Baring Industries, Inc. v. Rosen

Background

Baring Industries, Inc. brought a diversity action against Jared Rosen and Michael J. Noonan, individually, asserting legal malpractice and professional negligence. Baring is a commercial kitchen designer and contractor incorporated in Nevada with its principal place of business in Fort Lauderdale, Florida.

Baring had contracted with DaDong Catering, LLC to supply and install commercial kitchen equipment in rented space in a New York City building owned by 3BP Property Owner, LLC. After DaDong did not pay, Baring filed a $320,356.94 mechanic’s lien. Baring retained Rosen Law LLC, the law firm associated with the defendants, to advise it about the lien. On the firm’s recommendation, Baring filed a foreclosure action against 3BP.

3BP counterclaimed, alleging that the equipment was removable and therefore did not qualify as fixtures supporting a mechanic’s lien. The court in that earlier action granted summary judgment to 3BP, declared the lien void, and awarded 3BP $320,356.94 in damages, plus attorneys’ fees and costs. The Second Circuit affirmed. Baring then brought this malpractice action, alleging that the defendants gave advice contrary to settled New York law and departed seriously from the professional standard of care.

Motion to Dismiss

The defendants moved under Federal Rule of Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction and Rule 12(b)(7) for failure to join a required party under Rule 19. They argued that Rosen Law was a necessary and indispensable party. They further argued that joining the firm would destroy complete diversity because two of its members were domiciled in Florida, making the firm a Florida citizen, while Baring was also a Florida citizen.

Rule 19 requires a court first to determine whether an absent party is necessary. A party is necessary if the court cannot provide complete relief among the existing parties, if the absent party’s interests could be impaired by the case, or if the party’s absence could expose existing parties to conflicting obligations. If a necessary party cannot feasibly be joined, the court then determines whether the party is indispensable, which can require dismissal.

Court’s Analysis

The court held that Rosen Law was not a necessary party. The defendants relied largely on cases stating that a party to a contract involved in litigation is generally necessary. The court found that principle inapplicable because Baring was not suing for breach of its engagement agreement with Rosen Law. Under New York law, the malpractice claims sounded in tort.

The court also rejected the defendants’ argument that complete relief required Rosen Law’s presence because Baring sought repayment of legal fees paid to the firm. Under New York law, a demand for the return of attorneys’ fees is essentially a claim for monetary damages, even when described as disgorgement. The court therefore concluded that Baring could seek that relief from the existing defendants.

Although Rosen Law had a substantial interest in the case, the court found that the defendants had virtually identical interests and could adequately represent the firm’s position. The defendants also failed to explain how the firm’s absence could subject them or Baring to inconsistent obligations.

Disposition

Judge Analisa Torres denied the defendants’ motion to dismiss. The court stated that, because Rosen Law was not a necessary party under Rule 19(a), it did not need to decide whether the firm was indispensable under Rule 19(b). The Clerk of Court was directed to terminate the motion at ECF No. 27.