758 (3d Cir.1989); Amalgamated Transit Union, Div. 819 v. Byrne, 568 F.2d 1025, 1031 (3d Cir.1977) (en banc). The motions related to the RICO allegations have been decided on the pleadings, and the affidavits filed with the motions and plaintiffs' Response. At this stage of the litigation, prior to discovery, the court finds the RICO allegations sufficient to withstand a motion to dismiss or for summary judgment. These motions will be denied without prejudice to motions for summary judgment after discovery has been concluded. The court cannot now rule that plaintiffs will be unable to show a "pattern of racketeering activity" or a conspiracy to engage in one. A pattern of racketeering activity requires that the predicate acts of racketeering activity be "related, and that they pose a threat of continued criminal activity." H.J. Inc., 492 U.S. at 239. Defendants challenge plaintiffs' ability to meet the "continuity" prong of this test. "Continuity" may be shown in either of two ways. In the so-called "closed-ended" scheme, plaintiff must prove a series of related predicates lasting a " `substantial period of time.' " *3Hughes v. Consol-Pennsylvania Coal Co., 945 F.2d 594, 609 (3d Cir.1991), cert. denied,112 S.Ct. 2300 (1992) (quoting H.J. Inc., 492 U.S. at 242). For an "open-ended" scheme, plaintiff must prove a " `threat of continuity,' " i.e., that "the predicate acts are part of defendant's `regular way of doing business.' " Hughes, 945 F.2d at 609 610 (quoting H.J. Inc., 492 U.S. at 242). Defendants rely upon Hughes, supra, an appeal from denial of judgment n.o.v. following a jury trial. The Third Circuit Court of Appeals found a lack of continuity, under both the "open-ended" or "closedended" tests, stating: "continuity depends ultimately on the `specific facts of each case.' " Hughes, 945 F.2d at 610 (quoting H.J. Inc., 492 U.S. at 242). Since the facts here are yet to be established, it would be premature to dismiss the RICO claims in Count I under § 1962(c) and § 1962(d) because of the claimed lack of continuity.FN3 The Complaint, viewed in its entirety, adequately pleads a conspiracy under RICO. See Shearin v. E.F. Hutton Group, Inc., 885 F.2d 1162 (3d Cir.1989).FN4

© 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case 1:08-cv-00144-SLR

Document 13-2

Filed 05/12/2008

Page 9 of 18
Page 3

Not Reported in F.Supp. Not Reported in F.Supp., 1993 WL 95494 (E.D.Pa.), RICO Bus.Disp.Guide 8266 (Cite as: Not Reported in F.Supp., 1993 WL 95494)

B. IN PERSONAM JURISDICTION AND VENUE Defendant Markland has moved for dismissal for lack of in personam jurisdiction and improper venue. In addition to the Response of the plaintiffs in opposition, defendant Lawyers Title filed a Memorandum of Law in opposition to Markland's motion, and defendants Continental and Kehoe's motion to join Lawyers Title's opposition was granted by Order of March 11, 1993. Markland submitted the Affidavit of its President, George Piccola, averring that: Markland is a corporation organized under the laws of the State of New Jersey, conducting business in that State; it is not authorized to transact business in Pennsylvania; has never maintained an office, mailing address, telephone listing, bank account, or other business facility in Pennsylvania; and has never owned property or paid taxes in Pennsylvania. The affidavit further avers that the three particular real estate transactions in which Markland and its agent, Roberta Rankin, were directly involved, occurred in New Jersey, and concerned New Jersey properties. The Motion argues that Markland lacks sufficient "minimum contacts" with Pennsylvania for this court to exercise in personam jurisdiction over Markland. See Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985); Max Daetwyler Corp. v. R. Meyer, 762 F.2d 290 (3d Cir.1985), cert. denied,474 U.S. 980 (1985).FN5 This court has federal question subject matter jurisdiction over the RICO claims. See28 U.S.C. § 1331. Personal jurisdiction with regard to the RICO claims is determined according to federal law. See American Trading Partners, L.P. v. A-1 Int'l Importing Enterprises, Ltd., 755 F.Supp. 1292, 1302 (E.D.Pa.1990). Under sections 1965(a) and 1965(d) of the RICO statute, FN6 a federal court has in personam jurisdiction over defendants "coextensive with the boundaries of the United States." See id.(quoting Soltex Polymer Corp. v. Fortex Ind. Corp., 590 F.Supp. 1453, 1458 (E.D.N.Y.1984) (quoting FTC v. Jim Walter Corp., 651 F.2d 251, 256 (5th Cir.1981))). *4 Section 1965(d) "provides for `nationwide service of process.' " American Trading, supra. Therefore, this court has in personam jurisdiction over Markland provided that Markland has "minimum contacts with

