Kelley v. Vermont Mut. Ins. Co.
| Decision Date | 15 December 2005 |
| Docket Number | No. CIV.A.2005-10602 RBC<SMALL><SUP>1</SUP></SMALL>.,CIV.A.2005-10602 RBC<SMALL><SUP>1</SUP></SMALL>. |
| Citation | 407 F.Supp.2d 301 |
| Parties | Steven J. KELLEY, as Trustee of CC Realty Trust, Plaintiff, v. VERMONT MUTUAL INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
Robert M. Mendillo, Alexander Klibaner, Sally & Fitch, Boston, MA, for Steven J. Kelley, Plaintiff.
Douglas F. Hartman, Matthew Mahoney, William O. Monahan, Monahan & Associates, P.C., Boston, MA, for Vermont Mutual Insurance Company, Defendant.
MEMORANDUM AND ORDER ON PLAINTIFF'S MOTION TO AMEND THE COMPLAINT AND TO REMAND (# 7)
On February 23, 2005, plaintiff Steven J. Kelley, as Trustee of CC Realty Trust (hereinafter "CC"), filed a complaint against defendant Vermont Mutual Insurance Company (hereinafter "Vermont Mutual") alleging two claims: breach of contract and violation of Massachusetts General Laws chapter 93A. One month later, on or about March 23, 2005, Vermont Mutual filed its answer to the complaint and removed the case to the United States District Court for the District of Massachusetts on the basis of diversity of citizenship between the parties.
On August 3, 2005, CC filed a motion to amend the complaint and to remand. (# 7) Specifically, the plaintiff seeks leave to add a defendant, C & S Insurance Agency, Inc. (hereinafter "C & S"), to the complaint, to add a negligent misrepresentation against C & S, to add negligence claims against Vermont Mutual and C & S, to add C & S to the chapter 93A claim and to increase the damages claimed. If the motion to amend is allowed, CC requests that the case be remanded to the state court given that the addition of C & S as a defendant would destroy diversity. On the same date, August 3, 2005, Vermont Mutual filed its opposition to the motion to amend and remand. (# 8)2 With CC's reply (# 11) having been filed on August 18, 2005, the motion to amend and remand is poised for decision.
The facts as alleged in the proposed amended complaint are as follows. CC is a trust duly organized under the laws of the Commonwealth of Massachusetts with a principal place of business in Stoughton, Massachusetts. ) On or about January 28, 2003, CC purchased real property located at 17 Pearl Street and 733-735 Washington Street in Stoughton (the "Property") and a business owner's insurance policy (the "Policy") for that Property. ) The insurance policy was obtained from C & S, an entity which upon information and belief was an authorized agent of Vermont Mutual acting within the scope of its agency relationship. ) C & S, the defendant to be added, is a for-profit Massachusetts corporation with a principal place of business in Mansfield, Massachusetts. ) Vermont Mutual is a duly constituted insurance company with a principal place of business in Montpelier, Vermont. )
Richard Fitzgerald ("Fitzgerald") was an employee and/or agent of C & S working within the scope of his employment and/or agency. ) According to CC, Fitzgerald advised its trustee that the insurance policy was a replacement cost policy, and that the total cost of replacing the buildings on the Property (subject to deductions not relevant in the instant action) would be covered under the Policy. ) Shortly after the sale of the Policy, Fitzgerald valued the building located on the Property at $425,000 and inserted that value onto an insurance form without consulting or conferring with CC. ) According to Fitzgerald, he intended this amount to be a temporary estimate, as he expected that Vermont Mutual would have a licensed real estate appraiser determine the true value of the building on the Property. )
On March 2, 2003, CC's building on the Property was completely destroyed by fire. ) CC had not seen or received a copy of the Policy before the fire on March 2nd. ) Vermont Mutual has paid CC the value amount entered on the insurance form by Fitzgerald, i.e., approximately $425,000, although it has cost CC more than $1 million to replace the destroyed building on the Property. ) CC has made a written demand upon Vermont Mutual for additional monies, but Vermont Mutual has refused to honor the demand, taking the position that it has fulfilled all of its obligations to CC under the Policy. ) CC claims that, as a result of Vermont Mutual's refusal, it has suffered actual losses in excess of $575,000. )
The parties agree that Title 28 U.S.C. § 1447(e) is controlling. That statute, which authorizes the Court to exercise its discretion in determining whether to permit or deny joinder of nondiverse parties, provides that "[i]f after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State Court." 28 U.S.C. § 1447(e). The permissive language of § 1447(e) makes clear that Congress granted the courts broad discretionary power to permit or deny joinder, even though the decision could divest the court of its jurisdiction and force a remand to state court.
