Court Opinion

ID: 2967512
Source: CourtListenerOpinion
Date Created: 2015-09-22 02:44:17.580496+00
Date Added: 2024-06-11T12:45:59.086098
License: Public Domain

PUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

INTOWN PROPERTIES MANAGEMENT,          
INCORPORATED,
                Plaintiff-Appellant,
                and
TRANSCONTINENTAL INSURANCE
COMPANY, as subrogee of Intown
Properties Management,
Incorporated,
                          Plaintiff,
                 v.
                                                  No. 00-2419
WHEATON VAN LINES, INCORPORATED,
             Defendant-Appellee,
                and
RITE-WAY MOVING SERVICES,
INCORPORATED; JOHN KOWATS;
PACCAR LEASING CORPORATION;
KENWORTH VID2XKADR9X,
KENWORTH TRUCK 1995,
VID#2XKADR9XXSM64507,
                      Defendants.
                                       
           Appeal from the United States District Court
         for the District of South Carolina, at Greenville.
               Margaret B. Seymour, District Judge.
                   (CA-99-2287-6, CA-99-327)
                      Argued: September 24, 2001
                      Decided: October 31, 2001
     Before WIDENER, LUTTIG, and MOTZ, Circuit Judges.
2      INTOWN PROPERTIES MANAGEMENT v. WHEATON VAN LINES
Affirmed by published opinion. Judge Motz wrote the opinion, in
which Judge Widener joined. Judge Luttig wrote a concurring opin-
ion.

                             COUNSEL

ARGUED: William Marvin Grant, Jr., GRANT & LEATHER-
WOOD, P.A., Greenville, South Carolina, for Appellant. Kurt Mat-
thew Rozelsky, LEATHERWOOD, WALKER, TODD & MANN,
P.C., Greenville, South Carolina, for Appellee. ON BRIEF: Paul C.
Rathke, GRANT & LEATHERWOOD, P.A., Greenville, South Caro-
lina, for Appellant. Joseph E. Major, LEATHERWOOD, WALKER,
TODD & MANN, P.C., Greenville, South Carolina, for Appellee.

                             OPINION

DIANA GRIBBON MOTZ, Circuit Judge:

   This appeal arises from two related cases that were consolidated in
the district court. Intown Properties Management, Incorporated
appeals the district court’s grant of summary judgment against it in
its action against Wheaton Van Lines, Incorporated. Intown also
appeals the court’s denial of Intown’s motion to amend the complaint
to add Intown as the real party in interest, in an action Intown’s
insurer filed against Wheaton. Limitations barred Intown’s suit
against Wheaton, making the grant of summary judgment to Wheaton
in that action proper, and the district court clearly did not abuse its
discretion in denying Intown’s late-filed motion to amend in its insur-
er’s suit. Accordingly, we affirm.

                                  I.

   On July 18, 1996, a driver employed by Wheaton lost control of
his truck and hit a motel and restaurant that were owned by Intown
and insured by Transcontinental Insurance Company. Pursuant to this
insurance policy, Transcontinental paid Intown $302,700.85 for losses
resulting from the accident. On February 5, 1999 Transcontinental
       INTOWN PROPERTIES MANAGEMENT v. WHEATON VAN LINES               3
filed suit against Wheaton ("the Transcontinental action"), seeking
the amount it had paid Intown, plus interest, attorney’s fees, and
costs. Intown had notice of this law suit.

   Although Intown was involved in other litigation against Wheaton
in 1997, it did not file suit seeking recovery for damages incurred in
the July 18, 1996 accident until July 9, 1999. On that date, Intown
filed a complaint against Wheaton ("the Intown action"), seeking,
inter alia, $212,217.96 representing lost revenues and loss of reputa-
tion and good will that the insurance payment had not covered.
Intown failed to serve Wheaton with the complaint in this action until
August 31, 1999.

