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DL Star LLC v. Royal Seal Construction Inc.

United States District Court, Western District of Louisiana, Shreveport Division

February 2, 2015





Before this Court is an appeal from Magistrate Judge Hornsby’s Memorandum Order that denied the Motion For Leave To File Amended Complaint filed by the Plaintiff, DL Star, LLC. [Record Document 11]. This case came before the Court based on its diversity jurisdiction: the Plaintiff, a LLC in Louisiana, originally filed suit against the Defendant, Royal Seal Construction, Inc., a Texas corporation, as the general contractor in a now disputed construction contract. The Plaintiff sought leave to file an amended complaint to add as a defendant Somdal Associates, LLC (“Somdal”), a Louisiana LLC, the architect for the construction project. The Plaintiff’s proposed amendment was filed after the Defendant made allegations in its counterclaim concerning Somdal’s role in the dispute. [Record Document 8]. If Somdal is added as a defendant in this matter, this Court will be divested of jurisdiction and must remand the case to state court. For the reasons set forth below, this Court AFFIRMS the Magistrate Judge’s Memorandum Order [Record Document 11] denying the Plaintiff’s Motion for Leave To File Amended Complaint. [Record Document 8].

I. Background

The case arises from the alleged breach of a construction contract between the Plaintiff and the Defendant regarding a Carl’s Jr. Restaurant and an Orange Leaf Yogurt Shop. Record Document 12-1, p.1. After the Plaintiff set forth its original allegations in a state court petition in the First Judicial District Court in Caddo Parish, Louisiana, the case was removed to this Court on May 7, 2014, based on diversity. Record Document 1, p.2. The Defendant then filed an answer and a counterclaim on May 30, 2014, specifically alleging that Somdal, as the construction project’s architect, was the cause of many of the inconsistencies, delays, and modifications that affected the Defendant’s ability to properly complete the project on time. Record Document 7, p.11.[1] However, the Defendant did not name Somdal as a party in the counterclaim. Id., at pp.8-9.

On June 12, 2014, the Plaintiff filed its Motion for Leave To File Amended Complaint that sought to add Somdal as a defendant as well. Record Document 8. In its Memorandum in Support, the Plaintiff alleges that its claim against Somdal arises out of the same transaction or occurrence–the construction project–as its claim against the Defendant. Record Document 8-1, p.3. The Defendant filed its opposition and argued that in light of the factors outlined in Hensgens v. Deere & Co., 833 F.2d 1179, 1182 (5th Cir. 1987), this Court should not grant the Plaintiff’s motion. Record Document 10.

After consideration, the Magistrate Judge denied the Plaintiff’s motion based on an analysis of the Hensgens factors. Record Document 11. In weighing the factors, the Magistrate Judge found that the Defendant’s “interest in its choice of forum outweighs Plaintiff’s interest in litigating against Defendant and Somdal in a single lawsuit.” Id., at p.3.

The present procedural dispute now comes before this Court after the Plaintiff’s appeal of the Magistrate Judge’s Memorandum Order. Record Document 12.

II. Standard of Review

Under 28 U.S.C. § 636(b)(1)(A), a district court reviews a magistrate judge’s ruling on a non-dispositive pretrial motion to determine whether that decision was clearly erroneous or contrary to law. 28 U.S.C. § 636(b)(1)(A) (2012); Fruge v. Ulterra Drilling Techs., L.P., 883 F.Supp.2d 692, 694 (W.D. La. 2012) (citing Castillo v. Frank, 70 F.3d 382, 385 (5th Cir. 1995)). A magistrate judge’s legal conclusions are reviewed de novo, and the factual findings are reviewed for clear error. Jordan v. Patwardhan, No. 12-1575, 2013 WL 1333026, at *2 (W.D. La. Mar. 29, 2013) (citing Choate v. State Farm Lloyds, No. 03-2111, 2005 WL 1109432, at *1 (N.D. Tex. May 5, 2005)).

III. Law and Discussion

As the Magistrate Judge correctly set forth in his Memorandum Order, when a court is faced with making the determination of whether to amend a pleading to name a non-diverse defendant, such as Somdal, a court “should scrutinize that amendment more closely than an ordinary amendment.” Hensgens v. Deere & Co., 833 F.2d 1179, 1182 (5th Cir. 1987). While Rule 15(a) of the Federal Rules of Civil Procedure permits a court to “freely give leave when justice so requires”, this decision with a non-diverse defendant will determine the continued jurisdiction of a court over a matter and requires the consideration of the decision made by the original defendant as to its choice of forum. Fed.R.Civ.P. 15(a)(2); Hensgens, 833 F.2d at 1182. “If after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, ” as in the instant case, “the court may deny joinder, or permit joinder and remand the action to the State court.” 28 U.S.C. § 1447(e) (2012). The question now before this Court is whether the Magistrate Judge’s decision to deny amending the complaint was either clearly erroneous or contrary to law.

Under the jurisprudence of the United States Court of Appeals for the Fifth Circuit, courts considering whether to grant leave to amend a pleading for a non-diverse defendant are required to balance the original defendant’s interest in remaining in the federal forum with a plaintiff’s interest in not having parallel suits in both state and federal courts. Hensgens, 833 F.2d at 1182. To weigh these interests, this Court must consider four factors: “(1) the extent to which the purpose of the amendment is to defeat federal jurisdiction, (2) whether plaintiff has been dilatory in asking for amendment, (3) whether plaintiff will be significantly injured if amendment is not allowed, and (4) any other factors bearing on the equities.” Id. In reviewing the Magistrate Judge’s decision, this Court must balance these factors and determine whether the Memorandum Order should be affirmed or denied.

Both the Plaintiff and the Defendant focused their discussions on the first factor: to what extent the purpose of the amended pleading to add Somdal was to defeat diversity jurisdiction. The Magistrate Judge found that this factor weighed heavily in the Defendant’s favor, reasoning the Plaintiff knew of Somdal’s identity and the factual basis for any suit against Somdal relating to the construction project at the time the original state claim was filed. Record Document 11, p.3. Rather than include Somdal in the state ...

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