150908 Doc 109 CDMO & CDET v Comfort Dental Response to Opp

8/20/2019 150908 Doc 109 CDMO & CDET v Comfort Dental Response to Opp

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IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF COLORADO

Civil Action No. 1:14-cv-00871-RPM-MJW

CDMO, INC., and CDET, INC.,

Plaintiff/Counterclaim-Defendants,

v.

COMFORT DENTAL GROUP, INC.,

Defendant/Counterclaim-Plaintiff,

DR. CRAIG BAHR,

Counterclaim-Defendant.

RESPONSE IN OPPOSITION OF COMFORT DENTAL GROUP, INC.’S MOTION TODISMISS PLAINTIFFS/COUNTERCLAIM DEFENDANTS’ FIRST AMENDED

COMPLAINT

Plaintiffs CDMO, Inc. (“CDMO”) and CDET, Inc. (“CDET”) (collectively,

“Plaintiffs”), by and through their undersigned counsel, hereby submit this Response in

Opposition of Comfort Dental Group, Inc.’s Motion to Dismiss Plaintiffs/Counterclaim

Defendants’ First Amended Complaint.

I. INTRODUCTION

Comfort Dental Group, Inc. (“Comfort Dental”) has opportunistically seized upon

this Court’s inquiry about absent subfranchisees in an effort to secure a partial dismissal

of this case, basing its entire argument on the false premise that Plaintiffs have asked

this Court to determine “the Subfranchise Agreements between Plaintiffs and strangers

Case 1:14-cv-00871-RPM Document 109 Filed 09/08/15 USDC Colorado Page 1 of 35


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to this litigation are void” (Doc. #105, p. 2). Review of the First Amended Complaint

shows conclusively that Plaintiffs have sought no such determination. Comfort Dental’s

argument lacks merit, and should be denied for multiple reasons.

First, the subfranchisees are not necessary (now known as “required”) parties

under Rule 19(a)(1)(A) because the Court can “afford complete relief among the

existing parties” without joining the subfranchisees. Plaintiffs have not asked the Court

to “void” the Subfranchise Agreements. Plaintiffs have asserted no claims under the

Subfranchise Agreements, and sought no relief against the subfranchisees.1

Plaintiffs

have sought relief only with respect to their own agreements with Comfort Dental ,

including the obligation to act as Comfort Dental’s “middleman” or contract-enforcer.

The subfranchisees are not parties to those agreements, nor are they third-party

beneficiaries. Review of the First Amended Complaint demonstrates, beyond doubt,

that Plaintiffs make no claim against the subfranchisees, seek no decision or relief

against them, allege no wrongdoing by them and seek no decision under the

Subfranchise Agreements. Accordingly, the subfranchisees are not necessary parties

under Rule 19(a)(1)(A).

Second, the subfranchisees are not necessary parties under Rule 19(a)(1)(B)

because the subfranchisees have not “claim[ed] an interest” in this action. While the

subfranchisees are aware fully of this litigation, most have expressly indicated that they

do not wish to be parties. Accordingly, the fundamental requirement “that the absent

party ‘claims an interest ’” in the action is lacking. See Davis v. United States, 192 F.3d

1Paragraph 197 of the First Amended Complaint contains a typographical error, and should read

“Subfranchisor Agreement,” not “Subfranchise Agreement.”



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951, 958-59 (10th Cir. 1999) (citing Fed. R. Civ. P. 19(a)(2)) (emphasis in original).

Further, the Tenth Circuit has made clear that where a party could have intervened or

been joined by the Defendant, they can “never” be an indispensable party under

Rule 19. Thunder Basin Coal Co. v. Sw. Pub. Serv. Co., 104 F.3d 1205, 1211-12 (10th

Cir. 1997). Moreover, under Rule 19, an existing party (such as Comfort Dental) may

not “claim an interest” on behalf of an absent party; only the absent party may claim or

assert such an interest.

Even if these fundamental requirements that subfranchisees claim an interest in

the action were to be overlooked, Comfort Dental also has made no showing that the

second part of Rule 19(a)(1)(B) has been satisfied; namely, Comfort Dental has not

shown that “disposing of the action in the [subfranchisee]’s absence may: (i) as a

practical matter impair or impede the [subfranchisee]’s ability to protect the interest; or

(ii) leave an existing party subject to a substantial risk of incurring double, multiple, or

otherwise inconsistent obligations because of the interest.” Neither of these two

necessary elements of Rule 19(a)(1)(B) have been satisfied here. To the contrary,

Comfort Dental claims it has the right independently to enforce the Subfranchise

Agreements, thus leaving the subfranchisees with the same two choices they have

today -- namely, (1) to continue as subfranchisees of Comfort Dental or (2) to contest

the validity of Comfort Dental’s actions. Regardless of which ‘interest’ the

subfranchisees are deemed to have, however, both interests are adequately

represented by the current parties to this lawsuit, which alone is sufficient to defeat a

motion to dismiss under Rule 19. Indeed, Comfort Dental has not argued, because it



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cannot credibly claim, that any interests of the absent parties would not be adequately

represented by the current parties to the lawsuit.

Finally, and perhaps most importantly, if the Court decided that the

subfranchisees were necessary parties, then, under Rule 19(a)(2), “the court must order

that the [subfranchisees] be made a party.” Contrary to Comfort Dental’s argument,

their joinder as defendants would n o t destroy diversity or this Court’s jurisdiction over

the action. Specifically, Plaintiffs have made no claim against subfranchisees in the

First Amended Complaint, and thus, the addition of the subfranchisees as defendants

would fall within this Court’s supplemental jurisdiction under 28 U.S.C. § 1367(a). Price

v. Wolford , 608 F.3d 698, 702-04 (10th Cir. 2010) (exceptions to supplemental

jurisdiction under 28 U.S.C. § 1367(b) do not apply where a party is joined “as a

defendant, not a plaintiff, and Plaintiffs assert no claims against it.”). Joinder is

therefore feasible and should be ordered if the Court finds the subfranchisees to be

required parties.

The Court need not even reach the question of whether the action should

proceed in the absence of the subfranchisees under Rule 19(b), but if it did, equity and

good conscience would dictate the action should proceed, in the interest of the parties

and public policy, because the Court can narrowly tailor the relief sought while

promoting Colorado’s public policy against enforcing fee-sharing agreements in the

dental profession. Fed. R. Civ. P. 19(b).

For these reasons, the Motion to Dismiss lacks merit and should be denied.



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II. STATEMENT OF FACTS

CDMO is a party to a Master Franchise Agreement with Comfort Dental dated

February 18, 2011 (the “CDMO Agreement”). (Doc. #91, ¶ 13, Ex. A.) CDET and

Comfort Dental entered into a Master Franchise Agreement dated July 1, 2011 (“CDET

Agreement”) (collectively, “Subfranchisor Agreements” or “Master Franchise

Agreements”). (Doc. #91, ¶¶ 14, 16, Ex. B.) Plaintiffs entered into various agreements

with subfranchisees in Missouri, Kentucky and Indiana (“Subfranchise Agreements” or

“Subfranchisee Agreements”). (Doc. #91, ¶¶ 19, 20.) The subfranchisees are not

parties to the Subfranchisor Agreements. (Doc. #91, Exs. A, B.) Comfort Dental is not

a party to any of the Subfranchise Agreements, although it is identified as a third-party

beneficiary purportedly entitled to “independently enforce” any provision of the

Subfranchise Agreements. (Doc. #91, Ex. C.)

