14‐3348 Am. Trucking Ass’ns v. N.Y. State Thruway Auth.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 2014
(Argued: June 17, 2015 Decided: August 4, 2015)
Docket No. 14‐3348
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
AMERICAN TRUCKING ASSOCIATIONS, INC., WADHAMS ENTERPRISES, INC., LIGHTNING EXPRESS DELIVERY SERVICE INC., WARD TRANSPORT & LOGISTICS CORP., on behalf of themselves and all others similarly situated,
Plaintiffs‐Appellants,
‐v.‐
NEW YORK STATE THRUWAY AUTHORITY, NEW YORK STATE CANAL CORPORATION, THOMAS J. MADISON, JR., in his official capacity as Executive Director of the New York State Thruway Authority, HOWARD MILSTEIN, in his official capacity as Chair of the New York State Thruway Authority/Canal Corporation Boards of Directors, DONNA J. LUH, in her official capacity as Vice‐ Chair of New York State Thruway Authority/Canal Corporation Boards of Directors, E. VIRGIL CONWAY, in their official capacities as members of the New York State Thruway Authority/Canal Corporation Boards of Directors, RICHARD N. SIMBERG, in their official capacities as members of the New York State Thruway Authority/Canal Corporation Boards of Directors, BRANDON R. SALL, in their official capacities as members of the New York State Thruway Authority/Canal Corporation Boards of Directors, J. RICE DONALD, JR., in their official capacities as members of the New York State Thruway Authority/Canal Corporation Boards of Directors, JOSE HOLGUIN‐VERAS, in their official capacities as members of the New York State Thruway Authority/Canal Corporation Boards of Directors,
Defendants‐Appellees.
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
Before: NEWMAN, JACOBS, and CALABRESI, Circuit Judges.
Plaintiffs allege that the New York State Thruway Authority charges
excessive tolls in violation of the Commerce Clause of the United States
Constitution. The district court (McMahon, J.) dismissed for failure to join a
necessary party (the State of New York). We vacate the judgment of the district
2 court and remand for further proceedings consistent with this opinion. Judge
Newman concurs in a separate opinion.
RICHARD B. KATSKEE, Mayer Brown LLP, Washington, District of Columbia (Evan M. Tager, Thomas P. Wolf, Mayer Brown LLP, Washington, District of Columbia; Richard Pianka, ATA Litigation Center, Arlington, Virginia, on the brief), for Plaintiffs‐Appellants.
ANDREW W. AMEND, Assistant Solicitor General (Barbara D. Underwood, Solicitor General; Cecelia C. Chang, Special Counsel to the Solicitor General; Philip V. Tisne, Assistant Solicitor General; on the brief; for Eric T. Schneiderman, Attorney General of the State of New York), New York, New York, for Defendants‐Appellees.
DENNIS JACOBS, Circuit Judge:
Three commercial trucking companies along with their national trade
association and a putative class of commercial truckers (“plaintiffs”) sue the New
York State Thruway Authority (the “Thruway Authority”) under 42 U.S.C.
§ 1983, alleging that the Thruway Authority charges excessive tolls in violation of
the Commerce Clause of the United States Constitution. In particular, plaintiffs
allege that the Thruway Authority diverts excessive highway tolls to fund
3 maintenance and improvements to the New York Canal System (the “Canal
System”)‐‐projects that are unrelated to maintaining the Thruway as a channel of
interstate commerce. The district court (McMahon, J.) dismissed under Federal
Rule of Civil Procedure 12(b)(7) for failure to join the State of New York as a
necessary party under Rule 19. We conclude that the ruling was an abuse of
discretion, and therefore vacate the judgment and remand for further
proceedings consistent with this opinion.
BACKGROUND
The district court dismissed under Federal Rule of Civil Procedure 12(b)(7).
Accordingly, the following facts drawn from plaintiffs’ complaint are presumed
true, and are presented in the light most favorable to plaintiffs. See, e.g.,
Clarendon, Ltd. v. Bank of Saurashtra, 77 F.3d 631, 633 (2d Cir. 1996). Most facts
are undisputed.
The Governor Thomas E. Dewey Thruway system (the “Thruway”) is New
York’s piece of the National Interstate Highway System; stretching 570 miles
across the State of New York, it includes portions of I‐87, I‐90, I‐95, I‐190, and
4 I‐287. As a major artery of interstate commerce in the Northeast, it is a critical
route for commercial truckers serving the region.
The Thruway is operated and managed by the New York State Thruway
Authority, an “autonomous public‐benefit corporation” created by a statutory
charter from the State of New York. Compl. ¶ 17. Its statutory mandate is “to
finance, construct, reconstruct, improve, develop, maintain, or operate” the
Thruway. N.Y. Pub. Auth. Law § 353. Its organic statute authorizes the Thruway
Authority to “sue and be sued,” to “make contracts,” and to “borrow money and
issue negotiable notes.” Id. § 354(1), (7), (12).
The Thruway Authority is not an “arm of the state” and therefore does not
enjoy New York’s Eleventh Amendment state sovereign immunity. Mancuso v.
N.Y. State Thruway Auth., 86 F.3d 289, 296 (2d Cir. 1996) (“We are unable to
conclude that subjecting the Thruway Authority to suit in federal court would be
an affront to the dignity of New York.”). As we explained in Mancuso,
[t]he Thruway Authority . . . is not a traditional state agency, but a public entity that is generally self‐funded and, except for the appointment of its members to nine‐year terms, it is not under significant state control. Although the Thruway Authority may be identified closely with the state, New York State has given the Thruway Authority an existence quite independent from the state and exercises the most minimal control over the Thruway Authority.
Id. at 296.
5 “No provision of New York law requires the state to fund the Thruway
Authority’s operations,” id. at 295, the state is not liable for its debts, id. at 296;
and it receives no state tax dollars and only de minimis federal funds. Instead,
the Thruway Authority relies almost entirely on tolls. It is a “strictly . . .
user‐supported system,” Compl. ¶ 47, that is “structured . . . to be
self‐sustaining.” Mancuso, 86 F.3d at 296 (internal quotation marks omitted).
With the ascendancy of the Thruway and other modern channels of
interstate commerce, the New York Canal System has faded into obsolescence.
The Canal System‐‐“a network of waterways that stretches across upstate New
York,” including the Erie, Oswego, Champlain, Cayuga, and Seneca Canals‐‐
“[o]nce a vital link between the markets of the East Coast and suppliers in the
Midwest, . . . is now primarily a recreational space for tourists.” Compl. ¶ 2.
Since the completion of the Erie Canal in the early 1800s, the New York
constitution has included explicit textual protections for the Canal System, and
entrusted its management and care to the State. The wording has shifted over the
years, but there has always been a constitutional commitment by the State of
New York to care for the Canal System. The current provision is as follows:
6 The legislature shall not sell, abandon or otherwise dispose of the now existing or future improved barge canal, the divisions of which are the Erie canal, the Oswego canal, the Champlain canal, and the Cayuga and Seneca canals, or of the terminals constructed as part of the barge canal system; . . . such canals and terminals shall remain the property of the state and under its management and control forever.
N.Y. Const. art. XV, § 1.
The New York constitution also obligates the legislature to support the
canals financially, to some degree: “The legislature shall annually make
provision for the expenses of the superintendence and repairs of the canals, and
may provide for the improvement of the canals in such manner as shall be
provided by law.” Id. § 3.
Historically, the Canal System was supported through the normal
appropriations process and was managed by the New York Department of
Transportation. In 1992, the legislature transferred responsibility for
management of the Canal System from the New York Department of
Transportation to the Thruway Authority. See N.Y. Canal Law § 5. The 1992
legislation created a subsidiary corporation of the Thruway Authority, called the
New York Canal Corporation (the “Canal Corporation”), “which shall be deemed
to be the state for the purposes of such management and control of the canals but
7 for no other purposes.” Id. § 6(1). Finally, to respect the constitutional mandate
that the State own and operate the canal system “forever,” the 1992 legislation
confirmed that the “canal system shall remain the property of the state and under
its management and control as exercised by and through” the Thruway
Authority and the Canal Corporation. Id.
