Helzberg’s Diamond Shops, Inc. v. Valley West Des Moines Shopping Center, Inc.

Brief Fact Summary.

Plaintiff jeweler that entered into a contract where Defendant Mall agreed not to allow more than two other jewelers to be present in the mall. Defendant signed a lease with a third jeweler and Plaintiff sought injunctive relief to keep Defendant from creating the lease with the third jeweler. Defendant moved to dismiss Plaintiff’s claim for Plaintiff’s failure to join that third jeweler as an indispensable party.

Synopsis of Rule of Law.

A party does not become indispensable to an action to determine rights under a contract just because that party’s rights under a separate contract will be affected by the result of the action.

Facts.

Plaintiff and Defendant entered into a written contract for Defendant to not allow more than two other jewelers in the shopping center. Defendant thereafter signed a contract with two other jewelers in the mall, and then a third jeweler named Lord’s. Plaintiff Helzberg filed a complaint in federal court based on diversity jurisdiction seeking injunctive relief to stop Defendant Valley West from breaching the contract and signing a lease with the third jeweler. Defendant Valley West moved to dismiss for Plaintiff’s failure to join Lord’s as a party. The district court denied the motion and granted Plaintiff Helzberg’s preliminary injunction. Defendant West Valley appealed.

Issue.

Does a person become indispensable to an action because their rights under a separate contract will be affected as a result of the action?

Held.

No, a person does not become indispensable to an action because their rights under a separate contract will be affected as a result of the action. The judgement of the district court is affirmed.

Discussion.

1. Under FRCP 19, when a person cannot be made party to a lawsuit, the court must determine whether the action should proceed without the party or whether the case should be dismissed.
2. An indispensable party is one who, if absent from the lawsuit, could cause a judgement to be prejudicial to the other parties of the litigation.
3. The factors a court looks at when determining whether a party is indispensable are (1) whether a judgement rendered in that person’s absence would be prejudicial, (2) the extent to which the prejudice can be avoided, (3) whether a judgement rendered in the party’s absence would be adequate, (4) and whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder.
4. Generally, a party is not considered indispensable just because it has a contract that will be affected by the outcome of the case.
5. In this case, Lord’s is not prejudiced by the injunction because even if Defendant Valley West terminated the lease with Lord’s, Lord’s would still have its rights under the lease.
6. None of Lord’s rights will be determined by the outcome of the present suit.
7. In addition, the district court offered Lord’s the ability to join in the suit which Lord’s declined.
8. The district court was allowed to advance with Plaintiff Helzberg’s case because Lord’s had notice and a fair opportunity to be heard.
9. The judgement of the district court is affirmed.