Glancy v. Taubman , 373 F.3d 656 ( 2004 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206 2 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
ELECTRONIC CITATION: 2004 FED App. 0179P (6th Cir.)
File Name: 04a0179p.06 _________________
COUNSEL
UNITED STATES COURT OF APPEALS
ARGUED: Steven G. Schulman, MILBERG, WEISS,
FOR THE SIXTH CIRCUIT BERSHAD & SCHULMAN, New York, New York, for
_________ Appellant. Matthew F. Leitman, MIRO, WEINER &
KRAMER, Bloomfield Hills, Michigan, for Appellees.
LIONEL Z. GLANCY , on behalf X ON BRIEF: Steven G. Schulman, MILBERG, WEISS,
of himself and all others - BERSHAD & SCHULMAN, New York, New York, Marc L.
- Newman, MILLER & SHEA, Troy, Michigan, for Appellant.
similarly situated, Matthew F. Leitman, Joseph Aviv, Bruce L. Segal, MIRO,
- No. 03-1609
Plaintiff-Appellant, - WEINER & KRAMER, Bloomfield Hills, Michigan, I. W.
> Winsten, Raymond W. Henney, HONIGMAN, MILLER,
, SCHWARTZ & COHN, Detroit, Michigan, for Appellees.
v. -
- MOORE, J., delivered the opinion of the court. ROGERS,
TAUBMAN CENTERS , INC.; - J. (p. 36), delivered a separate opinion concurring in the
ROBERT S. TAUBMAN; LISA A. - judgment and in Judge Moore’s opinion, except as to part
PAYNE; GRAHAM T. ALLISON; - II.C.2. RYAN, J. (pp. 37-39), delivered a separate opinion
- concurring in part and dissenting in part.
PETER KARMANOS, JR.;
-
WILLIAM S. TAUBMAN; - _________________
ALLAN J. BLOOSTEIN ; JEROME -
A. CHAZEN; S. PARKER - OPINION
GILBERT, - _________________
Defendants-Appellees. -
- KAREN NELSON MOORE, Circuit Judge. Litigation
N stemming from the attempted, but failed, takeover of
Appeal from the United States District Court Defendant-Appellee Taubman Centers, Inc. (“TCI”) by
for the Eastern District of Michigan at Detroit. Simon Property Group, Inc. (“SPG”) gives rise to this appeal.
No. 02-75120—Victoria A. Roberts, District Judge. Plaintiff-Appellant Lionel Z. Glancy (“Glancy”), a California
citizen, filed an action, containing class and shareholder-
Argued: October 28, 2003 derivative claims, against Defendants-Appellees TCI and
various members of the TCI Board of Directors (“TCI Board”
Decided and Filed: June 16, 2004 or “Board”), alleging that TCI’s opposition to SPG’s tender
offer was a breach of the fiduciary duties of the TCI Board.
Before: RYAN, MOORE, and ROGERS, Circuit Judges. The district court dismissed the action, ruling that because
complete diversity of parties did not exist the district court did
1
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 3 4 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
not have subject matter jurisdiction over the case. The district TRG in 1985, to consolidate their various shopping center
court reached this conclusion because it ruled that an absent interests in a single partnership. Interests in TRG were
partnership, which owned a sizeable portion of TCI shares, parceled out in “units.” The Taubman family controlled a
had an interest in the litigation that would be impeded or share of these units, but about 50% of TRG’s units were
impaired by a disposition in its absence but could not be controlled by several pension trusts owned by General Motors
joined as a defendant because two general partners were (“GM Trusts”). J.A. at 512.
citizens of the same state as plaintiff Glancy. On appeal, the
question is whether that absentee partnership is an In late 1991, TRG began a restructuring so that it could
indispensable party pursuant to Federal Rule of Civil develop from a limited financial arrangement into a more
Procedure 19(b) such that the action must be dismissed rather expansive operating business. TG Partners Limited
than proceed in the partnership’s absence. For the following Partnership (“TG Partners”) was formed as a partnership
reasons, we VACATE the district court’s judgment and separate from TRG, and it owned 5.2% of TRG’s units. J.A.
REMAND the case back to the district court for further at 513, 517. TCI announced an initial public offering, selling
proceedings. 26.8 million shares to the public and offering an additional
13.6 million shares to the GM Trusts and the AT&T Trust, so
I. BACKGROUND that when added to a residual number of shares held by the
Taubman Group (which included the Taubman family
As an initial caveat, we note that the following rendition of members and TG Partners), approximately 40.7 million
facts is based upon our reading of the documents compiled by shares would be outstanding after the offering. J.A. at 516.
the parties at an early stage of the litigation. The district court Following the reconfiguration, TCI owned 32.8% of TRG’s
upon remand may receive additional factual and evidentiary units.1 J.A. at 517. The 26.8 million shares of TCI offered to
materials that may appropriately lead to different factual the public represented a 65.9% ownership stake in TCI, such
conclusions. The organization of TCI, its affiliated that the purchasers of the publicly available TCI stock
partnerships, and the enterprises of the Taubman family is controlled 21.6% of TRG’s units even though TCI as a whole
complex and laden with acronyms. TCI is a publicly traded controlled 32.8% of TRG’s units.2 J.A. at 517. Alfred
corporation that was incorporated in Michigan in 1973 and
that has its principal place of business in Michigan. TCI is
organized as a corporate Real Estate Investment Trust 1
After the restructuring, the GM Trusts contro lled 44.0% of TRG ’s
(“REIT”), which is “a legal entity that holds real estate units and the “Taubman Group,” which included various members of the
interests and, through its payment of dividends, is able to Taubman family (Alfred A. Taubm an, Robert Taubm an, W illiam
reduce or avoid incurring Federal income tax at the corporate Taubman, and Gayle Taubman Kalisman) and TG Partners Limited
Partnership (“TG Partners”), controlled 22.9% of TRG’s units (TG
level, allowing shareholders to participate in real estate Partners controlled 5.2% of TRG ’s units, the remainder of the Taubman
investments without the double taxation of income . . . .” group controlled 17.7% of TRG’s units). Joint Appendix (“J.A.”) at 517
Joint Appendix (“J.A.”) at 512 (TCI Initial Public Offering (TCI Initial Public Offering Prospectus, 11/20/92).
Prospectus, 11/20/92). TCI’s sole asset is a partial ownership
2
stake in Taubman Realty Group Limited Partnership The GM Trusts owned 19.8% of TCI’s outstanding shares, the
(“TRG”), which owns, operates, manages, leases, and AT&T Trust controlled 13.7%, and the Taubman Group controlled a 0.6%
develops shopping centers around the country. A. Alfred stake. J.A. at 517. The combination of the GM Trusts’ holdings of TCI
shares and their control of 44.0% of TRG ’s units left them with direct and
Taubman, along with several members of his family, formed indirect ownership of 50.5 % o f TRG ’s units.
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 5 6 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
Taubman’s sons, Robert and William, form the upper which then was all common stock, was controlled by
management of both TCI and TRG: Robert is the Chairman, shareholders (including GM and AT&T) other than the
President, and Chief Executive Officer of TCI, as well as the Taubman family. J.A. at 517 (TCI Initial Public Offering
President and Chief Executive Officer of TRG, while William Prospectus, 11/20/92). After 1998, non-Taubman family
is the Executive Vice-President of both TCI and TRG. control of TCI’s total outstanding shares decreased to
approximately 62.8%. J.A. at 193 (Keath Decl.). This
In 1998, TCI and TRG again restructured, partially to number is highly significant, because TCI’s Articles of
accommodate GM’s desire to withdraw from the previous Incorporation required a two-thirds-of-shareholders vote to
arrangement. Upon GM’s withdrawal, TCI’s unit ownership approve a merger or alter the Articles of Incorporation. Thus,
in TRG would have increased from approximately 39% to the 1998 issuance of Series B preferred shares insulated TCI,
approximately 63%. J.A. at 435 (TCI Bd. of Dirs. Meeting and thus TRG, from a takeover attempt, particularly in light
Minutes, 08/17/98). Consequently, TRG’s then minority unit of the Ownership Limit Provision of TCI’s Articles of
holders, in particular the Taubman Family (Alfred A. Incorporation, which prohibited any entity from owning more
Taubman, Robert Taubman, William Taubman, and Gayle than 8.23% of the value of TCI’s total outstanding capital
Taubman Kalisman) and TG Partners, would have less control stock. J.A. at 421 (TCI Restated Art. of Incorp.); J.A. at 591
over the management of TRG’s assets. The result was the (TCI Initial Public Offering Prospectus, 11/20/92). This
increased likelihood that a potential acquirer could gain a provision could not be removed without a two-thirds vote, so
controlling interest in TRG by acquiring TCI stock. To a potential acquirer had to purchase over 66.6% of TCI’s
counter this threat, the TCI Board in 1998 issued a new class outstanding shares (including Series B shares) in order to
of preferred TCI stock — the Series B Preferred Stock effectuate a takeover. J.A. at 591.
