Opinion ID: 454350
Heading Depth: 3
Heading Rank: 1

Heading: Microdata as an Indispensable Party

Text: 13 Ordinarily, when removal is proper at the outset, federal jurisdiction is not defeated by later changes or developments in the suit. Lopez v. General Motors Corp., 697 F.2d 1328, 1332 (9th Cir.1983); Southern Pacific Co. v. Haight, 126 F.2d 900, 903 (9th Cir.), cert. denied, 317 U.S. 676, 63 S.Ct. 154, 87 L.Ed. 542 (1942). But we have recognized an exception to this rule when an indispensable party would destroy diversity. See Othman v. Globe Indemnity Co., 459 F.2d 1458, 1465; Lopez v. General Motors Corp., 697 F.2d at 1332; Desert Empire Bank v. Insurance Co. of North America, 623 F.2d 1371, 1374 (9th Cir.1980); Molnar v. National Broadcasting Co., 231 F.2d 684, 687 (9th Cir.1956); accord In re Merrimack Mutual Fire Insurance Co., 587 F.2d 642, 646 (5th Cir.1978). 3 14 Rule 19 of the Federal Rules prescribes a bifurcated analysis to determine whether parties should or must be joined. We must first consider whether the party is necessary, i.e., whether: 15 (1) in his absence complete relief cannot be accorded among those already parties, or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his 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 his claimed interest. 16 Fed.R.Civ.P. 19(a). If the party is necessary but his joinder will destroy jurisdiction, as is the case here if Microdata is joined as a defendant, then we must consider whether in equity and good conscience the action should proceed without his joinder, i.e., whether he is indispensable. Fed.R.Civ.P. 19(b). In connection with this inquiry, four factors are relevant: 17 to what extent a judgment rendered in the person's absence might be prejudicial to him or those already parties; 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; whether a judgment rendered in the person's absence will be adequate, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder. 18 Fed.R.Civ.P. 19(b). 19 The Rule 19 analysis is easily stated, but not so easily applied. The rule emphasizes practical consequences and its application depends on the circumstances of each case. Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 118-19, 88 S.Ct. 733, 742-43, 19 L.Ed.2d 936 (1968); Kaplan v. International Alliance of Theatrical & Stage Employees, 525 F.2d 1354, 1361 (9th Cir.1975). 20 Our initial concern is whether plaintiffs can obtain complete relief from Northwestern alone. The ultimate responsibility for the medical plan and for decisions allowing or disallowing claims rests with Microdata. 4 It is not clear whether Microdata or Northwestern made the decisions about which plaintiffs complain (e.g., the disallowance of a portion of Whitten's claim, the establishment of rate schedules, or the geographic basis upon which rates are determined). Cf. Upshaw v. Equitable Life Assurance Society of the United States, 85 F.R.D. 674, 678-79 (E.D.Ark.1980) (in employee's action against insurer for failure to pay retirement disability benefits, employer's retirement board was indispensable party because it alone determined whether employees should be medically retired); Spirt v. Teachers Insurance & Annuity Association of America, 416 F.Supp. 1019, 1021-22 (S.D.N.Y.1976) (in employee's action against administrator of pension plan charging sex discrimination in computing benefits, employer was an indispensable party because it was an active participant and adopted and contributed to pension plan). 21 We must also consider Microdata's interest. Northwestern asserts that Microdata will suffer no prejudice if the action proceeds, because both Northwestern and Microdata have been and will be involved in the defense of this action, both would raise similar defenses, and in the event of an adverse result, Microdata would satisfy the judgment or would indemnify Northwestern. 5 Our recent decision in Aguilar v. Los Angeles County, 751 F.2d 1089 (9th Cir.) cert. denied, --- U.S. ----, 105 S.Ct. 2656, 86 L.Ed.2d 273 (1985), defeats this argument. 22 In Aguilar, the plaintiffs brought suit in federal court, alleging that the defendant-hospital's negligence caused their son to suffer severe brain damage. The son was not joined in the action, but instead brought a separate suit through his guardian ad litem in state court. The district court granted the defendant's motion to dismiss for failure to join the son, an indispensable party, Fed.R.Civ.P. 12(b)(7), since his citizenship would destroy diversity. We affirmed. 23 We concluded that the son was a necessary party because, under California law, he might have been collaterally estopped from relitigating issues determined adversely to his parents in the federal action. Id. at 1092-94. We noted that a California court could conclude that the son and the parents were in privity with one another, and therefore, collateral estoppel might have operated against the son. 6 24 In recent years, the concept of privity for collateral estoppel purposes has been given an expansive interpretation. California courts have defined privity as refer[ing] to a mutual or successive relationship to the same rights or property, or to such an identification in interest of one person with another as to represent the same legal rights. Clemmer v. Hartford Insurance Co., 22 Cal.3d 865, 875, 587 P.2d 1098, 1102, 151 Cal.Rptr. 285, 289 (1978). The inquiry is whether the relationship between the party to be estopped and the party in a prior litigation is sufficiently close so as to justify application of collateral estoppel. Id.; see also In re Gottheiner, 703 F.2d 1136, 1140 (9th Cir.1983) (Privity exists when there is 'substantial identity' between the parties, that is, when there is a sufficient commonality of interest.). 7 25 Aguilar makes clear that we need not conclusively determine how collateral estoppel would operate in future litigation. 751 F.2d at 1094. Rule 19 speaks to possible harm, not only to certain harm. Id. (emphasis in original). We find that a significant possibility exists that the relationship between Northwestern and Microdata is sufficiently close so that Microdata could be collaterally estopped from relitigating issues decided against Northwestern in this proceeding. 26 For this reason, then, as well as the possibility that complete relief may be unavailable if Microdata is not joined, we conclude that Microdata is a necessary party under Rule 19(a). Microdata's citizenship would destroy diversity in this action, so we must consider whether in equity and good conscience the case should proceed without joinder, or if the case more properly should be remanded to state court. 27 We have already discussed potential prejudice and the possibility of inadequate relief, two of the Rule 19(b) factors, in the analysis above. The remaining factor of Rule 19(b) deserving attention is the availability of an alternative forum. 8 28 State court provides an adequate alternative forum. In state court, all the parties who should be joined, can be joined. And, unlike a case brought under the federal court's original jurisdiction, the state court is the forum originally chosen by the plaintiffs. 29 The availability of an alternative forum weighs strongly in favor of remanding this case. This case is still young; discovery apparently has just begun. There would be little duplication of effort if this case were to return to the state court. See Walsh v. Centeio, 692 F.2d 1239, 1244 (9th Cir.1982). On the other hand, judicial efficiency would not be promoted by permitting this case to go forward in federal court, with the possibility that future litigation between plaintiffs and Microdata or between Microdata and Northwestern may be required to settle this controversy fully. 30 For these reasons, we conclude that Microdata is an indispensable party to this action.