§17.6 Analysis

• Jurisdiction: Washington

§17.6ANALYSIS

This section analyzes the real party in interest requirement of CR 17, including who qualifies as a real party in interest under the rule and relevant case law. This section also details how to properly object to CR 17 noncompliance in practice (through a motion to dismiss for failure to state a claim under CR 12(b)(6)) and, conversely, how to remedy noncompliance to avoid dismissal of an action (through substitution, joinder, or ratification of a proper real party in interest). This section also examines specific case law regarding particular types of parties who are real parties in interest.

(1)Definitions

A "real party in interest" is one who, under the substantive law of the case, possesses and is entitled to enforce the right in question. To qualify as a real party in interest, one must (1) have a present and substantial interest in the action and (2) be entitled to the benefit of the action, if successful. On the first requirement, the interest must be more than a mere expectancy: one must directly benefit from the relief sought. Kim v. Moffett, 156 Wn.App. 689, 699, 234 P.3d 279 (2010) ("mere expectancy or future contingent interest" insufficient to qualify individual as a real party in interest). The second requirement means that a real party in interest must be one who "will be entitled to the fruits of the action." Nw. Indep. Forest Mfrs. v. Dep't of Labor & Indus.,78 Wn.App. 707, 716, 899 P.2d 6 (1995) (citation omitted). Note, however, that "[o]ne who merely stands to benefit from the action, economically or otherwise, is not necessarily a real party." 4 James W. Moore, Moore's Federal Practice §17.10[1], at 17-11 (3d ed. 2013); see also Wash. Sec. & Inv. Corp. v. Horse Heaven Heights, Inc.,132 Wn.App. 188, 195, 130P.3d880, review denied, 158 Wn.2d 1023 (2006) (in case involving competing claims for ownership of right-of-way, claim of ownership is necessary under CR 17(a); "[t]he party with superior title, whether legal or equitable, must prevail.") (citation omitted).

Under CR 17(a), executors, administrators, guardians, bailees, trustees of express trusts, parties to contracts for the benefit of another, and others authorized by statute to bring actions in their own names may sue in their own names without joining the party for whose benefit an action is brought. The list of real parties in interest in CR 17(a) is illustrative and not exhaustive. 3A Karl B. Tegland, Washington Practice 399 (6th ed. 2002). "Other statutorily defined representatives who fall within the 'real party'provision of Rule 17 include labor unions, bankruptcy trustees, employers in workers' compensation cases, and state appointed representatives as proper claimants in wrongful death actions." 4 James W Moore, Moore's Federal Practice §17.10[3][a], at 17-21 (3d ed. 2013).

(2)Objections and waiver of the same

Although no procedure is set forth in CR 17 for raising the objection, a motion to dismiss under CR 12(b)(6) for failure to state a claim upon which relief can be granted is a proper vehicle for bringing the real party issue before the court for correction. Dennis v. Heggen,35 Wn.App. 432, 434, 667 P.2d 131, review denied, 100 Wn.2d 1032 (1983); see also Beal v. City of Seattle,134 Wn.2d 769, 775-76, 954 P.2d 237 (1998) (City of Seattle did not challenge plaintiff's capacity as plaintiff in its answer to complaint, but ultimately brought CR 12(b)(6) motion to dismiss). Because a CR 17 objection typically is seen in a CR 12(b)(6) motion, Washington courts rarely find the objection waivable (although it does happen). Once an objection is raised, courts permit a reasonable period of time for a real party in interest to ratify an action, to be substituted, or to be joined within a reasonable time after the objection. Ultimately, courts retain the right to dismiss a case based on a CR 17 objection.

