Janney Montgomery Scott, Inc. v. Shepard Niles, Inc.
United States Court of Appeals for the Third Circuit
11 F.3d 399 (3d Cir. 1993)
Janney (plaintiff) had a joint-and-several advisory contract covering Underwood and its subsidiary Shepard Niles (defendant). Janney sued Underwood in state court and separately sued Shepard Niles alone in federal court for breach of the same contract, without joining Underwood in the federal suit. Shepard Niles moved to dismiss for failure to join Underwood as an indispensable party, and the district court agreed, reasoning a federal judgment against Shepard Niles could improperly affect Underwood in the pending state action; Janney appealed.
Whether the possibility that a judgment against one co-obligor in a federal contract action could create persuasive precedent harmful to another co-obligor in a separate state action makes that other co-obligor's joinder compulsory.