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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
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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