United States District Court, M.D. North Carolina
SUPERIOR PERFORMERS, INC., d/b/a NATIONAL AGENTS ALLIANCE, Plaintiff,
JERROD EWING, MYLES JERDAN, DOMONIQUE RODGERS, MATTHEW SMITH, TODD SMITH, SEAN RUGGERIO (MCCOY, MICHAEL KILLIMETT, WILLIAM MARTIN, JOSHUA THOUNE, TRAVIS GEORGE, MIKE WINICK, MICHAEL COE, ROBERT JONES, KRISTOPHER KRAUSE, NICK THEODORE, FAMILY FIRST LIFE, LLC, PAUL E. MCCLAIN, ANDREW C. TAYLOR, JACK YIU, JIM GLASCOTT, JAIME CUAMATZI, WATHERA CUAMATZI, KIM REABER, BOBBY REABER, DENNIS RAUSSEER, JARROD M. FLATAU, RAYMOND MANALUS, ISRAEL WIZENFELD, and LISA M. ESTEP, Defendants and Third-Party Plaintiffs,
STEPHEN DAVIES, CHRIS LONG, MICHAEL OWENS, ANDY ALBRIGHT, JASON CAREY, JUSTIN TRIPP, ADAM KATZ, TAWNY CAREY, and PRO DATA RESEARCH, LLC, Third-Party Defendants.
MEMORANDUM OPINION AND ORDER
JAMES A. BEATY, Jr., District Judge.
This matter is currently before the Court on the Motion to Dismiss the Third-Party Complaint [Doc. #29] filed by Third-Party Defendants, Andy Albright, Stephen Davies, Michael Owens, Jason Carey, Tawny Carey, Adam Katz, Chris Long, Justin Tripp, Pro Data Research, LLC, and K.I.T. Marketing, LLC (collectively the "Albright Group" and the Motion to Dismiss the Counterclaim [Doc. #31] filed by Plaintiff Superior Performers, Inc. ("Plaintiff" or "NAA".
Third-Party Plaintiffs and Counter Claimants, Jerrod Ewing, Myles Jerdan, Domonique Rodgers, Matthew Smith, Todd Smith, Sean Ruggerio, Michael Killimett, William Martin, Joshua Thoune, Travis George, Mike Winick, Michael Coe, Robert Jones, Kristopher Krause, Nick Theodore, Paul E. McClain, Andrew C. Taylor, Jackie Yiu, Jim Glascott, Jaime Cuamatzi, Wathera Cuamatzi, Kim Reaber, Bobby Reaber, Dennis Rausseer, Jarrod M. Flatau, Raymond Manalus, Israel Wizenfeld, and Lisa M. Estep (collectively the "Ewing Group") have filed a combined Response in Opposition to the Motions to Dismiss [Doc. #40], to which, Plaintiff and the Albright Group have filed a Reply [Doc. #41]. For the reasons discussed below, the Court will deny the Plaintiff's and the Albright Group's Motions to Dismiss.
This case is one of several related cases brought by Plaintiff in an attempt to, among other things, enforce restrictive covenants entered into by current and former NAA agents and managers. In this particular case, Plaintiff asserted breach of contract claims based on alleged violations of the non-solicitation clauses, as well as claims for breach of contract based on other parts of the agent and managerial agreements. Other claims that Plaintiff alleged in this action include claims for tortious interference with business relationships, unfair and deceptive trade practices, unfair competition, civil conspiracy, and wiretapping.
