Agyei v. Endurance Power Prods., Inc.

198 F.Supp.3d 764

Emmanuel AGYEI, Plaintiff,

v.ENDURANCE POWER PRODUCTS, INC., et al, Defendants.

CIVIL ACTION NO. 4:15-CV-1389

United States District Court, S.D. Texas, Houston Division.

Signed August 1, 2016

Entered August 3, 2016

Ike N. A. Waobikeze, Waobikeze & Associates PC, Houston, TX, for Plaintiff.

William R. Moye, Andrew McCluggage, Thompson Coe Cousins and Irons LLP, Robert Francis Gilbert, Attorney at Law, Houston, TX, for Defendants.

ORDER ADOPTING REPORT AND RECOMMENDATION

KEITH P. ELLISON, UNITED STATES DISTRICT JUDGE

Pending before the Court is Defendants' joint motion seeking to dismiss Plaintiff's Amended Complaint, to dismiss Defendant UTP Engine, Inc. from this case, and to have the Court retain jurisdiction (Doc. No. 32). All nondispositive and dispositive matters in this case were referred to Magistrate Judge Dena Hanovice Palermo in this Court's order of June 8, 2016. On July 15, 2016, Judge Palermo issued a Report and Recommendation recommending that Defendants' joint motion be denied and that the case be remanded. The time for filing objections has passed, and no objections were filed.

Pursuant to Federal Rule of Civil Procedure 72(b), the Court has reviewed the Report and Recommendation for clear error. Finding no clear error, the Court adopts the Report and Recommendation in its entirety. Accordingly, Defendants' Joint Motion (Doc. No. 32) is hereby DENIED. The case is REMANDED to the 268th Judicial District Court of Fort Bend County, Texas. IT IS SO ORDERED.

REPORT AND RECOMMENDATION ON DEFENDANTS' JOINT MOTION TO DISMISS

DENA HANOVICE PALERMO, UNITED STATES MAGISTRATE JUDGE

On June 8, 2016, United States District Judge Keith P. Ellison referred all nondispositive and dispositive matters in this case pursuant to 28 U.S.C. § 636(b)(1)(A)-(B). [Doc. No. 26.] Now before the Court is Defendants' joint motion seeking to dismiss Plaintiff's Amended Complaint, to dismiss Defendant UTP Engine, Inc. from this case, and to have the Court retain jurisdiction. [Doc. No. 32.] Plaintiff has filed a response opposing Defendants' motion and requesting that the Court remand this matter to Texas state court. [Doc. No. 33.] For the following reasons, the Court RECOMMENDS that Defendants' joint motion be DENIED and that the case be REMANDED to the 268th Judicial District Court of Fort Bend County, Texas.

BACKGROUND

Plaintiff, a Texas citizen, originally filed this suit on April 15, 2015 in Texas state court. The original petition named Endurance Power Products, Inc. ("Endurance"), a Delaware corporation with a principal place of business in Nebraska, as the sole defendant and asserted claims against it under the Texas Deceptive Trade Practices Act ("DTPA"), TEX. BUS. & COM. CODE ANN. § 17.41 et seq. , and common-law fraud. (Orig. Pet. ¶¶ 13-19 [Doc. No. 1-4].) On May 22, 2015, Endurance removed the suit to federal court on the basis of diversity. (Not. of Removal ¶¶ 5, 8-13 [Doc. No. 1].) Six days later, on May 28, 2015, Endurance filed a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. [Doc. No. 5.]

On July 10, 2015, Plaintiff filed an Amended Complaint joining UTP Engine, Inc. ("UTP") as a defendant. (Am. Compl. ¶ 3 [Doc. No. 12].) The amended complaint alleges that UTP sold a defective connecting rod, which Endurance produced, that was installed in Plaintiff's truck. (Id. ¶ 5.) Plaintiff further alleges that the defective connecting rod caused his truck to break down in the middle of a freeway in Louisiana and that the truck had to be towed to Houston for repair. (Id .) Plaintiff asserts strict liability and common-law fraud claims against both Defendants, a negligence claim against Endurance, and a DTPA claim against UTP. (Id. ¶¶ 6-24.)

On July 13, 2015, Judge Ellison held a hearing on Endurance's motion to dismiss, denying that motion as moot in light of Plaintiff's amended complaint. In April and May of 2016, Defendants each filed a motion for summary judgment. [Doc. Nos. 21, 22.] While those motions were pending, it came to the Court's attention that UTP is a Texas corporation.¹ At a hearing held before Judge Ellison on June 23, 2016, the parties acknowledged that UTP is a Texas citizen for diversity purposes.

ANALYSIS

A. Legal Standard Governing Joinder of a Nondiverse Defendant After Removal

Federal district courts have diversity jurisdiction over "civil actions where the matter in controversy exceeds the sum of $75,000, exclusive of interest and costs, and is between citizens of different States." 28 U.S.C. § 1332(a)(1).² The diversity statute has long been interpreted to mandate a rule of "complete diversity," meaning that it "applies only to cases in which the citizenship of each plaintiff is diverse from the citizenship of each defendant." Caterpillar, Inc. v . Lewis , 519 U.S. 61, 68, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996) (citing Strawbridge v . Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806) ); see also Exxon Mobil Corp. v . Allapattah Servs., Inc ., 545 U.S. 546, 552, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005).

