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

March 10, 2008

CITY OF PERTH AMBOY, PLAINTIFF,
v.
SAFECO INSURANCE COMPANY OF AMERICA, DEFENDANT.



The opinion of the court was delivered by: Martini, U.S.D.J.

OPINION

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 Plaintiff's 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, Plaintiff's 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 dealing, 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 non-diverse 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 Plaintiff's 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.*fn1 The Court's scrutiny of motive must focus on the specific facts and circumstances in this case.*fn2 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 ...


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