Helzberg's Diamond Shops
v.
Valley West Des Moines Shopping Center

564 F.2d 816 (8th Cir. 1977)

What's Going On?

Defendant appeals the trial court's denial of Defendant's motion to dismiss an action due to Plaintiff's failure to join a party whose rights would be affected by the outcome of the case.

Who's Who?

Plaintiff     :

Helzberg's Diamond Shops, Inc. – full line jewelry store that leases space in Defendant's shopping center.

Defendant :

Valley West Des Moines Shopping Center – shopping center that leases space to Plaintiff.

Facts:

Plaintiff Helzberg's Diamond Shops, Inc., entered into a lease agreement with Defendant Valley West Des Moines Shopping Center granting Plaintiff the right to operate a full line jewelry store in Defendant shopping center. The lease agreement provided that Defendant would not lease other premises in the shopping center for use as a catalog jewelry store, nor lease premises for more than two full line jewelry stores in addition to Plaintiff's store. Defendant later entered into a lease agreement with two other corporations for the operation of full line jewelry stores. Defendant then entered into an additional lease agreement with Lord's Jewelers (Lord's). The agreement provided that Lord's would use the leased space only as a retail specialty jewelry store, and not as a catalog or full line jewelry store; however, Lord's intended to operate a full line jewelry store. In an attempt to avoid the opening of Lord's store, Plaintiff filed suit seeking injunctive relief restraining Defendant's breach of the lease agreement. The suit was filed in federal court with jurisdiction based on diversity of citizenship between the parties. Defendant moved to dismiss pursuant to FRCP 19, arguing that Plaintiff had failed to join an indispensable party, Lord's, as a defendant. The court denied Defendant's motion and ordered that Defendant be enjoined and restrained from allowing Lord's or any other tenant from operating a full line jewelry store at Defendant's shopping center during the term of Plaintiff's leasehold. Defendant appeals.

Issue:

In an action to determine rights under a contract, is a party indispensable to the action because that party's rights or obligations under an entirely separate contract will be affected by the result of the action?

Decision:

No. Under FRCP 19(a)(2)(i), Lord's should have been joined if feasible because the injunctive relief sought by Plaintiff would prevent Lord's from operating its jewelry store as intended. Because Lord's was not subject to personal jurisdiction in the district court, the district court was required to determine whether Lord's should be regarded as indispensable. FRCP 19(b) provides the factors to be considered in determining whether a party is indispensable. Rule 19(b) first requires the court to examine the extent to which a judgment rendered in Lord's absence might be prejudicial to Lord's or to Defendant. None of Lord's rights or obligations will be ultimately determined by the present proceedings, to which it is not party, so this action will not prejudice Lord's such that it is considered indispensable according to Rule 19(b). The fact that the obligations of Defendant to Plaintiff, as determined in these proceedings, may be inconsistent with Defendant's obligations to Lord's does not make the proceedings prejudicial to Lord's. Any inconsistency will result from Defendant's execution of two lease agreements that impose inconsistent obligations, not Lord's absence from the proceedings. Rule 19(b) also requires the court to consider ways in which prejudice to the absent party can be lessened or avoided. The district court acted in a manner sufficient to protect Lord's interests by affording Lord's an opportunity to intervene, of which it did not take advantage. In sum, a person does not become indispensable to an action to determine rights under a contract simply because that person's rights or obligations under an entirely separate contract will be affected by the result of the action. The district court properly denied Defendant's motion to dismiss.

Basic Rule:

A person does not become indispensable to an action to determine rights under a contract simply because that person's rights or obligations under an entirely separate contract will be affected by the result of the action.

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