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Effect of Requirement that Action be by Real Party in Interest

In law, the real party in interest is the one whose rights are involved and stands to gain from a lawsuit or petition even though the plaintiff who filed suit is someone else.  The real party in interest is the person who will be entitled to benefits of a court action if successful; one who is actually and substantially interested in the subject matter, as opposed to one who has only a nominal, formal, or technical interest in or connection with it.  It may be broadly defined as someone who may be adversely affected by the relief sought or the person or entity entitled to the benefits if the action is successful.

Under the Federal Rules of Civil Procedure (FRCP), FRCP 17(a) provides that “every action shall be prosecuted in the name of the real party in interest”, so that the named plaintiff must have, under the governing substantive law, the right sought to be enforced.  However, the real party in interest is not necessarily the person who ultimately will benefit from the successful prosecution of the action.  Therefore, sometimes even if the original party may have lost interest in the subject matter, the transferee, as the real party in interest, is given the right to continue prosecution of the case in the name of the first plaintiff without having to be substituted for the first plaintiff.[i]

In some jurisdictions, in the absence of objection from the adverse party, the assignor may continue as a party without including his or her assignee.[ii]   However, in cases where the assignor refuses to substitute or join the assignee, the action is abated.

In the case of Carrington v. Crandall[iii], it was observed that a statute authorizing the continuance of a suit, after a transfer of the subject matter, in the name of the original party, or by the person to whom a transfer has been made, exists solely for the benefit of the transferee.  It is not for the benefit of the transferor.  Therefore, after the occurrence of such transfer of interest, the transferee alone has the right to elect as to whether the action shall be carried on in the name of the original party, or whether he will proceed as a substituted party in his own name.  The fact that after such transfer the action may be carried on in the name of the original party does not make such original party a party in interest that may thereafter in any manner control the procedure of the action.

In Jelinek v. Nebraska Natural Gas Co[iv]., the plaintiff insurer who filed an action in the name of its insured, appealed from a decision of the District Court for Webster County (Nebraska), which sustained defendant natural gas company’s motion to dismiss the insurer’s subrogation claim on the ground that the insured were not the real parties in interest. The insured’s  home was damaged by an explosion and fire caused by a break in a gas main maintained by the natural gas company. The insurer paid the full amount of the insured’s’ claim, and then filed a subrogation action in the insured’s’ name for more than the amount it paid on the insurance coverage. The trial court sustained the natural gas company’s motion to dismiss. On appeal, the court affirmed. The court held that pursuant to Neb. Rev. Stat. § 25-301 (1943), every action had to be prosecuted in the name of the real party in interest. The court further held that an insured had only one action against a tort-feasor, which was not permitted to be split. The court found that since the insured did not claim damages for the money they spent in excess of the insurance coverage to remodel, repair, and refurnish their home, and stated in their deposition testimony that they had no claim against the natural gas company and that they considered the insurer’s payment to them settlement in full, the insurer was the real party in interest.  The court affirmed the judgment.

[i] Nicholson v. Thomas, 277 Ky. 760, 127 S.W.2d 155 (1939)

[ii] Armour Fertilizer Works v. Newbern, 210 N.C. 9, 185 S.E. 471 (1936)

[iii] 63 Idaho 651 (Idaho 1942)

[iv] 196 Neb. 488 (Neb. 1976)


Inside Effect of Requirement that Action be by Real Party in Interest