WHEATON v. DIVERSIFIED ENERGY, LLC (E.D.Pa. 2003)

RICHARD B. SURRICK, District Judge

Presently before the Court is the Motion of Diversified Energy, LLC, to Dismiss Pursuant to Rule 12(b)(1) (Doc. No. 5). For the following reasons, Diversified Energy, LLC's Motion will be denied.

This is an action for breach of contract. Plaintiff alleges that on or about September 26, 2000, he entered into a written employment contract (the "Contract") with Defendant to serve as its general manager/vice president. Defendant allegedly agreed to employ Plaintiff for three years. If Defendant terminated Plaintiff's employment before the expiration of three years and without cause, Defendant agreed to pay Plaintiff one year's salary ($130,000), plus one year's fringe benefits. On May 22, 2002, Defendant terminated Plaintiff's employment without cause, but refused to pay Plaintiff according to the Contract. On January 9, 2003, Plaintiff brought this action alleging breach of the Contract and seeking appropriate damages.

Plaintiff invokes the diversity jurisdiction of this Court. See 28 U.S.C. § 1332(a). The amount in controversy exceeds $75,000, the amount required for diversity jurisdiction. Also, the parties are citizens of different states. Plaintiff is a Pennsylvania resident. Defendant is a North Carolina limited liability corporation with its principal place of business in North Carolina. It appears based upon the complaint that this case meets the requirements for diversity jurisdiction.

Nevertheless, Defendant moves to dismiss the complaint for lack of subject matter jurisdiction. Defendant claims it never employed Plaintiff. According to Defendant, Plaintiff's Contract was with J.F. Energy Corp. ("J.F. Energy"), a Pennsylvania corporation. Defendant further claims that J.F. Energy employed Plaintiff until his employment terminated. (Doc. No. 5, Def.'s Mot. to Dismiss, Ex. C ¶ 9.) If Defendant is correct, J.F. Energy should be the defendant in this action. Moreover, the addition of J.F. Energy as a defendant would destroy diversity jurisdiction. Therefore, Defendant argues that this case must be dismissed.

Defendant generally challenges the subject matter jurisdiction of this Court, but it does not challenge any of the allegations in the complaint that clearly demonstrate diversity jurisdiction. Defendant does not dispute that the amount in controversy exceeds $75,000 or that it and Plaintiff are citizens of different states. Rather, Defendant claims that Plaintiff has failed to name an indispensable party. Accordingly, our analysis is guided by Federal Rule of Civil Procedure 19. See Henkel Corp. v. Degremont, S.A., 136 F.R.D. 88, 98 n. 15 (E.D. Pa. 1991) (noting that whether or not an absent party is indispensable does not present an issue of subject matter jurisdiction) (citing 7 C. WRIGHT A. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1611, pp. 166-68 nn. 19-20 (2001)).

Rule 19 entitled Joinder of Persons Needed For Just Adjucation deals with when a court shall dismiss a complaint for failure to join a party. First, a court must determine whether the absent party is a "person to be joined if feasible," i.e., a necessary party. FED. R. Civ. P. 19(a). An absent person is necessary if in their "absence complete relief cannot be accorded among those already parties," or if the absent "person claims an interest relating to the subject matter of the action," and is so situated that they may not be able to protect their interest, or there is a substantial risk to the persons already parties of incurring double, multiple, or otherwise inconsistent obligations. Id. If the absent party is necessary but their joinder is not feasible because it would destroy diversity, the court must then determine under Rule 19(b) whether "in equity and good conscience" the action should proceed without the absent party, or whether the absent party is indispensable and the action should be dismissed. See Steel Valley Auth. v. Union Switch Signal Div., 809 F.2d 1006, 1013 (3d Cir. 1987). When deciding whether an absent party is indispensable, a court should consider several factors, including: (1) the "extent a judgment rendered in the person's absence might be prejudicial to the person or those already parties;" (2) "the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided;" (3) "whether a judgment rendered in the person's absence will be adequate;" and (4) "whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder." FED. R. CIV. P. 19(b).

