Summary
treating the validity of the claim as one of six factors to be considered, in addition to motive, when analyzing a proposed joinder
Summary of this case from Drelick v. Innovative Development Company, LLCOpinion
No C-01-4320 VRW
February 26, 2002
ORDER
Plaintiff moves for leave to amend his complaint to join a non-diverse defendant and for the action to be remanded to state court. Doc #16. For the reasons set forth below, plaintiff's motion (Doc #16) is GRANTED. The court finds this matter appropriate for disposition without oral argument. See Civ. LR 7-1(b). The hearing scheduled for February 14, 2002, is VACATED.
Plaintiff filed suit in the Superior Court of the State of California for the County of San Mateo on October 19, 2001. Compl (Doc #1, Exh A). Defendants removed to this court on November 19, 2001, based on alleged diversity of citizenship. Doc #1. Defendants filed a counterclaim on November 28, 2001. Doc #9. All claims and counterclaims are state law claims.
On January 3, 2002, plaintiff filed the present motion, seeking leave to file amended complaint joining a non-diverse party and, accordingly, remand to state court, pursuant to 28 U.S.C. § 1447 (e). Doc #16. The parties stipulated to continue this motion on January 15, 2002, while the court considered defendants' ex parte application for a temporary restraining order (TRO). Doc #20. The court denied defendants' application for a TRO on January 25, 2002. Doc #32.
The claims and counterclaims in this matter are a product of a bitter personal and business dispute between plaintiff, his daughter and defendant Wild. From the record before the court, it appears that by 1992 plaintiff was suffering severe financial difficulties. Plaintiff attributes his debt to problems stemming from his investment in Lloyd's of London. See Compl (Doc #1, Exh A) at 3. Defendants attribute plaintiff's debt to his lavish lifestyle. See Def Opp Br (Doc #27) at 4.
Wild and plaintiff's daughter, Lezlie, have a close personal relationship. Plaintiff alleges that in response to his financial difficulties, as a "family" gesture, Wild offered to enter into an agreement with plaintiff to resolve plaintiff's debt. Plaintiff asserts that Wild offered to set up a holding company, which became defendant Casun Invest. Plaintiff alleges that plaintiff and Wild agreed that plaintiff was to convey title of his home, the "Woodside home," to Casun Invest, to secure an advance by Wild to plaintiff for $1,600,000. The purpose of this plan, alleges plaintiff, was to secure the ability of plaintiff and his family to continue to live in the Woodside home, while alleviating plaintiff's debt. Although this was not mentioned in the deed conveying legal title, plaintiff contends that Wild promised that plaintiff could reside in the Woodside home for plaintiff's lifetime and that plaintiff could reacquire title at any time for $1,600,000.
The parties do not agree on how to refer to plaintiff's daughter. In his brief, plaintiff refers to her as "Lezlie Simpson" and alleges that she is married to Ronald Simpson, although plaintiff also alleges that she represents that she is married to Wild and sometimes calls herself "Lezlie Wild." Defendants, however, refer to Lezlie as "Lezlie Gunn." Rather than weighing in on one side or the other, the court will refer to plaintiff's daughter as "Lezlie" or "plaintiff's daughter."
Plaintiff's complaint alleges that defendants breached their promise that plaintiff could continue to reside in the Woodside home, with an option to repurchase. Plaintiff seeks declaratory relief, specific performance of the alleged oral agreement for life estate and damages for conspiracy to commit fraud and deceit and abuse of elderly person.
Wild claims that plaintiff's debt was the result of plaintiff's tendency to live beyond his means. In order to help plaintiff avoid bankruptcy, Wild claims that he bought the Woodside home for $1,600,000, which was considerably more than the present value of the home. Wild contends that plaintiff continued to suffer financial reverses into the late 1990s and, as a result, Wild allowed plaintiff to do legal work for Wild's companies. Wild claims that plaintiff and his wife then conspired to get more money from Wild, by falsifying the claims in plaintiff's complaint. As a result of this alleged conspiracy, defendants filed their counterclaims alleging a variety of state law claims including breach of fiduciary duty relating to plaintiff's legal work for Wild.
