North Carolina Business Litigation Report

A "Proper" Party Isn't Necessarily A "Necessary" Party

What is the difference between a "proper" party and a "necessary" party"?  Judge McGuire spelled out the difference early this week in Cape Hatteras Electric Membership Corp. v. Stevenson, 2014 NCBC 62.

Why should you care about the distinction?  Because Rule 19 of the North Carolina Rules of Civil Procedure says that all "who are united in interest must be joined as plaintiffs or defendants."  In the absence of the joinder of a "necessary" party a valid judgment cannot be rendered.

But, as Judge McGuire held:

[a] party is not a necessary party simply because a pending action might have some impact on the party's rights, or otherwise affect the party.

Op. ¶10.

Instead, a person whose interests "may be affected by a decree, but whose presence is not essential in order for the court to adjudicate the rights of others is a 'proper' party, but not a necessary party."  Op. ¶10.

By now you are looking for some context.  The Defendants in the case before Judge McGuire were members of the Plaintiff corporation, an electric membership corporation per G.S. Chapter 117.  The corporation's Bylaws required its members to consent to the relocation of electrical transmission lines running over their property.  The Defendants had agreed, as a condition of their membership, to be bound by the Bylaws of the corporation.  So had all of the other hundreds of members of the corporation.

When the Defendants refused to allow the relocation of a transmission line running over their property, they were sued by the corporation.  The Defendants, in their Motion for dismissal per NC Rule of Civil Procedure 12(b)(7) (for failure to join a "necessary party"), argued that all of the corporation's hundreds of members were necessary parties to the action, because the Court's ruling interpreting the Bylaws would affect all of the members.

Judge McGuire didn't buy that argument.  Although he said that a judgment in the case before him could "in some sense" affect the rights of the members who hadn't been joined, it would "not deprive them of any rights."  Op. ¶14.  Moreover, he observed that there was no existing controversy with the other members, and that joining them as parties might put the Court in the impermissible position of issuing an advisory opinion.  Op. ¶14 & n.7.

Judge McGuire, after denying the Motion to Dismiss, said that the other members of the corporation could intervene in the case, subject to his discretion.  Op. Par. 14.

 

 

 

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Mack Sperling
Brooks Pierce, LLP
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