Now that the Canal System is operated by the Canal Corporation as a
subsidiary of the Thruway Authority, the considerable cost of maintaining (and
sometimes upgrading, developing, and expanding) the Canal System is funded
almost entirely through the collection of highway tolls. No appropriations from
New York’s general fund have been needed for many years. When the Canal
System needs more funding, the Thruway Authority raises tolls. Approximately
ten to twelve percent of Thruway tolls are diverted to canal‐related development
projects: about 80 to 100 million dollars annually.
Plaintiffs, who pay tolls on the Thruway daily, filed this lawsuit in
November 2010. Primarily, plaintiffs allege that the Thruway Authority is
unduly burdening interstate commerce by collecting excessive tolls to fund
canal‐related development projects upstate, rather than to maintain the Thruway
as a channel of interstate commerce.
8 Plaintiffs did not name the State of New York as a defendant, and the State
has not sought to intervene. The Thruway Authority‐‐through its counsel, the
Attorney General for the State of New York‐‐moved to dismiss under Federal
Rule of Civil Procedure 12(b)(7) for failure to join a necessary party under Rule
19. (Because of the Eleventh Amendment, the State cannot be joined without its
consent.)
The district court granted the motion and dismissed without prejudice.
First, the court noted its disagreement with our precedent in Mancuso, which
forecloses Eleventh Amendment sovereign immunity for the Thruway Authority.
See Am. Trucking Ass’ns, Inc. v. N.Y. State Thruway Auth., No. 13 Civ. 8123,
2014 WL 4229982, at *5 (S.D.N.Y. Aug. 6, 2014) (“Were I writing on a blank slate, I
would conclude that the Thruway Authority was in fact cloaked with sovereign
immunity . . . [a]nd I would dismiss this lawsuit on that ground.”). Then, after
acknowledging that Mancuso is the law of this Circuit, the district court turned to
Rule 19 to “recognize constitutional reality in a different way,” by holding that
the State was both a necessary and an indispensable party. American Trucking,
2014 WL 4229982, at *6.
Plaintiffs appeal.
9 DISCUSSION
This Court reviews dismissal of a complaint under Rule 12(b)(7)‐‐that is,
“for failure to join a party under Rule 19”‐‐only for abuse of discretion. Johnson
v. Smithsonian Inst., 189 F.3d 180, 188 (2d Cir. 1999). Questions of law that
inform a district court’s Rule 19 determination are reviewed de novo. Seneca
Nation of Indians v. New York, 383 F.3d 45, 47 (2d Cir. 2004) (per curiam). An
exercise of discretion that rests on an error of law is necessarily an abuse of
discretion. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990).
I
“In determining whether an action should be dismissed for nonjoinder, the
court . . . must initially determine whether the party should be joined as a
‘necessary party’ under Rule 19(a).” ConnTech Dev. Co. v. Univ. of Conn. Educ.
Props., Inc., 102 F.3d 677, 681 (2d Cir. 1996). As relevant here, an absent person
may be “necessary” under Rule 19(a) if “that person claims an interest relating to
the subject of the action and is so situated that disposing of the action in the
10 person’s absence may[,] . . . as a practical matter[,] impair or impede the person’s
ability to protect the interest.” Fed. R. Civ. P. 19(a)(1)(B).1
If joinder of a “necessary” party under Rule 19(a) is not feasible, the court
consults Rule 19(b), which “requires courts to consider whether, ‘in equity and
good conscience,’ the party is one without whom the action between the
remaining parties cannot proceed‐‐or, in the traditional terminology, whether the
absent party is ‘indispensable.’” Marvel Characters, Inc. v. Kirby, 726 F.3d 119,
132 (2d Cir. 2013) (quoting Fed. R. Civ. P. 19(b)). “Federal courts are extremely
reluctant to grant motions to dismiss based on nonjoinder and, in general,
dismissal will be ordered only when the defect cannot be cured and serious
prejudice or inefficiency will result.” 7 Charles Alan Wright & Arthur R. Miller,
Fed. Practice & Procedure § 1609 (3d ed. 2015).
1 An absent person may also be “necessary” under Rule 19(a) if “the court cannot accord complete relief among existing parties” without the absent person, or if a person’s absence subjects an existing party to a “substantial risk of incurring double, multiple, or otherwise inconsistent obligations.” Fed. R. Civ. P. 19(a)(1). None of those provisions of Rule 19(a) is at issue in this case.
