Posted: July 30, 2014
In 37 E. 50th St. Corp. , the owner (37 East) and manager (RGMS) of a restaurant agreed that RGMS would negotiate a lease extension with the landlord (Eurofinch) on behalf of both entities, but the new lease “cut 37 East out as a tenant” and named an affiliate of RGMS as the new tenant. 37 East sued RGMS for breach of contract and fiduciary duties, seeking injunctive relief requiring RGMS to assign the lease to 37 East. Because Eurofinch would be required to give its consent (not to be unreasonably withheld) to the assignment, 37 East also named Eurofinch as a defendant, although no direct claim was asserted against Eurofinch.
Eurofinch moved to dismiss on that basis, and 37 East opposed on the grounds that the landlord was a necessary party in a litigation concerning the assignment of a lease.
The court rejected all of 37 East’s arguments and dismissed Eurofinch.
First, the court noted that, as a general principle of law, “in order for an entity to be a necessary party, it must be one against whom plaintiff can assert a right to relief.” And in this case, 37 East had no present right to relief against Eurofinch, which would only become implicated in the dispute if it unreasonably withheld its consent to an assignment between 37 East and RGMS. The court held that any assertion that Eurofinch would breach its contractual obligations was highly speculative, and also noted that an entity that is merely “required to provide some cooperative acts if a judgment is adverse to the defendants” is not by law a necessary party.
Second, the court held that the general rule that “third parties with an interest in the property underlying the litigation between plaintiff and defendant [are] necessary parties” was inapplicable: