Opinion
No. 02-3179
January 9, 2003
MINUTE ENTRY
HEARING ON MOTION
MOTION: PLAINTIFF'S MOTION FOR LEAVE TO FILE FIRST AMENDED, RESTATED, AND SUPPLEMENTAL COMPLAINT (Rec. doc. 15)
GRANTED
Before the undersigned is the motion of the plaintiff, Universal Contract Services, Inc. ("Universal"), for leave to file first amended, restated and supplemental complaint/petition to substitute CLM Equipment Co. ("CLM Equipment") for CLM Equipment Rentals, Inc. ("CLM Rentals") as a defendant. A defendant, Kobelco Construction Machinery America, LLC ("Kobelco"), is opposed on the ground that Universal is attempting to defeat diversity jurisdiction and any claim against CLM Equipment is futile. Rec. doc. 18.
Universal filed its petition in the 17th Judicial District Court, Parish of Lafourche, State of Louisiana, and named as defendants: Shinn Systems, Inc. ("Shinn"), Kobelco and CLM Rentals. Rec. doc. 1. The petition alleges that CLM Rentals was Kobelco's representative and distributor in Louisiana. Id. at p. 9. Universal sought to purchase equipment that would enable it to clear land for a gas pipeline company.Id. at p. 10. Universal alleges that Kobelco and CLM Rentals informed it that a particular excavator would be sufficient for Universal's purposes. Id. Universal alleges that based on information provided by Kobelco and CLM Rentals regarding the weights of the components to be purchased by Universal, it contracted with another company to build a carriage/pontoon assembly to carry the Kobelco excavator and a Shinn cutter. Id. Universal alleges that shortly after the equipment was purchased and assembled, "it became apparent that the machine was wrought with redhibitory defects which made the equipment unfit for its intended use." Id. at p. 11. In its original petition, Universal makes claims for breach of contract, redhibition, unjust enrichment, failure to properly perform in workmanlike manner and unfair trade practices. Id. at pp. 13-14.
On October 21, 2002, Kobelco removed the petition to federal court and alleges that Universal fraudulently joined CLM Rentals. Rec. doc. 1. Universal filed a motion to remand and contends it possesses a viable cause of action against CLM Rentals for breach of contract and negligent performance of its duties. Rec. doc. 9. CLM Rentals filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(3) — improper venue, 12(b)(5) — insufficiency of service of process; and 12(b)(6) — failure to state a claim. CLM Rentals contends it is not a distributor for Kobelco and is in the equipment leasing business. Rec. doc. 11. Kobelco filed an opposition to Universal's motion to remand and contends that CLM Rentals was not the seller of the equipment. Rec. doc. 13. The District Court ordered that Universal's motion to remand and CLM Rentals' motion to dismiss be considered on briefs. Rec. doc. 16.
On December 10, 2002, Universal filed the motion for leave to amend to substitute CLM Equipment for CLM Rentals. Universal contends it should have named CLM Equipment in its original petition but mistakenly named CLM Rentals. Rec. doc. 15. Implicit in this concession is the fact that Universal has no claim against CLM Rentals. Accordingly, Universal's joinder of CLM Rentals was improper and Universal has no opposition to CLM Rentals' motion to dismiss for failure to state a claim. Kobelco argues that Universal's attempt to substitute CLM Equipment should be viewed as an attempt to join an additional defendant whose joinder would destroy subject matter jurisdiction.
In Jacobsen v. Osborne, 133 F.3d 315 (5th Cir. 1998), the Fifth Circuit said:
The denial of a Rule 15(a) motion to amend is reviewed for abuse of discretion. Likewise, whether to grant such a motion is committed to the sound discretion of the district court, but, that discretion is limited by Rule 15(a), which states that leave shall be given when justice so requires. In sum, the motion should not be denied unless there is a substantial reason to do so.Id. at 318. This is tempered by the requirement found in Hensgens v. Deere Co., 833 F.2d 1179, 1182 (5th Cir. 1987), that "the district court, when confronted with an amendment to add a nondiverse nonindispensable party, should use its discretion in deciding whether to allow that party to be added." See also Doleac v. Michalson, 264 F.3d 470, 474 (5th Cir. 2001). Hensgens identified the following factors that the district court should consider in balancing the defendants' interests in maintaining the federal forum with the competing interests of not having parallel lawsuits: (1) the extent to which the purpose of the amendment is to defeat federal jurisdiction; (2) whether the plaintiff has been dilatory in asking for an amendment; (3) whether the plaintiff will be significantly injured if the amendment is not allowed; and (4) any other factors bearing on the equities. 833 F.2d at 1182. See also Herzog v. Johns Manville Products Corp., 2002 WL 31556352, *2 (E.D.La.) (Fallon, J.).