   On October 8, 1999, the parties agreed by consent order to consoli-
date these two cases against Wheaton. A few weeks later, on October
26, 1999, Wheaton moved for summary judgment in the Intown
action on the ground that South Carolina’s three-year statute of limita-
tions barred it. On November 30, 1999, eleven days after responding
to Wheaton’s motion for summary judgment in the Intown action,
Intown moved to amend the complaint in the Transcontinental action.
The motion to amend, which Transcontinental joined, sought to add
Intown as a plaintiff on the ground that it, not Transcontinental, was
the real party in interest in the Transcontinental action. Days later, in
early December 1999, Transcontinental and Wheaton settled the
Transcontinental action and filed a stipulation of dismissal.

   Some months later, the district court held a hearing on Wheaton’s
motion for summary judgment in the Intown action and Intown’s
motion to amend the complaint in the Transcontinental action. The
court granted summary judgment to Wheaton in the Intown action,
reasoning that state law governed when an action "commenced" for
purposes of the statute of limitations, and that under South Carolina
law, Intown’s failure to serve Wheaton until weeks after the three-
year statute of limitations had run barred its action. See S.C. Code
Ann. § 15-3-530 (5) (Law. Co-op. Supp. 2000).

   The district court also denied Intown’s motion to amend the com-
plaint in the Transcontinental action. Applying South Carolina law,
which forbids the division of a claim between insurer and insured, the
court determined that Transcontinental was not the real party in inter-
4      INTOWN PROPERTIES MANAGEMENT v. WHEATON VAN LINES
est in its action against Wheaton. See Calvert Fire Ins. Co. v. James,
114 S.E.2d 832, 835 (S.C. 1960). Nevertheless, the court ruled that
Intown had waived any claim to assert its real party in interest status
by failing to file a timely motion to amend Transcontinental’s com-
plaint. The court further held that even if Intown had not waived its
claim, Rule 17 did not support Intown’s belated motion to amend the
complaint in the Transcontinental action. This appeal followed.

                                   II.

   If the district court improperly granted summary judgment in the
Intown action, we need not consider its ruling in the Transcontinental
action. Accordingly, we first examine the grant of summary judgment
to Wheaton in the Intown action.

   Although Intown asks us to reverse the district court’s grant of
summary judgment to Wheaton, it barely mentions the issue in its
appellate brief. Indeed, Intown’s only apparent challenge to the
summary-judgment ruling is its contention that the Intown and Trans-
continental actions, under South Carolina law, were two parts of an
"indivisible" action, and so the district court erred in separating them,
by granting summary judgment in the Intown action. No case, statute,
or rule requires this result.

   Intown suggests, however, that the consolidation of the two cases
somehow effectively barred the grant of judgment against it in its own
action. Intown misunderstands the role and scope of consolidation.
Although consolidation "is permitted as a matter of convenience and
economy in administration, [it] . . . does not merge the suits into a sin-
gle cause, or change the rights of the parties, or make those who are
parties in one suit parties in another." Johnson v. Manhattan Ry. Co.,
289 U.S. 479, 496-97 (1933).

   Other than its "indivisibility" argument, Intown makes no conten-
tion — and there is none to make — that the district court erred in
granting summary judgment against it. Under South Carolina’s ser-
vice of process requirements, Intown failed to commence the Intown
action within the statutory three-year period. See S.C. R. Civ. P. 3(a).
Accordingly, the district court properly granted summary judgment to
       INTOWN PROPERTIES MANAGEMENT v. WHEATON VAN LINES                 5
Wheaton on the ground that the applicable South Carolina statute of
limitations barred the Intown action.

  We therefore turn to the ruling denying Intown’s motion to amend.

                                   III.

   In the Transcontinental action, Intown moved under Federal Rules
of Civil Procedure 15 and 17 to amend the complaint to add itself as
the plaintiff, arguing that it was the real party in interest. The district
court denied the motion.

   Wheaton offers four independent reasons why the district court did
not err in doing so.1 First, as a non-party in the Transcontinental
action, Intown assertedly lacks standing to appeal from the denial of
the motion without Transcontinental’s participation in the appeal.
Second, Intown was not the real party in interest in the Transconti-
nental action. Third, Intown waived its claim to participate in the
Transcontinental action. Fourth, in any event, the district court prop-
erly denied Intown’s late-filed motion to amend the complaint.