A court's decision under § 1447(e) does not depend on whether the nondiverse defendant is classified as an indispensable or dispensable party as defined by the Fed.R.Civ.P. 19. Indeed, "[v]irtually every court confronted with this issue has unanimously agreed that the statute compels a court to focus on whether joinder would be `equitable' instead of being based on whether a party is indispensable." Irizarry v. Marine Powers Intl., 153 F.R.D. 12, 14 (D.P.R., 1994); see also Casas Office Machines, Inc. v. Mita Copystar America, Inc., 42 F.3d 668, 673-675 (1 Cir., 1994); Hensgens v. Deere & Co., 833 F.2d 1179 (5 Cir., 1987); St. Louis Trade Diverters v. Constitution State Ins., 738 F.Supp. 1269, 1271 (E.D.Mo., 1990); Righetti v. Shell Oil, 711 F.Supp. 531 (N.D.Cal., 1989); Heininger v. Wecare Distributors, Inc., 706 F.Supp. 860, 861 (S.D.Fla., 1989). However, when the party subject to joinder is classified as dispensable, "the district court has the options, pursuant to § 1447(e), of denying joinder and continuing its jurisdiction over the case, or permitting joinder and remanding the case to state court." Casas Office Machines, 42 F.3d at 675, citing Yniques v. Cabral, 985 F.2d 1031, 1034 (9 Cir., 1993). A court does not have the option to permit joinder of a nondiverse defendant and retain its jurisdiction over the case once diversity has been destroyed. Casas Office Machines, 42 F.3d at 675.
In circumstances where joinder would destroy diversity and force a remand, a fact specific analysis must be undertaken. The Court "`should scrutinize that amendment more closely than an ordinary amendment' by considering equitable factors `to balance the defendant's interest in maintaining the federal forum with the competing interests in not having parallel lawsuits.'" Schrepfer v. Framatome Connectors USA, Inc., 115 F.Supp.2d 182, 186 (D.N.H., 1999)(quoting Hensgens v. Deere & Co., 833 F.2d 1179, 1182 (5 Cir., 1987)3 ()); Irizarry, 153 F.R.D. at 14. The primary focus is whether "permitting joinder [under § 1447(e)] will comport with principles of fundamental fairness." Briarpatch Ltd., L.P. v. Pate, 81 F.Supp.2d 509, 515 (S.D.N.Y., 2000) (citing to Wyant v. National R.R. Passenger Corp., 881 F.Supp. 919, 921 (S.D.N.Y., 1995)). In making such a determination, a court will generally consider the following four factors: (1) any delay, and the reasons for the delay, in seeking to amend; (2) any resulting prejudice to the defendant; (3) the likelihood of multiple litigation; and (4) the plaintiff's motivation in moving to amend. See Soto v. Barnitt, 2000 WL 1206603, *3 (S.D.N.Y., 2000)(citing Briarpatch Ltd., 81 F.Supp.2d at 515).
While the First Circuit has not directly addressed the situation in which the plaintiff, after a case has been removed on diversity grounds, seeks to add a nondiverse defendant and thereby destroy diversity, it has cited the Fifth Circuit's decision in the Hensgens case with approval. Casas, 42 F.3d at 675, n. 8. In Hensgens, the Fifth Circuit wrote that:
[J]ustice requires that the district court consider a number of factors to balance the defendant's interests in maintaining the federal forum with the competing interests of not having parallel lawsuits. For example, the court should consider the extent to which the purpose of the amendment is to defeat federal jurisdiction, whether plaintiff has been dilatory in asking for amendment, whether plaintiff will be significantly injured if amendment is not allowed, and any other factors bearing on the equities. The district court, with input from the defendant, should then balance the equities and decide whether amendment should be permitted.
The factors limned in the Hensgens case shall be applied in deciding the motion to amend now before the Court.
CC contends that the Hensgens factors are non-exclusive and that a balancing of equities either applying the Hensgens factors or otherwise actually weigh in favor of allowing the addition of C & S as a defendant under § 1447(e). Vermont Mutual, on the other hand, is of the view that its interest in maintaining a federal forum coupled with evidence of improper motivation on the part of CC to destroy federal jurisdiction outweigh the plaintiff's competing interest in not having parallel lawsuits. Consequently the defendant requests that the Court deny joinder under § 1447(e), which action would effectively moot the motion for remand.
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