Harrison Co. v. A-Z Wholesalers, Inc.
| Decision Date | 26 February 2020 |
| Docket Number | CIVIL ACTION NO. 3:19-CV-1057-B |
| Parties | HARRISON COMPANY, LLC, Plaintiff, v. A-Z WHOLESALERS, INC., and BARKAT G. ALI, Defendants. |
| Court | U.S. District Court — Northern District of Texas |
Before the Court are Defendants A-Z Wholesalers, Inc. and Barkat Ali's Motion for Leave to Join a Party (Doc. 17) and Motion for Leave to File First Amended Answer (Doc. 15). For the reasons that follow, the Court DENIES the Motion for Leave to Join a Party (Doc. 17) and GRANTS IN PART the Motion for Leave to File First Amended Answer (Doc. 15) to the extent it asserts affirmative defenses and makes a jury demand. Accordingly, it is ORDERED that Defendants file a renewed Motion for Leave to File First Amended Answer, with the proposed affirmative defenses and jury demand.
On March 11, 2011, Plaintiff Harrison and Defendant A-Z executed a credit agreement (the "Credit Agreement") setting forth terms under which Harrison would sell tobacco products and other sundries to A-Z. Doc. 1, Compl., ¶ 7. Simultaneously, Ali executed a personal guaranty (Guarantee) of A-Z's payment and performance under the Credit Agreement. Id. ¶ 8.
Thereafter, Harrison alleges A-Z placed orders pursuant to the Credit Agreement, which were supplied and invoiced by Harrison's parent company, Imperial Trading Company, LLC. Id. ¶ 9. Harrison claims that, although A-Z remitted payment for Imperial invoices of orders placed through Harrison initially, it did not remit payment for the same regarding 39 invoices concerning orders placed between October 22, 2018, and March 4, 2019, totaling $2,574,885.73. Id. ¶¶ 10-11. In response, Imperial and Harrison each sent demand letters to A-Z and Ali for these payments. Id. ¶ 12.
Subsequently, Harrison brought causes of action against Defendants for breach of the Credit Agreement and the Guarantee, and requested attorney's fees. Id. ¶¶ 16-24.
Defendants filed an Answer to Harrison's Complaint on August 12, 2019. See Doc. 5, Defs.' Answer to Compl. Defendants then brought two motions: Motion for Leave to File First Amended Answer (Doc. 15) and Motion for Leave to Join a Party (Doc. 17) to join Imperial. Defendants' Motion for Leave to File First Amended Answer seeks to add affirmative defenses, demand a jury trial, and assert a third-party complaint against Imperial.1 All briefing has been submitted and the motions are ripe for review.
Under Federal Rule of Civil Procedure 19, a person must be joined as a party to a suit when (1) the person's absence will prevent the court from "accord[ing] complete relief among existingparties," or (2) the person claims an interest in the subject of the case, and disposing of the case in the person's absence will either "impair or impede the person's ability to protect the interest," or create a risk of multiple or inconsistent obligations for an existing party because of the interest. FED. R. CIV. P. 19(a)(1). If joining the required person is not feasible, "the court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed." FED. R. CIV. P. 19(b).
Courts "should freely give leave [to amend] when justice so requires." FED. R. CIV. P. 15(a)(2). But this "generous standard is tempered by the necessary power of a district court to manage a case." Schiller v. Physicians Res. Grp. Inc., 342 F.3d 563, 566 (5th Cir. 2003). While Rule 15(a) indicates "a bias in favor of granting leave to amend, leave is by no means automatic." Southmark Corp. v. Schulte Rother & Zabel (In re Southmark Corp.), 88 F.3d 311, 314 (5th Cir. 1996) (citing Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 598 (5th Cir. 1981); Wimm v. Jack Eckerd Corp., 3 F.3d 137, 139 (5th Cir. 1998)). Although the decision to grant leave remains within the district court's discretion, the court must have a "substantial reason" to deny leave. Smith v. EMC Corp., 393 F.3d 590, 595 (5th Cir. 2004)(citation omitted). In its discretion, the Court should consider several factors, including "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of the allowance of the amendment, [and] futility of the amendment." Rosenzweig v. Azurix Corp., 332 F.3d 854, 864 (5th Cir. 2003) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962))(alterations in Rosenzweig). Absent one of these factors, the court should grant leave. Id. (citing Foman, 371 U.S. at 182).
Federal Rule of Civil Procedure 39(b) provides that FED. R. CIV. P. 39(b). In determining whether to grant such a motion, a court should consider five factors:
(1) whether the case involves issues which are best tried to a jury; (2) whether granting the motion would result in a disruption of the court's schedule or that of an adverse party; (3) the degree of prejudice to the adverse party; (4) the length of the delay in having requested a jury trial; and (5) the reason for the movant's tardiness in requesting a jury trial.
