IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO 2 3 IN RE: : CASE NO. 01-06388 4 : JOSE HERNANDEZ AMADOR; 5 [ELSA COCA MIR CORREA, : CHAPTER 13 6 Debtors : 7 HERNANDEZ AMADOR; g ||ELSA COCA MIR CORREA, : ADVERSARY NO, 07-00334 9 Plaintiffs 10 BANCO SANTANDER PUERTO RICO ALS, : 12 Defendant OTT 14 15 OPINION AND ORDER 16 This adversary proceeding is before the court upon the motion to dismiss filed by Banco Santander Puerto Rico (the “Defendant”) on September 3, 2008 (Docket No. 13) alleging that this 18 action is barred by the doctrine of res judicata (claim preclusion) and, alternatively, by the lack 19 joinder of an indispensable party. José Hernandez Amador and his wife Elsa Coca Mir Correa (the 30 “Plaintiffs”) filed an opposition to the motion to dismiss on October 10, 2008 (Docket No. 38). For the reasons set forth below the motion to dismiss is denied. Facts and Procedural Background 33 . Plaintiffs Jose Francisco Hernandez Amador and Elsa Coca Mir Correa filed a bankruptcy petition under Chapter 13 of the Bankruptcy Code on June 1, 2001. Banco Santander was scheduled 35 as an unsecured creditor and included in the master address list. Banco Santander was duly notified 36 of the filing of the bankruptcy case. The 341 meeting of the creditors was held on June 13, 2001. 4 On July 17, 2001, Banco Santander filed a proof of claim.' Debtors’ chapter 13 plan was 28 ' The claims register shows that Banco Santander de Puerto Rico filed an unsecured claim || in the amount of $20, 238.79, claim number 17-1.
"1 Hlconfirmed on January 24, 2002, and completed on August 15, 2006.7 The discharge order was 2 jlentered on March 26, 2007, and the case was closed on the same date. 3 On December 7, 2007, Plaintiffs filed an adversary proceeding against NCO Financial 4 ||Systems of Puerto Rico, et ais (Adversary Number 07-00335). Inthe complaint Plaintiffs allege that 5 violated the automatic stay under the provisions of the Bankruptcy Code, 11 U.S.C. § 362 (a), 6 jland the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692c (a)(2) and 1692(f)(1), (“FDCPA”). 7 |The Plaintiffs contend that NCO willfully violated the automatic stay on two separate occasions. The 8 instance occurred on or about October 23, 2006 when a representative of NCO tried to collect 9 jjon the pre-petition debi via telephone with the Plaintiffs’ attorney. The second occasion was 10 sometime in February 2007 when Plaintiffs received a written demand for payment of such debt from 11 NCO. Plaintiffs also allege that Banco Santander continued to collect on the pre-petition debt after 12 bankruptcy filing, and that Banco Santander, sometime during the pendency of the case, sold, 13 |/transferred or assigned Plaintiffs’ pre-petition debt to NCO. On June 26, 2008, the Plaintiffs and NCO 14 a Joint Stipulation of Voluntary Withdrawal of Complaint (Docket No. 21) pursuant to Rule 15 of Bankruptcy Procedure, dismissing the case against NCO with prejudice. No further details 16 |jof the settlement were provided by the parties. 17 On December 7, 2007, Plaintiffs filed the present adversary proceeding alleging that 18 Defendant willfully violated the automatic stay provisions of the Bankruptcy Code, 11 U.S.C. □□□□ 19 |i(a), by continuing collection efforts of pre-petition debts against them, notwithstanding that Banco 20 ||Santander knew of their bankruptcy filing. Plaintiffs allege that following the debtors filing of the 21 bankruptcy petition, the pre-petition defaulted debt to Banco Santander was sold, transferred or 22 jlassigned to NCO. The complaint against Defendant also includes severai allegations which state that 23 |INCO Financial Systems of Puerto Rico (“NCO”) also violated the automatic stay provisions of the 24 Bankruptcy Code. However, other than as seller and buyer of this debt, the complaint does not 25 suggest any other nexus between the Defendant and NCO. 7 * The bankruptcy case docket shows that the chapter 13 trustee filed a final report on February 2, 2007 informing that the Debtors had completed their chapter 13 plan. The trustee’s 28 || report discloses payments to Banco Santander de Puerto Rico.
