Harrison v. Forde
| Decision Date | 28 March 2022 |
| Docket Number | CIVIL ACTION 20-0360-WS-N |
| Parties | William HARRISON, Plaintiff, v. Steve James FORDE, Defendant. |
| Court | U.S. District Court — Southern District of Alabama |
Adam P. Plant, Harlan F. Winn, III, Robert E. Battle, Battle & Winn LLP, Birmingham, AL, for Plaintiff.
Thomas M. O'Hara, O'Hara Law Firm LLC, Daphne, AL, Nicholas J. Zeher, Pro Hac Vice, Robert Allen Law, Miami, FL, for Defendant.
This matter is before the Court on the plaintiff's motion for leave to amend the complaint. (Doc. 48). The defendant has filed a brief in opposition and the plaintiff a reply, (Docs. 54, 59), and the motion is ripe for resolution. After careful consideration, the Court concludes the motion is due to be granted.
According to the first amended complaint, (Doc. 5), the plaintiff and the defendant entered a contract pursuant to which the plaintiff agreed to purchase three million respirator masks for $6.6 million. The plaintiff paid the defendant the full sum up front but did not receive the masks and received only $1 million returned of the amount paid. The first amended complaint asserts claims for breach of contract, conversion, fraud, promissory fraud, unjust enrichment, and money had and received.
On January 20, 2022, the defendant filed a motion for summary judgment as to all claims. (Doc. 44). As to the contract claim, the defendant argues that his contract was not with the plaintiff but with an entity ("Helenbak") owned by an individual ("Agoglia") with whom the plaintiff has a business relationship, such that the plaintiff cannot establish either the existence of an agreement between the parties or damages from any breach. (Doc. 45 at 10-12). As to the conversion claim, the defendant argues that the $5.6 million made the subject of that claim did not come from the plaintiff but from an entity "("Cathexis") of which the plaintiff is CEO and which is owned by three trusts of which the plaintiff is the sole beneficial owner, such that the plaintiff cannot establish an immediate right of possession of the subject funds. (Id. at 12-13). As to the equitable claims, the defendant argues that the plaintiff cannot prevail because the funds came from Cathexis and not from the plaintiff individually. (Id. at 20-21).1
The defendant's motion for summary judgment includes an alternative motion to join the real party in interest. (Doc. 44 at 1). The defendant argues that, should his motion for summary judgment be denied, the Court should order the plaintiff to join Helenbak and Cathexis as parties plaintiff pursuant to Rule 17(a)(1). (Doc. 45 at 21-23).
On February 17, 2022, the plaintiff filed the instant motion.2 The proposed second amended complaint would add Cathexis as a party plaintiff and add allegations that Helenbak, Agoglia, and an unnamed joint venture between the plaintiff and Agoglia, have all assigned their claims related to this litigation to the plaintiff. The plaintiff invokes Rules 15(a)(2) and 17(a)(3). The defendant argues that the former rule is irrelevant, that the latter rule is unsatisfied, and that Rule 16(b)(4) bars the amendment.
The defendant argues that the lenient amendment standard of Rule 15(a)(2) is inapplicable because the deadline for seeking amendment established by the Magistrate Judge pursuant to Rule 16(b) expired last July. (Doc. 54 at 6). The plaintiff does not disagree. The Court therefore confines its discussion to Rules 17(a) and 16(b).
"An action must be prosecuted in the name of the real party in interest." Fed. R. Civ. P. 17(a)(1). "The court may not dismiss an action for failure to prosecute in the name of 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." Id. Rule 17(a)(3). The defendant raises a welter of arguments against amendment under this rule.
First, the defendant argues that amendment under Rule 17(a)(3) is not in play because "there is no motion to dismiss before the Court." (Doc. 54 at 8). No, but there is a motion for summary judgment, the granting of which would result in "dismiss[al] [of] an action." Many courts have recognized that Rule 17(a)(3) applies to motions for summary judgment,3 and the Court does likewise.
