D L Star L L C v. Royal Seal Construction Inc

Filing 21

MEMORANDUM RULING re 12 Appeal of Magistrate Judge Decision re 11 Order on Motion to Amend. This Court affirms Magistrate Judge Hornsby's Memorandum Order [Record Document 11], denying the Plaintiff's motion to amend its complaint [Record Document 8]. Signed by Judge Elizabeth E Foote on 2/2/2015. (crt,Keifer, K)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
SHREVEPORT DIVISION

DL STAR, LLC

CIVIL ACTION NO. 14-0952

VERSUS

JUDGE ELIZABETH ERNY FOOTE

ROYAL SEAL CONSTRUCTION, INC.

MAGISTRATE JUDGE HORNSBY

MEMORANDUM RULING
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].

Page 1 of 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

1

Eventually, on November 21, 2013, Somdal’s involvement in the project ceased. Record
Document 7, p. 11.

Page 2 of 8

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

Page 3 of 8

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
Page 4 of 8

the state petition initially, the “Plaintiff simply chose not to sue Somdal until Defendant
invoked its right to a federal forum.” Id.
In its objection to the Memorandum Order, the Plaintiff explains that it had no
reason to add Somdal as a possible defendant in this matter until the Defendant
attempted to “shift blame” to Somdal in the counterclaim for some of the construction
project’s issues. Record Document 12-1, pp.3-4. It was not until the counterclaim, the
Plaintiff reasons, that it had a basis or reason to add Somdal as a defendant. Id.
Conversely, the Defendant explains that while the Plaintiff may have been unaware that
the Defendant was going to allude to Somdal’s fault in the counterclaim, the factual
basis for a claim against Somdal by the Plaintiff was known at the time of the original
state court petition. Record Document 14, pp.5-6. In support of this argument, the
Defendant submitted the Plaintiff’s recent state court petition against Somdal, which
was filed on August 28, 2014, and stated that Somdal’s revised structural foundation
plan and incorrect dimensions for the project’s slab caused substantial changes to be
made. Record Document 19, Ex. A, p.2. In that new petition, the Plaintiff explains that
this mistake to the project’s foundation was discovered “on or about October 8, 2013.”
Id. Later, on November 21, 2013, the Plaintiff’s construction manager advised the
Defendant that Somdal’s involvement was terminated. Record Document 14, p.5.
These circumstances indicate that not only was Somdal’s identity known to the
Plaintiff, but the factual basis for any claim against Somdal was also apparent at the
time of the Plaintiff’s initial state court petition, especially if Somdal’s involvement in the
project was terminated six months earlier. Thus, given this context, the Court finds that
these facts support the Magistrate Judge’s determination that this first Hensgens factor
Page 5 of 8

weighs heavily in the Defendant’s favor.
Second, in terms of whether the Plaintiff was dilatory in seeking the amendment,
the Magistrate Judge found the Plaintiff was not dilatory in the general sense, but it did
fail to provide an explanation for why Somdal was not included in the initial state court
petition. Record Document 11, p.3.2 The Plaintiff again objects to this explanation of the
circumstances and urges this Court that it was only put on notice of the need to amend
its complaint after the Defendant’s counterclaim. Record Document 12-1, p.5. This
Court agrees with the Magistrate Judge that the Plaintiff was not dilatory in amending
the petition once the Defendant presented its answer and counterclaim, so the factor
could arguably weigh in favor of amending the complaint. Despite the Plaintiff’s lack of
explanation for its delay, given its knowledge of a factual basis for suing Somdal, the
Magistrate Judge’s finding on this factor was not clearly erroneous.
Third, the Magistrate Judge found that the next factor was balanced fairly equally
between the parties. In determining whether or not the Plaintiff would be significantly
injured if the amendment were not allowed, the Magistrate Judge reasoned that the
“Plaintiff is no worse off than it was when Plaintiff initially filed suit in state court without
naming Somdal as an additional defendant,” because the Plaintiff must still litigate the
project’s issues in state court. Record Document 11, p.3. In objecting to this finding, the
Plaintiff argues that suing Somdal in state court means that it will be forced to litigate
“complex construction claim[s] against separate defendants in separate forums,

2

The Defendant conceded that the Plaintiff was not dilatory with the proposed amendment at
issue, but it did reiterate the Magistrate Judge’s concern for why the Plaintiff did not file suit against
Somdal originally. Record Document 10, p.9, and Record Document 14, p.7.

Page 6 of 8

doubling the time, effort, and expense of an already expensive venture.” Record
Document 12-1, p.5. While this is a genuine concern, the Court is not persuaded that
the Magistrate Judge’s decision was clearly erroneous given the facts. As the
Defendant notes in opposition, if the Plaintiff was truly concerned about the burden of
litigating separate claims, it would have included Somdal in the original state action
given what it knew of Somdal’s potential fault. Record Document 14, p.7.3
Finally, the Magistrate Judge found that the fourth factor–other factors bearing on
the equities–weighs in the Defendant’s favor. Record Document 11, p.3. As explained in
the Memorandum Order, the decision to grant leave to amend a complaint for a nondiverse defendant requires analyzing the original defendant’s interest in litigating the suit
in its chosen forum. Id. Here, the Plaintiff offered no specific objection to the
Memorandum Order that found that the Defendant had “exercised its right to litigate the
matter in a federal forum” and that it should “not be deprived of that right when Plaintiff
had ample opportunity to assert its claims against Somdal at the time it filed suit but
chose not to do so.” This finding is in line with the facts presented in the record and the
fourth Hensgens factor.
When taken together, the facts and arguments presented by both parties fail to
demonstrate that the Magistrate Judge’s weighing of the Hensgens factors and ultimate
ruling were clearly erroneous or contrary to law.

3
The Court also notes that the Plaintiff has filed a petition in state court against Somdal, indicating
that the burden of litigating these claims separately is not insurmountable. Record Document 19, Ex. A.

Page 7 of 8

IV.

Conclusion
For the foregoing reasons, this Court AFFIRMS Magistrate Judge Hornsby’s

Memorandum Order [Record Document 11], denying the Plaintiff’s motion to amend its
complaint.
THUS DONE AND SIGNED in Shreveport, Louisiana, on this 2nd day of
February, 2015.

Page 8 of 8