| IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO 2 3 IN RE: : CASE NO. 99-13317 4 : ISRAEL VAZQUEZ RIVERA : CHAPTER 13 5 : Debtor : 6 : 7 ISRAEL VAZQUEZ RIVERA : ADVERSARY NO. 07-00340 9 Plaintiff 9 10 BANCO SANTANDER PUERTO RICO I Defendant DD i i i3 OPINION AND ORDER is This adversary proceeding is before the court upon the motion to dismiss filed by Banco 16 Santander Puerto Rico (the “Defendant”) on June 9, 2008 (Docket No. 15) alleging that this action is barred by the doctrine of res judicata (claim preclusion) and alternatively by the lack of joinder of 18 an indispensable party. Israel Vazquez Rivera (the “Plaintiff’) filed an opposition to the motion to □□
19 dismiss on August 4, 2008 (Docket No. 25). For the reasons set forth below the motion to dismiss is denied. 20 > Facts and Procedural Background Plaintiff Israel Vazquez Rivera filed a bankruptcy petition under Chapter 13 of the Bankruptcy 33 Code on September 28, 1999. Banco Santander was scheduled as an unsecured creditor and included in the master address list. Banco Santander was duly notified of the filing of the bankruptcy case. The 95 341 meeting of the creditors was held on November 12, 1999. On December 17, 1999, Banco Santander filed two proofs of claim. ' Debtor’s chapter 13 plan 27 28 ' The claims register shows that Banco Santander de Puerto Rico filed two unsecured claims in the amounts of $8,624.13 and $2,959.22, claim numbers 7-1 and 8-1.
. | confirmed on December 13, 1999, and completed on February 11, 2004. ? The discharge order 2 entered on April 26, 2004, and the case was closed on the same date. On December 6, 2007, 3 ||Plaintiff filed a motion to reopen the chapter 13 bankruptcy case (Docket No. 18 in lead case). A court 4 granting the reopening of the case was issued on February 20, 2007 (Docket No. 21 in lead 5 6 On December 13, 2007, Plaintiff filed an adversary proceeding against United Collection 7 ||Bureau, Inc., et als (Adversary Number 07-00341). In the complaint Plaintiff alleges that United 8 Collection Bureau, Inc. violated the discharge injunction provisions of the Bankruptcy Code, 11 9 U.S.C. § 524 (a) and the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692c (a)(2) and 1692(f(1) 10 J“FDCPA”). Plaintiff contends that United Collection Bureau, Inc. (“UCB”) willfully violated the 11 [discharge injunction on various occasions by incurring in the following actions: (i) continuing its 12 |icollection efforts to collect on the discharged debt; (ii) sending a letter sometime in December 2006 13 |irequesting payment of the discharged debt in the amount of $2,268.50; (111) sending letters to Plaintiff 14 jon January 9, 2007 and February 23, 2007 requesting payment of the discharged debt; (iv) sending ‘15 jJlanother letter sometime in January of 2007 requesting payment in full of the discharged debt; and (v) 16 |isending a letter sometime in February of 2007 informing Plaintiff that Banco Santander had 17 |jauthorized UCB to make an offer to liquidate the debt. On April 17, 2008 the Plaintiff and UCB filed 18 Joint Stipulation of Voluntary Withdrawal of Complaint (Docket No. 16) pursuant to Rule 7041 of 19 |Bankruptcy Procedure, dismissing the case against UCB with prejudice. No further details of the 20 |lsettlement were provided by the parties. 21 On December 13, 2007, Plaintiff filed the present adversary proceeding alleging that 22 {Defendant willfully violated the discharge injunction provisions of the Bankruptcy Code, 11 U.S.C. 23 (a), by continuing its collection efforts against Plaintiff to collect on the discharged debt 24 knowing that such debt had been discharged. Plaintiff alleges that sometime following its discharge, 25 . 26 * The bankruptcy case docket shows that the chapter 13 trustee filed a final report on March 27 || 2, 2004 informing that the Debtors had completed their chapter 13 pian. The lead case included Plaintiff's wife Maria Milagros Rodriguez Rosario. The trustee’s report discloses payments to 28 || Banco Santander de Puerto Rico.
