Fiddler's Creek Community Development District 2 v. U.S. Bank National Association as Trustee

Filing 45

ORDER: Plaintiff's objection 43 to the report and recommendation 40 is SUSTAINED. The Court declines to adopt the report and recommendation. Plaintiff's Motion for Leave to File Verified Amended Complaint 28 is GRANTED. This case is REMANDED to the Circuit Court of the Twentieth Judicial Circuit in and for Collier County, Florida. After remand has been effected, the Clerk is directed to CLOSE THIS CASE. Signed by Judge Virginia M. Hernandez Covington on 6/20/2012. (KAK)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
FIDDLER’S CREEK COMMUNITY
DEVELOPMENT DISTRICT 2,
Plaintiff,
vs.

CASE NO.: 2:12-cv-5-FTM-UA-SPC

U.S. BANK NATIONAL ASSOCIATION,
As Trustee of the Indenture Trust,
Defendant.
___________________________________/
ORDER
This matter is before the Court pursuant to the February
29, 2012, report and recommendation of Sheri Polster Chappell,
United States Magistrate Judge (Doc. # 40), recommending that
Plaintiff’s

Motion

for

Leave

Complaint (Doc. # 28) be denied.

to

File

Verified

Amended

On March 13, 2012, Plaintiff

filed an objection to the report and recommendation (Doc. #
43) and Defendant filed a Response (Doc. # 44) on March 27,
2012.

For

the

reasons

that

follow,

the

Court

sustains

Plaintiff’s objection to the report and recommendation, grants
Plaintiff’s Motion to Amend, and remands this case to state
court.
I.

Background and Procedural History
Plaintiff filed its Verified Complaint in the Circuit

Court of the Twentieth Judicial Circuit in and for Collier
County, Florida on November 29, 2011.

Therein, Plaintiff

explains that it is “a Community Development District created
in year 2002 by Ordinance of the Collier County Board of
Commissioners

pursuant

to

Chapter

Statutes.” (Doc. # 2 at ¶ 1).
to

finance

the

of

the

Florida

Plaintiff issued bonds in order

construction

District. Id. at ¶ 3.

190

and

infrastructure

of

the

According to the Complaint, “Defendant

is the successor Trustee with respect to the Fiddler’s Creek
Community Development District 2 Special Assessment Revenue
Bonds” including Series 2003A, 2003B, 2004, and 2005 “pursuant
to a certain Master Trust Indenture dated as of June 1, 2003.”
Id. at ¶ 5.

Plaintiff claims that Defendant breached the

Master Trust Indenture.

Among other allegations, Plaintiff

claims that Defendant “removed approximately $765,000.00 from
the Construction Accounts and has failed to use the funds for
the purposes specified by the Master Indenture . . . and in
fact

has

used

the

money

expenses.” Id. at ¶ 30.

to

pay

its

own

legal

fees

and

Plaintiff sued Defendant for damages,

equitable accounting, and injunctive relief. (Doc. # 2).
On January 4, 2012, Defendant timely removed this action
to this Court on the basis of diversity of citizenship. (Doc.
# 1).

Defendant asserts that Plaintiff is a citizen of

2

Florida and Defendant is a citizen of Ohio. Id. at ¶¶ 8, 13.1
On January 4, 2012, Plaintiff filed an Emergency Verified
Motion for Preliminary Injunction (Doc. # 4).

On January 6,

2012, Defendant filed a Motion to Dismiss the Complaint. (Doc.
# 7).

The Court set the Motion for Preliminary Injunction for

an evidentiary hearing to be held on February 10, 2012. (Doc.
# 8).

On January 20, 2012, Defendant filed a response to the

Motion for Preliminary Injunction (Doc. # 12) and Plaintiff
filed a response to the Motion to Dismiss. (Doc. # 15).
Plaintiff terminated prior counsel and hired new counsel on
January 27, 2012, and the Court approved the substitution of
counsel on January 30, 2012. (Doc. ## 22, 23).
On February 1, 2012, Plaintiff filed a motion seeking to
continue the hearing on the Motion for Preliminary Injunction,
and on February 2, 2012, the Court cancelled the evidentiary
hearing. (Doc. ## 25, 26). On February 3, 2012, Plaintiff
filed its Motion to Amend the Complaint in which it seeks to
amend the Complaint allegations against Defendant to include
wrongful

conduct

that

occurred

after

the

filing

of

the

original Complaint, to add tort claims against Defendant and
to

amend

the

claim

for

injunctive

1

relief

to

include

a

Plaintiff disputes that it is a citizen of Florida for
the purpose of determining diversity jurisdiction.
3

statutory basis therefore. (Doc. # 28).