Plaintiffs filed this action on March 25, 2014. (Doc. #1.) Plaintiffs advised the

subfranchisees of the action, but received no indication that any subfranchisee wished

to join the action as a party. Plaintiffs have provided periodic updates to the

subfranchisees regarding various developments in the case. (Bahr Dec. ¶ 3.)2

On June 15, 2015, Plaintiffs filed the First Amended Complaint, alleging, among

other things, “[t]he Subfranchisor Agreements, as implemented, interpreted and

enforced should be declared illegal and void in their entirety.” (Doc. #91, ¶¶ 211, 224.)

Plaintiff’s further and in the alternative, alleged “Comfort Dental should be permanently

enjoined from enforcing the Subfranchisor Agreements in an illegal manner, and

2“Bahr Dec. ¶ __” refers to the Declaration of Dr. Craig Bahr in Support of Response to Comfort Dental

Group, Inc.’s Motion to Dismiss Plaintiff’s/Counterclaim Defendants’ First Amended Complaint.



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specifically enjoined from mandating that Plaintiffs refer dental laboratory services to the

Comfort Dental Labs, from mandating that Plaintiffs enforce such provisions in contracts

entered into pursuant to the Subfranchisor Agreements and from mandating that

Plaintiffs market and/or sell the Gold Plan.” (Doc. #91, ¶¶ 212, 225.) The First

Amended Complaint sought no relief under the Subfranchise Agreements and alleged

no wrongdoing on the part of any subfranchisee.

On or about July 17, 2015, the Court sua sponte raised the issue of whether the

subfranchisees are necessary parties to this action. To address this concern, Plaintiffs

contacted the subfranchisees regarding their interest in joining the action, but were

advised the subfranchisees, for various reasons, did not wish to assert a claim or

interest in the action. (Bahr Dec. ¶ 4.)

On August 13, 2015, Comfort Dental filed the Motion to Dismiss. (Doc. #105.)

Plaintiffs thereafter again contacted the subfranchisees regarding their interest, if any, in

the action. (Bahr Dec. ¶ 4.) Plaintiffs submit herewith declarations from the

subfranchisees who were willing to advise the Court of their position. (Bahr Dec. ¶ 5,

Exs. A-L.) The subfranchisees unanimously indicate that they have been aware of the

litigation, but are not parties to the action, are not parties to the Subfranchisor

Agreements, and have no interest in asserting any claim in this action. (Id .) Most of the

subfranchisees cite reasons of expense and fear of retaliation by Comfort Dental as

their primary reasons. (Id .) Some give no reason at all. Some state they have

consulted with independent counsel. (Id .) Most feel their interests are adequately

represented by the current parties to the action. (Id .) Some subfranchisees express



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great concern with Comfort Dental’s actions and look to this Court for guidance moving

forward. (Id .) No subfranchisee indicated an interest in joining the action. (Id .)3

III. ARGUMENT

A. Standard of Review

Federal Rule of Civil Procedure 12(b)(7) allows for dismissal for failure to join a

person under Rule 19. Rule 19 requires a two-step analysis before dismissing a claim

for failure to join an indispensable person. Davis v. United States, 343 F.3d 1282, 1288

(10th Cir.2003)). First, the court must determine whether the absent person is

“necessary” or, under the language in the newly revised Rule 19, “required.”

Fed.R.Civ.P. 19(a). A person is “required” to be joined under Rule 19 if:

(A) in that person’s absence, the court cannot accord complete relief among existing parties; or

(B) that person claims an interest relating to the subject of the actionand is so situated that disposing of the action in the person’sabsence may: (i) as a practical matter impair or impede theperson’s ability to protect the interest; or (ii) leave an existing partysubject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.

Fed.R.Civ.P. 19(a)(1).4

3The remaining dentists advised they did not want to submit anything to the Court, but each verbally

indicated their position that they were aware of the litigation, but did not want to be named as parties tothe action. Principal among the concerns expressed were legal costs and fear of retaliation by ComfortDental and its CEO, Rick Kushner, who had contacted many of the subfranchisees personally and hadindirectly contacted others through a Comfort Dental agent. (Bahr Dec. ¶ 6.)4

As discussed infra, “[i]n deciding whether to proceed without the required person, the court shouldconsider: (1) the extent to which a judgment rendered in the person’s absence might prejudice thatperson or the existing parties; (2) the extent to which any prejudice could be lessened or avoided by: (A)protective provisions in the judgment; (B) shaping the relief; or (C) other measures; (3) whether a

judgment rendered in the person’s absence would be adequate; and (4) whether the plaintiff would havean adequate remedy if the action were dismissed for nonjoinder.” Fed.R.Civ.P. 19(b).



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“A required person must be joined as a party if joinder is feasible.” Id . Only “[i]f a

required person c an n o t b e j oi n ed ,” need the court move to the second step,

determining “whether, in equity and good conscience, the action should proceed among

the existing parties or should be dismissed.” Fed.R.Civ.P. 19(b) (emphasis added).

“Fed.R.Civ.P. 19(b) forbids dismissal if the necessary party could be made a party.”

Symes v. Harris, 472 F.3d 754 (10th

Cir. 2006). This determination should be made “‘in

a practical and pragmatic but equitable manner.’” Id. (quoting Rishell v. Jane Phillips

Episcopal Memorial Medical Center, 94 F.3d 1407, 1411 (10th Cir.1996). “The party

seeking dismissal for failure to join bears the burden of persuasion.” Lenon v. St. Pa’ul

Mercury Ins. Co., 136 F.3d 1365, 1372 (10th Cir.1998); see also Rishell v. Jane Phillips

Episcopal Mem’l Med. Ctr., 94 F.3d 1407, 1411 (10th Cir.1996), cert. dismissed, 520

U.S. 1152 (1997), and cert. denied, 520 U.S. 1166 (1997) (citing Francis Oil & Gas,

Inc. v. Exxon Corp., 661 F.2d 873, 878 (10th Cir.1981)).

B. The Subfranchisees Are Not “Persons Required To Be Joined” Under Rule19(a).

Comfort Dental argues that the subfranchisees are “required parties for Plaintiffs’

claims . . . under Rule 19(a).” (Doc. #105, p. 4.) In support of its argument, Comfort

Dental asserts Plaintiffs claims “are based on several ways in which Comfort Dental has

allegedly violated the law and public policy through its interpretation and enforcement of

. . . the Subfranchisor Agreements” which “could significantly affect the interest of the

absent subfranchisees.” (Id . (emphasis in original).) Comfort Dental’s argument is

without merit.



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1. Comfort Dental Has Not Met Its Burden of Establishing that the Court“Cannot Afford Complete Relief Among Existing Parties”

Rule 19(a)(1)(A) requires the joinder of parties whose absence would preclude

the Court from according complete relief “among the existing parties.” Comfort Dental

does not argue Rule 19(a)(1)(A) applies, because it cannot. It is obvious that the Court

can afford complete relief among existing parties, because the existing parties are the

only parties to the Subfranchisor Agreements at issue. Plaintiffs assert no claim against

the subfranchisees and do not seek relief under the Subfranchise Agreements.

A court is able to afford complete relief when a party’s absence “does not prevent

the plaintiffs from receiving their requested . . . relief.” Sac & Fox Nation of Missouri v.

Norton, 240 F.3d 1250, 1258 (10th Cir.2001). As Moore’s Federal Practice explains, this

provision “requires joinder when nonjoinder precludes the court from effecting relief not

in some overall sense, but between extant parties.” 4 J. Moore & R. Freer, Moore’s

Federal Practice § 19.03[2][b], at 19–39 (3d ed.2009)(emphasis in original). “Properly

interpreted, the Rule is not invoked simply because some absentee may cause future

litigation . . . . The fact that the absentee might later frustrate the outcome of the

litigation does not by itself make the absentee necessary for complete relief.” 4 Moore’s

Federal Practice § 19.03[2][b], at 19–39 to 19–41 (footnotes omitted).

