Case Title: A-Plus Janitorial & Carpet Cleaning v. Employers' Workers' Compensation Assoc.

Citation: 

Docket Number: 83227

State: oklahoma

Court: Oklahoma Supreme Court

Date: 1997-04-08T00:00:00Z

Document:
A-Plus Janitorial & Carpet Cleaning v. Employers' Workers' Compensation Assoc.  A-Plus Janitorial & Carpet Cleaning v. Employers' Workers' Compensation Assoc. 1997 OK 37 936 P.2d 916 68 OBJ 1266 Case Number: 83227 Decided: 04/08/1997 Mandate Issued: 05/08/1997 Supreme Court of Oklahoma A-PLUS JANITORIAL & CARPET CLEANING, an Oklahoma sole proprietorship; A.R.K. RAMOS FOUNDRY & MANUFACTURINGCOMPANY, INC., an Oklahoma corporation; ACURA NEON, INC., an Oklahoma corporation; ALPINE TRUCKING, INC., an Oklahoma corporation; ANDERSON MECHANICAL INC., an Oklahoma corporation; BEESON MECHANICAL CONTRACTORS, INC., an Oklahoma corporation; BIGBY COMPANIES, an Oklahoma partnership; BRIDGEMAN ELECTRIC, INC., an Oklahoma corporation; CARPET MASTERS INCORPORATED, an Oklahoma corporation; CLEO WEAVER, INC., an Oklahoma corporation; COMPUTER POWER TECHNOLOGIES, a division of Wiley Electric, Inc., an Oklahoma corporation; CRAIG COUNTY FARM SUPPLY, an Oklahoma general partnership; E-TECH, INC., an Oklahoma corporation ; E-Z STOP, CORP., a Kansas corporation; E-Z STOP, INC., an Oklahoma corporation; EMTEC PEST CONTROL, INC., an Oklahoma corporation; GASOLINE MARKETING, INC., an Oklahoma corporation; GEORGE MAYER, INC., an Oklahoma corporation; GRIFFITH PETROLEUM MANAGEMENT CORPORATION, an Oklahoma corporation; HARDWALL FABRICATORS, INC., an Oklahoma corporation; JACK GRIFFITH PETROLEUM PRODUCTS, INC., an Oklahoma corporation; LaFAVER FIBERGLASS CORPORATION, an Oklahoma corporation; MIAMI STONE, an Oklahoma corporation; MILLER GLASS COMPANY, an Oklahoma corporation; N-R INDUSTRIES, INC., an Oklahoma corporation; OKLAHOMA ICE COMPANY, INC., an Oklahoma corporation; OKLAHOMA LEATHER PRODUCTS, INC., an Oklahoma corporation; OTTAWA COUNTY FARM SUPPLY, an Oklahoma partnership; PEEVY CONSTRUCTION COMPANY, INC., an Oklahoma corporation; ROTO HAMMER COMPANY, an Oklahoma corporation; SAM ROBINSON, d/b/a SAM ROBINSON SIGNS and d/b/a SIGNA OUTDOOR ADVERTISING; STANDARD MACHINE & WELDING WORKS, an Oklahoma sole proprietorship; TOTAL MARINE SERVICES, an Oklahoma corporation; TOWNLEY DAIRY COMPANY, an Oklahoma corporation; TULSA OVERHEAD DOOR CO., INC., an Oklahoma corporation; VALET WASH AND LUBE CENTERS, INC., an Oklahoma corporation; WILEY ELECTRIC, INC., an Oklahoma corporation, Plaintiffs-Appellants, v THE EMPLOYERS' WORKERS' COMPENSATION ASSOCIATION, an unincorporated group self-insurance association; AMERICAN CITIZENS INSURANCE AGENCY, INC., an Oklahoma corporation; BOMFORD, COUCH & WILSON, an Oklahoma business trust; COMMERCE INSURANCE AGENCY, INC., an Oklahoma corporation; RICH & CARTMILL, INC., an Oklahoma corporation; BILL KELLEY, d/b/a Bill Kelley Insurance Agency; STURDIVANT INSURANCE AGENCY, INC., an Oklahoma corporation; UNITED GENERAL AGENCY, INC., an Oklahoma corporation; CARRIS AGENCY, INC., an Oklahoma corporation; AL M. SNIPES GENERAL INSURANCE, INC., an Oklahoma corporation; ASSOCIATED UNDERWRITERS, INC., an Oklahoma corporation; BILL BECKMAN COMPANY, an Oklahoma corporation; and THE EMPLOYERS INSURANCE AGENTS GROUP, a/k/a THE TEWCA AGENTS GROUP, an unincorporated association, Defendants-Appellees. ON CERTIORARI TO THE COURT OF CIVIL APPEALS, DIV. III ¶0 In an action for breach of contract, breach of fiduciary duty, constructive and actual fraud by 37 former members of an unincorporated workers' compensation group self-insurance association against (a) the self-insurance association, (b) an unincorporated association composed of 11 insurance agents, who were the sole marketers of memberships in the self-insurance association, and (c) the members of the insurance agents association, the District Court, Tulsa County, Donald C. Lane, Judge, granted the defendants' dismissal quests for failure to state a claim. The plaintiffs appealed and the Court of Civil Appeals affirmed. On certiorari granted upon the plaintiffs' petition, THE COURT OF CIVIL APPEALS' OPINION IS VACATED; THE TRIAL COURT'S DISMISSAL ORDERS ARE REVERSED AND THE CAUSE IS REMANDED FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS PRONOUNCEMENT Cleve W. Powell, Northcutt, Clark, Gardner, Hron and Powell, Ponca City, Oklahoma For Appellants Clark O. Brewster John W. Anderson, Jr. Brewster, Shallcross & DeAngelis, Tulsa, Oklahoma For Appellee, The Employers' Workers' Compensation Association William C. Devinney, Oklahoma City, Oklahoma For Appellees, The Employers Insurance Agents Group and Associated Underwriters, Inc. William J. Bergner, Debra L. Chionopoulos, Walker, Ferguson & Ferguson, Oklahoma City, Oklahoma For Appellees, American Citizens Insurance