Failure of the district court to acquire jurisdiction over indispensable parties to an action deprives the court of jurisdiction to proceed in the matter and render a judgment.
Plaintiff brought suit against defendant, seeking damages as a result of defendant's failure to issue shares to plaintiff that plaintiff had allegedly acquired under an agreement with a third party. Prior to trial, the district court determined that the third party was indispensable and it dismissed the action because the presence of the third party violated the requirements of complete diversity. On appeal, the order of dismissal was affirmed.
Did the district court err in dismissing the action due to plaintiff's failure to join an indispensable third-party?
The court determined that the third party had an interest in the case, because his presence was critical to the determination of important issues in the litigation. The absence of third party would have potentially exposed defendant to the risk of multiple, inconsistent obligations. Applying factors under Fed. R. Civ. P. 19(b), as well as the "equity and good conscience test", the court determined that it was proper for the district court to find third party indispensable and to dismiss the action.