(“Series B”) — to the remaining partners of TRG in order to
give them increased control over TCI and thus increased Taubman family members, and the various entities
control over TRG. See J.A. at 414, 416 (Restated TCI controlled by Taubman family members, owned over twenty-
Articles of Incorp. at 10) (stating that TCI “will initially issue four million Series B shares, or 76.6% of all the Series B
the Series B Preferred Stock to each Person who, on the initial shares distributed.3 J.A. at 472 (Poissant Decl.). These
date of issuance, is a Registered Unitholder at the rate of one twenty-four million Series B shares account for 28.3% of the
share for each Unit held by such Registered Unitholder,” and total outstanding TCI shares. The Taubman family controls
defining “Registered Unitholder” as “a Person, other than the its Series B shares through a series of entities, including TG
Corporation [] who . . . is reflected in the records of [TRG] as Partners, which plays a critical role in this case. TG Partners
a partner in [TRG]”). TCI distributed nearly 32 million is a limited partnership formed under the laws of Delaware.
Series B shares for $.001 per share, or an extremely low total It owns 21% of the Series B stock (approximately 6.3 million
price of $38,400. J.A. at 193-94 (Keath Decl.); J.A. at 168 shares and about 6% of all outstanding TCI shares). The
(Bebchuk Decl.). Each Series B share gave its holder the general partners of TG Partners include two general partners
same voting rights as those attached to the preexisting 53 who are California citizens (Avner Naggar and Sidney R.
million common shares. J.A. at 193 (Keath Decl.). Unobskey). J.A. at 473-74 (Poissant Decl.). Another general
The influx of the Series B preferred TCI shares had its
desired effect and diluted the voting power of TCI’s common 3
7.43 million TCI Series B shares were distributed to other TR G U nit
shareholders. After 1992, approximately 99% of TCI’s stock, Holders. J.A. at 473 (Poissant Decl.).
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 7 8 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
partner of TG Partners is a separate partnership formed under Provision, and accordingly SPG needed to acquire at least
the laws of Michigan, Taubman Realty Ventures (“TRV”), two-thirds of the outstanding shares to alter TCI’s Articles of
whose partners are Taubman family members (Alfred, Robert, Incorporation. On December 10, 2002, the TCI Board met
William, and Alfred’s daughter, Gayle Taubman Kalisman). with its financial advisors and rejected the offer. Eventually,
Alfred Taubman, as trustee of the A. Alfred Taubman SPG joined with Westfield America (“Westfield”), an
Revocable Trust, is the managing general partner of TRV and Australian real-estate corporation, and increased the offer to
votes the Series B shares owned by TRV. The managing $20 a share. The TCI Board again rejected the offer, but
general partner of TG Partners is a Michigan corporation, TG many shareholders tendered their shares. SPG announced on
Michigan, Inc., see J.A. at 474; J.A. at 806 (TRG P’ship February 17, 2003, that 84.5% of the common shares of TCI
Agreement), whose sole shareholder is Alfred Taubman, had been tendered, which amounted to only 52% of the total
acting through a revocable trust. It is alleged that Alfred outstanding shares. SPG thus had failed to obtain the
Taubman votes TG Partners’s Series B stock. See J.A. at 474 requisite two-thirds ownership needed to abolish the
(Poissant Decl.). Ownership Limit Provision.
The bulk of the Taubman family’s Series B shares are SPG filed an action in the United States District Court for
owned through other partnerships. Alfred Taubman votes the the Eastern District of Michigan against TCI, alleging that the
Series B shares of TRA Partners, a Michigan partnership that issuance of the Series B shares constituted a “control share
owns almost 17.7 million (or 56%) of the outstanding Series acquisition,” which was at the time illegal under Michigan
B shares. Two other Alfred Taubman-controlled entities, law. SPG sought an injunction against the voting of the
Taub-Co Management, Inc., and the A. Alfred Taubman Series B shares. After receiving a favorable judgment in the
Trust, own almost 12,000 shares combined. The other district court, and even fully briefing a response to TCI’s
members of the Taubman family also own in their individual appeal in this court, No. 03-1610 (6th Cir. 2003), SPG
capacities relatively minimal quantities of shares.4 withdrew its tender offer on October 8, 2003, and the parties
stipulated to the dismissal of the appeal on October 15, 2003,
On October 16, 2002, SPG, said to be the largest retail- because of intervening Michigan state legislation that
shopping-mall REIT in the United States, initiated overturned the ruling of the district court.5
communication with Robert Taubman in hopes of purchasing
all the publicly traded TCI stock. Robert Taubman declined
even to discuss the issue, and SPG responded by outlining an 5
On September 18, 2003, the Michigan Legislature passed Public Act
offer to purchase all outstanding TCI shares for $17.50 a No. 181, which amended the Michigan Control Share Acquisition statute,
share. The TCI Board of Directors rejected the offer on Mich. Comp . Laws § 450.179 1, to provide that “the forma tion of a group
October 28, 2002, prompting SPG to announce a public does not constitute a control share acquisition of shares of an issuing
tender offer to purchase all of TCI’s outstanding common public corp oratio n held by membe rs of the group .” 2003 M ich. Pu b. Ac ts
181. The act also added section 798a, which insured the act’s retroactive
stock for $18.00 a share on December 5, 2002. SPG’s offer effect so that it covered the T aubman case: “Shares without voting rights
was conditioned upon the removal of the Ownership Limit because the formation of a group after April 1, 1988 was deemed to be a
control share acquisition shall have the same voting rights as were
accorded the shares before the formation of the group.” Id. The
4
Governor of Michigan signed the bill into law on October 7, 20 03. See
Robert Taubm an, William Taubma n, and Gayle Taubman Kalisman When Battles Commence, Economist, Feb. 21, 2004, at 67; Dean
each ow n 5,925 Series B shares. Starkman & R obin Sidel, Simon, Westfield Drop Tau bm an B id, W all St.
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 9 10 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
Glancy, a California citizen and a TCI shareholder, filed an defendants TCI and the TCI Board members,6 but does not
action in the U.S. District Court for the Eastern District of name as parties Alfred Taubman, TG Partners, or any of the
Michigan both as a representative of a class of TCI other Taubman-controlled partnerships.
shareholders and as a shareholder derivatively on behalf of
TCI on December 24, 2002. He later amended the complaint TCI did not file a motion pursuant to Federal Rule of Civil
with the permission of the district court on January 31, 2003. Procedure 12(b)(1) alleging lack of subject matter jurisdiction
At the heart of the complaint is the charge that the TCI Board or a Rule 12(b)(7) motion alleging failure to join a party
members “abus[ed] their fiduciary positions of control over pursuant to the joinder provisions of Rule 19. Rather, TCI
[TCI] to thwart any legitimate attempts or interest to acquire raised the issue of joinder and lack of subject matter
[TCI] for a substantial premium.” J.A. at 264 (Am. Compl.). jurisdiction in its brief in opposition to Glancy’s motion for
Glancy states that his claims arise under Michigan law, J.A. a preliminary injunction. See J.A. at 349-51. Rule 12(h)
at 297, and both sides agree that Michigan law applies. permits a defense based on lack of subject matter jurisdiction
to be raised in a motion other than a Rule 12(b)(1) motion.
Glancy’s amended complaint seeks various kinds of relief. Fed. R. Civ. P. 12(h)(3).
In Counts III-VI, Glancy presents class and derivative claims
against the TCI Board for various breaches of fiduciary The district court issued an Opinion and Order on May 1,
duties. J.A. at 297-306 (Am. Compl.). In Count VII, Glancy 2003. The district court then issued an Amended Opinion and
asks the court to order the TCI Board defendants to cooperate Order on May 8, 2003, which superseded the previous order,
with any entity “proposing any transaction which would but did not differ substantially. The district court addressed
maximize shareholder value,” J.A. at 308; to declare that the TCI’s contention that subject matter jurisdiction was lacking
TCI Board members violated their fiduciary duties; and to because Glancy did not satisfy the diversity or amount-in-
enjoin the TCI Board members from “entrenching themselves controversy requirements. The district court held that because
in office.” J.A. at 308. Most significantly, in Counts I-II, TG Partners was a real party in interest, given its ownership
Glancy seeks the invalidation of the Series B shares. of six million shares of Series B stock that the district court’s
Glancy’s Amended Complaint reads: “[P]laintiff seeks . . . a ruling could invalidate, TG Partners’s citizenship, and the
declaration that the Taubman family’s Series B Preferred citizenship of its constituent partners, had to be considered for
Stock does not have any voting rights . . .,” J.A. at 295, and diversity purposes. Because Plaintiff Glancy was a citizen of
“[P]laintiff seeks a declaration that the Taubman family may California as were two general partners of TG Partners,
not validly vote the Series B Preferred Stock under complete diversity did not exist between plaintiff and the
circumstances that would have the effect of foreclosing the proper defendants. The district court thus dismissed Glancy’s
[SPG] tender offer . . . .” J.A. at 297. Glancy names as suit, but did not rule on the amount-in-controversy issue.