   We need only address the last argument, and we review the district
court’s ruling denying the motion to amend for abuse of discretion.
See HCMF Corp. v. Allen, 238 F.3d 273, 276-77 (4th Cir. 2001).
Thus, assuming that Intown is the real party in interest in the Trans-
continental action, with standing and claims that have not been
waived, we consider whether the district court abused its discretion
in refusing to permit Intown to join its insurer’s suit as a party plain-
tiff, not by intervening under Rule 24, but by a combination of Rules
15 and 17.

  Ordinarily a would-be plaintiff seeking to join a case must timely
move to intervene in accordance with Rule 24. Fed. R. Civ. P. 24 (a
& b) ("Upon timely application anyone [1] shall be permitted to inter-
vene in an action . . . when the applicant claims an interest relating
  1
   On appeal, Wheaton does not assert that the motion was moot. See
Fed. R. App. P. 28(a)(9), (b). See also United Airlines v. McDonald, 432
U.S. 385, 395-96 (1977) (reviewing the denial of a post-judgment motion
to intervene).
6      INTOWN PROPERTIES MANAGEMENT v. WHEATON VAN LINES
to the property or transaction which is the subject of the action . . .
[or 2] may be permitted to intervene in an action . . . when an appli-
cant’s claim or defense and the main action have a question of law
or fact in common."). If a motion to intervene is untimely, it "must
be denied." See NAACP v. New York, 413 U.S. 345, 366 (1973). This
seems only fair because, if permitted, intervention may expose a
defendant to additional liability. (Indeed, in this case, if the court had
permitted Intown to participate in the Transcontinental action, Whea-
ton’s possible liability would have increased.) Perhaps for these rea-
sons, Intown itself concedes that it would have been preferable if it
had moved to intervene in the Transcontinental action. But Intown
did not seek to intervene. It filed its own (albeit untimely) suit, and
maintained that suit for several months although it knew that Trans-
continental had already sued Wheaton separately.

   Then, reversing course, Intown attempted to finesse Rule 24’s
timeliness requirement to join the timely Transcontinental action as
a plaintiff. It did so by invoking Rule 15, which permits liberal
amendment by a party when justice requires, and Rule 17, which ordi-
narily provides a shield for defendants. Intown argues that, in combi-
nation, those two rules may form a sword, permitting a non-party who
would be a plaintiff to enter a case late, even when that late entry
increases a defendant’s liability. Intown points to no case in which
such a use of the rules has been attempted, let alone judicially sanc-
tioned. Nevertheless, Intown contends that the language of Rules 15
and 17, and the interpretation accorded those rules by courts and the
Advisory Committee on Civil Rules to the Standing Committee on
Rules of Practice and Procedure, support its position.

   We first examine the text of the rules. The relevant portion of Rule
15 provides that after thirty days "a party may amend the party’s
pleading . . . by leave of court . . . [which] shall be freely given when
justice so requires." Fed. R. Civ. P. 15(a). Intown contends that "jus-
tice . . . requires" that its proposed amendment be permitted because
otherwise it will have suffered damages that will go unredressed.
However, Rule 15 allows liberal amendment by parties, not non-
parties; it requires a court to permit "a party," not a non-party, to
"amend the party’s pleading . . . freely when justice so requires." Rule
       INTOWN PROPERTIES MANAGEMENT v. WHEATON VAN LINES              7
15 does not aid Intown because it was not a party in the Transconti-
nental action.2

   Rule 17, meanwhile, provides that "[e]very action shall be prose-
cuted in the name of the real party in interest," and that "[n]o action
shall be dismissed on the grounds that it is not prosecuted in the name
of the real party in interest until a reasonable time has been allowed
after objection for ratification of commencement of the action by, or
joinder or substitution of, the real party in interest." Fed. R. Civ. P.
17(a). Intown argues that this language requires that it be given an
opportunity to amend the pleadings so that the case is prosecuted in
the name of the real party in interest. Although Rule 17 does limit dis-
missal of an action on the grounds that it is not prosecuted in the
name of the real party in interest, nothing in the text of the rule pro-
vides a non-party a right to join a case on those grounds.

   Thus, the plain language of Rules 15 and 17 offers Intown no assis-
tance. Moreover, while both rules have been generously interpreted,
those interpretations do not aid Intown either.