11 II
A
The Thruway Authority argues that three distinct state “interests” are
threatened if this lawsuit proceeds in the absence of the State of New York. None
of them is protected by Rule 19(a).
1. New York owns the Canal System, and the New York constitution
provides that the State “shall not sell, abandon or otherwise dispose of” it. N.Y.
Const. art. XV, § 1. That prohibition lasts “forever.” Id. Relying on this
language, the Thruway Authority has suggested that the State’s real property
interest in the Canal System, and its corresponding obligation not to “abandon”
it, are threatened by this litigation, and, thus, that this real property interest
makes the State a necessary party.
To the extent this argument is still being advanced on appeal, we reject it.
No judgment in this case would require New York to “sell, abandon or otherwise
dispose of” the Canal System. As context and common usage make clear, to
“sell” and to “abandon” property are two ways to “dispose of” it. See United
States v. Cowan, 396 F.2d 83, 87 (2d Cir. 1968) (“The abandonment of property is
12 the relinquishing of all title, possession, or claim to or of it‐‐a virtual intentional
throwing away of it.”). Since this lawsuit challenges only the collection of
excessive Thruway tolls to fund unrelated projects, title to real property owned
by an absent party is not at issue, and cannot serve as a valid interest under Rule
19(a).2
The district court focused on the State’s supposed obligation “to fund the
[canal] system so as to avoid ‘abandoning’ it.” American Trucking, 2014 WL
4229982, at *5. Even ignoring that the word “abandon” is a real property term of
art, and accepting the linguistic premise that insufficient funding can lead to
abandonment, this lawsuit is no threat to that constitutional obligation, which the
State can fulfill using its own funding sources.
2. The Thruway Authority contends that the State has a financial interest
in the outcome of this litigation because, if the practice of diverting toll revenue
to support the Canal System is held unconstitutional, the State will have to come
up with another way to raise these funds. The State’s interest in having another
2 That distinguishes one of the authorities heavily relied upon by the Thruway, Seneca Nation of Indians v. New York, which stands for the unsurprising proposition that an absent sovereign may be a necessary party to a lawsuit that calls into question a real property interest of the sovereign. 383 F.3d 45 (2d Cir. 2004) (per curiam).
13 entity fulfill its constitutional obligation to support the Canal System is assuredly
significant, but it is too remote and indirect to make it a necessary party.
An adverse judgment in this case would run only against the Thruway
Authority, and “the state is not legally obligated to pay for the Thruway
Authority’s debts.” Mancuso, 86 F.3d at 296. True, any adverse judgment would
prohibit the diversion of excess tolls to support projects that are unrelated to the
Thruway’s role as a channel of interstate commerce. See generally Bridgeport &
Port Jefferson Steamboat Co. v. Bridgeport Port Auth., 567 F.3d 79, 86‐88 (2d Cir.
2009). But that the allegedly excessive tolls are diverted to support canals is
beside the point‐‐it is the tolls that are alleged to be unconstitutional. Plaintiffs’
constitutional claims would be identical if the Thruway Authority charged
excessive tolls to underwrite the State’s interest in a new baseball stadium, or
agricultural research, or repertory theatre. The State may deem such
expenditures essential or not, and may fund them or not; and may well prefer
that the funding come from elsewhere. In the same way, if the Thruway
Authority loses, the State will likely have to come up with some other way to
raise money for the canals.
14 This theory of the State’s Rule 19 interest, premised on a lost stream of
money, is inconsistent with Circuit precedent. In ConnTech Development Co. v.