1 2 On September 3, 2008 Defendant filed a “Motion to Dismiss and Memorandum of Law in 3 |Support Thereof’ (Docket No. 13) alleging that Plaintiffs’ action is barred by the doctrine of res 4 |judicata, which guards against claim-splitting. Defendant alleges that both of Plaintiffs’ complaints 5 based upon the same set of facts, that Plaintiffs’ right of action is in its nature entire and 6 jjindivisible and, thus, may not be split up into several causes of action and sued piecemeal (Motion 7 Dismiss, p. 5). Defendant also argues that the dismissal with prejudice in the adversary proceeding § jlagainst NCO bars the complaint against Defendant because it stems from the same transaction and 9 set of facts (Motion to Dismiss, p. 5). Defendant argues that the elements for a claim to be preluded, 10 jas established in Porn v. National Grange Mutual Ins. Co., 93 F. 3d 31, 34 (1" Cir . 1996), were met; 11 is, a final judgment on the merits in an earlier action, sufficient identity between the causes of 12 |action asserted in both suits, and sufficient identity between the parties in the two suits. In the 13 |lalternative, Defendant argues that this adversary proceeding should be dismissed under Fed. R. Civ. 14 19(b) for failure to join an indispensable party (NCO) in this proceeding. 15 In their opposition Plaintiffs’ argue that the doctrine of res judicata is not applicable as one 16 its three components was not satisfied, namely, a final judgment on the merits was not entered in 17 |ithe adversary proceeding against NCO. Plaintiffs do not discuss in their opposition whether the other 18 components of the three prong test necessary to establish claim preclusion were met by the 19 Defendant. Plaintiffs’ position is that a voluntary dismissal achieved by means of a joint stipulation 20 prejudice does not constitute a final judgment on the merits. 21 Subsequently, Defendant filed a Motion Requesting Leave to File Reply to Opposition to 22 Motion to Dismiss and Submitting Tendered Reply Subject to the Court’s Leave to File the Same 23 {(Docket No. 22). In this motion Defendant reasserts its position that a voluntary dismissal by means 24 a joint stipulation is an adjudication on the merits for claim preclusion purposes. 25 Applicable Law and Analysis 26 |\Standard for Granting a Motion to Dismiss 27 Motions to dismiss are governed by Federal Rule of Civil Procedure 12(b)(6), which provides 28 a defense of “failure to state a claim upon which relief can be granted” to a claim for relief may
Ibe presented by motion before the filing of a responsive pleading. 2 For purposes of a motion to dismiss, “(1) the complaint is construed in the light most 3 Ifavorable to the plaintiff, (2) its factual allegations are taken as true, and (3) all reasonable inferences 4 can be drawn from the pleading are drawn in favor of the pleader.” Wright & Miller Federal 5 |(Practice and Procedure: Civil 3d § 1357 at 417, citing Viera Marcano v. Ramirez Sanchez, 224 F. 6 2d 397 (D.P.R. 2002). See also, Correa Martinez v. Arrillaga-Belendez, 903 F.2d 49, 51 (1* 7 1990). The plaintiff must set forth “factual allegations, either direct or inferential, regarding each 8 {material element necessary to sustain recovery under some actionable theory.” Id., citing Gooley v. 9 Oil Corp., 851 F.2d 513, 514 (1" Cir. 1988), See also, LaChapelle v. Berkshire Life Insurance 10 (Company, 142 F.3d 507, 508 (1* Cir. 1998) (in considering a motion to dismiss under Rule 12(b)(6), 11 court must “determine whether the complaint, so read, limns facts sufficient to justify recovery 12 any cognizable theory.”’) 13 “| A] complaint should not be dismissed for failure to state a claim unless it appears beyond 14 |\doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to 15 |irelief.” Federal Practice and Procedure §1357 at 571, quoting Conley v. Gibson, 355 U.S. 41, 78 □□□□□ 16 99, 2 L.Ed.2d 80 (1957); see also, Inre Diamond, 346 F.3d 224 (1" Cir. 2003); Leopoldo Fontanillas, 17 v. Luis Ayala Colon Sucesores, Inc., 283 F. Supp.2d 579 (D.P.R. 2003); Eastern Food Services, 18 v. Pontifical Catholic University of Puerto Rico Service Association, Inc., 222 F. Supp.2d 131, 19 (D.P.R. 2002). Therefore, “the question on a motion to dismiss under Rule 12(b)(6) is whether 20 |lin the light most favorable to the plaintiff, and with every doubt resolved in the pleader’s behalf, the 21 |lcomplaint states any legally cognizable claim for relief.” Id. at 640. “Because a dismissal terminates 22 |lan action at the earliest stages of the litigation, without a developed factual basis for decision, the 23 |lcourt must carefully balance the rule of simplified civil pleading against the need for something more 24 |Ithan conclusory allegations. Washington Legal Foundation v. Massachusetts Bar Foundation, 993 F. 25 962, 971 (1* Cir. 1993). The court will not accept unsupported conclusions or interpretations of 26 |ithe law. Id. . 27 |\\The Doctrine of Res Judicata 28 “Res judicata makes a valid final judgment conclusive on the parties... and prevents
"| llrelitigation of all matters that were or could have been adjudicated in the action. This doctrine is 2 llsometimes known as “merger and bar,” nomenclature that emphasizes the doctrine’s role in guarding 3 llagainst claim splitting.” Andrew Robinson Int’, Inc. v. Hartford Fire Insurance Co., 547 F.3d 48, 32 4 Cir. 2008) (citations omitted). Issues surrounding the application of the doctrine or res judicata 5 |Imay arise because of the exercise of concurrent jurisdiction by state and federal courts over similar 6 ||claims based upon similar facts and involving the same parties. Suarez Cestero v. Pagan Rosa, 198 7 IF. Supp. 52 73, 84 (D.P.R. 2002). “The doctrine of res judicata, now called claim preclusion, 8 |/forecloses litigation of all matters which have been litigated or might have been litigated in an earlier 9 |icase. The rule of collateral estoppel, now termed issue preclusion, precludes re-litigation of issues 10 llactually adjudicated.” Id., citing 18 Charles Alan Wright, Arthur R. Miller and Edward H. Cooper, 11 Federal Practice and Procedure: Jurisdiction, § 4402, 4404 (1981). 12 In this case, both the allegedly precluding suit and the allegedly precluded suit were filed in □ 13 |federal courts. Thus, federal law governs the res judicata effect of the first judgment. Mass. School 14 lof Law at Andover v. American Bar Assoc., 142 F.3d 26, 37 (1* Cir. 1998) (citation omitted). A three 15 test is used to determine whether res judicata precludes litigation of a party’s claims, to wit, 16 a final judgment on the merits in an earlier suit, (2) sufficient identicality between the causes of 17 |laction asserted in the earlier and later suits, and (3) sufficient identicality between the parties in the 18 suits. Perez v. Volvo Car Corporation, 247 F. 3d 303, 311, (1* Cir. 2001); Gonzalez v. Banco 19 Corp., 27 F. 3d 751, 755 (1* Cir. 1994), Apparel Art Int'l, Inc. v. Amertex Enters. Ltd., 48 F. 20 13d 576, 583 (1" Cir. 1995); Porn v. National Grange Mutual Ins. Co., 93 F. 3d at 34. 21 ‘The first prong of the test needed to satisfy claim preclusion under the res judicata doctrine 22 |lis whether a final judgment on the merits was obtained in the adversary proceeding against NCO. The 23 |ladversary proceeding against NCO culminated with a Joint Stipulation of Voluntary Withdrawal of 24 Complaint filed on June 26, 2008 pursuant to Rule 7041 of the Bankruptcy Procedure, dismissing the 25 INCO case with prejudice. The issue presented before this Court is whether a Joint Stipulation of 26 Voluntary Withdrawal with prejudice constitutes a final judgment on the merits. 27 Our analysis starts by stating that, “the principle that a judgment be on the merits before it can 28 the basis for claim preclusion was established long ago. Modern opinions continue to refer to the
principle. However, the term is misleading, because many dispositions short of trial are considered 2 the merits’ for claim preclusion purposes even though the validity of some or all of the theories 3 llof liability, claims for relief, and defenses of the parties may remain undetermined.” Moore’s Federal 4 Practice Civil §131.30 (3Xa). 