Graneros Unidos S.A. de C.V. v. GSI Group, LLC et al
Filing
50
OPINION. GSI's Objection to the Report and Recommendation 47 is OVERRULED and Magistrate Judge Cudmore's Report and Recommendation 43 is ADOPTED. GSI's Motion to Dismiss for Failure to Join Necessary and Indispensable Parties and, in Turn, Lack of Subject Matter Jurisdiction 5 is DENIED. This case is REFERRED back to Judge Cudmore for further pre-trial proceedings. Entered by Judge Sue E. Myerscough on 3/28/2013. (CC, ilcd)
E-FILED
Thursday, 28 March, 2013 03:20:00 PM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
GRANEROS UNIDOS S.A. de C.V.,
a foreign corporation,
)
)
)
Plaintiff,
)
)
v.
)
)
THE GSI GROUP LLC, GSI GROUP, )
INC., GSI INTERNATIONAL and
)
GSI, INC., believed to be an Indiana )
corporation,
)
)
Defendants.
)
No. 10-CV-3074
OPINION
SUE E. MYERSCOUGH, U.S. District Judge:
This matter is before the Court on the Report and
Recommendation (d/e 43) entered by Magistrate Judge Byron G.
Cudmore. Defendant, The GSI Group, LLC (GSI), filed its Response
and Objection to the Report and Recommendation (Objection) (d/e 47).
See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b). Plaintiff, Graneros
Unidos S.A. de C.V., has responded to GSI’s Objection.
In the Report and Recommendation, the Magistrate Judge
recommends denying GSI’s Motion to Dismiss for Failure to Join
Necessary and Indispensable Parties, and in turn, Lack of Subject Matter
Jurisdiction (Motion) (d/e 5). This Court reviews de novo any part of the
Report and Recommendation that has been properly objected to. 28
U.S.C. § 636(b)(1)(c). Because the Court finds that in equity and good
conscious this matter should proceed, the Court overrules the Objections
and adopts the Magistrate Judge’s Report and Recommendation.
BACKGROUND
GSI has objected to the Magistrate Judge’s Report and
Recommendation. GSI does not object to any of the facts set forth in the
Report and Recommendation. Instead, GSI objects only to the
recommendation that this case not be dismissed for Graneros’s failure to
join an indispensable party.
A. Relevant Facts
As neither party has objected to any of the facts as set forth in the
Report and Recommendation, the Court will repeat them verbatim.
This case concerns grain silos and related facilities and equipment
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(collectively Silos) destroyed by a hurricane in Mexico. The Plaintiff
Graneros Unidos S.A. de C.V. (Graneros), a Mexican corporation, bought
the Silos from Defendant GSI Group, LLC (GSI). GSI designed and
fabricated the Silos in the United States and two other Mexican
corporations, Ingenieria de Almancenimientos S.A. de C.V. (Ingenieria),
and Luseme Ingenieria S.A. de C.V. (Luseme), constructed the
prefabricated Silos on site in Mexico.
In September 2006, a hurricane severely damaged the Silos. In
September 2009, Graneros brought a diversity action in the Northern
District of Illinois, Case No. 09-5712, against GSI, Ingenieria and
Luseme (Northern District Action). Complaint (d/e 1), ¶ 52; Motion,
Exhibit A, N.D.Ill. Case No. 09-5712, Plaintiff’s First Amended
Complaint (Northern District Complaint). The Northern District Court
dismissed for improper venue. Graneros then brought this action in
March 2010.
