Opinion ID: 149223
Heading Depth: 3
Heading Rank: 3

Heading: Dismissal In Equity and Good Conscience

Text: If a required party under Rule 19(a) cannot be joined as a plaintiff or defendant, we look to the factors provided in Rule 19(b) to determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed. Fed.R.Civ.P. 19(b). Rule 19(b) provides four factors that we must consider in making this determination: (1) the extent to which a judgment rendered in the person's absence might prejudice that person or the existing parties; (2) the extent to which any prejudice could be lessened or avoided by shaping the judgment or the relief; (3) whether a judgment rendered in the person's absence would be adequate; and (4) whether the plaintiff would have an adequate remedy if the action were dismissed. Id. The heart of this inquiry is the question of equity and good conscience. See Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 125, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968); Dawavendewa II, 276 F.3d at 1161. The inquiry is a practical one and fact specific ... and is designed to avoid the harsh results of rigid application. Makah Indian Tribe v. Verity, 910 F.2d 555, 558(9th Cir.1990) (internal citations omitted). For the reasons that follow, we conclude that EEOC's claim for damages against Peabody must be dismissed under Rule 19(b), but that its claim for an injunction against Peabody should be permitted to proceed.
If EEOC's suit against Peabody were allowed to proceed, the district court would almost certainly award damages against Peabody if it concludes that the Navajo employment preference provision violates Title VII. In that event, Peabody would quite reasonably look to the Secretary for indemnification, given that the preference provision was included in the leases at the insistence of the Secretary. Rule 14(a) would permit Peabody to file a third-party complaint against the Secretary for indemnification. But because Peabody's indemnification suit would seek damages, it would be barred by the government's sovereign immunity unless that immunity is waived by statute. We can find no waiver of sovereign immunity to such a suit. The Tucker Act, 28 U.S.C. § 1346(a)(2), waives the government's sovereign immunity in damage suits based on contract, as well as for some claims arising under the Constitution and statutes of the United States. Under the Tucker Act, a party's claims must either rest upon a contract, seek the return of money paid by them to the Government, or establish an entitlement to money damages under a federal statute that `can fairly be interpreted as mandating compensation by the Federal Government for the damage sustained.' United States v. Testan, 424 U.S. 392, 400, 96 S.Ct. 948, 47 L.Ed.2d 114 (1976) (quoting Eastport S.S. Corp. v. United States, 178 Ct.Cl. 599, 372 F.2d 1002, 1009 (1967)); see also Lake Mohave Boat Owners Ass'n v. Nat'l Park Serv., 78 F.3d 1360, 1365 (9th Cir.1995). The Federal Tort Claims Act, 28 U.S.C. § 1346(b), waives the sovereign immunity of the United States for suits in tort. See FDIC v. Meyer, 510 U.S. 471, 477, 114 S.Ct. 996, 127 L.Ed.2d 308 (1994). However, neither the Tucker Act nor the Federal Tort Claims Act waives the government's sovereign immunity in the circumstances of this case. Title VII also waives the government's sovereign immunity to some extent. Based on that waiver, a federal employee may sue the government for damages under Title VII, provided that administrative remedies with EEOC have been exhausted. 42 U.S.C. § 2000e-16(c); see Library of Cong. v. Shaw, 478 U.S. 310, 319, 106 S.Ct. 2957, 92 L.Ed.2d 250(Congress waived the Government's immunity under Title VII as a defendant, affording federal employees a right of action against the Government for its discriminatory acts as an employer.); cf. Fitzpatrick v. Bitzer, 427 U.S. 445, 96 S.Ct. 2666, 49 L.Ed.2d 614 (1976) (Title VII abrogates the states' sovereign immunity). But we can find nothing in Title VII that waives the government's sovereign immunity to a damages suit brought by a private employer that has itself violated Title VII. Peabody's only sin, if indeed it was a sin, was to comply with an employment preference provision inserted in its lease at the insistence of the Secretary. It would be profoundly unfair for a court to award damages against Peabody while allowing Peabody no redress against the government. We are unable to see any way to mitigate this unfairness by, for example, protective provisions in the judgment;... shaping relief; or ... other measures. Fed.R.Civ.P. 19(b)(2)(A-C). We therefore conclude that in equity and good conscience EEOC's damages claim against Peabody must be dismissed under Rule 19(b).