Putting aside the first Hensgens factor for the moment, Universal was not dilatory in seeking to amend. It acted within a few weeks of learning of its error and before any pretrial deadlines were set. Herzog at *2. The third Hensgens factor favors Universal because it would be inefficient and a waste of judicial resources to file a separate suit based on the same facts against CLM Equipment. Id. The fourth Hensgens factor favors Universal because it intended to name CLM Equipment, the alleged representative of Kobelco, in the original petition. But for Universal's mistake, a mistake that could have been made by any litigant, Kobelco would be confronting Universal's alleged claims against CLM Equipment on a motion to remand rather than a motion to amend.
In Herzog. the court said:
With regard to the first Hensgens factor, the case law indicates that as long as the plaintiff states a valid claim against the new defendants, the principal purpose of the amendment is not to destroy diversity jurisdiction.
2002 WE 31556352, *2. Kobelco contends that Universal fails to state a valid claim against CLM Equipment. Universal has not made any reply to Kobelco's memorandum describing the deficiencies in its claims against CLM Equipment. The original petition, after describing the alleged facts, contains a claim for breach of contract as follows:
Shinn Systems and Kobelco's failure to provide equipment sufficient to meet Universal's stated needs constitutes a breach of contract which entitles Universal to the remedy of recission under the specific provisions of the Louisiana Civil Code.
Alternatively, Universal is entitled to damages for the defendants' respective breaches of contract sufficient to make Universal whole, including damages suffered by Universal in the form of lease payments to Hibernia, loss of income from the equipment's failure to properly perform, all costs of repairs, all costs of insurance incurred, and any other damages as shown at trial.
Rec. doc. 1 at p. 13. The same language appears in the amended petition as paragraphs 22 and 23 under Count 1 — Breach of Contract. Kobelco contends that neither the original nor amended petition contain a claim for breach of contract against CLM Equipment or CLM Rentals. In its motion to remand, Universal states it possesses a valid claim for breach of contract against CLM Rentals. Rec. doc. 9.
Kobelco is contending that Universal's motion to amend should be denied because the amendment is futile. An amendment is futile where the amended complaint fails to state a claim upon which relief can be granted.Stripling v. Jordan Production Company, L.L.C., 234 F.3d 863, 873 (5th Cir. 2000). To determine futility, the district court should apply "the same standard of legal sufficiency as applies under Rule 12(b)(6)." Id. (quoting Shane v. Fauver, 213 F.3d 113, 115 (3rd Cir. 2000). In Beanal v. Freeport-McMoran, Inc., 197 F.3d 161, 164 (5th Cir. 1999), the Fifth Circuit said:
A motion to dismiss under rule 12(b)(6) is viewed with disfavor and is rarely granted. The complaint must be liberally construed in favor of the plaintiff, and all facts pleaded in the complaint must be taken as true. The district court may not dismiss a complaint under rule 12(b)(6).unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. This strict standard of review under rule 12(b)(6) has been summarized as follows: The question therefore is whether in the light most favorable to the plaintiff and with every doubt resolved in his behalf, the complaint states any valid claim for relief.Id. at 164 (Citations and quotation marks omitted).
Universal describes CLM Equipment as Kobelco's representative and distributor. Rec. doc. 1 at p. 9. CLM Equipment submitted the invoice for the Kobelco excavator and payment was to be made to CLM Equipment. Exhibit A to Rec. doc. 18. In describing its claim for breach of contract, Universal alleges it is entitled to damages for the defendants' respective breaches of contract sufficient to make Universal whole. Rec. doc. 1 at p. 13. Kobelco has not shown any basis for limiting the word "defendants" in paragraphs 23 of the original petition and the proposed amended to petition to Shinn and Kobelco. When the standard described inBeanal v. Freeport-McMoran, Inc. is applied to Universal's original petition and proposed amended petition, Universal states a valid claim for breach of contract against CLM Equipment. It is unnecessary to consider whether Universal has stated a valid claim against CLM Equipment on any other cause of action.
IT IS ORDERED that Universal's motion for leave to file first amended, restated and supplemental complaint/petition (Rec. doc. 15) is GRANTED.