You Can't Force A Defendant To Join In Another Party's Counterclaim

 Can you force a party to a lawsuit to join in another party’s claim? There’s no answer in the  North Carolina Rules of Civil Procedure. But Judge Gale provided an answer this week in Nelson v. Alliance Hospitality Mgt., LLC, 2012 NCBC 39.

Two Rules were implicated: Rule 18, which allows for joinder of claims, and Rule 19, which allows for joinder of necessary parties. Neither Rule speaks to a forced joinder, and the Judge said he had not found any North Carolina case where a party already involved in a lawsuit was compelled to join other claims or counterclaims.

Why would Nelson want to force one of the Defendants to join in a counterclaim brought by another Defendant anyway? Well, the counterclaim was about the extent of Nelson’s percentage ownership interest in Alliance. Nelson said he had a 16.4% interest, but Alliance had counterclaimed saying that Nelson’s interest was limited to 10%. One of the other Defendants, Axis, was the majority owner of Alliance, and Nelson wanted Axis to be required to join in Alliance’s counterclaim. But Axis was already a Defendant on Nelson’s claims.

If you were to call this "compulsory joinder," the only time NC courts have required a person to join in claims or counterclaims has been when the person is not already a party to the case.

Judge Gale framed the issue as “whether Rule 19 compels a person who is already a plaintiff or defendant on other claims in the lawsuit to be joined to the other claims or counterclaims of that lawsuit.” Op. Par. 11 (emphasis added). He concluded that “when a party is already a party to the lawsuit, Rule 19 does not compel the party to join other claims or counterclaims.” Op. ¶16.

Nelson argued that Axis was the real party in interest, and that Rule 17, which requires all claims to be made in the name of the real party in interest, therefore required its joinder.  Judge Gale said that the LLC itself, Alliance, was the real party in interest, because "Rule 17. . . considers a party authorized by statute to bring the claim in its own name the real party in interest without joining the party for whose benefit the action is brought."  Op. ¶23.

Since Alliance, a Georgia LLC, had the authority under the Georgia Code to sue in its own name, it was the real party in interest, and Axis didn't need to be joined to Alliance's claims.

 

 

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