Glancy timely filed his notice of appeal. We have appellate
6
J., Oct. 9, 20 03, at C5. SPG aban doned its tender offer the following day, None of the TCI Board defendants are from California. The TCI
and TCI d ropped its appeal a week later. By overturning the district Board defendants are: Robert S. Taubman (M ichigan), William S.
court’s decision and altering the text of the statute that TCI allegedly Taubman (Michigan); Lisa A. Payne (M ichigan); Graham T . Allison
violated so as to absolve it from liability, the Michigan legislature (Massachusetts); Peter Karmanos, Jr. (M ichigan ); Allan J. Bloostein
effectively ended any chance of SPG either completing the acquisition or (Connecticut); Jerome A. Chazen (New York); and S. Parker Gilbert
winning its case. (New Y ork).
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 11 12 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
jurisdiction over the district court’s order of dismissal stock which purportedly provide them with approximately
pursuant to 28 U.S.C. § 1291. 30% of the voting power of [TCI],” J.A. at 272, even though
the 30% voting block is in reality owned by absentee parties,
II. ANALYSIS such as TG Partners, TRV, and TRA Partners.
Before delving into the depths of the Federal Rules of Civil The purpose of Glancy’s action was to remove the
Procedure’s joinder provisions, we must pause to comprehend impediment to acquisition created by the Series B shares,
fully what precisely Glancy seeks from his litigation. As which he contended gave the “Taubman family” the power to
Glancy argues, “the plaintiff is the master of the complaint.” veto any sale of TCI and to prevent the consummation of any
Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc., 535 tender offers, thus entrenching the family’s control over the
U.S. 826, 831 (2002) (quotation omitted). The benefits of company to the alleged derogation of the non-Series B
that stewardship are often accompanied by jurisdiction-related shareholders. See J.A. at 274-77 (Am. Compl.).
pitfalls, as is the case here. The central problem is an Accordingly, the relief sought by Glancy is not limited to the
incongruence between the defendants named by Glancy and invalidation of just a few Series B shares, as Glancy wanted
the relief he seeks. Glancy named only TCI and the TCI “a declaration that the Taubman family may not validly vote
Board as defendants, but part of the relief he seeks — the the Series B [shares] under circumstances that would have the
invalidation of the Series B shares — potentially impacts the effect of . . . disenfranchising the public shareholder body.”
interests of more than just those named defendants. J.A. at 297. It is only the large 30% voting bloc controlled by
TG Partners and others that would have such an effect.
There is little doubt that Glancy’s complaint seeks Glancy also requested injunctive relief that would “prohibit[]
comprehensive relief that entails the invalidation of all the the Taubman family from voting the Series B [shares],” J.A.
Series B shares owned by the network of partnerships at 295, so as to abrogate the “effective veto position for the
controlled by the Taubman family. In his amended Taubman family.” J.A. at 296. It is patently clear that
complaint, Glancy states that “the Taubman defendants . . . Glancy’s complaint seeks the invalidation of all the Series B
improperly gave themselves a blocking voting position shares owned by the archipelago of partnerships controlled by
against unsolicited takeovers,” J.A. at 264 (Am. Compl.) the “Taubman family,” which together possess the blocking
(emphasis added), by “providing to [themselves], for nominal position Glancy seeks to abrogate.
consideration without shareholder approval, [Series B stock]
that increased their purported voting power over [TCI] from We vacate the district court’s judgment and remand the
less than 1% to just over 30%.” J.A. at 264. This passage case for further proceedings. Because Glancy has sought
alone demonstrates the disconnect between the named parties relief that will affect the interests of various absentees, it is
and the actual owners of the Series B shares; there are only necessary to engage in a Rule 19 analysis to assess the proper
two named Taubmans (William and Robert), yet they do not parties to Glancy’s lawsuit and to determine whether the
own enough Series B shares to give them a 30% voting block application of Rule 19 impacts the district court’s ability to
over TCI. It is only the combined partnerships that possess hear the case. We first consider the threshold question of
such a large bloc of shares. Throughout his substantive whether TG Partners is a “necessary” party and answer in the
allegations, Glancy uses the term “Taubman family” broadly affirmative because TG Partners’s interest in voting its Series
and non-literally. For example, he states that “[t]he Taubman B shares would be impeded or impaired by the requested
Family currently owns both Series B [shares] and common relief. The joinder of TG Partners as a defendant is not
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 13 14 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
possible because of the citizenship of two of its constituent of persons needed for just adjudication. It establishes
partners, which raises the question of whether TG Partners is guidelines for determining when it is proper to dismiss a case
an “indispensable” party pursuant to Rule 19(b) such that we because a person or entity has an interest in the outcome of
cannot “in equity and good conscience,” Fed. R. Civ. P. the litigation that could be impaired in the absence of that
19(b), proceed without TG Partners. The answer to that person or entity, but joinder of the person or entity will
inquiry centers on whether any named parties (TCI or the TCI deprive the court of subject matter jurisdiction. Rule 19
Board), or any other absentees who should be joined as provides:
necessary parties, can adequately represent the interests of TG
Partners. We hold that none of the named parties can (a) Persons to be Joined if Feasible. A person who is
adequately represent the interests of TG Partners, but we subject to service of process and whose joinder will not
cannot determine at this time whether Alfred Taubman, deprive the court of jurisdiction over the subject matter
another absentee whose interests may be impaired by a of the action shall be joined as a party in the action if
judgment in Glancy’s favor, can adequately represent the (1) in the person’s absence complete relief cannot be
interests of TG Partners. Upon remand we instruct the district accorded among those already parties, or (2) the person
court to consider the issue. claims an interest relating to the subject of the action and
is so situated that the disposition of the action in the
A. Federal Rule of Civil Procedure 19 person’s absence may (i) as a practical matter impair or
impede the person’s ability to protect that interest or
We begin by analyzing the joinder provisions of the Federal (ii) leave any of the persons already parties subject to a
Rules of Civil Procedure. We have subject matter jurisdiction substantial risk of incurring double, multiple, or
over “all civil actions where the matter in controversy exceeds otherwise inconsistent obligations by reason of the
the sum or value of $75,000 . . . and is between [] citizens of claimed interest. If the person has not been so joined, the
different States . . . .” 28 U.S.C. § 1332(a)(1).7 It is well court shall order that the person be made a party. If the
settled that as a matter of statutory construction, diversity of person should join as a plaintiff but refuses to do so, the
citizenship requires complete diversity between all plaintiffs person may be made a defendant, or, in a proper case, an
on one side and all defendants on the other side. See involuntary plaintiff. If the joined party objects to venue
Caterpillar, Inc. v. Lewis, 519 U.S. 61, 68 (1996). Parties and joinder of that party would render the venue of the
seeking to evade the complete-diversity rule may attempt to action improper, that party shall be dismissed from the
maintain federal jurisdiction by failing to name persons or action.
entities that have an interest in the litigation and otherwise
should be named. Federal Rule of Civil Procedure 19 (b) Determination by Court Whenever Joinder Not
addresses this problem by providing guidance for the joinder Feasible. If a person as described in subdivision (a)(1)-
(2) hereof cannot be made a party, the court shall
determine whether in equity and good conscience the
7 action should proceed among the parties before it, or
The district court did not assess TCI’s alternative argument that
Glancy failed to fulfill the amount-in-controversy requ irement of 28 should be dismissed, the absent person being thus
U.S.C. § 13 32(a) because the district court ru led on the diversity-of- regarded as indispensable. The factors to be considered
parties issue. Upon rem and the district co urt should analyze this by the court include: first, to what extent a judgment
argument to ensure that the $75,00 0 jurisd ictional-amount thresh old is
met.
rendered in the person's absence might be prejudicial to
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 15 16 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
the person or those already parties; second, the extent to rule should be employed to promote the full adjudication of
which, by protective provisions in the judgment, by the disputes with a minimum of litigation effort.” 7 Charles Alan
shaping of relief, or other measures, the prejudice can be Wright, Arthur R. Miller, & Mary Kay Kane, Federal
lessened or avoided; third, whether a judgment rendered Practice & Procedure § 1602, at 20 (3d ed. 2001). In sum,
in the person's absence will be adequate; fourth, whether “the essence of Rule 19 is to balance the rights of all those
the plaintiff will have an adequate remedy if the action is whose interests are involved in the action.” Id.
dismissed for nonjoinder.
B. Standard of Review
Fed. R. Civ. P. 19.