Comfort Dental, at most, makes reference to the ‘adequacy’ of a judgment on

pages 10 and 11 of its Motion, arguing “the Subfranchisees and Comfort Dental could

be tied up in litigation for years” because the judgment would not be “judicially binding”

on the subfranchisees. (Doc. #105, p. 11.) The possibility of future litigation between

Comfort Dental and one or more subfranchisees, however, has no place in this analysis.



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Under Rule 19(a)(1)(A), “[t]he focus is on relief between the parties and not on the

speculative possibility of further litigation between a party and an absent person.”

Zahourek Sys., Inc. v. Canine Rehab. Inst., Inc ., No. 12-CV-00978-LTB, 2012 WL

5936540, at *1 (D. Colo. Nov. 27, 2012) (Babcock, J.). Accordingly, the subfranchisees

are not necessary parties under Rule 19(a)(1)(A).

2. The S ubf ranc hi s ees Do Not “Cl ai m A n Int eres t ” i n t h i s A c t i on

After more than 18 months of litigation, the subfranchisees have taken no action

to assert any claim related to this litigation. Comfort Dental admits no subfranchisee

has sought to join this action. (Doc. #5 p. 2.) To the contrary, the subfranchisees have

consciously avoided doing so. As will be discussed more fully below, Comfort Dental

cannot assert that the purported interest of subfranchisees “on their behalf” as a basis

for dismissal.

Under Rule 19(a)(1)(B), a party may be necessary if it “claims an interest relating

to the subject of the action and is so situated that disposing of the action in [its] absence

may . . . as a practical matter impair or impede [its] ability to protect the interest.”

Joinder is contingent upon a threshold requirement is “that the absent party ‘claims an

interest ’” in the action. See Citizen Potawatomi Nation v. Norton, 248 F.3d 993, 997

(10th Cir.) opinion modified on reh’g , 257 F.3d 1158 (10th Cir. 2001); Davis v. United

States, 192 F.3d 951, 958-59 (10th Cir. 1999) (“Rule 19, by its plain language, does not

require the absent party to actually possess an interest; it only requires the movant to

show that the absent party “claims an interest relating to the subject of the action.”)

(emphasis in original).



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Cases meeting this threshold requirement involve some affirmative act by the

absent party to assert their interest in the action. See Ctr. for Biological Diversity v.

Pizarchik , 858 F. Supp. 2d 1221, 1225 (D. Colo. 2012) (“The Nation has presented

substantial evidence supporting its claimed economic interests in this lawsuit.”); Three

Stars Prod. Co., LLC v. BP Am. Prod. Co., 2012 WL 32916, at *4 (D. Colo.) (“Rule 19 is

concerned with “claimed” interests . . . Because the Tribe asserted title to the minerals

under the subject acres in the previous action before the Tribal Court, . . . I conclude

that the Tribe has an interest in the subject mineral acres.”).

Where an absent party is aware of an action and elects not to claim an interest,

that party is unnecessary for purposes of Rule 19. Thunder Basin Coal Co. v. Sw. Pub.

Serv. Co., 104 F.3d 1205, 1211-12 (10th Cir. 1997) (“We specifically hold that an entity

or individual . . . entitled to intervene under Fed.R.Civ.P. 24 i s nev er an i ndi s pens abl e

part y under Fed.R.Civ.P. 19.”) (emphasis added) (discussed further infra); see also

United States v. Bowen, 172 F.3d 682, 689 (9th Cir. 1999) (“Sterilization Systems was

aware of this action and chose not to claim an interest . . . joinder was ‘unnecessary.’”)

(cited with approval in Citizen Potawatomi Nation v. Norton, 248 F.3d 993, 997 (10th

Cir.) opinion modified on reh’g , 257 F.3d 1158 (10th Cir. 2001)); School Dist. of City of

Pontiac v. Secretary of U.S. Dept. of Educ., 584 F.3d 253, 266 (6th Cir.2009) (“[I]t would

turn Rule 19 analysis on its head to argue that the States’ interests are now impaired

because they declined to participate in this much-publicized case”); United States v.

San Juan Bay Marina, 239 F.3d 400, 406–407 (1st Cir.2001) (When a party “does not

deem its own interests substantially threatened by the litigation, the court should not



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second-guess this determination”); U.S. v. Sabine Shell, Inc., 239 F.3d 480, 483 (5th

Cir.1982) (“[T]he property owners themselves, patently aware of this litigation, never

intervened . . . . Presumably the property owners do not believe that the disposition of

this suit will ‘impair or impede’ their ability to protect their interests.”).

3. Comfort Dental May Not Assert Any Claims It Believes theSubfranchisees Might Have

Comfort Dental attempts, with no evidentiary or factual support, to assert “claims”

it imagines the subfranchisees might have in this action. Under Rule 19, however,

Comfort Dental cannot assert theoretical claims on behalf of absent parties, and its

attempt to do so must be rejected.

Comfort Dental argues that the subfranchisees should be joined in this litigation,

that it is not “fair to the absent franchisees” for the case to proceed without them. (Doc.

#105, p. 2.) As an initial matter it is clear that the subfranchisees have made the

conscious decision, sometimes informed by their independent counsel, not to join this

action. Comfort Dental attempts to second-guess their decision, arguing that it would

somehow be “unfair” not to force them into the expense and uncertainty of this litigation.

Comfort Dental offers no evidence supporting its apparent desire to countermand the

decisions these subfranchisees have already made not to assert any interest in this

litigation.

As a legal matter, Comfort Dental may not properly, under Rule 19, assert any

claims or interests on behalf of the absent subfranchisees. Under Rule 19, only the

absent party may assert its claim. A party named in the litigation cannot assert the

interest on the absent party’s behalf. United States ex rel. Morongo Band of Mission



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Indians v. Rose, 34 F.3d 901, 908 (9th Cir.1994) (“[I]t is inappropriate for one defendant

to attempt to champion [the] absent party’s interests”); Peregrine Myanmar Ltd. v.

Segal , 89 F.3d 41, 49 (2d Cir.1996) (Defendant’s “attempt to assert on behalf of the

[third-party] its supposed concern about the dilution of its interest . . . falls outside the

language of the rule. It is the absent party that must ‘claim an interest.’”); Gibbs Wire

and Steel Co. v. Johnson, 255 F.R.D. 326, 329 (D. Conn. 2009) (“Only the absent party

may assert its claim. A party named in the litigation cannot assert the interest on the

absent party’s behalf.”). “[C]ourts are reluctant to join a nonparty for the purpose of

protecting that nonparty’s interests when the nonparty itself has not claimed an interest

in the outcome of a suit.” HDR Eng’g, Inc. v. R.C.T. Eng’g, Inc., 2010 WL 2402908, at