   Courts have construed Rule 15 liberally to permit amendment so
that claims can be adjudicated on the merits. See, e.g., Gillespie v.
U.S. Steel Corp., 379 U.S. 148, 158 (1964); Foman v. Davis, 371 U.S.
178, 182 (1962). If Intown had been a party to the case from the out-
set, a court might well have concluded that Intown’s new claims
based on good will and reputation, if known to Wheaton, related back
to the earlier claims for physical and business damage, since all arose
from the same accident. See Fed. R. Civ. P. 15(c)(2). But Rule 15 has
its limits, and courts properly exercise caution in reviewing an appli-
cation of the rule that would increase a defendant’s exposure to liabil-
ity. Thus, an amendment to the pleadings that drags a new defendant
into a case will not relate back to the original claims unless that
defendant had fair notice of them. Fed. R. Civ. P. 15(c)(3). Similarly,
courts have limited the applicability of Rule 15; a motion to amend
the pleadings comes too late if it unduly prejudices the opposing
party. See, e.g., Hill v. BASF Wyandotte Corp., 782 F.2d 1212, 1214
  2
   Transcontinental was a party, of course, and it joined in the motion
to amend, but it settled with Wheaton and has taken no appeal from the
district court’s denial of the motion to amend.
8      INTOWN PROPERTIES MANAGEMENT v. WHEATON VAN LINES
(4th Cir. 1985); Davis v. Piper Aircraft Corp., 615 F.2d 606, 613 (4th
Cir. 1980).

   Given these limits, judicial interpretation of Rule 15 cuts against,
rather than supports, Intown’s attempted use of the rule. Because
Intown was not a party to the Transcontinental action, and had not
served its own complaint in a timely manner, Wheaton had no timely
notice that it faced liability above and beyond those damages sought
by Transcontinental. When Wheaton finally did receive Intown’s
complaint, it of course learned of Intown’s additional claims, but
Wheaton also knew of the fatal limitations problem that barred the
Intown action. Wheaton might well have negotiated differently or
refused to settle with Transcontinental had it been confronted with
viable additional Intown claims. In these circumstances, the liberality
of Rule 15 runs out. Cf. Weisgal v. Smith, 774 F.2d 1277, 1279 (4th
Cir. 1985) (treating the loss of a limitations defense as prejudice
within the context of Rule 15(c)).