Graneros runs a grain storage business. In September 2002, Joel
Valenzuela, the General Director of Graneros, traveled to Illinois with his
Page 3 of 18
cousin Jesus Valenzuela, to meet with GSI president William Branch and
other GSI representatives. Jesus Valenzuela apparently works for
Graneros, but the parties do not state his position at the company. Luis
Pena and Gerardo Navarro accompanied them on this trip. Pena and
Navarro were representatives of Ingenieria and Luseme. Plaintiff’s
Response to Defendant’s Motion to Dismiss for Failure to Join Necessary
and Indispensable Parties (d/e 7), Exhibit 1, Declaration of Joel
Valenzuela ¶¶ 1-5; Defendant The GSI Group, LLC’s Supplemental Brief
in Support of its Original Motion to Dismiss for Failure to Join Necessary
and Indispensable Parties and in turn Lack of Subject Matter Jurisdiction
(d/e 32) (GSI Supplemental Memorandum), attached Deposition of Joel
Valenzuela, at 6, 75-77. According to Joel Valenzuela, Pena owns
Luseme and Ingenieria. Deposition of Joel Valenzuela, at 79. Joel
Valenzuela states that during these meetings in 2002, the GSI executives,
“firmly recommended against my preference to purchase domed
warehouses, encouraging me, instead to purchase their silos, insisting that
the silos were strong enough to handle hurricanes in southern Mexico.”
Page 4 of 18
Declaration of Joel Valenzuela ¶ 10.
In October 2003, Graneros contracted with GSI for the purchase of
Silos in Obispo, Mexico. In May 2005, Graneros contracted with GSI for
enlargement of the facilities in Obispo and for additional Silos in Quila,
Mexico. Graneros paid a total of $2,742,000 for the Silos at these
locations. Complaint, ¶¶ 12-13. Les Garcia, GSI’s sales manager for
Latin America, negotiated sale of the Silos directly with Joel Valenzuela.
Pena and Navarro were not involved in these negotiations. Joel
Valenzuela Deposition, at 16, 87-89.
Graneros signed separate contracts with Ingenieria and Luseme for
construction of the Silos on site. Joel Valenzuela understood that
Ingenieria and Luseme were the exclusive contractors for GSI. Joel
Valenzuela understood that Ingenieria and Luseme personnel performed
the construction. Valenzuela stated that GSI sent technicians to
supervise the installation of grain dryers included in the purchase of the
Silos. Joel Valenzuela Deposition, at 64-65. Graneros made separate
payments to GSI and Ingenieria and Luseme. Joel Valenzuela
Page 5 of 18
Deposition, at 65-66.
Jesus Valenzuela viewed Ingenieria and Luseme, and Pena and
Navarro, to be agents or representatives of GSI. Supplemental Brief
Regarding Defendants’ Motion to Dismiss for Failure to Join Necessary
and Indispensable Parties and, in turn, Lack of Subject Matter
Jurisdiction (d/e 41) (Graneros Supplemental Memorandum), Exhibit 3,
Deposition Excerpts of Jesus Antonio Valenzuela, at 54. Pena and
Navarro were authorized dealers of GSI and wore GSI logos on their
shirts. Jesus Valenzuela understood Pena “always was the representative,
handled the representation of GSI as the builder.” Jesus Valenzuela
Deposition Excerpts, at 56.
Both Obispo and Quila were regularly subjected to the effects of
hurricanes that hit the west coast of Mexico. Joel Valenzuela stated in
his deposition that GSI representatives including Garcia, as well as Pena
and Navarro, all represented that GSI Silos were hurricane proof. He
stated that the documentation stated that the Silos could withstand
winds of 120 miles per hour; however, the representatives told him that
Page 6 of 18
the number was a very conservative figure. Joel Valenzuela Deposition,
at 10. He stated that both GSI corporate representatives and Pena and
Navarro told him that the Silos would withstand any hurricane. Joel
Valenzuela Deposition, at 8-11, 12-14, 24-32.
On September 14, 2006, Hurricane Lane hit the west coast of
Mexico and destroyed Graneros’ grain facilities in Obispo and Quila,
including the Silos. Joel Valenzuela contacted GSI to secure
replacements, but the negotiations were unsuccessful. Joel Valenzuela
Deposition, at 68.