Agency, Inc., Commerce Insurance Agency, Inc., United General Agency, Inc., Carris Agency, Inc.,Al M. Snipes General Insurance, Inc.and Bill Beckman Company John R. Paul, Suzanne Hale Costin, Lori Moon Kastner,Richards, Paul, Richards & Siegel, Tulsa, Oklahoma For Appellee, Sturdivant Insurance Agency, Inc. Scott B. Wood Barkley, Rodolf & McCarthy, Tulsa, Oklahoma For Appellee, Rich & Cartmill, Inc. John B. StuartWagner, Stuart & Cannon, Tulsa, Oklahoma For Appellee, Bomford, Couch & Wilson OPALA, J. [936 P.2d 920] ¶1 The dispositive issue on certiorari is whether the trial court erred in dismissing the plaintiffs' claims. We answer in the affirmative. I THE ANATOMY OF LITIGATION ¶2 The plaintiffs/appellants are former members [plaintiffs, former or ex-members] of The Employers' Workers' Compensation Association [TEWCA], an unincorporated workers' compensation group self-insurance association organized under the authority of 85 O.S.1991 § 149.1. ¶3 At the time TEWCA was formed, several independent insurance agents [the Agents] created their own unincorporated association, the TEWCA Agents Group [the Agents Group or Group]. The Agents Group members were the sole approved and authorized marketing representatives for TEWCA. In furtherance of the Group's objectives, the agents solicited the plaintiffs and many other employers to join TEWCA. ¶4 In November 1992 TEWCA assessed its present and former members (approximately 1,000 employer-members) for additional contributions to satisfy a deficit of more than $3 million, accumulated during a six-year period (1986 through 1991). ¶5 Thirty-seven former TEWCA members brought suit against TEWCA, grounded on breach of contract, constructive fraud and actual fraud; and alternatively against the Agents Group (and its members) for negligence, breach of fiduciary duty, constructive fraud and [936 P.2d 921] actual fraud, which induced the plaintiffs to join TEWCA and renew annually their membership in the organization. They pressed for (a) exoneration of their liability for the initial (and any future) assessment, (b) TEWCA's indemnification for any future loss or liability to third persons and (c) recovery of deposits and credits seized by TEWCA in partial satisfaction of the levy. ¶6 The trial court dismissed the plaintiffs' first and second amended petitions ¶7 The Court of Civil Appeals affirmed the dismissal orders on appeal, concluding that (a) the plaintiffs' claims are derivative in nature and (b) the plaintiffs have alleged no harm peculiar to them, which would dispense with the necessity of bringing a derivative suit - i.e., one pressed by TEWCA itself for the benefit of all interested persons (or by [936 P.2d 922] representatives of the association who would adequately represent its interests and those of its members). The Defendants' Attempt To Disqualify the Plaintiffs' Lawyer ¶8 After the parties had filed their supplemental briefs on certiorari, TEWCA moved (some two years after the suit began) to disqualify plaintiffs' counsel for an alleged conflict of interest. We referred that controversy to the trial judge, to sit as this court's special master, for a decision on fact and law issues relating to the claimed conflict. II THE MOTION TO DISMISS ¶9 III THE FORMER TEWCA MEMBERS HAVE STANDING TO BRING A DIRECT ACTION AGAINST THE DEFENDANT ASSOCIATIONS AND AGENTS ¶10 The defendants (TEWCA, Agents Group and agents) urge that the dismissal should stand because (a) the claims can only be pursued in a derivative action and (b) the plaintiffs lack standing to sue in a representative capacity as they failed to comply with the requirements of 12 O.S.1991 §2023.1 A. The Statutory Scheme Governing Group Self-Insurance Associations and Derivative Actions Pressed On Behalf of An Unincorporated Association ¶11 TEWCA, an unincorporated association of approximately 1,000 members, was organized under the terms of 85 O.S.1991 § 149.1 ¶12 At common law a voluntary unincorporated association was not recognized as a legal entity. Because it lacked a status distinct from the persons composing it, an unincorporated association had no capacity to become a party to an action. It could neither sue nor be sued. B. These Ex-TEWCA Members Lack Standing To Press A Derivative Claim ¶13 By analogy to the continuous-ownership-rule requirement for shareholder derivative actions, ¶14 Moreover, to press a derivative claim, a plaintiff must have standing as a non-Hohfeldian plaintiff - i.e., one who sues to secure judicial relief that would benefit other persons or the community as a whole.23 The interest tendered for judicial vindication in a derivative action is neither personal nor [936 P.2d 925] proprietary.24 The plaintiffs here are suing not to confer a benefit on TEWCA, but for the exoneration of their