Virginia Electric and Power Company (VEPCO) brought this action on April 16, 1969, on its own behalf and on behalf of its insurer and partial subrogee, Insurance Company of North America (INA), to recover damages resulting from the failure of one of VEPCO's power generating stations. The defendants are Westinghouse Electric Corporation, builder of the station, and Stone and Webster Engineering Corporation, the engineers. Jurisdiction was founded on diversity of citizenship under 28 U. S.C. Sec. 1332.

The defendants moved to dismiss the action urging that INA, by virtue of the subrogation, was the real party in interest under Fed.R.Civ.P. 17 and must prosecute the action as plaintiff. Since INA is a Pennsylvania corporation, its joinder as party plaintiff would destroy diversity jurisdiction and require dismissal because defendant Westinghouse is also a Pennsylvania corporation. Alternatively, the defendants urged that INA was an indispensable person who could not be made a party (because to do so would destroy diversity jurisdiction) and that under Fed.R.Civ.P. 19(b) the action should be dismissed. The district court denied the motion to dismiss and certified, under 28 U.S.C. Sec. 1292(b), that a controlling question of law was involved as to which there existed a substantial ground for difference of opinion and that an immediate appeal would materially advance the litigation. We granted an interlocutory appeal to determine whether the district court properly concluded VEPCO could pursue this action for the entire loss and that the action could continue without joinder of INA. We think so, and affirm.

On January 22, 1967, a failure occurred at VEPCO's Mount Storm Generating Station, resulting in alleged losses of approximately $2,200,000. There was in effect an insurance policy issued by INA securing VEPCO against the risk of additional operating costs due to physical damage or loss to facilities. The policy contained a $100,000 deductible clause. Pursuant to the policy, INA originally paid VEPCO $1,900,000.

VEPCO then brought this action on its own behalf for $200,000 (the $100,000 loss uninsured under the deductible provision of the insurance policy plus $100,000 alleged expediting expenses) and for $1,900,000 for its insurer, INA. VEPCO also instituted a separate action against INA for an alleged balance owing under the insurance policy of approximately $200,000. VEPCO and INA settled that action, and VEPCO received an additional $50,000 from INA, leaving VEPCO with an unreimbursed loss of $150,000. In consideration of the settlement, VEPCO and INA agreed that INA would furnish counsel and have exclusive control over the present action and that INA would prosecute VEPCO's claims for the remaining uninsured loss.1 Additionally, VEPCO executed a subrogation agreement whereby INA was subrogated to the rights of VEPCO against Westinghouse and Stone and Webster.2

The district court, construing the agreement of cooperation and the instrument of subrogation, found "that VEPCO has retained a pecuniary interest and that standing is retained by virtue of its intent to recover the uninsured loss." This finding is not contested on appeal. The district court then held that VEPCO as a real party in interest could proceed in the action to attempt to recover the full loss. The court concluded that INA was also a real party in interest and that the question of INA's joinder was to be determined under Rule 19. The district court found: (1) that nonjoinder would not prejudice the parties, (2) any danger of double claims against the defendants could be protected against by appropriate decrees;3 (3) no other adequate forum existed for the resolution of the dispute in view of the interstate character of the dispute and the problems involved in obtaining personal jurisdiction in a state court. The court determined that in equity and good conscience the action should proceed among the parties before it without joinder of INA.

About the best that can be said for Fed.R.Civ.P. 174 is that it conveys a certain amount of correct information about naming plaintiffs. C. Wright, Law of Federal Courts Sec. 70, at 293-94 (2d ed. 1970). Originally intended to incorporate the more permissive practice of equity to permit persons having an equitable or beneficial interest to sue in their own names, it is now thought by some commentators to serve only to confuse the already complex problems of determining whether diversity of citizenship exists. 6 C. Wright & A. Miller, Federal Practice & Procedure: Civil Sec. 1541. Intended to expand the class of those who may sue to include persons having an equitable or beneficial interest, the rule is unfortunately susceptible to efforts to prevent prosecution of claims as illustrated by this appeal. Ingenious counsel are enabled to present yet another "decision point" resulting in extravagant expenditures of time and effort before ever reaching the merits. See J. Frank, American Law, The Case for Radical Reform 65 (1969).

"Rule 17(a) is a barnacle on the federal practice ship. It ought to be scraped away. . . . Rules 19, 17(b) and substantive rules as to stating a claim for relief are adequate without interjecting the meaningless, logically inconsistent commands of the real party in interest rule . . . ." Kennedy, Federal Rule 17(a); Will the Real Party in Interest Please Stand?, 51 Minn.L.Rev. 675, 724 (1967).

The meaning and object of the real party in interest principle embodied in Rule 17 is that the action must be brought by a person who possesses the right to enforce the claim and who has a significant interest in the litigation.5 Whether a plaintiff is entitled to enforce the asserted right is determined according to the substantive law. In a diversity action such as this one, the governing substantive law is the law of the state.6 While the question of in whose name the action must be prosecuted is procedural, and thus governed by federal law, its resolution depends on the underlying substantive law of the state.7

In the present case it appears that VEPCO has both a sufficient interest in the litigation and is entitled under the substantive law to recover for the entire loss resulting from the failure of its generating station. VEPCO retained a significant pecuniary interest in the litigation. Thus this is not a case where an insurer-subrogee has paid an entire loss suffered by the insured and is the only real party in interest who must sue in his own name. United States v. Aetna Casualty & Surety Co., 338 U.S. 366, 380-381, 70 S. Ct. 207, 94 L. Ed. 171 (1949).8 In addition to having a sufficient interest in the litigation, VEPCO, as subrogor, is entitled under the substantive law to bring suit for its entire loss.9 VEPCO, being entitled to enforce the right, may bring this action even though INA will ultimately receive the major portion of any recovery.10

