Necessity of Understanding Rules of Procedure In Court Filings

March 19, 2017

Nanko Shipping v. Alcoa 15-7070 demonstrates the necessity of understanding the rules of procedure when you file a case. In Nanko the plaintiff filed and action alleging Alcoa had breached a contract to ship a certain percentage of bauxite using ships sailing under the Guinean flag. When Nanko acquired the contract it sought to enforce the terms of the shipping agreement. Alcoa refused, and sought to have the case dismissed because under Rule 19 Nanko failed to include a necessary party in the suit.

Rule 19 Required Joinder of Parties:

(1) Required Party. A person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if:
(A) in that person’s absence, the court cannot accord complete relief among existing parties; or
(B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person’s absence may:
(i) as a practical matter impair or impede the person’s ability to protect the interest; or
(ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.

In 1963 the Republic of Guinea and the Harvey Aluminum Company of Delaware (Halco) signed an agreement establishing the Compagnie des Bauxites de Guinée (CBG) for the purpose of developing Guinea’s rich bauxite mines. Guinea owned a 49 per cent share of the corporation and Halco 51%.

Under Article 9 of the CBG Agreement, Guinea reserved the right to require that up to 50 per cent of the Republic’s bauxite be shipped on vessels flying the Guinean flag or chartered by the Guinean government, provided the freight rates of the Guinean shippers were no higher than, and the services equal to, those otherwise available on the international shipping market.

In August of 2011, Guinea entered into a Technical Assistance Agreement (TAA) with Nanko. Pursuant to the TAA, Nanko assumed Guinea’s rights under Article 9 of the CBG Agreement “to manage, control and ship” up to 50 per cent of Guinean-produced bauxite.

CBG’s Board of Directors invited its constituent corporations, including Halco and Alcoa, to contact Nanko to make shipping arrangements. Nevertheless, Halco and Alcoa refused to deal with Nanko, offering only a few limited micro-tender shipping opportunities that were substantially less in value and volume than the shipping rights and contracts to which Nanko claims it is entitled under the TAA.

To add insult to injury Halco and Alcoa raised questions about Nanko’s background and capacity, questions that were not asked of other shipping companies. Halco then refused to credit Nanko’s response. Guinea, for its part, repeatedly urged Halco and Alcoa to hire Nanko to ship their bauxite.

Nanko filed two claims against Halco the first for breach of the CBG Agreement, asserting that it is a third-party beneficiary thereof, the second claim was for racial discrimination in violation of 42 U.S.C. § 1981. Alcoa moved to dismiss on a variety of grounds, including lack of standing, failure to state a claim, and failure to join a required party.

The District Court dismissed the case under Rule 12(b)(7) for failure to join a Rule 19 party. Guinea was a required party under Rule 19(a), the court concluded, because resolving Nanko’s claims would depend on defining Guinea’s rights under its CBG Agreement with Halco, which might “impair or impede Guinea’s right to protect its interests” under that Agreement.

Proceeding to the Rule 19(b) inquiry, the court concluded Guinea could not be joined because it was entitled to sovereign immunity, and that the case could not in equity and good conscience proceed in Guinea’s absence. The District Court alternatively noted that if Guinea could be joined the case “would have to be dismissed so that the parties could proceed to mandatory arbitration.”

Federal Rule of Civil Procedure 19 calls on a District Court confronting a Rule 12(b)(7) Motion to Dismiss a case for failure to join an absent party, to decide first whether the absent party should be joined, and, if joinder is infeasible, to assess whether the action among the existing parties should proceed or be dismissed in light of the missing party’s absence.

The Rule 19 inquiry poses three questions: Should the absentee be joined, i.e., is it necessary to the litigation? If so, can the absentee be joined? And finally, if the absentee should but cannot be joined, may the lawsuit nonetheless proceed “in equity and good conscience”

Rule 19 promotes fair treatment of non-parties in certain circumstances where their interests, and particularly their due process rights, are at risk from litigation between others. It also seeks to avoid multiple and wasteful litigation, such as where the absence of a party would prevent the court from granting the relief sought or expose an existing party (typically the defendant) to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations. Rule 19 does not apply merely because dispute resolution would be more efficient with the nonparty’s participation, nor because the pending case could yield precedent adverse to the absentee’s interests. A decision under Rule 19 not to decide a case otherwise properly before the court is a power to be exercised only in rare instances.” Nat’l Ass’n of Chain Drug Stores v. New England Carpenters Health Benefits Fund, 582 F.3d 30, 42 (1st Cir. 2009).

The District Court determined that Guinea was a necessary party under Rule 19, simply because the Court’s interpretation of the CBG Agreement may impair or impede Guinea’s right to protect its interests” under that Agreement.

However, said the Appellate Court, due process protected Guinea from being bound by any judgment rendered in its absence, and it was not obvious what interests Guinea would retain in the CBG Agreement if Nanko “assumed Guinea’s rights” thereunder, as Nanko alleges.

“The requirements of Rule 19(a) are not satisfied simply because a judgment against Defendants in this action might set a persuasive precedent in any potential future action. Insofar as the existing parties’ interests are concerned, evidence of Guinea’s actions, views, or prerogatives can be discovered and introduced where relevant to the parties’ claims and defenses even if Guinea remains a nonparty.

The District Court further held that Guinea could not be joined involuntarily on the ground that it is entitled to sovereign immunity under the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1602 et seq. The FSIA “renders a foreign government ‘presumptively immune from the jurisdiction of United States courts unless one of the Act’s express exceptions to sovereign immunity applies.

Under the FSIA, a foreign state is not immune from claims based [1] upon a commercial activity carried on in the United States by the foreign state; or [2] upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or [3] upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.”

The court’s immunity holding rested exclusively on Nanko’s failure to contest Alcoa’s bare assertion, that the court lacked jurisdiction over Guinea. However, Nanko did contest the point. Nanko’s motion for reconsideration argued that the court was “not in a position to resolve, absent discovery, the “fact question” whether Guinea enjoyed sovereign immunity. Nanko’s assumption that Alcoa’s assertion of Guinea’s immunity “may be correct” is not, in context, fairly read to concede the matter.

At this preliminary stage, based only on the pleadings, the court did not find an adequate basis for the District Court’s dismissal of the complaint under Rule 12(b)(7). Further proceedings would help to clarify what interests of Guinea, if any, would be impaired in its absence, what role Guinea would play in this litigation if joined, and whether sovereign immunity prevents its involuntary joinder here.

For the above stated reasons, the District Court’s dismissal of the complaint was reversed and remand for further proceedings.

Leave a Reply

Your email address will not be published. Required fields are marked *