Opinion ID: 779064
Heading Depth: 2
Heading Rank: 1

Heading: Joinder of the Partnership as an Indispensable Party

Text: 22 On review of the district court's denial of Defendants' motion to dismiss for failure to join an indispensable party, we first examine the standard articulated in Rule 19 for indispensable parties. Fed.R.Civ.P. 12(b)(7); 19(b). To find that a person who is not joined is indispensable, the absent person must first be deemed necessary as a person to be joined if feasible under Rule 19(a)(1) and (2). Fed.R.Civ.P. 19(b). If the person is necessary, and cannot be joined, the court shall determine whether in equity and good conscience the action should proceed among the parties before it or should be dismissed, the absent person being thus regarded as indispensable. Id. Rule 19 then provides four factors for the trial court to consider, in determining whether the matter should proceed or be dismissed for failure to join the absent person: [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. 23 Fed.R.Civ.P. 19(b). 24 To begin, the district court held that the partnership was not a person to be joined if feasible, and therefore rejected dismissal for failure to join an indispensable party. If joinder of a party will not deprive the court of subject matter jurisdiction, the party shall be joined as necessary if: 25 (1) [I]n 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). 3 26 Under California law, partners are permitted to maintain an action against the partnership or another partner for legal or equitable relief. Cal. Corp.Code § 16405(b). Relief is available against another partner for an accounting, enforcement of rights under the partnership agreement, dissolution, and to enforce other rights of a partner arising under the code or for rights independent of the partnership agreement. Id. Given the state law permitting plaintiff partners to sue defendant partners for breach of contract, dissolution, and accounting, the district court rejected the argument that Plaintiffs' claims stated injury only to the partnership. In addition, Plaintiffs presented affirmative evidence that the partnership had no separate assets, and was not a party to any contracts in its own name. The court therefore held that complete relief could be afforded among existing parties without joinder of the partnership, and that the failure to join the partnership would not prejudice any party. 27 Defendants cite several California cases for the proposition that the interest of an individual partner in partnership assets is not subject to attachment or execution except on a claim against the partnership entity. Epstein v. Frank, 125 Cal.App.3d 111, 119-120, 177 Cal.Rptr. 831 (1981); see also Hildebrand v. Stonecrest Corp., 174 Cal.App.2d 158, 169, 344 P.2d 378 (1959); Potts v. Whitson, 52 Cal.App.2d 199, 207, 125 P.2d 947 (1942). In Epstein, the most recent of these cases, the court relied on Cal. Corp.Code §§ 15025, 15509. Epstein, 125 Cal.App.3d at 120, 177 Cal.Rptr. 831. As the district court noted, Section 15025 was repealed, and Section 16405 was enacted in its stead, in 1996. Cal. Stats.1996, c. 1003 (A.B.583), §§ 1.2, 2 (operative Jan. 1, 1999). Likewise Section 15509 applies only to limited partnerships. Epstein, 125 Cal.App.3d at 120, 177 Cal.Rptr. 831. 28 Assuming that the parties' partnership agreement was governed by the repealed law which was in effect in 1996, an issue not explicitly addressed by the parties, the authority cited remains inapposite. In Epstein, for example, the court noted that a partnership is generally regarded as an aggregate of individuals and has no domicile or residence separate and distinct from the individuals who constitute it. Id. at 119, 177 Cal.Rptr. 831 (citations omitted). By way of contrast, the court also noted that [t]he authorities are replete with instances where the partnership is considered an entity. Id. Addressing this competing authority, the Epstein court determined that analysis of the cases demonstrates that the concept to be utilized in any given case is dependent largely upon policy considerations and upon which concept will achieve a fair and equitable disposition of the issues in controversy. Id. The court then held that a limited partnership would be treated as an entity for purposes of applying the statute of limitations. Id. at 120, 177 Cal.Rptr. 831. 29 In the instant case, the partnership had no name, assets, or contracts as a partnership. Unlike Hildebrand, no judgment was entered against the partnership as an entity which had not appeared in its own name. See Hildebrand, 174 Cal.App.2d at 169, 344 P.2d 378 (amending judgment to name only individual partners, and affirming judgment as amended). Thus, even assuming that the repealed statute would apply, the authority weighs in favor of treating the partnership as a collection of individual partners. In light of the current California statute permitting suit against individual partners, and the finding that the partnership did not have its own assets, the district court's legal conclusion that the partnership need not be joined was correct. See Cal. Corp. Code § 16405(b). 30 Having established that an action is available against and among individual partners, we note that Defendants have not addressed how the partnership factually meets the standard under Rule 19 as a person to be joined if feasible. Fed.R.Civ.P. 19(a). It is undisputed that the partnership has no assets and no contractual obligations, hence no showing that in the partnership's absence complete relief cannot be accorded among those already parties. Fed.R.Civ.P. 19(a)(1). For the second prong, there is no argument that the partnership had interests which could not be protected without joinder, nor that existing parties faced a risk of multiple or inconsistent liabilities. See Fed.R.Civ.P. 19(a)(2)(i), (ii). As such, the district court properly found that the partnership was not an entity to be joined if feasible under Rule 19(a). Because the partnership is not a necessary party under the standard of Rule 19(a), it cannot be indispensable under Rule 19(b). Fed.R.Civ.P. 19(b). Consequently, the district court's denial of the motion to dismiss for failure to join an indispensable party was not an abuse of discretion.