We review de novo the district court’s decision that a party
The current phrasing of Rule 19 reflects the 1966 is indispensable under Federal Rule of Civil Procedure 19(b)
amendment of the rule. The changes eschew rigid application as well as the decision that the court lacks subject matter
and adopt a more pragmatic approach. Provident Tradesmens jurisdiction. Keweenaw Bay Indian Cmty. v. Michigan, 11
Bank & Trust Co. v. Patterson, 390 U.S. 102, 116 n.12 F.3d 1341, 1346 (6th Cir. 1993) (failure to join an
(1968). As the Supreme Court described it, indispensable party); Caudill v. N. Am. Media Corp., 200
F.3d 914, 916 (6th Cir. 2000) (lack of subject matter
Where the new version emphasizes the pragmatic jurisdiction). We review a Rule 19(a) determination that a
consideration of the effects of the alternatives of party is necessary under an abuse-of-discretion standard.
proceeding or dismissing, the older version tended to Keweenaw Bay, 11 F.3d at 1346.
emphasize classification of parties as ‘necessary’ or
‘indispensable.’ Although the two approaches should C. Rule 19 Joinder of TG Partners
come to the same point, since the only reason for asking
whether a person is ‘necessary’ or ‘indispensable’ is in 1. The Three-Part Test
order to decide whether to proceed or dismiss in his
absence and since that decision must be made on the Assessing whether joinder is proper under Rule 19 is a
basis of practical considerations, and not by prescribed three-step process. See 4 James Wm. Moore et al., Moore’s
formula, the Committee concluded, without directly Federal Practice, § 19.02[3][a], at 19-17 (3d ed. 2003) (“The
criticizing the outcome of any particular case, that there compulsory party joinder inquiry is a three-step process.”); 7
had at times been undue preoccupation with abstract Federal Practice & Procedure § 1604, at 39-40 (describing
classifications of rights or obligations, as against a three-step process); W. Md. Ry. Co. v. Harbor Ins. Co., 910
consideration of the particular consequences of F.2d 960, 961 (D.C. Cir. 1990) (Thomas, J.) (“When a party
proceeding with the action and the ways by which these to a federal lawsuit moves to join a nonparty resisting joinder,
consequences might be ameliorated by the shaping of the district court must answer three questions: . . . Is the
final relief or other precautions. absentee’s presence necessary? If the absentee’s presence is
necessary, is her joinder feasible? If the absentee’s joinder is
Id. (internal citations and quotations omitted). “Ideally, all not feasible, is she indispensable?”); cf. Local 670, United
. . . parties would be before the court. Yet Rule 19 calls for a Rubber Workers v. Int’l Union, United Rubber Workers, 822
pragmatic approach . . . .” Smith v. United Bhd. of F.2d 613, 618 (6th Cir. 1987) (“Local 670”) (describing a
Carpenters, 685 F.2d 164, 166 (6th Cir. 1982). “Thus, the similar three-part test when a question of personal jurisdiction
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 17 18 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
may make the joinder of a person unfeasible). First, the court absence may [] as a practical matter impair or impede the
must determine whether the person or entity is a necessary person’s ability to protect that interest.” Fed. R. Civ. P.
party under Rule 19(a). See Temple v. Synthes Corp., 498 19(a)(2)(i). This test “reflects the interest in avoiding the
U.S. 5, 8 (1990) (establishing that Rule 19(b) inquiry is prejudice that might befall the absentee’s interest if the
required only if party satisfies the threshold requirements of litigation proceeded without the absentee.” 4 Moore’s
Rule 19(a)). Second, if the person or entity is a necessary Federal Practice § 19.03[1], at 19-34.
party, the court must then decide if joinder of that person or
entity will deprive the court of subject matter jurisdiction. W. What if a person or entity already named as a party to the
Md. Ry. Co., 910 F.2d at 961 (“If the absentee should be action has the same interests and litigation goals as the
joined, can the absentee be joined?”); 4 Moore’s Federal absentee whose joinder is at issue? Can an absentee suffer the
Practice § 19.02[3][b], at 19-18 (“If the absentee is necessary impairment or impediment of its interests if another party,
. . . the next question is whether joinder of the absentee is who has already been named, is fighting the same fight?
feasible.”). Third, if joinder is not feasible because it will Moreover, if an absentee’s interests can be adequately
eliminate the court’s ability to hear the case, the court must represented by an existing party, should we consider that fact
analyze the Rule 19(b) factors to determine whether the court at the Rule 19(a) stage or at the Rule 19(b) stage? We have
should “in equity and good conscience” dismiss the case not definitively answered these questions previously,
because the absentee is indispensable. W. Md. Ry. Co., 910 although our lone decision that touches on the issue suggests
F.2d at 961 (“If the absentee cannot be joined, should the that adequate representation should be considered when
lawsuit proceed without [him or] her nonetheless?”); 4 evaluating the Rule 19(b) factors. Local 670, 822 F.2d at 622
Moore’s Federal Practice § 19.02[3][c], at 19-20 (“Once a (considering whether the absent entity’s interest was
necessary absentee’s joinder is found infeasible, the court has adequately represented by an already-named party under the
only two options: to proceed or dismiss.”). Thus, a person or Rule 19(b) factors); see also Prof’l Hockey Club Cent. Sports
entity “is only indispensable, within the meaning of Rule 19, Club of the Army v. Detroit Red Wings, Inc., 787 F. Supp.
if (1) it is necessary, (2) its joinder cannot be effected, and 706, 713 (E.D. Mich. 1992) (same). The first Rule 19(b)
(3) the court determines that it will dismiss the pending case factor to evaluate is “to what extent a judgment rendered in
rather than proceed in the case without the absentee.” the person’s absence might be prejudicial to the person or
4 Moore’s Federal Practice § 19.02[3][c], at 19-22. those already parties.” Fed. R. Civ. P. 19(b). Many courts
have suggested that the presence of a party with identical
2. Rule 19 and “Adequately Represented” interests to the person or entity whose joinder is in question
serves to mitigate any prejudice that might befall the absentee
Before deciding pursuant to Rule 19 whether various Series because of the identity of their interests. See Local 670, 822
B shareholders must be joined or the case must be dismissed F.2d at 622 (holding that a union’s presence at the particular
if the shareholders cannot be joined, we must analyze whether arbitration proceeding in question was not essential because
the presence of a party that can “adequately represent” the a named party had the same interest in avoiding arbitration as
interests of the absentee shortens our Rule 19 inquiry. The the union); Dainippon Screen Mfg. Co. v. CMFT, Inc., 142
subsection of Rule 19(a) that is most pertinent to this question F.3d 1266, 1272 (Fed. Cir. 1998) (ruling that any prejudice to
makes joinder compulsory when the absent person or entity subsidiary would be mitigated by presence of parent company
“claims an interest relating to the subject of the action and is in the litigation because both subsidiary and parent shared
so situated that the disposition of the action in the person’s common interest of preserving a patent). Several circuits
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 19 20 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
have addressed this question of adequate representation as representation in their Rule 19(a) analyses, but they employ
part of a Rule 19(b) analysis, as opposed to during the a more rigorous test that requires close to a “perfect identity
threshold Rule 19(a) analysis. See, e.g., Witchita & Affiliated of interests” in order for representation to be adequate. Tell
Tribes of Okla. v. Hodel, 788 F.2d 765, 774-75 (D.C. Cir. v. Trs. of Dartmouth Coll., 145 F.3d 417, 419 (1st Cir. 1998)
1986); Hansen v. Peoples Bank of Bloomington, 594 F.2d (“[W]ithout a perfect identity of interests, a court must be
1149, 1153 (7th Cir. 1979); Prescription Plan Serv. Corp. v. very cautious in concluding that a litigant will serve as a
Franco, 552 F.2d 493, 497 (2d Cir. 1977). proxy for an absent party.”); see also Nat’l Union Fire Ins.
Co. v. Rite Aid of S.C., Inc., 210 F.3d 246, 251 (4th Cir. 2000)
Other circuits have employed an adequate representation (“A court should hesitate to conclude . . . that a litigant can
test when considering whether a person or entity should be serve as a proxy for an absent party unless the interests of the
joined under Rule 19(a); they have ruled that there will be no two are identical.”); Pujol v. Shearson/Am. Express, Inc., 877
impairment or impediment of an absent person’s or entity’s F.2d 132, 135 (1st Cir. 1989) (Breyer, J.) (finding that named
interest under Rule 19(a)(2)(i) if a named party is already party adequately represented the interests of the absentee
adequately representing that interest. For example, the Ninth when the interests of both entities were “virtually identical”).
Circuit has ruled that “[i]mpairment may be minimized if the
absent party is adequately represented in the suit.” Makah There is clearly considerable overlap between Rule
Indian Tribe v. Verity, 910 F.2d 555, 558 (9th Cir. 1990)8; see 19(a)(2)(i) and Rule 19(b). 4 Moore’s Federal Practice
also Washington v. Daley, 173 F.3d 1158, 1167 (9th Cir. § 19.05[2][a], at 19-86 to 19-87 (“[The first 19(b) factor]
1999) (“As a practical matter, an absent party’s ability to clearly overlaps with the considerations of whether an
protect its interest will not be impaired by its absence from absentee is necessary under the ‘impair or impede’ clause
the suit where its interest will be adequately represented by . . . .”); Kickapoo Tribe of Indians v. Babbitt, 43 F.3d 1491,
existing parties to the suit.”). That court employs a three- 1497 n.9 (D.C. Cir. 1995) (“The inquiry as to prejudice under
factor test “in determining whether existing parties adequately Rule 19(b) is the same as the inquiry under Rule 19(a)(2)(i)
represent the interests of the absent[ee]”: (1) whether the regarding whether continuing the action will impair the absent
named party “undoubtedly” will make all the arguments that party's ability to protect its interest.”). Yet, in order to be
the absent person or entity would make; (2) whether the faithful to the text and purposes of the rules and to provide
named party is “capable of and willing to make such parties with guidance, it is necessary to decide at what stage
arguments”; and (3) whether the absent person or entity of the three-part Rule 19 test does adequacy of representation
would “offer any necessary element to the proceedings” that play a role. Some courts believe that it is proper to assess the
the named party would not. Shermoen v. United States, 982 question of adequate representation during the first (Rule
F.2d 1312, 1318 (9th Cir. 1992) (quotations omitted). 19(a)) stage of the analysis, even though this can make
Various other circuits also account for adequacy of consideration of the first Rule 19(b) factor completely
redundant. However, in part because of our sole decision on
this issue, see Local 670, 822 F.2d at 622, it is proper that
adequacy of representation should be considered as part of the
8
Interestingly enough , the court in Makah engrafts an “adequate Rule 19(b) multifactor analysis.