Plaintiff also seeks

leave to amend to add tort and unjust enrichment claims
against bondholders ITG Tax Free Income & Capital Appreciation
Fund, Ltd. and OppenheimerFunds, Inc. Id.
that

adding

these

Defendants

will

It is not disputed

divest

this

Court

of

diversity jurisdiction. On February 22, 2012, Defendant filed
a response in opposition to the Motion to Amend. (Doc. # 34).
On February 29, 2012, the Magistrate Judge entered a
report and recommendation recommending that the Motion to
Amend be granted in part and denied in part. (Doc. # 40).
Specifically, the Magistrate Judge recommends that the Court
allow Plaintiff to amend its claims against Defendant U.S.
Bank NA and deny Plaintiff’s request for leave to add the two
additional Defendants.

Plaintiff objects to the extent that

the Magistrate Judge recommends that Plaintiff be denied the
opportunity to add the two additional Defendants.
II.

Legal Standard
After conducting a careful and complete review of the

findings and recommendations, a district judge may accept,
reject

or

modify

the

magistrate

judge’s

report

and

recommendation. 28 U.S.C. § 636(b)(1); Williams v. Wainwright,
681 F.2d 732 (11th Cir. 1982), cert. denied, 459 U.S. 1112
(1983).

In the absence of specific objections, there is no
4

requirement that a district judge review factual findings de
novo, Garvey v. Vaughn, 993 F.2d 776, 779 n.9 (11th Cir.
1993), and the court may accept, reject or modify, in whole or
in part, the findings and recommendations.

28 U.S.C. §

636(b)(1)(C). The district judge reviews legal conclusions de
novo, even in the absence of an objection.

See Cooper-Houston

v. S. Ry. Co., 37 F.3d 603, 604 (11th Cir. 1994); Castro
Bobadilla v. Reno, 826 F. Supp. 1428, 1431-32 (S.D. Fla.
1993), aff’d, 28 F.3d 116 (11th Cir. 1994) (Table).
III. Analysis
In recommending denial of the opportunity to amend to add
the two new Defendants, the Magistrate Judge noted, “the
timing and other circumstances surrounding the Plaintiff’s
filing of the Amended Complaint strongly suggest that the
purpose

of

amendment

is

to

jurisdiction.” (Doc. # 40 at 4).

defeat

federal

diversity

The Magistrate Judge further

concluded: “Plaintiff took no steps to contest removal when
the case was initially removed, or to add the non-diverse
defendant Bondholders.

Instead, Plaintiff’s attempt to add a

non-diverse defendant only occurred after the parties were
scheduled

to

have

a

Preliminary Injunction.
Verified

Amended

hearing

on

Defendant’s

Motion

for

Plaintiff’s Motion for Leave to File

Complaint

was
5

filed

on

the

eve

of

the

injunction hearing.” Id.
There appears to be some confusion in the report and
recommendation concerning the identity of the preliminary
injunction

movant.

It

was

Plaintiff

that

moved

for

preliminary injunction, not Defendant as the Magistrate Judge
states, and Plaintiff would have no reason, as this Court sees
it, to unnecessarily delay their own hearing.

As explained by

Plaintiff:
[T]he Emergency Verified Motion for Preliminary
Injunction (Doc. # 4) was filed in this action by
[Plaintiff], not [Defendant]. In seeking leave to
amend-–which amendment may have mandated remand-[Plaintiff] was the party whose rights were
prejudiced, not [Defendant]. [Plaintiff] was forced
to seek a postponement of the hearing on its own
emergency motion to its own detriment, not
[Defendant’s]. This fact clearly illustrates that
[Plaintiff] was not motivated by an improper purpose
or solely to defeat diversity. [Plaintiff] believed
the amendment to have been so important as to seek
leave of court despite the fact that it would have
to forego its own efforts to put an immediate stop
to the continued conversion of its construction
funds by [Defendant].
(Doc. # 43 at 6-7)(emphasis in original).
This

Court

comes

to

the

opposite

conclusion

as

the

Magistrate Judge when considering the timing of the Motion to
Amend.

The record reflects that the Motion was brought within

three days of a new attorney representing Plaintiff.

This

Court agrees with Plaintiff that “a change in counsel is . . .

6

a legitimate reason for the timing of [Plaintiff’s] Motion
which appears to have been overlooked in the R&R.” Id. at 8.
In determining whether to grant Plaintiff leave to amend
to add parties that will destroy diversity of citizenship and
mandate a remand to state court, the Court considers 28 U.S.C.
§ 1447(e), which states, “If after removal, the plaintiff
seeks

to

destroy

join

additional

subject

matter

defendants

jurisdiction,

whose
the

joinder
court

may

would
deny

joinder, or permit joinder and remand the action to the State
court.”