the United States." Id. Since Markland admits in its Motion and the Affidavit of its President that it is a citizen and resident of New Jersey, Markland has the requisite minimum contacts with the United States. See also Max Daetwyler, 762 F.2d at 293 (where a federal statute provides for nationwide service of process, "the proper inquiry in determining personal jurisdiction ... is one directed to the totality of a defendant's contacts throughout the United States"). Because the court has jurisdiction over Markland with regard to the federal RICO claims, the court has jurisdiction over Markland with respect to the common law claims arising from a common nucleus of operative facts. See28 U.S.C. § 1367(a). See also12 U.S.C. § 1452(f). Venue lies in the Eastern District of Pennsylvania under 28 U.S.C. § 1391(b).FN7 The Complaint, at ¶¶ 1 18 and 200 205, adequately alleges the existence of a conspiracy, the plan and purpose of the conspiracy, the roles of the defendants in the conspiracy, the performance of substantial acts in Pennsylvania in furtherance of the conspiracy by Markland's alleged co-conspirators, and Markland's knowledge of those acts, so that venue is proper in this District. See American Trading, 755 F.Supp. at 1304 (" `where [a RICO] action is brought against multiple defendants alleging a common scheme of acts or transactions in violation of ... [federal] ... statutes, so long as venue is established for any of the defendants in the forum district, venue is proper as to all defendants' ") (quoting S.I.P.C. v. Vigman, 764 F.2d 1309, 1317 (9th Cir.1985), rev'd on other grounds sub nom., Holmes v. S.I.P.C., 112 S.Ct. 1311 (1992)).FN8 C. RULE 19 Defendant Edward Cavallaro has moved for dismissal "for failure to conform with Federal Rule of Civil Procedure 19, failure to join an indispensable party." Cavallaro Motion ¶ 10. It is unclear whether Cavallaro is asserting that the MortgageLinq I defendants are indispensable to this action, or that the present defendants were indispensable to the earlier action, or both.FN9 Regardless, dismissal is not appropriate under Rule 19. Under Federal R. Civ. P. 12(b)(7), failure to join a party under Rule 19 may be the basis for a motion to dismiss. Rule 19 sets up a two part test. See, e.g., Bank of Am. Nat'l Trust & Sav. Ass'n v. Hotel

© 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case 1:08-cv-00144-SLR

Document 13-2

Filed 05/12/2008

Page 10 of 18
Page 4

Not Reported in F.Supp. Not Reported in F.Supp., 1993 WL 95494 (E.D.Pa.), RICO Bus.Disp.Guide 8266 (Cite as: Not Reported in F.Supp., 1993 WL 95494)

Rittenhouse Assocs., 844 F.2d 1050, 1053 54 (3d Cir.1988). First, under Rule 19(a), the court must determine whether the person in question should be joined. The standard for this "threshold" test is set out in the rule: A person ... 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, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may (i) as a practical matter impair or impede the persons's ability to protect that interest or (ii) leave any of the person's already parties subject to a substantial risk of incurring doubt, multiple, or otherwise inconsistent obligations by reason of the claimed interest. *5Fed.R.Civ.P. 19(a). If the person must be joined under Rule 19(a), but cannot be made a party, then the test of Rule 19(b) must be applied. See, e.g., Field v. Volkswagenwerk AG, 626 F.2d 293, 300 (3d Cir.1980). "[T]he court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed, the absent person being thus regarded as indispensable." Fed.R.Civ.P. 19(b). The rule lists four factors to consider: [F]irst, to what extent a judgment rendered in the person's absence might be prejudicial to the person or those already parties; second; the extent to which, by the protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder. Id. In deciding a Rule 19 motion, the court considers as true all well pled allegations. See Clements v. Holiday Inns, Inc., 105 F.R.D. 467 (E.D.Pa.1984). Temple v. Synthes Corp., Ltd., 498 U.S. 5, 111 S.Ct. 315 (1990) (per curiam) is controlling. Contra, Cavallaro Memorandum, at 6. "It has long been the rule that it is not necessary for all joint tortfeasors to be named as defendants in a single lawsuit.... [A] tortfeasor with the usual `joint and several' liability is merely a permissive party to an action against another with like liability." Temple, 498 U.S. at ----, 111 S.Ct. at 316 (citations omitted).

