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VMS/PCA L.P. v. PCA PTNRS. L.P.

October 5, 1989

VMS/PCA LIMITED PARTNERSHIP, Plaintiff,
v.
PCA PARTNERS LIMITED PARTNERSHIP, PROPERTY COMPANY OF AMERICA, INC., PAUL D. HINCH, RONALD M. BENEKE and HUGH L. CARAWAY, JR., Defendants


Marvin E. Aspen, United States District Judge.


The opinion of the court was delivered by: ASPEN

MARVIN E. ASPEN, UNITED STATES DISTRICT JUDGE

 I.

 Introduction

 The plaintiff VMS/PCA Limited Partnership ("VMS") and one of the named defendants PCA Partners Limited Partnership ("PCA") entered into a joint venture, the Property Company of America Joint Venture ("Joint Venture"). The relationship between VMS and PCA soured, however, so VMS brought this suit against PCA, and after twice amending its complaint, against the Property Company of America, Inc. ("Property Company") and its three controlling persons Paul Hinch, Ronald Beneke, and Hugh Caraway. Both sides filed a flurry of papers and conducted expedited discovery, and a preliminary injunction hearing was scheduled before Magistrate Joan Humphrey Lefkow for her report and recommendation. On June 14, shortly before the scheduled preliminary injunction hearing, we denied the defendants' motion to dismiss to the extent that it was based on the failure to join the Joint Venture as an indispensable party and to the extent that it was based on VMS' failure to bring an accounting before proceeding in this action. We promised that an opinion would follow and took the remainder of the motion and the rest of the outstanding motions under advisement. The next day, presumably after learning of our decision and before the preliminary injunction hearing, PCA filed a Chapter 11 petition in the United States Bankruptcy Court for the Northern District of Texas. The filing stayed the preliminary injunction hearing and all other proceedings against PCA.

 At a subsequent hearing, we asked the parties to consider whether PCA was an indispensable party, that is, whether we could proceed in its absence. At our request, the parties filed briefs on this issue. In addition, Property Company renewed its previous motion to transfer this case to the Northern District of Texas, and VMS filed a motion to sever its claims against Property Company. On August 15, we denied VMS' motion to sever.

 In this opinion, we will set out the reasons for our June 14 decision. In addition, we will consider whether PCA is an indispensable party and whether transfer to the Northern District of Texas is warranted. For the reasons set forth in section IV, we conclude that PCA is not an indispensable party. For the reasons set forth in section V, we grant the motion to transfer.

 II. Is the Joint Venture an Indispensable Party?

 In both its original and first amended complaints, VMS brought only state law claims against PCA alone. Our jurisdiction was premised on diversity: VMS, an Illinois limited partnership whose general and limited partners are all from Illinois, is considered an Illinois citizen, while PCA, as a Texas limited partnership, whose general and limited partners are Texas corporations or partnerships with principal places of business in Oklahoma, is considered a citizen of Texas and Oklahoma. *fn1" However, PCA asserted that VMS had failed to join an indispensable party, namely, the Joint Venture itself. For diversity purposes, the Joint Venture is considered to have the citizenship of both joint ventures, that is, Illinois, Texas and Oklahoma. Although PCA never made clear whether they thought the Joint Venture should be joined as a plaintiff or a defendant, no matter where it was joined, it would have destroyed complete diversity and eliminated our jurisdiction.

 VMS responded that the Joint Venture was not an indispensable party, but it also amended its complaint to add a federal RICO claim; that way, even if we decided that the Joint Venture was a necessary party, it could have been joined without destroying our jurisdiction. *fn2" However, VMS was not yet home free. The defendants now argued that VMS had failed to allege a pattern of racketeering activity sufficient to state a claim under RICO. Of course, the question of pattern under RICO is often a difficult one, and at the time of our decision, we knew that a case which raised that question was pending before the Supreme Court. (That case, H.J., Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 109 S. Ct. 2893, 106 L. Ed. 2d 195 (1989), was decided shortly after we denied the motion to dismiss.) Accordingly, we thought it best to reserve judgment on the RICO question, and so we assumed, without deciding, that VMS had failed to state a claim under RICO and proceeded to consider whether the Joint Venture was an indispensable party. We decided that it was not.

 Rule 19 of the Federal Rules of Civil Procedure sets out the standards for the "Joinder of Persons Needed for Just Adjudication." Under Rule 19(a), the first question is whether the Joint Venture is a "person[] to be joined if feasible." It is such a person if (1) complete relief cannot be accorded the parties if the Joint Venture is not joined or (2) disposition of the suit will as a practical matter impair or impede the Joint Venture's ability to protect its interests. See Fed.R.Civ.P. 19(a)(2)(i), (ii); see also Freeman v. Liu, 112 F.R.D. 35, 40 (N.D.Ill. 1986). Neither requirement was satisfied here. Since both of the joint venturers -- VMS and PCA -- were parties at the time we made our decision, complete relief could have been accorded the parties even if the Joint Venture was not joined. Likewise, as best as we can discern, the Joint Venture did not have any interests separate from those of VMS and PCA. Proceeding without the Joint Venture would not, "as a practical matter," have impaired or impeded its ability to protect its interests.

 Moreover, even had we assumed that the requirements of Rule 19(a) were met, the requirements of Rule 19(b) clearly were not. A court considers Rule 19(b) only after deciding under Rule 19(a) that a person should be joined if feasible. If such a person cannot be joined, "the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed, the absent person being thus regarded as indispensable." The factors to be considered include:

 
First, to what extent a judgment rendered in the person's absence might be prejudicial to the person or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a Judgment rendered in the person's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder.

 Fed.R.Civ.P. 19(b). Although this list is not exhaustive, and no one factor is determinative, see Freeman v. Liu, 112 F.R.D. at 40, the first three factors weighed heavily in favor of proceeding without the Joint Venture. First, we could see no prejudice to the Joint Venture or to the parties they joined, since both joint venturers were before the court. Further, under the second factor, even if there were prejudice, the relief could be shaped to protect the interests of all persons. Finally, since both joint venturers were present, the relief granted would have been adequate. It is true that if we had dismissed, VMS would have had an adequate remedy in the Texas state courts, and possibly in the ...


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