*4 (S.D. Fla.).5

5Consistent with the text of Rule 19, courts around the country have interpreted Rule 19 to require the

absent party to “claim an interest” to be deemed “necessary”. See also, e.g., Perkins v. Bennett , 2015 WL1313247, at *6 (D.S.C.) (“The absent parties’ failure to actually claim an interest is sufficient grounds todeny the motion under Rule 19.”); Richland Partners, LLC v. Cowry Enterprises, Ltd ., 2014 WL 4954475,at *7 (D. Mont.) (“Richland Partners has not presented any evidence that Phillips has claimed an “interestrelating to the subject of the action.’ . . . Accordingly, this Court is not required to join Phillips”); Wicklund v. Page, 2010 WL 5572813, at *5 (D. Idaho) report and recommendation adopted, 2011 WL 98544 (D.Idaho) (“If the absent party is aware of the action and chooses not to claim an interest, the Court does noterr in “holding that joinder [is] unnecessary.”); Sheevam v. Patel , 2009 WL 4430738, at *4 (E.D. Mo.)(“Despite a near-certain awareness of this suit, Yogesh has not claimed an interest in this lawsuit. Absent

such a claim, Yogesh is not a “required” party”); Sakelaris v. Danikolas, 2007 WL 1832119, at *3 (N.D.Ind.) (“When an absent party . . . foregoes intervention, this is indicative of the fact that it does not deemits interest to be threatened by the litigation. Under these circumstances, I am loathe to second guess theCounty’s decision.”); Travers v. City of Newton, MA, 2005 WL 3008660, at *2 (D. Mass.) (“[I]ts decision toforgo intervention indicates that the [HRD] does not deem its own interests substantially threatened by thelitigation,” a determination that “the court should not second-guess”); O.M. ex rel. McWhirter v. OrangeCnty. (N.C.) Bd. of Educ., 2013 WL 664900, at *9-10 (M.D.N.C.) report and recommendation adopted subnom. O.M. ex rel. McWhirter v. Orange Cnty., N.C. Bd. of Educ ., 2013 WL 1212880 (M.D.N.C.) (“even if credited, the Board’s proffer regarding the position of the State Parties confirms that they know about thiscase, but do not wish to assert any claimed interest in it. Such circumstances also foreclose joinder under Rule 19(a)”); Anchorage v. Integrated Concepts & Research Corp., 1 F. Supp. 3d 1001, 1015 (D.

Alaska 2014) (“MarAd is not a required party under Rule 19(a)(1)(B)(i) or (ii) because MarAd, which isaware of this litigation, has not claimed an interest in the litigation.”).



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“Though the non-party need not actively intervene in the present litigation, it must

at least manifest some legal claim in the subject matter of the action.” Varlen Corp. v.

Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 2011 WL 3664796, at *5 (N.D. Ill.); Marina

One, Inc. v. Jones, 29 F. Supp. 3d 669, 678 (E.D. Va. 2014) (“[T]he precedent that

exists . . . require[es] some sort of affirmative indication by the absent party in the court

hearing the Rule 19 matter”); Kuhn Constr. Co. v. Ocean & Coastal Consultants, Inc.,

723 F.Supp.2d 676, 692 (D. Del. 2010) (“[W]here there is no showing that the absent

party actually has claimed an interest relating to the subject of the action, the court may

deny a motion to dismiss.”); Am. Ins. Co. v. St. Jude Med., Inc., 597 F. Supp. 2d 973,

978 (D. Minn. 2009) (“Willis has claimed no interest in the pending litigation and is thus

not a required party”).

This litigation has been pending for over 18 months. Even though the

subfranchisees are aware fully of the litigation, they have taken no steps to assert or

claim an interest in this litigation. Comfort Dental has made no showing of any

affirmative indication by the subfranchisees that they have asserted any claim or

interest. It is improper for Comfort Dental to attempt to assert the interests of the

subfranchisees ‘on their behalf’ as a basis for dismissal. Comfort Dental has failed to

demonstrate the subfranchisees are required parties under Rule 19(a)(1)(B).

Although Plaintiffs do not have the burden of proof, Plaintiffs have nonetheless

demonstrated that every subfranchisee has been made aware of this litigation. None

has elected to intervene or assert any claim or interest in the action. Many have

consulted with independent counsel and chosen not to become involved, for reasons of



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cost, expense or fear of retaliation by Comfort Dental, and myriad other reasons. Some

have indicated that they have deep concerns about Comfort Dental’s practices and look

forward to guidance from this Court, but do not consider their professional licenses or

ability to practice dentistry at issue in this lawsuit. The subfranchisees as a whole have

expressed no rights or interest in the Subfranchisor Agreements that are at issue in this

action. Most, if not all, have expressed their interests are adequately protected by the

current parties (which as set forth below, is another reason joinder is unnecessary).

Comfort Dental’s attempt to self-servingly assert the purported ‘interest’ of

subfranchisees on their behalf, based on supposition and without any evidentiary

support, is an inappropriate and improper basis for dismissal under Rule 19.

Accordingly, the Motion to Dismiss should be denied.

4. Th i s Co u r t’ s D ec is io n o n t h e Me ri ts W il l N o t Im p ai r o r Im p e de th e S ubf ranc hi s ees ’ A bi l i t y t o P rot ec t Thei r I nt eres t s

In addition to the requirement that an absent party “claim an interest,” Rule

19(a)(1)(B) also requires a determination that a decision in their absence may “impair or

impede the [absent] party’s ability to protect [its] interest.” Comfort Dental argues this

requirement is satisfied because “a ruling on Plaintiffs’ claims could significantly affect

the interest of the absent subfranchisees by voiding the contracts under which they earn

their livelihood.” (Doc. #105, p. 5.) Comfort Dental is in error.

As set forth above, Plaintiffs have sought no relief under the Subfranchise

Agreements. Plaintiffs have not alleged any wrongdoing by the subfranchisees or made

any claim against them. Plaintiffs’ claims relate exclusively to Comfort Dental’s actions

and the terms of the Subfranchisor Agreements, which enable Comfort Dental to



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engage in the unlawful corporate practice of dentistry, and through which it seeks to

contractually compel Plaintiffs (through the Subfranchisor Agreements) to interfere with

the independent judgment of its subfranchisees. More importantly, however, neither

Comfort Dental nor the subfranchises themselves have sought their joinder to this

action, which precludes dismissal under Rule 19 as a matter of law.

a. The Subfranchisees Cannot Be Indispensable Parties Because

Comfort Dental Did Not Seek to Add Them and They Did Not Seek to Join This Action

Comfort Dental criticizes Plaintiffs at length for not “convinc[ing] their

subfranchisees to join this suit.” (Doc. # 105, p. 6.) If Comfort Dental truly believed the

subfranchisees were necessary to this dispute, however, it could long ago have sought

to implead them. Alternatively, if the subfranchisees were necessary parties, the

subfranchisees would be entitled to intervene. For this reason, under binding Tenth

Circuit precedent, they cannot be deemed indispensable parties. See Thunder Basin

Coal Co. v. Southwestern Public Service Co., 104 F.3d 1205, 1208 (10th Cir.1997) (“W e

s pec if ic all y h o ld t hat an en ti ty o r in d iv id u al s u bj ec t t o i m pl ead er u n d er

F ed .R .C iv .P . 1 4 a n d en t it l ed t o i n t er v en e u n d e r F ed .R .C iv .P . 2 4 i s n e v er a n

indispensable party under Fed.R.Civ.P. 19.”) (emphasis added).

In Thunder Basin, the Tenth Circuit addressed the issue of when a party is

indispensable under Rule 19. Thunder Basin, 104 F.3d at 1210. The Plaintiff (Thunder

Basin) entered into coal supply contracts with TUCO, Inc. (Tuco). Id . at 1208. The

defendant (Southwestern) guaranteed the contracts. Id . Thunder Basin initially sued



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TUCO and Southwestern in federal court; however, Thunder Basin and TUCO were

nondiverse. Id . at 1210.

