Opinion
FSTCV196044151S
01-09-2020
SOSV Investments, LLC et al. v. Charles Henry, III
UNPUBLISHED OPINION
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Krumeich, Edward T., J.
MEMORANDUM OF DECISION
KRUMEICH, J.
Defendant has moved to strike the complaint in this declaratory judgment action for failure to join persons who defendant asserts are indispensable parties. For the reasons stated below, the motion is denied.
The motion initially also asserted failure to give proper notice to all persons who have an interest in the subject matter, but this ground was later withdrawn after plaintiffs filed the Notice of Delivery, which listed the non-party signatories.
Practice Book § 17-56 provides:
(b) All persons who have an interest in the subject matter of the requested declaratory judgment that is direct, immediate and adverse to the interest of one or more of the plaintiffs or defendants in the action shall be made parties to the action or shall be given reasonable notice thereof ...
The party seeking the declaratory judgment shall append to its complaint or counterclaim a certificate stating that all such interested persons have been joined as parties to the action or have been given reasonable notice thereof. If notice was given, the certificate shall list the names, if known, of all such persons, the nature of their interest and the manner of notice.
(c) Except as provided in Sections 10-39 and 10-44, no declaratory judgment action shall be defeated by the nonjoinder of parties or the failure to give notice to interested persons. The exclusive remedy for nonjoinder or failure to give notice to interested persons is by motion to strike as provided in Sections 10-39 and 10-44.
This action seeks a declaration that former limited partners, who were signatories to an agreement dated February 10, 2014 (the "Agreement") that provided inter alia for sharing legal fees and costs incurred in certain litigation concerning their dissolved partnerships and indemnification, (1) are liable to reimburse a pro rata share of said fees and costs paid by plaintiff SOSV Investments, LLC ("SOSV"), and (2) that this obligation was not referred to or superseded by the indemnification provision in the same agreement. The complaint alleges defendant Henry, a limited partner, became the general partner of the partnerships and, along with most of the partners, was party to the Agreement. Henry is the only defendant to this action; the other limited partners who were parties to the Agreement were served with notice of the action pursuant to Practice Book § 17-56(b) but are not parties to this action. Henry argues that merely providing notice of suit pursuant to the Practice Book is insufficient and the complaint must be stricken because the limited partner signatories are indispensable parties.
Plaintiff Higgins was also a limited partner and party to the Agreement.
In Sturman v. Socha, 191 Conn. 1, 6-7 (1983), the Supreme Court discussed when a person was an indispensable party to a law suit:
Parties have been characterized as "indispensable" when they "not only have an interest in the controversy, but an interest of such a nature that a final decree cannot be made without either affecting that interest, or leaving the controversy in such condition that its final termination may be wholly inconsistent with equity and good conscience." ... Necessary parties, however, have been described as "[p]ersons having an interest in the controversy, and who ought to be made parties, in order that the court may act on that rule which requires it to decide on, and finally determine the entire controversy, and do complete justice, by adjusting all the rights involved in it ... [B]ut if their interests are separable from those of the parties before the court, so that the court can proceed to a decree, and do complete and final justice, without affecting other persons not before the court, the latter are not indispensable parties." (Citations omitted).
In 98 Lords Highway, LLC v. 100 Lords Highway, LLC, 138 Conn.App. 776, 786 (2012), the Appellate Court reaffirmed that a non-party generally is not affected by a declaratory judgment:
[A] person who is not a party generally will not be bound by a declaratory ruling ... [A]n interested person who is not notified of the action is subject only to the stare decisis impact of the judgment ... [When] the interested person’s circumstances are sufficiently different from those of the parties, the parties’ representation of the nonparty’s interests may have been weak, but the case will have less precedential effect on the interested person and any future action to which that person may be a party.
In 98 Lords Highway, the Appellate Court cited the Supreme Court’s decision in Batte-Holmgren v. Commissioner of Public Health, 281 Conn. 277, 288-89 (2007), for the proposition that failure to join an indispensable party may implicate due process concerns even though the non-party’s rights or obligations are not directly adjudicated:
While failure to join indispensable parties generally does not implicate a court’s subject matter jurisdiction, such failure "may implicate due process concerns that would compel a court to require notice or joinder before proceeding with the action." Batte-Holmgren v. Commissioner of Public Health, supra, 281 Conn. at 289 ... "[A] court may refuse to proceed with litigation if a claim cannot properly be adjudicated without the presence of those indispensable persons whose substantive rights and interests will be necessarily and materially affected by its outcome ... Joinder of indispensable parties is mandated because due process principles make it essential that [such parties] be given notice and an opportunity to protect [their] interests by making [them] a party to the [action] ... Hilton v. New Haven, 233 Conn. 701, 722-23, ... (1995)." Batte-Holmgren v. Commissioner of Public Health, supra, at 289-90 ...