To allow VEPCO to maintain this action for the entire loss accords with the purposes of Rule 17. Under the common-law practice, a subrogee or assignee could enforce his rights only in the name of his subrogor or assignor. The original purpose of Rule 17 was to liberalize party rules, i. e., to allow an assignee or subrogee to enforce his rights in his own name.11 The permissive function of Rule 17 has been accomplished, and Rule 17 now serves primarily a negative function. It is to enable a defendant to present defenses he has against the real party in interest, to protect the defendant against a subsequent action by the party actually entitled to relief, and to ensure that the judgment will have proper res judicata effect.12 In view of its current purpose, to protect defendants against subsequent suits, Rule 17 will not bar a suit by a real party in interest which will have the effect of preventing a multiplicity of suits.13

Where there is partial subrogation, there are two real parties in interest under Rule 17. Either party may bring suit-the insurer-subrogee to the extent it has reimbursed the subrogor, or the subrogor for either the entire loss or only its unreimbursed loss. If either the subrogor or subrogee brings suit, joinder is often appropriate upon proper motion by the defendant.14 But joinder is not appropriate, and certainly not required by Rule 17, for the purpose of destroying diversity jurisdiction and requiring dismissal. Even without joinder the partial subrogee is generally precluded from bringing a subsequent action against the defendants where a judgment has been rendered in a suit by the subrogor for the entire loss.15 Multiplicity of suits, one by the subrogor for his loss and one by the subrogee for the reimbursed loss, is thus prevented as fully as if joinder were compelled.

In the present case INA will clearly be precluded from subjecting Westinghouse and Stone and Webster to further suits. Under the cooperation agreement between VEPCO and INA filed with the court, INA has full and exclusive control of the litigation. It is settled under the applicable substantive law that any judgment will have full res judicata effect as to INA in these circumstances.16

Thus we conclude that the district court properly allowed the suit to continue with VEPCO as the party plaintiff. "It would result in unnecessary hardship and confusion to hold that such a company [as INA], entitled to partial subrogation, . . . must go into a state court and try over again issues that [will be] settled in the federal court. There is nothing in modern practice which sanctions any such absurdity." Virginia Electric & Power Co. v. Carolina Peanut Co., 186 F.2d 816, 821 (4th Cir. 1951).

As noted, the modern function of Rule 17 is to prevent the defendant from being subjected to subsequent suits. In Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 88 S. Ct. 733, 19 L. Ed. 2d 936 (1968), the Court stated that one of the primary considerations under Rule 19 in whether to allow a suit to continue where a party cannot be joined is the protection of a defendant from multiple litigation, or inconsistent relief. 390 U.S. at 10, 88 S. Ct. 733. In view of this overlap between Rule 17 and Rule 19, we think the emphasis in a case such as this should be on whether under Rule 19 the action should be allowed to continue without joinder of the absent party.17 That an absent person who cannot be joined is a real party in interest does not conclude the matter-the court must determine whether, in equity and good conscience, the action should proceed without the person.18

It is clear that a partial subrogee is a person to be joined if feasible under Fed.R.Civ.P. 19(a).19 United States v. Aetna Casualty & Surety Co., 338 U.S. 366, 381-382, 70 S. Ct. 207, 94 L. Ed. 171 (1949). However, here the partial subrogee, INA, cannot be joined without destroying diversity jurisdiction, and Rule 19 by its own terms exhibits concern that the courts not be deprived of jurisdiction by unnecessary joinder. Fed.R.Civ.P. 19(a). In such a case the court must consider the four factors enumerated in Rule 19(b)20 to determine whether in equity and good conscience the action should proceed, or should be dismissed, the absent person being regarded as indispensable. "Whether a person is 'indispensable,' that is, whether a particular lawsuit must be dismissed in the absence of that person, can only be determined in the context of particular litigation." Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 118, 88 S. Ct. 733, 742, 19 L. Ed. 2d 936 (1968).

A review of the four interests which must be considered by the district court in its discretion demonstrates that the court below properly allowed the action to continue without joinder of INA. First, it is difficult to see how a judgment in this action might be prejudicial to either INA or the parties before the court. INA has control of the litigation and the opportunity to fully litigate its derivative rights arising out of subrogation. The defendants have failed to show how they would be prejudiced on the merits by nonjoinder of INA. Second, if any prejudice were shown, it can be avoided by the shaping of relief. Third, it is clear that a judgment rendered in INA's absence will be fully adequate to protect both INA and the parties and the public interest in the termination of disputes on the merits. The defendants have not sought any affirmative relief against VEPCO and do not suggest they would seek affirmative relief against INA if it were joined. Also because of INA's control of the suit, it will be bound by any judgment in favor of the defendants.21 Fourth, it is not clear that plaintiff would have an adequate remedy in the courts of either Virginia or another state against both Stone and Webster and Westinghouse.22 INA, the partial subrogee, is thus clearly not an "indispensable" party to this litigation. See United States v. Aetna Casualty & Surety Co., 338 U.S. 366, 382 n. 19, 70 S. Ct. 207 (1949); Peoples Loan & Finance Corp. v. Lawson, 271 F.2d 529, 532 (5th Cir. 1959), cert. denied, 362 U.S. 903, 80 S. Ct. 613, 4 L. Ed. 2d 555 (1960). The district court below correctly allowed the action to continue without joinder of INA.23

Accordingly, for the reasons stated, the decision of the district court is.

Affirmed.