University of Connecticut Education Properties, Inc., 102 F.3d 677 (2d Cir. 1996),
we considered a Rule 19 interest asserted on behalf of the State of Connecticut, by
a corporate entity (named “UCEPI”) that was “incorporated by the Connecticut
legislature for the purpose of overseeing the construction” of a state‐owned park
on the campus of the University of Connecticut. Id. at 679. The relevant contract,
however, confirmed that UCEPI was legally distinct from the State, and that the
State was not liable for UCEPI’s debts. Id. at 682‐83. When UCEPI was sued for
breach of contract by a construction sub‐contractor, it moved to dismiss for
failure to join a necessary party who could not be joined: the State of Connecticut,
which owned the property, funded the construction project, and had “created
[UCEPI] solely to develop this project.” Id. at 682 n.2. This Court rejected
UCEPI’s Rule 19 argument:
This narrow dispute simply does not implicate any of the more general interests that Connecticut arguably could claim in the development of the property and as lessor of the property itself. Connecticut’s interests are separate and distinct from UCEPI’s contractual obligations to ConnTech. . . . The express language of [] the lease . . . clearly demonstrates that Connecticut, ConnTech, and
15 UCEPI all intended to keep Connecticut at arm’s length from the activities contemplated by the [contract].
Id. at 682‐83. Because it had kept the state‐owned corporation “at arm’s length,”
id.‐‐in that case, by contract‐‐any indirect interest of Connecticut in the outcome
of a lawsuit against UCEPI was insufficient under Rule 19.
To accomplish the goals of corporate separation and limited liability,
Connecticut employed a contract; New York employs statutes and constitutional
provisions. New York has disclaimed liability for the financial obligations of
public‐benefit corporations like the Thruway Authority. N.Y. Const. art. X, § 5. It
has granted power to the Thruway Authority to “sue and be sued,” to “make
contracts,” and to “borrow money” on its own. N.Y. Pub. Auth. Law § 354. And
it has specified that the Thruway Authority is the “state” for “exercising the
powers and duties” given to it by the Canal Law, but “for no other purposes.”
N.Y. Canal Law § 5. “The express language” of these provisions “clearly
demonstrates” that the State intended to keep itself “at arm’s length from the
activities” of the Thruway Authority. ConnTech, 102 F.3d at 683.3
3 The concurring opinion takes issue with our discussion of ConnTech. Judge Newman perceives a distinction based on the relevant contract in ConnTech, which “expressly disavowed” any direct financial responsibility for Connecticut, see 102 F.3d at 683 n.3, “whereas an adverse judgment in our case
16 New York and the Thruway Authority, having reserved and retained the
benefits of corporate separation for all other purposes, may not pierce their own
arrangements to accommodate litigation strategy. That is so even if, as a practical
matter, a defeat for the Thruway Authority may have downstream effects that
cost the State money. The State’s interest here is the same as its interest in the
fortunes of any other entity that contributes to a state function and thereby and to
that extent obviates an expenditure that the state might otherwise make. Cf. Hess
v. Port Auth. Trans‐Hudson Corp., 513 U.S. 30, 50‐51 (1994) (“A charitable
organization may undertake rescue or other good work which, in its absence, we
would expect the State to shoulder. But none would conclude, for example, that
in times of flood or famine the American Red Cross, to the extent it works for the
public, acquires the States’ Eleventh Amendment immunity.”); see also Askew v.
would create a serious financial risk for New York.” Op. of Judge Newman at 6. The distinction is not as strong as the affinity. Just as in ConnTech, the State in this case will have no direct financial obligation stemming from the judgment, because of the corporate separateness it established. See N.Y. Const. art. X, § 5. In any event, we are not relying on stare decisis, and Judge Newman may be right that ConnTech’s holding, standing alone, does not necessarily “defeat[] the State’s claim” to a Rule 19 interest. What matters is that New York’s interests in this case are, by the State’s own design, “separate and distinct,” ConnTech, 102 F.3d at 682, from those of the Thruway Authority‐‐and that subverts the Thruway Authority’s Rule 19 argument.
17 Sheriff of Cook Cnty., Ill., 568 F.3d 632, 637 (7th Cir. 2009) (“[T]he County does
not become an ‘indispensable’ party [under Rule 19] just because it may need to
indemnify the Sheriff in the future . . . .”). New York’s financial interest in the
outcome of this lawsuit‐‐however large‐‐is too remote and indirect to qualify as a
valid Rule 19 interest.
