Preston v. Kindred Hospitals West, LLC – 3/24/2011

April 1, 2011

Arizona Supreme Court Holds Plaintiffs May Substitute Real Party In Interest Without Showing Initial Failure to Name Proper Party Resulted From Understandable Mistake or Difficulty Identifying Proper Party.

Personal representatives of musician Billy Preston filed a complaint against Kindred Hospitals West for wrongful death, negligence, and elder abuse.  Kindred moved to dismiss, arguing that because Preston had filed for bankruptcy before his death, the claim properly belonged to the bankruptcy estate.  The personal representatives argued that they should be able to substitute in the bankruptcy estate as the real party in interest pursuant to Rule 17(a) of the Arizona Rules of Civil Procedure.

The superior court granted Kindred’s motion to dismiss, relying on a State Bar Committee note accompanying Rule 17 which states that the purpose of the rule is to “prevent forfeiture when determination of the proper party to sue is difficult or when an understandable mistake has been made.”  Because the personal representatives knew of the bankruptcy, it was not difficult for them to name the bankruptcy estate as the real party in interest, nor was their failure to name the estate understandable.  The Court of Appeals reversed, holding that the plain language of Rule 17(a) does not require difficulty or understandable mistake.

The Arizona Supreme Court affirmed the decision of the Court of Appeals and reversed the superior court’s dismissal of the lawsuit.  Arizona Rule of Civil Procedure 17(a) requires every action to be “prosecuted in the name of the real party in interest.” Under that rule, however, an action cannot be dismissed for failure to name the proper party “until a reasonable time has been allowed after objection” for the real party in interest to ratify, join, or be substituted into the action. Ariz. R. Civ. P. 17(a).  Citing the well-known principle of statutory construction that courts need not look beyond the language of a rule to determine the drafters’ intent when the rule is clear and unambiguous, the Court declined to “engraft” the language of the State Bar Committee note onto Rule 17 as additional “requirements.”  The Court noted that some federal courts interpret the counterpart in the Federal Rules of Civil Procedure as requiring difficulty or mistake, but chose not to follow that interpretation.

The Court also rejected Kindred’s argument that permitting liberal substitution of plaintiffs could lead to abuse, noting that the trial courts may exercise discretion in ruling on motions to amend.  Moreover, the Court noted that it would be rare for a defendant to be prejudiced by the substitution of one representative plaintiff for another when the claims remain exactly the same.

Justice Bales authored the unanimous opinion.