McCright et al v. Smith & Nephew Inc

Filing 26

MEMORANDUM ORDER withdrawing 21 Report and Recommendations; and denying 14 Motion for Leave to Amend. The Motion for Leave to File Amended Complaint is denied as now presented, but without prejudice to resubmitting it no later than 3/11/2016 in accordance with the instructions given herein regarding the proper allegation of the citizenship of any new defendants. Signed by Magistrate Judge Mark L Hornsby on 2/25/2016. (crt,Keifer, K)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
SHREVEPORT DIVISION

PRISCILLA McCRIGHT, ET AL

CIVIL ACTION NO. 14-cv-2237

VERSUS

JUDGE HICKS

SMITH & NEPHEW, INC.

MAGISTRATE JUDGE HORNSBY

MEMORANDUM ORDER
Report and Recommendation Withdrawn
Priscilla McCright suffered serious complications after surgery. She and her husband
(“Plaintiffs”) filed this products liability action in state court against Smith & Nephew, the
manufacturer of a wound vac that was used during treatment. Smith & Nephew removed the
case based on diversity jurisdiction.
At about the same time, Plaintiffs filed a medical review panel proceeding against the
two physicians (Dr. Howell and Dr. Banda) and hospital (Willis-Knighton Bossier Health
Center) who provided the treatment.

The review panel process is a Louisiana-law

prerequisite to filing a medical malpractice suit in court.
The parties to this suit began conducting discovery, but no trial date was set. The
medical review panel issued its decision, which allowed Plaintiffs to file suit on their medical
malpractice claims. Plaintiffs then filed a Motion for Leave to File Amended Complaint
(Doc. 14) to add malpractice claims against the two physicians and the hospital. The
proposed amended complaint would also add (1) a new products liability claim against the

manufacturer (Acelity, L.P., Inc.) of a KCI brand wound vac that was also used in the
treatment and (2) and the company (Universal Hospital Services, Inc. or “UHS”) that leased
the two wound vacs to the hospital.
All parties originally briefed the motion for leave to amend as if Plaintiffs were
Louisiana citizens and the addition of the Louisiana healthcare providers would destroy
diversity.

The undersigned accepted those representations and issued a Report and

Recommendation that recommended leave be granted, despite the lack of diversity, and the
case be remanded for lack of subject-matter jurisdiction. The rationale was that Plaintiffs
were not to blame for the delay in adding the healthcare providers because Plaintiffs were
required by law to first complete the medical malpractice review process. The court did not
address the proposed addition of claims against Acelity and UHS because it had already been
determined that remand was in order.
Smith & Nephew filed an objection to the Report and Recommendation and stated that
it had recently come to its attention that all parties had mistakenly briefed the issue as if
Plaintiffs were citizens of Louisiana when they were actually citizens of Texas. A review
of the state court petition and the notice of removal shows that they both allege that Plaintiffs
are domiciled in and, thus, citizens of Texas. That means the addition of the Louisiana
healthcare provider defendants (assuming they are actually Louisiana citizens) will not
destroy diversity, and the prior briefs and recommendation were largely a waste of time. The
citizenship of Acelity and UHS is not alleged with certainty in the proposed amended

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complaint. Smith & Nephew states, on information and belief, that Acelity is a Texas
corporation with its principal place of business in Texas, so its addition as a defendant would
destroy diversity. In light of these developments, the Report and Recommendation (Doc.
21) is withdrawn.
Motion for Leave to Amend
The court now revisits the Motion for Leave to File Amended Complaint (Doc. 14).
A court “should freely give leave when justice so requires.” F.R.C.P. 15(a). The Fifth
Circuit interprets Rule 15 as having a heavy bias in favor of granting leave. “[U]nless there
is a substantial reason, such as undue delay, bad faith, dilatory motive, or undue prejudice
to the opposing party, the discretion of the district court is not broad enough to permit
denial.” Martin’s Herend Imports v. Diamond & Gem Trading, 195 F.3d 765 (5th Cir. 1999).
If the proposed amendment would destroy jurisdiction, the court’s decision is guided
by the factors set forth in Hensgens v. Deere & Co., 833 F.2d 1179 (5th Cir. 1987).
Although leave to amend is ordinarily freely granted, Hensgens instructs that when a district
court is faced with an amendment that adds a non-diverse party it “should scrutinize that
amendment more closely than an ordinary amendment.” Id. at 1182.
The motion for leave was filed within the deadline set by the court (Doc. 13), and it
appears that the proposed addition of the healthcare defendants does not present a risk of
destroying diversity. The case has seen some discovery, but it is still relatively early in the
litigation process. Smith & Nephew will not suffer any unreasonable harm if the new