Because Washington courts generally treat a CR 17 objection as a defense to be raised in a motion to dismiss under CR 12(b)(6), the objection is typically protected from waiver under CR 12(h)(2). See Dennis, 35 Wn.App. at 434; cf. Foothills Dev. Co. v. Clark Cnty. Bd. of Cnty. Comm'rs,46 Wn.App. 369, 377-78, 730 P.2d 1369 (1986), review denied, 108 Wn.2d 1004 (1987) (same reasoning applied to objection based on capacity to sue or be sued). Contra Walter Implement, Inc. v. Focht,42 Wn.App. 104, 107, 709 P.2d 1215 (1985), aff'd in part, rev'd in part on other grounds, 107 Wn.2d553 (1987) (citing cases) (treating CR 17 objection as an affirmative defense that could be waived if not timely raised). Related case law reinforces the practice of bringing a CR 17 objection in a motion to dismiss: Washington courts have held a defendant must take "a positive step to bring the matter before the court so that the mistake can be corrected." Fitch v. Johns-Manville Corp.,46 Wn.App. 867, 869-70, 733P.2d562, review denied, 108 Wn.2d 1027 (1987). The addition of a real party in interest, rather than dismissal of an action, is the preferred course when the refusal to allow the addition of a real party in interest "would cause retrial of the same case, delay in final settlement of the issues, and waste judicial resources." Betchard-Clayton, Inc. v. King,41 Wn.App. 887, 896, 707P.2d1361, review denied, 104 Wn.2d 1027 (1985) (analyzing CR 17 in conjunction with CR 21).

Of course, courts retain their discretion to rule that CR 17 objections have been waived if they were not timely made. 4 James W Moore, Moore's Federal Practice §17.12[2][a], at 17-63 to 17-64 (3d ed. 2013). Whether an objection has been timely made or waived is mainly a function of the prejudice, if any, to the defendant from the addition of a new plaintiff. Id.; see also Betchard-Clayton, 41 Wn.App. at 895-96. When courts do exercise their right to dismiss the case under CR 17, dismissal is proper only after a reasonable time is allowed for ratification, substitution, or joinder, and none can be effected. Rinke v.Johns-Manville Corp.,47 Wn.App. 222, 227-28, 734 P.2d 533, review denied, 108 Wn.2d 1026 (1987). In other words, a simply delay in adding a real party in interest is insufficient to warrant dismissal of an action. Plese-Graham, LLC v. Loshbaugh, 164 Wn.App. 530, 538, 269 P.3d 1038 (2011) (requiring a showing of prejudice).

(a)Substitution and the relation-back doctrine

In the face of a CR 17 objection, a real party in interest can be substituted or joined within a reasonable period to avoid dismissal. Such substitution or joinder of a real party in interest will "have the same effect as if the action had been commenced in the name of the real party in interest." CR 17(a). The relation-back doctrine is only met, however, when (1) the defendant is not prejudiced and (2) the amendment changes only the representative capacity in which the action is brought. Kommavongsa v. Haskell, 149 Wn.2d288,315,67 P.3d 1068 (2003); Sprague v. Sysco Corp., 97 Wn.App. 169, 982 P.2d 1202 (1999), review denied, 140 Wn.2d 1004 (2000) (applying relation-back doctrine when plaintiff's counsel sought to substitute a different natural person as plaintiff—a bankruptcy trustee as opposed to the debtor).

Caveat: Because CR 17(a) only relates to plaintiffs and not defendants the relation-back provision does not apply when a complaint is amended to add a proper defendant. Geschwind v. Flanagan,65 Wn.App. 207, 210, 828 P.2d 603 (1992), aff'd in part, rev'd in part on other grounds,121 Wn.2d 833,854 P.2d 1061 (1993).

Although Ninth Circuit courts still use an "honest or excusable mistake" approach in applying CR 17, Dunmore v. United States,358 F.3d 1107, 1112-13 (9th Cir. 2004); Riverview Comm. Group v. Spencer & Livingston, 173 Wn.App. 568, 579, 295P.3d258, review granted, 308P.3d643 (2013) (citing CR 17(a)) ("The rule expressly permits a reasonable time 'for ratification of commencement of the action by' a real party in interest."), Washington courts no longer apply the "honest mistake" approach, see Rinke, 47 Wn.App. at 230.

Practice Tip: Because of the change in the substitution and relation-back test, practitioners should be cautious citing to Washington case law pre-dating Beal and Kommavongsa or that otherwise uses an "honest or understandable mistake" analysis.

(b)Ratification and the relation-back doctrine

In addition to substitution or joinder, a CR 17 defect may be remedied by a real party in interest ratifying the action, which, upon successful ratification, will "have the same effect as if the action had been commenced in the...