   As for Rule 17, courts have generally seen it as having a "negative
function," "enabl[ing] a defendant to present defenses he has against
the real party in interest, to protect the defendant against a subsequent
action by the party actually entitled to relief, and to ensure that the
judgment will have a proper res judicata effect." Virginia Elec. &
Power Co. v. Westinghouse Elec. Corp., 485 F.2d 78, 83, 84 (4th Cir.
1973). Nevertheless, as Intown points out, the Advisory Committee’s
Notes to both Rule 15 and Rule 17, as well as some cases, suggest
that Rule 17 retains a residual affirmative purpose. The Committee
explains that "[t]o avoid forfeiture of just claims," Rule 17 "provide[s]
that no action shall be dismissed on the ground that it is not prose-
cuted in the name of the real party in interest until a reasonable time
has been allowed for correction of the defect" using Rule 15. Fed. R.
Civ. P. 15 advisory committee’s note (1966). Thus, Rule 17 is "in-
tended to insure against forfeiture and injustice" in cases where "an
honest mistake has been made in choosing the party in whose name
the action is to be filed." Fed. R. Civ. P. 17 advisory committee’s note
(1966). In this spirit, courts have often permitted amendment under
Rule 17 even late in the course of litigation. See Advanced Magnetics,
Inc. v. Bayfront Partners, Inc., 106 F.3d 11, 18-21 (2d Cir. 1997);
Hill, 782 F.2d at 1213-14; Cummings v. United States, 704 F.2d 437
(9th Cir. 1983); Hess v. Eddy, 689 F.2d 977 (11th Cir. 1982); Link
        INTOWN PROPERTIES MANAGEMENT v. WHEATON VAN LINES                  9
Aviation, Inc. v. Downs, 325 F.2d 613 (D.C. Cir. 1963); see also Chi-
cago & Northwestern Transp. Co. v. Negus-Sweenie, Inc., 549 F.2d
47, 50 (8th Cir. 1977). However, upon examination, neither the Advi-
sory Committee’s comments nor these cases assist Intown.
   The Committee specifically cautions against abuse of Rule 17: the
rule "should not be misunderstood or distorted. It is intended to pre-
vent forfeiture when determination of the correct party to sue is diffi-
cult or when an understandable mistake has been made." Fed. R. Civ.
P. 17 advisory committee’s note (1966). Such was not the case here.
Rather, as the district court explained in ruling that Intown’s mistake
had not been "understandable," Intown was represented by counsel
and had notice of the Transcontinental action from an early date, and
yet failed to seek to join the Transcontinental action until after the
limitations problem with its own action became apparent.
   Nor do the cases granting Rule 17 motions late in the proceedings
aid Intown. Those courts that have permitted late amendment under
Rule 17 have not exposed defendants to additional liability without
notice; they have ordinarily confronted requests to exchange a plain-
tiff or plaintiffs for another plaintiff or plaintiffs with identical claims.
Advanced Magnetics, 106 F.3d at 13, 20-21; Hill, 782 F.2d at 1213-
14; Cummings, 704 F.2d at 438-40; Hess, 689 F.2d at 979; Link Avia-
tion, 325 F.2d at 613-14. Courts have not permitted Rule 17 to be
used late in the course of litigation if the opposing party would suffer
undue prejudice. See Whelan v. Abell, 953 F.2d 663, 671-73 (D.C.
Cir. 1992) (reversing grant of motion to amend because it came too
late in the proceedings and unduly prejudiced the plaintiffs). As with
Rule 15, Rule 17’s liberality evaporates if amendment would unduly
prejudice either party.
   In sum, the plain language of Rules 15 and 17, the interpretations
accorded them by the courts and the Advisory Committee on Civil
Rules, and basic fairness to defendants all support the district court’s
denial of Intown’s motion to amend. Accordingly, we cannot find that
the district court abused its discretion in denying the motion.
                                    IV.
   For these reasons, the district court’s orders granting summary
judgment to Wheaton in the Intown action and denying Intown’s
motion to amend in the Transcontinental action are
10       INTOWN PROPERTIES MANAGEMENT v. WHEATON VAN LINES
                                                             AFFIRMED.

LUTTIG, Circuit Judge, concurring in the judgment:

     Fed. R. Civ. P. 17(a) states:

       Every action shall be prosecuted in the name of the real
       party in interest. . . . No action shall be dismissed on the
       ground that it is not prosecuted in the name of the real party
       in interest until a reasonable time has been allowed after
       objection for ratification of commencement of the action by,
       or joinder or substitution of, the real party in interest; and
       such ratification, joinder, or substitution shall have the same
       effect as if the action had been commenced in the name of
       the real party in interest.

(Emphasis added). Transcontinental’s action against Wheaton, which
Intown seeks to join, was not dismissed on the ground that it was not
prosecuted in the name of the real party in interest. It was dismissed
because Transcontinental and Wheaton settled. Hence, even if Intown
is correct that it, and not Transcontinental, is the real party in interest,
Rule 17(a) does not give Intown a "reasonable time . . . after objec-
tion" to ratify, join, or be substituted into Transcontinental’s now-
dismissed action. In other words, given that the suit was between
Transcontinental and Wheaton and that the suit was dismissed
because the two parties settled their dispute, Rule 17(a) simply cannot
apply to afford Intown the relief it requests.

   Nor can Intown avail itself of Rule 15(a). Intown was not a "party"
to Transcontinental’s action. Counsel for Transcontinental did "sup-
port" and "join" Intown’s motion to amend. J.A. 167, 168. But even
if this support and joinder could somehow convert Intown’s motion
into one by Transcontinental itself, once a party has settled and volun-
tarily dismissed a case, that party’s motions to amend are moot. See,
e.g., Florida Country Clubs, Inc. v. Carlton, Fields, Ward, Emman-
uel, Smith & Cutler, P.A., 98 F. Supp. 2d 1356, 1362 (M.D. Fla.
2000).

   Because the text of neither Rule 15 nor Rule 17 give Intown a right
to join Transcontinental’s action against Wheaton, I concur in the
judgment.