. | Defendant sold, transferred or assigned its discharged debtto UCB. The complaint against Defendant 2 includes several allegations which state that UCB violated the discharge injunction provisions 3 the Bankruptcy Code on various occasions. 4 On June 9, 2008 Defendant filed a Motion to Dismiss and Memorandum of Authorities in 5 |Support Thereof (Docket No. 15) alleging that Plaintiffs action is barred by the doctrine of res 6 |judicata, which guards against claim-splitting. Defendant alleges that both of Plaintiffs complaints 7 jare based upon the same set of facts, that Plaintiffs right of action is in its nature entire and 8 |lindivisible and, thus, may not be split up into several causes of action and sued piecemeal (Motion 9 Dismiss, p. 4-5). Defendant also argues that the dismissal with prejudice in the adversary 10 |lproceeding against UCB bars the complaint against Defendant because it stems from the same 11 transaction and set of facts (Motion to Dismiss, p. 5). Defendant argues that the elements for a claim 12 |ito be precluded, as established in Porn v. National Grange Mutual Ins. Co., 93 F. 3d 31, 34 (1* Cir, 13 11996), were met; that is, a final judgment on the merits in an earlier action, sufficient identity between 14 causes of action asserted in both suits, and sufficient identity between the parties in the two suits. 15 the alternative, Defendant argues that this adversary proceeding should be dismissed under Fed. 16 Civ. P. 19(b) for failure to join an indispensable party (UCB) in this proceeding. 17 In its opposition Plaintiff argues that the doctrine of res judicata under the branch of collateral 18 ljestoppel (issue preclusion) is not applicable because it fails to satisfy all three components necessary 19 |/for an issue (as opposed to a claim) to be barred by the doctrine of res judicata. Plaintiff's argues that 20 |Ithe three factors necessary for the res judicata doctrine to apply were not met, namely, because there 21 |jis no privity between Defendant and UCB mainly because the former did not acquire any property 22 |irights from UCB, the causes of action of the two different lawsuits are different because Banco 23 |Santander’s violation of the discharge injunction is independent and separate from UCR’s violation, 24 land that the voluntary dismissal achieved by means of a joint stipulation with prejudice in the 25 |jadversary proceeding against UCB does not constitute a final judgment on the merits. 26 Subsequently, Defendant filed a Reply to Opposition to Motion to Dismiss (Docket No. 31). 27 motion Defendant explains the difference between collateral estoppel and claim preclusion and 28 jjconcludes that claim preclusion is the branch of the res judicata doctrine which applies to this
. 1 adversary proceeding. In addition, Defendant reasserts its position that all three prongs of the test to 2 |\determine claim preclusion have been satisfied in this adversary proceeding. 3 Plaintiff filed a reply to Opposition to Motion to Dismiss (Docket No. 24) in which he argues 4 the doctrine of res judicata (claim preclusion) as one of its three components was not satisfied, 5 |inamely, a final judgment on the merits was not entered in the adversary proceeding against UCB. 6 ||Plaintiff does not discuss in his opposition whether the other two components of the three prong test. 7 \necessary to establish claim preclusion were met by the Defendant. Plaintiff reasserts its position that 8 voluntary dismissal achieved by means of a joint stipulation with prejudice does not constitute a 9 judgment on the merits. 10 Lastly, Defendant filed a “Motion to Strike Plaintiffs’ Sur-Reply as to Motion to Dismiss 11 ||Surreptitiously Titled ‘Reply to Opposition’ and Incorrectly Filed in Bankruptcy Case No. 99-13317 12 Alternatively, for Leave to File the Tendered Sur-Reply” (Docket No. 41). In this motion 13 Defendant reasserts its position that a voluntary dismissal by means of a joint stipulation is an 14 fladjudication on the merits for claim preclusion purposes. 15 Applicable Law and Analysis 16 ||\Standard for Granting a Motion to Dismiss 17 Motions to dismiss are governed by Federal Rule of Civil Procedure 12(b}(6), which provides 18 |Ithat a defense of “failure to state a claim upon which relief can be granted” to a claim for relief may 19 presented by motion before the filing of a responsive pleading. 20 For purposes of a motion to dismiss, “(1) the complaint is construed in the light most 21 ifavorable to the plaintiff, (2) its factual allegations are taken as true, and (3) all reasonable inferences 22 can be drawn from the pleading are drawn in favor of the pleader.” Wright & Miller Federal 23 Practice and Procedure: Civil 3d § 1357 at 417, citing Viera Marcano v. Ramirez Sanchez, 224 F. 24 Supp. 2d 397 (D.P.R. 2002). See also, Correa Martinez v. Arrillaga-Belendez, 903 F.2d 49, 51 (1* 25 Cir. 1990). The plaintiff must set forth “factual allegations, either direct or inferential, regarding each 26 ilmaterial element necessary to sustain recovery under some actionable theory.” Id., citing Gooley v. 27 Oil Corp., 851 F.2d 513, 514 (1* Cir. 1988). See also, LaChapelle v. Berkshire Life Insurance 28 Company, 142 F.3d 507, 508 (1* Cir. 1998) (In considering a motion to dismiss under Rule 12(b)(6),
