United States District Court, D. Massachusetts
MEMORANDUM AND ORDER
Talwani United States District Judge
Motion for Joinder/Substitution of Parties Pursuant to
Fed.R.Civ.P. 25(c) and Entry of an Amended Judgment
[#132] is hereby DENIED without prejudice to Defendant
seeking leave to file an Amended Counterclaim adding new
AF Holdings, LLC (“AF”) brought the underlying
case against Defendant Sandipan Chowdhury
(“Chowdhury”). Compl. [#1]. Chowdhury answered
and counter-claimed against AF. Answer [#7]. Following a
hearing at which AF failed to appear, the court dismissed
AF's claims against Chowdhury and denied AF's motion
to dismiss Chowdhury's counterclaim. See Mot. To
Strike [#8]; Mot. To Dismiss [#9]; Order [#20]. AF
subsequently failed to answer Chowdhury's counterclaim,
and the court granted Chowdhury's unopposed motion for a
default judgment against AF. See Mot. Default
Judgment [#28]; Endorsed Order [#31].
then sought and was granted a default judgment against
AF's alleged aliases or alter egos: AF Holdings, Inc.,
Prenda Law, Inc., John L. Steele, Paul A. Duffy, Paul R.
Hansmeier, and Mark Lutz. See Mot. Default Judgment
[#32], Final Judgment [#34]. Upon the entry of the Final
Judgment, Hansmeier and Steele filed Motions to Set
Aside Default [#36, #38], arguing that they were never
designated as parties to the action or served with process.
After these motions were denied, see Order [#43],
Steele, Duffy, and Hansmeier appealed. See Notice of
United States Court of Appeals for the First Circuit held
that the appellants were not properly named and served as
parties to the counterclaims, and that “[a]bsent some
exception, which was not established, a judgment cannot be
entered against those who are not made parties through proper
service.” See AF Holdings, LLC v. Chowdhury,
No. 13-2535 (1st Cir. Aug. 29, 2016). The First Circuit
further held that allegations that parties are alter egos and
liable for a judgment, even if undisputed, do not
“obviate the need to call [parties] before the court
before entering judgment.” Id. at 2.
Accordingly, the First Circuit vacated the judgment and
remanded the case. Id.
remand, this court set aside the Final Judgment [#34], and
directed Chowdhury to file a proposed Amended Judgment.
See Order on Remand [#78]. Chowdhury subsequently
filed a Motion for Substitution of Parties and Entry of
an Amended Judgment [#81], which this court denied
without prejudice for failing to include a certificate of
service showing that service had been completed prior to
filing the new motion. Order [#92]. After various
delays, including some sought by Chowdhury in light of
Hansmeier's bankruptcy proceedings, Chowdhury filed his
renewed Motion for Joinder/Substitution of Parties
Pursuant to Fed.R.Civ.P. 25(c) and Entry of an Amended
seeks to substitute John Steele and Paul Hansmeier for AF
under Fed. Civ. R. Pro. 25(c). Chowdhury contends that Steele
and Hansmeier were the real parties in interest, and because
“Steele and Hansmeier have [now] been personally served
[. . .], there can be no doubt any due process concerns have
been addressed.” See Docket Entry #133 at 8.
The court disagrees.
25(c) is a “discretionary procedural vehicle”
which allows for substitution “where a party to a
lawsuit transfers an interest during the pendency of
the lawsuit or after judgment has been rendered.”
Negron-Almeda v. Santiago, 579 F.3d 45, 52-3 (1st
Cir. 2009) (internal quotation marks and citations omitted,
emphasis added). Chowdhury argues that the First Circuit
“sanctioned the use of Rule 25(c) to join parties as
alter egos and hold them liable for full judgment.”
Mem. In Support of Mot. [#133] at 5, citing
Rodriguez-Miranda v. Benin, 829 F.3d 29 (1st Cir.
2016). In Rodriguez-Miranda, joinder was sought to
collect from a corporate defendant's officer, his mother,
and a successor corporation after the officer and his mother
attempted to shield the original corporation's assets
from judgment by transferring its assets to the successor.
829 F.3d at 34. The case differs in two material respects
from the case at bar. First, Rodriguez-Miranda
involved an adjudication on the merits following a trial,
while Chowdhury seeks to substitute Steele and Hansmeier and
charge them with AF's default where the underlying claim
has never been adjudicated on the merits. Second,
Rodriguez-Miranda involved the transfer of assets of
a party, while Chowdhury does not allege that AF transferred
assets to Steele and Hansmeier but rather that these two
individuals are, and have always been, the real parties in
claim that Hansmeier and Steele were the real parties in
interest may well give rise to a new claim for relief. But
due process requires that they be brought into court on that
new claim, rather than having a default against AF assigned
to them. The court notes by analogy that under Fed.R.Civ.P.
5(a)(2), a “pleading that asserts a new claim for
relief against [a party who is in default for failing to
appear] must be served on that party under Rule 4.”
See D'Angelo v. Potter, 221 F.R.D. 289, 293 (D.
Mass. 2004) (defaulted party was entitled to summons and
service of the Second Amended Complaint because additional
claims for attorney's fees constituted new and/or
additional claims under Fed.R.Civ.P. 5(a)(2)); see also
Varnes v. Local 91, Glass Bottle Blowers Ass'n of U.S.
& Canada, 674 F.2d 1365, 1371 (11th Cir. 1982). This
same concern applies to a new claim that Hansmeier and Steele
were the real parties in interest in the actions at issue in
the counter-claim. Just as a plaintiff cannot tack on new or
additional claims against a party in default without serving
new or amended papers, see Fed. R. Civ. P. 5(a)(2)
and Fed.R.Civ.P. 4, Chowdhury cannot raise new claims against
Steele and Hansmeier through a substitution on a default
judgment of a counterclaim that does not include the alter
ego allegations. To do so would be tantamount to amending the
claims against them without providing the required notice and
opportunity to defend. The proper vehicle for such relief is
not through Fed.R.Civ.P. 25(c).
ruling does not preclude Chowdhury from promptly seeking
leave to amend his cross-claim to add his new claims and
parties. If leave is granted, summons will issue and the new
pleading and summons will need to be served, and the
individuals named will then be afforded an opportunity to
defend against Chowdhury's claims.
these reasons, Chowdhury's Motion is DENIED, without
prejudice to Chowdhury promptly seeking ...