Opinion
CIVIL ACTION NO. 3:04-CV-0734-G.
July 21, 2004
MEMORANDUM ORDER
Before the court are the related motions of the plaintiff Cynthia McNeel ("McNeel") for joinder of an additional party and for remand For the reasons set forth below, McNeel's motions are granted.
I. BACKGROUND
This case arises out of a dispute over the collection of workers' compensation death benefits by McNeel from the defendants, Kemper Casualty Insurance Company, Kemper Employers Insurance Company, and American Protection Insurance Company ("AMPICO") (collectively, "Kemper" or "the defendants"). McNeel's husband, Raymond McNeel, died two days after a fall at his work, the Miller Brewing Company ("Miller"). See generally Plaintiff's Original Petition ("Petition") ¶ 7, attached to Notice of Removal as Exhibit 1. The defendants, insurers of Miller's employees, refused to pay McNeel any benefits, as they attributed Mr. McNeel's death to cardiac disease. Id.
On December 31, 2003, McNeel filed a state court action against the defendants in the 413th Judicial District Court of Johnson County, Texas, alleging breach of the duty of good faith and fair dealing, violations of the Texas Deceptive Practices Act and the Texas Insurance Code, breach of contract, and intentional infliction of emotional distress. See generally Petition. On April 8, 2004, the defendants timely removed this action, pursuant to 28 U.S.C. § 1441(a), on the basis of diversity jurisdiction. See Defendants' Notice of Removal ("Notice of Removal") at 2. McNeel is a citizen of Texas. Petition ¶ 2. Each of the defendants is an Illinois corporation with its principal place of business in Long Grove, Illinois. Notice of Removal at 2-3.
On May 21, 2004, McNeel filed the instant motions to join an additional party and to remand the case back to state court. See generally Docket Sheet; Motion and Brief for Joinder of Additional Parties ("Joinder Motion"); Motion and Brief for Remand ("Remand Motion"). McNeel seeks to join Kristen Murphy ("Murphy"), a citizen of Texas and the insurance adjuster who handled McNeel's claim for death benefits, as a defendant in this lawsuit. See Remand Motion ¶ 1; Joinder Motion ¶ 2; Defendants' Response to Plaintiff's Motion for Joinder of Additional Parties ("Joinder Response") ¶ 4. If Murphy is joined in the lawsuit, her presence will defeat diversity jurisdiction and thereby necessitate remand
II. ANALYSIS
In order for the court to grant McNeel leave to add a non-diverse defendant in this case, she must show that: (1) the joinder of Murphy is proper under the Federal Rules of Civil Procedure; and (2) the factors gleaned from 28 U.S.C. § 1447(e) and Hensgens v. Deere Company, 833 F.2d 1179, 1182 (5th Cir. 1987), cert. denied, 493 U.S. 851 (1989), do not weigh against removal. See Holcomb v. Brience, Inc., No. 3:01-CV-1715-M, 2001 WL 1480756, at *2 (N.D. Tex. Nov. 20, 2001).
Kemper argues that Murphy is a "necessary" party to this action and, therefore, her joinder is prohibited under FED. R. CIV. P. 19(a) because it will deprive the court of jurisdiction over the subject matter of the action. Brief in Support of Defendants' Response to Plaintiff's Motion for Joiner of Additional Parties ("Joinder Response Brief") ¶ 5. Murphy is not a "necessary" party under FED. R. CIV. P. 19(a), however. Murphy is being sued as a joint-tortfeasor. See Plaintiff's Reply in Support of Motion for Joinder of Additional Party and Motion in Remand ("Reply") at 1. The relief McNeel seeks from Murphy arises out of the same series of occurrences and involves questions of law and fact common to the claims asserted against the defendants presently in the case. The court thus finds that Murphy is a "permissive" party under FED. R. CIV. P. 20.
Under FED. R. CIV. P. 20, McNeel must simply show that the relief sought against the parties — i.e., Kemper and Murphy — "aris[es] out of the same transaction, occurrence, or series of transactions or occurrences" and involves common questions of law and fact. Id. The Fifth Circuit has rejected a rigid distinction between the post-removal joinder of indispensable parties under FED. R. CIV. P. 19 and post-removal joinder of permissive parties under FED. R. CIV. P. 20. See Hensgens, 833 F.2d at 1182.
When a plaintiff seeks joinder of additional non-diverse defendants after removal, the court — according to 28 U.S.C. § 1447(e) — has two options: (1) deny the joinder, or (2) permit the joinder — thus destroying diversity of citizenship of the parties — and remand the action to the state court. The Fifth Circuit has advised district courts to closely scrutinize an amendment which would destroy subject matter jurisdiction and that justice requires the consideration of a number of factors to determine if the amendment should be permitted. See Hensgens, 833 F.2d at 1182; see also Doleac v. Michalson, 264 F.3d 470, 474 (5th Cir. 2001); Cobb v. Delta Exports, Inc., 186 F.3d 675, 677 (5th Cir. 1999).
