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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Bethel Family Clinic v. Bethel Wellness Associates (06/15/2007) sp-6132

Bethel Family Clinic v. Bethel Wellness Associates (06/15/2007) sp-6132, 160 P3d 142

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
     e-mail corrections@appellate.courts.state.ak.us.


            THE SUPREME COURT OF THE STATE OF ALASKA

BETHEL FAMILY CLINIC, an )
Alaska corporation, ) Supreme Court No. S- 12233
)
Appellant,)
) Superior Court No.
v. ) 4BE-01-345 CI
)
BETHEL WELLNESS ASSOCIATES,) O P I N I O N
an Alaskan partnership, MICHAEL R. )
MOSER, M.D., and GAY PETRO, P.A., )
)
Appellees. ) No. 6132 June 15, 2007
)
          Appeal  from the Superior Court of the  State
          of  Alaska, Fourth Judicial District, Bethel,
          Randy M. Olsen, Judge.

          Appearances:    John  S.  Hedland,   Hedland,
          Brennan & Heideman, Anchorage, for Appellant.
          David  W.  Baranow, Law Offices of  David  W.
          Baranow,    and    Rhonda   F.   Butterfield,
          Anchorage, for Appellees.

          Before:    Fabe,  Chief  Justice,   Matthews,
          Eastaugh, Bryner, and Carpeneti, Justices.

          MATTHEWS, Justice.

I.   INTRODUCTION
          Bethel  Wellness  Associates, LLC  (BWA-LLC)  sued  the
Bethel  Family  Clinic (the Clinic) for breach of contract.   The
Clinic moved for summary judgment on the grounds that BWA-LLC was
not  a  party  to the contract.  The superior court  denied  this
motion  and substituted the Bethel Wellness Associates  (the  BWA
partnership)  as  the real party in interest under  Alaska  Civil
Rule  17(a).  The Clinic lost at trial and now appeals the denial
of  its  summary judgment motion.  We affirm the superior  courts
denial  of  summary  judgment on the basis  that  real  party  in
interest  objections under Civil Rule 17(a) must be brought  with
reasonable  promptness  and the Clinic  waited  over  four  years
before  claiming  that BWA-LLC was not the appropriate  party  to
bring the lawsuit.
II.  FACTS AND PROCEEDINGS
          In  the  early 1990s, Dr. Michael Moser, M.D., and  Gay
Petro,  P.A.,  worked with the Clinic to provide health  care  in
Bethel.   By  1996 they had begun what was to be a prolonged  and
ultimately  unsuccessful series of negotiations with the  Clinics
board of directors to take over operation of the Clinic.  At  the
outset  Moser  and  Petro were planning to establish  a  business
entity to operate the Clinic but had not yet decided on what form
they  would  use.  Petro and Moser formed the BWA partnership  in
1996  and  then  incorporated the BWA-LLC on  January  31,  1997.
Petro and Moser were the only partners in the BWA partnership and
the only stockholders and managing members of BWA-LLC.
          By  early  1998 the Clinic and the BWA partnership  had
signed  an  Interim  Operating Agreement.   The  purpose  of  the
agreement was to provide for the interim operation and management
of  the Clinic during negotiations for a long term agreement  for
the  operation  of  the Clinic.  The agreement,  which  was  made
retroactive to January 1, 1997, required the Clinic  to  pay  the
BWA  partnership  $5,000  per month for  the  management  of  the
Clinic.
          The negotiations between the Clinic and Petro and Moser
eventually  broke  down.  BWA-LLC brought an action  against  the
Clinic  on April 20, 2000.  The complaint claimed that the Clinic
had  been  negligent  and  had  breached  the  Interim  Operating
Agreement by failing to compensate the plaintiff, even though the
plaintiff  had  performed services as required by the  agreement.
The  Clinic  filed a counterclaim alleging, among  other  things,
that  the  plaintiff  failed to provide services  as  agreed  and
failed to bargain in good faith.
          On  June  9, 2004  over four years after the  complaint
was  filed  the Clinic filed a motion for summary judgment and  a
motion to dismiss for failure to state a claim.  The Clinic noted
that  the Interim Operating Agreement was between the Clinic  and
the  BWA partnership.  The Clinic argued that since the plaintiff
in  the  case, BWA-LLC, was not a party to the agreement, it  was
not  entitled to recover.  Instead, it claimed, any claims should
be brought by the contracting party.
          The  superior  court denied the Clinics  motions.   The
court ruled that the motion was properly characterized as a  real
party  in interest challenge under Civil Rule 17(a).1  It  denied
the summary judgment motion on the basis that motions challenging
whether  a plaintiff is a real party in interest should generally
be raised with reasonable promptness, and [the Clinic] raised the
issue  years after the original complaint was filed.   The  court
then  ordered  that the BWA partnership and Moser  and  Petro  be
substituted as real parties for BWA-LLC.
          A  five-day jury trial took place in October 2005.  The
jury  awarded  the BWA partnership $120,000 on  the  claim.   The
          total judgment, including prejudgment interest, costs, and
attorneys  fees, was $205,720.35.  The superior court denied  the
Clinics  motion to alter or amend the judgment, to enter judgment
notwithstanding the verdict, or to grant a new trial.
          The  Clinic appeals the superior courts denial  of  the
motion   for  summary  judgment  and  substitution  of  the   BWA
partnership as a real party in interest.
III. DISCUSSION
          The question of whether to permit or require joinder of
a  real  party in interest rests in the sound discretion  of  the
superior  court.2   The superior court also  has   discretion  to
determine  whether  in  the particular  factual  context  of  the
litigation a waiver of the [real party in interest] objection has
occurred.3  An abuse of discretion occurs when this court is left
with  a  definite and firm conviction, after reviewing the  whole
record, that the trial court erred in its ruling.4
          The  superior  court  denied  the  Clinics  motion  for
summary  judgment  on the basis that Civil Rule 17(a)  objections
should  generally be raised with reasonable promptness, and  [the
Clinic]  raised the issue years after the original complaint  was
filed.5   There  is widespread support for the assertion  that  a
real party in interest objection is waived if it is not raised in
a timely manner.  In Burns v. Anchorage Funeral Chapel this court
noted that [s]ince a real party in interest objection is dilatory
in  nature,  it  should  be  raised with reasonable  promptness.6
Moores   Federal  Practice  also  supports  waiver  of   untimely
objections:
          Because a real party defect should be evident
          at   the  commencement  of  the  action,  the
          defendant  should present the  issue  in  its
          pleadings or by an early motion. A timeliness
          requirement  is also inherent in the  portion
          of  Rule 17 that requires that the court  and
          the  parties  allow time after the  objection
          for  the joinder or substitution of the  real
          party  in  interest. Therefore, the objection
          must  be  raised  at a time when  joinder  is
          practical and convenient. If an objection  is
          not  timely made, it will be deemed  to  have
          been waived.[7]
          