| court must “determine whether the complaint, so read, limns facts sufficient to justify recovery 2 |jon any cognizable theory.”) 3 “[A] complaint should not be dismissed for failure to state a claim unless it appears beyond 4 doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to 5 ilrelief.” Federal Practice and Procedure §1357 at 571, quoting Conley.v. Gibson, 355 U.S. 41, 78 S.Ct. 6 199, 2 L.Ed.2d 80 (1957); see also, In re Diamond, 346 F.3d 224 (1* Cir. 2003); Leopoldo Fontanillas, 7 \\Inc. v. Luis Ayala Colon Sucesores, Inc., 283 F. Supp.2d 579 (D.P.R. 2003); Eastern Food Services, 8 v. Pontifical Catholic University of Puerto Rico Service Association, Inc., 222 F. Supp.2d 131, 9 134 (D.P.R. 2002). Therefore, “the question on a motion to dismiss under Rule 12(b)(6) is whether 10 the light most favorable to the plaintiff, and with every doubt resolved in the pleader’s behalf, the 11 |icomplaint states any legally cognizable claim for relief” Id. at 640. “Because a dismissal terminates 12 |lan action at the earliest stages of the litigation, without a developed factual basis for decision, the 13 ||court must carefully balance the rule of simplifted civil pleading against the need for something more 14 |than conclusory allegations. Washington Legal Foundation v. Massachusetts Bar Foundation, 993 F. 15 962, 971 (1* Cir. 1993). The court will not accept unsupported conclusions or interpretations of 16 law. Id. 17 |The Doctrine of Res Judicata 18 “Res judicata makes a valid final judgment conclusive on the parties... and prevents 19 firelitigation of all matters that were or could have been adjudicated in the action. This doctrine is 20 ||sometimes known as “merger and bar,” nomenclature that emphasizes the doctrine’s role in guarding 21 jjagainst claim splitting.” Andrew Robinson Int’L, Inc. v. Hartford Fire Insurance Co., 547 F.3d 48, 52 22 ||(1* Cir. 2008) (citations omitted). Issues surrounding the application of the doctrine or res judicata 23 arise because of the exercise of concurrent jurisdiction by state and federal courts over similar 24 |\claims based upon similar facts and involving the same parties. Suarez Cestero v. Pagan Rosa, 198 25 F. Supp. 52 73, 84 (D.P.R. 2002). “The doctrine of res judicata, now called claim preclusion, 26 |tforecloses litigation of all matters which have been litigated or might have been litigated in an earlier 27 The rule of collateral estoppel, now termed issue preclusion, precludes re-litigation of issues 28 actually adjudicated.” Id., citing 18 Charles Alan Wright, Arthur R. Miller and Edward H. Cooper,
- Federal Practice and Procedure: Jurisdiction, § 4402, 4404 (1981). 2 In this case both the allegedly precluding suit and the allegedly precluded suit were filed in 3 federal courts. Thus, federal law governs the res judicata effect of the first judgment. Mass. School 4 Law at Andover v. American Bar Assoc., 142 F. 3d 26, 37 (1* Cir. 1998) (citation omitted), A three 5 ||prong test is used to determine whether res judicata precludes litigation of a party’s claims, to wit, 6 (1) a final judgment on the merits in an earlier suit, (2) sufficient identicality between the causes of 7 |jaction asserted in the earlier and later suits, and (3) sufficient identicality between the parties in the 8 |Itwo suits. Perez v. Volvo Car Corporation, 247 F. 3d 303, 311, (1* Cir. 2001); Gonzalez v. Banco 9 Cent. Corp., 27 F. 3d 751, 755 (1* Cir. 1994), Apparel Art Int’l, Inc. v. Amertex Enters. Ltd., 48 F. 10 576, 583 (1* Cir. 1995); Porn v. National Grange Mutual Ins. Co., 93 F. 3d at 34. 11 The first prong of the test needed to satisfy claim preclusion under the res judicata doctrine 12 |lis whether a final judgment on the merits was obtained in the adversary proceeding against UCB. The 13 jjadversary proceeding against UCB culminated with a Joint Stipulation of Voluntary Withdrawal of 14 Complaint filed on April 17, 2008 pursuant to Rule 7041 of the Bankruptcy Procedure, dismissing 15 the UCB case with prejudice. The issue presented before this court is whether a Joint Stipulation of 16 Voluntary Withdrawal with prejudice constitutes a final judgment on the merits. 