31-01 Broadway Assocs. v. Travelers Cas. & Sur. Co.

• Court: U.S. District Court — District of New Jersey
• Writing for the Court: John Michael Vazquez, U.S.D.J.
• Decision Date: 08 October 2019
• Docket Number: Civil Action No. 17-6292
• Citation: 31-01 Broadway Assocs. v. Travelers Cas. & Sur. Co., Civil Action No. 17-6292 (D. N.J. Oct 08, 2019)
• Parties: 31-01 BROADWAY ASSOCIATES, LLC, et al., Plaintiffs, v. TRAVELERS CASUALTY & SURETY COMPANY, et al., Defendants.

31-01 BROADWAY ASSOCIATES, LLC, et al., Plaintiffs, v. TRAVELERS CASUALTY & SURETY COMPANY, et al., Defendants.

Civil Action No. 17-6292

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

October 8, 2019

Not for Publication

OPINION & ORDER

John Michael Vazquez, U.S.D.J.

This matter comes before the Court on the August 27, 2019 Report and Recommendation ("R&R") of Magistrate Judge James B. Clark, which addressed Plaintiffs' motion to amend the complaint to add a non-diverse defendant. The R&R recommends that this Court grant Plaintiffs' motion to amend and, accordingly, that the case be remanded to the New Jersey Superior Court because the additional defendant defeats diversity jurisdiction. D.E. 84. Defendants Travelers Casualty & Surety Company and Hartford Casualty Insurance Company (collectively "Defendants") filed a timely objection to the R&R, D.E. 87, and Plaintiffs 31-01 Broadway Associates, LLC ("31-01 Broadway") and Cameo Fabric Care, Inc. ("Cameo" and collectively "Plaintiffs") filed a response, D.E. 88.¹ The Court reviewed all relevant documents and submissions, and for the reasons stated below, the Court adopts the R&R in part and modifies theR&R in part. The modifications do not alter Judge Clark's overall recommendations. Accordingly, Plaintiffs' motion to amend is GRANTED and this matter shall be REMANDED to the New Jersey Superior Court, Bergen County.

I. FACTUAL BACKGROUND & PROCEDURAL HISTORY

The factual details of this dispute are explained in detail in the R&R. In short, 31-01 Broadway owned the property where Cameo once operated a dry-cleaning business. Defendants insured non-party individuals and entities (the "Insured") that purchased the dry-cleaning business from Cameo and continued to operate a dry cleaner at the property. In 2001, the New Jersey Department of Environmental Protection determined that the property was contaminated by chemical solvents frequently used in the dry-cleaning industry, and Plaintiffs were issued corrective action directives to remediate the property. As a result, 31-01 Broadway initiated state court actions against the Insured seeking contribution for remediation costs. 31-01 Broadway and some of the non-party individuals that operated the dry cleaner after Cameo are also presently involved in a separate state court matter that involves New Jersey Spill Act contribution claims.

31-01 Broadway and the Insured resolved the state court actions by executing a settlement agreement. As part of the settlement agreement, 31-01 Broadway agreed that it would only seek to recover the settlement amount from Defendants. To date, Defendants have refused to indemnify the Insured. As a result, on July 12, 2017, Plaintiffs initiated this action in New Jersey state court against Defendants to enforce the settlement agreement. Defendants removed the matter to this Court on August 21, 2017 on the grounds that there was diversity jurisdiction pursuant to 28 U.S.C. § 1332. D.E. 1.

On April 5, 2018, Plaintiffs requested leave to file a motion to amend to include Cameo Protecna Clean, Inc. ("Cameo Protecna") as a defendant. D.E. 29. Cameo Protecna, however, isa New Jersey corporation whose presence would destroy diversity between the parties. Cameo Protecna was owned by the same family that owned Plaintiffs, and when it was sold, one of its principals personally indemnified Cameo Protecna for environmental liabilities. However, it appears that Cameo Protecna is also independently insured by a third party. Cameo Protecna is not a party to any of the underlying and related state court litigation.

Judge Clark granted Plaintiffs' request on April 10, 2018, and Plaintiffs subsequently filed their motion to amend on April 12, 2018. D.E. 32, 33. Defendants opposed Plaintiffs' motion, arguing that Plaintiffs' primary motivation for adding Cameo Protecna was to defeat diversity jurisdiction. D.E. 37. On November 20, 2018, Judge Clark issued a Report and Recommendation recommending that the Motion to Amend be granted and that the matter be remanded to New Jersey Superior Court. D.E. 55. Defendants filed a timely objection and Plaintiffs responded. D.E. 57, 58. In Defendants' objection, they relied on new facts that were not before Judge Clark when he issued the Report & Recommendation and then filed a letter supplementing their objections in light of a new case decided by the Superior Court of New Jersey, Appellate Division.²Plaintiffs also filed a supplemental letter addressing developments in the state court matter that involves the Spill Act claims. In light of the new evidence and arguments, this Court remanded the matter to Judge Clark. D.E. 65. Judge Clark entered the current R&R on August 27, 2019. D.E. 84. Defendants again filed a timely objection to the R&R in its entirety and Plaintiffs filed a response. D.E. 87, 88.³

