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Dollar Rent A Car Inc. v. Westover Car Rental LLC

United States District Court, N.D. Oklahoma

July 13, 2018

DOLLAR RENT A CAR, INC.; THRIFTY RENT-A-CAR SYSTEM, INC.; and THE HERTZ CORPORATION, Plaintiffs,
v.
WESTOVER CAR RENTAL, LLC; PHILIP R. MOOAR; CARL P. PALADINO; JOEL CASTLEVETERE; ENRICO D'ABATE; and MICHAEL G. DILLON, Defendants.

          OPINION AND ORDER

          CLAIRE V. EAGAN UNITED STATES DISTRICT JUDGE.

         Now before the Court are non-party 1234 Group, LLC's (1234 Group) motion for substitution as co-counterclaimant or, in the alternative, intervention (Dkt. ## 42, 44), [1] and plaintiffs' motion to dismiss defendant Westover Car Rental, LLC's (Westover) amended counterclaims (Dkt. # 49).

         I. Background and Procedural History

         This is an action for breach of contract and declaratory judgment arising from Westover's operation of plaintiff Dollar Rent A Car, Inc. (Dollar) and plaintiff Thrifty Rent-A-Car System, Inc. (Thrifty) outlets in Buffalo, New York. Dkt. # 2. Plaintiffs filed their complaint on November 17, 2017. Id. It alleges: Dollar and Thrifty claim against Westover for breach of license agreements (count one); Dollar and Thrifty claim against the individual defendants for breach of personal guaranty (count two); plaintiff The Hertz Corporation (Hertz) claims against Westover for breach of vehicle purchase participation (count three); Hertz claims against the individual defendants for breach of personal guaranty (count four); Dollar and Thrifty claim against the individual defendants for breach of license agreements (count five); and Dollar and Thrifty claim against Westover and the individual defendants for declaratory judgment as to post-termination obligations (count six). Id. at 12-17.

         On December 27, 2017, Westover and 1234 Group executed an “Assignment of Claim for Damages” (the assignment). Dkt. # 42-1. 1234 Group, a non-party to this litigation, apparently shares at least one manager with Westover. Id.[2] The assignment states that Westover “hereby sells and transfers to [1234 Group] . . . any and all claims [Westover] . . . has or may have against [plaintiffs].” Id. On April 3, 2018, Westover filed counterclaims against plaintiffs (Dkt. # 21). On May 3, 2018, plaintiffs filed a motion to dismiss for failure to state a claim (Dkt. # 33). In addition, on May 23, 2018, plaintiffs filed a motion to supplement their motion to dismiss (Dkt. # 36). In it, plaintiffs aver, and Westover and 1234 Group do not contest, that neither Westover nor 1234 Group disclosed to plaintiffs the existence of the assignment until May 7, 2018-i.e. over four months after Westover and 1234 Group executed the assignment, over one month after Westover filed its counterclaims, and four days after plaintiffs filed their motion to dismiss. Id. at 2-3.[3] Accordingly, plaintiffs moved to supplement their motion to dismiss with the argument that, due to the assignment, Westover lacks prudential standing to assert its counterclaims, and the Court granted plaintiffs' motion to supplement. Id.; Dkt. # 37.

         In lieu of responding to plaintiffs' motions to dismiss and supplement, on May 24, 2018, Westover filed amended counterclaims, alleging: breach of contract against Dollar and Thrifty (count one); tortious interference with existing contract against Hertz (count two); tortious interference with prospective economic advantage against all plaintiffs (count three); violation of the Racketeer Influenced Corrupt Organizations (RICO) Act, 18 U.S.C. § 1962(c) against all plaintiffs (count four); and unlawful tying in violation of the Sherman Act, 15 U.S.C. § 1 against all plaintiffs (count five). Dkt. # 38, at 26-38.

         On June 4, 2018, 1234 Group filed its motion for substitution as a co-counterclaimant or, in the alternative, intervention (Dkt. ## 42, 44). On June 7, 2018, plaintiffs filed a motion to dismiss Westover's amended counterclaims for failure to state a claim and lack of jurisdiction. Dkt. # 49.[4]In it, plaintiffs renew their argument that, due to the assignment, Westover lacks prudential standing to bring its counterclaims. Id. at 16-18. On June 14, 2018, however, in their response to 1234 Group's motion for substitution or intervention, plaintiffs state that “[t]here are serious questions as to the assignability of, at a minimum, the contract-related counterclaims, because Westover's License Agreement with Dollar and Thrifty contain non-assignment provisions.” Dkt. # 51, at 2 n.2. On July 2, 2018, the Court ordered plaintiffs to take a position as to whether they contest or consent to the assignment. Dkt. # 57. On July 3, 2018, plaintiffs filed a notice that they “will not contest the validity or existence of the . . . assignment of claims at issue in this case.” Dkt. # 58.