3. The Thruway Authority contends that New York’s “interest[] in
defending the validity of its own laws,” Appellee Br. at 36, is an interest that
makes the State a necessary party under Rule 19. No precedent supports that
view. State (and federal) statutes are frequently challenged as unconstitutional
without the state (or federal) government as a named party. A federal statute
contemplates such suits by providing a notice mechanism and relaxed
intervention rules for an absent sovereign in cases challenging the validity of its
laws. See 28 U.S.C. § 2403(b) (in any federal suit “to which a State or any agency,
officer, or employee thereof is not a party, wherein the constitutionality of any
statute of that State affecting the public interest is drawn in question, the court
shall certify such fact to the attorney general of the State, and shall permit the
State to intervene . . . for argument on the question of constitutionality”); see also
id. § 2403(a) (analogous provision for the federal government). If, as the
18 Thruway Authority argues, a state is a necessary party in any lawsuit in which a
state statute is challenged as unconstitutional, there would be no need for these
procedures.
B
Even assuming that New York had a relevant “interest” protected by Rule
19(a), the State is only a necessary party if proceeding in its absence might, “as a
practical matter[,] impair or impede” New York’s “ability to protect [its]
interest.” Fed. R. Civ. P. 19(a)(1)(B)(i). As the text of the rule suggests,
“[p]ragmatic considerations are controlling” in conducting this inquiry. See 7
Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1601 (3d
ed. 2015).
In briefing and oral argument, the Thruway Authority warns of the grave
prejudice to be suffered by the State of New York if this case is litigated in its
absence. That argument is advanced by counsel for the Thruway Authority, Eric
T. Schneiderman, the Attorney General of the State of New York. So the careful
reader will notice that the Thruway Authority’s attorney is the chief legal officer
of the State of New York, and the head of New York’s Department of Law. In
19 this role, he “serves as the guardian of the legal rights of the citizens of New
York, its organizations and its natural resources.” Our Office, Attorney General
Eric T. Schneiderman, http://www.ag.ny.gov/our‐office (last visited August 3,
2015).
Whatever interest New York has in the outcome of this lawsuit, we are
confident that Mr. Schneiderman will keep it in mind. As we recognized in a
recent Rule 19 decision, “prejudice to absent parties approaches the vanishing
point when the remaining parties are represented by the same counsel, and when
the absent and remaining parties’ interests are aligned in all respects.” Marvel,
726 F.3d at 134; see also United Transp. Union v. Long Island R. Co., 634 F.2d 19,
22 (2d Cir. 1980) (“[I]n light of the fact that the MTA and LIRR . . . took the same
position as the Attorney General would have taken, he cannot be heard to claim
that the disposition of the action in his absence impairs his ability to protect the
State’s interests.”), rev’d in part on other grounds, 455 U.S. 678 (1982). The
Thruway Authority does not dispute that its interests are “aligned in all
respects,” Marvel, 726 F.3d at 134, with those of the State. Nor could it‐‐were
there adversity between the Thruway Authority and the State, Attorney General
20 Schneiderman would surely be conflicted out of his representation of the
Thruway Authority. See N.Y. Rule of Prof’l Conduct 1.7.
The absence of prejudice to the State can be demonstrated by a
hypothetical. If plaintiffs had named the State as an additional defendant, and
filed in state court to avoid an Eleventh Amendment problem, the substantive
Commerce Clause question would be briefed identically and by the same
counsel. The only likely difference would be that New York might include a
separate defense that, because it is a legally distinct entity from the Thruway
Authority and is not liable for the Thruway’s obligations, the State should be
dismissed as a defendant.
It follows that, if this case cannot be litigated without New York, it will
proceed anyway‐‐in state court. But Rule 19 is about protecting absent persons
from unfair prejudice‐‐it is not about giving a named defendant veto power over
the plaintiff’s chosen forum. Cf. A.L. Smith Iron Co. v. Dickson, 141 F.2d 3, 6 (2d
Cir. 1944) (L. Hand, J.) (rejecting defendant’s argument that plaintiffs failed to
join a necessary party, reasoning that “the [absent party] can avoid . . . prejudice
by intervening in this action,” and “[t]hat being true, [his] only interest in the
21 dismissal of the complaint is . . . in the choice of the forum in which . . . he will
assert his rights”).