Plaintiff's complaint discussed the participation of his daughter, Lezlie, in the actions in dispute and referred to her repeatedly as the agent of Wild. See, e g, Compl (Doc #1, Exh A) at ¶ 15. Plaintiff now contends, however, that "recent investigation" has revealed that Lezlie was involved in the conspiracy to "wrestle [plaintiff's] Woodside home from him." Pl Br (Doc #16) at 1. Plaintiff states that this new information, which indicates Lezlie's active participation in the alleged conspiracy, has overcome his initial reluctance to assert claims against his daughter and that he now wishes to join her as a defendant. Besides joining her in all existing claims, plaintiff also wishes to bring a claim solely against Lezlie, alleging defamation and libel as a result of a letter Lezlie wrote to plaintiff, which plaintiff contends was also shown to Wild. See proposed first amended complaint (FAC) (Doc #16, Exh #2) at ¶¶ 50-53. As plaintiff and Lezlie are both residents of California, plaintiff contends that the matter must be remanded to state court.
II A
Consistent with the vigorously contested nature of the proceedings to date, each party has filed evidentiary objections to the other party's declarations. On January 24, 2002, defendants filed evidentiary objections to plaintiff's declaration. Doc #28. Soon after, plaintiff filed evidentiary objections to defendants' declarations. Doc #36. Defendants then filed evidentiary objections to plaintiff's reply declaration. Doc #40.
On February 11, 2002, three days before the hearing on plaintiff's motion, defendants also filed a separate motion to strike plaintiff's reply declaration. Doc #37. In this motion, defendants make a variety of allegations, including that in his reply declaration plaintiff disclosed defendants' confidential information, learned as a result of plaintiff's legal representation of defendants, without authorization. Defendants, however, do not identify the substance of this allegedly unauthorized disclosure. Defendants also assert that plaintiff's reply declaration contains various factual and legal inaccuracies.
Defendants' motion to strike is noticed for hearing on February 14, 2002, the same day as the hearing on plaintiff's motion. Defendants, however, provide no authority for their attempt to notice a motion for hearing on three days time, nor is the court aware of any such authority. Moreover, defendants' evidentiary objections, filed on the same day as the motion to strike, cover the same territory as the motion. As a result of this procedural defect, the court DENIES defendants' motion to strike. Doc #37.
Both of defendants' evidentiary objections (Doc #28 and #40) identify numerous allegedly conclusory and irrelevant statements made by plaintiff in his declaration (Doc #17) and reply declaration (Doc #35). Defendants are undoubtedly correct that plaintiff's declarations are replete with conclusory, indeed sometimes inflammatory, statements and irrelevant allegations. Defendants' objections, therefore, are duly noted. The court does not find it necessary, however, to analyze defendants' objections individually, because the court's ruling on plaintiff's substantive motion does not rely upon plaintiff's statements in his declarations. Moreover, many of the disputes raised by defendants' evidentiary objections go to the factual issues underlying plaintiff's complaint, such as the extent of plaintiff's legal representation of defendants, and the court sees no reason to attempt to resolve these disputes here.
Not to be left out, plaintiff has also filed cursory evidentiary objections to defendants' declarations. Doc #36. In his objections, plaintiff merely states, with negligible variation, that the statements in Wild's declaration are "conclusory and lack foundation" and that paragraph one of Ponder's declaration "rests on hearsay and its subject matter is not relevant." See id at 1. Again, the court notes plaintiff's objections, but, because of their lack of both specificity and relevance to the court's determination, declines to analyze them individually. Resolution of the substantive issues before the court simply does not require addressing these matters.
B
Plaintiff's substantive motion is governed by 28 U.S.C. § 1447 (e), which provides:
If 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.