Subsection (e) of section 1447 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.28 U.S.C. § 1447(e).
In Hensgens, the Fifth Circuit outlined four factors which the district court should, in its discretion, consider when a plaintiff seeks joinder of a non-diverse defendant after removal: (1) the extent to which the purpose of the amendment of the complaint is to defeat federal jurisdiction; (2) the degree of dilatory conduct on the part of the plaintiff; (3) the risk of significant injury to the plaintiff if the amendment is not allowed; and (4) any other equitable considerations. 833 F.2d at 1182. The purpose of weighing these factors, according to Hensgens, is to balance the defendants' interest in maintaining a federal forum against the plaintiff's interest in avoiding multiple and parallel litigation. Id.
The first Hensgens factor is the extent to which joinder of Murphy, a non-diverse party, is sought to defeat diversity jurisdiction. Id. It is clear that if McNeel had wished to include Murphy in the original state court lawsuit filed on December 31, 2003, she could have. By waiting until the case was removed to federal court, McNeel appears to have moved to add Murphy as a defendant for the purpose of defeating federal jurisdiction. See In re Norplant Contraceptive Products Liability Litigation, 898 F. Supp. 433, 435 (E.D. Tex. 1995); see also Mayes v. Rapoport, 198 F.3d 457, 463 (4th Cir. 1999) ("Especially where, as here, a plaintiff seeks to add a nondiverse defendant immediately after removal but before any additional discovery has taken place, district courts should be wary that the amendment sought is for the specific purpose of avoiding federal jurisdiction."); see also Joinder Motion ¶ 3 (admitting that one motivation in joining Murphy to this suit "is to destroy diversity").
McNeel contends, however, that the "primary purpose" behind joining Murphy is that, as an independent claims adjuster, she is liable to McNeel under Article 21.21 of the Texas Insurance Code. Joinder Motion ¶ 3. Indeed, if McNeel has stated a viable claim against Murphy under Texas law, then it is unlikely that the primary purpose of the amendment is to destroy diversity jurisdiction. See Jade Marine, Inc. v. Detroit Diesel Corporation, No. Civ. A. 02-2907, 2002 WL 31886726, at *2-*3 (E.D. La. Dec. 20, 2002) (permitting an amendment joining a non-diverse defendant where the plaintiff had a cause of action against that defendant under Louisiana law); Johnson v. Sepulveda Properties, Inc., No. Civ. A. 99-2312, 1999 WL 728746, at *3 (E.D. La. Sept. 16, 1999) (permitting an amendment joining a non-diverse defendant where employee of a corporation could be held personally liable under state law).
In this case, Murphy may be liable to McNeel in her individual capacity or her capacity as an insurance adjuster. Under TEX. INS. CODE Art. 21.21 § 16(a) (Vernon Supp. 2004), any "person" who engages in a prohibited act is a potential defendant. See also Liberty Mutual Insurance Company v. Garrison Contractors, Inc., 966 S.W.2d 482, 484-85 (Tex. 1998) (finding that individuals engaged in the business of insurance can be sued under Article 21.21). "Person" is defined by this article as "any individual, corporation, . . . and any other legal entity engaged in the business of insurance, including agents, brokers, adjusters and life insurance counselors." TEX. INS. CODE Art. 21.21 § 2(a) (emphasis added). The defendants concede that Murphy was "one of the adjusters who handled [McNeel's] claim." Joinder Response ¶ 4.
Given her role in denying McNeel's claim for death benefits, there is a possibility that Murphy may be liable for violating TEX. INS. CODE Art. 21.21 § 4(10)(a)(ii) and § 4(10)(a)(viii). These sections prohibit bad-faith claim denials, which include "failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer's liability has become reasonably clear," id. § 4(10)(a)(ii), and "refusing to pay a claim without conducting a reasonable investigation with respect to the claim," id. § 4(10)(a)(viii). "A cause of action exists under this statute when an insurer `has no reasonable basis for denying or delaying payment of a claim or when the insurer fails to determine or delays in determining whether there is any reasonable basis for denial.'" Performance Autoplex II Ltd. v. Mid-Continent Casualty Company, 322 F.3d 847, 860-61 (5th Cir. 2003) (quoting Higginbotham v. State Farm Mutual Automobile Insurance Company, 103 F.3d 456, 459 (5th Cir. 1997)).
