                                                                                                                           Opinions of the United
2006 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


10-6-2006

Dickson v. Murphy
Precedential or Non-Precedential: Non-Precedential

Docket No. 05-4728




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Recommended Citation
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                                                              NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                                ____________

                                    No. 05-4728
                                   ____________

                             JEFFREY S. DICKSON;
                           DAVIS YACHT SALES, INC.,

                                           Appellants

                                            v.

                             WENDELL MURPHY, JR.;
                               MARK ROBERTS
                                 ____________

                   On Appeal from the United States District Court
                       for the Middle District of Pennsylvania
                               (D.C. No. 04-cv-01687)
                    District Judge: Honorable James M. Munley
                                   ____________

                     Submitted Under Third Circuit LAR 34.1(a)
                                September 13, 2006

              Before: FUENTES, FISHER and McKAY,* Circuit Judges.

                               (Filed October 6, 2006)
                                    ____________

                             OPINION OF THE COURT
                                  ____________




      *
        The Honorable Monroe G. McKay, United States Circuit Judge for the Tenth
Circuit, sitting by designation.
FISHER, Circuit Judge.

       Jeffrey S. Dickson and Davis Yacht Sales, Inc. appeal the District Court’s

dismissal of their claims against Wendell Murphy, Jr. The issue on appeal is whether the

District Court erred in granting a motion to dismiss for failure to join indispensable

parties who were signatories of the two agreements at issue in this case. For the reasons

that follow, we will affirm the dismissal.

                                              I.

       As we write only for the parties, who are familiar with the factual context and the

procedural history of the case, we will set forth only those facts necessary to our analysis.

       Wendell Murphy, Jr., entered into an Asset Purchase Agreement (“Agreement”) to

purchase the assets of Davis Yacht Sales, Inc. (“Yacht Sales”) and Davis & Dickson

Enterprises, Inc. (“Enterprises, Inc.”).1 Jeffrey S. Dickson is the sole owner and President

of Yacht Sales, the sole owner of Davis & Dickson Enterprises, LLC (“Enterprises,

LLC”), and a fifty-percent owner of Enterprises, Inc. The other fifty percent of

Enterprises, Inc. is owned by Carson R. Davis, Jr., and Barbara Davis. In turn,

Enterprises, Inc. owns one hundred percent of Davis Boat Works, Inc., Carolina Yacht

Interiors, Inc., Carolina Welders, Inc., Buddy Davis & Associates, Inc., Mill Landing

Marine Maintenance Center, Inc., and Davis Resources Management, Inc. The sellers on



       1
        Although the caption still includes Mark Roberts as an appellee, Mr. Roberts is no
longer a party to this dispute because Dickson and Yacht Sales voluntarily dismissed their
claim against Mr. Roberts on July 16, 2005.

                                              2
the Agreement are all of these corporations, Carson Davis, Barbara Davis, and Dickson.

Murphy entered into a second agreement, the Boat Agreement, to purchase a boat and

boat slips from Davis Boat Works, Inc., Yacht Sales, and Dickson. Both of these

agreements provide that they are governed by North Carolina law and lawsuits under the

Boat Agreement must be brought in North Carolina courts.

       Dickson is a citizen of Pennsylvania and Yacht Sales is a Pennsylvania

corporation. Every other corporation that signed the two agreements are North Carolina

corporations, and Murphy, Carson Davis and Barbara Davis are citizens of North

Carolina.

       Murphy decided not to go through with the terms of the Agreement. Dickson and

Yacht Sales brought suit in the United States District Court for the Middle District of

Pennsylvania against Murphy based on diversity of citizenship. The complaint alleged

various fraud, contract and quasi-contract claims related to the two agreements. Murphy

and others brought suit in a North Carolina state court against Dickson, Yacht Sales and

all of the other signatories to the two agreements. Then, Murphy moved to dismiss the

federal court complaint for failure to join indispensable parties or in the alternative

improper venue. The District Court granted Murphy’s motion to dismiss for failure to

join indispensable parties. Dickson and Yacht Sales now appeal.




                                              3
                                              II.

       The District Court had jurisdiction over this diversity suit pursuant to 28 U.S.C.

§ 1332 because for diversity purposes Dickson and Yacht Sales are citizens of

Pennsylvania, and Murphy is a citizen of North Carolina. We have appellate jurisdiction

over the final order of the District Court dismissing the claims pursuant to 28 U.S.C.

