City of Lincoln, Nebraska v. Windstream Nebraska

Filing 39

MEMORANDUM AND ORDER- The plaintiffs amended motion to amend, (filing no. 21 ), is granted in part and denied in part as follows: a. The motion is denied as to the addition of proposed defendants Windstream Midwest, Inc, Windstream Holding of Midwes t, Inc., and Windstream Systems of the Midwest, Inc. b. The plaintiff is granted leave to add proposed defendants Windstream Corporation and Windstream Communications, Inc. The plaintiffs motion to amend, (filing no. 19 ), is denied as moot. The plaintiff shall have seven (7) days from today to file an amended complaint in compliance with this order. Ordered by Magistrate Judge Cheryl R. Zwart. (MKR)

C i t y of Lincoln, Nebraska v. Windstream Nebraska

D o c . 39

IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF NEBRASKA C IT Y OF LINCOLN, NEBRASKA, A m u n ici p al corporation, Plaintiff, V. W IN D S T R E A M NEBRASKA, Inc., Defendant. ) ) ) ) ) ) ) ) ) ) )

4 :1 0 C V 0 3 0 3 0

M E M O R A N D U M AND ORDER

T h is matter comes before the court on the plaintiff's Motion for Leave to Amend C o m p lain t (filing no. 21). The plaintiff seeks to amend its Complaint to add a number of d efen d an ts to this action. The group of proposed additional defendants consists of both n o n d iv ers e and diverse parties. For the reasons set forth below the Motion is denied with re s p e c t to the addition of nondiverse parties and granted with respect to the addition of d iv er s e parties.

BACKGROUND

T h e plaintiff originally filed a complaint in the District Court of Lancaster County, N eb ras k a alleging that the defendant, Windstream Nebraska, Inc. ("WNI"), and its p red eces so r Alltel Nebraska, Inc., failed to pay telecommunication occupation taxes owed to th e City of Lincoln, pursuant to Lincoln Municipal Code § 3.24.080. Shortly after the

c o m p l a in t was filed, the defendant removed the case to this court (filing no. 1). The d efen d an t asserted removal was proper because this court has subject matter jurisdiction u n d er 28 U.S.C. § 1332. That is, the amount in controversy exceeds $75,000 and the parties are citizens of different states. Specifically, WNI is a Delaware Corporation and its principal p lace of business is Arkansas and the plaintiff is a citizen of Nebraska for the purposes of

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d eterm in in g subject matter jurisdiction. ju ris d ict io n . See filing no. 15.

The plaintiff does not contest subject matter

The defendant filed its Corporate Disclosure Statement, pursuant to Fed. R. Civ. P. 7.1, an d identified WNI as a wholly-owned corporate subsidiary of Windstream of the Midwest, In c. which was in turn identified as a wholly-owned subsidiary of Windstream Corporation (filin g no. 8). The Corporate Disclosure Statement was later amended to reflect that WNI was a wholly-owned subsidiary of Windstream Holding of the Midwest, Inc., rather than W in d stream of the Midwest, Inc., as indicated on the initial Corporate Disclosure Statement.

In response to the Corporate Disclosure Statement, the plaintiff filed a motion to am en d its complaint1 and sought to add a number of parties as defendants (filing no. 2 1 ). The p ro p o sed additional defendants include:

Windstream Communications, Inc. ("Communications") ­ a Delaware Corporation w ith its principal place of business in Arkansas; W in d stream of the Midwest, Inc. ("Midwest") ­ a Nebraska Corporation with its p r in c ip a l place of business in Arkansas; W in d stream Holding of the Midwest, Inc. ("Holding") ­ a Nebraska Corporation with its principal place of business in Arkansas; W in d stream Systems of the Midwest, Inc. ("Systems") ­ a Nebraska Corporation with its principal place of business in Arkansas;
1

The amendment was filed pursuant to the Final Progression Order (filing no. 1 6 ). Although the

o rig in a l deadline for filing amended pleadings was May 16, 2010 and the proposed amendment was filed May 2 0 , 2010, the proposed amendment was filed in response to the defendants Amended Disclosure of Corporate A f f il ia t i o n , filed on May 19, 2010 (filing no. 20). The defendant is not objecting on grounds of timeliness.

2

W in d stream Corporation ("WIN Corp.") ­ a Delaware Corporation with its principal p l ace of business in Arkansas. T h e defendant has objected to the Motion to Amend on the grounds that the proposed add ition al defendants are not necessary or indispensable to the proceedings and asserting that the joinder of the parties would destroy complete diversity, requiring remand to state court an d unnecessarily depriving the defendant of its choice of forum.

A N A LY SIS

T h e plaintiff has moved to amend its complaint and add both nondiverse and diverse p arties to this action. Because the analysis for the joinder of a nondiverse party differs from th at of a diverse party, the issues are addressed separately below.