          The  superior  court did not abuse  its  discretion  in
finding  that  the Clinic had waived any real party  in  interest
objections  by  waiting  too long to bring  its  objection.   The
complaint  was filed in April 2000, and the Clinic did  not  move
for  summary judgment until June 9, 2004.  While it is true  that
in  some cases it is not immediately obvious that a party is  not
the  real party in interest,8 in this case there is no indication
that  this  was  a problem.  Any party defects should  have  been
obvious  to  the  Clinic  from the beginning  since  BWA-LLC  was
clearly not a party to the Interim Operating Agreement.
          A  trial court may base its determination that  a  real
party  in  interest objection has been waived on the  grounds  of
prejudice  resulting from the delay.9  The BWA partnership  might
          have been prejudiced if the superior court had granted summary
judgment  since it arguably would have been barred from  bringing
the  claim under the statute of limitations.  But the Clinic  has
no  plausible claim of prejudice as a result of the substitution.
In  Fairbanks North Star Borough v. Kandik Construction,  Inc.  &
Associates,  this  court found that the superior  court  did  not
abuse  its  discretion by permitting a substitution  under  Civil
Rule  17(a) because the defendant had notice of the partys  claim
and therefore had the ability to prepare a defense.10  Similarly,
the  Clinic  had  ample notice of the claim against  it  and  had
several years in which to prepare a defense.11
          The  Clinic  argues that it was inappropriate  for  the
superior court to allow a substitution of the BWA partnership  as
a real party in interest because the original error in naming BWA-
LLC  as  the  plaintiff  was not the  result  of  an  honest  and
understandable mistake.  While the Clinic is correct  in  arguing
that  a  plaintiff generally should not be substituted as a  real
party in interest unless the original error was the result of  an
honest mistake, the Clinic waived this objection by waiting  four
years to raise it.12
IV.  CONCLUSION
          We  hold  that  the superior court did  not  abuse  its
discretion  by  finding that the Clinic had waived its  objection
due  to  untimeliness.  We therefore AFFIRM the  superior  courts
order denying summary judgment to the Clinic and substituting the
BWA  partnership as the real party in interest under  Civil  Rule
17(a).
_______________________________
     1    Civil Rule 17(a) provides:

               Every action shall be prosecuted in  the
          name  of  the  real party  in  interest.   An
          executor, administrator, guardian, trustee of
          an  express  trust, a party with whom  or  in
          whose  name a contract has been made for  the
          benefit of another, or a party authorized  by
          statute  may  sue  in that persons  own  name
          without  joining the party for whose  benefit
          the action is brought;  and when a statute of
          the  state so provides, an action for the use
          or benefit of another shall be brought in the
          name  of  the  state.   No  action  shall  be
          dismissed  on  the  ground  that  it  is  not
          prosecuted in the name of the real  party  in
          interest  until a reasonable  time  has  been
          allowed  after objection for ratification  of
          commencement of the action by, or joinder  or
          substitution of, the real party in  interest;
          and    such    ratification,   joinder,    or
          substitution shall have the same effect as if
          the action had been commenced in the name  of
          the real party in interest.
          