Because, “as a practical matter,” any interest New York might have in this
litigation will be neither “impair[ed]” nor “impede[d]” by New York’s absence,
the State is not a necessary party under Rule 19(a).
III
Having concluded that the State of New York is not a necessary party
under Rule 19(a), we need not consider whether the State was also an
indispensable party under Rule 19(b), nor whether plaintiffs forfeited any
separate Rule 19(b) argument by failing to raise it in their opening brief.
CONCLUSION
For the foregoing reasons, we vacate the judgment of the district court and
remand for further proceedings consistent with this opinion.
22 1 American Trucking Assn. v. N.Y. State Thruway Authority 2 Docket No. 14-3348 3 4 JON O. NEWMAN, Circuit Judge, concurring in the result: 5 I agree that the State of New York need not be joined as
6 a necessary and indispensable party in this lawsuit but for
7 only one of the reasons the Court sets forth: the Attorney
8 General of the State of New York has appeared in the case (in
9 the District Court and here) representing the Defendant-
10 Appellant New York State Thruway Authority, and his argument
11 that the Authority’s use of tolls to pay for maintenance of
12 the State’s Canal System does not violate the dormant Commerce
13 Clause will be exactly the same, whether asserted only on
14 behalf of the Authority or also on behalf of the State.
15 Moreover, as the State’s chief legal officer, he can be
16 expected to advance that argument as vigorously as if the
17 State were a party to this lawsuit. In urging dismissal under
18 Rule 19 of the Federal Rules of Civil Procedure, with the
19 consequence of refiling in state court because of the State’s
20 Eleventh Amendment immunity in federal court, the Attorney
21 General makes no claim that he would advance a different or
22 stronger argument on the constitutional issue in the state
23 court. “[J]oinder will not be compelled under the ‘impair or
24 impede’ provision of Rule 19(a) if the absentee’s interest is
1 1 adequately represented by an existing party.” 4 Moore’s
2 Federal Practice § 19.03[3][f][ii] (2014) (footnote collecting
3 cases omitted). See Marvel Characters, Inc. v. Kirby, 726 F.3d
4 119, 134 (2d Cir. 2013).
5 I cannot agree, however, with several of the Court’s
6 other reasons and therefore concur only in the result that
7 reverses the dismissal of the suit for failure to join the
8 State as a party under Rule 19.
9 1. The Court acknowledges that “if the Thruway Authority
10 loses, the State will likely have to come up with some other
11 way to raise money for the canals,” Court op. at 15, but
12 nevertheless concludes that “New York’s financial interest in
13 the outcome of this lawsuit – however large – is too remote
14 and indirect to qualify as a valid Rule 19 interest.” Court
15 op. at 18. When a court tells people they “will likely have
16 to come up” with money upon losing a lawsuit, they would not
17 consider their interest in the lawsuit “remote.” Neither does
18 New York. Whether New York’s financial interest in the
19 lawsuit is the kind of interest that suffices for Rule 19
20 joinder is a fairly debatable issue that we need not decide,
21 but that interest is surely not “remote.”
22 2. The Court observes that “[t]he State’s interest in
2 1 having another entity fulfill its constitutional obligation to
2 support the Canal System is assuredly significant, but it is
3 too remote and indirect to make it a necessary party.” Id. at
4 [14] (Emphasis added).
5 Perhaps the State’s interest in having “another entity”
6 fulfill the State’s constitutional obligation is remote and
7 speculative. After all, if the Turnpike Authority is denied
8 the use of tolls to fund the Canal System, the State can
9 choose either to have “another entity” raise and disburse the
10 needed funds or to provide the funds directly out of the
11 State’s treasury. Which means the State chooses might be
12 speculative, but the State’s need to take some action to make
13 sure the constitutionally required funds are provided is by no
14 means speculative. Indeed, it is certain.1
15 3. The Court acknowledges that “a defeat for the Thruway
16 Authority may have downstream effects that cost the State
17 money.” Id. at [17-18]. Nevertheless, the Court asserts that
18 “the State’s interest here is the same as its interest in the
19 fortunes of any other entity that contributes to a state
1 The Plaintiffs-Appellants suggest that the Thruway Authority itself can find some revenue source other than tolls to maintain the Canal System. That possibility is fairly described as speculative.
