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So argued a surety pursuing recovery under its general agreement of indemnity when the indemnitors urged a Louisiana federal court to dismiss the surety’s complaint for failure to join various allegedly required parties as defendants in the litigation.
As part of its court action, the surety moved for preliminary injunction to enforce its collateral security rights. In response thereto, the indemnitors informed the court that if the injunction were to be granted, the indemnitors would “be forced to sell assets that are encumbered by security interests senior to those held by” the surety. In connection therewith, the indemnitors demanded that the other creditors be joined in the action or the lawsuit dismissed. The indemnitors also urged that the public project owner be joined as a party because the surety was seeking proceeds from the project that were still in the possession of the project owner.
Analyzing the indemnitors’ arguments under various provisions of FRCP 19, the court ruled in favor of the plaintiff surety. The court found that the third parties were not “necessary” parties under the Rule, as the court could “accord complete relief among existing parties” without joining the third parties. Noting that the indemnitors “misapprehended entirely the nature of commercial surety relationships,” the court held that key to the court’s refusal of the indemnitors’ motion was that the “ability” of the indemnitors to satisfy the judgment was of little concern to the court. Rather, the court was concerned principally with the establishing of the “existence and amount” of the indemnitors’ obligation to the surety
The court also refused arguments by the indemnitors that absent joining the third parties in the surety’s litigation, the indemnitors might be subjected to “double or multiple liability” based upon separate suits against the indemnitors. According to the court: only the true “threat of inconsistent obligations, not the possibility of multiple litigation” determines whether a necessary party is missing from the federal court fray.
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