United States District Court, D. Nevada
NANCY J. KOPPE, Magistrate Judge.
Pending before the Court is Defendant U.S. Bank, N.A., as Trustee for the Holders of CSMC 2007-2's (hereafter, "Defendant") Motion to Join SFR Investments Pool 1, LLC ("SFR") as a Necessary Party pursuant to Federal Rule of Civil Procedure 19. Docket No. 13. No opposition has been filed. The Court finds that this motion is appropriately resolved without oral argument. See Local Rule 78-2.
This interpleader action arises from the non-judicial foreclosure sale of the property located at 6342 Mighty Flotilla Avenue, Las Vegas, NV 89139 (the "Property"), completed by Coronado Ranch Street Homeowner's Association ("HOA") on May 17, 2013. Docket No. 13, at 2. The transaction was conducted through the HOA's agent Nevada Association Services, Inc. ("NAS"), which sold the property to SFR. Id . The trustee's deed was recorded on May 22, 2013. Id .
NAS filed this interpleader action on March 7, 2014, in Clark County District Court, seeking declaratory relief regarding the priority of claims to excess proceeds of the HOA's foreclosure sale. See Docket No. 1-2. The action was removed to this Court on May 12, 2014. Docket No. 1. SFR is not presently a party to this case. Docket No. 13, at 2. Defendant requests that the Court join SFR as a necessary party on the ground that the Court cannot afford the parties complete relief absent SFR's participation. Id .; see also Fed.R.Civ.P. 19(a)(1)(A). Defendant represents that the "Court cannot allocate the sale proceeds correctly without first determining whether U.S. Bank's deed of trust survived the HOA's foreclosure sale." Id . Defendant accordingly seeks leave to file a cross claim against SFR in order to "enable this Court to resolve the interpleader and quiet title issues in one judicial action." Id .
Determining whether a party is required to be joined to a lawsuit pursuant to Fed.R.Civ.P. 19 involves a three-step inquiry. EEOC v. Peabody W. Coal Co. , 400 F.3d 774, 779 (9th Cir. 2005) ( citations omitted ). First, under Fed.R.Civ.P. 19(a), the court determines whether a party is necessary. Id . If the court finds that the absent party is a necessary party, the court must then determine whether joinder of the party is feasible. Id . Finally, if joinder is not feasible, the court determines whether the case can proceed without the absent party or whether the absent party is an indispensable party such that the court must dismiss the action. Id . "The inquiry is a practical one and fact specific, and is designed to avoid the harsh results of rigid application." Makah Indian Tribe v. Verity , 910 F.2d 555, 558 (9th Cir. 1990). It is helpful at this stage of the analysis to clarify the nature of the parties' interests in this interpleader action. As described above, NAS is unsure as to which party it must provide excess proceeds derived from the HOA sale, and seeks declaratory relief regarding the priority of claims. Docket No. 13, at 3. This is due, in part, to the fact that NAS "cannot determine who has the more senior interest in the property." Id . Defendant, for its part, seeks to determine whether its senior deed of trust was extinguished by the HOA's sale of the Property. Id ., at 4. The issue of whether an HOA foreclosure sale extinguishes a first security interest, however, "is the subject of hundreds of lawsuits and appeals currently pending in Nevada[.]" Id ., at 2-4. As noted by Defendant, has a legal interest in the Property given SFR's purchase of the Property from NAS. Id . Given the present ambiguity of Nevada law, as well as the degree to which NAS' interpleader action implicates a contract in which SFR possesses a legally enforceable interest, Defendant argues that complete relief cannot be afforded without SFR's participation. Id ., at 4.
A. Whether SFR is a Necessary Party
1. Pursuant to Fed.R.Civ.P. 19(a)(1)(A)
To determine whether SFR is a necessary party under Fed.R.Civ.P. 19, the first step is to determine whether the Court can grant complete relief in SFR's absence. Fed.R.Civ.P. 19(a)(1)(A). "This factor is concerned with consummate rather than partial or hollow relief as to those already parties, and with precluding multiple lawsuits on the same cause of action." Disabled Rights Action Comm. v. Las Vegas Events, Inc. , 375 F.3d 861, 879 (9th Cir. 2004), quoting Northrop Corp. v. McDonnell Douglas Corp. , 705 F.2d 1030, 1043 (9th Cir. 1983). The "complete relief" factor "is concerned only with relief as between the persons already parties, not as between a party and the absent person whose joinder is sought." Eldredge v. Carpenters 46 N. Cal. Cntys. Joint Apprenticeship and Training Comm. , 662 F.2d 534, 537 (9th Cir. 1981) ( citations and internal quotations omitted ). In making its determination, the court asks whether the "absence of the party would preclude the district court from fashioning meaningful relief as between the parties." Id .
Two Ninth Circuit decisions guide the Court's analysis. First, in Dawavendewa v. Salt River Project Agric. Improvement Dist. , 276 F.3d 1150 (9th Cir. 2002), the Ninth Circuit found the Navajo Nation was a necessary party because the court could not grant complete relief in the Nation's absence.. The Navajo Nation had leased land to the defendant, who operated a business on the reservation. Id ., at 1153. The lease included a provision whereby the defendant was required to extend employment preferences to qualified local Navajos. Id . The plaintiff, a member of the Hopi Tribe, sought to enjoin the defendant from enforcing the lease provision, but did not name the Nation as a party. Id ., at 1153-54.
In finding that it could not grant complete relief in the Nation's absence, the court reasoned that the injunction sought would bind only the defendant and the plaintiff, not the Nation. Id ., at 1155. As a result, even if the court enjoined the defendant from enforcing the lease provision, the Nation could continue to attempt to enforce the provision. Id . The court noted that if the defendant were to ignore the injunction, the plaintiff would not receive the relief he sought. Id . At the same time, if the defendant were to comply with the injunction, the Navajo Nation would likely take action against the defendant under the lease. Id . The court concluded that, if the court granted plaintiff an injunction, the defendant would be "between the proverbial rock and a hard place - comply with the injunction... or comply with the lease." Id ., at 1156. If the defendant declined to abide by the injunction and instead complied with the lease, the plaintiff would not be afforded complete relief. As a result, the court found that the Nation was a necessary party. Id .
Similarly, in Peabody W. Coal Co. , the Ninth Circuit found that the Navajo Nation was a necessary party because the court could not grant complete relief in its absence. 400 F.3d at 780. In that case, the Navajo Nation was a party to the challenged lease with defendant Peabody. Id . The EEOC sought declaratory, injunctive, and monetary relief, but did not join the Navajo Nation as a party. Id . The court found that while it could award the EEOC monetary damages without the Nation's participation, "declaratory and injunctive relief could be incomplete unless the nation is bound by res judicata ." Id . The court stated, "[i]f the EEOC is victorious in this suit but the Nation has not been joined, the Nation could possibly initiate further action to enforce [the provision in the lease] against Peabody, even though that preference would have been held illegal in this litigation." Id . Accordingly, the court found that the Navajo Nation was a necessary party. Id .
The above-cited cases indicate that where a plaintiff seeks injunctive or declaratory relief, and a third-party has an enforceable interest in the subject matter of the dispute, the court cannot grant complete relief in the third party's absence. Here, the Court finds that SFR is a necessary party to NAS' interpleader action, because it seeks to clarify rights to the proceeds of a contract in which SFR possesses a legally enforceable interest. Similar to the above-cited cases, a judgment declaring injunctive relief with respect to a contract in which SFR possesses a legally enforceable interest would not be binding against SFR. Thus, ...