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Wizzards Asset Management, Inc. v. MF Global Inc.

February 19, 2009


The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge


This matter is before the court on Defendant MF Global Inc.'s ("MFG") motion to dismiss. For the reasons stated below, we deny the motion to dismiss.


Plaintiff Wizzards Asset Management, Inc. ("Wizzards") states that it is a brokerage firm that acts as an introducing broker for managed futures funds. Wizzards claims that in return it receives from such funds round-turn trading commissions. On March 20, 2003, Wizzards allegedly entered into a contract ("Agreement") with Man Financial Inc., a predecessor in interest to MFG. Under the Agreement, Wizzards was allegedly required to act as the introducing broker, and MFG was required to provide clearing, execution, and other services for the accounts at issue, and was required to pay Wizzards certain brokerage commissions. Wizzards contends that, under the terms of the Agreement, in certain instances MFG would incur third-party, transaction-based expenses and that such hard costs ("Hard Costs") could be charged to Wizzards in the relevant account. Wizzards claims that MFG breached the Agreement by double billing both the relevant accounts and Wizzards for such Hard Costs. MFG also allegedly failed to pay Wizzards commissions owed for March 2008. Wizzards brought the instant action and includes in the amended complaint a breach of contract claim (Count I), a breach of fiduciary duty claim (Count II), a constructive fraud claim (Count III), a conversion claim (Count IV), an account stated claim (Count V), and an unjust enrichment claim (Count VI). On October 1, 2008, we granted MFG's motion to dismiss in part, dismissing the unjust enrichment claim (Count VI). MFG moves to dismiss the instant action for failure to sue in the name of the real party in interest and failure to join a required party.


Pursuant to Federal Rule of Civil Procedure 12(b)(7) ("Rule 12(b)(7)"), a defendant can move to dismiss an action based on the "failure to join a party" under Federal Rule of Civil Procedure 19 ("Rule 19"). Fed. R. Civ. P. 12(b)(7). For a Rule 12(b)(7) motion, the court must "accept the allegations in the complaint as true." Davis Companies v. Emerald Casino, Inc., 268 F.3d 477, 479 n.2 (7th Cir. 2001); see also Boulevard Bank Nat. Ass'n v. Philips Medical Systems Intern. B.V., 15 F.3d 1419, 1422 (7th Cir. 1994)(stating that "in deciding a Rule 12(b)(7) motion to dismiss," the court "must apply Rule 19(b) if [the court] first determine[s] that the party to be joined satisfies the threshold requirements of Rule 19(a)").

Rule 19 provides in part that "[a] person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if: (A) in that person's absence, the court cannot accord complete relief among existing parties; or (B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may: (i) as a practical matter impair or impede the person's ability to protect the interest; or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest." Fed. R. Civ. P. 19(a). When ruling on a Rule 12(b)(7) motion to dismiss, "a court may go outside the pleadings and look to extrinsic evidence." Davis Companies, 268 F.3d at 480 n.4.

Pursuant to Federal Rule of Civil Procedure 17, "[a]n action must be prosecuted in the name of the real party in interest." Fed. R. Civ. P. 17(a)(1). A court cannot dismiss an action for failure to name the "real party in interest until, after an objection, a reasonable time has been allowed for the real party in interest to ratify, join, or be substituted into the action." Fed. R. Civ. P. 17(a)(3). A real party in interest is defined by the Seventh Circuit as "a party that has a legally protectable interest in the outcome of the suit." Old Ben Coal Co. v. Office of Workers' Compensation Programs, 476 F.3d 418, 420 (7th Cir. 2007). A party that "has no possible stake in [the] litigation" and "is a party in name only," is not a real party in interest. Id.


I. Claim for Alleged Unpaid Commissions

Wizzards argues initially that even if this court agreed with MFG's arguments in the instant motion, MFG has not offered a sufficient basis for dismissing the entire action. In particular, Wizzards contends that its claims for unpaid commissions are not challenged.

MFG contends in its instant motion that Superfund Asset Management ("Superfund"), an affiliate of Wizzards, is the real party in interest and is a required party that must be joined in this case. MFG argues that the basis for Wizzards' claims in this case is that MFG improperly double charged certain accounts in regard to the Hard Costs. MFG further contends that the alleged double billing involved accounts of Superfund as well as Wizzards. According to MFG, Superfund has separately initiated litigation against MFG and made a demand for arbitration in that litigation. MFG contends that Superfund is seeking the same damages in the arbitration proceedings ("Arbitration") that Wizzards is seeking to recover in the instant action and that MFG is faced with the risk of having to pay the same damages twice. However, even if we were to accept such arguments, Wizzards correctly points out that the alleged improper double billing that MFG asserts is a basis for the Arbitration and this case is not the entire basis for Wizzards' case in this court.

Wizzards also specifically seeks to recover unpaid commissions allegedly owed to Wizzards for March 2008, totaling $423,451. (A. Compl. Par. 35). Wizzards points out that MFG has not argued or shown, in regard to the claims brought by Wizzards for the unpaid commissions allegedly owed to Wizzards, that Superfund would be a real party in interest or a required party that needs to be joined in this case. MFG made a cursory reference to the commissions in its reply, stating that Wizzards had not shown that the commissions issue could be "resolved only in this forum." (Reply 4 n.2). However, MFG failed to offer any reason why Wizzards could not properly choose to pursue the commissions claim in this court. MFG also indicates that the amount that Wizzards is seeking in this action for double billing, when added to the amount sought for unpaid commissions, is roughly the same amount that Superfund is seeking in the Arbitration. (Reply 4). MFG has not shown that this case can be dismissed based upon such supposition. MFG presents no evidence to show that the amounts are the same or that the amounts in each proceeding represent the same damages such as the commissions that Wizzards seeks in this case. Wizzards also asserts in its sur-reply ...

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