Thunder Basin dismissed TUCO and amended its complaint to assert claims that

Southwestern breached its contract of guarantee and intentionally interfered with

Thunder Basin’s coal purchase contracts with TUCO. Id . Southwestern moved for

dismissal claiming TUCO was an indispensable party under Rule 19. Id . The district

court denied the motion. Id .

On appeal, the Tenth Circuit affirmed. Id . at 1212. The Tenth Circuit held

Southwestern could have impleaded TUCO under Rule 14. Id . It further found TUCO

would have been entitled to intervene under Rule 24. Id . Under these circumstances,

the Tenth Circuit affirmed the district court, holding that TUCO could not be considered

an indispensable party: “We specifically hold that an entity or individual subject to

impleader under Fed.R.Civ.P. 14 and entitled to intervene under Fed.R.Civ.P. 24 is

never an indispensable party under Fed.R.Civ.P. 19.” Id . at 1208, 1211–12.

In so holding, the Tenth Circuit relied upon the Seventh Circuit’s decision in

Pasco Int’l (London) Ltd. v. Stenograph Corp., 637 F.2d 496 (7th Cir. 1980). Pasco

involved claims of breach of contract, interference with contractual relations, and

interference with prospective economic relations. Pasco, 637 F.2d at 499. The Pasco

plaintiff originally brought suit against three corporations and their agent but this first

action was dismissed for lack of diversity between the plaintiff and the defendant agent.

Id. at n.1. The plaintiff then brought a second suit against the same corporations but

chose not to name the agent, the actual person whose conduct was challenged. Id.



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The district court dismissed the suit for failure to join the agent, finding him

indispensable. Id.

In reversing the district court, the Seventh Circuit conceded the availability of

state court as an alternate forum. Id. at 501. Nevertheless, the court held that

availability an insufficient reason to dismiss under Rule 19(b). Id . According to the

court, the plaintiff had an interest, granted by federal law, in the chosen federal forum.

Id. Thus, a competing interest of the nonparty, a party, or the judicial system was

needed in order to outweigh the plaintiff’s interest in its chosen forum. Id.

As to the competing interest of the nonparty agent, the court noted that despite a

lack of diversity of citizenship, the agent could intervene under Fed.R.Civ.P. 24(a) if he

were a necessary party under Rule 19(a) and the defendants did not adequately protect

his interest. Id. at 502, n.13. As to the competing interests of the defendants, the court

held that the availability of third-party practice/impleader under Fed.R.Civ.P. 14

demonstrated the agent was not indispensable under Rule 19(b). Id. at 503.

In recounting the Pasco decision, the Tenth Circuit noted the common-sense

rationale behind the Seventh Circuit’s decision:

Underlying the Seventh Circuit’s decision is this proposition: if the

defendant is capable of bringing into the litigation a nonparty whosepresence is allegedly required to fully resolve the controversy and if that nonparty is otherwise capable of intervening, then the nonpartycannot be considered indispensable under Rule 19(b).

Thunder Basin, 104 F.3d at 1211.



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Expressly adopting the reasoning of Pasco, the Tenth Circuit held that the

defendant and the absent party could not be heard to complain about their own strategic

choices:

We find the reasoning of Pasco persuasive and applicable. Each of the concerns referenced in Rule 19(b) would be resolved if TUCOwere a party to this case. TUCO was free to seek mandatory or permissive intervention under Rule 24. It chose not to do so.Southwestern, which at oral argument acknowledged it had a claim

against TUCO for damages awarded, could have brought TUCOinto this litigation by impleader under Rule 14(a). It too chose not todo so.

* * *Based on the way this litigation unfolded and the way it waspresented on appeal, we understand why there was no effort tomake TUCO a party. Southwestern desperately wanted thislitigation to proceed in Texas and was unwilling to take anymeasures inconsistent with this desire. Accordingly, Southwesternwas not about to join TUCO as a party under circumstances whereTUCO’s non-diverse citizenship was consistent with and did not

destroy the district court’s jurisdiction. F o reg o in g i ts r ig h t t o i mpl ead TUCO under Rul e 14, howev er, bel i es S out hwes t ern’s

c l a i m o f i n d i s p e n s a b i l i t y u n d e r R u l e 1 9 ( a ) . E v e n i f w e d i d n o t

h a v e P a s c o u p o n w h i c h t o r e l y f o r t h i s p r o p o s i t i o n , w e w o u l d

be wi l l i ng t o s t and f i rs t and al one .

Thunder Basin, 104 F.3d 1212 (emphasis added).

Comfort Dental has, apparently for its own reasons, forgone its right to implead

the subfranchisees as parties, which belies its claim of indispensability under Rule 19.

Similarly, the subfranchisees were free to seek mandatory or permissive intervention

under Rule 24. They chose not to do so, believing in large part that their interests were

being protected by the current parties. Accordingly, as a matter of law, the

subfranchisees cannot be deemed indispensable parties under Rule 19.



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b. The Subfranchisees Are Not Required Parties Because Their Interests Are Adequately Protected by the Current Parties to the

Action

Comfort Dental has not argued -- much less established -- that the absent

parties’ interests (subfranchisees) will not be adequately represented by the existing

parties to the litigation. Because any such interests of the absent parties will be

vigorously represented by the existing litigants, Comfort Dental’s Motion must be

denied.

“If, as a practical matter, the interests of the absent party will be adequately

represented,” by a current party to the action, their interests are not impaired under

Rule 19(a). Rishell v. Jane Phillips Episcopal Mem’l Med. Ctr ., 94 F.3d 1407, 1413

(10th Cir.1996). Even if an absent party would be bound by a judgment (which is not

the case here), the prejudice to the relevant party’s interest “may be minimized if the

absent party is adequately represented in the suit.” Id.; see also 3A James Moore,

Moore’s Federal Practice ¶ 19.07[2.–1], at 19–106 (2d ed. 1995) (“the fact that the

absent person may be bound by the judgment does not of itself require his joinder if his

interests are fully represented by parties present”).

In Rishell, the Tenth Circuit reversed a district court decision dismissing an action

due to the failure to add a necessary party who would be bound by the judgment. While

noting “[i]t is true that under Oklahoma law the interest of the [absent party] is

derivative . . . , and that the [absent party] would therefore be barred in the state court

action by an adverse determination here”, the Tenth Circuit found present and absent

parties’ rights were aligned, and therefore dismissal was improper. Id .



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Here, the subfranchisees interests are aligned with and adequately protected by

either Plaintiffs or Comfort Dental. The subfranchisees’ contracts are with Plaintiffs not

Comfort Dental. Plaintiffs seek to uphold the laws and standards of the profession, as

the subfranchisees presumably do as well. The declarations of various subfranchisees

demonstrate that they deem their interests adequately protected by the current parties

to this litigation. See infra, Section II. To the extent the subfranchisees wish to continue

in the Comfort Dental system, Comfort Dental would adequately protect that interest.

Comfort Dental has maintained that the subfranchisees will have the opportunity to do

so notwithstanding any judgment of this Court.6

Comfort Dental’s argument that Plaintiffs have “put the Subfranchisee dentists’

professional licenses at risk” is disingenuous, at best. Plaintiffs proposed a stipulation

that would fully protect all subfranchisees, by allowing each subfranchisee to elect

whether to remain in the Comfort Dental system if the Court invalidated the

Subfranchisor Agreements. (Doc. #102, p. 6.) However, Comfort Dental rejected

Plaintiffs’ proposal, now arguing the subfranchisees should be brought at their own

expense and against their wishes into this litigation.

