dissenting:

Since 1966 the District has had a comprehensive contract with Chino, entitled the Waste Water Capacity Agreement, governing the discharge of wastewater from Chino into the sewer system of the District. Chino has permitted Inland to make discharges into the Chino system, and these discharges ultimately enter the District’s system. The District contends that it has a right to stop Inland and asks for an injunction.

Chino is an indispensable party. Each of the three causes of action asserted by the District required interpretation of its contract with Chino. The first cause of action put forward the District’s rights under the District’s own Wastewater Ordinance; but these rights were affected as to water from Chino by the contract with Chino. The second cause of action asserted the District’s obligations under federal law; but any appraisal of these obligations as to water from Chino depended on the control the District had over such water through the contract with Chino. The third cause of action actually sought declaratory relief in interpretation of the contract between the District and Chino. Chino’s rights and obligations were immediately at issue in the third cause of action; and Chino’s contract, and so its rights and obligations, had to be interpreted to resolve the first two cause of actions.

Chino was indispensable. It was not sued. Failure to sue Chino did not deprive the district court of jurisdiction. It did deprive the District of the opportunity of getting the relief it sought. Asking for the exercise of the equitable powers of the court, the District has behaved inequitably. It has sought to have the rights and obligations of Chino determined in the absence of Chino.

When counsel for the District was asked in open court, on the argument of the appeal, why the District had not made Chino a party, he replied, “It would have de *1080 stroyed diversity.” This candid answer stated the obvious. In order to have access to the federal courts in this case, the District could not have a California defendant. The desire to have a federal forum is no excuse for the District’s inequitable conduct.

The District’s conduct was doubly inequitable in its attempt to avoid the arbitration provisions of the contract with Chino. The Waste Water Capacity Agreement provided:

This clause bound the District if it was to raise with Chino the issues it seeks to raise in this suit.

In argument before the district court, on October 9, 1985, that court noted “some real problems with not joining the Chino District.” Daniel V. Hyde, counsel for the District, replied, “Well, the problem with that is that there is a binding arbitration clause in the contract with them which____ which then leaves the District with no ability to proceed against Inland Container at all in this court.” The present suit was an end run around the binding arbitration clause. Arbitration would have provided the answer to the issues the District here raises. The District should not be permitted to ignore its contractual obligation to Chino.

The District chose to bring an inequitable suit asking equitable relief. The District could not win. It could only lose. It has lost in the trial court. Having invoked federal jurisdiction and having imposed on Inland the burden of defending itself, the District should not now be permitted to walk away from the litigation without consequences. On this appeal, we are entitled to sustain the district court on any ground before us in the record. Hatch v. Reliance Insurance Co., 758 F.2d 409 (9th Cir.1985). The record proclaims the unjust attempt of the District to obtain a federal judgment affecting its contract with Chino without Chino being heard. He who seeks equity must do equity. The district court properly denied relief to this inequitable plaintiff.