Pasco Intern. (London) Ltd. v. Stenograph Corp., 80-1061

• Citation: 637 F.2d 496
• Decision Date: 23 December 1980
• Docket Number: No. 80-1061,80-1061
• Parties: PASCO INTERNATIONAL (LONDON) LTD., Plaintiff-Appellant, v. STENOGRAPH CORPORATION, Energy Absorption Systems and Data General Corporation, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 496

637 F.2d 496

PASCO INTERNATIONAL (LONDON) LTD., Plaintiff-Appellant, v. STENOGRAPH CORPORATION, Energy Absorption Systems and Data General Corporation, Defendants-Appellees.

No. 80-1061.

United States Court of Appeals Seventh Circuit.

Argued May 6, 1980.

Decided Dec. 23, 1980.

William B. Lawless, New York City, for plaintiff-appellant.

Paul G. Simon, Chicago, Ill., for defendants-appellees.

Before PELL, Circuit Judge, NICHOLS, Judge, ^* and CUDAHY, Circuit Judge.

CUDAHY, Circuit Judge.

Appellant Pasco International (London) Limited ("Pasco") appeals from the dismissal of its complaint for damages and injunctive relief against Stenograph Corporation ("Stenograph"), Data General Corporation, and Energy Absorption Systems. The district court, applying Rule 19 of the Federal Rules of Civil Procedure, dismissed the complaint because of Pasco's failure to sue a purported indispensable party, Alan Croxford. ¹ We find that Croxford is not an indispensable party to this action as that term is used in Rule 19 and, accordingly, we reverse.

According to the complaint, ² Pasco, through its chief engineer in Nigeria, Alan Croxford, began negotiating in late 1978 to obtain a contract to sell a computerized stenographic system to the Nigerian government and its nineteen constituent states. On March 19, 1979, Pasco entered into an exclusive agency agreement with defendant Stenograph. The agreement provided that Stenograph would provide the machines for the stenographic system and supervise the training of the Nigerian personnel. ³ However, before the oral agreement between Pasco and the Nigerian officials was put in final written form, Stenograph and Croxford conspired to obtain the Nigerian contracts for Stenograph. Pursuant to their agreement, Croxford ceased to represent Pasco's interests, began falsely disparaging the financial condition of Pasco to the Nigerians ⁴ and became Stenograph's sales agent. ⁵ This activity was designed to induce the Nigerian government to bypass Pasco and deal directly with Stenograph. Two Nigerian states have already entered into contracts with Croxford in his capacity as an agent for Stenograph.

The complaint attempts to allege three separate causes of action. One consists of a breach of contract action against Stenograph on the exclusive agency agreement between Pasco and Stenograph. The others are tort claims based upon Stenograph's alleged interference with the contractual relations between Pasco and the Nigerians and upon the alleged interference with the prospective economic advantage Pasco possessed in its expected future dealings with the Nigerians.

Plaintiff seeks to enjoin Stenograph and its agents from entering into contracts for stenographic services with the Nigerian Government and the constituent states of Nigeria. The plaintiff also seeks to enjoin the defendants from making any future false or injurious statements to the Nigerian officials. For monetary relief, the complaint seeks damages from Stenograph for its breach of the Pasco-Stenograph sales agency agreement. Pasco further prays for an accounting and restitution of the profits from the contracts already executed with the two states of Nigeria as well as for damages if Pasco fails to conclude its proposed contract with the Nigerian government.

I. THE ISSUE

The district court's dismissal of Pasco's complaint reflects the conclusion that Croxford is an indispensable party to the action within the framework established by Rule 19 of the Federal Rules of Civil Procedure. The subsections of Rule 19 set out a two-step analysis of compulsory joinder problems.

Rule 19(a) lists the criteria for determining whether an absent party should be joined if feasible. When the joinder of the absent party would destroy diversity jurisdiction, however, Rule 19(a) is inapplicable. Bio-Analytical Services, Inc. v. Edgewater Hospital, Inc., 565 F.2d 450, 452 (7th Cir. 1977), cert. denied, 439 U.S. 820, 99 S.Ct. 84, 58 L.Ed.2d 111 (1978).

If the plaintiff cannot join an absent person who should be joined if feasible under Rule 19(a), ⁶ the court must then determine under Rule 19(b) whether, in equity and good conscience, the action should proceed among the parties before it or should be dismissed because the absent person is indispensable. Rule 19(b) sets out four factors to guide the court's judgment:

first, to what extent a judgment rendered in the person's absence might be prejudicial to him or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder.

