Opinion ID: 2978524
Heading Depth: 4
Heading Rank: 1

Heading: Required Parties

Text: A required party under Rule 19(a) is a party whose absence prevents the court from according “complete relief among existing parties” or a party who “claims an interest relating to the subject of the action” and whose absence “as a practical matter impair[s] or impede[s] the [party’s] ability to protect the interest” or “leave[s] an existing party subject to the substantial risk of . . . multiple[] or otherwise inconsistent obligations.” Fed. R. Civ. P. 19(a)(1)(A), (B)(i), (ii). In essence, required parties are those “persons 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.” 7 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure § 1604 (3d ed. 2009) (“FPP”) (quoting Shields v. Barrow, 58 U.S. (17 How.) 130, 139 (1854)). Plaintiffs have requested declaratory and injunctive relief for “states and school districts.” JA 67. Plaintiffs do not specify whether the term “school districts” means only Plaintiff school districts or rather all school districts across Michigan, Texas, and Vermont or even Michigan, Ohio, Kentucky, Tennessee, Texas, and Vermont. It can be No. 05-2708 School District of the City of Pontiac, et al. v. Secretary Page 75 of the United States Dep’t of Educ. inferred that they intended a broad construction, one not limited to just Plaintiff school districts, given that they have also sought relief for “states” even though neither Michigan, Texas, nor Vermont (nor any other State within the Sixth Circuit) is involved in this case. In Warshak, this court found that the plaintiff’s facial challenge to a provision of the Electronic Communications Privacy Act of 1986, 18 U.S.C. § 2703(d), was not justiciable. 532 F.3d at 525, 534. One of the problems with plaintiff’s attack identified by the court stemmed from the fact that relief was granted to persons other than the plaintiff. The court recognized, “‘While district courts are not categorically prohibited from granting injunctive relief benefitting an entire class in an individual suit, such broad relief is rarely justified because injunctive relief should be no more burdensome to the defendant than necessary to provide complete relief to the plaintiffs.’” Id. at 531 (quoting Sharpe v. Cureton, 319 F.3d 259, 273 (6th Cir. 2003)). Plaintiffs here have not sought class-action status or fashioned this action as one brought on behalf of another person or entity. How the district court could grant the full relief requested in the complaint is a quandary that has never been explained by Plaintiffs. It is the case that Rule 19(a)(1)(A) requires that “complete relief” be possible only “among existing parties.” So, if the court ignores Plaintiffs’ request for relief on behalf of nonparty school districts and States, then any relief could be limited to Plaintiff school districts. But, this leads to another quandary relevant to Rule 19(a)(1)(B): what would it mean for the Secretary to be enjoined “from withholding from . . . school districts any federal funds to which they are entitled under the NCLB because of a failure to comply with the mandates of the NCLB that is attributable to a refusal to spend nonNCLB funds to achieve such compliance”? JA 67. As Plaintiffs stated during oral argument before the panel, “[P]rimary responsibility to educate children rests with the States.” Clearly, the States have a strong interest “relating to” the Act in general and in particular whether school districts should have the discretion to opt-out of certain programs and requirements if the federal funds No. 05-2708 School District of the City of Pontiac, et al. v. Secretary Page 76 of the United States Dep’t of Educ. in any given year are somehow deemed insufficient. Fed. R. Civ. P. 19(a)(1)(B). The Act requires that the States wield significant oversight authority vis-à-vis school districts. The federal funds at issue in this lawsuit flow through the States in accordance with their statewide plans approved by the Secretary and with the districts’ own plans approved by the States. Under the statewide plans, every public school is required to make AYP and is included in the State’s accountability system. The States must ensure that school districts comply with all of the requirements of the Act, as embodied in their statewide plans. Thus, if Plaintiff school districts were to be granted relief in this case, the States would necessarily fall out of compliance with their own statewide plans in order to accommodate that relief. As a result, the States would have to submit plan amendments to the Secretary seeking either to carve out exceptions for Plaintiff school districts or to make fundamental, wholesale revisions along the lines sought by those school districts, presumably then applying to all school districts within the States. Again, though, without any involvement by the States in this case, the court can only make educated guesses about how the States would react to a favorable outcome for these Plaintiff school districts. The States play a (if not the) major role in primary and secondary education within their geographic borders. They set educational priorities and direction for all of the public schools. They have a legitimate interest in the funding of education as well as the resources that must be devoted to administering and supervising compliance with their statewide plans. Even if it could be assumed that the States would desire more discretion in how they can spend federal funds, the States’ absence impairs their ability to protect the viability and legality of their plans. It is suggested that Plaintiffs and the Secretary have adequately argued the legal merits of Plaintiffs’ claims and, as a result, there can be no risk of prejudice to the States’ interests. That, however, is too blinkered a view of this case. Rule 19 is a “creature of equity jurisprudence” and the court must consider not only any legal prejudice, but also any practical prejudice to the States’ interests. FPP § 1602 (citation omitted); see also id. § 1604 (“It should be noted that the prejudicial effect of nonjoinder referred to in No. 05-2708 School District of the City of Pontiac, et al. v. Secretary Page 77 of the United States Dep’t of Educ. [Rule 19(a)(1)(B)] may be practical rather than legal in character.” (citation omitted)). The court must consider the interests of an absent person, even if that person’s legal claim is “technically unaffected.” Id. § 1602 (citation omitted). While the court is not faced with a pure contract dispute, the Supreme Court has drawn on contract principles when resolving Spending-Clause disputes. See, e.g., Pennhurst, 451 U.S. at 17. It is hornbook law that all parties to a contract are necessary in an action challenging its validity or interpretation. See, e.g., Lomayaktewa