     2     Fairbanks  N. Star Borough v. Kandik Constr.,  Inc.  &
Assocs., 795 P.2d 793, 802 (Alaska 1990).

     3     Burns  v.  Anchorage Funeral Chapel, 495 P.2d  70,  75
(Alaska  1972); 4 James Wm. Moore et al., Moores Federal Practice
17.12[2][a] (3d ed. 1997) (A determination of waiver is made on a
case-by-case basis at the discretion of the court.).

     4     City of Kenai v. Friends of the Recreation Ctr., Inc.,
129 P.3d 452, 455 (Alaska 2006) (quotations omitted).

     5    Even though the Clinic did not mention Civil Rule 17(a)
in  its  summary  judgment  motion, it was  appropriate  for  the
superior  court  to frame the issue as a real party  in  interest
objection.   See  Advanced Magnetics, Inc. v. Bayfront  Partners,
Inc.,106  F.3d 11, 20 (2d Cir. 1997) (holding that  even  if  the
defendant did not style its motion to dismiss as a real party  in
interest  objection, the district court should  nonetheless  have
allowed  the  plaintiff  to add parties under  Civil  Rule  17(a)
because [t]he form of the . . . contentions should not have  been
allowed  to obscure their substance); Hembree v. Tinnin,  807  F.
Supp.  109,  110  (D. Kan. 1992) (holding that  even  though  the
defendants  motion was stylized as a motion for judgment  on  the
pleadings  and for summary judgment, [it was], in  fact,  a  real
party in interest challenge).

     6    495 P.2d at 75 n.15.

     7     Moore  et  al.,  supra note 3,  17.12[2][a].   Several
federal  courts have also held a real party in interest objection
is  waived if it is not brought with reasonable promptness.  See,
e.g., United HealthCare Corp. v. Am. Trade Ins. Co., 88 F.3d 563,
569  (8th  Cir.  1996); Allegheny Intl, Inc. v. Allegheny  Ludlum
Steel  Corp., 40 F.3d 1416, 1431 (3d Cir. 1994); Whelan v. Abell,
953  F.2d  663, 672 (D.C. Cir. 1992); Hefley v. Jones,  687  F.2d
1383,  1388  (10th Cir. 1982); Nikimiha Sec. Ltd. v. Trend  Group
Ltd., 646 F. Supp. 1211, 1224 (E.D. Pa. 1986).

     8    Burns, 495 P.2d at 75 n.15.

     9     Moore  et al., supra note 3,  17.12[2][a];  see  also,
e.g.,   Stichting   Ter   Behartiging   Van   de   Belangen   Van
Oudaandeelhouders  In  Het  Kapitaal Van  Saybolt  Intl  B.V.  v.
Schreiber,  407  F.3d  34, 45-46 (2d Cir.  2005)  (upholding  the
district  courts finding that the defendant had  not  waived  its
real  party in interest objection by waiting three years to raise
it because the plaintiff suffered no prejudice as a result of the
defendants  delay);  Allegheny, 40 F.3d at  1431  (upholding  the
district  courts  finding  that  the  defendants  real  party  in
interest  objection  was  waived due to untimeliness,  since  the
court  may  conclude that the point has been waived by the  delay
and  exercise  its discretion to deny motions on  the  ground  of
potential  prejudice (quotations omitted)); Whelan, 953  F.2d  at
672  (holding  that the district court abuses its  discretion  by
allowing a real party in interest objection as late as the  start
of  the  trial  if  the  real party has been  prejudiced  by  the
defendants laxness); Sun Ref. & Mktg. Co. v. Goldstein  Oil  Co.,
801 F.2d 343, 344-45 (8th Cir. 1986) (reversing a district courts
judgment  in  favor  of the defendant on real party  in  interest
grounds  because  the defendants objection was untimely  and  the
effect  on  the  real party in interest was a forfeiture  of  the
claim).

     10    795 P.2d 793, 802 (Alaska 1990).

     11     The  Clinic seems to argue that it suffered prejudice
because if the superior court had not permitted the substitution,
the BWA partnership would have been barred from bringing suit  by
the  statute  of  limitations.  But if the Clinic  had  made  its
objection in a timely manner, there would have been time to  take
corrective action before the statute of limitations deadline.

     12    See, e.g., Burns, 495 P.2d at 76 n.17 (quoting Federal
Rule of Civil Procedure 17 advisory committee note of 1966).   We
do not suggest by relying on waiver that bringing the case in the
name  of  the LLC rather than the partnership was not  an  honest
mistake.   The  Clinic made the same mistake in its counterclaim,
alleging that it was the LLC that breached, and thus was a  party
to, the Interim Operating Agreement.

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