NWP Services Corporation v. VAC L.L.L.P. et al
Filing
14
OPINION. Signed by District Judge John A. Gibney, Jr on 08/03/2016. (tjoh, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Richmond Division
NWP Services Corporation,
Plaintiff,
V.
Civil Action No. 3:15-cv-787
VAC L.L.L.P.,
CLHV, L.L.C.,
and
SJW, L.LX.P.,
Defendants.
OPINION
The plaintiff, NWP Services Corporation, has sued the defendants for breach of contract
for failure to pay the amount allegedly owed for services, and the defendants have filed a motion
to dismiss. The defendants contend the complaint named improper defendants by including the
original parties to the contract rather than the LLCs to whom the defendants assigned the
contracts. They say the assignees are necessary parties to the case. Alternatively, the defendants
ask the Court to compel the plaintiff to amend the complaint, adding the assignees as defendants.
In addition, SJW, L.L.L.P. ("SJW") seeks dismissal from the action entirely, as SJW allegedly
no longer exists. Because the plaintiff named proper parties in the complaint, the Court denies
the defendants' motions.
I. BACKGROUND
According to the complaint, NWP had a series of contracts with the defendants to provide
utility submetering services at apartment complexes. NWP performed its contractual duties, but
the defendants have not paid $302,089.55, the amount collectively outstanding under the terms
of the agreements.
The defendants say they assigned their service agreements to other LLCs, so the
assignees are the correct defendants. They also say that SJW has been dissolved, so it cannot be
sued.
11. DISCUSSION
A. Failure to Join a Necessary Party.*
The assignees are not necessary parties under Rule 19, so the Court denies the
defendants' 12(b)(7) motion to dismiss and declines to join the assignees by order. Fed. R. Civ.
P. 12(b)(7). Rule 19 defines a party as necessary in two circumstances. First, Rule 19(a)(1)(A)
defines a party as necessary if "in that [party's] absence, the court cannot accord complete relief
among existing parties." Fed. R. Civ. P. 19(a)(1)(A). Here, the Court can accord complete relief
to the plaintiff. "Under Virginia law, the parties to a contract remain liable for obligations under
the contract unless novation occurs." See BestSweet, Inc. v. NTI Holdings Corp., Civil Action
No. I:09cv942, 2010 WL 2671303, at *2 (E.D. Va. July 2, 2010) (citing Honeywell, Inc. v.
Elliott, 213 Va. 86, 189 S.E.2d 331 (1972).
As conceded by both parties, no novation has
' "Rule 12(b)(7) provides for dismissal where a party has not been joined as required by Rule
19." Marina One, Inc. v. Jones, 22 F.Supp.3d 604, 606 (E.D. Va. 2014). Courts addressing a
12(b)(7) motion face a two-step inquiry. Owens-Illinois, Inc. v. Meade, 186 F.3d 435, 440 (4th
Cir. 1999). First, the court must ask whether a party "is necessary to a proceeding because of its
relationship to the matter under consideration" pursuant to Rule 19(a). Id. (internal quotations
and citations omitted). If the party is necessary, the court will join it into the action. Id. If the
court cannot join the party, however, the court must then determine whether that party is
indispensable pursuant to Rule 19(b). Id. If the party is indispensable, the court must dismiss the
action. Id. The party asserting the Rule 12(b)(7) motion has the burden of showing that a person
not joined is necessary and indispensable. Am. Gen. Life & Accident Ins. Co. v. Wood, 429 F.3d
83, 92 (4th Cir. 2005).
occurred in this case. The original parties remain liable for the assigned contracts, and NWP can
obtain complete relief from them.
Second, Rule 19(a)(1)(B) defines a party as necessary when "that [party] claims an
interest relating to the subject of the action" and adjudicating the action in that party's absence
could impede its ability to protect the interest or leave an existing party subject to risk of
inconsistent obligations. Fed R. Civ. P. 19(a)(1)(B). The assignees have not claimed an interest
in the action.
Even if they had, however, they would not meet the requirements under Rule
19(a)(1)(B). First, under Rule 19(a)(l)(B)(i), a party's ability to protect its interest is not
impaired or impeded simply because it has an interest in the outcome of the litigation or even
faces adverse consequences as a possible result of the litigation. Instead, Rule 19(a)(l)(B)(i)
requires that the party's interests are impaired or impeded because of their absence from the
litigation as required by Rule 19(a)(l)(B)(i). See MasterCard Int'I, Inc. v. Visa Int'l Serv. Ass%
471 F.3d 377, 387 (2d Cir. 2006). The ability of the assignees to protect their interests will
remain intact, despite the potential for an adverse outcome in the immediate case, so they are not
necessary parties.
Furthermore, since the currently named parties will not face exposure to
conflicting legal obligations, the defendants have failed to satisfy the requirements under Rule
19(a)(l)(B)(ii).
Accordingly, the Court denies the defendants' 12(b)(7) motion.
B. SJW's 12(b)(6) Motion to Dismiss
SJW says that because it has been dissolved, it cannot be sued. This is simply incorrect,
so the Court denies SJW's motion to dismiss. Although SJW did dissolve upon its automatic
cancellation, Va. Code § 50-73.49(5), dissolution does not result in immunity from liability. Va.
Code § 50-73.52:2.
SJW relies on Delaware LLC law, which apparently forecloses suits against LLCs after
they file a certificate of cancellation. See Metro Commc'n Corp. BVI v. Advanced Mobilecomm
Techs. Inc., 854 A.2d 121, 138 (Del. Ch. 2004). Under Virginia law, on the other hand, when a
limited partnership files a certificate of cancellation (which the briefs do not indicate has
occurred in this case), the existence of that limited partnership "shall cease, except for the
purpose of suits." Va. Code Ann. § 50-73.52:4.
Furthermore, the law makes it clear that the dissolution of a limited partnership only
terminates that partnership's liabilities to third parties if the partnership takes specific steps to
notify potential claimants. Va. Code Ann. § 50-73.52:2. Even if a partnership publishes such
notice, the law does not bar claims until three years after publication. Id. SJW did not dissolve
until December 31, 2014, so the three-year period cannot have passed, even if SJW did publish
the proper notice immediately at dissolution.
Accordingly, SJW remains liable for its contract, despite its automatic cancellation on
December 31, 2014. The Court denies SJW's motion to dismiss.
m. CONCLUSION
For these reasons the Court DENIES the defendants' motions to dismiss.
The Court will enter an appropriate Order.
Let the Clerk send a copy of this Opinion to all counsel of record.
August 3. 2016
Richmond, VA
John A. Gibney, Jr. /
/ /
United States District Judee
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