Second, the defendant suggests that its motion for summary judgment does not seek dismissal "for failure to prosecute in the name of the real party in interest," (Doc. 54 at 8), but that is exactly what it does. The defendant explicitly insists that Helanbak and Cathexis, rather than the plaintiff, are the real parties in interest, (Doc. 45 at 22), and he seeks dismissal of the contract claim precisely because "Forde and Helanbak are the only parties to the subject transaction" and of the conversion and equitable claims precisely because "Cathexis funded Helenbak's purchase of the masks from Forde." (Id. at 11, 20). The real party in interest is "the person who, according to the governing substantive law, is entitled to enforce the right"4 and, according to the defendant's argument, the entities whose rights may have been infringed are Helenbak and Cathexis. (Doc. 54 at 4). To the uncertain extent the defendant suggests he can avoid implicating Rule 17(a)(3) simply by avoiding the term "real party in interest" in his motion for summary judgment, the Court rejects the suggestion as unsupported by reasoned argument or citation to relevant authority and as pointlessly, if not disingenuously, elevating form over substance.
Because the defendant's motion for summary judgment effectively seeks dismissal of the plaintiff's contract, conversion and equitable claims for failure to prosecute in the name of the real party in interest, the Court cannot grant the motion for summary judgment "until, after an objection, a reasonable time has been allowed" the plaintiff to rectify the situation. The defendant argues that a reasonable time after objection had passed before the plaintiff filed the instant motion, on the grounds that he "repeatedly plead [sic] in his Answer that he had an agreement with Helanbak, not Harrison." (Doc. 54 at 7-8). In fact, the portions of the answer on which the defendant relies for this proposition, (id. at 1-3), while admitting or asserting various communications with Helenbak, do not state that the contract was with Helenbak, much less that the contract was only with Helenbak, to the exclusion of the plaintiff (with whom the answer admits the defendant was communicating and negotiating). Moreover, the defendant twice admitted in his answer that it was "Harrison's money" that he had received. (Doc. 5 at 4-5, ¶¶ 18, 19; Doc. 14 at 3, ¶¶ 18, 19).5
The defendant fails to explain how his admission that the money at issue was that of the plaintiff (rather than Cathexis) could possibly constitute an objection that Harrison is not the real party in interest as to his conversion and equitable claims. Nor does he explain how material that merely suggests a contract with Helanbak could constitute an objection that the plaintiff was not also a contracting party. Given the ease with which a defendant may raise an objection by employing the standard phrase, "real party in interest," given the harsh consequences visited on a plaintiff that does not timely respond to an objection, and given the purpose of Rule 17(a) "to insure against forfeiture and injustice,"6 the Court declines to rule that the defendant's answer constitutes an "objection" within the rule.
Although ignored in his argument, the defendant's brief notes that his answer asserted as affirmative defenses: (1) that the plaintiff "lacks proper standing"; (2) that the plaintiff "failed to name an indispensable party"; and (3) that Helenbak was not properly licensed to do business in Alabama. (Doc. 54 at 4). None of these assertions rise to the level of an objection under Rule 17(a). Standing can be either constitutional or prudential, and constitutional standing is a "distinct issu[e] with separate considerations" from those underlying real party in interest concerns. Fisher v. PNC Bank, N.A. , 2 F.4th 1352, 1358 (11th Cir. 2021) (internal quotes omitted). Because the answer does not specify what form of standing is being challenged, it is inherently ambiguous and thus incapable of constituting an objection for purposes of Rule 17(a).7 A reference to an "indispensable party" implicates Rule 19(b), not Rule 17(a). E.g., Florida Wildlife Federation Inc. v. United States Army Corp of Engineers , 859 F.3d 1306, 1316 (11th Cir. 2017). Finally, the reference to Helanbak's licensure is perfectly consistent with a defense belief that Helanbak was an additional contracting party along with the plaintiff and is far too ambiguous to constitute an objection that the plaintiff is not the real party in interest.
After arguing that the plaintiff's motion comes too late, the defendant next argues that it comes too early. According to the defendant, the Court must rule on his motion for summary judgment before it can consider any issue regarding the plaintiff's alternative motion that, because Helanbak and Cathexis are real parties in interest, they be joined as parties plaintiff. (Doc. 54 at 8). On the contrary, because the defendant's alternative motion patently constitutes an objection for purposes of Rule 17(a), and because the defendant seeks summary judgment on real-party-in-interest grounds, the express language of the rule compels the Court to address the objection before considering the motion for summary judgment.
The text of Rule 17(a) contains no qualifiers, other than temporal, on a plaintiff's ability to correct an issue regarding the real party in interest. The Advisory Committee note, however, states that the rule "is intended to prevent forfeiture when determination of the proper party to sue is difficult or when an understandable mistake has been made." Fed. R. Civ. P. 17...
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