The dentists’ licenses are not at issue in this case. If anything, Plaintiffs have

sought to protect the integrity of the dental licenses and professional standards and to

6In a related matter on the orthodontic side, Comfort Dental characterized Plaintiffs role as subfranchisor

merely that of “a middleman” whose “ pr es en c e ( or n o t) i n C o m f or t D en t al ’s n et w o r k h as n o c o n s e q u e n c e to th e o r th o d o n t i s ts th a t t r e a t p a t i e n ts , o r th e p a t i e n ts th e ms e l v e s .” Comfort Dentalwent so far as to assert that “[n]othing in the termination of these middleman [franchisor] contracts hasany relation to an actual orthodontist or dentist providing services to any patient.” Comfort Dental’ssudden concern over the impact of this case on subfranchisees is simply contrived in an effort to gain adismissal of the case. (See Defendant Comfort Dental Group, Inc.’s Opposition to Plaintiffs’ Motion for Temporary Restraining Order Pursuant to C.R.S. § 13-22-208, Smile One, Prof. LLC., et al v. ComfortDental Group, Inc., et al (D. Colo.) (copy submitted herewith) as Ex. 2.)



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comply with the applicable laws, and sought to enjoin enforcement of contracts similar

to those that have been invalidated by multiple judges in this District. If Comfort Dental

is, as it claims to be, acting within the bounds of the law, the alleged concerns it raises

in the Motion are unfounded. If, on the other hand, this Court finds Comfort Dental is

unlawfully interfering with the practice of dentistry, the dentists can govern themselves

accordingly. They will not, however, be bound by this Court’s order, a fact that Comfort

Dental appears to acknowledge.7 It is not this lawsuit that puts dentists’ professional

licenses at risk. If anything puts them at risk, it is Comfort Dental’s actions.

Not only have the subfranchisees claimed no interest as required under

Rule 19(a), their absence will not impair or impede their ability to protect their interest in

this action, if any, as demonstrated by their failure to intervene (and Comfort Dental’s

similar failure to join them) which bars dismissal under Rule 19. Moreover, any interest

they have is adequately protected by the parties to this action. The subfranchisees are

not necessary or required parties.

At a minimum, however, if the Court believes the subfranchisees are necessary,

they can feasibly be joined as defendants because such joinder would not destroy

diversity.

7(Doc. #105, pp. 8, 9, 11) (“whatever conclusion is reached will practically affect them [the

subfranchisees] . . . but may not technically bind them.”); (“[e]ven if the Subfranchisees were nottechnically bound by this Court’s judgment . . . ); (“it would purport to invalidate the Subfranchisees’contracts w i th o u t e n ter i n g a j u d i c i a ll y b i n d i n g o r d e r a s to th o s e a b s e n t p a r t i es .”) (emphasis added).



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C. The Subfranchisees May Be Joined Without Destroying This Court’sJurisdiction.

Comfort Dental argues “the court cannot force joinder of the party as a plaintiff,

and instead must force the party to join as a defendant.” (Doc. #105, p. 6.) Plaintiffs

agree.

Rule 19 provides:

(2) J o i n d e r b y C o u r t O r d e r . If a person has not been joined as required,the court must order that the person be made a party. A person whorefuses to join as a plaintiff may be made either a defendant or, in aproper case, an involuntary plaintiff.

Fed. R. Civ. P. 19(a)(2) (emphasis added).

Ordinarily, “the jurisdiction of the Court depends upon the state of things at the

time of the action brought, and . . . after vesting, it cannot be ousted by subsequent

events.” Price v. Wolford , 608 F.3d 698, 702-04 (10th Cir. 2010) (quoting Mullan v.

Torrance, 22 U.S. (9 Wheat.) 537, 539, 6 L.Ed. 154 (1824); accord Grupo Dataflux v.

Atlas Global Group, L.P., 541 U.S. 567, 570–71, 124 S.Ct. 1920, 158 L.Ed.2d 866

(2004)). Once a district court has jurisdiction, additional claims and parties can be

added under the supplemental-jurisdiction statute, 28 U.S.C. § 1367(a), which confers

the district court’s jurisdiction “over all other claims that are so related to claims in the

action within such original jurisdiction that they form part of the same case or

controversy under Article III of the United States Constitution.” Id . Section 1367(a)

explicitly states that “supplemental jurisdiction shall include claims that involve the

joinder or intervention of additional parties.” Id .



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“Although § 1367(b) sets forth exceptions to supplemental jurisdiction, they are

not applicable” where additional parties are added as defendants and the plaintiff makes

no claim against them. Price v. Wolford , 608 F.3d 698, 702-04 (10th Cir. 2010)

(exceptions to supplemental jurisdiction under 28 U.S.C. § 1367(b) do not apply where

a party is joined “as a defendant, not a plaintiff, and Plaintiffs assert no claims against

it.”).

Section 1367(b) provides in full:

In any civil action of which the district courts have original jurisdictionfounded solely on section 1332 of this title, the district courts shall nothave supplemental jurisdiction under subsection (a) over claims b y plaint i f fs against persons made parties under Rule 14, 19, 20, or 24 of the Federal Rules of Civil Procedure, o r o v er c lai m s b y p er so n s p r o p o s e d t o b e j o i n e d a s p l a i n t i f f s u n d e r R u l e 1 9 of such rules, or seeking to intervene as plaintiffs under Rule 24 of such rules, whenexercising supplemental jurisdiction over such claims would be

inconsistent with the jurisdictional requirements of section 1332.

28 U.S.C. § 1367(b) (emphasis added).

“[T]he limitation of § 1367(b) generally applies onl y t o p l a i nt i f f s ’ ef f ort s to join

nondiverse parties.” Denver NMR, Inc. v. Front Range Mobile Imaging, Inc., 2009 WL

1538080, at *4-5 (D. Colo. ) (emphasis added); W. Bend Mut. Ins. Co. v. Schwantes,

2011 WL 5024873, at *6 (D. Colo.) (“Section 1367(b) articulates exceptions to the

exercise of supplemental jurisdiction . . . None of these exceptions are present here.

American Family intervenes as a defendant, not a plaintiff, and Plaintiff asserted no

claims against American Family in the original Complaint. See Price, 608 F.3d at

703-04. Accordingly, the Court is satisfied that it may exercise subject matter jurisdiction



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over this case, inclusive of American Family as an Intervenor–Defendant, pursuant to

28 U.S.C. § 1367(a) and (b).”).

In Price, the Intervenor-Defendant (OHCA) “claim[ed] that its intervention

destroyed the requirement of complete diversity.” Price, 608 F.3d at 703-04. The Tenth

Circuit rejected this argument, stating: “Although we agree that if OHCA had been a

named defendant when suit was brought, the federal court would not have had diversity

jurisdiction . . . we do not agree that OHCA’s intervention destroyed jurisdiction.” Id .

Following a thorough analysis of the language of Section 1367, and other applicable

authorities, the Tenth Circuit concluded the exceptions to supplemental jurisdiction

under 28 U.S.C. § 1367(b) do not apply where a party is joined “as a defendant, not a

plaintiff, and Plaintiffs assert no claims against it.” Id .

The Tenth Circuit explained:

Once a district court has jurisdiction, additional claims and partiescan be added under the supplemental-jurisdiction statute, 28U.S.C. § 1367(a), which grants the district courts jurisdiction “over all other claims that are so related to claims in the action withinsuch original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.” Aclaim is part of the same case or controversy if it “‘derive[s] from acommon nucleus of operative fact.’” [citations omitted]. Here, thereis no question that OHCA’s claim for a share of the settlement

proceeds arises out of the same facts as the underlying tort claim. And § 1367(a) explicitly states that “supplemental jurisdiction shallinclude claims that involve the joinder or intervention of additionalparties.”

