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EFA Properties, LLC v. Lake Toxaway Community Association, Inc.

United States District Court, W.D. North Carolina, Asheville Division

January 4, 2018

EFA PROPERTIES, LLC, Plaintiff,
v.
LAKE TOXAWAY COMMUNITY ASSOCIATION, INC., Defendant, LAKE TOXAWAY COMMUNITY ASSOCIATION, INC., Counter Claimant,
v.
EFA PROPERTIES, LLC, Counter Defendant.

          ORDER

          Dennis L. Howell United States Magistrate Judge

         This matter is before the Court on the Motion for Leave to Join Additional Parties and Claims (# 13) filed by Lake Toxaway Community Association, Inc. (“LTCA”). The issues have been fully briefed, and the matter is now ripe for ruling. For the reasons addressed below, LTCA's motion is GRANTED in part and DENIED in part.

         I. Factual and Procedural Background

         On February 19, 2017, EFA Properties, LLC (“EFA”), filed a Complaint to Quiet Title and for a Declaratory Judgment. See Compl. (# 1). EFA seeks to establish its rights with respect to its property along the shore of Lake Toxaway.[1] Id. at 1.

         EFA is a Louisiana Limited Liability Company, which is licensed with its principal headquarters and place of business in Jefferson Parish, Louisiana. Id. ¶ 1. LTCA is a North Carolina corporation with its headquarters and principal place of business in Transylvania County, North Carolina. Id. ¶ 2. Jurisdiction for this action is based on diversity of citizenship, pursuant to 28 U.S.C. § 1322. Id. ¶ 7.

         In its Complaint, EFA raised the following claims: (1) equitable estoppel/laches/waiver (id. ¶¶ 76-105); (2) declaratory judgment as to EFA's easement appurtenant (id. ¶¶ 106-121); (3) quiet title as to EFA's easement appurtenant (id. ¶¶ 122-24); (4) declaratory judgment as to disputed property (id. ¶¶ 125-28); and (5) quiet title as to disputed property (id. ¶¶ 129-31).

         On June 29, 2017, LTCA filed an Amended Motion to Dismiss, Answer, and Counterclaims (# 10), in which it raised the following counterclaims: (1) declaratory relief; quiet title (id. ¶¶ 41-45); (2) trespass (id. ¶¶ 46-53); (3) breach of restrictive covenants (id. ¶¶ 54-57); (4) nuisance (id. ¶¶ 58-63); (5) violation of North Carolina Sedimentation and Pollution Control Act (“SPCA”) (id. ¶¶ 64-74); and (6) punitive damages (id. ¶¶ 75-78). On July 28, 2017, EFA filed a Motion to Dismiss and Answer to Counterclaims (# 11).

         On August 4, 2017, LTCA filed the instant Motion for Leave to Join Additional Parties and Claims (# 13), in which it requests leave to file its Second Amended Counterclaims.[2] Id. at 1. In particular, LTCA seeks to join the following parties as additional defendants for purposes of its counterclaims and the assertion of additional counterclaims: Suzanne Terrell and Lee Terrell (the “Terrells”), Holbrook and Nichols Construction Co., Inc. (“Holbrook & Nichols”), and John F. Holbrook (“Holbrook”). Br. Supp. (# 14) at 1-2.

         LTCA also seeks to expand or add the following counterclaims: (1) Count One for declaratory relief/quiet title, which is currently made against EFA, will be expanded to include the Terrells, Holbrook & Nichols, and Holbrook; (2) Count Two for trespass, which is currently made against EFA, will be expanded to include the Terrells, Holbrook & Nichols, and Holbrook; (3) Count Three for breach of restrictive covenants, which is currently made against EFA, will be expanded to include the Terrells, Holbrook & Nichols, and Holbrook; (4) Count Four for nuisance, which is currently made against EFA, will be expanded to include the Terrells, Holbrook & Nichols, and Holbrook; (5) Count Five for violation of the SPCA, which is currently made against EFA, will be expanded to include the Terrells, Holbrook & Nichols, and Holbrook; (6) Count Six for punitive damages, which is currently made against EFA, will be expanded to include the Terrells, Holbrook & Nichols, and Holbrook; (7) A new Count Seven for conspiracy will be added against all counterclaim defendants; and (8) a new Count Eight for piercing the corporate veil will be added against the Terrells. Id. at 3-4.

         On September 1, 2017, EFA filed a Response (# 19) in opposition. LTCA filed a Reply (# 23) on September 15, 2017.

         II. Legal Standards

         A. Amendments to Pleadings

         Within the Fourth Circuit, “leave to amend a pleading should be denied only when the amendment would be prejudicial to the opposing party, there has been bad faith on the part of the moving party, or the amendment would be futile.” Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir. 1986) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). Denial on the basis of futility is appropriate only “when the proposed amendment is clearly insufficient or frivolous on its face.” Johnson, 785 F.2d at 510; accord Joyner v. Abbott Labs., 674 F.Supp. 185, 190 (E.D. N.C. 1987). Denial on the basis of futility is also appropriate when the proposed amendment could not withstand a motion to dismiss. Perkins v. United States, 55 F.3d 910, 917 (4th Cir. 1995) (citing Glick v. Koenig, 766 F.2d 265, 268-69 (7th Cir. 1985)).

         To survive a motion to dismiss, the factual allegations in the complaint, or in this case, the Counterclaim, must “state a claim to relief that is plausible on its face” and that “permit[s] the court to infer more than the mere possibility of misconduct.” Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009) (citation omitted). The pleading party must rely on “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Additionally, the pleading party is not required to “plead facts that constitute a prima facie case in order to survive a motion to dismiss.” Coleman v. Maryland Court of Appeals, 626 F.3d 187, 190 (4th Cir. 2010); Owen v. County of Franklin, Va., No. 7:17CV205, 2017 WL 6391486, at *2 (W.D. Va. Dec. 14, 2017).

         B. Joinder of Additional Parties

         Pursuant to Federal Rule of Civil Procedure 13, the joinder of additional parties to a counterclaim is governed by Federal Rules of Civil Procedure 19 and 20. Fed.R.Civ.P. 13(h); Pennsylvania Intern. Educ. Serv. Grp., LLC v. Xie, No. 1:14CV1203(JCC/MSN), 2015 WL 2195183, at *2 (E.D. Va. May 11, 2015).

         Federal Rule of Civil Procedure 19 establishes a two-step inquiry for assessing the joinder of parties. In re N.C. Swine Farm Nuisance Litigation, No. 5:15CV13-BR, 2017 WL 2312883, at *4 (E.D. N.C. May 25, 2017) (citing Owens-Illinois, Inc. v. Meade, 186 F.3d 435, 440 (4th Cir. 1999)). Under the first step, Rule 19(a) refers to persons that are required to be joined if feasible.

         Fed. R. Civ. P. 19(a). A “required party” is “[a] person who is subject to the service of process and whose joinder will not deprive the court of subject-matter jurisdiction.” Fed.R.Civ.P. 19(a)(1). A “required party” must be joined as a party if:

(A) in that person's absence, the court cannot accord complete relief among existing parties;[3] or
(B) 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 substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.

Id.

         If the person has not been joined when required, the court must order that the person be made a party. Fed.R.Civ.P. 19(a)(2). On the other hand, if the person is not a required party, the analysis ends. Mainstream Constr. Grp., Inc. v. Dollar ...


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