A careful application of these factors compels the conclusion that Croxford is not an indispensable party and that the district court erred in dismissing Pasco's complaint.

II. THE FOUR FACTORS OF RULE 19(b)

A critical consideration under Rule 19(b) is the availability or unavailability of an alternative forum. ⁷ If the plaintiff's complaint is dismissed and there is no other court having jurisdiction over the parties as well as over the absent person, the plaintiff's interest in having the federal forum would strongly influence a court to find that the absent person was not indispensable. Here, however, there is an alternative forum because, on the face of the plaintiff's complaint, there is jurisdiction in the Illinois state courts over both the present defendants ⁸ and Croxford. The complaint alleges that Croxford is "doing business in Illinois," a potential basis for jurisdiction over Croxford in any Illinois action. See Ill.Rev.Stat. ch. 110, § 16 (1979). An affidavit filed by an officer of Pasco also states, upon information and belief, that Croxford has committed certain tortious acts within Illinois to further the conspiratorial aims of the defendants. See Ill.Rev.Stat. ch. 110, § 17 (1979). It seems clear from these allegations (although an Illinois state court would not be bound by our analysis) that Croxford is subject to the jurisdiction of the Illinois courts.

While the availability of the alternative Illinois forum renders a Rule 19(b) dismissal less onerous, "we do not view the availability of an alternative remedy, standing alone, as a sufficient reason for deciding that the action should not proceed among the parties before the court." Bio-Analytical Services, Inc. v. Edgewater Hospital, Inc., 565 F.2d 450, 453 (7th Cir. 1977), cert. denied, 439 U.S. 820, 99 S.Ct. 84, 58 L.Ed.2d 111 (1978) (citing Bonnet v. Trustees of Schools of Township 41 North, 563 F.2d 831, 833 (7th Cir. 1977)). ⁹ Where the plaintiff can otherwise maintain a diversity action in the federal courts, the plaintiff has an interest in the forum granted by federal law and chosen by him. To outweigh the plaintiff's choice some additional interest of the absent person, the other parties or the judicial system must be found.

Appellees have stressed the first factor recited in Rule 19(b), the prejudice to the absent person or to those already parties, to supply the additional interest to offset the plaintiff's choice of this federal forum. There are several alleged sources of prejudice, but we think them insufficiently substantial to make Croxford an indispensable party under Rule 19(b). ¹⁰

Considering the absent party first, the possibility of injunctive relief in this suit does not result in any impermissible prejudice to Croxford. Any injunction against Stenograph would also bind Croxford to the extent of his agency ¹¹ under Rule 65(d) of the Federal Rules of Civil Procedure:

Every order granting an injunction ... is binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise.

Fed.R.Civ.P. 65(d) (emphasis supplied). As an agent, Croxford would be bound by any injunction against his principal while acting in that capacity. Le Tourneau Co. of Georgia v. NLRB, 150 F.2d 1012 (5th Cir.), rev'd on other grounds, 324 U.S. 793, 65 S.Ct. 982, 89 L.Ed. 1372 (1945). This binding effect would undeniably affect Croxford's activities in Nigeria on behalf of Stenograph, but Rule 65 obviously contemplates that agents need not be parties to suits for injunctive relief against their principals. A harmonious reading of Rule 65 and Rule 19(b) therefore contemplates that this sort of impact is not a source of prejudice under the tests of Rule 19(b).

The possibility of monetary relief in this action does nothing to change our conclusion. It is difficult to perceive how Croxford would be prejudiced by an unfavorable judgment ¹² for money damages against Stenograph. Croxford would not be liable for any of those damages and could assert any of his defenses in any indemnity or contribution action brought against him by Stenograph.

Stenograph asserts that Croxford will be prejudiced by the impact of the suit on Croxford's business reputation in Nigeria. Any agent will suffer some adverse practical consequences when his principal is held vicariously liable on account of the agent's conduct, but this is not a sufficient interest for finding the agent indispensable under Rule 19. ¹³ See Wylain, Inc. v. Kidde Consumer Durables Corp., 74 F.R.D. 434, 436 (D.Del.1977). Any adverse impact on an agent of a money judgment against his principal would certainly be less intrusive than the impact of the agent's being bound by an injunction against the principal. But, as we have seen, the possibility of injunctive relief against the principal does not result in any prejudice to the agent which is cognizable under Rule 19(b). Hence, we similarly find no cognizable prejudice with respect to any claim for monetary relief.

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