Cavallaro urges that the present circumstances are distinguishable from those in Temple, because here "plaintiffs filed the identical suit as was filed in the first federal action," while the two actions under consideration in Temple were "entirely different" from one another. Cavallaro Memorandum at 6 7. The suits are not identical and the distinction urged is not significant. Cavallaro contends that "Cavallaro was a necessary party to the first federal action and ... the defendants of the first federal action are necessary parties to the instant action." Cavallaro Memorandum at 8.FN10 The burden is on the movant to show that a person not joined in an action is needed for just adjudication. See F.D.I.C. v. Beall, 677 F. Supp 279, 283 (M.D. Pa.1987). Here, movant has not met this burden. Neither the possibility of inconsistent results nor of multiple litigation makes a party "necessary" under Rule 19. The rule addresses "inconsistent obligations," not inconsistent results. See Field v. Volkswagenwerk AG, 626 at 301. Similarly, the Rule is concerned with "multiple obligations," not multiple litigation. See Sindia Expedition, Inc. v. Wrecked and Abandoned Vessel, 895 F.2d 116, 122 23 (3d Cir.1990). Rule 19(a)(1) addresses whether complete relief can be accorded between those already party to an action, not between a party and an absent party whose joinder is sought. See Central Delaware Branch NAACP v. City of Dover, 110 F.R.D. 239, 241 (D. Del.1985). *6Marra v. Burgdorf Realtors, Inc., 726 F.Supp. 1000 (E.D.Pa.1989), cited by Cavallaro at oral argument, is inapposite. Unlike in Marra, the fraud alleged in the present case relates to the value of property, not its ownership. Title to the 24 properties involved in the alleged fraud of Cavallaro and the other defendants is not in question. There is no suggestion in the pleadings or motions that any of the present defendants ever had, or were entitled to, an ownership interest in the subject properties. Title was determined in MortgageLinq I, but Cavallaro has not offered any support for his argument that he was prejudiced thereby. Cavallaro has not shown that the "threshold" requirements of Fed.R.Civ.P. 19(a) are met. Therefore, it is unnecessary to conduct the

© 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case 1:08-cv-00144-SLR

Document 13-2

Filed 05/12/2008

Page 11 of 18
Page 5

Not Reported in F.Supp. Not Reported in F.Supp., 1993 WL 95494 (E.D.Pa.), RICO Bus.Disp.Guide 8266 (Cite as: Not Reported in F.Supp., 1993 WL 95494)

"indispensable" party analysis of Rule 19(b). See Temple, 498 U.S. at, 111 S.Ct. at 316. D. CLAIM PRECLUSION (MortgageLinq I ) Defendant Commonwealth, moving for dismissal, argues that this action is precluded because Commonwealth was not included in MortgageLinq I. Defendants Continental, Kehoe, and Lawyers Title have moved for summary judgment on the same ground. Defendants rely upon the so-called "Bruszewski doctrine." See Bruszewski v. United States, 181 F.2d 419 (3d Cir. 1950), cert. denied,340 U.S. 865 (1950); Gambocz v. Yelencsics, 468 F.2d 837 (3d Cir.1972). See also Gambrell v. Hess, 777 F.Supp. 375 (D.N.J.1991), aff'd970 F.2d 898 (3d Cir.1992), cert. denied,113 S.Ct. 272 (1992); Goel v. Heller, 667 F.Supp. 144 (D.N.J.1987). According to defendants, Bruszewski holds that: A Plaintiff may not litigate in a subsequent action claims he could have, and should have, litigated in a prior action, even as to new defendants in the second action, where the new defendants have, or are alleged to have, a significant relationship with the defendants in the first case. Memorandum of Lawyers Title, at 13.FN11 Defendants argue that: (i) "the gravamen of plaintiffs' [two federal actions] is a conspiracy participated in by the defendants to [the two actions]," (ii) "plaintiffs settled with, or obtained default judgments against, virtually all of the defendants in [MortgageLinq I ]," and (iii) the defendants in the present action "have a substantial relationship to the defendants against whom [plaintiffs] have