17 Our analysis starts by stating that, “the principle that a judgment be on the merits before it can 18 |lbe the basis for claim preclusion was established long ago. Modern opinions continue to refer to the 19 |lprinciple. However, the term is misleading, because many dispositions short of trial are considered 20 ||‘on the merits’ for claim preclusion purposes even though the validity of some or all of the theories 21 |lof liability, claims for relief, and defenses of the parties may remain undetermined.” Moore’s Federal 22 ||Practice Civil §131.30 (3){a). 23 A voluntary dismissal with prejudice is ordinarily deemed a final judgment that satisfies the 24 judicata criterion. See United States v. Cunan, 156 F. 3d 110 (1* Cir. 1998); Langton v. Hogan, 25 F. 3d 930, 935 (1" Cir. 1995). Also, a voluntary dismissal under Fed. R. Civ. P. 41(a) by which 26 lithe parties intend to put and end to their claims by means of a joint stipulation with prejudice is 27 jiconsidered to be ajudgment on the merits for claim preclusion purposes and is an exercise of judicial 28 having a presumption of validity. Moore’s Federal Practice Civil §131.30 (3)(c)(ii). Thus, the
- | voluntary dismissal by way of a joint stipulation with prejudice under Rule 7041(a)(1)(A)Gi) of the 2 Bankruptcy Procedures which is analogous to Fed. R. Civ. P. 41(aj(1)(A)Gi) is considered an 3 |ladjudication on the merits for claim preclusion purposes. Furthermore, the dismissal ofan action with 4 ||prejudice pursuant to a settlement agreement constitutes a final judgment on the parties and precludes 5 llparties from reasserting the same claim in a subsequent action. See Union of Operating Eng’rs v. 6 994 F. 2d 1426, 1429 (9™ Cir. 1993); In re Dominelli, 820 F. 2d 313, 316-317 (9" Cir, 1987); 7 ||Astron Indus. Assocs, Inc. v. Chrysler Motors Corp., 405 F. 2d 958 (5" Cir. 1968). 8 The Plaintiff in its “Reply to Opposition to Motion to Dismiss” cite the case of American 9 |\Cyanamid Company v. Capuano, 381 F. 3d 6 (1* Cir. 2004) to sustain its argument that, “this type 10 Hof dismissal cannot be used as the bases of res judicata since no issues or facts were resolved nor any 11 |iquestion of law. Therefore, there is not a ruling on the merits” ( Reply to Opposition to Motion to 12 |Dismiss, p. 3). In American Cyanamid Company v. Capuano the specific issue before the United 13 States Court of Appeals for the First Circuit, and which is relevant to the case at hand, is whether 14 the doctrine of res judicata, Rohm and Haas Company (“R&H”) was precluded from seeking 15 |icontribution against Capuano. 16 American Cyanamid dealt with an action under the Comprehensive Environmental Response, 17 |}Compensation and Liability Act (“CERCLA”) §§ 101-405, as amended by the Superfund 18 Amendments and Reauthorization Act of 1986 (“SARA”), 42 U.S.C. §§ 9601-9675 brought by R&H 19 |lwhose hazardous waste was deposited at the Picillo site against a group of people who were involved 20 ||with the site. American Cyanamid Company v. Capuano, 381 F. 3d at 9. R&H had entered into 21 |Imultiple settlement agreements and dismissal agreements which were approved by the district court 22 |lin which the parties which entered these agreements also sued in the King Industries case. American 23 I|\Cyanamid v. Capuano, 381 F. 3dat 16. Some of these settlement agreements included dismissals with 24 |iprejudice. Capuano’s position was that the dismissals with prejudice were judgments on the merits 25 thus are barred by the doctrine of res judicata. However, the court established that, “a dismissal 26 prejudice contained in a consent decree is ‘not a ruling on the merits... [that] applies to others 27 under the law of claim preclusion. American Cyanamid Company v, Capuano, 381 F. 3d at 17 28 quoting Langton v. Hogan, 71 F. 3d 930, 935 (1* Cir. 1995). The First Circuit held that the claims
- | llasserted by R&H against the Capuanos do not have a res judicata effect because (1) the Capuanos 2 not defendants in the King Industries case and were not parties to any of the settlement 3 agreements, meaning that there is no identicality between the parties in the two suits; (2) at the time 4 lof the King Industries lawsuit, R&H could not pursue a claim against the Capuanos because the 5 groundwater remediation had not yet occurred and the Capuanos had contribution immunity for 6 ilclaims relating to the soil remediation, meaning that there was no sufficient identicality between the 7 of action asserted in the earlier and later suit; and (3) the “two dismissal rule” under Fed. R. 8 P. 41(a)(1) is not applicable because the defendants are not the same nor were they in privity 9 with the defendants in King Industries. See American Cyanamid Company v. Capuano, 381 F. 3d 10 lat 17. The First Circuit held that the res judicata doctrine does not apply to the claim presented by 11 |R&H for the reasons stated above, however, the decision does not conclude that a voluntary dismissal 12 \by joint stipulation with prejudice under Fed. R. Civ. P. 41(a)(1)(A)(i) is not an adjudication on the 13 |merits for claim preclusion purposes. 