Because both UTP and Plaintiff are Texas citizens, UTP's joinder, if permitted, ³ would destroy complete diversity—and thus diversity jurisdiction—in this case. See Hensgens v . Deere & Co ., 833 F.2d 1179, 1181 (5th Cir.1987) ("[a]lthough it is true that most subsequent events will not defeat jurisdiction, addition of a nondiverse defendant will"); Rouf v . Cricket Commc'ns, Inc. , No. H–13–2778, 2013 WL 6079255, at *2 (S.D.Tex. Nov. 19, 2013) (Miller, J.) ("An amendment to the complaint that adds a non-diverse party after removal will defeat jurisdiction, and the court must remand.").⁴ When a plaintiff seeks to join a nondiverse defendant after the case has been removed, the district court's analysis begins with 28 U.S.C. § 1447(e), which states:

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.

These are the district court's only options; "the court may not permit joinder of non-diverse defendants but then decline to remand." Cobb v . Delta Exports, Inc. , 186 F.3d 675, 677 (5th Cir.1999) ; accord Doleac ex rel. Doleac v . Michalson , 264 F.3d 470, 477 (5th Cir.2001) (statute "direct[s] remand if the district court permits joinder of a defendant whose citizenship destroys subject matter jurisdiction"); Schur v . L.A. Weight Loss Centers, Inc. , 577 F.3d 752, 759 (7th Cir.2009) ("These are the only options; the district court may not permit joinder of a nondiverse defendant and retain jurisdiction." (footnote omitted)); Bailey v. Bayer CropScience L.P., 563 F.3d 302, 307 (8th Cir.2009) (same).

The decision between these two options lies within the court's sound discretion. Hensgens , 833 F.2d at 1182 ; see also Hawthorne Land Co. v . Occidental Chem. Corp ., 431 F.3d 221, 227 (5th Cir.2005). In exercising that discretion, the court must balance "the danger of parallel federal/state proceedings with the inherent dangers of inconsistent results and the waste of judicial resources" against the diverse defendant's "interest in retaining the federal forum." Hensgens , 833 F.2d at 1182. In Hensgens , the Fifth Circuit identified four factors to consider in weighing these competing interests: (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 the amendment; (3) whether the plaintiff will be significantly injured if the amendment is not allowed; and (4) any other factors bearing on the equities. Id. ; Hawthorne , 431 F.3d at 227 ; see also Tillman v . CSX Transp., Inc ., 929 F.2d 1023, 1029 & n. 11 (5th Cir.1991).

B. Application of the Hensgens Factors Require the Court to Permit the Amended Complaint and Remand

1. Factor 1: The primary purpose of Plaintiff's amendment was not to defeat diversity jurisdiction.

In analyzing the first Hensgens factor, courts take into account considerations such as whether the plaintiff knew or should have known the identity of the nondiverse defendant when the state court suit was filed, whether the plaintiff states a valid claim against the nondiverse defendant, and the timing of the amendment. Richardson v . Wal – Mart Stores Texas, LLC , No. H–15–3167, 192 F.Supp.3d 719, 725–26, 2016 WL 3346542, at *5 (S.D.Tex. June 16, 2016) (Miller, J.); Gallegos v. Safeco Ins. Co. of Ind ., No. 09–CV–2777, 2009 WL 4730570, at *3–4 (S.D.Tex. Dec. 7, 2009) (Rosenthal, J.).

a. It is unclear whether Plaintiff knew of UTP's identity as an appropriate defendant when he initiated his state court suit.

Plaintiff's original petition alleged that Endurance sold the defective connecting rod. (Orig. Pet. ¶ 11.) Only in his amended complaint (filed after removal) did Plaintiff allege Endurance to be the manufacturer and UTP the seller. (Am. Compl. ¶ 5.) Moreover, in filing his amended complaint, Plaintiff did not simply add UTP as a defendant; he substantively revised his claims against each defendant as well. This suggests Plaintiff may not have learned of UTP's identity or involvement as the seller until after filing the state court suit. See Gallegos , 2009 WL 4730570, at *4 (plaintiff "did not add any allegations" against nondiverse individual and "the only substantive changes in the proposed amended pleading are to add [him] as a defendant and to change the references to the ‘defendant’ to the ‘defendants' "). In his amended complaint, Plaintiff alleges that he notified both Endurance and UTP of his complaint "by letter dated December 29, 2014." (Am. Compl. ¶ 20.) Plaintiff did not attach a copy of that letter to his complaint, but Endurance provided a copy of it in support of its now-moot motion to dismiss [Doc. No. 5-2]. The letter makes no mention of UTP and thus does not establish that Plaintiff was aware of UTP's involvement at the time. See Gallegos , 2009 WL 4730570, at *3 (record contained letters,...