If Defendant is correct that Plaintiff was employed by J.F. Energy until his employment was terminated, there is little doubt that J.F. Energy is necessary and indispensable to this action. See Ward v. Deavers, 203 F.2d 72, 75 (D.D.C. 1953) ("[T]here is a general rule that where rights sued upon arise from contract all parties to it must be joined.") (quotations omitted); Ragan Henry Broadcast Group, Inc. v. Hughes, No. 91-CV-6157, 1992 WL 151308, at *2 (E.D. Pa. June 19, 1992) (holding employer a necessary and indispensable party to an action for breach of an employment contract). In support of its claim that J.F. Energy was Plaintiff's employer, Defendant points to the Contract, which on its face shows that in 2000 it was entered into between Plaintiff and J.F. Energy. (Doc. No. 1, Complaint, Employment Agreement attached as Ex., at 3.) Defendant claims that J.F. Energy never assigned the Contract to Defendant, and that J.F. Energy is a functioning corporate entity. Therefore, Defendant argues, J.F. Energy was Plaintiffs employer and is an indispensable party to this action.

Plaintiff argues that even if J.F. Energy originally was his employer, J.F. Energy assigned the Contract to Defendant before Plaintiff was terminated. In support of this argument, Plaintiff submits a copy of his last paycheck, which bears the name of Defendant. (Doc. No. 8, Markowitz Aff. ¶ 2(c).) Plaintiff also points to Defendant's tax records from the first two quarters of 2002, which list Plaintiff as Defendant's employee. ( Id. ¶ 2(b).) Finally, Plaintiff argues that even if J.F. Energy never assigned the Contract, Defendant should still be liable for breach of the Contract because J.F. Energy is no longer operating, and Defendant succeeded J.F. Energy's operations. ( Id. ¶ 2(d).)

We are satisfied that we need not decide at this time whether J.F. Energy assigned the Contract to Defendant, or whether J.F. Energy still operates. In the case of Roth v. H.A. T. Painters, Inc., 126 F.R.D. 40 (E.D. Pa. 1989), the court denied a motion to dismiss a complaint alleging breach of an employment agreement without resolving which entity employed the plaintiff. In Roth, the plaintiff employee sued H.A.T. Painter's Inc. ("FIAT"), for breach of his employment agreement. HAT moved to dismiss the complaint, arguing that one of its subsidiary corporations actually employed the plaintiff and that the subsidiary was therefore an indispensable party. The court denied HAT's motion to dismiss, reasoning that "[c]omplete relief between plaintiff and HAT" was possible "with regards to plaintiffs allegations of breach." Roth, 126 F.R.D. at 41. Though the court might ultimately find that the plaintiff was entitled to no relief on his breach of contract claim (if, for example, the evidence showed that HAT was not a party to the employment contract), "this should not prevent plaintiff from pursuing, should he so choose, an action against HAT for breach of the agreement." Id. Accordingly, the court denied HAT's motion to dismiss.

In the instant case, although Defendant has submitted some evidence that J.F. Energy was Plaintiff's employer, Plaintiff has responded by pointing to evidence that J.F. Energy assigned the Contract to Defendant. It would be premature for us to decide on this limited record which entity employed Plaintiff when he was terminated. Instead, we will allow the parties to conduct discovery on that issue. See Limited, Inc. v. El Al Isreal Airlines, No. 98-CIV-5651 (LAP), 1999 WL 588290, at *3 (S.D.N.Y. Aug. 4, 1999) ("A motion to dismiss for failure to join a necessary party under Rule 19(a) and (b) should not be granted where there are issues of fact regarding the indispensability of the alleged necessary party.") (citing Kirk v. Campbell, 7 F.R.D. 231 (S.D.N.Y. 1946)). After discovery, the parties may file whatever motions they deem appropriate.

An appropriate order follows.

AND NOW, this 16^th day of December, 2003, upon consideration of the Motion of Defendant Diversified Energy, LLC, to Dismiss Pursuant to Rule 12(b)(1), and Plaintiff's response thereto, it is ORDERED that Defendant's Motion is DENIED.

IT IS SO ORDERED.