The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge
Plaintiffs are five authors who have publishing contracts, each of which contains a mandatory arbitration clause, with Regnery Publishing, Inc. ("Regnery"). Dissatisfied with Regnery's marketing and distribution tactics on the grounds that they have allegedly deprived plaintiffs of potential royalty income, plaintiffs have filed suit. But instead of suing Regnery, the only signatory to the contracts, plaintiffs have sued Regnery's parent company, Eagle Publishing, Inc. ("Eagle"), in a transparent attempt to avoid mandatory arbitration. In this suit, the authors allege that Eagle "orchestrates and participates" in a "scheme to divert book sales away from retail outlets and to wholly-owned subsidiary organizations within the Eagle conglomerate." (Compl. at 2.) They assert eight causes of action for 1) fraud; 2) inducement to breach of contract; 3) interference with contractual relations; 4) interference with prospective business advantage; 5) unjust enrichment; 6) accounting; 7) unfair trade practices in violation of the D.C. Consumer Protection Procedures Act, D.C. Code § 28-3901; and 8) damage to commercial reputation.
Defendant has filed a motion to dismiss the complaint under Fed. R. Civ. P. 12(b)(7) for failure to join Regnery, a necessary and indispensable party under Rule 19. In the alternative, defendant moves to dismiss all counts for failure to state a claim under Rule 12(b)(6).
Having considered the arguments of the parties and relevant law, the Court will grant defendant's motion under Rule 12(b)(7). The crux of plaintiffs' action is their claim that Regnery breached the publishing contracts, and since Regnery cannot be joined in this action because of the arbitration clause, this case must be dismissed.
Plaintiffs each have a written contract with their publisher, Regnery, which is a wholly-owned subsidiary of Eagle. Defendant Eagle has no contractual relationship with any plaintiff. Under plaintiffs' contracts, they have granted and assigned to Regnery "the exclusive right, title and interest to print, publish and market" the authors' books. (See, e.g., Def.'s Mot. Ex. 1 ¶ 1.) The contracts provide for royalties based on sales to the book trade (i.e., retail market), to the book trade at discounts, and to "additional markets outside regular bookstores or outside of the book trade . . . ." (Compl. ¶¶ 19-21; see, e.g., Def.'s Mot. Ex.1 ¶ 2(e).) The contract fails to specify how the books are to be marketed or distributed, but sales to "additional markets" yield lower royalties than retail sales. (See, e.g., Def.'s Mot. Ex. 1 ¶¶ 2(d), (e).) Each of the contracts also contains an arbitration provision that requires that:
Any controversy or claim arising out of or relating to this agreement, the interpretation, implementation, breach or subject matter thereof, shall be settled by arbitration in the District of Columbia and the rules of the American Arbitration Association. (Def.'s Mot. Ex. 1 ¶ 14.)
One of the plaintiffs in this case, Richard Miniter, is already involved in an arbitration proceeding with Regnery as a result of Regnery's claim that Miniter breached the contract by failing to produce a manuscript of a second book for publication. (Id. Ex. 9.) In response, Miniter filed counterclaims, asserting claims that are virtually identical to those made by plaintiffs here. Specifically, Miniter contends that Regnery breached the contract by allegedly failing to make royalty payments and by "its improper diversion of books from retail sales and to affiliate and/or subsidiary organizations for no charge, or for a substantially reduced charge, in order to avoid royalty payments." (Id. Ex. 10 ¶ 8.)
In September 2007, Miniter moved to join the remaining four plaintiffs in this case on the grounds that they would be asserting identical claims against Regnery (id. Ex. 11), but the arbitrator denied the motion without prejudice on the grounds that the authors' contracts involved separate and distinct facts and that any joinder would unnecessarily delay the proceeding. (Id. Ex. 12 at 1.) The arbitrator noted, however, that the other four authors were free to initiate their own claims against Regnery. (Id. at 2.) Consistent with the arbitrator's observation, plaintiffs have indicated in their opposition that "the Authors are not barred from re-filing their arbitration claims against Regnery in a separate proceeding and are preparing to do so." (Pls.' Opp'n at 3.)
Despite their concession that arbitration is available to address their grievances over Regnery's alleged contractual breaches, plaintiffs have sought out a new forum and a new defendant by filing suit on November 6, 2007, against only Eagle. They claim that Eagle's marketing and distribution strategies deprive them of potential royalty income by distributing Regnery's books in ways that divert plaintiffs' books away from the traditional retail sales that produce the highest royalties. Specifically, plaintiffs assert that Eagle distributes Regnery's books by direct mail and over the Internet, gives the books as free gifts to new subscribers of Eagle's periodicals and donates plaintiffs' books to nonprofits, all of which reduces or eliminates royalties that otherwise could have been realized from retail sales. (See Compl. ¶¶ 14-17.) Plaintiffs also complain that "Eagle's vertically integrated business model exploits, manipulates and defrauds" plaintiffs (id. ¶ 18), because "Regnery, at Eagle's direction, funnels books that otherwise would be available for retail sale to its Eagle affiliates under the 'additional markets' clause," and by so doing, "Regnery, at Eagle's direction, undertakes to minimize retail sales . . . , while maximizing sales to 'additional' markets." (Id. ¶¶ 23, 24.)
To stave off defendant's motion to dismiss, plaintiffs argue that Regnery is neither necessary nor indispensable because "the interests of Eagle and Regnery are identical in this litigation," so Eagle can "adequately protect" Regnery's interests involving the publishing contracts. (Pls.' Opp'n at 4.) Plaintiffs also assert inconsistently and incorrectly that Regnery will not be prejudiced by this action, since "any findings against Eagle will lack res judicata effect against Regnery." (Id.) Finally, they contend that even if Regnery were deemed to be a "necessary party" within the meaning of Rule 19(a), the action should proceed for equitable reasons under Rule 19(b), because otherwise, they would have no adequate remedy against Eagle. (Id. at 4-5.) None of these arguments has merit.*fn1
I. Legal Standard under Rule 19
Rule 19 sets forth a two-part test that mandates joinder of a party or dismissal of the suit if the absent party meets the description of a necessary party under Rule 19(a) and is deemed indispensable under Rule 19(b). See Cloverleaf Standardbred Owners Ass'n, Inc. v. Nat'l Bank of Washington, 699 F.2d 1274, 1278-79 (D.C. Cir. 1983). Under Rule 19(a), a party is necessary if without it (1) "complete relief cannot be accorded among those already parties," or (2) the absent party "claims an interest relating to the subject of the action and is so situated that the disposition of the action in [that party's] absence may" either "(i) as a practical matter impair or impede the person's ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest." Fed. R. Civ. P. 19(a); see also Cloverleaf Standardbred, 699 F.2d at 1278-79 (all three criteria for Rule 19(a) were met when plaintiff voluntarily dismissed a claim against one of two parties in order to maintain diversity jurisdiction, leaving only the absent party's bank as defendant, on the grounds that "evidence ...