14 In light of the above discussion regarding the first prong of the claim preclusion test, this court 15 that a voluntary dismissal by joint stipulation with prejudice is a judgment on the merits. 16 The First Circuit has adopted the “transactional” approach to determine whether causes of 17 llaction are sufficiently related to support a res judicata defense. Massachussetts Sch. of Law at 18 Andover, Inc. v. American Bar Ass’n., 142 F. 3d 26, 38 (1* Cir. 1998); Porn v. National Grange 19 Mutual Ins. Co., 93 F.3d at 34 citing Manego v. Orleans Bd. of Trade, 773 F. 2d 1, 5 (1* Cir. 1985), 20 jicert. denied, 475 US. 1084, 89 L. Ed. 2d 722, 106 S. Ct, 1466 (1 986); Aunyx Corporation v. Canon 21 HULS.A., Inc., 978 F. 2d 3, 11 (1* Cir. 1992); Gonzalez v. Banco Cent. Corp., 27 F.3d at 755. Under 22 approach, a valid and final judgment in the first action will extinguish subsequent claims “ ‘with 23 |\respect to all or any part of the transaction, or series of connected transactions, out of which the action 24 jlarose.’” Porn v. National-Grange Mutual Ins. Co., 93 F.3d at 34 quoting Restatement of the Law, 25 ||Second, Judgments §24 (1982)). The court determines the factual grouping which constitutes a 26 IItransaction” ptagmatically, giving weight to such factors as “ whether the facts are related in time, 27 |\space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment 28 |las a unit conforms to the parties’ expectations.” Porn v. National Grange Mutual Ins. Co., 93 F.3d
- | flat 34 citing Restatement §24; Aunyx Corporation v. Canon U.S.A.. Inc., 978 F. 2d at 7. However, 2 ||these factors are suggestive and are not intended to be exhaustive, noris any one factor determinative. 3 || Porn v. National Grange Mutual Ins. Co., 93 F.3d at 34. Therefore, we must analyze whether the facts 4 junderlying the willful violation of the discharge injunction in the UCB and Banco Santander 5 |ladversary proceedings are related in time, space, origin or motivation, and whether, they arise out of . 6 same transaction, seek redress for essentially the same basic wrong, and rest on the same or a 7 |isubstantially similar factual basis. Porn v. National Grange Mutual Ins. Co., 93 F. 3d at 34 citing 8 Kale v. Combined Ins. Co, of Am., 924 F. 2d 1161, 1166 (1* Cir.), cert. denied, 502 U.S. 816, 116 9 IL. Ed. 2d 44, 112 8. Ct. 69 (1991). 10 The facts underlying the two different complaints stem from different transactions or 11 lloceurrences (which are not sufficiently identical) that involve the violation of the discharge injunction 12 |lby different parties which are not related to one another. Both claims seek redress for violations of 13 |Ithe discharge injunction. However, the adversary proceeding against UCB also alleges violations to 14 the FDCPA, 15 U.S.C. §§ 1692, et seq. 15 The claim in the adversary proceeding against UCB is derived from UCB’s violation of the 16 ||discharge injunction. UCB’s actions do not stem from the same common nucleus of operative facts 17 the alleged violation of the discharge injunction by Banco Santander. The violations of the 18 |Iidischarge injunction allegedly caused by these two different entities (UCB and Banco Santander) are 19 |iseparate and independent and do not stem from the same transaction. The complaint against Banco 20 |\Santander violated the provisions of the discharge injunction by continued collection efforts tocollect 21 |ithe discharged debt from the Plaintiff (paragraphs 20 and 21 of complaint). This complaint also 22 |jincorporates in its factual allegations specific instances in which UCB violated the discharge 23 |linjunction (paragraphs 23, 24, and 25 of complaint). The complaint against UCB pleads specific 24 |linstances in which UCB by itself violated the discharge injunction (paragraphs 21, 23, 24, 25 and 26 25 lof complaint). 26 Furthermore, these facts do not form a convenient trial unit to the extent the witnesses or 27 ||proof needed in the second action do not overlap substantially with the witnesses or proof relevant 28 |Ito the first as the claims alleged in the complaints stem from substantially different transactions. See