5 A voluntary dismissal with prejudice is ordinarily deemed a final judgment that satisfies the 6 |lres judicata criterion. See United States v. Cunan, 156 F. 3d 110 (1* Cir. 1998); Langton v. Hogan, 7 171 F. 3d 930, 935 (1" Cir. 1995). Also, a voluntary dismissal under Fed. R. Civ. P. 41(a) by which 8 parties intend to put and end to their claims by means of a joint stipulation with prejudice is 9 ilconsidered to be a judgment on the merits for claim preclusion purposes and is an exercise of judicial 10 power having a presumption of validity. Moore’s Federal Practice Civil §131.30 (3)(c)(ii). Thus, the 11 voluntary dismissal by way of a joint stipulation with prejudice under Rule 7041(aj(1)(A)(ii) of the | 12 Bankruptcy Procedures which is analogous to Fed. R. Civ. P. 41(a)(1)(A)(ii) is considered an 13 adjudication on the merits for claim preclusion purposes. Furthermore, the dismissal of an action with 14 Ilprejudice pursuant to a settlement agreement constitutes a final judgment on the parties and precludes 15 parties from reasserting the same claim in a subsequent action. See Union of Operating Eng’rs v. 16 Karr, 994 F. 2d 1426, 1429 (9" Cir. 1993); In re Dominelli, 820 F. 2d 313, 316-317 (9" Cir. 1987); 17 llAstron Indus. Assocs, Inc. v. Chrysler Motors Corp., 405 F. 2d 958 (5" Cir. 1968). 18 The Plaintiffs in their “Opposition to Motion to Dismiss” cite the case of American Cyanamid 19 |Company v. Capuano, 381 F. 3d 6 (1* Cir. 2004) to sustain their argument that, “this type of dismissal 20 cannot be used as the bases of res judicata since no issues or facts were resolved nor any question of 21 Therefore, it is not a ruling on the merits” (Opposition to Motion to Dismiss, p. 3). In American 22 ICyanamid Company v. Capuano the specific issue before the United States Court of Appeals for the 23 Circuit, and which is relevant to the case at hand, is whether under the doctrine of res judicata, 24 Rohm and Haas Company (“R&H”) was precluded from seeking contribution against Capuano. 25 American Cyanamid dealt with an action under the Comprehensive Environmental Response, 26 Compensation and Liability Act (“CERCLA”) §§ 101-405, as amended by the Superfund 27 \||Amendments and Reauthorization Act of 1986 (“SARA”), 42 U.S.C. §§ 9601-9675 brought by R&H 28 hazardous waste was deposited at the Picitlo site against a group of people who were involved
the site. American Cyanamid Company v. Capuano, 381 F. 3d at 9. R&H had entered into | 2 multiple settlement agreements and dismissal agreements which were approved by the district court 3 |lin which the parties which entered these agreements also sued in the King Industries case. American 4 |\Cyanamid v. Capuano, 381 F. 3d at 16. Some of these settlement agreements included dismissals with 5 |iprejudice. Capuano’s position was that the dismissals with prejudice were judgments on the merits 6 thus are barred by the doctrine of res judicata. However, the court established that, “a dismissal 7 prejudice contained in a consent decree is ‘not a ruling on the merits... [that] applies fo others 8 junder the law of claim preclusion. American Cyanamid Company v. Capuano, 381 F. 3d at 17 9 [quoting Langton v. Hogan, 71 F. 3d 930, 935 (1* Cir. 1995). The First Circuit held that the claims 10 }lasserted by R&H against the Capuanos do not have a res judicata effect because (1) the Capuanos 11 |}were not defendants in the King Industries case and were not parties to any of the settlement 12 jlagreements, meaning that there is no identicality between the parties in the two suits; (2) at the time 13 jlof the King Industries lawsuit, R&H could not pursue a claim against the Capuanos because the 14 |groundwater remediation had not yet occurred and the Capuanos had contribution immunity for 15 jiclaims relating to the soil remediation, meaning that there was no sufficient identicality between the 16 |icause of action asserted in the earlier-and later suit; and (3) the “two dismissal rule” under Fed. R. 17 P. 41(a)(1) is not applicable because the defendants are not the same nor were they in privity 18 the defendants in King Industries. See American Cyanamid Company v. Capuano, 381 F. 3d 19 flat 17. The First Circuit held that the res judicata doctrine does not apply to the claim presented by 20 |R&H for the reasons stated above, however, the decision does not conclude that a voluntary dismissal 21 iby joint stipulation with prejudice under Fed. R. Civ. P. 41(a)(1)(A)(ii) is not an adjudication on the 22 for claim preclusion purposes. 23 In light of the above discussion regarding the first prong of the claim preclusion test, this court 24 that a voluntary dismissal by joint stipulation with prejudice is a judgment on the merits. 25 The First Circuit has adopted the “transactional” approach to determine whether causes of 26 jlaction are sufficiently related to support a res judicata defense. Massachussetts Sch. of Law at 27 Andover, Inc. v. American Bar Ass’n., 142 F. 3d 26, 38 (1* Cir. 1998); Porn v. National Grange 28 {Mutual Ins. Co., 93 F.3d at 34 citing Manego v. Orleans Bd. of Trade, 773 F. 2d 1, 5 (1* Cir. 1985),