v. Hathaway, 520 F.2d 1324, 1325 (9th Cir. 1975) (“No procedural principle is more deeply imbedded in the common law than that, in an action to set aside a lease or a contract, all parties who may be affected by the determination of the action are indispensable.”). This lawsuit is not only missing a party, but arguably the most important party. The Secretary cannot force a State to accept federal funds under the Act. The school districts cannot accept federal funds on their own. Only the States can decide in the first instance whether, after reading the offer sheet (i.e., the Act), to accept the funds and associated requirements for the benefit of the State’s public-school students. The interests of the States in this context are too myriad for a political subdivision to protect. And to think that the Secretary, the party sitting across the bargaining table, can adequately represent the States’ interests in this dispute is simply not realistic. To illustrate, let’s assume for the moment that Plaintiffs are correct. Section 7907(a) releases recipients from requirements of the Act “if, and only to the extent that, federal funding falls short.” Appellant’s Br. at 22. The federal government cannot require recipients “to comply with the NCLB to the extent that they do not receive sufficient federal funding to do so.” Id. at 23-24. As a result, Plaintiff school districts get an injunction permitting them to avoid compliance with a requirement of the Act to the extent that the costs associated with that requirement are somehow deemed too much. Even if the States agree with Plaintiffs about the meaning of § 7907(a), does it necessarily follow that the States would therefore not be prejudiced by an injunction No. 05-2708 School District of the City of Pontiac, et al. v. Secretary Page 78 of the United States Dep’t of Educ. favoring these school districts? To take one example, consider the State of Michigan. As part of its statutory provisions governing aid to schools, Michigan mandates, “A district or intermediate district shall comply with all applicable reporting requirements specified in state and federal law.” MCL § 388.1619(3). It is clear from the explicit mention of the “no child left behind act of 2001” in that same section that the State had in mind the reporting requirements of the Act. See id. § 388.1619(1). Now, Michigan does not make provision for school districts to comply with reporting requirements specified in the Act only to the extent paid for by federal funds. If the Pontiac School District determines that it will not comply with the reporting requirements of the Act and nails the court’s injunction on the doors of the Michigan Capitol building, is it really true that the legitimate interests of the State of Michigan have not been prejudiced or that those interests have been adequately protected by the Secretary? Staying with the State of Michigan, the State requires all school districts to administer the State’s merit examination to students in particular grades. Under state law, the merit examination must meet “all of the . . . requirements of the no child left behind act of 2001.” MCL § 388.1704b(3)(d)(ii); see also id. § 388.1704b(2)(d). There is no provision in state law providing that the examination administered by a school district must satisfy the requirements of the Act only if that district deems that the amount of federal funds it receives are sufficient to cover certain costs. One of the requirements of the Act is that all students throughout the state be tested—in Michigan, this would include students of Pontiac School District. Yet, armed with an injunction from this court, could Pontiac School District refuse to participate in Michigan’s meritsexamination system even though the State otherwise mandates that the system comply with the Act’s requirements? Furthermore, one issue that has come up repeatedly in this case is how to determine whether a particular requirement has been “underfunded.” This is an issue that might have benefitted from some development at the administrative level in the context of a more narrow, concrete complaint or proposed plan amendment. Be that as it may, a related issue central to the practical operation of the Act under Plaintiffs’ No. 05-2708 School District of the City of Pontiac, et al. v. Secretary Page 79 of the United States Dep’t of Educ. interpretation is this: which entity should have final authority to make the determination that a particular program or requirement is underfunded? The particular school district? The Secretary? Or the State? School districts are, after all, political subdivisions of the States. School districts are subrecipients of federal funds under the Act, while States are primary recipients of the funds. It seems at least plausible that between the two, the States would prefer that they have final authority to determine whether any program or requirement is underfunded. On the flip side, although the Act represents an unprecedented extension of federal policy into primary and secondary public education, the States remain the central players in public education by setting priorities, direction, and spending. It seems at least plausible that the States would prefer that they, rather than the Secretary, have final authority to make the determination. This is certainly an important interest of the States related to the subject matter of this case and not an issue anyone could seriously argue has been adequately addressed on behalf of the States by Plaintiffs or the Secretary. It must be acknowledged that Plaintiffs and the Secretary have presented both of their respective positions with vigor. However, “interests” encompass more than just legal positions. The States are separate players in our nation’s public-education system, or, as Plaintiffs’ counsel described during oral argument, the “three-way deal” of public education. In short, it is clear that neither Plaintiffs nor the Secretary fully share or represent the interests of the States, regardless of the outcome of an interpretation of § 7907(a). Thus, the States of Michigan, Vermont, and Texas should be considered required parties under Rule 19(a)(1)(B).3 3 Despite Judge Sutton’s contention that one of my “primary disagreements” with him centers “on whether we can grant ‘complete relief’ without the States” under Rule 19(a)(1)(A), it should be clear from the preceding analysis that my primary emphasis is that the States have important interests in the subject of this litigation that are not adequately represented by Plaintiff school districts or the Secretary, a consideration that is sufficient by itself under Rule 19(a)(1)(B) to find that the States are required parties. No. 05-2708 School District of the City of Pontiac, et al. v. Secretary Page 80 of the United States Dep’t of Educ.