Daniel Int'l Corp. v. Fischbach & Moore, Inc., 916 F.2d 1061, 1064 (5th Cir. 1990) (citing Parrott v. Wilson, 707 F.2d 1262, 1267(11th Cir. 1983)).
Generally, a "court should grant a jury trial in the absence of strong and compelling reasons to the contrary." Id. (quoting Swofford v. B & W, Inc., 336 F.2d 406, 409 (5th Cir. 1991)). However, where a movant presents "no viable reasons for [a] delay" in requesting a jury trial, the court may "assume the delay resulted from mere inadvertence," and does not abuse its discretion by denying the movant's request for a jury trial. Farias v. Bexar Cty. Bd. of Trs., 925 F.2d 866, 873 (5th Cir. 1991).
The Court concludes that Imperial is not a necessary party under Rule 19, but that Defendants should be granted leave to file their First Amended Answer to assert affirmative defenses and demand a jury trial.
Defendants have asked the Court to grant leave to join Imperial as either an involuntary plaintiff or a third-party defendant because they believe Imperial is a necessary party under Rule 19. Doc. 18, Defs.' Br., 3. Because the Court concludes that Imperial is not a necessary party under Rule 19, the Court will not distinguish between joining Imperial as an involuntary plaintiff or a third-party defendant.2
Harrison has alleged that A-Z breached the Credit Agreement and Ali, the Guarantee. Doc. 1, Compl., ¶¶ 16-22. Defendants contend that, to determine whether A-Z breached the Credit Agreement, the Court must first determine whether Harrison has standing to sue because of non-payment to Imperial and, if so, whether A-Z breached its obligations to Imperial. Doc. 23, Defs.' Reply, 3. According to Defendants, these determinations make Imperial a necessary party for two reasons. First, Defendants argue that the above inquiry frames the interest of Imperial as a central issue, preventing the Court from awarding complete relief. Id. Second, Defendants assert that proceeding without Imperial would not necessarily resolve any alleged liability owed Imperial and would create a possibility of double recovery. Id.
The Court disagrees, and concludes that Imperial is not a necessary party under Rule 19. The party seeking joinder of a nonparty under Rule 19 "bears the burden of proving that joinder is necessary." Boundy v. Dolenz, 2002 WL 1160075, at *5 (N.D. Tex. May 30, 2002) (citing Nevada Eighty-Eight, Inc. v. Title Ins. Co. of Minn., 753 F. Supp. 1516, 1522 (D. Nev. 1990)). The Rule 19inquiry is a "highly practical, fact-based decision" invoking case-specific determinations. GE Bus. Fin. Servs. Inc. v. Sundance Res., Inc., 2009 WL 1449052, at *2 (N.D. Tex. May 21, 2009) (quoting Pulitzer-Poster v. Pulitzer, 784 F.2d 1305, 1309 (5th Cir. 1986)).
Rule 19(a)(1)(A) classifies a party as necessary when, in its absence, "the court cannot accord complete relief among existing parties[.]" FED. R. CIV. P. 19(a)(1)(A). The focus of this inquiry is the relief between existing parties "and not on the speculative possibility of further litigation between a party and an absent person." GE Bus. Fin. Servs. Inc., 2009 WL 1449052, at *2 (quoting LLC Corp. v. Pension Benefit Guar. Corp., 703 F.2d 301, 325 (8th Cir. 1989)).
Here, the focus of litigation is the alleged breach of the Credit Agreement by A-Z and the resulting liability. See Doc. 1, Compl., ¶¶ 16-22. Defendants are correct that the question of whether non-payment to Imperial constituted breach under the Credit Agreement may arise. See generally BCC Merch. Sols., Inc. v. JetPay, LLC, 129 F. Supp. 3d 440 (N.D. Tex. 2015) (). Regardless, the Court can award complete relief to Harrison without adding Imperial because Harrison has asked only for damages stemming from the alleged breach of the Credit Agreement. See Doc. 1, Compl., 4-5. To award such relief, the Court must determine whether the Credit Agreement was breached; doing so requires no one other than the signatories to the Credit Agreement—Harrison and A-Z—to be in this suit. See Gigi's Cupcakes LLC v. 4 Box LLC, 2018 WL 3729610, at *3 n.4 (N.D. Tex. Aug. 6, 2018) (); see also Pavecon Holding Co. v. Tuzinski, 2017 WL 2539414, at *2-3 (E.D. Tex. May 19,2017) (...
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