As explained in Linares v. Home Depot U.S.A., Inc.,

No. 12-60308, 2012 U.S. Dist. LEXIS 58275, at *3 (11th Cir.
Apr. 26, 2012), the decision to allow amendment to add a nondiverse defendant “is committed to the sound discretion of the
district court” and “the district court should scrutinize a
motion to amend to join a non-diverse party more closely than
a motion to amend under Rule 15.”
The Linares court also instructed this Court to consider
those factors delineated in Hensgens v. Deere & Co., 833 F.2d
1179, 1182 (5th Cir. 1987), in deciding whether to allow
amendment to join non-diverse parties.

In Hensgens, the court

directs the district court to “consider the extent to which
the

purpose

of

the

amendment

is

to

defeat

federal

jurisdiction, whether plaintiff has been dilatory in asking
7

for amendment, whether plaintiff will be significantly injured
if amendment is not allowed, and any other factors bearing on
the equities.” Id.
This

Court

has

considered

the

factors

above

determines that it is appropriate to allow amendment.
the

record

does

not

support

Defendant’s

First,

contention

Plaintiff seeks to amend to defeat diversity.

and

that

The mere fact

that the requested amendment would divest the Court of its
jurisdiction does not, in itself, establish that Plaintiff’s
motive in seeking amendment is to accomplish this aim.

There

is no reason to discredit Plaintiff’s statement that its
motivation in seeking amendment “is simply to conform the
pleadings with the evidence now known to the [Plaintiff] and
to promote the resolution of the parties’ dispute in one
lawsuit against all culpable parties, rather than two.” (Doc.
# 43 at 7).
The Magistrate Judge’s finding that the timing of the
Motion to Amend is indicative of Plaintiff’s nefarious purpose
in seeking amendment is not supported by any part of the
record.

Rather, the record shows that Plaintiff hired a new

attorney and that the new attorney immediately sought to amend
the Complaint after entering his appearance for Plaintiff. See
Espat

v.

Espat,

56

F.

Supp.
8

2d

1377,

1378

(M.D.

Fla.

1999)(granting leave to amend to join non-diverse party and
noting that plaintiff retained new counsel shortly before
filing the motion to amend, and new counsel indicated that the
proposed amendment was the result of his investigation).
Here, the Court finds that the requested amendment is not
brought for any improper purpose and specifically was not
brought to defeat this Court’s jurisdiction.
Second, the Court concurs with the Magistrate Judge that
Plaintiff did not delay in moving to amend.

As stated by the

Magistrate Judge, “this case is still in its infancy” (Doc. #
40 at 6).

The third factor, whether Plaintiff will be

prejudiced if amendment is denied, also militates in favor of
allowing amendment.

If amendment is denied, Plaintiff will

face litigating this matter in both state and federal court.
Such a result is inconsistent with the stated purpose of the
Federal Rules of Civil Procedure, which is to ensure the just,
speedy,

and

inexpensive

determination

of

every

action.

Fed.R.Civ.P. 1.
As for other factors bearing on the equities, the Court
has also considered whether there is a federal interest at
stake, which there is not.

Each and every claim in the

Complaint and proposed Amended Complaint is asserted pursuant
to state law.

In addition, Plaintiff is a creature of the
9

Florida Statutes.

The Court agrees with Plaintiff that the

state law claims “are generally more appropriately resolved in
the

courts

of

Collier

County,

Florida

in

which

the

[Plaintiff], the money, the land, the infrastructure, and the
developer are all located and where the tortious conduct
occurred.” (Doc. # 43 at 11-12).

See Rowe v. City of Fort

Lauderdale, 279 F.3d 1271, 1288 (11th Cir. 2002)(“Both comity
and economy are served when issues of state law are resolved
by state courts.”).
Accordingly, the Court sustains Plaintiff’s objection to
the

Magistrate

Judge’s

report

and

recommendation,

grants

Plaintiff’s Motion for Leave to Amend the Complaint, and
remands this case to the Circuit Court of the Twentieth
Judicial Circuit in and for Collier County, Florida.
Accordingly, it is
ORDERED, ADJUDGED, and DECREED:
(1)

Plaintiff’s objection (Doc. # 43) to the report and
recommendation

(Doc.

#

40)

is

SUSTAINED.

The

Court

declines to adopt the report and recommendation.
(2)

Plaintiff’s Motion for Leave to File Verified Amended
Complaint (Doc. # 28) is GRANTED.

(3)

This

case

is

REMANDED

to

10

the

Circuit

Court

of

the

Twentieth Judicial Circuit in and for Collier County,
Florida.
(4)

After remand has been effected, the Clerk is directed to
CLOSE THIS CASE.
DONE and ORDERED in Fort Myers, Florida, this 20th day of

June, 2012.

Copies: All Counsel of Record

11