Although § 1367(b) sets forth exceptions to supplemental jurisdiction, they are not applicable here. The exceptions relating tointervention under Fed.R.Civ.P. Rule 24 preclude supplemental

jurisdiction over (1) claims by parties “seeking to intervene asplaintiffs under Rule 24” and (2) “claims by plaintiffs againstpersons made parties under Rule . . . 24,” if “exercising



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supplemental jurisdiction over such claims would be inconsistentwith the jurisdictional requirements of section 1332.” 28 U.S.C.§ 1367(b). Neither exception applies here because OHCAintervened as a defendant, not a plaintiff, and Plaintiffs assert noclaims against it.

Id .

The same analysis applies here. Joinder under Rule 19 is subject to the same

rules as intervention under Rule 24. 28 U.S.C. § 1367(b) (“the district courts shall not

have supplemental jurisdiction under subsection (a) over claims by p l a i nt i f f s against

persons made parties under Rule . . . 19 . . . , o r o v e r c l ai m s b y p e r s o n s p r o p o s e d t o

b e j o i n ed a s p l a in t i f fs u n d e r R u l e 1 9 . . . when exercising supplemental jurisdiction

over such claims would be inconsistent with the jurisdictional requirements of section

1332.”) (emphasis added). The lack of diversity is a non-issue when the absent parties

are joined as defendants under Rule 19 and no claims are asserted against them by

plaintiffs. Price, 608 F.3d at 703–04. Because the subfranchisees can be joined

without destroying this Court’s diversity jurisdiction, if the Court finds them to be

required parties, the Court must order them to be joined and dismissal would be

improper.

D. Plaintiffs’ Claims I-III, V-VII, and IX Should Not Be Dismissed Because the

Action Should Proceed in Equity and Good Conscience.

For the reasons stated above, the Court should not even reach the question,

under Rule 19(b), whether “in equity and good conscience, the action should proceed

among the existing parties or should be dismissed.” Fed. R. Civ. P. 19(b). Because

Comfort Dental has raised the issue, however, Plaintiffs will briefly address it.



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Comfort Dental argues that Plaintiffs’ claims I-III, V-VII and IX should be

dismissed because of the “four factors found in Rule 19(b) . . . all four factors weigh in

favor of dismissal.” (Doc. #105, p. 7.) Plaintiffs respectfully disagree.

“[I]f joinder is not feasible, the court must decide whether the absent [party] is

indispensable, i.e., whether in equity and good conscience the action can continue in

[its] absence.” Thiess v. Mercer , 2010 WL 2635521, at *2 (D. Colo.). “The moving party

has the burden of persuasion in arguing for dismissal.” Rishell v. Jane Phillips Episcopal

Mem’l Med. Ctr., 94 F.3d 1407, 1411 (10th Cir.1996), cert. dismissed, 520 U.S. 1152

(1997), and cert. denied, 520 U.S. 1166 (1997) (citing Francis Oil & Gas, Inc. v. Exxon

Corp., 661 F.2d 873, 878 (10th Cir.1981)) (internal quotations omitted).

“The Rule 19(b) factors are neither exclusive nor dispositive.” Ctr. for Biological

Diversity v. Pizarchik , 858 F. Supp. 2d 1221, 1224 (D. Colo. 2012). “The design of the

Rule . . . indicates that the determination whether to proceed will turn upon factors that

are case specific, which is consistent with a Rule based on equitable considerations.”

Republic of the Philippines v. Pimentel , 553 U.S. 851, 862–63, 128 S. Ct. 2180, 2188,

171 L.Ed.2d 131 (2008). See also Davis v. United States, 192 F.3d 951, 961 (10th

Cir.1999) (“The nature of the Rule 19(b) inquiry-a weighing of intangibles-limits the force

of precedent and casts doubt on generalizations.”) (citation and internal quotation marks

omitted). Thus, a determination under Rule 19 will be “based on factors varying with the

different cases, some such factors being substantive, some procedural, some

compelling by themselves, and some subject to balancing against opposing interests.”

Pimentel , 128 S. Ct. at 2189 (quoting Provident Tradesmens Bank & Trust Co. v.



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Patterson, 390 U.S. 102, 119, 88 S. Ct. 733, 743, 19 L.Ed.2d 936 (1968)) (internal

quotation marks omitted).

1. A J u d g m en t R en d er ed i n t he S u b fr an c h is ees ’ A b s en c e W i ll N o t P rejudi c e Com f ort Dent al or t he S ubf ranc h i s ees

As set forth above, a judgment rendered in the subfranchisees’ absence will not

prejudice the subfranchisees’ interests. They are not parties to the Subfranchisor

Agreements and there are no allegations or claims against them in this action. A

judgment rendered in their absence will leave them with informative guidance, and the

same choice they currently face: (1) continue as direct Comfort Dental subfranchisees,

or (2) dispute Comfort Dental’s actions. As Comfort Dental admits, “whatever

conclusion is reached will practically affect them [the subfranchisees] . . . but may not

technically bind them.” (Doc. #105, p. 8.)

It bears noting that Comfort Dental’s Motion seeks dismissal of Claims I-III, V-VII,

and IX. Only two of those claims, however, (I and II) seek a declaration the

Subfranchisor Agreements (not the Subfranchisee Agreements) are void. (Doc. #91.)

The other claims (Fraud in the Inducement, Breach of Contract, Breach of Duty of Good

Faith and Fair Dealing, and Tortious Interference), do not seek a declaration voiding

anything and therefore could not affect the subfranchisees’ rights even by implication.

Moreover, even Claims I and II propose alternatives that would not void any

contract, but would merely enjoin Comfort Dental from illegally enforcing certain

provisions. (Doc. #91, ¶¶ 212, 225.) Accordingly, these claims are not ‘all or nothing’

as Comfort Dental argues. The subfranchisees could not even theoretically be

prejudiced by such an injunction.



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Comfort Dental argues allowing this case to proceed “will be prejudicial to

Comfort Dental” because “a chaotic result . . . would leave Comfort Dental open to

conflicting judgments as to the validity of the same contract provisions that are central to

the framework of the Comfort Dental system.” (Doc. #105, p. 8.) Comfort Dental fails to

further elaborate on this potential scenario, but it is not the type of prejudice at issue

under Rule 19. 4 Moore’s Federal Practice § 19.03[2][b], at 19–39 to 19–41. This

argument that the risk that a judgment might be used in some manner by a non-party is

inherent in every franchise agreement or standard form contract any company uses.

The logical extension of Comfort Dental’s argument is that every franchisee is an

indispensable party to every case in which any contract provision “central to the

framework of the Comfort Dental system” is at issue. That is obviously not the law.

2. The P rejudi c e Can B e Les s ened or A v oi d ed

Comfort Dental argues the judgment cannot be tailored to lessen or avoid

prejudice because “[t]he First Amended Complaint does not seek a middle ground, or

even suggest that one would be possible.” (Doc. # 105, p. 9.) Comfort Dental claims

“the nature of the interests implicated” is “all-or-nothing: the contracts are either

invalidated or they are not.” (Id. p. 10.) Comfort Dental is mistaken.