On October 2, 2009, Graneros brought the Northern District
Action against GSI, Ingenieria, and Luseme. GSI moved to dismiss for
improper venue and for lack of jurisdiction. GSI asserted that the Court
had no diversity jurisdiction because there was a foreign plaintiff and a
group of defendants consisting of a United States citizen and foreign
citizens. On January 6, 2010, the Northern District dismissed for
improper venue. On March 25, 2010, Graneros filed this action against
GSI only. The action is a diversity action. Graneros asserts state law
Page 7 of 18
claims for breach of contract, breach of warranty, consumer fraud under
the Illinois Consumer Fraud Deceptive Business Practices Act (815 ILCS
5/10a), negligence, and punitive damages, along with attorney fees and
prejudgment interest. Complaint, at 5-8. Graneros asserted the same
claims in the Northern District Action. See Northern District Complaint,
at 5-8.
B. Magistrate Judge Recommends Denying Motion to Dismiss
The Magistrate Judge agreed with GSI that Ingenieria and Luseme
are required to be joined if feasible, but cannot be joined because their
presence would destroy diversity subject matter jurisdiction. However,
after analyzing the factors in Rule 19(b)(2) of the Federal Rules of Civil
Procedure, the Magistrate Judge determined that in equity and good
conscience, the matter should not be dismissed and therefore
recommended that the Motion be denied. Report and Recommendation,
at 2, citing Fed. R. Civ. P. 19(b). The Magistrate Judge found especially
important that Graneros would have no remedy if the case were
dismissed because all of Graneros’ claims would be barred by the statute
Page 8 of 18
of limitations. Report and Recommendation, at 17.
ANALYSIS
GSI argues that Graneros failed to join Ingeniera and Luseme as
necessary and indispensable parties and, therefore, this matter must be
dismissed pursuant to Rule 19. Graneros disagrees and contends that
even if Ingenieria and Luseme are required parties under Rule 19(a), the
factors in Rule 19(b) favor allowing the action to proceed.
“The purpose of Rule 19 is to ‘permit joinder of all materially
interested parties to a single lawsuit so as to protect interested parties
and avoid waste of judicial resources.’” Askew v. Sheriff of Cook County,
Ill., 568 F.3d 632, 634 (7th Cir. 2009), quoting Moore v. Ashland Oil,
Inc., 901 F.2d 1445, 1447 (7th Cir. 1990). A court analyzing a motion
to dismiss based on Rule 19 for the failure to join uses a two-step inquiry.
Davis Cos. v. Emerald Casino, Inc., 268 F.3d 477, 481 (7th Cir. 2001).
The first step is to identify the “persons required to be joined if feasible.”
Askew, 568 F.3d at 635. Rule 19(a)(1) sets forth who is a “required
party”, and states as follows:
Page 9 of 18
(1) Required Party. A person who is subject to service of
process and whose joinder will not deprive the court of
subject-matter jurisdiction must be joined as a party if:
(A) in that person's absence, the court cannot
accord complete relief among existing parties; or
(B) that person claims an interest relating to the
subject of the action and is so situated that
disposing of the action in the person's absence
may:
(i) as a practical matter impair or
impede the person's ability to protect
the interest; or
(ii) leave an existing party subject to a
substantial risk of incurring double,
multiple, or otherwise inconsistent
obligations because of the interest.
Fed. R. Civ. P. 19(a).
The Magistrate Judge concluded that Ingenieria and Luseme were
“required parties”, in part because: (1) Ingenieria and Luseme have
interests directly relating to the construction of the Silos and have a
commercial stake in the outcome of this litigation; (2) their interests
could possibly be impaired or impeded by virtue of their relationship with
GSI; (3) GSI is at some risk of inconsistent obligations if Ingenieria and
Page 10 of 18
Luseme are not included in this action1; and (4) Ingeniera and Luseme
may have interests that are adverse to GSI. Report and
Recommendation, at 8-14. Ultimately, the Magistrate Judge concluded
that “[i]n light of the risk of conflicts in their possible defenses, GSI
cannot protect the interests of Ingenieria and Luseme” and that
“Ingeniera and Luseme are parties required to be joined under Rule
19(a).” Id. at 15. However, because joinder of Ingeniera and Luseme
would destroy diversity, the Magistrate Judge concluded the Court
cannot order their joinder. Id.; see also Extra Equipamentos E
Exportacao LTDA. v. Case Corporation, 361 F.3d 359, 361 (7th Cir.