representation” test onto Rule 1 9(a) by citing to the D.C. Circuit’s
decision in Wich ita & Affiliated Tribes of Okla. v. Hodel, 788 F.2d 765, Adequate representation should be considered as a part of
774-75 (D.C. Cir. 1986), which considered the question of adequate
representation a s part of a Rule 1 9(b) ana lysis.
the Rule 19(b) analysis, and not the threshold Rule 19(a)
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 21 22 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
analysis, because: (1) the text of Rule 19(a)(2)(i) does not representation” clause in Rule 19(a)(2)(i) is impossible to
support an adequate-representation component, especially ignore.
when juxtaposed with the text of Rule 24(a); and (2)
consideration of whether an absentee’s interests are Second, the practical realities of joinder explain why
adequately represented will almost always occur only when consideration of adequate representation should occur as part
the absentee should be joined under Rule 19(a)(2)(i), but of the Rule 19(b) analysis. Rule 19 is the tool of the
cannot be joined for jurisdictional reasons, in which case the defendant, as the plaintiff has the power to choose which
four factors of Rule 19(b) will need to be weighed. parties it wishes to sue and generally has ample freedom to
amend its complaint to add a party. 9 Aside from the rare
First, the text of Rule 19(a)(2)(i) mentions nothing about instance of pure altruism, it is difficult to conceive of a reason
measuring adequacy of representation. The importation of an why a defendant would invoke Rule 19(a)(2)(i), as opposed
“adequate representation” test into Rule 19(a)(2)(i) is to the other provisions of Rule 19(a),10 for any reason other
prompted by the similarities between the provisions of Rule than to seek dismissal of the case. The defendant has no
19(a) and Federal Rule of Civil Procedure 24(a), which incentive to invoke Rule 19(a)(2)(i) unless the absentee that
provides for intervention as a matter of right. The language the defendant seeks to join cannot be joined for reasons of
of Rule 24(a)(2) is nearly identical, but in one critical way, jurisdiction or venue and because the defendant seeks to rid
not exactly identical, to that of Rule 19(a)(2)(i). Rule 24(a)(2) itself of the case.11 The issue of adequate representation will
states, “Upon timely application anyone shall be permitted to thus likely only arise in a situation in which the absentee
intervene in an action . . . when . . . the applicant is so situated should be joined under Rule 19(a)(2)(i), but cannot be, in
that the disposition of the action may as a practical matter which instance the court proceeds to analyze the four factors
impair or impede the applicant’s ability to protect that of Rule 19(b) to “determine whether in equity and good
interest, unless the applicant’s interest is adequately conscience” the action should be dismissed because of the
represented by existing parties.” Fed. R. Civ. P. 24(a)(2) indispensability of the absentee. Fed. R. Civ. P. 19(b).
(emphasis added). Intervention of right pursuant to Rule
24(a) is “a kind of counterpart to Rule 19(a)(2)(i).” Fed. R.
Civ. P. 24(a), 1966 Advisory Comm. Notes (cited in Cascade 9
Rule 19 could also be used by the plaintiff when the defendant files
Natural Gas Corp. v. El Paso Natural Gas Co., 386 U.S. 129, a counterclaim and raises an issue that the plaintiff then claims impacts an
134 n.12 (1967)); see also Pujol, 877 F.2d at 135 (noting absentee who should be joined.
similarity between Rule 19(a)(2)(i) and Rule 24(a)(2)). Rule 10
24, which was amended contemporaneously with Rule 19 in It is quite likely that a defendant would seek joinder of an absentee
1966, and has not changed substantively since that time, under Rule 19(a)(2)(ii) out of the defendant’s self-interest even if there is
no hope of the case being d ismissed for jurisdictional reaso ns; a defendant
“provides that an applicant is entitled to intervene in an action may want to jo in all absentees so that it can avoid costly, duplicative, or
when his position is comparable to that of a person under inconsistent litigation.
Rule 19(a)(2)(i), as amended, unless his interest is already
adequately represented in the action by existing parties.” 11
Joinder via Rule 19(a)(2)(i) provides defendants with a
Fed. R. Civ. P. 24(a), 1966 Advisory Comm. Notes (emphasis counterweight to plaintiffs’ incentive to fail to join “necessary” persons
added). Given that both Rules were amended at the exact or entities whose presence could threaten the court’s jurisdiction when the
same time and that Rule 24 explicitly mentions its plaintiff wants to remain in federal court. R ule 12 (b)(7 ) perm its
defendants to seek dismissal and p enalize plaintiffs for the failure to join
relationship to Rule 19(a)(2)(i), the absence of an “adequate a party pursuant to R ule 19 . See Fed. R. Civ. P. 12(b)(7).
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 23 24 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
To consider adequacy of representation as part of the There is no justification for considering adequacy of
determination of whether a party should be joined pursuant to representation during the threshold analysis of whether a
Rule 19(a)(2)(i) analysis is to undermine the factor-balancing absentee is “necessary” when the text of Rule 19(a) does not
test of Rule 19(b). If, for example, adequacy of command it and when, in most instances of this ilk, adequacy
representation were considered as part of the Rule 19(a)(2)(i) of representation will need to be assessed as part of a Rule
analysis, an absentee whose interests were adequately 19(b) analysis anyway. It makes more sense simply to
represented would not be joined. Yet, such a result would be consider adequacy of representation as a part of the first factor
unfortunate if in reality the absentee’s joinder would create a of Rule 19(b), where it will most often need to be considered,
jurisdictional problem and the other three Rule 19(b) factors rather than to read into Rule 19(a)(2)(i) language that does not
suggest that the proper course is to dismiss the case because exist.13
the court “in equity and good conscience” cannot proceed
without the absentee. Adequacy of representation then 3. The Application of Rule 19
becomes a trump card, mooting consideration of Rule 19(b)
in its entirety. Furthermore, to the extent that Rule 19(a)(2)(i) In applying Rule 19 here, the district court held that TG
and Rule 19(b) are redundant,12 eliminating the repetition by Partners was an indispensable party. The district court
considering adequate representation in the Rule 19(a) stage specifically held that the citizenship of TG Partners had to be
improperly amends the text of Rule 19 by adding language to considered for diversity purposes and that the overlap of
Rule 19(a)(2)(i) and rendering language in Rule 19(b) Glancy’s California citizenship with that of two of the general
surplusage.
13
There are curious interactions between Rule 1 9 joinder and R ule
24 intervention. Rule 24 is the implement of the absentee, as the absentee
12
can petition for intervention without any involvement by the defendant
Some courts have held the Rule 19(b) and Rule 19 (a)(2)(i) analyses when the absentee stands to have its interests harmed. This raises the
are indistinguishable. See Kickapo o Trib e of Indian s v. Ba bbitt, 43 F.3d question of why a defendant would ever need to utilize Rule 19(a)(2)(i)
1491, 1497 n.9 (D.C. Cir. 1995). Commentators have disagreed, if the absentee can just intervene. One potential answer is that the
suggesting that while the analyses are similar, they differ in degree; the defendant may be q uicker than the po tential intervenor. Non etheless,
Rule 19(a)(2)(i) analysis entails a much more hypothetical examination some commentators have criticized Rule 19 and endorsed intervention as
of whether nonjoinder could harm the absentee, but the Rule 19(b) the most appropriate ap proach. See, e.g., Richard D. Freer, Rethinking
analysis is concerned with a more con crete assessment of whether Com pulsory Joinder: A Proposal to R estructu re Federal Rule 19, 60
nonjoinder will actually cause harm. 4 James Wm . Moore et al., Moo re’s N.Y.U. L. Rev. 1061, 108 6-88 (1985 ). They have encouraged courts and
Federal Practice,§ 19.0 5[2][a], at 19-87 (3d ed. 2003 ); see also 7 Charles the Congress to expand the concept of ancillary jurisdiction to encompass
Alan Wright, Arthur R. Miller, & M ary Kay Kane, Federal Practice & intervenors whose presence would destroy jurisdiction so that Rule 19
Procedure § 1604 , at 62 (3d ed. 2001). Ho wever persuasive these joinder would no longer need to be used. Id. Ho wever merito rious this
comm entators’ rationales may seem, they are not supported by the text of argum ent, Congress chose the exact opposite course in 1990. In the
Rule 19, which uses the word “may” in Rule 19(a)(2)(i) and the word Judicial Improvements Act of 1990, Pub. L. 101-650, 104 Stat. 5089
“might” in Rule 19(b), belying any argume nt that the two are (1990) (codified at 28 U.S.C. § 1367(b )), Congress explicitly provided
substa ntively different. There is no need to resolve the textual that federal courts cannot exercise supplemental jurisdiction over persons
interpretation issue, because no matter whether the two analyses are or entities joined pursuant to Rule 19 or Rule 24. This legislation
identical or qualitatively different, it does not alter the conclusion that significantly limited the usefulness of the interventio n mec hanism . See
adequacy of representation should be considered solely as a Rule 19(b) 7 Charles Alan Wright, Arthur R. Miller, & M ary Kay Kane, Federal
factor given the text and operation of Rule 19. Practice & Proced ure § 1610, at 151-53.