"Under § 1447, whether to permit joinder of a party that will destroy diversity jurisdiction remains in the sound discretion of the Court." Palestini v. General Dynamics Corp, 193 F.R.D. 654, 658 (SD Cal 2000), citing Newcombe v. Adolf Coors Co., 157 F.3d 686, 691 (9th Cir 1998); Clinco v. Roberts, 41 F. Supp.2d 1080, 1082 (CD Cal 1999). In the Ninth Circuit, district courts, in the exercise of their broad discretion, may consider any of a wide range of factors in considering whether to permit amendment to join non-diverse defendants, including whether: (1) the party to be joined is necessary for just adjudication; (2) plaintiff would be barred by a statute of limitations from bringing claims against the new defendant in state court; (3) there has been unexplained delay in seeking joinder; (4) plaintiff's purpose in seeking joinder is dilatory; (5) the claims against the new defendant appear valid; and (6) denial of joinder will prejudice plaintiff. See, e g, IBC Aviation Servs v. Compania Mexicana De Aviacion, 125 F. Supp.2d 1008, 1011 (ND Cal 2000); Righetti v. Shell Oil Co, 711 F. Supp. 531, 535 (1989).
Relying heavily on Yniques v. Cabral, 985 F.2d 1031 (9th Cir 1993), defendants assert that, when considering whether to permit an amendment that would destroy diversity, the court is required to analyze the case under both § 1447(e) and F.R.C.P. 19, which concerns joinder of necessary parties. Because Lezlie is not a necessary or indispensable party under F.R.C.P. 19, defendants assert, the court should deny plaintiff's motion. This is, however, both a misstatement of the law and the holding of the Ynigues court. In Ynigues, the district court dismissed a removed action sua sponte and without a hearing after plaintiff joined a non-diverse defendant. The court subsequently declined to reconsider its order. The Ninth Circuit reversed, holding that, pursuant to § 1447(e), a district court could not both allow joinder and dismiss a removed action.
The Yniques court, however, explicitly rejected defendants' assertion that the district court was required to undertake a F.R.C.P. 19 analysis, holding instead that Congress intended "district courts to have a choice" between the options available under § 1447(e) and F.R.C.P. 19. Id at 1036. Besides the options available under § 1447(e), allowing joinder and remanding the action or denying joinder, theYniques court held that a district court could, pursuant to F.R.C.P. 19, determine that the party seeking to be joined was indispensable to the action but nevertheless refuse joinder, perhaps because the motion was untimely, and dismiss the action.
Defendants' reliance on Ynigues is unavailing. A court considering joinder of a non-diverse party after removal is not required to undergo F.R.C.P. 19 analysis. Section 1447 was intended to broaden the options available to a district court, by "tak[ing] advantage of the opportunity opened by removal from a state court to permit remand if a plaintiff seeks to join a diversity-destroying defendant after removal." HR Rep No 889, 100th Cong. 2d Sess 73-74, reprinted in 1988 US Code Cong Admin News 6033, quoted in Righetti, 711 F. Supp. at 535.
Although courts considering whether to allow joinder of a non-diverse party under § 1447(e) frequently discuss the F.R.C.P. 19 standard, such courts only "disallow joinder of non-diverse defendants where those defendants are only tangentially related to the cause of action or would not prevent complete relief." IBC Aviation Servs, 125 F. Supp.2d at 1012. Clearly, the actions of plaintiff's daughter are not tangentially related to the actions in dispute. Lezlie, in fact, is alleged to be a full, active participant in the alleged conspiracy at the basis of plaintiff's claims.
