350 F.2d 551 (5th Cir. 1965), 20803, Kuchenig v. California Co.

Docket Nº:20803.
Citation:350 F.2d 551
Party Name:Fred KUCHENIG, Appellant, v. The CALIFORNIA COMPANY, Appellee.
Case Date:July 12, 1965
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 551

350 F.2d 551 (5th Cir. 1965)

Fred KUCHENIG, Appellant,

v.

The CALIFORNIA COMPANY, Appellee.

No. 20803.

United States Court of Appeals, Fifth Circuit.

July 12, 1965

Rehearing Denied Oct. 10, 1965.

C. Ellis Henican, Deynoodt, de la Vergne, Meyers & Buckley, Henican,

Page 552

James & Cleveland, New Orleans, La., for appellant.

Lawrence K. Benson, New Orleans, La., for appellee, Milling Saal, Saunders Benson & Woodward, New Orleans, La., of counsel.

Before RIVES and WISDOM, Circuit Judges, and MORGAN, District Judge.

WISDOM, Circuit Judge:

In this diversity action conflicting claims of the plaintiff and of the State of Louisiana to oil-rich water bottoms raise the question whether the State (a) in its capacity as the defendant's lessor and also (b) in its capacity as a sovereign State asserting title to allegedly inalienable beds of navigable waters is an indispensable party defendant.

The land in suit is in Plaquemines Parish, Louisiana. It is covered by the waters of Breton Sound, an arm of the Gulf of Mexico. The plaintiff, Fred Kuchenig, a resident of Missouri, is the adopted son and sole heir of his uncle, Martin Kuchenig. The plaintiff alleges that at one time the property was swamplands; 1 that the State patented the land in 1911 to one Millard C. Baker; and that, after several intermediate transfers, Martin Kuchenig bought the land in 1912. In 1915 Martin Kuchenig lost the land to the State for unpaid taxes. In 1961 Fred Kuchenig redeemed it. 2 Meanwhile, in 1951 the State, through its Mineral Board, executed Mineral Lease 1960, leasing Tract 4778 to the California Company. This tract encompasses the property lost to the State for unpaid taxes but later redeemed. The Company has drilled four oil wells on Tract 4778-- two completed wells, two dry holes--all in navigable waters. The State has received royalties on all production from the two completed wells.

In 1961 Fred Kuchenig filed this petitory (title) action against California Company. In addition to asking the court to recognize his sole ownership of the property in dispute, the plaintiff demanded that California Company account for all oil and gas taken from the land. California Company, asserting possession under the mineral lease from the State of Louisiana, moved to dismiss on the ground that the State, an indispensable party, had not been joined. The district court gave Kuchenig leave to join the State; when he failed to do so, the court dismissed the action for failure to join an indispensable party. Fed.R.Civ.P. 19. We affirm the dismissal of plaintiff's demand for a decree of ownership; we reserve judgment as to the accounting.

I.

A threshold problem is whether, in a diversity action, indispensability is a matter governed by state or federal law.

The Federal Rules of Civil Procedure offer no clear solution. In general, the Federal Rules dealing with joinder are not finely drawn. They derive from common law rules leavened by equity. 3

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Rules 19 and 20, after a passing nod to the old common law standard, jointness of interest, 4 adopt by indirection the classification laid down by the Supreme Court in Shields v. Barrow, 1855, 17 How. 130, 147, 15 L.Ed. 158. There Justice Curtis described the 'three classes of parties to a bill in equity': formal, 5 necessary, and indispensable. 6 Rule 19, dealing with 'necessary joinder', refers to 'persons who are not indispensable, but who ought to be parties if complete relief is to be accorded between those already parties'. 7

Rule 19 gives no content to the term 'indispensable'. The rule is said to be merely declaratory of existing law. 8 It is questionable, however, whether Rule 19 is declaratory of federal law or of state law, or, indeed, of either.