In response to Plaintiff's Amended Complaint, the Ewing Group filed a combined Answer, in which all Defendants, other than FFL, asserted Counterclaims against Plaintiff and Third-Party Claims against the Albright Group. The Ewing Group asserts that these claims arise out of Plaintiff's and the Albright Group's alleged operation of "pyramid scheme, " and their actions related to such scheme, which includes the "unlawful churning and twisting of insurance policy-holders' insurance polices." (Answer, Counterclaim, Third Party Compl. [Doc. #17], at 15.) The Ewing Group claims that Plaintiff and the Albright Group are liable for fraudulently inducing the Ewing Group into such scheme. Based on these alleged actions the Ewing Group asserts a total of 12 claims against Plaintiff and the Albright Group. First, the Ewing Group asserts a claim for declaratory judgment, requesting that the Court find that the agent and management agreements are invalid for lack of consideration among other arguments. Second, the Ewing Group asserts a claim for rescission of the management and agent agreements based on Plaintiff's and the Albright Group's alleged fraudulent inducement. Third, the Ewing Group asserts a Counterclaim against Plaintiff and Third-Party Claim against the Albright Group for fraud based upon the parties' alleged fraudulent statements and omissions concerning various aspects of the Ewing Group's employment with NAA. Fourth, the Ewing Group asserts a Counterclaim against Plaintiff and Third-Party Claim against the Albright Group based upon the parties' alleged misrepresentation and suppression concerning various aspects of the Ewing Group's employment with NAA. Fifth, the Ewing Group asserts a Counterclaim against Plaintiff for breach of the duties of loyalty, due care, good faith, and fair dealing in relation to the management and agent agreements. Sixth, the Ewing Group asserts a Counterclaim for breach of contract against Plaintiff in relation to the management and agent agreements. Seventh, the Ewing Group asserts a breach of contract Counterclaim against Plaintiff and a Third-Party Claim against the Albright Group based on alleged oral and implied contracts or agreements. Eighth, the Ewing Group asserts a Counterclaim against Plaintiff and a Third-Party Claim against the Albright Group for defamation concerning alleged statements made about the individuals that comprise the Ewing Group. Ninth, the Ewing Group asserts a Counterclaim of conversion against the Plaintiff based on Plaintiff's alleged wrongful withdrawal of funds from the Ewing Group's individual bank and credit accounts. Tenth, the Ewing Group asserts a Counterclaim against Plaintiff and a Third-Party Claim against the Albright Group for unfair and deceptive trade practices. Eleventh, the Ewing Group asserts a Counterclaim against Plaintiff and a Third-Party Claim against the Albright Group for tortious interference with business or contractual relations. Twelfth, the Ewing Group asserts a Counterclaim against Plaintiff and a Third-Party Claim against the Albright Group for civil conspiracy based on the allegation that they acted in concert in committing the above violations. The Ewing Group also asserts a separate claim for punitive damages against Plaintiff and the Albright Group based on the alleged foregoing actions.
Both Plaintiff and the Albright Group filed separate Motions to Dismiss the above-described claims. In the Albright Group's Motion to Dismiss, it argues that the Ewing Group cannot assert these claims because the alleged liability of the Albright Group in this action is not derivative of or secondary to the Ewing Group's liability to Plaintiff. Plaintiff's arguments in its Motion to Dismiss are related to the Albright Group's argument, in that it also argues that the claims against the Albright Group are improper because its liability would not be secondary or derivative to the Ewing Group's liability. Plaintiff then argues that it is impossible to determine which claims are asserted against Plaintiff, versus which claims are asserted against the Albright Group. As a result, Plaintiff argues that the entirety of the Ewing Group's claims must be dismissed against both Plaintiff and the Albright Group. In response to the Motions to Dismiss, the Ewing Group argues that the individuals that make up the Albright Group, are proper parties to this lawsuit pursuant to Rule 14, Rule 19, and Rule 20 of the Federal Rules of Civil Procedure.
Both Plaintiff's and the Albright Group's Motions revolve around the issue of whether the Third-Party Claims are properly asserted against the Albright Group in this action. Accordingly, prior to addressing Plaintiff's Motion to Dismiss regarding the impossibility of determining which claims are asserted against which party, the Court will address whether the Ewing Group properly asserted the claims against the Albright Group.
