§ 8.01  Claim Joinder

 

FRCP 18 allows a party who has made a claim against another to join further claims with it against the same opponent. It authorizes claim joinder without limitation, regardless of whether the claim to be joined is related to the pre-existing claims or not, as long as the joined claim satisfies subject matter jurisdiction requirements.

 

 

§ 8.02 Counterclaims

 

A party may assert a counterclaim against one who previously asserted a claim against him/her.  Counterclaims may be compulsory [FRCP 13(a)] or permissive [FRCP 13(b)]. 

 

[1] Compulsory Counterclaims

 

A claim that arises out of the same transaction or occurrence as the subject matter of the opposing party’s claim must be asserted in the present action or is forever barred, except for the following claims:

• claims requiring joinder of parties over whom the court lacks personal jurisdiction.
• in rem claims.
• quasi in rem claims.

 

Most federal courts interpret “arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim” as being logically related to the underlying claim.

 

Compulsory counterclaims fall within the court’s supplemental jurisdiction and thus require no showing of independent grounds for subject matter jurisdiction.

 

[2] Permissive Counterclaims

 

Any claim against an opponent that does not arise out of the same transaction or occurrence as the opponent’s claim is permissive in nature.  Failure to assert it does not bar its assertion in a subsequent litigation.  Generally, permissive counterclaims fall outside the court’s supplemental jurisdiction.

 

 

§ 8.03 Cross-Claims

 

A party may assert a claim against a co-party – a cross-claim – arising out of the transaction or occurrence that is the subject matter of:

• the original action;
• a counterclaim; or
• relating to property that is the subject matter of the original action.

 

Cross-claims are generally within federal courts’ supplemental jurisdiction.  One may either plead a cross-claim or reserve it for further litigation; cross-claims are never compulsory under FRCP 13(g).

 

 

§ 8.04 Joinder of Parties

 

[1] Permissive Joinder

 

FRCP 20 permits joinder of plaintiffs or defendants provided that the claims joined to bring multiple parties into the lawsuit:

(1) arise from the same transaction or occurrence; and

(2) have a common question of law or fact.

 

Additional defendants to be joined must meet the requirements of personal and subject matter jurisdiction, as supplemental jurisdiction does not apply to such claims.  Thus, in a diversity action, joinder of additional defendants must not destroy complete diversity among the parties.  The jurisdictional amount must also be met by each defendant individually; such claims cannot be aggregated.

 

[2] Compulsory Joinder

 

FRCP 19 compels joinder in certain circumstances where the adjudication of pending claims will be compromised without the involvement of the party sought to be joined. FRCP 19(a) provides a framework for determining whether the party is “necessary” to the action.  A necessary party must be joined if feasible.  If joinder is not feasible, a court must determine, pursuant to FRCP 19(b), whether the person’s non-involvement will be so detrimental that the case cannot proceed without the person.  Such parties are deemed “indispensable.”

 

[a] Necessary Parties

 

FRCP 19(a) sets forth the circumstances under which a party is deemed “necessary”:

(1) if complete relief cannot be accorded among existing parties in his absence;

(2) the absent party’s ability to protect his interest relating to the subject of the action may be impaired without his involvement in the action; 

            (3) disposition of the action in his absence may subject existing parties to a “substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest.”  

 

So long as joinder is feasible, a necessary party must be joined in order for the lawsuit to continue. If one sought to be joined as a plaintiff does not join voluntarily, under limited circumstances, the court may compel such party to join, making the party an “involuntary plaintiff.”

 

[b] Feasibility of Joinder

 

However necessary a person might be to the lawsuit, he will not be joined unless it is feasible to do so.  Joinder is feasible only if he is subject to the personal jurisdiction of the court, and his joinder “will not deprive the court of jurisdiction over the subject matter of the action.” FRCP 19(a) furthermore excuses an involuntarily joined party from the case if he “objects to venue and [his] joinder . . . would render the venue of the action improper.”

 

[c] Indispensable Parties

 

When it is not feasible to join a party, the court may determine the party indispensable to the action, pursuant to FRCP 19(b).  If the party is deemed indispensable, the action will be dismissed.  The factors that determine whether a party is indispensable are:

(1) the extent to which a judgment rendered in the party’s absence might be prejudicial to the party or existing parties;

(2) the extent to which the prejudice can be lessened or avoided by protective provisions in the judgment, by the shaping of relief, or other measures;

(3) whether a judgment rendered in the party’s absence will be adequate; and

(4) whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder.  [FRCP 19(b)]

 

 

§ 8.05  Impleader (Third-Party Practice)

 

[1] Nature of Third-Party Practice

 

Impleader is a device by which a defendant can join a third party who may either share or be legally responsible for defendant’s liability to plaintiff.  In this capacity, defendant becomes a third-party plaintiff, the added party becomes a third-party defendant.

