United States District Court, W.D. New York
DECISION AND ORDER
WILLIAM M. SKRETNY, Chief District Judge.
1. On February 13, 2014 this Court ordered Plaintiff, Jeffrey Masters, to show cause why Erie Insurance Company of New York should not be dismissed as a party. This Court will presume familiarity with that Order. For the following reasons, this Court finds that Masters has provided such cause, and accordingly, it directs the matter to be remanded to state court.
2. By way of background, according to his amended complaint Jeffrey Masters was injured in a car accident on July 7, 2010 while operating a vehicle in the course of his employment. On June 12, 2013, he brought a claim in state court seeking recovery of "supplemental underinsurance" benefits from the entity he believed to be his employer's insurer, Erie Insurance. Soon thereafter, Erie Insurance Company answered and, invoking this Court's diversity jurisdiction, see 28 U.S.C. §1332(a)(1), removed the case to this Court. After removal, Masters filed an amended complaint, naming both Erie Insurance Company and Erie Insurance Company of New York as defendants. For the purposes of corporate citizenship, Erie Insurance Company is a Pennsylvania corporation and Erie Insurance of New York is a New York corporation. Because Masters is a citizen of New York, complete diversity existed under the original, but not the amended complaint.
3. In its February 13, 2014 Order, this Court found that "[a]lthough Masters filed his amended complaint - adding defendant Erie of New York - as a matter of course, ' there is a tension between 28 U.S.C. § 1447(e), which grants the court discretion to deny an amendment when plaintiff seeks to join' defendants who would divest the Court of subject matter jurisdiction and require a remand, and Rule 15, which allows plaintiffs to amend without the court's leave.'" See February 13, 2014 Decision and Order to Show Cause, ¶ 3 (quoting McGee v. State Farm Mut. Auto. Ins. Co. , 684 F.Supp.2d 258, 261 (E.D.N.Y. 2009) (modifications omitted)). This Court further highlighted the McGee court's finding, that "every federal court that has considered the issue, " has determined that the "the discretionary decision called for by § 1447(e) is appropriate even when plaintiff has amended as a matter of course under Rule 15(a) ." Id . (emphasis added). Because neither party addressed § 1447(e), this Court allowed supplemental briefing on that topic. That briefing concluded on March 17, 2014, at which time this Court took the matter under consideration.
4. Although Masters was unable to locate a case that reached a different conclusion, he nonetheless took the opportunity for further briefing as an invitation to question this Court's previous decision. He points out that "Rule 15 of the Federal Rules of Civil Procedure was amended substantively effective December 1, 2009, reasserting a litigant's right to amend without leave" - suggesting, apparently, that this Court was unaware of, or overlooked that change, and that the change is crucial to the outcome of this case.
5. Neither suggestion is true. Though Masters is correct that the rule change, which permits a plaintiff to amend his complaint as a matter of course even after a responsive pleading has been filed (previously, the right to amend once as a matter of course was terminated by service of a responsive pleading), occurred some two weeks after McGee was decided, the McGee court's rationale did not hinge on the principle overturned by the amendment. Rather, the plaintiff in McGee, just like Masters , amended his complaint "as a matter of course" after the case had been removed to federal court. The change in the rule was irrelevant because the defendant there had not yet filed a responsive pleading, a critical fact that Masters apparently failed to notice. Thus, the rule change - which, again, changed the ability of a plaintiff to amend his complaint after a responsive pleading has been filed - would not have affected the McGee court's rationale. And thus, it does not affect this Court's reliance on the McGee court's conclusion.
6. Continuing to overlook the relevant issue, Masters then goes on to argue that "McGee Was Not the Rule in the Second Circuit Even Before the Rules Change" (title case in original). For this proposition, he cites Pepsico, Inc., which holds, unremarkably, that parties added before removal ought to be considered in the diversity analysis. Pepsico, Inc. v. Wendy's International, Inc. , 118 F.R.D. 38, 44 (S.D.N.Y. 1987) ("[P]laintiffs contend there was no diversity at the time of removal because... prior to removal, the complaint had been [improperly] amended to include two nondiverse plaintiffs."). That's not, and never was, the issue; the issue arises only after removal, and is properly framed as "the tension between 28 U.S.C. § 1447(e), which grants the court discretion to deny an amendment when plaintiff seeks to join' defendants who would divest the Court of subject matter jurisdiction and require a remand, and Rule 15, which allows plaintiffs to amend without the court's leave."
7. Since Masters has failed to highlight any relevant authority that would overcome this Court's finding that "the discretionary decision called for by § 1447(e) is appropriate even when plaintiff has amended as a matter of course under Rule 15(a), " this Court will proceed with the § 1447(e) analysis.
8. Although Masters urges this Court not to "address the matter within the framework of 28 U.S.C. § 1447(e)... following the Rule 15 amendment" that analysis, in the end, results in a finding in his favor.
9. "Joinder is appropriate under § 1447(e) only when the new parties are proper under Rule 20(a) of the Federal Rules of Civil Procedure." Hosein v. CDL W. 45th St., LLC, No. 12 CIV. 06903 LGS, 2013 WL 4780051, at *4 (S.D.N.Y. June 12, 2013) (citing Vanderzalm v. Sechrist Indus., Inc. , 875 F.Supp.2d 179, 183 (E.D.N.Y. 2012)). In turn, Rule 20 permits joinder of multiple defendants in one action:
if (A) any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and (B) any question of law or fact common to all defendants will arise in the action.
Fed. R. Civ. P. 20(a)(2)(A)-(B). If these standards are met, "the decision whether to admit  new parties remains "within the sound discretion of the trial court." Hosein, 2013 WL 4780051 at *4 (citing Briarpatch Ltd., L.P. v. Pate , 81 F.Supp.2d 509, 515 (S.D.N.Y. 2000)). To that end, "district courts consider whether joinder and remand under Section 1447(e) would comport with principles of fundamental fairness.'" Id . (quoting Deutchman v. Express Scripts, Inc., No. 07 Civ. 3539, 2008 WL 3538593, at *3 (E.D.N.Y. Aug. 11, 2008). And, in making that determination, they consider four factors: (1) any delay, as well as the reason for delay, in seeking joinder; (2) resulting prejudice to defendant; (3) likelihood of multiple litigation; and (4) plaintiff's motivation for the amendment. Id . (citing Nazario v. Deere & Co. , 295 F.Supp.2d 360, 363 (S.D.N.Y. 2003)).
10. As for the first of the § 1447 factors, there was very little delay in seeking joinder. Defendant Erie Insurance answered Masters' complaint in state court on June 28, 2013. It removed this action on July 1, 2013. Roughly two weeks later, Masters amended his complaint to add a non-diverse party. Erie Insurance concedes that this factor weighs in Masters' favor.
The remaining three factors also support Masters application for joinder. As the following discussion demonstrates: (1) the requirements of Rule 20 are satisfied, (2) there will be no undue prejudice to any party if Masters amends his complaint, (3) there is a likelihood of multiple litigation without it, and (4) it is clear that Masters did not seek a tactical advantage by naming Erie Insurance of New York after removal. ...