§ 1291.

       Federal Rule of Civil Procedure 19 determines whether a non-joined party is

indispensable and must be joined in the action. The first step of the analysis is to decide

whether the non-joined party must be joined. If the court determines that the non-joined

party must be joined and that joinder is not feasible, the next step of the analysis is to

determine whether the non-joined party is indispensable under Rule 19(b). If the court

determines that the non-joined party is indispensable, the suit must be dismissed. See

Janney Montgomery Scott, Inc. v. Shepard Niles, Inc., 11 F.3d 399, 404 (3d Cir. 1993).

       We exercise plenary review over the District Court’s determinations that are

conclusions of law, but we review only for clear error the subsidiary findings of fact. We

review for abuse of discretion the District Court’s Rule 19(b) determination that a party is

indispensable and that dismissal is required because the party’s joinder would destroy

subject matter jurisdiction in diversity.

                                              A.

       Rule 19(a) states in pertinent part:



                                               4
       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, 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 person’s ability to protect that interest or
       (ii) leave any of the persons already parties subject to a substantial risk of
       incurring double, multiple, or otherwise inconsistent obligations by reason
       of the claimed interest.

Fed. R. Civ. P. 19(a). The District Court found that the non-joined parties were necessary

parties because they were signatories to one or both of the agreements.

       Dickson and Yacht Sales argue that the non-joined parties are not necessary to this

action because the non-joined corporations have no claims being pursued in this action.

However, the complaint alleges that Murphy interfered with the business of Davis Boat

Works, Inc., a non-joined party, by contacting vendors. Additionally, under the terms of

the Agreement, the non-joined parties as sellers contracted to conduct its operations

according to its ordinary and usual course of business. Considering the complaint alleges

breach of contract claims, whether or not the sellers fulfilled their side of the bargain is

very relevant to this action.

       We recognized a distinction between co-obligees and co-obligors in the context of

Rule 19(a) in our decision in Janney Montgomery Scott, Inc. See Janney, 11 F.3d at 408.

In Janney, we were faced with the question of whether Rule 19(a) required joinder of a

co-obligor to a contract. See id. at 402. In our analysis we explained that generally a co-

obligor was not necessary. See id. at 413. However, co-obligees usually are


                                               5
indispensable parties. We pointed to one commentator’s explanation that “[j]oint

obligees, … [as compared to joint obligors], usually have been held indispensable parties

and their nonjoinder has led to a dismissal of the action.” Id. (citing Federal Practice &

Procedure § 1614 at 182-85). Additionally, the Advisory Committee note to Rule 19(a)

explains that:

       [c]lause (1) stresses the desirability of joining those persons in whose
       absence the court would be obliged to grant partial or “hollow” rather than
       complete relief to the parties before the court. 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.

Bank of Am. Nat’l Trust & Savs. Assoc. v. Nilsi, 844 F.2d 1050, 1055 n.5 (3d Cir. 1988)

(citing Fed. R. Civ. P. 19(a) Advisory Committee note to the amended rule).

       Dickson, Yacht Sales and the other non-joined signatories are co-obligees under

the agreements. An obligee is “[o]ne to whom an obligation is owed.” See Black’s Law

Dictionary 1106 (8th ed. 2004). Murphy owed obligations to all of the signatories. The

claims that are being pursued in this action relate to the conduct of Murphy in relation to

Davis Boat Works, Inc. Adjudication of this action absent the non-joined signatories will

not further the public interest of preventing lawsuits on the same essential matter.

Because we agree with the District Court that the non-joined signatories to the

agreements are necessary parties under Rule 19(a), we will affirm this finding by the

District Court.

       Rule 19(a) requires joinder of necessary parties if feasible. It is not disputed that

joinder in this case is not feasible because joinder of any of the non-joined parties will

                                              6
defeat complete diversity. Like Murphy, all of the non-joined parties are citizens of

North Carolina for diversity purposes. In order for a federal court to have jurisdiction in a

diversity suit, complete diversity of citizenship must exist. See City of Indianapolis v.

Chase Nat’l Bank, 314 U.S. 63, 69 (1941). The District Court did not err in determining

that the non-joined parties were necessary parties under Rule 19(a) and that their joinder

was not feasible.