In the Batte-Holmgren case the Supreme Court examined due process considerations where, unlike here, interested parties were not given notice of a declaratory judgment action:
Having concluded that failure to provide notice, like noncompliance with the joinder rules, is nonjurisdictional, we also conclude that failure to provide notice, like nonjoinder, may implicate due process concerns that would compel a court to require notice or joinder before proceeding with the action. "[A] court may refuse to proceed with litigation if a claim cannot properly be adjudicated without the presence of those indispensable persons whose substantive rights and interests will be necessarily and materially affected by its outcome ... Joinder of indispensable parties is mandated because due process principles make it essential that [such parties] be given notice and an opportunity to protect [their] interests by making [them] a party to the [action]." ... Thus, we now consider whether this action should be remanded for such a purpose, or whether we may proceed with this appeal consistent with the dictates of due process. 281 Conn. at 289-90 (citations omitted).
The Supreme Court in Batte-Holmgren concluded that remand for notice or joinder was not necessary to afford due process protection to interested nonparties under circumstances where their interests were adequately protected by another party:
We conclude that the interests of nonparties who may be interested in the present action, including the municipalities that bear responsibility for enforcing the smoking ban statute, have been represented adequately by the current parties. The posture of the action is such that both this court and the trial court have been asked to determine solely a legal question, the constitutionality, on equal protection grounds, of the smoking ban statute. The inquiry does not require any factual determinations. The question has been fully briefed and argued by the parties, as well as the amicus curiae. We perceive no deficiency in the pursuit of this legal argument that would leave the interests of a potential party, either plaintiff or defendant, unprotected. Moreover, as we have noted previously, a person who is not a party generally will not be bound by a declaratory ruling. Practice Book § 17-56(d). Thus, an interested person who is not notified of the action is subject only to the stare decisis impact of the judgment. If the situation of an interested person is quite similar to that of one of the parties, then the stare decisis impact on the interested person may be strong, but, because of the similarity of interests, the existing parties are likely to have represented well the nonparty’s interests. If, on the other hand, the interested person’s circumstances are sufficiently different from those of the parties, the parties’ representation of the nonparty’s interests may have been weak, but the case will have less precedential effect on the interested person and any future action to which that person may be a party." 281 Conn. at 290-91.
Unlike Batte-Holmgren this case does not concern "solely a legal question" but declarations about the interpretation of the Agreement, the resolution of which, while not binding on non-party signatories, is likely to have to have strong stare decisis impact. On the other hand, here the non-party signatories have notice of the action and the opportunity to join as parties if they wish. Plaintiffs’ compliance with the notice provision in Practice Book § 17-56(b) and its disjunctive requirement that "[a]ll persons who have an interest in the subject matter of the requested declaratory judgment that is direct, immediate and adverse to the interests of one or more of the plaintiffs or defendants in the action shall be made parties to the action or shall be given reasonable notice thereof" (emphasis added), satisfied the due process requirement that the nonparty signatories have notice and the opportunity to join the action to protect their interests. See Gen’l Ins. Co. of America v. Okeke, 182 Conn.App. 83, 94-95 (2018), citing New London County Mut. Ins. Co. v. Nantes, 303 Conn. 737, 748 (2012). Accord Mattera v. Civil Service Comm’n of Bridgeport, 49 Conn.Supp. 224 (2005) (Robinson, J.) (notice under P.B. § 17-56(b) required by due process). Given the presumed common interest in minimizing pro rata sharing of plaintiff’s fees and costs and the identity of interests of the signatories to the Agreement on the issues presented, there is every reason to believe defendant will competently represent the interests of the non-party signatories if they chose not to join the action. See Batte-Holmgren, 281 Conn. at 291-92.
The older cases cited by defendant such as Mannweiler v. LaFlamme, 232 Conn. 27, 32-36 (1995), were decided when the failure to join an indispensable party was deemed a jurisdictional defect, which is not the case today, see Batte-Holmgren, 281 Conn. at 284-85; however, a close reading of the older case law indicates that it was notice and the opportunity to be heard that were held necessary to protect the interested non-party’s due process rights. See e.g., Mannweiler, 232 Conn. at 33-36; Hilton v. City of New Haven, 233 Conn. 701, 722-23 (1995).
Presumably defendant will be in a better position to litigate the matter than non-party signatories whose putative pro rata share may be too small to justify active participation in the law suit. Also, as a practical matter, the putative pro rata share of such party may be so small that SOSV may not pursue reimbursement in a separate proceeding. If the non-party signatories chose not to join the action, this is not a case where their non-participation would be "wholly inconsistent with the principles of equity" as was the case in New Breed Logistics, Inc, v. CT Indy N.H. TT, 2009 WL 5317804 *6 (Conn.Super. 2009) (Robinson, J.), in which the court declined to grant summary judgment because Judge Robinson found the non-party possessor’s contractual and property rights would be affected by the declaration and were "inextricably intertwined with the legal and factual issues in this case."
The motion to strike is denied.