N o n d ivers e Parties

T h e plaintiffs seek to add three nondiverse parties to this action ­ Midwest, Systems an d Holding. Each of these companies is deemed a citizen of Nebraska under 28 U.S.C. § 1 3 3 2 (c). Because complete diversity of citizenship must exist for this court to exercise

ju ris d ictio n , if these parties are joined to the action, the court will be required to remand the c a s e to the District Court of Lancaster County. 28 U.S.C. § 1447(e); Bailey v. Bayer C r o p s cien ce L.P., 563 F.3d 302, 307 (8th Cir. 2009).

The district court has discretion in determining whether to allow the amendment of p lea d in g s . Fed. R. Civ. P. 15(a)(2). Under Fed. R. Civ. P. 15(a)(2) courts generally grant mo tio n s to amend liberally; however, the right to amend is not without limits. See McAninch v . Wintermute, 491 F.3d 759, 766 (8th Cir. 2007). Rule 15 of the Federal Rules of Civil P r o ced u re must be considered with 28 U.S.C. § 1447(e), which gives the court a great deal 3

o f discretion in determining whether to allow a party to amend a complaint by adding a party that will destroy diversity. See Baily, 563 F.3d at 308; see also Hensgens v. Deere & Co., 8 3 3 F.2d 1179,1182 (5th Cir. 1987)(finding additional scrutiny is appropriate where the ad d itio n of nondiverse parties will require remand). Courts have generally held that 28 U .S .C . § 1447(e) gives the court the authority to deny joinder notwithstanding any right the p laintiff may have to amend under Rule 15. See Brcka v. St. Paul Travelers Co., Inc., 366 F . Supp. 2d 850, 853 (S.D. Iowa 2005)(citing Mayes v. Rapaport, 198 F.3d 457, 462 n. 11 (4 th Cir. 1999)).

Faced with the issue now before this court, the Bailey court first addressed whether the joinder of additional parties was mandated under Fed. R. Civ. P. 19. "Joinder would be requ ired if the plaintiff satisfie[s] Fed. R. Civ. P. 19 by showing that the new parties are n ecessary and indispensable to a full resolution of the case." Bailey, 563 F.3d at 308. . In d eterm in in g whether the additional parties are necessary, the court evaluated (1) whether the comp lete relief between the parties can be granted in the absence of the proposed additional p arties and (2) whether the proposed additional parties "claimed an interest relating to the su b ject of the action." Bailey, 563 F.3d at 308; see also Dominium Austin Partners, L.L.C. v . Emerson, 248 F.3d 720, 726 (8th Cir. 2001) (applying the same factors).

In this case, the plaintiff has not shown that the proposed additional parties are n eces s ary to the action. The plaintiff has not asserted, or provided any evidence, that the co u rt cannot afford complete relief between the plaintiff and WNI in the absence of Midwest, S ys tem s and Holding. The plaintiff speculates that Midwest, Systems and Holding "may be o b lig ate d for occupation tax" (filing no. 31, p. 4). However, the question of whether these en tities owe occupation tax is a separate matter from whether WNI owes occupation tax, and d o es not need to be answered in order to resolve the matter between the plaintiff and WNI. A lth o u g h WNI is a wholly owned subsidiary of Holding, there is no indication that WNI will 4

b e unable to pay any occupation tax it allegedly owes, or that WNI is a sham or shell co rp o ratio n which would enable the plaintiff to pierce the corporate veil and require Holding to pay for any obligations owed by WNI. In addition, Midwest, Systems and Holding have n o t claimed any interest in this proceeding. Thus, Midwest, Systems and Holding are not n eces s ary parties to this action.

E v en if Midwest, Systems and Holding were necessary parties, joinder would not be co m p elled because they are not indispensable parties under Fed. R. Civ. P. 19. When ev a lu a tin g whether an party is "indispensable" the court may consider several factors, in clu d in g :

(1 )

the extent to which a judgment rendered in the person's absence might p r eju d ice that person or the existing parties; th e extent to which any prejudice could be lessened or avoided by: (A ) (B ) (C) p ro tective provisions in the judgment; s h ap in g the relief; or o t h er measures;

(2 )

(3) (4)

w h eth er a judgment rendered in the person's absence would be adequate; w h eth er the plaintiff would have an adequate remedy if the action were d ismissed for nonjoinder.