A. The Albright Group's Motion to Dismiss - Rule 14
The Albright Group argues that the Ewing Group improperly added the claims against it pursuant to Rule 14 of the Federal Rules of Civil Procedure. Rule 14(a)(1) provides that a defendant may "as third-party plaintiff, serve a summons and complaint on a nonparty who is or may be liable to it for all or part of the claim against it." Fed.R.Civ.P. 14(a)(1). This means that the defendant may only join a third-party defendant when the third-party defendant is liable to the defendant for the losses sustained by the defendant as a result of the plaintiff's claim. Accordingly, it is not enough to only find that the claims arise from the same transaction or occurrence. See GE Healthcare Financial Services v. EBW Laser, Inc., 225 F.R.D. 176, 180 (M.D. N.C. 2004); 6 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1446 (3d ed. 2015). Instead, the third-party defendant must be derivatively or secondarily liable to the plaintiff. Watergate Landmark Condominium Unite Owners' Ass'n v. Wiss, Janey Elstner Assoc., Inc., 117 F.R.D. 576, 578 (E.D. Va. 1987).
In this case, the Ewing Group argues that the Albright Group's liability is derivative. Derivative liability is defined as, "[l]iability for a wrong that a person other than the one wronged has a right to redress." Black's Law Dictionary, 926 (7th ed. 1999). In other words, the third-party defendant's liability to the defendant is dependent on finding that the defendant wronged the plaintiff. Laughlin v. Dell Financial Services, L.P., 465 F.Supp. 563, 566 (D.S.C. 2006); see also Scott v. PPG Industries, Inc., No. 89-2362, 1990 WL 200655, at *3 (4th Cir. December 13, 1990) (citing authority for the proposition that the third-party's liability must in some way be dependent on the outcome of the main claim). Such situations that constitute a proper basis for a third-party complaint generally include those that arise in the context of indemnification, subrogation, and express or implied warranties. Wright & Miller, supra, § 1446. Whether or not a defendant has a right to contribution under such theories in a federal case where jurisdiction is founded on diversity, depends on the law of the state. Id. However, "federal law determines whether that right may be asserted by way of Rule 14." Id.
The Ewing Group's argument in support of its contention that, based on Rule 14, the Albright Group was properly joined, relies primarily on the assertion that the Albright Group fraudulently induced the Ewing Group into the relationships that are the subject of this case. Essentially, the Ewing Group argues that if it is liable to Plaintiff for any breach of contract or any act that results from the Ewing Group's previous relationships with Plaintiff, the Albright Group is liable to the Ewing Group for fraudulently inducing the Ewing Group into such relationships and contracts. The main case that the Ewing Group relies upon for the contention that its claims of fraudulent inducement are proper Third-Party Claims in this action is Farmers Production Credit Ass'n of Oneonta v. Whiteman, 100 F.R.D. 310 (N.D.N.Y. 1983). In Farmers, the plaintiff, a credit association, instituted a foreclosure action to recover money owed on a promissory note and mortgage. 100 F.R.D. at 311. In response, the defendants filed claims against third-parties, alleging that such third-parties were liable for the outstanding balance of the mortgage as a result of their misrepresentations made to the defendants that induced them into entering into the mortgage. Id. The court found that based on this assertion, defendants had properly asserted their claim pursuant to Rule 14(a). Id. at 313-14; see also Deutsche Bank National Trust Co. v. Tyner, 233 F.R.D. 460, 463 (D.S.C. 2006) (finding that third-party claims, which alleged that others were responsible for the defendants' default on their mortgage based on theories such as negligent misrepresentation, were proper third-party claims.)
In a more recent case, however, a district court came to the exact opposite conclusion. See Deman Data Systems, LLC v. Schessel, No. 8:12-cv-2580, 2013 WL 408443 (M.D. Fla. Feb. 3, 2014). In Deman Data, the plaintiff asserted various claims against a former employee. Id., at *2. One of these claims sought to enforce certain promissory notes entered into between the plaintiff and the defendant. Id., at * 4. The defendant filed a third-party claim against the plaintiff's CEO, arguing that the CEO fraudulently induced the defendant into entering into these promissory notes with the plaintiff. Id. The district court found that the defendant could not properly implead the CEO based on his claim that the CEO fraudulently induced the defendant into entering into the promissory notes. Id., at *5-6. In making such finding, the court relied upon the fact that the CEO's liability for the fraud-in-the-inducement claim would not be ...