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defendants are added. Plaintiffs and the judicial system will benefit from having one suit
instead of two; there will be a saving of judicial and party resources, and there will be a
reduced risk of inconsistent verdicts or problems with defendants in one suit attempting to
cast blame on parties that are not in the same suit with them.
For these reasons, the court is willing to allow Plaintiffs to add the physicians and
hospital if their citizenship is alleged with specificity and that does not destroy diversity. The
court is unsure of the citizenship of the other two proposed defendants, Acelity and UHS, so
the Motion for Leave to File Amended Complaint (Doc. 14) is denied as now presented,
but without prejudice to resubmitting it no later than March 11, 2016 in accordance with the
instructions given herein regarding the proper allegation of the citizenship of any new
defendants.
Instructions for Citizenship Allegations
The current parties are Plaintiffs (Texas) and Smith & Nephew, Inc. (Delaware and
Tennessee). Plaintiffs’ proposed amended complaint would name new defendants Dr.
Michael Banda, Dr. James Howell, and Willis-Knighton Bossier Health Center, but it does
not allege the citizenship of any of those parties.
If Plaintiffs proposes a new amended complaint, it must allege with specificity the
state in which each individual defendant is domiciled. It is domicile rather than mere
residency that decides citizenship for diversity purposes. Great Plains Trust Co. v. Morgan
Stanley, 313 F.3d 305, 310 n. 2 (5th Cir. 2002).

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Plaintiffs must also allege with specificity the legal form (corporation, partnership,
etc.) of the Willis-Knighton hospital entity and allege its citizenship in accordance with the
rules that apply to that form of entity. If it is a corporation, it is deemed to be a citizen of (1)
the state in which it was incorporated and (2) the state where it has its principal place of
business. 28 U.S.C. § 1332(c)(1). The pleading must state both with specificity. Howery
v. Allstate Ins. Co., 243 F.3d 912, 919 (5th Cir. 2001); Joiner v. Diamond M Drilling Co.,
677 F.2d 1035, 1039 (5th Cir. 1982).
If the hospital is an LLC, partnership, or other unincorporated association, its
citizenship is determined by looking to the citizenship of all of its members, with its state of
organization or principal place of business being irrelevant. Harvey v. Grey Wolf Drilling
Co., 542 F.3d 1077 (5th Cir. 2008). If the members are themselves partnerships, LLCs,
corporations or other form of entity, their citizenship must be alleged in accordance with the
rules applicable to that entity, and the citizenship must be traced through however many
layers of members or partners there may be. Feaster v. Grey Wolf Drilling Co., 2007 WL
3146363 (W.D. La. 2007). The court has explained the need for such detail in cases such as
Burford v. State Line Gathering System, LLC, 2009 WL 2487988 (W.D. La. 2009) and
Adams v. Wal-Mart Stores, Inc., 2014 WL 2949404 (W.D. La. 2014).
Plaintiffs also contemplate adding new defendant Acelity, LP, Inc., which they
describe as a “foreign entity” that is responsible for the KCI wound vac. Smith & Nephew
states its belief that Acelity is a Texas corporation with its principal place of business in

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Texas. (Online SEC filings and other resources indicate the company may actually be a
non-operating holding company organized under Guernsey law with its principal executive
offices in San Antonio.) Plaintiffs will need to determine whether they have the correct
defendant and, if they elect to pursue it, make specific allegations about the form of entity
and its citizenship. If Acelity (or whatever entity might be sued) is a Texas citizen and would
destroy diversity, Plaintiffs will have to determine whether they wish to attempt to add them
to the case. If they do, they will need to accompany their motion with a memorandum that
makes their best case under the Hensgens factors.
The final newly proposed defendant is Universal Hospital Services, Inc., which is also
identified as a “foreign entity” that leased to the hospital the two wound vac pumps used in
the treatment. The name of this entity suggests that it is a corporation, which requires that
the pleadings set forth with specificity (1) the state in which it is incorporated and (2) the
state in which it is principal place of business.
Any proposed amended complaint must include specific allegations of citizenship for
each new party. If Plaintiffs do not have the information necessary to make those allegations,
they should say so and allege what they do know about the location/organization of the
parties. They will then be required to promptly serve those parties so that the defendants may
appear and provide the necessary information to determine their citizenship. If it is
determined that they share Texas citizenship with Plaintiffs, the court will then have to
decide under the Hensgens principles whether to (1) vacate the addition of the non-diverse

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defendant or (2) allow the non-diverse defendant to remain and remand the case to state
court.
THUS DONE AND SIGNED in Shreveport, Louisiana, this 25th day of February,
2016.

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