Court Opinion

ID: 9494646
Source: CourtListenerOpinion
Date Created: 2023-08-05 15:43:10.958182+00
Date Added: 2024-06-11T17:56:32.074732
License: Public Domain

BRIGHT, Circuit Judge,
dissenting.
I dissent. The district court was correct in concluding that Richard Wilhelm is a necessary and indispensable party pursuant to Federal Rule of Civil Procedure 19. Wilhelm’s presence destroys diversity jurisdiction, the sole basis for federal jurisdiction over this matter. As a result, this case belongs in the state court.
As the majority acknowledges, the district court properly decided that Wilhelm was a necessary party because he was covered by the arbitration clause in agreements entered into by Ginsburg and Paine-Webber.1 Therefore, Wilhelm could claim an interest in the contract between Ginsburg and PaineWebber. Having resolved that Wilhelm is a necessary party whose presence deprives the federal court of jurisdiction, the majority labors to preserve jurisdiction by concluding erroneously, in my opinion, that Wilhelm is not an indispensable party under Rule 19(b).
The majority minimizes the prejudice Cohen will face if he is forced to litigate this matter in state court against Wilhelm and in the federal court against Paine-Webber.2 Additionally, the majority discounts the prejudice to Wilhelm if he is forced to defend himself in state court without the support of his employer.
Permitting this suit to continue in both the state and the federal courts could subject the parties to conflicting legal obligations because both courts will likely be asked to make determinations on the validity and interpretation of the same arbitration agreement. This creates a needless risk of inconsistent results. As the district court noted, the risk of factual and legal whip-sawing weighs heavily in favor of *210having one court adjudicate this entire matter.3
The majority concludes that this risk of piecemeal litigation resulting from parallel proceedings is a “necessary and inevitable consequence” of the FAA’s policy favoring . arbitration. This contention is misplaced for several reasons. First, the cases cited, Moses H. Cone Mem’l Hosp. and Distajo, condone piecemeal litigation where one of the parties to the underlying dispute is not a party to the arbitration agreement. In the instant case, the district court concluded Wilhelm was covered by the arbitration clause even though he did not sign it. Cohen raises claims against Wilhelm and PaineWebber alleging substantially the same misconduct, and Wilhelm and Paine-Webber’s arbitration claims are inextricably linked. In this situation, there is absolutely no need for parallel proceedings.
The other problem with the majority’s logic is its assumption that a policy in favor of arbitration under the FAA necessitates a federal forum. Congress did not enact a policy in favor of arbitration as ordered by federal courts. As the majority admits in its consideration of the Rule 19(b) alternative fora prong, the state court would be perfectly capable of protecting both PaineWebber and Cohen’s rights, adjudicating the dispute, interpreting the arbitration agreement, and resolving all the matters related to this common cause of action.4
The majority expresses concern that affirming the district court would set a dangerous precedent whereby defendants could defeat arbitration by joining non-diverse parties. This position evinces an unnecessary distrust of both state courts and federal district courts. In regard to state courts, neither party presents the argument that state courts in general, or that the Ohio courts in particular, shirk their duty to enforce lawful arbitration agreements under the FAA.
Furthermore, the majority’s policy implication is not tenable because decisions to dismiss based on nonjoinder of parties are to be made pragmatically and based on the particularized context of each case. See e.g., Owens-Illinois, Inc. v. Meade, 186 F.3d 435, 441 (4th Cir.1999) (explaining that dismissal based on nonjoinder must be made “pragmatically, in the context of the substance of each case, rather than by procedural formula”) (quoting Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 119 n. 16, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968)). Federal district courts are fully capable of distinguishing between a situation where non-diverse parties are joined solely to defeat federal jurisdiction and the situation whei-e a non-diverse party who is covered by an arbitra*211tion agreement must be joined under Rule 19 as a necessary and indispensable party.
Finally, I strongly disagree with the majority’s reaching out to decide the issue of abstention. The district court did not rule on this issue and so it is not properly before this court on appeal. To me, it sets a bad precedent for an appellate court, except in unusual circumstances not present here, to decide an issue not ruled on by the trial court. I think it only proper to remand that issue to the able district judge. The question of abstention here is far from clear. The district court may well ask for additional evidence and briefing on the subject.

. The majority contends that the agreement's terms "arguably benefit employees like Wilhelm by enabling them to arbitrate complaints." The district court specifically determined that "Wilhelm is covered by the Agreement based on Mr. Barry's affidavit and the language of the Agreement.” (J.A. at 100). Neil Barry, Corporate Vice President and Assistant General Counsel at Paine-Webber, swore an affidavit explicitly stating that Wilhelm, as an employee of Paine-Webber, was covered by the arbitration clause in the agreements.

. Litigation in today’s world is truly expensive. No litigant should be forced into two forums to resolve a dispute.

. The majority argues that Cohen’s position of having to litigate in both state and federal courts is the result of his decision to file suit in state court instead of demanding arbitration. This argument is based on the assumption that arbitration is required in this case. This decision has not been reached by any court and it is not this court's function to decide whether Cohen is bound to arbitrate at this time.

. The majority opinion does not account for the amount of progress made in the Hamilton County Common Pleas Court. The state court issued a temporary restraining order to preserve evidence. Furthermore, as the federal district court explained, the state court held a case management conference on October 31, 2000, where the court set a trial date of June 25, 2001, and established deadlines for the completion of discovery and filing pretrial motions and trial briefs. Apart from the parties’ agreement to not proceed with the state court action while the federal action was pending, there is every indication that the state court would have addressed this matter in a timely fashion.