If EEOC's suit is allowed to proceed and if the district court were to hold that the Navajo employment preference provision violates Title VII, the district court would almost certainly grant an injunction requiring Peabody to ignore the provision in making its employment decisions. This injunction would not only require Peabody to take certain actions; it would also operate as res judicata against the Nation. In the event such an injunction were issued, Peabody and the Nation would quite reasonably want to seek prospective relief preventing the Secretary from enforcing the provision. Rule 14(a) would permit Peabody and the Nation to file a third-party complaint seeking such relief against the Secretary. Sovereign immunity does not bar prospective injunctive relief against the Secretary. We conclude that the availability of prospective relief through a third-party complaint under Rule 14(a) means that in equity and good conscience EEOC's suit against Peabody should be permitted to proceed.
A claim to which sovereign immunity is not a defense may be entertained even if another claim in the suit is dismissed because of sovereign immunity. See, e.g., United States v. Georgia, 546 U.S. 151, 159, 126 S.Ct. 877, 163 L.Ed.2d 650 (2006) (finding sovereign immunity of state was not a bar to some of the plaintiffs' claims and remanding to the district court to allow suit to proceed for any claims that were not shielded by sovereign immunity). Therefore, the district court may entertain Peabody and the Nation's third-party claim for prospective relief if it is not barred by the United States' sovereign immunity, even if a Peabody claim for damages would have to be dismissed. Prospective relief requiring, or having the effect of requiring, governmental officials to obey the law has long been available. Sovereign immunity does not bar such relief. The case often cited for this proposition is Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), which permitted an injunction against the Attorney General of Minnesota despite the Eleventh Amendment. The Ex parte Young fiction remains the basis for prospective relief against state officers. For example, in Verizon Maryland, Inc. v. Public Service Commission, 535 U.S. 635, 122 S.Ct. 1753, 152 L.Ed.2d 871 (2002), the Supreme Court allowed injunctive and declaratory relief against individual state officials despite the Eleventh Amendment. For a number of years, prospective relief against federal officials was available under the fiction of Ex parte Young. For example, in Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682, 69 S.Ct. 1457, 93 L.Ed. 1628 (1949), the Supreme Court allowed prospective relief against a federal official despite an asserted defense of sovereign immunity. The Court wrote: There may be, of course, suits for specific relief against officers of the sovereign which are not suits against the sovereign. If the officer purports to act as an individual and not as an official, a suit directed against that action is not a suit against the sovereign.... [W]here the officer's powers are limited by statute, his actions beyond those limitations are considered individual and not sovereign actions. The officer is not doing the business which the sovereign has empowered him to do or he is doing it in a way which the sovereign has forbidden. His actions are ultra vires his authority and therefore may be made the object of specific relief. Id. at 689, 69 S.Ct. 1457. We explicitly followed the legal fiction described in Larson in Washington v. Udall, 417 F.2d 1310, 1314 (9th Cir.1969), and did so again in Rockbridge v. Lincoln, 449 F.2d 567, 572-73 (9th Cir.1971). However, since 1976 federal courts have looked to § 702 of the Administrative Procedure Act (APA), 5 U.S.C. § 702, to serve the purposes of the Ex parte Young fiction in suits against federal officers. In Presbyterian Church (U.S.A.) v. United States, 870 F.2d 518 (9th Cir.1989), we explained that after § 702 was amended in 1976, it replaced the Ex parte Young fiction as the doctrinal basis for a claim for prospective relief. We wrote: It is particularly significant that [in enacting § 702 of the APA] Congress referred disapprovingly to the Ex parte Young fiction, which permitted a plaintiff to name a government official as the defendant in equitable actions to redress government misconduct, on the pretense that the suit was not actually against the government. By invoking the Young fiction plaintiffs could, even before Congress amended § 702 in 1976, maintain an action for equitable relief against unconstitutional government conduct, whether or not such conduct constituted agency action in the APA sense. See, e.g., Larson v. Domestic & Foreign Commerce Corp . ... Congress' plain intent in amending § 702 was to waive sovereign immunity for all such suits, thereby eliminating the need to invoke the Young fiction. Id. at 525-26 (citations omitted) (emphasis added). In Presbyterian Church we wrote, On its face, the 1976 amendment [to § 702] is an unqualified waiver of sovereign immunity in actions seeking nonmonetary relief against legal wrongs for which governmental agencies are accountable. 