The opinion of the court was delivered by: LORETTA PRESKA, District Judge
On or about September 15, 2003, plaintiff, Michael Newbro, filed a
complaint (the "Complaint") against defendants, Kristen Eberhard and
Powell Transactions, Ltd., alleging that defendants had been unjustly
enriched (First Cause of Action), had obtained Newbro's money under false
pretenses (Second Cause of Action), and had converted Newbro's money
(Third Cause of Action). The allegations in the Complaint stem from
alleged transfers of $87,296 into accounts controlled by Kristen Eberhard
and Powell Transactions without Newbro's permission.
According to the Complaint, in December 2000, Newbro and his wife,
Konnie Newbro, opened six investment accounts with Kristen Eberhard's
husband, Todd Eberhard, and invested more than $5 million in those
accounts. (Compl. ¶¶ 6, 12). In February 2003, the Newbros learned
that Todd Eberhard had fraudulently transferred some of their funds,
without their authorization, to individuals and entities unknown to them. (Compl. ¶ 9).*fn1
Newbro alleges that through the use of forged transfer letters Todd
Eberhard fraudulently made three transfers, totaling $87,296.00, from
Newbro's accounts to the defendants and that defendants received and
benefitted from these fraudulent transfers. (Compl. ¶¶ 14-18, 21-22).
On or about October 24, 2003, Kristen Eberhard filed a motion to
dismiss for failure to join an indispensable party or stay the action
pursuant to Rule 12(b)(7) of the Federal Rules of Civil Procedure. In her
motion, Kristen Eberhard argued that Todd Eberhard was a necessary and
indispensable party under Rule 19 of the Federal Rules of Civil
Procedure, and, therefore, the failure to name him as a defendant
requires dismissal of the action. Alternatively, Kristen Eberhard
submitted that because I will be deciding issues arising out of the
relationship between a customer and investment advisor, which implicates
the regulatory schemes set up to govern such relationships, I should stay
the instant matter pending arbitration between Newbro and Todd Eberhard. Under Rule 12(b)(7), an action must be dismissed for failure to join
a party as defined in Rule 19. F.R.C.P. 12(b)(7). Rule 19(a)(1) states
that a person is a necessary party and must be joined in an action if:
(1) in the person's absence complete relief cannot be accorded among
those already parties, or (2) the person claims an interest relating to
the subject of the action and is so situated that the disposition of the
action in the person's absence may (i) as a practical matter impair or
impede the person's ability to protect that interest or (ii) leave any of
the persons already parties subject to a substantial risk of incurring
double, multiple, or otherwise inconsistent obligations by reason of the
claimed interest. F.R.C.P. 19(a). If a person is found to be a necessary
party under the Rule 19(a) standard, but cannot be made a party to the
action, the Court must decide if the absent party is indispensable
requiring dismissal of the action. F.R.C.P. 19(b); Viacom Int'l,
Inc. v. Kearney, 212 F.3d 721, 724 (2d Cir. 2000). In determining
the indispensability of an absent party, the Court may consider: (1) to
what extent a judgment rendered in the person's absence might be
prejudicial to the person or those already parties; (2) the extent to
which, by protective provisions in the judgment, by the shaping of
relief, or other measures, the prejudice can be lessened or avoided;
(3) whether a judgment rendered in the party's absence will be adequate;
and (4) whether the plaintiff will have an adequate remedy if the
action is dismissed for nonjoinder. F.R.C.P. 19(b).
Though I understand and sympathize with Kristen Eberhard's contention
that this case is about the alleged wrongdoing of her husband, properly
characterized, Newbro's Complaint is not about Todd Eberhard's alleged
conduct but rather the alleged acts of Kristen Eberhard and Powell
Transactions. Todd Eberhard is neither a necessary nor indispensable
party pursuant to Rule 19, and his joinder is not required for a just
adjudication. As this case is based on these defendants' alleged improper
receipt and retention of funds transferred to them, Todd Eberhard's
presence as a party in this matter is not necessary to ensure complete
relief for Newbro or protect Todd Eberhard's interests, and the
continuation of this matter will not increase the risk that defendants
will incur multiple or inconsistent obligations. See F.R.C.P.
19(a). As Todd Eberhard is not a necessary party, neither is he an
indispensable party. See F.R.C.P. 19(b); Viacom Int'l, Inc.,
212 F.3d at 724.
As the focus of this case is on defendants' alleged receipt and
retention of the funds in question, there is no reason to stay this
action pending arbitration between Newbro and Todd Eberhard. Any
arbitration between those parties would not concern the wrongdoing
alleged to have been committed by defendants, and, therefore, there is no reason why the present
action ought to be stayed.
Finally, that Kristen Eberhard disavows having ever received any of the
funds in question does not change the fact that her name appears on the
checks as the recipient of the funds and that Newbro's allegations
concern defendants' receipt and retention of those funds. At this stage
in the litigation, Kristen Eberhard's factual assertions and testimony
that she never received any of Newbro's money is irrelevant.
For the reasons stated above, Kristen Eberhard's motion to dismiss or
stay the action (docket no. 5) is denied in all respects.