City of Perth Amboy v. Safeco Ins. Co. of America

• Decision Date: 10 March 2008
• Docket Number: No. 07-4420.,07-4420.
• Citation: 539 F.Supp.2d 742
• Parties: CITY OF PERTH AMBOY, Plaintiff, v. SAFECO INSURANCE COMPANY Of AMERICA, Defendant.
• Court: U.S. District Court — District of New Jersey

539 F.Supp.2d 742

CITY OF PERTH AMBOY, Plaintiff, v. SAFECO INSURANCE COMPANY Of AMERICA, Defendant.

No. 07-4420.

United States District Court, D. New Jersey.

March 10, 2008.

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Andrew C. Samson, Scott D. Baron, Baron Samson LLP, Fairfield, NJ, for Plaintiff.

Kevin Michael Gary, Torre Lentz Garnell Gary & Rittmaster LLP, Jericho, NY, for Defendant.

OPINION

MARTINI, District Judge.

This matter comes before the Court on Plaintiff City of Perth Amboy's Motion for Joinder and Remand. Defendant Safeco Insurance Company of America opposes the motion. Magistrate Judge Mark Falk entered a Report and Recommendation on December 27, 2007 (hereinafter "R & R") in favor of granting Plaintiffs motion. Defendant filed objections to the R & R. There was no oral argument. Fed.R.Civ.P. 78(b). After careful consideration of the parties' submissions and a de novo review of the R & R, the Court agrees with the findings and conclusions in the R & R. Accordingly, Plaintiffs Motion for Joinder and Remand is granted.

I. BACKGROUND

As the R & R accurately lays forth the full background and procedural history of this case, the Court recites only the following relevant facts pertaining to its de novo review. This construction contract dispute was initially brought by Plaintiff in state court on September 7, 2007. On September 13; 2007, TAK Construction, Inc. ("TAK") filed a separate lawsuit in state court against Plaintiff for breach of contract and breach of the covenant of good faith and viewing, among others. On September 14, 2007, Defendant removed this case to federal court based upon diversity jurisdiction. Upon removal, Plaintiff sought immediate relief in the form of specific performance in an application for an order to show cause. This Court denied the application on September 20, 2007. On September 26, 2007, Defendant filed an Answer and Counterclaim for declaratory relief and monetary damages. On October 11, 2007, Plaintiff filed an Answer and Counterclaim in the state court case involving TAK. Concurrently, Plaintiff filed a Third-Party Complaint in the TAK state court case against Defendant.

On October 12, 2007, Plaintiff filed this present motion to join TAK as a nondiverse party and sought remand of this case to state court. Defendant opposed. After careful consideration of the parties' submissions, Magistrate Judge Falk recommended the joinder of TAK and remand to state court on December 26, 2007. Defendant objected to the recommendation. Before this Court is a consideration of the parties' full submissions and a de novo review of the disputed findings and conclusions in the R & R.

II. DISCUSSION

A. Standard of Review

A United States Magistrate Judge is vested with the authority to hear a pretrial matter dispositive of a claim and to enter a recommendation for its disposition. Fed. R.Civ.P. 72(b); see also 28 U.S.C. § 636(b)(1). A party may object to the recommended disposition of the matter by filing a written objection within ten days of being served with a magistrate judge's report and recommendation. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); L. Civ. R 72.1(c)(2). Thereafter, the district court "shall make a de novo determination of those positions 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).

B. Hensgens Factors

Courts may permit joinder of a non-diverse party to a removed case, even if that joinder would then require the court to remand the action back to state court. 28 U.S.C. § 1447(e). Although motions to amend are liberally granted under Rules 15(a) and Rule 20, a court must scrutinize motions to amend more carefully where a plaintiff seeks to join a non-diverse party, and as a result, deprive a federal court of subject matter jurisdiction. When assessing motions to amend under § 1447(e), courts in this district along with numerous other districts have adopted a flexible and equitable approach developed by the Fifth Circuit Court of Appeals in Hensgens v. Deere & Co. 833 F.2d 1179, 1182 (5th Cir.1987); see also Doe v. Soc'y for Creative Anachronism, Inc., No. 07-1439, 2007 WL 2155553, at *3, 2007 U.S. Dist. LEXIS 53644, at *11 (E.D.Pa. July 25, 2007)(noting that although the Third Circuit has not yet articulated an analytical method to 28 U.S.C. § 1447(e), district courts have adopted the Hensgens approach).