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 25 26 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
partners of TG Partners would destroy diversity. The district Partners’s interest is in the continued validity of its 6.3
court made two chief errors: one of fact and one of logic. million Series B shares. Second, the granting of an injunction
First, the district court erroneously stated that Alfred and declaration would place the Series B shares at the center
Taubman was the managing general partner of TG Partners; of the litigation. Third, TG Partners is “so situated that the
in fact TG Michigan, Inc., a Michigan corporation, of which disposition of the action” in its absence would undoubtedly
Alfred Taubman is the sole shareholder, is the managing impede its interest in the shares because an injunction against
general partner. J.A. at 473-74. Second, after determining the use of the Series B shares would prevent TG Partners
that TG Partners did not need to be joined because its from voting its sizeable stake.14 Thus, TG Partners is a
interests could be represented by Alfred Taubman, the district necessary party under Rule 19(a).
court wrote:
b. Can TG Partners Be Joined?
[I]t cannot be disputed that A. Alfred Taubman has an
interest in his ability to vote the Series B stock that he Continuing to the next step of the three-part test, TG
owns or controls. This fact implicates the joinder Partners cannot be joined because its presence would violate
provisions of [Rule] 19, under which either: 1) A. Alfred the complete-diversity requirement. Section 1332 requires
Taubman is an indispensable party who should be joined complete diversity, and it is settled that a limited partnership
so that his interests can be adequately protected; or (2) A. is a citizen of each state in which its partners (general or
Alfred Taubman is a dispensable party who does not
need to be joined because his interest will be adequately
14
protected since they are identical to his sons, . . . who are Possibly realizing the corner into which he has b acked himself,
named defendants . . . . Glancy argues in his reply brief that he did n ot seek to void the voting
rights of all the Series B stock, b ut rather sough t to enjoin only the voting
J.A. at 917-18 (Dist. Ct. Op. 05/08/03). This formulation stock of the named defendants. He thus suggests that any injunction
issued by the court would not impact the ability of Alfred Taubman or TG
improperly creates a false dichotomy in the application of Partners to exercise its votes. Glancy Reply Br. at 5-6. This argument is
Rule 19. Alfred Taubman cannot be considered “an specious, as we have explained m ore fully, supra pps. 11-1 2. In his
indispensable party who should be joined” because an amended complaint, Glancy sought “a declaration that the Taubman
indispensable party by definition cannot be joined. Nor is he family’s Series B P referred Sto ck do es not have any voting rights,” J.A.
a “dispensable” party, as that term has no meaning under Rule at 295 (Am. Compl.), in order to prevent the “Taubman family” from
“thwart[ing] any unsolicited acquisition proposal for [TCI].” J.A. at 263-
19. 64. Throughout the amended complaint, Glancy uses the term “Taubman
family” to describe more than just William and Robert Taubman, who
a. Is TG Partners “Necessary”? were the only Taubman family members named. Also, the text of the
amended complaint mentions “[n]on-party A. Alfred Taubman” and states
Regarding TG Partners, the first inquiry of the three-step that Alfred Taubman “owns and/or controls” over 24 million shares of
test must be answered in the affirmative. TG Partners falls Series B stock. J.A. at 267-68. Furthermore, Glancy’s action would have
within the reach of Rule 19(a)(2)(i), as it “claims an interest been futile if he did not intend to enjoin all the shares controlled by the
web of entities under the Taubman family’s command . Enjoining the
relating to the subject of the action and is so situated that the Taubman sons’ 12,000 Series B votes would not have even remotely
disposition of the action in [TG Partners’s] absence may (i) as accomplished the objective of Glancy’s litigation, which wa s to “enjoin
a practical matter impair or impede [TG Partners’s] ability to any vote by the Taubmans of their purported blocking position,” J.A. at
protect that interest.” Fed. R. Civ. P. 19(a)(2)(i). First, TG 265, because the remaining 23.9 million shares could still have been voted
to quash SP G’s takeover attem pt.
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 27 28 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
limited) are citizens. Carden v. Arkoma Assocs., 494 U.S. examination of whether TCI, the TCI Board, or any other
185, 195-196 (1990). Here, the joinder of TG Partners is not parties can adequately represent the interests of TG Partners.
possible, because two general partners hail from California, As we explain further below, TCI and the TCI Board, as
which is plaintiff Glancy’s state of citizenship. named parties, do not adequately represent the interests of TG
Partners because the complete identity of interests that is
c. Must the Action Be Dismissed Because TG required to satisfy Rule 19(b) does not exist. Yet, in trying to
Partners is Indispensable? determine whether any other absentee can adequately protect
the interests of TG Partners, we are unable to determine,
The final step then is to determine whether the court should based upon the record at this stage of the litigation, whether
“in equity and good conscience” dismiss the action because Alfred Taubman can adequately protect the interests of TG
TG Partners is indispensable according to the factors Partners if he can be joined as a party. We therefore remand
described in Rule 19(b). Courts are to consider at least four to the district court for further consideration of these issues.
factors in assessing whether the action should be dismissed,
including (but not limited to), “first, to what extent a i. Adequate Representation by TCI and the TCI
judgment rendered in the person’s absence might be Board
prejudicial to the person . . . ; second, the extent to which, by
protective provisions in the judgment, by the shaping of We begin by resolving the question of whether a named
relief, or other measures, the prejudice can be lessened or corporation or board of directors can adequately represent the
avoided; third, whether a judgment rendered in the person’s interests of shareholders whose shares are threatened to be
absence will be adequate; [and] fourth, whether the plaintiff invalidated.15 At the outset, we note that several pre-1966
will have an adequate remedy if the action is dismissed for Rule 19 cases, including the one Sixth Circuit case on the
nonjoinder.” Fed. R. Civ. P. 19(b). The final three factors issue, broadly discuss the issue of the “indispensability” of
clearly suggest that the court cannot proceed in the absence of shareholders whose shares will be invalidated, even though
TG Partners. First, the district court could not have mitigated these cases do not analyze whether a named corporation or
the prejudice to TG Partners of being denied the voting power board of directors can adequately represent the interests of
of its shares except by denying the requested injunction. those shareholders. These cases are dated, in their use of the
Second, a judgment in which the shares of TG Partners were older, more inflexible Rule 19 analysis, but they help to
not invalidated may not have been adequate for plaintiff demonstrate the pattern of the courts’ unwillingness to
Glancy, because those 6.3 million shares could be the proceed in the absence of shareholders whose shares will be
difference between success and failure in SPG’s (or any other invalidated by the action. In General Investment Co. v. Lake
future acquirer’s) attempt to acquire the two-thirds of all Shore & Michigan Southern Railway Co., 250 F. 160 (6th
available shares needed to delete the Ownership Limit Cir. 1918), a plaintiff shareholder sought to enjoin a larger
Provision. Third, Glancy would still have an adequate state shareholder from voting its stock in favor of a merger. The
court remedy if the federal court case were dismissed. court concluded that the larger shareholder was an
The remaining factor requires us to consider whether “a
judgment rendered in [TG Partners]’s absence might be 15
prejudicial to [TG Partners].” Fed. R. Civ. P. 19(b). As Our holding is limited to a situatio n in which the relief sought is
described above, the analysis of this factor requires an the invalidation of a large number of shares held by a small number of
shareholders.