own individual liability. Because these former members no longer have a stake in TEWCA and are trying to affect that entity in a negative manner, they cannot be described as acting on its behalf as non-Hohfeldian plaintiffs.25 C. ¶15 The Plaintiffs Are Entitled To Be Considered Individually As Hohfeldian Plaintiffs C. ¶15 The Plaintiffs Are Entitled To Be Considered Individually As Hohfeldian Plaintiffs ¶16 The plaintiffs' claim against TEWCA is founded on theories of breach of contract, constructive fraud and actual fraud. They seek (a) recovery of all deposits or credits seized by TEWCA in partial satisfaction of the assessment, (b) a declaration that they have no liability to TEWCA for the initial assessment or any future assessments and (c) TEWCA's indemnification for any future loss or liability to third persons (i.e., injured employees of current or former TEWCA members) arising out of their participation in TEWCA. ¶17 The plaintiffs' alternative claim against the Agents and the Agents Group is grounded on negligence, breach of fiduciary duty, constructive fraud and actual fraud by the agents, which induced the plaintiffs to join the organization and renew annually their TEWCA membership.27 Because of alleged misrepresentations and omissions, the plaintiffs urge, the true nature and extent of their TEWCA participation risk was concealed from them. As a result, the plaintiffs contend, they were induced to continue their TEWCA membership and to stand exposed to further liability for that association's accumulating deficits. ¶18 Not all current and former TEWCA members, the plaintiffs contend, have a similar claim against their insurance agent. Some members were adequately informed by their agent or obtained independent knowledge of the true facts about TEWCA. Others either left TEWCA before the adverse material developments occurred or joined it after that period. The claim against all the defendants - except for each plaintiff's claim against its own insurance agent - is founded upon the vicarious liability of the Agents Group and its members for the torts of each member committed in furtherance of the Group's business. ¶19 Although the trial court's earlier rulings were rested upon the plaintiffs' lack of standing to bring a derivative action, the dismissal [936 P.2d 926] orders in contest here are silent on this issue.28 Measuring this claim by the narrow Conley v. Gibson29 test, we cannot conclude from the face of the third amended petition that the plaintiffs can prove no set of facts entitling them to relief on their selected theory. IV THE ARGUMENT SUGGESTING MISJOINDER OF PARTIES AND OF CLAIMS ¶20 One motion to dismiss urges that (a) the plaintiffs' claim against this party was misjoined with those pressed against the other defendants and (b) the joinder of such diverse and numerous parties and claims in one lawsuit can only be correct if the claims are derivative. Another motion urges misjoinder of claims and parties by the inclusion in one action of distinctly separate claims. According to the movant, misjoinder (a) occurred when fraud claims were pressed against some parties and derivative claims against others and (b) resulted in naming as defendants some parties who could only be sued in another venue. A. Permissive Joinder Of Parties ¶21 The terms of 12 O.S.1991 § 2020(A)30 allow the permissive joinder of parties. Because § 2020 parallels the language of Federal Rule 20, both state and federal jurisprudence on the subject is instructive. Federal Rule 20(a) imposes two requisites for the joinder of parties: (1) a right to relief must be asserted by or against each plaintiff or defendant relating to or arising out of the same transaction or occurrence; and (2) some question of law or fact common to all the parties will arise in the action.31 There is no rigid rule on what constitutes the same series of transactions or occurrences for purposes of joinder under Federal Rule 20.32 The rule is to be construed liberally in order to promote trial convenience and to expedite the final determination of disputes, all with a view to preventing multiple lawsuits.33 Federal Rule 21 provides a mechanism for remedying either [936 P.2d 927] the misjoinder or nonjoinder of parties. Although the rule's text is silent on what constitutes misjoinder or nonjoinder, federal jurisprudence makes it clear that parties are misjoined when they fail to satisfy either prong of Federal Rule 20(a)'s two-part test for permissive joinder.34 ¶22 The terms of § 2021 provide that misjoinder of parties is not a ground for dismissal. ¶22 The terms of § 2021 provide that misjoinder of parties is not a ground for dismissal. B. Permissive Joinder of Claims ¶23 The terms of 12 O.S.1991 § 2018(A) and (B)38 allow the joinder of a party's claims