         II. 1234 Group's Motion for Substitution or Intervention

         In its motion for substitution as co-counterclaimant or, in the alternative, intervention, 1234 Group-citing five of the six conceivably applicable Federal Rules of Civil Procedure-argues that it has a right, or at least should be permitted, to be substituted for Westover in, or join or intervene in, Westover's amended counterclaims. Dkt. ## 42, 44.[5] First, 1234 Group argues that, in light of the assignment, it “should be substituted as a co-counterclaimant.” Dkt. # 42, at 3-4 (quoting Fed.R.Civ.P. 25(c); Fed.R.Civ.P. 21). In the alternative, 1234 Group asserts, providing no rationale, that the Court either must permit it to intervene in Westover's amended counterclaims under Fed.R.Civ.P. 24(a)(2) or should permit its intervention under Fed.R.Civ.P. 24(b)(1)(B). Dkt. # 44, at 4-5. Finally, in its reply brief, 1234 Group argues that Fed.R.Civ.P. 17(a)(3) “is the proper procedural mechanism” to join or substitute 1234 Group as the real party in interest. Dkt. # 55, at 2-3.[6]

         Plaintiffs respond that substitution under Fed.R.Civ.P. 25(c) is inappropriate because the Rule governs scenarios where an interest is transferred during an action, which is not the case here since Westover assigned its counterclaims to 1234 Group before Westover filed its initial counterclaims. Dkt. # 51, at 4 (citing Fed.R.Civ.P. 25(c); Wells Fargo Bank, N.A. v. Hous. Found., 2011 WL 1833378, at *2 (N.D. Okla. May 6, 2011)). In addition, plaintiffs state that 1234 Group should “be permitted to intervene as the party in interest” but only for the purpose of ensuring that the Court's dismissal with prejudice of Westover's amended counterclaims for lack of standing binds both Westover and 1234 Group. Id. at 5. Plaintiffs do not rebut 1234 Group's arguments under Fed.R.Civ.P. 21, 24(a)(2) or 24(b)(1)(B), and 1234 Group raised its arguments under Fed.R.Civ.P. 17 and 20(a)(1)(A) for the first time in reply.

         The Court finds that 1234 Group has no right, and should not be permitted, to be substituted for Westover in, or join or intervene in, Westover's amended counterclaims under any Federal Rule of Civil Procedure.[7] Below, the Court addresses 1234 Group's arguments in turn.

         Federal Rule of Civil Procedure 25(c) provides, “[i]f an interest is transferred, the action may be continued by or against the original party unless the court, on motion, orders the transferee to be substituted in the action or joined with the original party.” Fed.R.Civ.P. 25(c). Here, there has been no transfer of interest between Westover and 1234 Group for purposes of Rule 25(c). Westover assigned any and all claims against plaintiffs to 1234 Group on December 27, 2017-i.e. over three months before Westover filed its initial counterclaim on April 3, 2018.[8] Accordingly, as this Court has held under similar circumstances, because there has been no transfer of interest between Westover and 1234 Group since Westover filed its initial counterclaims, Rule 25(c) “is an improper avenue by which to substitute” 1234 Group as plaintiff in Westover's amended counterclaims. Wells Fargo, 2011 WL at *2.

         1234 Group's argument that the Court should permit it to join Westover as a co-counterclaimant pursuant to Fed.R.Civ.P. 21 also fails. Rule 21 provides, “[m]isjoinder of parties is not a ground for dismissing an action. On motion or on its own, the court may at any time, on just terms, add or drop a party.” Fed.R.Civ.P. 21. But no parties were misjoined in this case, and the Court does not dismiss Westover's amended counterclaims on such a ground. Rule 21, therefore, is plainly inapposite.

         Equally unavailing are 1234 Group's arguments that it has a right or should be permitted to intervene under Fed.R.Civ.P. 24(a)(2) or 24(b)(1)(B) respectively. Rule 24(a)(2) ...


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