                                             B.

       When a court determines that joinder is necessary under Rule 19(a) and that

joinder is not feasible, the court must then determine whether the non-joined party is

indispensable under Rule 19(b). See HB General Corp. v. Manchester Partners, L.P., 95

F.3d 1185, 1190 (3d Cir. 1996). The question under Rule 19(b) is whether “in equity and

good conscience” the court should proceed without the non-joined parties. Fed. R. Civ.

P. 19(b). Rule 19(b) provides factors that should be considered by the court in making

the determination of whether to proceed or dismiss the action. Those factors include:

       [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 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.

Fed. R. Civ. P. 19(b). This is not an exhaustive list of factors that can be considered, but

they are the most important factors. See Gardiner v. V.I. Water & Power Auth., 145 F.3d

635, 640-41 (3d Cir. 1998). The District Court determined that the rights of the absent

                                              7
signatories would be prejudiced if they were not present, and that Dickson and Yacht

Sales had an adequate remedy in state court. It considered the pending North Carolina

state court case that involves the same issues as the present action and includes all of the

signatories as defendants. Additionally, the District Court considered the fact that both of

the agreements provide that North Carolina law applies and the Boat Agreement provides

that any lawsuits should be brought in North Carolina state court.

       The first factor favors dismissal because the analysis under this factor “overlaps

considerably with the Rule 19(a) analysis.” Gardiner v. V.I. Water & Power Auth., 145

F.3d 635, 641 n.4 (3d Cir. 1998). As we explained in our Rule 19(a) analysis, a judgment

rendered in this action may prejudice Murphy because he may be subject to multiple

identical claims and multiple or inconsistent judgments in other actions.

       The second factor considers whether a judgment or a remedy can be shaped in

order to lessen the prejudice of not having the non-joined parties involved in the action.

Dickson and Yacht Sales argue that there is an identity of interests between them and the

other signatories because all of the people with the power to bring suit on behalf of the

non-joined signatories are before the District Court; Dickson controls all of the absent

corporations. In support of this argument, Dickson and Yacht Sales rely on our decision

in HB General Corp. v. Manchester Partners, L.P., 95 F.3d 1185 (3d Cir. 1996). In HB

General, we held that in a suit between partners of a partnership the partnership itself was

a necessary party under Rule 19(a), but was not indispensable under Rule 19(b). Id. at

1190-91. We determined that non-joinder of the partnership would not leave the

                                              8
defendant partner subject to multiple identical claims because the court could protect his

interests by enjoining “all of the partners from bringing a subsequent suit on behalf of the

[p]artnership.” Id. In the present case, the District Court cannot enjoin all of the

individuals or corporations who could bring a subsequent lawsuit. Dickson is not the sole

shareholder of Enterprises, Inc. and the other shareholders are not before the Court; the

Court cannot enjoin the other shareholders from bringing a subsequent derivative suit on

behalf of the corporation. Furthermore, there are two absent signatories who are

individuals, Carson Davis and Barbara Davis. There is a difference between an absent

entity and an absent human being. HB General, 95 F.3d at 1193 n.3. Relief cannot be

shaped so as to lessen prejudice to Murphy.

       The third factor, whether a judgment will be adequate, also weighs in favor of

dismissal. The United States Supreme Court has interpreted this factor to be a

determination of the interest of the public in having a dispute completely, consistently and

efficiently resolved. See Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S.

102, 111 (1968). Under the agreements in the present action, the non-party signatories

can bring claims against Murphy and Murphy has brought claims against them. Such

additional litigation is inefficient and could lead to inconsistent determinations.

       Finally, the fourth factor of whether an adequate remedy exists for the plaintiff if

the action is dismissed is answered in the affirmative. Although this factor is not

dispositive, it is clear that the North Carolina courts would be an appropriate forum. See

Bank of Am. Nat’l Trust & Savs. Assoc. v. Nilsi, 844 F.2d 1050, 1055 (3d Cir. 1988).

                                              9
       In balancing these factors, we find that the District Court did not abuse its

discretion in determining that the non-joined parties were indispensable to this action

under Rule 19(b).

                                             III.

       Because we agree with the District Court’s determination that the non-joined

parties are indispensable under Rule 19, we will affirm the judgment of the District Court.




                                             10
