The opinion of the court was delivered by: Elaine E. Bucklo, United States District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiff John L. Byczek ("Byczek") was president and sole shareholder
of Byzcek Equipment Company ("BEC"). In May 2001, BEC entered into an
asset purchase agreement with defendants The Boelter Companies, Inc. and
its president F. William Boelter (collectively "Boelter"). According to
the agreement, Boelter was to purchase BEC and create a new company to
carry on its operations. Boelter allegedly breached this agreement. In
July 2001, all of BEC's assets were assigned to David Abrams, Abrams
& Jossel Consulting, Inc. ("Abrams"), as assignee for the benefit of
creditors of the estate of SEC. In January 2002, Abrams assigned BEC's
chose in action for claims relating to the May 2001 agreement to Byczek.
Byczek filed this suit against Boelter in Illinois state court, making
six claims as assignee of BEC's claims (counts I and III-VII), and one
claim on his own behalf (count II). Boelter removed the case to federal
court pursuant to 28 U.S.C. § 1441 and 1332. Boelter now moves to
dismiss the SEC counts for failure to state a claim pursuant to
Fed.R.Civ.P. 12(b)(6) or for failure to join Abrams as a necessary party
pursuant to Fed.R.Civ.P. 12(b)(7). I deny the motion.
Boelter makes two arguments for dismissal. First, it argues that the
assignment of BEC's chose of action from Abrams to Byczek was invalid,
and Abrams thus retains the chose in action. In that case, Abrams, not
Byczek, is the true party in interest and the SEC counts must be
dismissed if he is not joined to pursue them. Second, Boelter argues that
even if the assignment was valid, Abrams is still a necessary party to
the litigation of the SEC counts, and failure to have him joined should
result in dismissal.
II. Is the Assignment from Abrams to Byczed Valid?
Boelter is correct in stating that if the assignment from Abrams to
Byczek was invalid, Byczek cannot pursue the SEC claims. It argues that
the assignment is invalid because Abrams, as a fiduciary to the creditors
of BEC, could not assign the creditors' chose in action to Byczek because
Byczek has significant conflicts of interest with the SEC creditors that
preclude such an assignment. First, because Byczek is pursuing a direct
claim against Boelter on his own behalf, he would not be able to
adequately represent the interests of BEC creditors in the same
litigation. Second, because Byczek is the first secured creditor of BEC,
he may seek to secure his own recovery at the expense of lower creditors
of BEC. Boelter argues that these conflicts make the assignment of the
chose in action to Byczek invalid. Further, in its reply brief, Boelter
argues that the assignment was a sham and should therefore be
disregarded. Whatever merit there is to these claims, they are claims
that only the BEC creditors, not Boelter, may raise. Boelter lacks
standing to challenge the validity of the assignment. See Liu v. T &
H Mach., Inc., 191 F.3d 790, 797-98 (7th Cir. 1999) (finding that a
manufacturer lacked standing to challenge the reassignment from a
broker's associates back to the broker of a chose of action to recover
unpaid commissions from the manufacturer). For purposes of this
litigation, then, the assignment of the BEC creditors' chose of action
from Abrams to Byczek is valid, and Byczek is thus the true party in
interest to pursue the SEC claims.
III. Is Abrams a Necessary Party?
Although Byczek is the true party in interest to pursue the SEC
claims, Abrams may still be a necessary party to the litigation. Under
Fed.R.Civ.P. 19(a), a party is necessary if
(1) in that person's absence complete relief cannot be
accorded among those already parties, or (2) the
person claims an interest relating to the subject of
the action and is so situated that the disposition of
the action in the person' s absence may (i) as a
practical matter impair or impede the person s ability
to protect that interest or (ii) leave any of the
persons already parties subject to a substantial risk
of incurring double, multiple, or otherwise
inconsistent obligations by reason of the claimed
Boelter argues that Abrams is a necessary party under all three
provisions of Rule 19(a).
First, Boelter argues that Abrams is a necessary party under 19(a)(1)
because complete relief cannot be accorded without the presence of
Abrams. Boelter states that it has significant counterclaims against BEC
and thus, without joining Abrams, it cannot be accorded complete relief.
This argument is wrong for two reasons. First, Boelter may be able to
assert against Byczek as assignee of BEC's chose in action some or all of
the counterclaims it has against BEC. See First Nat'l Bank off Boston
(Int'l) v. Banco Nacional de Cuba, 658 F.2d 895, 902 (2d Cir. 1981)
("When a plaintiff sues on a claim as an assignee, the defendant may
assert a counterclaim against the assignee based on a right of action
against the assignor."). Second, to the extent that Boelter has claims
against BEC that cannot be asserted as counterclaims against Byczek as
assignee, this fact does not make Abrams a necessary party under
19(a)(1). Rule 19(a)(1) refers to according complete relief among those
already parties. Here, only Byczek and Boelter are already parties. The
fact that Boelter has claims against BEC that might be more conveniently
litigated in the pending suit than in a separate suit does not make
Abrams a necessary party under 19(a)(1). See Morgan Guar. Trust Co. off
New York v. Martin, 466 F.2d 593, 598 (7th Cir. 1972)
Boelter also argues that complete relief cannot be afforded in Abrams'
absence because there is a great risk that the BEC creditors will set
aside the assignment and seek to proceed in their own behalf. Again, this
argument relates to the ability to accord complete relief between a party
and a non-party. Such is not ...