870 F.2d at 525. We explained that the waiver is not limited to judicial review in suits challenging agency action as defined in the APA, but instead covers all actions seeking relief from official misconduct except for money damages. Id. In Gallo Cattle Co. v. United States Department of Agriculture, 159 F.3d 1194 (9th Cir.1998), we stated that the APA's waiver of sovereign immunity contains several limitations, including the final agency action requirement that we had considered irrelevant in Presbyterian Church. Id. at 1198. We held that, because the plaintiffs failed to challenge final agency action, the waiver of sovereign immunity did not apply. Id. In Gros Ventre Tribe v. United States, 469 F.3d 801 (9th Cir.2006), we discussed but declined to resolve the tension between the two cases, observing that there is no way to distinguish The Presbyterian Church from Gallo Cattle.  Id. at 809. We similarly need not resolve this tension here. Unlike in Gallo Cattle, there is final agency action in this case, because the Secretary has mandated the disputed lease terms. Agency action under the APA is defined as the whole or a part of an agency rule, order, license, sanction, relief, or the equivalent or denial thereof, or failure to act. 5 U.S.C. § 551(13). Persons entitled to judicial review under the APA include an individual, partnership, corporation, association, or public or private organization other than an agency. 5 U.S.C. § 701(b)(2)(providing that, for purposes of provisions on judicial review, definition of person in 5 U.S.C. § 551 applies); id. § 551(providing definition of person). Both Peabody and the Navajo Nation come within this definition of person. Peabody is a corporation, and the Nation is a public organization. Id. Therefore, under § 702 of the APA, as would be the case under the Ex parte Young fiction, either Peabody or the Nation may assert a claim against the Secretary requesting injunctive or declaratory relief. We therefore conclude that neither Peabody nor the Nation is barred by sovereign immunity from bringing a thirdparty complaint seeking prospective relief against the Secretary under Rule 14(a).
If a required party under Rule 19(a) cannot be joined as a plaintiff or defendant, the court must determine whether under Rule 19(b) the action must be dismissed in equity and good conscience. Among the factors to be considered in making that determination is whether, under Rule 19(b)(2)(C), measures may be taken that would lessen or avoid any prejudice. To the degree that Peabody and the Nation may be prejudiced by the absence of the Secretary as a plaintiff or defendant, that prejudice may be eliminated by a third-party complaint against the Secretary under Rule 14(a). The courts of appeals that have addressed the question are unanimous in holding that if an absentee can be brought into an action by impleader under Rule 14(a), a dismissal under Rule 19(b) is inappropriate. In Pasco International (London) Ltd. v. Stenograph Corp., 637 F.2d 496 (2d Cir.1980), the Second Circuit repeatedly indicated that prejudice to existing parties could be eliminated by impleader under Rule 14(a). The court wrote, Stenograph can always protect itself from the possibility of inconsistent verdicts by impleading Croxford under Rule 14[.] ... [T]he existence of the Rule 14 provisions demonstrates that parties such as Croxford who may be impleaded under Rule 14 are not indispensable parties within Rule 19(b). Id. at 503. It summarized, [A]ll persons subject to impleader by the defendant are not indispensable parties. This is... merely an extension of the settled doctrine that Rule 19(b) was not intended to require the joinder of persons subject to impleader under Rule 14 such as potential indemnitors. Id. at 505 n. 20. The other circuits that have addressed the question have come to the same conclusion. See, e.g., Boone v. General Motors Acceptance Corp., 682 F.2d 552, 553 (5th Cir.1982) (defendants could protect their interests by joining the dealer as a third party should they care to do so); Challenge Homes, Inc. v. Greater Naples Care Ctr., Inc., 669 F.2d 667, 671 (11th Cir.1982) (defendant may protect itself against [prejudice] by impleading [the absent person] under Rule 14).
We conclude that prospective relief in the form of an injunction or declaratory judgment is available in a Rule 14(a) impleader against the Secretary. Such prospective relief against the Secretary is enough to protect Peabody and the Nation, both with respect to EEOC's request for injunctive relief against Peabody and with respect to any res judicata effect against the Nation. Such relief would also protect the Secretary because, once brought in as a third-party defendant, he will be able to defend his position on the legality of the leases. We therefore conclude, in equity and good conscience, that EEOC's claim against Peabody for injunctive relief should be allowed to proceed.