B ailey, 563 F.3d at 308 (quoting Fed. R. Civ. P. 19(b)). In this case, the application of these factors does not favor a finding that Midwest, S ys tem s and Holding are indispensable parties. As discussed above, the plaintiff has not made a showing that it will be prejudiced by the absence of any of the proposed parties or that any judgment issued without joinder of the proposed parties would in any way be inadequate. T h u s , Midwest, Systems and Holding are also dispensable. 5

T h e analysis does not end with a finding that joinder is not required in this case. A co mp lain t may still be amended, and nondiverse, nonessential parties may still be joined, to the extent justice requires. Bailey, 563 F.3d at 309 (citing Hensgens v. Deere & Co., 833 F .2 d 1179,1182 (5th Cir. 1987)). The Bailey court identified a three-factor balancing test to app ly in determining whether a nondiverse, unnecessary, and dispensable party may n o n eth eless be joined. "`[T]he Court is required to consider (1) the extent to which joinder o f the nondiverse party is sought to defeat federal jurisdiction,( 2) whether [the] plaintiff has b een dilatory in asking for amendment, and (3) whether [the] plaintiff will be significantly injured if amendment is not allowed.' " Bailey, 563 F.3d at 309 (quoting Le Duc v. Bujake, 7 7 7 F.Supp. 10, 11-12 (E.D.Mo. 1991)). These factors must be weighed against the d efen d an t's strong interest in maintaining the federal forum. Hensgens, 833 F.2d at 309.

In this case, the balancing test favors the denial of the Motion to Amend and add M id w e st, Systems and Holding as defendants. Weighing in favor of allowing the joinder of th e nondiverse parties is the fact that no direct evidence exists that the plaintiff is attempting to add the parties in an attempt to defeat diversity and the Motion to Amend was filed in a tim ely manner. However, these factors alone do not justify joinder of the nondiverse parties.

T h e plaintiff has not adequately explained how it might be "significantly injured" if its request to join the nondiverse parties is denied. The plaintiff has not shown that Midwest, S ys tem s or Holding are, or could be, responsible for the obligations of Alltel, WNI, or any o f the other Windstream related entities.2 The plaintiff argues that it has "information and b elief" that each of the Windstream entities "contributed in providing telecommunications s erv ices in the City of Lincoln or may have assumed obligations of Alltel Nebraska, Inc. for
2

The plaintiff argues that WIN Corp assumed certain "debt securities" of Alltel's (filing no. 3 2 -7 ) .

H o w e v e r, the plaintiff provides no explanation as to how "debt securities" could involve an obligation to pay o c c u p a t i o n tax.

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an y unpaid occupation tax," (filing 31, p. 3). The plaintiff claims that if, through further d isco v ery, it appears Midwest, Systems and/or Holding are not responsible for the taxes at issue, either the plaintiff will voluntarily dismiss these defendants, or these defendants can mo v e for summary judgement. The plaintiff's arguments are based on speculation, and under s u ch circumstances, the court will not allow joinder at the risk of unnecessarily depriving the n am ed defendant's right to litigate this case in federal court.

Diverse Parties

T h e plaintiff seeks to add two parties ­ WIN Corp. and Communications ­ that are in co m p lete diversity with the plaintiff. Unlike the nondiverse parties, the addition of these two corp o ration s as defendants will not work to defeat complete diversity and will not require a rem an d of the case. Thus, the proposed amendment, as it relates to the addition of WIN Corp. an d Communications is not subject to the same level of scrutiny as the proposed addition of the nondiverse parties, but is subject to the more liberal standard of Rule 15 of the Federal R u les of Civil Procedure.

In such circumstances, leave to amend should be denied "where there are compelling reaso n s such as undue delay, bad faith, or dilatory motive, repeated failure to cure deficiencies b y amendments previously allowed, undue prejudice to the non-moving party, or futility of amend ment." Moses.com Securities, Inc. v. Comprehensive Software Systems, Inc., 406 F.3d 1 0 5 2 , 1065 (8th Cir. 2005); see also Popp Telcom v. American Sharecom, Inc., 210 F.3d 928, 9 4 3 (8th Cir. 2000)(noting leave to amend should normally be granted "absent good reason fo r denial"). None of those reasons are present in this case. Therefore, the plaintiff's motion to amend is granted to the extent it seeks to add WIN Corp. and Communications.

Accordingly, 7

IT IS ORDERED:

1)

T h e plaintiff's amended motion to amend, (filing no. 21) , is granted in part and d e n ied in part as follows: a. T h e motion is denied as to the addition of proposed defendants W in d s tream Midwest, Inc, Windstream Holding of Midwest, Inc., and W in d stream Systems of the Midwest, Inc. T h e plaintiff is granted leave to add proposed defendants Windstream C o rp o ra tio n and Windstream Communications, Inc.

b.

2) 3)

T h e plaintiff's motion to amend, (filing no. 19), is denied as moot. T h e plaintiff shall have seven (7) days from today to file an amended complaint in compliance with this order.

DATED this 15th day of July, 2010. B Y THE COURT: s/ Cheryl R. Zwart United States Magistrate Judge

*This opinion may contain hyperlinks to other documents or Web sites. The U.S. D is trict Court for the District of Nebraska does not endorse, recommend, approve, or g u ar an t ee any third parties or the services or products they provide on their Web sites. L ik ew is e, the court has no agreements with any of these third parties or their Web sites. The co u rt accepts no responsibility for the availability or functionality of any hyperlink. Thus, the fact that a hyperlink ceases to work or directs the user to some other site does not affect the o p in io n of the court. 8