denied, 475 U.S. 1084, 89 L. Ed. 2d 722, 1068. Ct, 1466 (1986); Aunyx Corporation v. Canon 2 |ULS.A., Inc,, 978 F. 2d 3, 11 (1 Cir. 1992); Gonzalez v. Banco Cent. Corp., 27 F.3d at 755. Under 3 approach, a valid and final judgment in the first action will extinguish subsequent claims “ ‘with 4 jlrespect to all or any part of the transaction, or series of connected transactions, out of which the action 5 |larose.’” Porn v. National Grange Mutual Ins. Co., 93 F.3d at 34 quoting Restatement of the Law, 6 Second, Judgments §24 (1982)). The court determines the factual grouping which constitutes a 7 |“transaction” pragmatically, giving weight to such factors as “ whether the facts are related in time, 8 origin, or motivation, whether they form a convenient trial unit, and whether their treatment 9 llas a unit conforms to the parties’ expectations.” Porn v. National Grange Mutual Ins. Co., 93 F.3d □ 10 jlat 34 citing Restatement §24; Aunyx Corporation v. Canon U.S.A.. Inc., 978 F. 2d at 7 (1* Cir. 11 11992). However, these factors are suggestive and are not intended to be exhaustive, nor is any one 12 |factor determinative. Porn v. National Grange Mutual Ins. Co., 93 F.3d at 34. Therefore, we must 13 llanalyze whether the facts underlying the violation of the automatic stay in the NCO and Banco 14 |\Santander adversary proceedings are related in time, space, origin or motivation, and whether, they 15 jlarise out of the same transaction, seek redress for essentially the same basic wrong, and rest on the 16 or a substantially.similar factual basis. Porn v. National Grange Mutual ins. Co., 93 F. 3d at 34 17 Kale v Combined Ins. Co, of Am., 924 F. 2d 1161, 1166(1st Cir.), cert. denied, 502 U.S. 816, 18 L. Ed. 2d 44, 112 S. Ct. 69 (1991). 19 The facts underlying the two different complaints stem from different transactions or 20 \loccurrences, which are not sufficiently identical and that involve the violation of the automatic stay 21 ||by different parties which are not related to one another. Both claims seek redress for the violations 22 |lof the automatic stay. However, the adversary proceeding against NCO also alleges violations to the 23 |FDCPA, 15 U.S.C. §§ 1692, et seq. 24 The claim in the adversary proceeding against NCO is derived from NCO’s violation of the 25 llautomatic stay. NCO’s actions do not stem from the same common nucleus of operative facts as the 26 |lalleged violation of the automatic stay by Banco Santander. The violations of the automatic stay 27 |lallegedly caused by these two different entities (NCO and Banco Santander) are separate and 28 llindependent and do not stem from the same transaction. The complaint against Banco Santander
pleads in various instances that Banco Santander violated the provisions of the automatic stay by 2 |lcontinued collection efforts to collect the pre-petition balance from the Plaintiffs (paragraphs 20,21, 3 40, and 41 of complaint). This complaint also incorporates in its factual allegations specific instances 4 llin which NCO violated the automatic stay (paragraphs 23 and 25 of complaint). The complaint 5 ljagainst NCO pleads specific instances in which NCO by itself or through its representatives violated 6 ||the automatic stay (paragraphs 24 and 26 of complaint). . 7 Furthermore, these facts do not form a convenient trial unit to the extent the witnesses or proof 8 |Inceded in the second action do not overlap substantially with the witnesses or proof relevant to the 9 as the claims alleged in the complaints stem from different transactions. See Porn _v. National 10 ||Grange Mutual Ins. Co., 93 F.3d at 36 citing Restatement §24. This inquiry focuses upon what would 11 happen at trial. Iannochino v. Rodolakis, 242 F. 3d 36, 47 (1° Cir. 2001) citing Restatement (Second) 12 Hof Judgments §24 cmt. b (1982). 