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 29 30 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
indispensable party, writing that “[a] stockholder in a parent defrauded the bank by issuing a block of shares that
corporation is an indispensable party to a suit seeking to were eventually sold to another entity, “Tools.” Id. at 212.
enjoin him from voting his stock at a stockholders’ meeting.” Tools had been named as a defendant, but defendant Hunter
Id. at 171; see also Gen. Inv. Co. v. Lake Shore & Mich. S. moved to dismiss under Rule 12(b)(7) because the court could
Ry. Co., 260 U.S. 261, 285 (1922) (affirming the Sixth not assert personal jurisdiction over Tools. The Delaware
Circuit’s decision and stating that if the action sought to Supreme Court16 wrote that “the current owner of the shares
enjoin a shareholder’s voting rights, it was “obvious that the which plaintiff IBI seeks to have canceled[] clearly has an
[larger shareholder] was an indispensable party”); Tucker v. interest relating to the subject matter of the action such that
Nat’l Linen Serv. Corp., 200 F.2d 858, 863 (5th Cir. 1953) disposition of the action in its absence as a practical matter
(ruling that a shareholder is an indispensable party to an may impair or impede its ability to protect that interest.” Id.
action that attempts to void his shares); Steinway v. Majestic at 226. The court believed that Tools “me[t] the criterion set
Amusement Co., 179 F.2d 681, 684 (10th Cir. 1949), cert. forth in Rule 19 for an indispensable party” even though the
denied, 339 U.S. 947 (1950) (same). A more recent, post- corporation that issued the stock had also been named, but the
1966 Rule 19 case reaches a similar result. Klaus v. Hi-Shear court ultimately ruled that the action did not need to be
Corp., 528 F.2d 225, 234-35 (9th Cir. 1975). Additionally, dismissed because the court properly had personal jurisdiction
several commentators have stated generally that when a over Tools. In so holding, the Istituto court followed a line of
“plaintiff sues a corporation to compel stock of absentee to be Delaware cases holding that shareholders are indispensable
canceled and reissued in the joint names of plaintiff and parties in actions to cancel or invalidate shares of stock.
absentee . . . [the] absentee has an interest in the proceedings Elster v. Am. Airlines, Inc., 106 A.2d 202 (Del. Ch. 1954);
and its ability to protect that interest could be impaired by a Hodson v. Hodson Corp., 80 A.2d 180 (Del. Ch. 1951).17 No
judgment in the pending case.” 4 Moore’s Federal Practice
§ 19.03[3][c], at 19-51; see also 7 Federal Practice &
16
Procedure § 1615, at 236 (stating that joinder depends upon There is no Michigan corporate law on this specific question. In
nature of interest in the controversy and citing to a case the absence of clear Michigan law on matters of corporate law, Michigan
involving cancellation of stock that was dismissed because a courts often refer to Delaware law. J.A. at 919 (D ist. Ct. Op.) (quoting In
re Consumers Power Co. Derivative Litig., 132 F.R.D. 455, 461 (E.D.
“necessary” party could not be joined); 9A William M. Mich. 199 0)); see also Russ v. Fed. Mogul Corp., 316 N.W.2d 454, 457
Fletcher, Cyclopedia of the Law of Private Corporations n.1 (M ich. Ap p. 19 82). Delaware emp loys its own Rule 19 that differs
§4474, at 84 (Rev. ed. 2000) (“If . . . shareholders . . . have from Federal Rule of Civil Procedure 19 only in its use of gendered
distinct and indivisible individual rights which will be prono uns. Istituto Bancario Italiano v. Hunter Eng’g Co., 449 A.2d 210,
affected in the action by or against the corporation, they must 226 (D el. 1982).
be joined as coparties.”). 17
Several single-jud ge-authored , unpublished opinions of the
More specific to the acute inquiry here, courts have held Delaware Chancery C ourt reach inconsistent results. We note the
divergence, but we are no t swayed by any of these unpublished opinions.
that a corporation cannot always adequately represent the In National Education Corp. v. Bell & Howell Co., No. 7278, 1983 W L
interests of shareholders when the invalidation of shares is 8946 (Del. Ch. Dec. 13, 1983) (unpublished), a Chancellor assumed,
involved. In Istituto Bancario Italiano SpA v. Hunter without deciding, that the shareholders’ interests could not be adeq uately
Engineering Co., 449 A.2d 210 (Del. 1982), a bank brought represented by the named company, although it ultimately held based
suit against several defendants, including the stock-issuing upon other Rule 19(b) factors that the action did not need to be dismissed.
Id. at *4. B y contra st, a differen t Chan cellor in Flerlage v. KDI Corp.,
company, Hunter Engineering, alleging that Hunter and its No. Civ. A. 8007, 1986 WL 1397 (Del. Ch. Jan. 29, 1986) (unpublished),
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 31 32 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
federal court of which we are aware has held that a named continued existence of the Series B shares.18 These distinct
corporation adequately represents the interests of a small but overlapping interests could come into conflict; TCI is
group of shareholders who stand to lose a large number of responsible in this litigation to act not only for the best
shares such that those shareholders’ interests will not be interests of the Series B shareholders, but for the best interests
prejudiced in their absence. But cf. OmniOffices, Inc. v. of the corporation and all its shareholders.
Kaidanow, No. Civ. A. 99-0260, 2001 WL 1701683, at * 8
(D. D.C. Sept. 12, 2001), rev’d on other grounds sub nom. On appeal, Glancy does not even suggest that TCI or the
CarrAmerica Realty Corp. v. Kaidanow, 321 F.3d 165 (D.C. TCI Board adequately represents the interests of TG Partners.
Cir. 2003) (shareholder controlling a substantial portion of Instead, Glancy argues that Robert and William Taubman,
shares to be voided was not indispensable because named who are named parties, can adequately represent TG
party agreed to indemnify the absentee in the event that the Partners’s interests. Glancy Br. at 18. There are several
shares were invalidated); Wheaton v. Diversified Energy, reasons why this is questionable. First, the Taubman sons
LLC, 215 F.R.D. 487, 490 n.2 (E.D. Pa. 2003) (holding that were named as members of the TCI Board, not as individual
a subsidiary is adequately represented by the parent when its Series B shareholders. As explained above, the TCI Board’s
shareholder interests may be impacted). interests are not completely identical to those of TG Partners.
Second, even if the Taubman sons were named as individual
Particularly in light of the tendency of courts to join all shareholders, they control a relatively tiny number of Series
shareholders whose rights will be determined by litigation, we B shares in their own names (12,000 out of the 24 million
cannot say that TCI and the TCI Board adequately represent shares controlled by the Taubman family). As individual
the interests of TG Partners. There is a similarity of interests, shareholders, they would have a similar interest in fighting
but the interests are not identical; TG Partners monolithically any action to invalidate the stock, but the intensity of that
desires to maintain its voting rights while TCI and the TCI interest differs from TG Partners’s interest, as TG Partners
Board must respond to and defend themselves from various controls five hundred times more shares. Courts have held
other charges of breach of fiduciary duties unrelated to the that asymmetry in the intensity of the interest can prevent a
named party from representing the interests of the absentee.
See Nat’l Union Fire Ins. Co. v. Rite Aid of S.C., Inc., 210
F.3d 246, 251 (4th Cir. 2000) (holding that although both the
held that the interests of holders of preferred stock wou ld be fully
named subsidiary and the unnamed parent had an identical
protected by the na med corp oratio n. Id. at *6-7. It is difficult to consider interest in the subsidiary being covered as a beneficiary of a
KDI as persuasive because it directly conflicts with the Istituto B anc ario liability policy, the subsidiary could not represent the parent’s
decision and its line of predec essors but fails to reconcile the differences. interest regarding the impact of the court’s decision on future
Furthermore, the KDI decision places great weight on two federal cases concerning coverage); Burger King Corp. v. Am. Nat’l
app ellate decisions that do not discuss the propriety of joining a Bank & Trust Co. of Chicago, 119 F.R.D. 672, 678 (N.D. Ill.
shareholder that faces the invalidation of its stock or the voting rights in
that stock. See O wens-Illinois, Inc. v. Lake Shore Land Co., 610 F.2d
1185, 1191 (3d Cir. 1979) (ruling that a named plaintiff could represent
the interests of the absentee when the action sought the termination of an 18
option to purchase pro perty); Fetzer v. Cities Serv. Oil Co., 572 F.2d W e cannot accept a rule by which a corp oratio n, or any other p arty,
1250, 1253-54 (8th Cir. 1978) (holding that absentee railroad did not need is considered to represent the interests of the absentee simply by virtue of
to be jo ined in an actio n regarding royalty payments because named the corp oratio n’s attempt to invoke Rule 19 and join the absentee. To do
plaintiff had a similar interest in receiving the royalty payments). so wo uld ren der R ule 19 a nullity.