| |/Porn v. National Grange Mutual Ins. Co., 93 F.3d at 36 citing Restatement §24. This inquiry focuses 2 what would happen at trial. Iannochino v. Rodolakis, 242 F. 3d 36, 47 (1* Cir. 2001) citing 3 |Restatement (Second) of Judgments §24 cmt. b (1982). 4 Finally, as to the parties’ expectations, we are guided by the principle that, where “two claims 5 llarose in the same time frame out of similar facts, one would reasonably expect them to be brought 6 jtogether.” Iannochino v. Rodolakis, 242 F. 3d at 48 citing Porn v. National Grange Mutual Ins. Co., 7 193 F. 3d at 37. In the present case, the two claims for willful violation of the discharge injunction 8 llarose at different times and from different facts or transactions, thus one would expect the claims be 9 Ilbrought separately under different cases. Thus, because the claims are independent and separate it 10 |}would be expected that they be brought under different cases or complaints by the Plaintiff. 11 In summary, applying the transactional test to this adversary proceeding, the court concludes 12 the two lawsuits involve different causes of action which stem from different transactions which 13 |joccurred at different times. 14 The third requirement for claim preclusion requires sufficient identicality between the parties 15 the two suits. A prior judgment obtained on a lawsuit bars a subsequent action on the same claim 16 llonly between the same parties or their privies. Moore’s Federal Practice Civil §131.40 (1). The 17 Supreme Court established that, “[i]t is a principle of general application in Anglo-American 18 |ljurisprudence that one is not bound by a judgment in personam in a litigation in which he is not 19 lldesignated as a party or to which he has not been made a party by service or process.” Hansberry v. 20 311 U.S. 32, 40, 61 S. Ct. 115, 85 L. Ed. 22 (1940). The Hansberry principle establishes that 21 |lpreclusion may not be used in an action by or against a person who was not a party in a prior 22 lladjudication. Id. However, the term “parties” in light of the requirement of identicality between the 23 |lparties for claim preclusion purposes refers to parties in interest, meaning those parties whose interest 24 llare so closely related that a judgment against one should preclude all. Moore’s Federal Practice Civil 25 11§131.40 (3)(a) quoting Latham v. Wells Fargo Bank, N.A., 896 F. 2d. 979, 983 (5 Cir. 1990). 26 Traditionally, courts have referred to a “party” as a party of record and referred to nonparties who □□□□ 27 subject to the preclusive effect of the judgment as being in “privity” with a party. See Richards v. 28 IlJefferson County, 517 U.S. 110, 129-130, 103 S. Ct. 1761, 135 L. Ed. 2d 76, 84 (1996). Given that 10
- }ithere is no specific rule or test for determining privity the same is identified by specific relationships 2 |between parties and nonparties that may preclude nonparties. Moore’s Federal Practice Civil §131.40 3 11(3)(a) quoting the Restatement (Second) of Judgments Ch.1 intro. 13-14. 4 Generally to justify claim preclusion, a nonparty will be considered in privity, or sufficiently 5 ilclose to a party in the prior suit in three situations: (1) a nonparty who has succeeded to a party’s 6 jlinterest in property is bound by any prior judgments against that party, (2) anonparty who controlled 7 ithe original suit will be bound by the resulting judgment, and (3) federai courts will bind a nonparty 8 |lwhose interests were represented adequately by a party in the original suit. Ford Gas Co. v. Wanda 9 [Petroleum Co., 833 F. 2d 1172, 1174 (5™ Cir. 1987), Freeman v. Lester Coggins Trucking, Inc. ,771 10 |IF. 2d 860,864 (5" Cir. 1985) quoting Southwest Airlines Co. v. Texas International Airlines, 546 F. 11 84,95 (5" Cir.). Privity will not exist if either a preexisting legal relationship or identity of interests 12 missing from the equation. Moore’s Federal Practice Civil §131.40 (3)(a). 13 Defendant in its Motion to Dismiss and in its Reply to Opposition to Motion to Dismiss argues 14 ||that there is a close relationship or privity of interest between the assignor Santander and the assignee 15 Defendant cites the case of In Re El San Juan Hotel Corporation, 841 F.2d 6 (1* Cir. 1988), to 16 sustain its position that the requirement of sufficient identicality of the parties is met because there is 17 a close relationship or privity of interest between Defendant and UCB. In In Re El San Juan Hotel 18 |Corporation, one of the issues before the court was whether nonmutual claim preclusion was llappropriate, meaning whether a party not involved in the earlier action may deflect the lawsuit because 20 should have been, but was not, included in the earlier suit. In Re El San Juan Hotel Corporation, 21 1841 F. 2d at 10. To support its holding, the First Circuit incorporates the rationale that, “[o]ther courts 22 have concluded that a version of claim preclusion is appropriate in these circumstances if the new 23 |idefendants have a close and significant relationship with the original defendants, such as when the new 24 |idefendants were named as conspirators in the first proceeding but were not joined in the action.” In 25 El San Juan Hotel Corporation, 841 F, 2d at 11 citing Gamboez v. Yelencsics, 468 F. 2d 837, 841 26 Cir. 1972). Preclusion is appropriate “only if the new party can show good reasons why he should 27 ||have been joined in the first action and the old party cannot show any good reasons to justify a second 28 ||chance.” In Re El San Juan Hotel Corporation, 841 F. 2d at 11 citing 18 Wright & Miller §4464, at 11