In Hanna v. Plumer, 1965, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8, decided in April of this year, the Supreme Court discussed the relationship between the Federal Rules, the Rules Enabling Act, 9 and the Constitution. The Court distinguished between the line of cases classifying matters as substantive or procedural for the purpose of adjudicating the validity of various federal rules (Sibbach v. Wilson & Co., 1940, 312 U.S. 1, 61 S.Ct. 422, 85 L.Ed. 479, and progeny) and the line of cases making that classification under the rule in Erie R. Co. v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188,

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10 none of which, said the Court, finally required a determination of the validity of a federal rule. The Court pointed out that Congress has the power to regulate 'matters which, though falling within the uncertain area between substance and procedure, are rationally capable of classification as either', 380 U.S. at 472, 85 S.Ct., at 1144, even where, in absence of an applicable federal rule or federal statute, Erie R. Co. v. Tompkins might require application of state law. A court instructed to apply a federal rule may 'refuse to do so only if the Advisory Committee, (the Supreme) Court, and Congress erred in their prima facie judgment that the rule in question transgresses neither the terms of the Enabling Act nor constitutional restrictions'. 380 U.S. at 471, 85 S.Ct. at 1144. The opinion does not undertake to say what, if any, difference there is between the 'terms of the Enabling Act' and 'constitutional restrictions'--that is, whether the Enabling Act exhausts the power of Congress to regulate practice and pleading in diversity suits. But in any event, the 'uncertain area' that the Court mentions includes matters neither so clearly substantive that the Constitution requires that they be governed by state law, 11 nor so clearly procedural that the Court may regulate them simply through its inherent rule-making power. 12

Hanna v. Plumer introduces a helpful double abstraction-- the choice of choice of law. The decision makes clear that the first inquiry for a diversity court seeking the proper source of the law governing indispensability-- or any other matter potentially affected by the Federal Rules-- is which of the Supreme Court's two lines of decision is pertinent. Do the Federal Rules 'cover' indispensability? That is, does Rule 19, by mentioning indispensability, incorporate by reference the entire body of federal indispensability precedent? The easy answer is, 'No'. In the first place, the text of the rule gives not the slightest clue as to the criteria that a federal court should apply in deciding who must, as opposed to who should or merely may, be joined. Second, no federal court faced with a conflict between a state indispensability rule and federal precedent has ever treated the question as one involving the validity of Rule 19. The cases, though many, are widely discrepant

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as to which law should apply. 13 But every court that has dealt with the issue at all seems to have treated it, appropriately in our view, as a run-of-the-mine Erie problem, requiring the usual balancing of substantive and procedural elements. 14

Unhappily, indispensability matters do not fall neatly into categories. Several factors urge application of federal law: Obviously joinder is, in a sense, always a matter of procedure, if that aging shibboleth still serves. And indispensability, while not properly regarded as a jurisdictional issue, 15 is closely related to jurisdiction, 16 and may act to defeat diversity jurisdiction. Moreover, 'the concept of indispensability * * * was to a large extent self-imposed as a limitation upon federal equity jurisdiction, and there is a large body of federal indispensability precedent'. Note, Developments in the Law, Multiparty Litigation in the Federal Courts, 71 Harv.L.Rev. 874, 888. Current theory, 'which regards compulsory joinder as a discretionary matter, dependent on a realistic analysis of the facts of the case rather than as a matter governed by conceptual classifications of the interests of the parties', 17 lends further support to the view that federal, rather than state, law should govern. 18 2 Barron & Holtzoff, Federal Practice and Procedure § 511 (Wright Ed. 1961). On the other hand, rules of joinder depend on the substantive rights and liabilities of the parties, present and

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absent. In diversity actions, these substantive rights and liabilities are creatures of state law. Whenever a missing person cannot be joined, rules of indispensability are 'outcome determinative', in the sense that they control whether the pending action must be dismissed. Disparities between federal and state indispensability rules, therefore, may affect primary private activity, and will necessarily encourage forum-shopping. 19

Professor Wright characterizes the conflict in the cases as 'more apparent than real': state law determines the interests of the parties; federal law determines whether these state-created interests render a missing person indispensable. Wright, Federal Courts 260 (1963). This short-hand formulation must at least be qualified insofar as it leaves room for a federal court to run afoul of Angel v. Bullington, 1947, 330 U.S. 183, 67 S.Ct. 657, 91 L.Ed. 832, by entertaining diversity actions unavailable under state law. 20 Professor Wright has recognized this caveat suggested by Judge Wyzanski in Stevens v. Loomis, D.C.Mass.1963, 223 F.Supp. 534, aff'd., 1 Cir. 1964, 334 F.2d 775. 'Judge Wyzanski carefully points out the limitation that if, as a matter of substantive law, a state does not recognize that a plaintiff has a particular right of action unless he joins with him certain others, then the federal court in a diversity action is precluded from giving a plaintiff who fails to join those others an opportunity to proceed as though alone he had a substantive right.' 2 Barron & Holtzoff, Federal Practice and Procedure § 511 (1964 pocket part) (Wright ed. 1961). Even under Judge Wyzanski's view, however, the mere fact that state law labels a missing person 'indispensable' may not always be controlling in federal...

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