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 33 34 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
1988) (finding that even though named corporation/franchisor to represent the interests of TG Partners would obviate the
and unnamed franchisee both sought determinations that they need to dismiss the action because of TG Partners’s effect on
did not violate the lease, the named franchisor could not subject matter jurisdiction. Based upon the factual record we
adequately represent the interests of the franchisee because currently possess, we cannot determine whether Alfred
the latter faced greater future liability). Third, to the extent Taubman, named in his individual capacity as the owner
that Glancy is arguing that the Taubman sons can protect the and/or voter of 17.7 million Series B Shares, can adequately
interests of the Taubman family regarding the Series B stock represent the interests of TG Partners. Upon remand, the
because Alfred Taubman will exert his influence through their district court and the parties must address this issue. If TG
presence, see Glancy Br. at 18-19, Roberts and William’s Partners’s interests will not be adequately represented by the
function in this capacity does not assure that the interests of joinder of Alfred Taubman in his individual capacity,
the non-Taubman-family partners in TG Partners will be Glancy’s action must be dismissed because TG Partners will
protected. See infra p.6-7 (partially listing the partners of TG be indispensable given that the action cannot proceed in its
Partners). absence. If TG Partners’s interests can be adequately
represented by Alfred Taubman, the district court must
ii. Adequate Representation by Alfred Taubman analyze whether Alfred Taubman’s joinder is proper under the
three steps of Rule 19. The court must assess whether Alfred
Given that none of the named parties can adequately Taubman has “an interest relating to the subject of the action
represent the interests of TG Partners, we must consider and is so situated that the disposition of the action in [his]
whether Alfred Taubman should be named as a necessary absence may (i) as a practical matter impair or impede [his]
party who can represent the interests of the absentee, TG ability to protect that interest,” Fed. R. Civ. P. 19(a)(2)(i), and
Partners. Glancy discussed Alfred Taubman in his complaint, whether his joinder is possible.19 If his joinder is not
but Glancy did not name Alfred Taubman as a defendant. In
their answer and their brief opposing Glancy’s action,
defendants TCI and the TCI Board did not request that 19
The record on appeal reflects that Alfred Taubman owns or votes
Taubman be joined. Nor did they file a Rule 12(b)(7) motion 17.7 million shares through TRV, TRA, T aub-Co, and the A. Alfred
seeking dismissal of the action for failure to join Alfred Taubman Revocable trust. Alfred Taubman is also the sole shareholder
Taubman. However, the district court considered the joinder of the corporation, TG M ichigan, Inc., that is the managing general
of Alfred Taubman and its effect on whether the action should partner of TG P artners and that votes all of the shares of TG Partners. It
is alleged that Alfred Taubman votes TG Par tners’s Series B shares on
be dismissed pursuant to Rule 19(b). Both parties also behalf of the partners of TG Partners through TG M ichigan, Inc. J.A. at
discuss the issue in their appellate briefs. Glancy Br. at 17-19 474 (Poissant Decl.). It is unclear based upon these facts whether there
(arguing that Alfred Taubman either directly, or indirectly exists between T G M ichigan, Inc. and A lfred Tau bman “such a unity of
through his sons, can adequately represent the interests of TG interest and ownership that the separate personalities of the corporation
Partners, although not explicitly asking for Alfred Taubman’s and its owner cease to exist.” United States v. Cordova Chem. Co., 113
F.3d 572 , 580 (6th C ir. 199 7), vacated on other grounds sub nom. Mich.
joinder); TCI Br. at 33 n.18. Furthermore, we may raise the Dep’t of Envtl. Quality v. Bestfoods, 524 U.S. 924 (1998). Alfred
issue of joinder sua sponte. 4 Moore’s Federal Practice Taubm an’s relationship with TG Partners is important because the
§ 19.02[4][b][ii], at 19-27. citizenship of all members of a partnership impacts diversity jurisdiction
even if only one genera l partner, as op posed to the partnership itself, has
We discuss the joinder of Alfred Taubman mainly to assess been name d as a party to a suit. Halleran v. Hoffman, 966 F.2d 45, 47-48
whether the impact of his presence as a party and his ability (1st Cir. 199 2); Stouffer Corp. v. Breckenridge, 859 F.2d 75 , 76 (8th Cir.
1988); Carlsberg Res. Corp. v. Cam bria Sav. & Loan A ss’n, 554 F.2d
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 35 36 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
possible, the court must, pursuant to Rule 19(b), then ___________________
determine whether “in equity and good conscience” the action
can proceed in Alfred Taubman’s absence or whether the CONCURRENCE
action must be dismissed. Without the presence of a party ___________________
who can adequately represent the interests of TG Partners, the
action must be dismissed. ROGERS, Circuit Judge, concurring. I concur in the
judgment and in Judge Moore’s careful and thoughtful
III. CONCLUSION opinion, with the exception of part II.C.2.
Because of the multiple pleading, jurisdictional, and joinder In this case, it appears clear that “adequacy of
complications with this appeal, several of which cannot be representation” by one shareholder of an absent shareholder’s
resolved on the basis of this record, we VACATE the interest is not enough to make the absent shareholder
judgment of the district court. We REMAND to the district “unnecessary” for purposes of Rule 19(a). “Adequacy of
court with instructions to resolve the incongruence between representation” therefore becomes relevant in the context of
the relief Glancy seeks and the parties he has named. The this case only at the Rule 19(b) stage. I am reluctant to
district court must analyze whether Alfred Taubman can conclude, however, that “adequacy of representation” is
adequately represent the interests of TG Partners and whether categorically not to be considered as part of a Rule 19(a)
Alfred Taubman can be joined in his individual capacity as a analysis, and such a conclusion is unnecessary to our holding.
Series B shareholder under the strictures of Rule 19. If Alfred
Taubman cannot adequately represent the interests of TG
Partners, the action must be dismissed because the court
cannot “in equity and good conscience” proceed without TG
Partners, whose interests will be impaired by a judgment
invalidating the Series B stock, but who cannot be joined
because of the requirement of complete diversity for subject
matter jurisdiction.
1254, 1258-59 (3d Cir. 1977). The S upreme Co urt has held that the
citizenship of all members of a joint-stock company, which was referred
to as a “mere partnership,” must be considered even though the company
brought suit only on behalf of its president. Chapm an v. Barney, 129 U.S.
677, 682 (1889); cf. United Steelworkers v. R.H. Bouligny, Inc., 382 U.S.
145 (1965) (citizensh ip of labor union consists of state of citizenship of
each member of the union and not just union’s principal place of
business).
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 37 38 Glancy v. Taubman Centers, Inc. et al. No. 03-1609
_____________________________________________ of their partnerships or in their capacity as partners, which
suggests that the court thought that an injunction against a
CONCURRING IN PART, DISSENTING IN PART person in his individual capacity would have the same effect
_____________________________________________ as an injunction against a person in his capacity as a general
partner of a partnership. The court assumed, without
RYAN, Circuit Judge, concurring in part and dissenting in explanation, that there was “no substantive difference”
part. While I agree that the district court’s judgment between an injunction against A. Alfred Taubman in his
dismissing the plaintiff’s lawsuit must be vacated and the case individual capacity and an injunction against him in the
remanded, I respectfully disagree with the majority’s analysis. capacity of the managing general partner of TG. The first
I believe my colleagues have imposed on the plaintiff their difficulty with this assumption is that A. Alfred Taubman is
own idea of the ideal complaint and the relief they think such not the managing general partner of TG. A corporation of
a complaint should have requested, rather than reading the which A. Alfred Taubman is the sole shareholder is the
complaint as it was written. While the majority rightly faults managing general partner of TG. The district court made no
Glancy for his wildly inconsistent use of the term “the findings of fact or conclusions of law to support its
Taubman family” throughout his amended complaint, the assumption that an injunction against A. Alfred Taubman
amended complaint clearly demonstrates that Glancy sought individually would prevent a separate entity, the corporation
no relief with respect to A. Alfred Taubman. Glancy of which he is the sole shareholder, from voting TG’s Series
explicitly excluded from his suit “Non-party A. Alfred B stock.
Taubman,” who allegedly “own[ed] and/or control[ed]
186,937 shares of Taubman Centers common stock and Although the district court appears to have concluded that
24,669,087 shares of Series B [stock].” if Glancy’s requested relief were granted, A. Alfred Taubman
(in some unspecified capacity) would suffer an impairment of
In my judgment, vacatur and remand are nevertheless “his ability to vote the Series B stock that he owns or
appropriate because the district court failed to make adequate controls,” the court did not conduct a Federal Rule of Civil
findings of fact and conclusions of law, thereby depriving this Procedure Rule 19 analysis with respect to A. Alfred
court of “‘a sufficiently definite predicate for proper appellate Taubman. Instead, it merely concluded that regardless of
review.’” Cousin v. McWherter, 46 F.3d 568, 574 (6th Cir. whether A. Alfred Taubman should have been joined as a
1995) (citation omitted); see also Fed. R. Civ. P. 52. party, “if Glancy’s relief is granted, the shares that A. Alfred
Taubman controls through the TG partnership would be
The district court appears to have concluded that although affected”; that is, TG would be prevented from voting its
A. Alfred Taubman was not named as a defendant in this suit, Series B shares. The court also failed to conduct a Rule 19
the plaintiff Glancy’s request for declaratory and injunctive analysis with respect to TG, which, likewise, was not a named
relief against “the Taubman family” would, if granted, party in the action. Instead, it merely concluded that TG’s
prevent A. Alfred Taubman from voting “the Series B stock citizenship had to be considered for diversity purposes.
that he owns or controls.” The district court then assumed
that an injunction against A. Alfred Taubman in his individual In my judgment, the district court erred in taking an overly
capacity would prevent TG Partners (TG) from voting its simplistic view of the jurisdictional complexities of this case.
Series B shares. The court appears to have relied upon cases Specifically, it failed to distinguish between A. Alfred
in which general partners have been named either on behalf Taubman’s various capacities, and instead, spoke generally of
No. 03-1609 Glancy v. Taubman Centers, Inc. et al. 39
A. Alfred Taubman’s “interest in his ability to vote the Series
B stock that he owns or controls.” In my view, the
complexities of the case, particularly the various legal
capacities in which A. Alfred Taubman is involved, required
a far closer analysis. I would remand the case to afford the
court an opportunity to explain its reasoning.