- In this particular case, the court concluded that, “with regard to these allegedly joint harms, it is 2 llevident that Cuprill [trustee’s counsel] as the co-perpetrator, shared a significant relationship with 3 {Rodriguez [trustee].” In Re El San Juan Hotel Corporation, 841 F. 2d at 11. The court held that the 4 |ldefendants were co-perpetrators of the harming act, and shared a significant relationship, thus the 5 preclusion factor of identicality of the parties was satisfied. However, in the present case the 6 |lcomplaint simply does not allege that Defendant and UCB were co-perpetrators of the violation of the 7 i\discharge injunction nor that they shared a significant relationship. Defendant in its Reply to the 8 Opposition to Motion to Dismiss argues that there is a substantial relationship in interest between UCB 9 land Defendant which stems from clause three (3) of the Settlement and General Release Agreement 10 |\(the “Agreement”) between UCB and Plaintiff. Defendant alleges that this Agreement, “expressly 11 ||recognizes that Santander was a predecessor in interest to the claim that the parties settled in the first 12 (Reply to Opposition to Motion to Dismiss, p. 14). Upon reading this Agreement, this court 13 that such clause does not establish that Banco Santander is a predecessor in interest, but rather 14 |iexcludes Banco Santander from the release, meaning that Plaintiffmay initiate an action against Banco 15 |\Santander. However, pursuant to the guidelines to establish privity a party must establish that it is a 16 lisuccessor in interest, not a predecessor in interest. Defendant fails to establish how these two different 17 jentities are closely related other than as the assignor and the assignee. 18 In this case, the Plaintiff is the same in both adversary proceedings but the defendants are 19 different. The next question to be answered is whether the defendants, though not identical, are 20 |sufficiently in privity to satisfy this element. According to the pleadings in this adversary proceeding, 21 only relationship that exists between Defendant and UCB is that ofa business relationship in which 22 ||Defendant allegedly sold, transferred or assigned to UCB Plaintiff's discharged debt (paragraph #22 23 fof complaint). This type of business relationship does not construe privity between these two separate 24 |lentities since they are not under common control or share a common economic interest in attempting) □ 25 Ito satisfy Plaintiff's discharged debt. This court finds that there is no identicality between Defendant 26 lland UCB since they are separate and unrelated corporations that do not share a common economic 27 |jinterest. 28
- | ||Failure to Join an Indispensable Party 2 In the alternative, Defendant has presented to the court the position that this adversary 3 proceeding be dismissed under Fed. R. Civ. P. 19(b)for failure to join UCB. Fed. R. Civ. P. 19 states 4 part the following: 5 “(a) Persons Required to Be Joined if Feasible. (1) Required Party. A person who is subject to service of process and whose joinder 6 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 7 existing parties; or (B) that person claims an interest relating to the subject of the action and is 8 so situated that disposing of the action in the person’s absence may: (1) as a practical matter impair or impede the person’s ability to 9 protect the interest; or (ii) leave an existing party subject to a substantial risk of 10 incurring double, multiple, or otherwise inconsistent obligations because of the interest. 11 (2) Joinder by Court Order. If a person has not been joined as required, the court must order that the person be made a party. A person who refuses to join as a plaintiff 12 may be made either a defendant or, in a proper case, an involuntary plaintiff. (3) Venue. If a joined party objects to venue and the joinder would make venue 13 improper, the court must dismiss that party. (b) When Joinder Is Not Feasible. If a person who is required to be joined is feasible cannot 14 be joined, the court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed.” Fed. R. Civ. P. 19. 