2004) (“The diversity jurisdiction does not extend to a suit in which
there is a U.S. citizen on only one side of the suit and foreign parties on
both sides.”).
The parties do not contest the Magistrate Judge’s conclusion that
Ingenieria and Luseme are “required parties” under 19(a). Instead, the
The Magistrate Judge noted that GSI could protect itself from possible
inconsistent or multiple liabilities by filing a third party complaint against Ingeniera
and Luseme. As will be noted below, GSI filed a third-party complaint against
Ingeniera and Luseme.
1
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parties focus their arguments on the second part of the test, i.e., whether
“in equity and good conscience” the action should proceed without
Ingeniera and Luseme or be dismissed. See Fed. R. Civ. P. 19(b).
If a court, as here, “determines that a party meets the criteria of
Rule 19(a)(1)(A) and (B), but the party cannot be joined,” the court
must “turn to Rule 19(b) and decide what to do about the problem.”
Askew, 568 F.3d at 635. “[D]ismissal is not automatic. Instead, the
court must ‘determine whether, in equity and good conscience, the action
should proceed among the existing parties or should be dismissed.’ Rule
19(b) spells out factors for the court to consider in making that
judgment, with an emphasis on practical measures that will allow either
the entire suit or part of it to go forward.” Id. Those factors include:
(1) the extent to which a judgment rendered in the person’s
absence might prejudice that person or the existing parties;
(2) the extent to which any prejudice could be lessened or
avoided by:
(A) protective provisions in the judgment;
(B) shaping the relief; or
Page 12 of 18
(C) other measures;
(3) whether a judgment rendered in the person’s absence
would be adequate; and
(4) whether the plaintiff would have an adequate remedy if
the action were dismissed for nonjoinder.
Fed. R. Civ. P. 19(b). No particular weight is given to any of the factors.
See Extra Equipamentos E Exportacao LTDA, 361 F.3d at 361.
“[F]ederal courts are reluctant to dismiss for failure to join where doing
so deprives the plaintiff of his choice of federal forum. Davis Companies,
268 F.3d at 481, citing Pasco Int'l (London) Ltd. v. Stenograph Corp.,
637 F.2d 496, 501(7th Cir. 1980).
Here, the Magistrate Judge found the first three factors weigh
against continuing the action. Report and Recommendation, at 16-17.
As stated, neither party has focused their arguments on this conclusion.
Instead, the parties focus on the conclusion in the Report and
Recommendation that the fourth factor weighs heavily against dismissal
because Graneros will have no remedy if the case is dismissed since all of
Graneros’ claims will be barred by the statute of limitations.
Page 13 of 18
As the Magistrate Judge noted, Illinois’ statute of limitations
applies to Graneros’ various claims in this case. See Thomas v.
Guardsmark, Inc., 381 F.3d 701, 707 (7th Cir. 2004) (“A federal court
sitting in diversity must follow the statute of limitations that the state in
which it is sitting would use.”). Of all of Graneros’ claims, the negligence
claim has the longest statute of limitations, which is five years. See
Report and Recommendation, at 18, citing 735 ILCS 5/13-205. That
period ran on September 16, 2011, five years after the hurricane.
Therefore, if this case is dismissed, Graneros will have no remedy because
all of the relevant statutes of limitations have run.2
GSI admits that dismissal would result in a “harsh” outcome but
suggests that Graneros is responsible for any such outcome. Graneros
waited three years to file the original complaint in the Northern District.
While section 13-217 of the Illinois Code of Civil Procedure allows a party to
refile an action within one year after dismissal from federal court for improper venue,
that section provides for one, and only one, refiling of a cause of action regardless of
whether the applicable statute of limitations has expired. See 735 ILCS 5/13-217;
see also Flesner v. Youngs Development Co., 145 Ill.2d 252, 253, 582 N.E.2d 720,
721 (1991). Therefore, Graneros could not use this statute to refile in state court
because the Northern District dismissed for improper venue and Graneros refiled the
case here.