13 Finally, as to the parties’ expectations, we are guided by the principle that, where “two claims 14 llarose in the same time frame out of similar facts, one would reasonably expect them to be brought 15 |ltogether.” Iannochino v. Rodolakis, 242 F. 3d at 48 citing Porn v. National Grange Mutual Ins. Co., 16 F.3d at 37. In the present case, the two claims arose at different times and from different facts or 17 |Itransactions, thus one would expect the claims to be brought separately under different cases. 18 In summary, applying the transactional test to this adversary proceeding, the court concludes 19 the two lawsuits involve different causes of action which stem from different transactions which 20 |foccurred at different times. 21 The third requirement for claim preclusion requires sufficient identicality between the parties 22 lin the two suits. A prior judgment obtained on a lawsuit bars a subsequent action on the same claim 23 between the same parties or their privies. Moore’s Federal Practice Civil $131.40 (1). The 24 Supreme Court established that, “[i]t is a principle of general application in Anglo-American 25 jurisprudence that one is not bound by a judgment in personam in a litigation in which he is not 26 |idesignated as a party or to which he has not been made a party by service or process.” Hansberry y. 27 311 U.S. 32, 40, 61 S. Ct. 115, 85 L. Ed. 22 (1940). The Hansberry principle establishes that 28 |Ipreclusion may not be used in an action by or against a person who was not a party in a prior
adjudication. Id. However, the term “parties” in light of the requirement of identicality between the 2 iparties for claim preclusion purposes refers to parties in interest, meaning those parties whose interest 3 so closely related that a judgment against one should preclude all. Moore’s Federal Practice Civil 4 |§131.40 (3)(a) quoting Latham v, Wells Fargo Bank, N.A., 896 F. 2d. 979, 983 (5 Cir. 1990). 5 |{Traditionally, courts have referred to a “party” as a party of record and referred to nonparties who are 6 |isubject to the preclusive effect of the judgment as being in “privity” with a party. See Richards v. 7 |\Jefferson County, 517 U.S. 110, 129-130, 103 S. Ct. 1761, 135 L. Ed. 2d 76, 84 (1996). Given that 8 is no specific rule or test for determining privity the same is identified by specific relationships 9 Ilbetween parties and nonparties that may preclude nonparties. Moore’s Federal Practice Civil $131.40 10 quoting the Restatement (Second) of Judgments Ch.! intro. 13-14. Generally to justify claim preclusion, a nonparty will be considered in privity, or sufficiently 12 to a party in the prior suit in three situations: (1) a nonparty who has succeeded to a party’s 13 |linterest in property is bound by any prior judgments against that party, (2) a nonparty who controlled 14 |Ithe original suit will be bound by the resulting judgment, and (3) federal courts will bind a nonparty 15 interests were represented adequately by a party in the original suit. Ford Gas Co. v. Wanda 16 ||Pctroleum Co.. 833 F. 2d 1172, 1174 (5" Cir. 1987), Freeman _v. Lester Coggins Trucking, Inc. ,771 17 ||F. 2d 860,864 (5™ Cir. 1985) quoting Southwest Airlines Co. v. Texas International Airlines, 546 F. 18 2d 84,95 (5" Cir.). Privity will not exist if either a preexisting legal relationship or identity of interests 19 missing from the equation. Moore’s Federal Practice Civil $131.40 (3){a). 20 Defendant in its Motion to Dismiss argues that there is a close relationship or privity of interest 21 |/between the assignor Santander and the assignee NCO*. Defendant cites the case of In Re El San Juan 22 Corporation, 84 1 F.2d 6 (1* Cir. 1988), to sustain its position that the requirement of sufficient 23 |lidenticality of the parties is met because there is a close relationship or privity of interest between 24 Defendant and NCO. In In Re El San Juan Hotel Corporation, one of the issues before the court was 25 [whether nonmutual claim preclusion was appropriate, meaning whether a party not involved in the 26 7 3 In the motion to dismiss Banco Santander refers to the assignee as UCB in one instance. We have construed this as a misstatement; because all other related documents identify the 28 || assignee as NCO. 10