or remedies against an opponent (or opponents) in the same action. Extant jurisprudence construing the corresponding Federal Rule 18 teaches that once parties are correctly joined in a single action under Federal Rule 20(A) - because the transaction (or common-question) test has been satisfied - additional claims, whether related or unrelated (or by or against all or less than all of the parties), may be joined under Federal Rule 18(a).39 This rule expresses a [936 P.2d 928] philosophy of liberality "toward entertaining the broadest possible scope of action consistent with fairness to the parties."40 The purpose of the rule is to avoid multiplicity of litigation.41 ¶24 As a practical matter, Federal Rule 18(a) must be read in conjunction with Federal Rule 42(b), ¶24 As a practical matter, Federal Rule 18(a) must be read in conjunction with Federal Rule 42(b), ¶25 When interposed below by some of the defendants, misjoinder of both parties and claims was urged not as part of a motion for severance of a party defendant or for separate trial of claims but rather as a ground for dismissal. The trial judge made no disposition of the pressed misjoinder theory.47 An appellate court may not make first-instance rulings on facts or law.48 When necessary dispositions are absent, the case must be remanded with directions that they be effected at nisi prius.49 Because the misjoinder issue does not pertain directly to dismissal of the plaintiffs' claim, we will not address that question here. It should be dealt with in a post-remand proceeding. On review of the dismissal orders under the Conley v. Gibson50 standard - as we must - we cannot say it appears beyond doubt that the plaintiffs can prove no set of facts in support of their claim which would entitle them to relief on this theory. C. Class Action ¶26 The plaintiffs' first and second amended petitions are styled in the nature of [936 P.2d 929] a class action. The captions in both petitions state that the suit was brought on behalf of the plaintiffs and "all others similarly situated." The quoted text was removed from the caption of the third amended petition. According to the plaintiffs, they now seek redress solely upon their individual claims. ¶27 It is not fatal to the prosecution of the plaintiffs' individual claims that they are not joined by all similarly situated plaintiffs. If the named plaintiffs have separate and distinct interests which may be dispositive of the claim, class certification may be inappropriate.51 If so, the plaintiffs' claims may proceed to final adjudication sans a class-action certification. V VENUE ¶28 Some of the defendants based their dismissal quests on mislaid venue. 12 O.S.1991 § 2012(B).52 They argued, inter alia, that (a) venue lies not in Tulsa County, where this action was brought, but in the county where the primary events pertaining to the claim against them had occurred, (b) Tulsa County is not their place of business, and (c) their principal officer does not reside in Tulsa County. According to the Agents Group, its service agent can only be served in Oklahoma County. ¶29 Mislaid venue - no matter how facially apparent - neither reveals a jurisdictional defect nor tenders a contest over cognizance.53 Pribram v. Fouts54 teaches that when a challenge to venue is interposed and sustained, the trial judge has a duty to transfer the case to the district court in the county in which venue may be laid. The issue of mislaid venue, when tested by the Pribram standard, addresses not whether a claim should be dismissed, but rather whether it should be moved to another location. Those critical findings and conclusions are absent from the record. Since the trial court has not yet reached the venue question,55 we will not review it by the Pribram standard.56 Measuring this claim by the Conley v. Gibson57 test, we cannot say it appears beyond doubt that the plaintiffs can prove no set of facts in support of their claim which would entitle them to relief. The defendants are free to renew their venue challenge in the post-remand process. VI VICARIOUS LIABILITY ¶30 The plaintiffs' third amended petition alleges that the Agents Group and its members [936 P.2d 930] are jointly and severally liable for the "actions, errors and omissions" of each individual agent. They urge that the liability of the individual agent-member for the torts of another depends upon the nature and purpose for which the association was formed.58 If the group is created for business purposes, the plaintiffs reason, the individual members are to be treated as partners59 and hence as jointly and severally liable for the torts of other partners committed in the course and scope of partnership activities.60 According to the plaintiffs, the Agents Group (a) was organized to promote