Comfort Dental fails to recognize that the First Amended Complaint seeks

multiple alternatives, all intended to enjoin Comfort Dental’s illegal actions. Plaintiffs

expressly seek a declaration that the Subfranchisor Agreements are invalid, but “[i]n the

alternative, Comfort Dental should be permanently enjoined from enforcing the

Subfranchisor Agreements in an illegal manner, and specifically enjoined from



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mandating that Plaintiffs and/or their dentists refer dental laboratory services solely to

the Budget Labs, from mandating that Plaintiffs enforce such provisions in contracts

entered into pursuant to the Subfranchisor Agreements and mandating that Plaintiffs

market and sell the Gold Plan in states where it has not been properly registered” (Doc.

#91, ¶¶ 212, 225.)

Plaintiff further seeks an injunction preventing Comfort Dental from enforcing

certain provisions of the Subfranchisor Agreements if deemed to be invalid,

unconscionable or illegal. (Id . ¶ 229 and “Wherefore” paragraph pp. 73-75.) Comfort

Dental does not identify any way in which such relief could prejudice the subfranchisees

as non-parties to the Subfranchisor Agreements. In any event, the Court could simply

decide it will not render a judgment “voiding” the Subfranchise Agreements or

implicating wrongdoing on the part of the subfranchisees.

Comfort Dental also argues “[e]ven if the subfranchisees were not technically

bound by this Court’s judgment, any opinion issued by this Court based on Plaintiffs’

claims could leave the subfranchisees open to regulatory, and potentially even criminal,

proceedings.” (Doc. #105, p. 9.) Comfort Dental’s doomsday scenario again seeks to

obscure the fact that Plaintiffs claim no wrongdoing by any subfranchisees. Plaintiffs’

claims are limited to the language of the Subfranchisor Agreements and Comfort

Dental’s conduct. Because Plaintiffs have alleged no wrongdoing of any kind by the

subfranchisees, no decision by this Court could “open” them to any such “proceedings.”



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3. Th e J u dg men t W ou ld B e A deq uat e in th e A bs en ce o f th e S ubf ranc hi s ees

Comfort Dental argues that any judgment would not be adequate because “it

would purport to invalidate the subfranchisees’ contracts wi t hout ent er i ng a j udi c i a l l y

b i n d in g o r d er a s t o t h o s e a b s en t p a rt ie s .” (Doc. #105, p. 11 (emphasis added).)

Comfort Dental was apparently unconcerned with this issue when it drafted the

Subfranchisor Agreements (which preclude the joinder of other parties to any litigation

between Plaintiffs and Comfort Dental), and while this action was pending for the

previous 18-months. Nonetheless, as stated above, Plaintiffs seek no order invalidating

the Subfranchise Agreements. Moreover, as acknowledged by Comfort Dental, a

judgment of this Court will not be binding on the subfranchisees. A judgment would not

directly affect their rights. It may, however, provide useful guidance to the

subfranchisees (and potentially other subfranchisors in the Comfort Dental system) as

any legal precedent may do, including prior authority from this Court interpreting similar

contracts. This factor therefore weighs against dismissal.

4. P l ai nt i f f s May Hav e No A dequ at e Remedy

Comfort Dental argues that Plaintiffs will have an adequate remedy because

“Plaintiffs can pursue their claims against Comfort Dental and all of the Subfranchisees

in state court.” (Doc. #105, p. 11.) Plaintiffs have no claims against the subfranchisees

to pursue in state court or otherwise. Availability of an alternative forum is an

insufficient basis to dismiss under Rule 19(b). Rishell v. Jane Phillips Episcopal Mem’l

Med. Ctr., 94 F.3d 1407, 1413 (10th Cir.1996) (“The district court should not have given

dispositive weight to the availability of an alternative forum. [P]laintiff, has an interest



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recognized by federal law in the forum of his choice, which is not outweighed here by

the interests of the absent parties, defendants, or the judicial system. Accordingly, we

conclude the district court abused its discretion in dismissing [Plaintiff]’s action under

Rule 19.”)

Moreover, if this action were dismissed (in part) and the dismissed claims refiled in

state court as a class action, Comfort Dental may seek to raise the one-year statute of

limitations in its Subfranchisor Agreements as a bar to Plaintiffs claims. Faced with that

uncertainty, this factor weighs heavily against dismissal.

5. The P ubl i c Int eres t W ei ghs A g ains t Di s mi s s al

While not an express factor under Rule 19(b), “[t]he Supreme Court has long

recognized the inapplicability of the term ‘indispensable party’ to adjudications of public,

not private rights . . . [W]hen litigation seeks the vindication of a public right, third

persons who may be adversely affected by a decision favorable to the plaintiff do not

thereby become indispensable parties.” Natural Resources Defense Council, Inc. v.

Berklund , 458 F. Supp. 925, 933 (D.D.C.1978)), aff’d, 609 F.2d 553 (D.C.Cir.1979).8

Here, Plaintiffs’ claims clearly implicate important public policy interests, which

would be undermined by dismissal of this action. This Court has previously recognized

the strong public policy considerations at issue in the types of agreements involved in

this case. Mason v. Orthodontic Ctrs. of Colorado, Inc ., 516 F. Supp. 2d 1205, 1216-17

(D. Colo. 2007) (Krieger, J). “The public policy considerations underlying the prohibition

8In Ctr. for Biological Diversity v. Pizarchik , 858 F. Supp. 2d 1221, 1230 (D. Colo. 2012), the court

refused to consider this as an ‘exception’ to the indispensable party analysis, at least context of arequired party’s sovereign immunity.



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of the corporate practice of medicine are (1) lay control over professional judgment;

(2) commercial exploitation of the medical practice; and (3) division of the physician’s

loyalty between patient and employer.” Hall v. Frankel , 190 P.3d 852, 861 (Colo. App.

2008). The “public interest in, inter alia, preventing conflicts of interest between dentists

and unlicensed entities” is thwarted if Comfort Dental were permitted to continue

unchecked and unabated its unlawful interference with the practice of dentistry in

Colorado and elsewhere, to the ultimate detriment of patients. Gentile v. Orthodontic

Centers of North Dakota, 2007 WL 2890199 (D. Colo. 2007). The public interest weighs

against dismissal of this action.

IV. CONCLUSION

For the foregoing reasons, Plaintiffs respectfully request that the Court deny

Defendants’ Motion to Dismiss or alternatively, allow Plaintiff’s leave to amend. In the

event the Court grants the Motion and determines that claims I-III, V-VII and IX of the

First Amended Complaint should be dismissed, against the weight of the legal

precedent set forth herein, Plaintiffs will seek leave to amend their complaint or to

modify their claims in a manner consistent with the Court’s decision.



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344823-5020-5992.7

Dated this 8th

day of September, 2015.

Respectfully Submitted

By: /s/ Neil L. Arney Neil L. ArneyKUTAK ROCK LLP1901 California Street, Suite 3000Denver, CO 80202(303) 297-2400

Thomas J. Kenny, NE #20022Suzanne M. Shehan-Ames, NE #20531KUTAK ROCK LLPThe Omaha Building1650 Farnam StreetOmaha, NE 68102-2186(402) 346-6000

Attorneys for Plaintiffs CDMO, INC. andCDET, INC.



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CERTIFICATE OF SERVICE

I hereby certify that on September 8th, 2015, I filed and electronically served the

foregoing on the following:

Steven M. Kelso (#29099)LaMar F. Jost (#34706)Kathryn A. Reilly (#37331)Erin F. Frohardt (#47182)

Wheeler Trigg O’Donnell LLP370 Seventeenth Street, Suite 450Denver, CO 80202-5647Telephone: 303.244.1800Facsimile: [email protected]

[email protected]@[email protected]

Attorneys for Defendant

s/Edna Slagle


Documents

150908 Doc 109 CDMO & CDET v Comfort Dental Response to Opp