2
Page 14 of 18
Moreover, GSI points out that once the Northern District dismissed the
case for improper venue, Graneros decided to file the Complaint in this
Court. Therefore, Graneros should suffer the consequences of the choices
it made.
Graneros maintains its decision to file the case here is supported by
the fact it is prepared to prosecute the case against GSI solely for the
engineering, design, and manufacture of the component parts of the Silos
and the consumer fraud and misrepresentation counts against GSI.
Graneros agrees with the Magistrate Judge’s conclusion that the fact
Graneros would have no alternative forum weighs in favor of allowing the
case to proceed.
The Seventh Circuit Court of Appeals has stated that the
availability or unavailability of an alternative forum is a “critical
consideration.” Pasco International (London) Ltd. v. Stenograph
Corporation, 637 F.2d 496, 500 (7th Cir. 1980). “If the plaintiff's
complaint is dismissed and there is no other court having jurisdiction
over the parties as well as over the absent person, the plaintiff's interest
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in having the federal forum would strongly influence a court to find that
the absent person was not indispensable.” Id. Here, there is no
alternative forum because the statutes of limitations have run. This
factor favors allowing the action to proceed without Ingeniera and
Luseme.
However, the Seventh Circuit has also stated that “plaintiffs should
not be entitled to a federal forum merely because they waited too long to
file their complaints in state court.” Moore v. Ashland Oil, Inc., 901
F.2d 1445, 1448 (7th Cir. 1990), citing Cloverleaf Standardbred Owners
Association, Inc. v. National Bank of Washington, 699 F.2d 1274, 1279
(D.C. Cir. 1983) (case may be dismissed pursuant to Rule 19(b) even if
state statute of limitations runs during pendency of appeal). In Moore,
the plaintiffs in the federal case included some, but not all, of the original
plaintiffs in the state court case. Id. The defendant moved to dismiss
the federal complaint under Rule 19(b) because it was a citizen of
Indiana and the federal complaint omitted the non-diverse plaintiffs from
the state court case who were necessary for a just adjudication of the
Page 16 of 18
issues before the court. Id. at 1446-1447. The Seventh Circuit affirmed
the dismissal of the federal case under Rule 19.
As the Magistrate Judge concluded, Moore is distinguishable from
the case sub judice because in Moore a state court action had commenced
before some of the plaintiffs filed the federal case and the state case was
still pending at the time the court dismissed the federal action. See id. at
1447 n.2 Therefore, an alternative forum existed for adjudication of the
plaintiffs’ claims in Moore at the time the federal case was dismissed.
Here, there is no alternative state proceeding and all state statute of
limitations have run.
After a de novo review of the relevant factors, the Court agrees with
the Magistrate Judge’s recommendation that in equity and good
conscious this action should proceed. As the Pasco court stated, “[t]he
absence of an alternative forum would weigh heavily, if not conclusively
against dismissal.” Pasco, 637 F.2d at 501 n.9. Therefore, the Court
accepts the recommendation that this cause be allowed to proceed
without Ingeniera and Luseme. The Court also notes that shortly after
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the Magistrate Judge issued the Report and Recommendation, GSI
protected itself from potential prejudice it may suffer from the absence of
Ingenieria and Luseme by filing a Third Party Complaint against those
two entities under Rule 14. See Florian v. Sequa Corp., 2002 WL
31844985, at *6 (N.D. Ill. 2002), citing Pasco, 637 F.2d at 503.
IT IS THEREFORE ORDERED that GSI’s Objection to the Report
and Recommendation (d/e 47) is OVERRULED and Magistrate Judge
Cudmore’s Report and Recommendation (d/e 43) is ADOPTED. GSI’s
Motion to Dismiss for Failure to Join Necessary and Indispensable
Parties and, in Turn, Lack of Subject Matter Jurisdiction (d/e 5) is
DENIED. This case is REFERRED back to Judge Cudmore for further
pre-trial proceedings.
IT IS SO ORDERED.
ENTERED: March 27, 2013
FOR THE COURT:
s/ Sue E. Myerscough
SUE E. MYERSCOUGH
UNITED STATE DISTRICT JUDGE
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