Defendants also contend that plaintiff has failed adequately to explain the reasons for his delay in naming his daughter as a defendant. Plaintiff's motion is brought at an early stage of this litigation. Discovery has not commenced, nor has the first case management conference occurred. Moreover, plaintiff has explained that, although aware that Lezlie was a participant in defendants' actions, plaintiff was unaware of her culpability until recently. Particularly in light of Congress' intention in enacting § 1447(e) to "undermine the doctrine employed by some courts that amendments that destroyed diversity were to be viewed with suspicion," the court sees no reason to inquire further into plaintiff's expressed initial reluctance to name his daughter as a defendant. IBC Aviation, 125 F. Supp.2d at 1012, quoting Trotman v. United Parcel Service, 1996 US Dist LEXIS 10388, *1 (ND Cal 1996).
Defendants also seek to impugn plaintiff's motive, asserting that plaintiff's motive is to "drag two foreign nationals * * * to the state court in the area where he was born and raised * * *." Def Opp Br (Doc #27) at 18. In other words, defendants suggest that plaintiff added Lezlie as a defendant in order solely to defeat diversity jurisdiction. There is divergence within the Ninth Circuit whether an intention to defeat diversity jurisdiction is a dilatory motive. Clearly, § 1447(e) makes the possibility that plaintiff adds a defendant in order to defeat diversity less of a concern. "Suspicion of diversity destroying amendments is not as important now that § 1447(e) gives courts more flexibility in dealing with the addition of such defendants." IBC Aviation, 125 F. Supp.2d at 1012. As a result, when considering motive, courts often consider whether plaintiff is attempting unreasonably to delay proceedings. See Righetti, 711 F. Supp. at 534.
Moreover, courts that consider diversity destroying amendments improper invariably rely on Desert Emnire Bank v. Ins Co of N America, 623 F.2d 1371 (9th Cir 1980), which was decided well before the enactment of § 1447(e) and is, therefore, of extremely limited pertinence. See, e g,Clinco, 41 F. Supp.2d at 1083. As a result, the court finds Desert Empire Bank unpersuasive. To the extent that the intention to destroy diversity counts as an improper motive under § 1447(e), however, the court finds that defendants have not produced evidence demonstrating this intention. Defendants assert that plaintiff was aware of Lezlie's actions at the time of filing his original complaint and deduce that the attempt to include her now must, therefore, be dilatory. Yet although plaintiff's complaint did discuss Lezlie's actions, it did not assign her active participation in the conspiracy at issue, but relegated her to the role of agent for Wild's actions. Plaintiff's proposed FAC asserts that Lezlie, aside from being Wild's agent, was an active participant in designing and carrying out the alleged conspiracy.
Since defendants possess no "substantive right" to remove an action, "[t]he `right' of removal is merely an expectancy contingent on plaintiff['s] failure to add non-diverse defendants * * *." Righetti, 711 F. Supp. at 534 n3. As a result, "denying the amendment would require [pJlaintiff to choose between redundant litigation arising out of the same facts and involving the same legal issues or foregoing [his] potential claims against" Lezlie. IBC Aviation, 125 F. Supp.2d at 1013. On the other hand, "allowing amendment will not prejudice [d]efendants as discovery has not yet begun." Id. Plaintiff's motion is timely and his delay in naming Lezlie as a defendant has been explained. Moreover, although plaintiff may not ultimately prevail against any defendant, plaintiff's claims against Lezlie appear to be as viable as those against the original defendants. As a result, the court determines that, pursuant to § 1447(e), joinder and remand are appropriate.
As in Righetti:
This approach is consistent with Congress' concern for the administration of justice by reducing the number of diversity-of-citizenship cases to be handled in federal court and the express purpose of section 1447(e), as well as the liberal policy favoring amendment under [F.R.C.P.] 15.Righetti, 711 F. Supp. at 535, citing 2Foman v. Davis, 371 U.S. 178 (1962)
III
In sum, for the foregoing reasons, plaintiff's motion for leave to file an amended complaint and remand (Doc #16) is GRANTED. Defendants' motion to strike (Doc #37) is DENIED. The court ORDERS this matter to be REMANDED to San Mateo superior court. The clerk is directed to close the file and terminate all pending motions.
IT IS SO ORDERED.