the business of each of its (agent) members and (b) was paid by TEWCA sizeable commissions for the purchase of reinsurance. The plaintiffs conclude that the Agents Group and the agents are vicariously liable for the torts of each member committed in connection with their joint enterprise. ¶31 One of the defendant agents (Sturdivant Insurance Agency) counters that the issue of vicarious liability was not addressed below because the plaintiffs failed to state a claim against the agents for which relief could be granted. Sturdivant urges a claim cannot be stated against it because it had not sold to any of the plaintiffs their membership in TEWCA. ¶32 Agency is generally a question of fact to be determined by the trier.61 If the existence of a partnership is disputed, the question presented is for the court or jury.62 Because the agents' status tenders a fact issue here, these defendants cannot by operation of law be deemed partners or subagents (for the purpose of soliciting new TEWCA members). The burden of proving agency or partnership, including not only the fact of its existence but also its nature and extent, is ordinarily cast upon the party who raises it.63 The plaintiffs' theory of vicarious liability - whether based on the general principles of agency or those of partnership - gives rise to a fact question. The parties did not present any evidence below. The trial court is free to address the issue on remand.64 ¶33 Measuring the third amended petition by the Conley v. Gibson test, ¶33 Measuring the third amended petition by the Conley v. Gibson test, VII FAILURE TO PLEAD FRAUD WITH PARTICULARITY ¶34 The defendants argue that the allegations of constructive and actual fraud are not plead with the particularity required by 12 O.S.1991 §2009(B).66 ¶35 The allegations of fraud must be stated with sufficient particularity to enable[936 P.2d 931] the opposing party to prepare his/her responsive pleadings and defenses. Gay v. Akin.67 Particularity does not mean the plaintiff has to plead detailed evidentiary matters.68 ¶36 The method for securing the missing information is not by pressing for dismissal but rather by a motion to supply the necessary particulars that would support the allegations of fraud. Because the record is devoid of any denied quest for particulars, the defendants are not entitled to have the petition tested by the Gay v. Akin rule. Applying the Conley v. Gibson standards, ¶36 The method for securing the missing information is not by pressing for dismissal but rather by a motion to supply the necessary particulars that would support the allegations of fraud. Because the record is devoid of any denied quest for particulars, the defendants are not entitled to have the petition tested by the Gay v. Akin rule. Applying the Conley v. Gibson standards, SUMMARY ¶37 The plaintiffs, qua former TEWCA members, lack standing to represent fairly and adequately the interests of TEWCA in a derivative action. Measuring this claim by the Conley v. Gibson standard - as we must - we cannot say, on this record, that it appears beyond doubt the plaintiffs can prove no set of facts in support of their individual claims. ¶38 Misjoinder (of parties and claims) and failure to plead fraud with particularity are not grounds for dismissal. The correct remedy for misjoinder is to sever (or remove) the party that has been incorrectly joined. When multiple parties are correctly brought into a single action, additional claims, whether related or unrelated, may be joined. Separate trials of claims or issues may be ordered if fairness or convenience justifies separate treatment. The method for securing absent information on fraud allegations is by requesting the missing particulars. The defendants are entitled to a post-remand opportunity to press their quests by motion. In short, defendants' objections to misjoinder of parties and claims and to lack of particularity entitle them neither to dismissal's affirmance nor to other appellate relief. ¶39 When a challenge to mislaid venue is interposed and sustained, the case must be transferred to the district court in the county where venue may be laid. The existence of an agency relation is generally a question in pais for the trier. A vicarious liability theory based on agency status of the parties gives rise to a fact question. Because the trial court has made no ruling on either mislaid venue or on vicarious liability, the defendants are free to renew their objections in the post-remand process. On certiorari granted upon the plaintiffs' petition, THE COURT OF CIVIL APPEALS' OPINION IS VACATED; THE TRIAL COURT'S DISMISSAL ORDERS ARE REVERSED AND THE CAUSE IS REMANDED FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS PRONOUNCEMENT ¶40 KAUGER ¶41 HODGES ¶42 WATT ¶43 SUMMERS FOOT