After identifying and articulating the appropriate structure of analysis under § 1447(e), Judge Falk considered the four Hensgens factors: (1) whether the purpose of the plaintiff's motion is to defeat diversity jurisdiction; (2) whether the plaintiff was dilatory in seeking to amend his complaint; (3) whether the plaintiff will be prejudiced if the motion is not granted; and (4) any other equitable factors. See Hensgens, 833 F.2d at 1182. In balancing the "defendant's interests in maintaining the federal forum with the competing interests of not having parallel lawsuits," Judge Falk concluded that the Hensgens factors weighed in favor of joinder and remand. Id. Defendant objects to the R & R's analysis of each of the Hensgens factors. After a de novo review of the R & R and Defendant's objections, this Court finds that the R & R correctly determined that the four Hensgens factors weighed in favor of granting Plaintiffs motion to join TAK and remand this action to state court.

(i) Purpose of Amendment

The first Hensgens factor is an examination of the extent to which defeating Defendant's choice in the federal forum was the purpose of Plaintiff's decision to add the non-diverse party, i.e. plaintiff's motive.¹ The Court's scrutiny of motive must focus on the specific facts and circumstances in this case.² The parties' actions during the period between the filing of the complaint and the motion to amend is an appropriate matter for consideration by the Court.

In turning to the specific facts in this case, Defendant contends that the primary motivation for Plaintiff's motion to add TAK was to defeat federal jurisdiction, because: (1) Plaintiff could have included TAK in the original complaint, but Plaintiff strategically chose not to include TAK; (2) the actions of Defendant and TAK subsequent to the filing of Plaintiff's original complaint did not require Plaintiff to add TAK to this suit; and (3) the timing of Plaintiff's motion, after this Court's denial of the Order to Show Cause, suggests that Plaintiff is seeking an alternative forum. As discussed below, the Court finds that the facts do not evidence a primary intent to defeat this Court's diversity jurisdiction.

Plaintiff has provided several legitimate reasons for failing to name TAK as a defendant in the initial complaint. First, Plaintiff only sought specific performance under the construction bond in the original complaint.³ Thus, Plaintiff need not have included TAK as a defendant, and in fact, based upon the relief sought in the original complaint, TAK would not have been a proper party to a complaint seeking specific performance under the construction bond. Second, Defendant's actions subsequent to the filing of Plaintiffs original complaint and after removal of this action logically triggered Plaintiff's response. Defendant countersued Plaintiff in this action for monetary damages arising from Plaintiffs failure to pay requisition orders by TAK and Defendant prior to a declaration of TAK's alleged default under the construction contract. A resolution of the complaint and counterclaim would require a determination of the scope of TAK's alleged default and TAK's rights to payment under the construction contract. Thus, it is wholly appropriate for Plaintiff to seek the addition of TAK as a party in this suit. The R & R appropriately focused on actions that transpired after the filing of the Complaint and considered the effect of Defendant's actions in enlarging the scope of this case.

With regards to Defendant's third argument that Plaintiff is now seeking to avoid federal jurisdiction after having failed to obtain immediate relief in the Order to Show Cause, this Court finds that the denial of immediate relief was likely irrelevant to Plaintiff's decision to TAK as a defendant in this case. The Court's' critical remarks regarding the emergent nature of the application did not reflect any considerations of the merits of the case. Instead, the Court's observations reflected its considerations regarding the immediate relief requested by Plaintiff. To the extent that Plaintiff "tested the waters," it was with respect to immediate relief. Additionally, the sequence of events supports a finding that Plaintiff was motivated primarily by Defendant's counterclaim, not by its failure to obtain immediate relief. Plaintiff did not seek to amend the complaint after being denied the order to show cause but rather sought amendment after the filing of Defendant's counterclaim,

These reasons undermine Defendant's argument that the primary motive in filing the motion to join TAK as a party in this case was to defeat jurisdiction. It appears from the sequence of events that Plaintiffs primary purpose in adding TAK to this litigation was to respond to the assertions of claims against Plaintiff by. Defendant and TAK as well as to promote the efficient resolution of the ongoing construction dispute. The Court cannot conclude that Plaintiff's motion to add a non-diverse defendant was predominately motivated by their attempt to defeat federal jurisdiction. Thus, the Court agrees with the R & R that the first Hensgens factor weighs in favor of Plaintiff.

(ii) Dilatory Conduct

With regards to the second Hensgens factor, the R & R correctly determined that Plaintiff was not dilatory in seeking to amend its complaint. Dilatory conduct under this factor takes into consideration the length of time as well as the nature of the delay. See Doe, 2007 WL 2155553, at *3, 2007 U.S....