 

The defendant, as a third-party plaintiff, may also join other claims against the third-party defendant.  Impleader furthermore makes available to the third-party defendant all the options available to defendants, e.g., counterclaims, cross-claims, and impleader of yet additional parties that could be fully or partially responsible for any liability the third-party defendant is found to have to the original defendant.

           

[2] Requirements for Impleader

 

Under FRCP 14, a claim sought to be impleaded must:

(1) have arisen out of the same transaction or occurrence as the original plaintiff’s claim; and

(2) be contingent or derivative.

 

[3] Common Theories of Contingent or Derivative Liability

 

(1) Indemnity – A right to indemnification either arises out of an express contractual provision whereby one party agrees to indemnify (“hold harmless”) another for certain liabilities, or by implication when a person without fault is held legally liable for damages caused by the fault of another.

 

(2) Subrogation – Subrogation is the succession of one person to the rights of another.  Often a subrogee is an insurer that has compensated an insured for an injury resulting from the negligence of a third-party. 

 

(3) Contribution – The right of contribution typically arises among joint tortfeasors, two or more persons who are jointly or severally liable in tort for the same injury. 

 

(4) Warranty – A warranty is an express or implied statement or representation typically made by a seller to a buyer or others in the chain of product distribution regarding the character of or title to the product.

 

            [4] Jurisdictional Requirements

 

Subject matter jurisdiction is satisfied because third-party claims fall within the court’s supplemental jurisdiction.  Personal jurisdiction may be had over a third-party defendant if he can be served within the 100-mile bulge of the courthouse. [FRCP 4(K)(1)(B)]

 

 

§ 8.06  Interpleader

 

When there are two or more claimants to a specific property or monetary fund (“stake”), interpleader allows a defendant to avoid multiple actions regarding the same stake by forcing all claimants to proceed against the stakeholder in one lawsuit.  Two forms of interpleader exist in federal practice:  one under FRCP 22 and one under 28 U.S.C. § 1335. 

 

Whether proceeding by statute or FRCP 22, the defendant deposits with the court the stake which is the target of the competing claims.  The stakeholder may seek interlocutory relief, enjoining maintenance of other suits against the stakeholder with respect to the fund during the federal interpleader action. In the interpleader action, the first court determines whether interpleader is appropriate on the facts of the case, and if so, adjudicates the adverse claims and distributes the stake. The stakeholder may be either disinterested (claiming no interest in the stake and getting excused from further involvement in the case) or interested (retaining a claim in the stake and continuing to be involved in the action through its resolution). 

 

Statutory interpleader has some advantages over FRCP 22 interpleader.  Under FRCP 22, the interpleaded claims must independently satisfy the requirements of subject matter and personal jurisdiction.  Statutory interpleader on the other hand provides for:

• Nationwide service on claimants;
• Minimum diversity (only 2 adverse claimants need be citizens of different states);
• Amount in controversy significantly lower than the diversity jurisdictional amount (more than $500).

 

 

§ 8.07  Intervention

 

Intervention, governed in federal trials by FRCP 24, provides a means for outsiders to join a lawsuit on their own initiative.  Intervention may be of right under 24(a) or permissive under 24(b).  In either case, there is no supplemental jurisdiction over claims.

 

[1] Intervention of Right

 

Intervention of right does not require court permission if three conditions are met:

(1) the intervenor claims an interest relating to the property or transaction which is the subject of the action;

(2) the intervenor demonstrates that the lawsuit carries a possibility of significant detriment to the intervenor;

(3) there is a substantial possibility that none of the present parties will adequately represent the intervenor’s interest.  However, when the applicant’s stake in the outcome is no greater than that of an existing party with whom the applicant would be aligned, and when that existing party is not in collusion with an opposing party, incompetent, or hostile toward the applicant, representation by the existing party often will be deemed adequate and intervention of right will be denied.

 

[2] Permissive Intervention

 

If one does not qualify to intervene as of right, he may petition the court to do so under FRCP 24(b).  The claim or defense must have a question of law or fact in common with the pending action.