3 1 function and thereby and to that extent obviates an
2 expenditure that the [S]tate might otherwise make.” Id. at
3 [18] (emphasis added). The Court offers as an example of the
4 “other entity” the American Red Cross providing flood or
5 famine relief. See id.
6 But the State’s interest here is not the same as whatever
7 interest in might have in the fortunes of the Red Cross.
8 Worthy as such private expenditures are, they are not made in
9 lieu of a State obligation, like New York’s obligation to
10 maintain the canals.2 A decision by the Red Cross to cease
11 funding relief to flood or famine victims would be
12 unfortunate, but it would not trigger a state constitutional
13 or statutory obligation to replace such funding.
14 4. The Court contends that a financial interest,
15 sufficient for Rule 19 joinder, is “inconsistent” with Circuit
16 precedent, id. at [15], citing ConnTech Development Co. v.
17 University of Connecticut Education Properties, Inc., 102 F.3d
2 The Court’s example of a state interest in the fortunes of a private organization would be persuasive if the private organization had the sole responsibility for discharging a state obligation like the obligation to provide schools. Denial of the use of toll receipts to discharge an obligation of that sort would indeed make the state interest in the fortunes of the private organization relevant. But that example would merely raise the Rule 19 issue, not resolve it.
4 1 677 (2d Cir. 1996). I see nothing in ConnTech that defeats
2 the State’s claim that it has a financial interest here.
3 That case was a suit by ConnTech to enforce an
4 arbitration award it had won for breach of its assignor’s
5 contract with Connecticut Education Properties, Inc.
6 (“UCEPI”). UCEPI unsuccessfully moved to dismiss, contending
7 that the State of Connecticut was a necessary party under Rule
8 19. The adverse judgment against UCEPI created no actual or
9 even potential liability for the State of Connecticut. Here,
10 by contrast, an adverse judgment against the Thruway
11 Authority, restricting the use of tolls, would create a
12 distinct likelihood that New York will have to find some way
13 to pay for maintenance of the canals.
14 The Court deems ConnTech relevant because the contract in
15 that case expressly insulated the State from liability for the
16 debts of UCEPI, and New York has insulated itself by statute
17 from liability for the debts of the Thruway Authority. But
18 that insulation was not decisive in ConnTech, and it is not
19 decisive here. The critical difference between the cases is
20 that the adverse judgment in ConnTech created no risk of a
21 financial obligation for Connecticut,3 whereas an adverse
3 In ConnTech, our Court relegated to a footnote the rejection of ConnTech’s argument that Connecticut had an
5 1 judgment in our case would create a serious financial risk for
2 New York.
3 There appears to be some uncertainty as to what kind of
4 financial interest would make a party necessary within the
5 meaning of Rule 19. On the one hand, it is said that the
6 “interest” of an absent party rendering it necessary must be
7 “legally protected, not merely a financial interest.” 4
8 Moore’s Federal Practice § 19.03[3][b] (2004) (internal
9 quotation marks omitted). On the other hand, that same
10 treatise says that in a suit against an insurer in states
11 permitting direct actions against insurance companies, “the
12 insurer . . . would probably be an indispensable party.” Id.
13 § 19.06[5]. Of course, an insurer in a direct action state is
14 not similarly situated to New York in the pending case, but
15 the example of such an insurer indicates that a financial
16 interest can in some circumstances make a party indispensable.
17 If toll receipts cannot be used to maintain the Canal
18 System, New York will have an obligation to arrange for
interest requiring joinder because UCEPI lacked sufficient assets to satisfy a judgment against it and such a judgment would “implicate the State’s treasury.” See 102 F.3d at 683 n.3. The footnote pointed out that the contract, on which ConnTech had sued, expressly disavowed any such responsibility by the State. In any event, the claim that UCEPI lacked sufficient funds to pay the adverse judgment, lacking support in the record, was entirely speculative.
6 1 replacement funding. Rather than resolve the debatable issue
2 of whether a financial obligation of that sort creates an
3 interest that renders New York necessary, I prefer to reject
4 joinder on the clear basis that New York is not an
5 indispensable party because its interests are fully protected
6 by the appearance of the Attorney General.