Estero Development Partners, LP v. Harvey Honore Construction Company, LLC
3:18-cv-01082
| M.D. La. | Nov 8, 2019Background
- Estero Development Partners (Plaintiff) sued Honore Construction and Hyacinth Village in federal diversity court alleging breach of a construction contract and claims relating to conveyance/dedication of Tract A-1 (common area/servitude).
- The case expanded: Grants Design, TitlePlus, and BRH Consultants were later added or intervened; Grants Design is in default. Several defendants are Louisiana citizens; Estero is a South Carolina/New Zealand citizen.
- Estero moved (timely) for leave to file a Third Amended Complaint to add Kate Deumite Robert (LA) and WFG National Title Insurance Company (WFG) (South Carolina/Oregon). The proposed amendment would name WFG (a non-diverse defendant vis-à-vis Estero) and thus would destroy complete diversity.
- Defendants initially did not oppose the proposed amendment but later opposed after the Court raised the jurisdictional consequence, arguing the amendment was a forum-manipulation “end-run” and urging scrutiny under Hensgens.
- The Magistrate Judge applied Rule 15(a), concluded leave to amend should be granted (no bad faith, timely, not futile), found Hensgens inapplicable to a plaintiff-filed federal case (and that, even if applied, amendment would be allowed), recommended the Third Amended Complaint be entered, and recommended dismissal without prejudice under Rule 12(h)(3) because the amendment destroys diversity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether leave to amend to add WFG and Ms. Robert should be granted | Motion timely; no bad faith or futility; joinder permissible under Rule 20; leave favored under Rule 15 | The amendment is an attempt to destroy diversity and should be scrutinized or denied | Granted under Rule 15(a); amendment allowed and Third Amended Complaint to be entered |
| Whether Hensgens factors apply and require denial of joinder | Hensgens governs removed cases; plaintiff chose federal forum so Hensgens inapplicable | Hensgens should govern because addition of non-diverse party defeats jurisdiction | Court: Hensgens primarily addresses removed cases and is not controlling here; even if applied, amendment still permitted |
| Whether the amendment is an improper "end-run" around Rule 41(a)(2) | Not seeking voluntary dismissal; simply adding a defendant to sue all parties together and will refile in state court if necessary | The amendment effectively accomplishes a dismissal/remand that circumvents Rule 41 protections | Court: Not an end-run; amendment not to evade Rule 41; but entry of the amended complaint necessitates dismissal for lack of subject-matter jurisdiction under Rule 12(h)(3) |
| Whether joinder is permissive (Rule 20) vs. required (Rule 19) and the jurisdictional consequence | Joinder of WFG is permissive and arises from same transaction/occurrence and common questions of law/fact | WFG is not a required party and its addition destroys diversity; defendants object to jurisdictional defeat | Court: Permissive joinder available; adding WFG destroys complete diversity; therefore, after amendment is entered, case must be dismissed without prejudice for lack of subject-matter jurisdiction |
Key Cases Cited
- Foman v. Davis, 371 U.S. 178 (1962) (standards for granting leave to amend pleadings)
- Hensgens v. Deere & Co., 833 F.2d 1179 (5th Cir. 1987) (factors to consider when plaintiff seeks to join a non-diverse defendant after removal)
- Rockwell Int'l Corp. v. United States, 549 U.S. 457 (2007) (distinguishing forum-manipulation concerns in removed cases from plaintiff-filed federal cases)
- Martin's Herend Imports, Inc. v. Diamond & Gem Trading U.S.A. Co., 195 F.3d 765 (5th Cir. 1999) (noting bias in favor of granting leave to amend)
- Cobb v. Delta Exports, Inc., 186 F.3d 675 (5th Cir. 1999) (treating Hensgens factors and 28 U.S.C. § 1447(e) in joinder/remand context)
- Wilkinson v. D.M. Weatherly Co., 655 F.2d 47 (5th Cir. 1981) (distinguishing dismissal under Rule 41(a)(2) from dismissal for lack of subject-matter jurisdiction under Rule 12(h)(3))