1 flearlier action may deflect the lawsuit because he should have been, but was not, included in the earlier 2 In Re El San Juan Hotel Corporation, 841 F.2d at 10. To support its holding, the First Circuit 3 llincorporates the rationale that, “[o]ther courts have concluded that a version of claim preclusion is 4 llappropriate in these circumstances if the new defendants have a close and significant relationship with 5 ithe original defendants, such as when the new defendants were named as conspirators in the first 6 |[proceeding but were not joined in the action.” In Re El San Juan Hotel Corporation, 841 F. 2d at 11, 7 Gambocz v. Yelenesics, 468 F. 2d 837, 841 Cir. 1972). Preclusion is appropriate “only if 8 new party can show good reasons why he should have been joined in the first action and the old 9 |[party cannot show any good reasons to justify a second chance.” In Re El San Juan Hotel Corporation, 10 841 F. 2d at 11 citing 18 Wright & Miller §4464, at 589. In this particular case, the court concluded 1] “with regard to these allegedly joint harms, it is evident that Cuprill [trustee’s counsel] as the co- 12 perpetrator, shared a significant relationship with Rodriguez [trustee].” In Re El San Juan Hotel 13 ICorporation, 841 F. 2d at 11. The court held that the defendants were co-perpetrators of the harming 14 and shared a significant relationship, thus the claim preclusion factor of identicality of the parties 15 was satisfied. However, in the present case the complaint simply does not allege that Defendant and 16 INCO were co-perpetrators of the violation of the automatic stay nor that they shared a significant] — 17 frelationship. Furthermore, Defendant fails to establish how these two different entities are closely 18 trelated other than as the assignor and the assignee. 19 In this case, the Plaintiffs are the same in both adversary proceedings but the defendants are 20 different. The next question to be answered is whether the defendants, though not identical, are 21 |sufficiently in privity to satisfy this element. According to the pleadings in this adversary proceeding, 22 only relationship that exists between Defendant and NCO is that ofa business relationship in which 23 Defendant allegedly sold, transferred or assigned to NCO Plaintiffs’ defaulted debt (paragraph #22 of 24 complaint). This type of business relationship does not construe privity between these two separate 25 |lentities since they are not under common control or share a common economic interest in attempting 26 |Ito satisfy Plaintiff's debt. This court finds that there is no identicality between Defendant and NCO 27 they are separate and unrelated corporations that do not share a common economic interest. 28 11
2 ||Failure to Join an Indispensable Party 3 In the alternative, Defendant has presented to the court the position that this adversary 4 proceeding be dismissed under Fed. R. Civ. P. 19(b)for failure to join NCO. Fed. R. Civ. P. 19 states 5 |jin part the following:
6 “(a) Persons Required to Be Joined if Feasible. (1) Required Party. A person who is subject to service of process and whose joinder 7 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 8 existing parties; or (B) that person claims an interest relating to the subject of the action and is 9 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 10 : protect the interest; or (ii) leave an existing party subject to a substantial risk of 11 incurring double, multiple, or otherwise inconsistent obligations because of the interest. 12 (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 13 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 14 improper, the court must dismiss that party. (b) When Joinder Is Not Feasible. Ifa person who is required to be joined is feasible cannot 15 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. 