United States District Court, N.D. Alabama, Southern Division
DAVID G. BYKER, ROBERT PRZYDYSZ, GLOBAL ASSET MANAGEMENT HOLDINGS, LLC, Plaintiffs,
NANNETTE SMITH, Defendant.
E. OTT CHIEF UNITED STATES MAGISTRATE JUDGE.
G. Byker, Robert Przybysz, Global Asset Management Holdings,
LLC (“GAM”) (collectively,
“Plaintiffs”) filed this suit against defendant
Nannette Smith, invoking this court's diversity
jurisdiction under 28 U.S.C. § 1332(a). (Doc. 1).
Plaintiffs assert that Ms. Smith breached a settlement
agreement between the parties. Ms. Smith filed a motion to
dismiss, contending that this court lacks subject matter
jurisdiction based on Plaintiffs' failure to join an
indispensable party who would destroy the court's
diversity jurisdiction. (Doc. 21). Plaintiffs responded in
opposition to Ms. Smith's motion (doc. 31), and Ms. Smith
has filed a reply (doc. 32). Also pending before the court
are Ms. Smith's motion to strike (doc. 40),
Plaintiffs' motions for leave to file a subpoena on an
out-of-state third-party (docs. 41, 43), Plaintiffs'
motion for a status conference (doc. 44), and Plaintiff's
motion to lift the stay on discovery (doc. 45). Ms. Smith has
filed a response in opposition to the motion to lift the stay
discovery. (Doc. 47). Upon consideration, the
court finds that Ms. Smith's motion to
dismiss is due to be denied, Ms. Smith's motion to strike
is due to be denied as moot, Plaintiffs' motions for
leave to file a subpoena are due to be granted,
Plaintiffs' motion for a status conference and to lift
the stay are due to be denied as moot.
broad strokes, this case arises out of a dispute between the
parties regarding computer software that is designed to run
payment systems in gas stations and convenience stores (the
“B2K Software”). Ms. Smith developed the B2K
Software and owned a business to market and implement the
Software. (Doc. 23-1, ¶ 2). In 2012, Mr. Przybysz, the
managing member of Ingenuity International, LLC
(“Ingenuity”), approached Ms. Smith about
purchasing her business, and Ms. Smith agreed to the sale.
(See Doc. 23-1, ¶¶ 3-4; Doc. 31-1, ¶
1). As part of that agreement, Ingenuity formed a new company
called B2K Systems, LLC (“B2K LLC”) to purchase
the assets of Ms. Smith's business, including the B2K
Software, and Ms. Smith became an employee of B2K LLC. (Doc.
23-1, ¶ 4). Ms. Smith held a 20% interest in B2K LLC,
and Ingenuity held the remaining 80% interest in the company.
(Doc. 23-1, ¶ 4).
experienced financial difficulties and took several loans
from GAM, which were secured by the B2K Software.
(See Doc. 1, ¶ 8; Doc. 23-1, ¶¶ 7-8;
Doc. 31-2, ¶ 1). B2K LLC defaulted on the loans, and GAM
eventually sued B2K in Michigan state court to collect on the
loans. (Doc. 23-1, ¶ 9; Doc. 31-2, ¶ 3). Ms. Smith
attempted to intervene in GAM's action against B2K LLC to
protect her interest in the B2K Software, but the Michigan
state court denied her request. (Doc. 23-1, ¶ 10; Doc.
23-2). GAM won a default judgement against B2K LLC in the
Michigan lawsuit, and B2K LLC subsequently filed for
bankruptcy protection in the Western District of Michigan.
(Doc. 23-1, ¶ 10; Doc. 31-2, ¶¶ 3-4). As a
secured creditor, GAM filed a proof of claim in B2K LLC's
bankruptcy proceedings. (Doc. 31-2, ¶ 4). In 2016, the
bankruptcy administrator abandoned B2K LLC's assets that
had been disclosed to the bankruptcy court, and GAM succeeded
to control of those assets. (Doc. 31-2, ¶ 5).
LLC was foundering, the relationship between Ms. Smith and
B2K LLC deteriorated. B2K LLC terminated Ms. Smith's
employment in 2014 and then sued Ms. Smith in Michigan state
court. (Doc. 31-2, ¶ 2). Ms. Smith reciprocated by suing
B2K LLC, GAM, Ingenuity, Mr. Byker, and Mr. Przybysz in
Alabama state court. (Doc. 23-1, ¶ 12; Doc. 31-1, ¶
1; Doc. 31-2, ¶ 2). The Alabama state court action is based
on Ms. Smith's allegations that the defendants in that
action conspired to steal the B2K Software. (See
Doc. 31-3). After B2K LLC filed bankruptcy, the Alabama court
severed and stayed all of Ms. Smith's claims against the
company, and Ms. Smith's claims against the remaining
defendants proceeded to trial on November 14, 2016. (Doc.
