Opinion
CIVIL ACTION NO: 01-1662 SECTION: "R" (3)
October 10, 2001
ORDER AND REASONS
Before the Court is defendant HLM Design of North America, Inc.'s motion to dismiss pursuant to Rule 12(b)(7) of the Federal Rules of Civil Procedure. For the following reasons, the defendant's motion is denied.
I. BACKGROUND
This action arises out of a dispute over the construction of the Alton Ochsner Medical Foundation Multi-Purpose Tower, locate in Jefferson Parish, Louisiana. Plaintiff, Alton Ochsner Medical Foundation entered into a contract with HLM in March of 1987 in which HLM agreed to serve as the project architect for the design of the project. Ochsner also entered into a contract with Broadmoor, a Louisiana partnership, in which Broadmoor agreed to serve as the general contractor for the project. Fidelity Deposit Company of Maryland executed a performance bond on the project, naming Broadmoor as the principal and Ochsner as the obligee.
Beginning in January of 1994, Ochsner noticed cracks in the pile caps designed by HLM and constructed by Broadmoor. Although notified of the problems with the project, both HLM and Broadmoor failed to take any action either to repair or to arrest the cracks in the pile caps. As a result, Ochsner sued HLM and FD in federal court on May 30, 2001. That same day, Ochsner filed a related case in Louisiana state court against HLM, FD, and Broadmoor.
HLM now moves to dismiss this action under Federal Rule of Civil Procedure 12(b)(7) for failure to join Broadmoor, which it contends is a necessary and/or indispensable party See FED. R. Civ. P. 12(b)(7).
II. DISCUSSION
A. Legal Standard
Rule 12(b)(7) of the Federal Rules of Civil Procedure permits a party to bring a motion to dismiss a complaint for failure to join a party under Rule 19. See FED. R. Civ. P. 12(b)(7). Proper joinder under Rule 19 is a two step process. First, the court must decide if the absent party is a necessary party to the action. See FED. R. Civ. P. 19(a). Second, if the absent party is a necessary party, but its joinder is not feasible, the court must decide whether the absent party is an "indispensable" party to the action under Rule 19(b). See FED. R. CIV. p. 19(b).
Under Rule 19(a), a party is "necessary" if:
(1) in the person's absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may (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).
If a party is "necessary," but cannot be joined in the action because its joinder would defeat the court's diversity jurisdiction, the court must determine "whether in equity and good conscience the action should proceed among the parties before it . . ." FED. R. Civ. P. 19(b). The rule provides a list of four factors for a court to consider when making its determination:
[F]irst, to what extent a judgment rendered in the person's absence might be prejudicial to the person or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder. FED. R. Civ. P. 19(b).
State law is relevant "in determining what interest the outsider actually has, but the ultimate question whether, given those state-defined interests, a federal court may proceed without the outsider is a federal matter." Morrison v. New Orleans Pub. Serv. Inc., 415 F.2d 419, 423 (5th Cir. 1969) ( citing Provident Tradesmens Bank Trust Co. v. Patterson, 390 U.S. 102, 125 n. 22, 88 S.Ct. 733, 746 n. 22 (1968)).
B. Necessary Party Analysis
As the Fifth Circuit has stated, the nature of a person's interest in a lawsuit depends upon the law of the state concerned, in this case Louisiana. See id. Louisiana Civil Code Article 3045 provides that a surety such as FD is liable for the full performance of the principal debtor:
A surety . . . is liable to the creditor in accordance with the provisions of this Chapter, for the full performance of the obligation of the principal obligor, without the benefit of division or discussion, even in the absence of an express agreement of solidarity. LA. Civ. CODE art. 3045.
Under Article 3045, a creditor may sue a guarantor without first attempting collection from the principal debtor or including the principal debtor in the same suit. See Katz v. Innovator of America, Inc., 552 So.2d 724, 726 (La.App. 1st Cir. 1989) ( citing Bordelon v. Smith, 506 So.2d 788 (La.App. 1st Cir.), writ denied, 512 So.2d 1178 (1987); Revision Comment (c) to LA. CIV. CODE art. 3045 (West 1994). Based on this fact, it is clear that complete relief can be granted among those already parties to this case because Ochsner, as the creditor, may sue the guarantor, FD, without joining Broadmoor, the principal. See LA. CIV. CODE art. 3045. FD's liability on the bond is not dependant on plaintiff's first obtaining a judgment against Broadmoor. See Id. In LL Oil v. Hugh Mac Towing Co., 859 F. Supp. 1002 (E.D. La. 1994), the defendant argued that the principal in a guaranty contract was an indispensable party in an action against the guarantor, but the court concluded that complete relief could be obtained in the principal's absence because Article 3045 permitted the creditor to sue the guarantor without first attempting to collect from the principal. See LL Oil, 859 F. Supp. at 1005; see also CFSC Capital Corp. XXVII v. Riverwood LaPlace Associates, L.L.C., 1996 WL 337220, *1 (E.D. La. 1996). Accordingly, Broadmoor is not a necessary party under Rule 19(a)(1) because its absence from this action does not prevent the existing parties from obtaining complete relief.
Broadmoor also fails to qualify as a necessary party under Rule 19(a) (2). Indeed the only specific argument that HLM raises is that there is a potential for inconsistent obligations against itself, FD, and Broadmoor in the absence of Broadmoor because of the impact this action will have on the plaintiff's claims in state court against HLM, FD, and Broadmoor. (See Def's Mot. to Dism. 4). This argument is without merit. First, the Court notes that Rule 19 is concerned with the threat of inconsistent obligations, not multiple litigation. See Shelton v. Exxon Corp., 843 F.2d 212, 218 (5th Cir. 1988). Second, HLM fails to explain how it is exposed to the risk of inconsistent obligations in Broadmoor's absence. Further, HLM's potential liability for faulty design of the pile caps is distinct from the potential liability of the general contractor, Broadmoor, which is predicated on the construction of pile caps. Moreover, FD, Broadmoor's surety, has not even argued that it could be exposed to inconsistent obligations by Broadmoor's absence from this proceeding.
Additionally, there is no potential for inconsistent obligations as to FD in the absence of Broadmoor because any decision regarding the liability, or lack thereof, of FD in this Court, is likely to have res judicata affect on the state court proceedings under Louisiana Revised Statute Section 13:4231. See Triche v. Crescent Turnkey Engineering, L.L.C., 744 So.2d 689, 691 (La.App. 5th Cir. 1999) ("A final judgment in the federal system can form the basis of a res judicata plea in state court."). A valid and final judgment is conclusive between the same parties with respect to any issue actually litigated and determined if its determination was essential to that judgment. See LA. REV. STAT. § 13:4231.
Finally, HLM argues that Broadmoor may be subjected to inconsistent obligations because FD can seek indemnification from Broadmoor if FD is held liable here on account of Broadmoor's failure to perform its obligations to plaintiff. The Court fails to see how this could impose inconsistent obligations on Broadmoor. In any case, the relevant inquiry under Rule 19(a)(2) is whether there is a risk of inconsistent obligations on those "already parties," and Broadmoor is not a party.
Since the Court has determined that defendant has failed to show that Broadmoor is a necessary party under Rule 19, the Court need not analyze whether Broadmoor is an indispensable party.
III. CONCLUSION
For the foregoing reasons, the Court DENIES defendant's motion to dismiss for failure to join a party under Federal Rule of Civil Procedure 19.