Here, McNeel seeks to add as a defendant the insurance adjuster responsible for denying her claim for benefits. She alleges that Murphy disputed her death benefits claims "without ordering any medical records and without any support from any medical provider." Reply at 2. McNeel also contends that Murphy did so, "even though both the Tarrant County Medical Examiner and Mr. McNeel's medical providers concluded that he died from a blow to the head." Id. These facts show that Murphy may have had no reasonable basis, or failed to determine whether there was any reasonable basis, for denying McNeel's claim. Consequently, McNeel has a potentially viable claim against Murphy personally under TEX. INS. CODE Art. 21.21. The court, therefore, cannot find that McNeel's principal purpose in joining Murphy is to defeat federal jurisdiction. This factor thus weighs in favor of allowing the amendment.
Procedural and discovery advantages are available to McNeel if Murphy is a party defendant rather than a mere non-party witness. See Deliberto v. Wyndham Canal Place, Inc., No. Civ. A. 03-3271, 2004 WL 1290774, at *3 (E.D. La. Jun. 10, 2004).
The second Hensgens factor is whether McNeel has been dilatory in asking for this amendment. 833 F.2d at 1182. It is undisputed that the request to amend did not occur until after the defendants had answered the state court complaint and removed the case to this court. Still, the proposed amendment came less than five months after McNeel filed her state court complaint, only six weeks after removal, and prior to July 30, 2004, the deadline set by this court for joining parties in this case. See Order Establishing Schedule and Certain Pretrial Requirements (April 30, 2004) ¶ 3; see also Deliberto, 2004 WL 1290774, at *4 (permitting an amendment joining a non-diverse party even though "the court-ordered deadline for filing amendments to pleadings ha[d] passed"); Johnson, 1999 WL 728746, at *3 (finding that, where "[t]he amendment came two months after plaintiff filed her original petition in state court," the amendment would not be classified as dilatory). These facts are not sufficient to establish that McNeel was dilatory.
The third Hensgens factor is whether McNeel would be significantly injured if she is not permitted to amend the complaint to add Murphy as a defendant. 833 F.2d at 1182. The defendants urge that McNeel will not be significantly injured if an amendment is not allowed because, in the absence of Murphy's joinder, McNeel "can still recover damages for all of her claims and causes of action asserted against Defendants." Joinder Response Brief ¶ 14. In addition, the defendants also argue that AMPICO, Murphy's employer, "will be liable to [McNeel] for all her damages." Id. ¶ 8. Indeed, other courts have denied joinder under Hensgens where the employer would be liable for all of the purported negligence of its employees. See, e.g., Campagna v. Averitt Express, Inc., No. Civ. A. 99-1007, 1999 WL 386652, at *3 (E.D. La. Jun. 10, 1999); Wells v. Certainteed Corporation, 950 F. Supp. 200, 201 (E.D. Mich. 1997).
However, McNeel urges that because she has an independent cause of action against Murphy under TEX. INS. CODE Art. 21.21, she will be prejudiced if she cannot join Murphy as a defendant. See Joinder Motion ¶ 3; Reply at 1-2. At this stage of the case, the court must evaluate the factual allegations in the light most favorable to McNeel — and the court has already concluded that McNeel has stated a potentially viable claim against Murphy under the Texas Insurance Code. The merits of this claim are most properly determined by the state court, and this court should not deny McNeel the opportunity to bring all of her related claims in one suit. See Holcomb, 2001 WL 1480756, at *3. Considerations of cost, judicial efficiency, and possible inconsistency of results militate in favor of not requiring McNeel to prosecute two separate claims in two separate forums when both arise from the same set of facts. Thus, the court finds that — on balance — McNeel will be prejudiced, and judicial economy disserved, by denial of the amendment. See Johnson, 1999 WL 728746, at *3.
The fourth Hensgens factor is to weigh any other equitable considerations that would affect the amendment. 833 F.2d at 1182. The defendants ask the court to discount the possibility of McNeel recovering against Murphy. See Joinder Response Brief ¶ 15 (stating that recovery is "unlikely, if not impossible"). The defendants' skepticism as to whether McNeel will succeed in her action against Murphy may, however, be tested in the state court proceeding on a motion for summary judgment or at trial. No other equities were argued by counsel. The fourth Hensgens factor is, therefore, a non-factor.
In sum, the court concludes that under the circumstances of this case the balance of the equities favors granting McNeel's motion to add Murphy as an additional defendant.
III. CONCLUSION
For the foregoing reasons, McNeel's motion to join Murphy as an additional defendant is GRANTED, pursuant to FED. R. CIV. P. 20, 28 U.S.C. § 1447(e), and Hensgens, 833 F.2d at 1182. Consequently, McNeel's motion to remand is also GRANTED and this case is REMANDED to the 413th District Court of Johnson County, Texas. The clerk shall mail a certified copy of this memorandum order to the district clerk of Johnson County, Texas. 28 U.S.C. § 1447(c).
SO ORDERED.