 

 

§ 8.08  Class Actions

 

[1] Certification

 

Class actions in federal court are governed by FRCP 23.  In order to proceed as a class action, the group of interested parties much be certified as a class.  FRCP 23(a) provides for certification of a class if:

(1) the class is so numerous that joinder of all members is impracticable (“numerosity” requirement);

(2) there are questions of law or fact common to the class (“commonality” requirement);

(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class (“typicality” requirement); and

(4) the representative parties will fairly and adequately protect the interests of the class.

 

[2] Categories of Class Actions

 

Class actions are authorized under FRCP 23 in four situations:

(1) where individual actions might result in inconsistent decisions that establish incompatible standards of conduct for the defendant. [FRCP 23(b)(1)(A)]

(2) where the interests of absent class members could be impaired if issues are resolved by individual actions. [FRCP 23(b)(1)(B)]

(2) where the primary relief sought is injunctive or declaratory, not monetary. [FRCP 23(b)(2)]

(3) where “questions of law or fact common to the members of the class predominate over any questions affecting only individual members,” and where “a class action is superior to other available methods for the fair and efficient adjudication of the controversy.” [FRCP 23(b)(3)]

 

Subsection (b)(3) sets forth the factors to be considered in determining whether a class action is superior to other methods:

 

(1) the interest of class members to individually control separate actions.

(2) whether and to what extent any litigation concerning the controversy has already been undertaken.

(3) the advantages or disadvantages of litigating the claims in the particular forum.

(4) any likely difficulties in managing the class action. 

 

[3] Binding Nature of Class Actions

 

Class actions brought pursuant to FRCP 23(b)(1) and (2) do not permit class members to “opt out” of the class.  Therefore, all class members, whether or not they participate, are bound by settlement or adjudication of the class action and may not bring individual suits on the matter.

 

In contrast, members of a FRCP 23(b)(3) action may opt out from the class upon timely notice to the court.  Members who exclude themselves from a (b)(3) action are not bound by the disposition of the class action and can bring their own action against the defendant.

 

[4] Notice Requirements

 

FRCP 23 requires notice only to (b)(3) class members, and such notice must be “the best notice practical under the circumstances.” [FRCP 23(c)(2)]  Nevertheless, courts have held that due process requires adequate notice to members of all class actions, including those brought under subsections (b)(1) and (2). 

 

In Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950), the Supreme Court articulated the standard for notice of a pending class action that would satisfy due process.  The Court required individual notice by mail for those persons whose names and addresses were known or could be determined with reasonable effort.  However, where notice to other individuals would be impractical – e.g., where the identities of class members are unknowable or where the cost of ascertaining the names and addresses of parties would be considerable – the Court approved of constructive notice by publication.

 

The class representative is to bear the cost of identifying members of the class [Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340 (1978)] and notifying class members [Eisen v. Carlisle & Jacqueli, 417 U.S. 156 (1974)].

 

[5] Jurisdiction

 

Class representatives must meet the requirements of diversity and venue in federal class actions but passive class members need not.

 

There is uncertainty as to whether each class member in a diversity action must satisfy the amount-in-controversy.  In Zahn v. International Paper Co., 414 U.S. 291 (1973), the Supreme Court ruled that all class members possessing a separate and distinct claim must satisfy the amount-in-controversy.  However, some courts have interpreted the supplemental jurisdiction statute to make Zahn obsolete.

 

Individual members of a plaintiff-class, aside from named representatives, need not satisfy the “minimum contacts” test in order for the forum state court to exercise personal jurisdiction over them.  [Phillips Petroleum Company v. Shutt, 472 U.S. 797 (1985)]

 

§ 8.09  Consolidation

 

[1] Cases Pending in a Single District

 

FRCP 42(a) authorizes a federal court, at its discretion, to consolidate cases pending within the same judicial district involving a common question of law or fact.  The claims need not arise out of the same transaction.

 

[2] Multidistrict Litigation

 

Civil actions involving one or more common questions of fact that are pending in different districts may be transferred to any district for coordinated or consolidated pretrial proceedings. [28 U.S.C. § 1407] Transfers are authorized only when they “will be for the convenience of the parties and witnesses and will promote the just and efficient conduct of such actions” and are most frequently invoked in antitrust cases, aviation accident cases, patent and trademark suits, products liability actions and securities law violation actions.  Section 1407 applies only to pretrial proceedings and not trials.