31-1, ¶ 2; Doc. 31-4, pp. 4-5; see also Doc.
31-5, pp. 25-26).
parties in the Alabama state court action reached a
settlement on November 15, 2016, the second day of pre-trial
motions. (Doc. 31-1, ¶ 14). Counsel read the terms of
the settlement on the record, and the settlement contained
the following six essential terms:
(1) GAM or Mr. Byker would pay Ms. Smith $500, 000 in
installments over a period of time;
(2) Ms. Smith would send the B2K Software to a third-party
expert, who would verify the software was the same functional
and operational software that he previously reviewed in the
course of the state court action, and the software would then
be sent to GAM or Mr. Byker after they paid the first
settlement installment to Ms. Smith;
(3) The parties would “use their good faith, best
efforts” to conclude the B2K LLC bankruptcy, and Mr.
Byker, GAM, Mr. Przybysz or Ingenuity will indemnify Ms.
Smith if the bankruptcy court claws back any payment from B2K
LLC to her or her son;
(4) The parties would enter full mutual releases of any and
all claims up through the date of the settlement agreement;
(5) GAM would void its judgment against B2K LLC, or mark it
as satisfied; and
(6) The B2K LLC's Michigan lawsuit against Ms. Smith
“will be dismissed with prejudice.”
(Doc. 1-1, pp. 4-9; Doc. 23-1, ¶ 14). Because the
settlement agreement required payments over time, the Circuit
Court of Jefferson County retained jurisdiction over the
matter until payment under the agreement was complete, but
moved the action to its administrative docket. (Doc. 1-1, pp.
parties' settlement broke down approximately a month
after they entered the agreement. According to the plaintiffs
in this case, Ms. Smith did not deliver the promised B2K
Software to the third-party expert. They contend that Ms.
Smith delivered a “read only” version of the B2K
Software rather than a functional and operational copy of the
software. (Doc. 1, ¶ 14; Doc. 31-2, ¶ 8). Ms.
Smith, on the other hand, contends that she fully complied
with her obligation under the parties' settlement
agreement. (Doc. 23-1, ¶¶ 15-16). While Ms. Smith
does not dispute that she delivered a “read only”
version of the B2K Software to the third party expert, she
asserts that it was exactly the same as the software the
expert reviewed during the litigation and that the read only
software was functional and operational. (Doc. 23-1,
Byker, Mr. Przybysz, and GAM filed this action against Ms.
Smith based on Ms. Smith's alleged breach of the
parties' settlement agreement. (Doc. 1). They assert
claims against Ms. Smith for breach of contract, promissory
estoppel, fraudulent misrepresentation, and fraudulent
suppression based upon her alleged failure to deliver
functional and operational B2K Software to GAM.
(Id.). Plaintiffs request monetary damages and seek
preliminary and permanent injunctions ordering Ms. Smith to
provide GAM with a functional and operational copy of the B2K
Software. (Id.). Ms. Smith asks this court to dismiss
the action, arguing that B2K LLC is an indispensable party
whose joinder would destroy the court's diversity
jurisdiction in this matter. (Doc. 22).
STANDARD OF REVIEW
Rule 12(b)(7) of the Federal Rules of Civil Procedure, a
defendant may move to dismiss an action for “failure to
join a party under Rule 19.” Fed.R.Civ.P. 12(b)(7). A
district court undergoes a two-step inquiry when deciding a
motion to dismiss under Rule 12(b)(7) and Rule 19. First, the
court must determine “whether the absent part is a
‘required party' within the meaning of Rule
19.” Auto-Owners Ins. Co. v. Morris, 191
F.Supp.3d 1302, 1303 (N.D. Ala. 2016) (citing Molinos
Valle Del Cibao v. Lama, 633 F.3d 1330, 1344 (11th Cir.
2011)). Then, “if the absent party is
‘required' but cannot be joined in the action, the
court must consider if, ‘in equity and good conscience,
the action should proceed among the existing parties or
should be dismissed.'” Id. (quoting
moving party bears the burden of proving that the absent
party is a required and indispensable party under Rule 19.
Barrow v. OM Fin. Life Ins. Co., 2011 WL 2659987, at
*1-2 (M.D. Fla. July 6, 2011) (citing Am. Gen. Life &
Accident Ins. Co. v. Wood, 429 F.3d 83, 92 (4th Cir.
2005)). Finally, when deciding a motion to dismiss under Rule
12(b)(7), the court may look to matters outside of the
pleadings and consider evidence presented by the parties.
Auto-Owners Ins. Co., 191 F.Supp.3d at 1303 (citing
Estes v. Shell Oil Co., 234 F.2d 847, 849 n.5 (5th
Ms. Smith's ...