527 B.R. 590
Bankr. S.D.N.Y.2015Background
- Defendants MIG Inc. and AREC are Tennessee corporations and general partners in the Tennessee partnership MIG; MIG is the non-moving defendant.
- The Trust filed a Second Amended Complaint alleging breach of representations and warranties and indemnification related to loans sold by MIG to RFC.
- Defendants moved to dismiss under Rule 17, arguing capacity to be sued and choice-of-law issues governability for contractual claims.
- The Court preliminarily concluded MIG is not treated as a New York partnership for Rule 17(b) purposes, making capacity analysis immaterial to the outcome.
- The Court held the Defendants may be sued in this Court for the contract claims regardless of subsections (b)(2) or (b)(3) and denied the motion to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rule 17 governs capacity to sue MIG Inc. and AREC in this Court. | Trust argues capacity is governed by Rule 17(b)(2). | MIG and AREC contend Rule 17(b)(3) applies as partnerships. | Denial of motion; capacity issue does not change outcome. |
| What law governs liability for the contract claims (capacity aside)? | Choice-of-law under Minnesota law governs substantive issues. | New York law or other forum rules consulted; alleged conflicts irrelevant. | Under either rule, liability under Tennessee or Minnesota law applies; claims not dismissible. |
| Is MIG Inc. and AREC's capacity to be sued bound by New York partnership law? | The Trust asserts capacity under Rule 17(b)(2) due to corporate status; New York partnership law not controlling. | Defendants rely on New York partnership law to bar claims. | Rule 17(b) analysis shows foreign partnership capacity not binding; claims survive. |
Key Cases Cited
- Gilbert Switzer & Assocs. v. Nat’l Hous. P’ship, Ltd., 641 F.Supp. 150 (D. Conn. 1986) (foreign partnership liability governed by law of partnership's organization; capacity not limited by forum law)
- Dep’t of Econ. Dev. v. Arthur Andersen & Co. (U.S.A), 924 F.Supp. 449 (S.D.N.Y. 1996) (New York courts judge liability of partners of out-of-state partnerships by the jurisdiction where the partnership was organized)
- Beltrone v. Gen. Schuyler & Co., 223 A.D.2d 938, 636 N.Y.S.2d 917 (N.Y. App. Div. 1996) (partnership named as defendant may proceed on contract claims without insolvency allegations against the partnership)
- Lewis v. Rosenfeld, 138 F.Supp.2d 466 (S.D.N.Y. 2001) (New York law limits a partner's liability for contracts but permits claims when partnership is named)
- Philips Credit Corp. v. Regent Health Grp., Inc., 953 F.Supp. 482 (S.D.N.Y. 2002) (contractual choice-of-law provisions valid; apply relevant law for liability)