Court Opinion

ID: 9475488
Source: CourtListenerOpinion
Date Created: 2023-08-05 05:28:48.562157+00
Date Added: 2024-06-11T17:44:44.698192
License: Public Domain

NOONAN, Circuit Judge,
dissenting:
Since 1966 the District has had a comprehensive contract with Chino, entitled the Waste Water Capacity Agreement, governing the discharge of wastewater from Chino into the sewer system of the District. Chino has permitted Inland to make discharges into the Chino system, and these discharges ultimately enter the District’s system. The District contends that it has a right to stop Inland and asks for an injunction.
Chino is an indispensable party. Each of the three causes of action asserted by the District required interpretation of its contract with Chino. The first cause of action put forward the District’s rights under the District’s own Wastewater Ordinance; but these rights were affected as to water from Chino by the contract with Chino. The second cause of action asserted the District’s obligations under federal law; but any appraisal of these obligations as to water from Chino depended on the control the District had over such water through the contract with Chino. The third cause of action actually sought declaratory relief in interpretation of the contract between the District and Chino. Chino’s rights and obligations were immediately at issue in the third cause of action; and Chino’s contract, and so its rights and obligations, had to be interpreted to resolve the first two cause of actions.
Chino was indispensable. It was not sued. Failure to sue Chino did not deprive the district court of jurisdiction. It did deprive the District of the opportunity of getting the relief it sought. Asking for the exercise of the equitable powers of the court, the District has behaved inequitably. It has sought to have the rights and obligations of Chino determined in the absence of Chino.
When counsel for the District was asked in open court, on the argument of the appeal, why the District had not made Chino a party, he replied, “It would have de*1080stroyed diversity.” This candid answer stated the obvious. In order to have access to the federal courts in this case, the District could not have a California defendant. The desire to have a federal forum is no excuse for the District’s inequitable conduct.
The District’s conduct was doubly inequitable in its attempt to avoid the arbitration provisions of the contract with Chino. The Waste Water Capacity Agreement provided:
In the event of a dispute or controversy arising between Chino Basin and District 21 as to the construction of any term, condition, provision or covenant contained herein, or as to the amount of money payable by Chino Basin to District 21, pursuant to the terms hereof, or dispute as to the rights or obligations of either of the parties hereto, all such questions shall be referred to and determined by a Board of Arbitrators. The parties hereto do hereby agree that all differences, disputes and controversies which may arise at any time concerning the construction or application of the terms, covenants, conditions and provisions of this agreement, shall be submitted by the parties to arbitration by a Board of Arbitrators, one to be appointed by each party to this agreement and the third to be appointed by the two arbitrators so appointed by the two arbitrators so appointed.
This clause bound the District if it was to raise with Chino the issues it seeks to raise in this suit.
In argument before the district court, on October 9, 1985, that court noted “some real problems with not joining the Chino District.” Daniel V. Hyde, counsel for the District, replied, “Well, the problem with that is that there is a binding arbitration clause in the contract with them which____ which then leaves the District with no ability to proceed against Inland Container at all in this court.” The present suit was an end run around the binding arbitration clause. Arbitration would have provided the answer to the issues the District here raises. The District should not be permitted to ignore its contractual obligation to Chino.
The District chose to bring an inequitable suit asking equitable relief. The District could not win. It could only lose. It has lost in the trial court. Having invoked federal jurisdiction and having imposed on Inland the burden of defending itself, the District should not now be permitted to walk away from the litigation without consequences. On this appeal, we are entitled to sustain the district court on any ground before us in the record. Hatch v. Reliance Insurance Co., 758 F.2d 409 (9th Cir.1985). The record proclaims the unjust attempt of the District to obtain a federal judgment affecting its contract with Chino without Chino being heard. He who seeks equity must do equity. The district court properly denied relief to this inequitable plaintiff.