16 Before analyzing whether Fed. R. Civ. P. 19(b) applies to this case, the court must first determine 17 whether the joinder of NCO as described in Fed. R. Civ. P. 19(a) is desirable but not feasible. See 18 Wright & Miller Federal Practice and Procedure: Civil 3d_§1608 at 91. A necessary precursor to a 19 decision under Fed. R. Civ, P. 19(b) is a decision under Fed. R. Civ. P. 19(a). See United States v. San 20 Juan Bay Marina, 239 F. 3d 400, 405 (1* Cir. 2001). “Rule 19(b), which governs indispensable parties, 21 works in two steps. Step one requires the district court the district court to decide whether a person fits 22 the definition of those who should “be joined if feasible” under Rule 19{a).” Pujol v. Shearson 23 American Express, 877 F. 2d 132, 134 (1* Cir. 1989) referring to Provident Tradesmens Bank v. 24 Patterson, 390 U.S. 102, 118, 19 L. Ed. 24936, 88 S. Ct. 733 (1968). “If the person 1s a “necessary” 25 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,’ whether ‘in equity and good conscience the action should proceed among 27 the parties before it, or should be dismissed.” Pujol v. Shearson American Express, 877 F. 2d at 134. 28 12
The first step is to determine whether NCO is a necessary party under Fed. R. Civ. P. 19(a). 2 |iNecessary parties are those, “who ought to be made parties, in order that the court may act on that rule 3 |lwhich requires it to decide on, and finally determine the entire controversy, and do complete justice, 4 |lby adjusting all the rights involved in it.” Shields v. Barrow, 58 U.S. 130, 139 15 L. Ed. 158 (1855). 5 i“Thus, when applying Rule 19(a), a court essentially will decide whether considerations of efficiency 6 jJand fairness, growing out of the particular circumstances of the case, require that a particular person 7 ibe joined as a party.” Pujol v. ShearsonAmerican Express, Inc., 877 F. 2d at 134. Despite the fact 8 \Ithat Fed. R. Civ. P. 19(a) no longer contains the word “necessary,” the term has been retained by the 9 as a convenient shorthand for the Rule 19(a) determination. Picciotto v. Continental Casualty 10 |}Company, 512 F.3d 9, 16 (1“ Cir. 2008) referring to Janney Montgomery Scott, Inc. v. Shepard Niles. 11 11 F.3d, 399, 404 n.4 (3 Cir, 1993) (citing Provident Tradesmen Bank & Trust Co. v. Patterson, 12 390 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 13 deemed necessary. Picciotto v. Continental Casualty Company, 512 F. 3d at 16. 14 In this case, the analysis of Fed. R. Civ. P. 19(a) consists in determining whether NCO’s 15 |labsence from this adversary proceeding would “impair or impede” Defendant’s “ability to protect its 16 jlinterest” or if the case would leave Defendant subject to multiple obligations. See Picciotto_v. 17 ||\Continental Casualty Company, 512 F.3d at 16. If Defendant fails to satisfy this test, it is not even 18 |la‘“‘Rule 19(a) person” who should be joined “if feasible,” let alone a Rule (1 9(b) “indispensable party.” 19 Pujol v. Shearson American Express. Inc., 877 F. 2d at 135. This court finds that NCO is not an 20 |lindispensable party to this adversary proceeding because, as previously discussed, the violations of the 21 jlautomatic stay allegedly committed by NCO and Banco Santander are independent and separate, 22 |meaning that they stem from a different nucleus of operative facts. Furthermore, it has not been 23 {established that there is privity or any type of relationship between Defendant and NCO, except as 24 and buyer of debt obligations. This court finds that Defendant did not establish the 25 llindispensability of NCO as a necessary party. NCO’s absence in this adversary proceeding does not 26 |limpair or impede in any manner Defendant’s ability to protect its interest in this lawsuit. 27 Since this court has determined that NCO is not a necessary party under Fed. R. Civ. P. 19(a) 28 find it unnecessary to proceed to the second part of the analysis, that is of Fed. R. Civ. P. 19(b). 13
2 Conclusion 3 For the reasons stated above, this court concludes that the three prong test of the res judicata 4 doctrine for claim preclusion is not met and thus Plaintiffs are not barred from ensuing their claim 5 against Defendant. The court also holds that NCO is not an indispensable party to this adversary 6 |iproceeding and Fed. Rule Civ. P. 19 is inapplicable and thus this court finds no reason to dismiss said 7 jladversary proceeding. 8 . 9 In view of the foregoing, Defendant’s motion to dismiss is hereby DENIED. 10 SO ORDERED. 11 In San Juan, Puerto Rico, this le □□ day of March 2009. 12 13
NRIQUES. CAMOUTTE 16 U.S. Bankruptcy Judge 17 18 19 20 . 21 22 23 24 25 26 27 28 14