II. LEGAL STANDARD

Local Civil Rule 72.1(c)(2) allows a party to object to a Magistrate Judge's report and recommendation within 14 days of service. The district court "shall make a de novo determination of those portions to which objection is made and may accept, reject, or modify, in whole or in part, the findings or recommendations made by the Magistrate Judge." L. Civ. R. 72.1(c)(2); see Edelson V., L.P. v. Encore Networks, Inc., No. 11-5802, 2012 WL 4891695, at *2 (D.N.J. Oct. 12, 2012). The district court "need not normally conduct a new hearing and may consider the record developed before the Magistrate Judge, making his or her own determination on the basis of that record." L. Civ. R. 72.1(c)(2); see Edelson V., L.P., 2012 WL 4891695, at *2. "As to uncontested portions of the report, the district court has discretion to choose an appropriate standard of review. At a minimum, what is not objected to, the district court reviews under the plain error or manifest injustice standard." Edelson V., L.P., 2012 WL 4891695, at *3 (internal quotations, citations, and brackets omitted). "[W]here no objections are made in regard to a report or parts thereof, the district court will adopt the report and accept the recommendation if it is 'satisf[ied] . . . that there is no clear error on the face of the record.'" Sportscare of Am., P.C. v. Multiplan, Inc., No. 10-4414, 2011 WL 500195, at *1 (D.N.J. Feb. 10, 2011) (quoting Fed. R. Civ. P. 72 Advisory Committee's Notes).

Plaintiffs argue that because the instant motion solely involves their leave to amend, this Court should review Judge Clark's decision under a clearly erroneous standard. Plfs. Resp. at 5-8. Motions to amend are generally considered non-dispositive for purposes of 28 U.S.C. § 636(b)(1). Therefore, a magistrate judge may decide a motion to amend and it is reviewed by the district court, only if a party appeals the decision, under the clearly erroneous standard.⁴ Spring Creek Holding Co., Inc. v. Keith, No. 02-376, 2006 WL 2715148, at *2 (D.N.J. Sept. 22, 2006); see also 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72. A motion to remand, however, is a dispositive motion for purposes of § 636(b)(1). In re U.S. Healthcare, 159 F.3d 142, 146 (3d Cir. 1998). As a result, when referred to a magistrate judge, a district court judge must review de novo any portion of the magistrate judge's decision to which a party objects. See E.E.O.C. v. City of Long Branch, 866 F.3d 93, 99-100 (3d Cir. 2017).

In this instance, granting Plaintiffs' motion to amend would cause this Court to lose subject matter jurisdiction. When faced with this situation, the Third Circuit has not directly addressed what standard a district court should use in reviewing a magistrate judge's conclusion as to themotion to amend. Moreover, courts in this district appear divided on the issue. Compare Thomas v. Ford Motor Co., 137 F. Supp. 2d 575, 579 (D.N.J. 2001) (reviewing a motion to amend that disposed of federal claim de novo), with Fishbein Family P'ship v. PPG Indus., Inc., 871 F. Supp. 764, 769 n.4 (D.N.J. 1994) (stating that a magistrate judge may decide motion to amend as a non-dispositive matter even though "denial of this motion would be tantamount to a dispositive order"). The Third Circuit, however, has repeatedly stated that a motion for leave to amend is non-dispositive for purposes of 28 U.S.C. § 636. See, e.g., Patel v. Meridian Health Sys., Inc., 666 F. App'x 133, 136 (3d Cir. 2016) ("Because we find that the Magistrate Judge's denial of [the] motion for leave to amend is nondispositive," appellants were required to comply with Rule 72(a) in order to challenge the magistrate judge's decision that denied the plaintiffs leave to amend sole federal claim); see also Kenny v. United States, 489 F. App'x 628 (3d Cir. 2012) (declining to resolve the issue but stating that "[s]tatutory and precedential authority largely rejects" the argument that motion to amend that in practice results in a dismissal should be construed as a dispositive motion for purposes of 28 U.S.C. § 636).

Thus, it appears that this Court should treat the R&R as deciding a non-dispositive motion and review Judge Clark's decision under the clearly erroneous standard. But even under a de novo review, which is what Judge Clark and the parties clearly contemplated given the fact that the motion to amend was addressed through a report and recommendation, Judge Clark's determination that Plaintiffs should be granted leave to amend is sound. Therefore, the remainder of this Opinion considers the R&R de novo.

III. ANALYSIS

A. The Hensgens Factors

A motion to amend is ordinarily governed by Fed. R. Civ. P. 15(a)(2). Motions for leave to amend pursuant to Rule 15(a)(2) are liberally granted. Fed. R. Civ. P. 15(a)(2). When a party seeks to add a non-diverse defendant that would destroy diversity jurisdiction, however, courts in the Third Circuit apply 28 U.S.C. § 1447(e). City of Perth Amboy v. Safeco Ins. Co. of Am., 539 F. Supp. 2d 742, 746 (3d Cir. 2008). In such a scenario, "a court must scrutinize motions to amend more carefully." Id. While not addressed by the Third Circuit, ...