15 Before analyzing whether Fed. R. Civ. P. 19(b) applies to this case, the court must first determine 16 whether the joinder of UCB as described in Fed. R. Civ. P. 19(a) is desirable but not feasible. See 17 Wright & Miller Federal Practice and Procedure: Civil 3d §1608 at 91. A necessary precursor to a 18 decision under Fed. R. Civ. P. 19(b)} is a decision under Fed. R. Civ. P. 19(a). See United States v. San 19 Juan Bay Marina, 239 F. 3d 400, 405 (1* Cir. 2001). “Rule 19(b), which governs indispensable parties, 20 works in two steps. Step one requires the district court to decide ‘whether a person fits the definition 21 of those who should “be joined if feasible” under Rule 19(a).” Pujol v. Shearson American Express, 22 877 F. 2d 132, 134 (1* Cir. 1989) referring to Provident Tradesmens Bank v. Patterson, 390 U.S. 102, 23 118, 19 L. Ed, 2d 936, 88 S. Ct. 733 (1968). “If the person is a ‘necessary’ party (i.e., fits the definition of 19({a)), but joinder is not feasible, the court must take step two. It must decide, using four ‘factors,’ 25] whether ‘in equity and good conscience the action should proceed among the parties before it, or 26 should be dismissed.” Pujol v. Shearson American Express, 877 F. 2d at 134. 27 The first step is to determine whether UCB is a necessary party under Fed. R. Civ. P. 19(a). 28 13
- | ilNecessary parties are those, “who ought to be made parties, in order that the court may act on that rule 2 |which requires it to decide on, and finally determine the entire controversy, and do complete justice, 3 adjusting all the rights involved in it.” Shields v. Barrow, 58 U.S. 130, 139 15 L. Ed. 158 (1855). 4 |*Thus, when applying Rule 19(a), a court essentially will decide whether considerations of efficiency
_ 5 fairness, growing out of the particular circumstances of the case, require that a particular person 6 joined as a party.” Pujol v. ShearsonAmerican Express, Inc., 877 F. 2d at 134. Despite the fact 7 |ithat Fed. R. Civ. P. 19(a) no longer contains the word “necessary,” the term as been retained by the 8 courts as a convenient shorthand for the Rule 19(a) determination. Picciotto v. Continental Casualty 9 |Company, 512 F.3d 9, 16 (1* Cir. 2008) referring to Janney Montgomery Scott, Inc. v. Shepard Niles. 10 11 F.3d, 399, 404 n4 (3 Cir. 1993) (citing Provident Tradesmen Bank & Trust Co. v. Patterson, 1] 390 U.S. at 116 n. 12). A party only has to satisfy one of the three criteria of Fed. R. Civ. P. 19(a) to 12 deemed necessary. Picciotto v. Continental Casualty Company, 512 F. 3d at 16. i3 In this case, the analysis of Fed. R. Civ. P. 19(a) consists in determining whether UCB’s 14 llabsence from this adversary proceeding would “impair or impede” Defendant’s “ability to protect its 15 llinterest” or if the case would leave Defendant subject to multiple obligations. See Picciotto v. 16 Continental Casualty Company, 512 F. 3d at 16. If Defendant fails to satisfy this test, it is not even 17 ja“Rule 19{a) person” who should be joined “if feasible,” let alone a Rule (1 9(b) “indispensable party.” 18 See Pujol v. Shearson American Express, Inc., 877 F. 2d at 135. This court finds that UCB is not an 19 indispensable party to this adversary proceeding because as previously discussed the violations of the |idischarge injunction allegedly committed by UCB and Banco Santander are independent and separate, 21 meaning that they stem from a different nucleus of operative facts. Furthermore, it has not been 22 |lestablished that there is privity or any type of relationship between Defendant and UCB, except as 23 and buyer of debt obligations. This court finds that Defendant did not establish the 24 |lindispensability of UCB as a necessary party. UCB’s absence in this adversary proceeding does not 25 jlimpair or impede in any manner Defendant’s ability to protect its interest in this lawsuit. 26 Since this court has determined that UCB is not a necessary party under Fed. R. Civ. P. 19(a) 27 ||we find it unnecessary to proceed to the second part of the analysis, that is of Fed. R. Civ. P. □□□□□□□ 28 14
2 Conclusion 3 For the reasons stated above, this court finds that the three prong test of the res judicata 4 |\doctrine for claim preclusion is not met and thus Plaintiffis not barred from ensuing their claim against 5 ||Defendant. The court also holds that UCB is not an indispensable party to this adversary proceeding 6 Fed. Rule Civ. P. 19 is inapplicable and thus this court finds no reason to dismiss said adversary 7 \\proceeding. 8 9 In view of the foregoing, Defendant’s motion to dismiss is hereby DENIED. 10 SO ORDERED. il In San Juan, Puerto Rico, this/,2 * day of March 2009. 12 13 14
16 Bankruptcy Judge 17
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