United States District Court, E.D. Virginia, Richmond Division
A. Gibney, Jr. United States District Judge.
plaintiff, NWP Services Corporation, has sued the defendants
for breach of contract for failure to pay the amount
allegedly owed for services, and the defendants have filed a
motion to dismiss. The defendants contend the complaint named
improper defendants by including the original parties to the
contract rather than the LLCs to whom the defendants assigned
the contracts. They say the assignees are necessary parties
to the case. Alternatively, the defendants ask the Court to
compel the plaintiff to amend the complaint, adding the
assignees as defendants. In addition, SJW, L.L.L.P.
("SJW") seeks dismissal from the action entirely,
as SJW allegedly no longer exists. Because the plaintiff
named proper parties in the complaint, the Court denies the
to the complaint, NWP had a series of contracts with the
defendants to provide utility submetering services at
apartment complexes. NWP performed its contractual duties,
but the defendants have not paid $302, 089.55, the amount
collectively outstanding under the terms of the agreements.
defendants say they assigned their service agreements to
other LLCs, so the assignees are the correct defendants. They
also say that SJW has been dissolved, so it cannot be sued.
Failure to Join a Necessary Party.
assignees are not necessary parties under Rule 19, so the
Court denies the defendants' 12(b)(7) motion to dismiss
and declines to join the assignees by . Fed.R.Civ.P.
12(b)(7). Rule 19 defines a party as necessary in two
circumstances. First, Rule 19(a)(1)(A) defines a party as
necessary if "in that [party's] absence, the court
cannot accord complete relief among existing parties."
Fed.R.Civ.P. 19(a)(1)(A). Here, the Court can accord complete
relief to the plaintiff. "Under Virginia law, the
parties to a contract remain liable for obligations under the
contract unless novation occurs." See BestSweet,
Inc. v. NT I Holdings Corp., Civil Action No. I:09cv942,
2010 WL 2671303, at *2 (E.D. Va. July 2, 2010) (citing
Honeywell, Inc. v. Elliott, 213 Va. 86, 189 S.E.2d
331 (1972). As conceded by both parties, no novation has
"Rule 12(b)(7) provides for dismissal where a party has
not been joined as required by Rule 19." Marina One,
Inc. v. Jones, 22 F.Supp.3d 604, 606 (E.D. Va. 2014).
Courts addressing a 12(b)(7) motion face a two-step inquiry.
Owens-Illinois, Inc. v. Meade, 186 F.3d 435, 440
(4th Cir. 1999). First, the court must ask whether a party
"is necessary to a proceeding because of its
relationship to the matter under consideration" pursuant
to Rule 19(a). Id. (internal quotations and
citations omitted). If the party is necessary, the court will
join it into the action. Id. If the court cannot
join the party, however, the court must then determine
whether that party is indispensable pursuant to Rule 19(b).
Id. If the party is indispensable, the court must
dismiss the action. Id. The party asserting the Rule
12(b)(7) motion has the burden of showing that a person not
joined is necessary and indispensable. Am. Gen. Life
& Accident Ins. Co. v. Wood, 429 F.3d 83, 92 (4th
Cir. 2005). occurred in this case. The original parties
remain liable for the assigned contracts, and NWP can obtain
complete relief from them.
Rule 19(a)(1)(B) defines a party as necessary when "that
[party] claims an interest relating to the subject of the
action" and adjudicating the action in that party's
absence could impede its ability to protect the interest or
leave an existing party subject to risk of inconsistent
obligations. Fed R. Civ. P. 19(a)(1)(B). The assignees have
not claimed an interest in the action. Even if they had,
however, they would not meet the requirements under Rule
19(a)(1)(B). First, under Rule 19(a)(1)(B)(i), a party's
ability to protect its interest is not impaired or impeded
simply because it has an interest in the outcome of the
litigation or even faces adverse consequences as a possible
result of the litigation. Instead, Rule 19(a)(1)(B)(i)
requires that the party's interests are impaired or
impeded because of their absence from the litigation
as required by Rule 19(a)(1)(B)(i). See MasterCard
In! 7, Inc. v. Visa Int'l Serv. Ass 'n,
471 F.3d 377, 387 (2d Cir. 2006). The ability of the
assignees to protect their interests will remain intact,
despite the potential for an adverse outcome in the immediate
case, so they are not necessary parties. Furthermore, since
the currently named parties will not face exposure to
conflicting legal obligations, the defendants have failed to
satisfy the requirements under Rule 19(a)(1)(B)(ii).
the Court denies the defendants' 12(b)(7) motion.
SJW's 12(b)(6) Motion to Dismiss
says that because it has been dissolved, it cannot be sued.
This is simply incorrect, so the Court denies SJW's
motion to dismiss. Although SJW did dissolve upon its
automatic cancellation, Va. Code § 50-73.49(5),
dissolution does not result in immunity from liability. Va.
Code § 50-73.52:2.
relies on Delaware LLC law, which apparently forecloses suits
against LLCs after they file a certificate of cancellation.
See Metro Commc'n Corp. BVI v. Advanced Mobilecomm
Techs. Inc., 854 A.2d 121, 138 (Del. Ch. 2004). Under
Virginia law, on the other hand, when a limited partnership
files a certificate of cancellation (which the briefs do not
indicate has occurred in this case), the existence of that
limited partnership "shall cease, except for the purpose
of suits." Va. Code Ann. § 50-73.52:4.
the law makes it clear that the dissolution of a limited
partnership only terminates that partnership's
liabilities to third parties if the partnership takes
specific steps to notify potential claimants. Va. Code Ann.
§ 50-73.52:2. Even if a partnership publishes such
notice, the law does not bar claims until three years after
publication. Id. SJW did not dissolve until December
31, 2014, ...