Buffalo State Alumni Association, Inc. et al v. The Cincinnati Insurance Company et al

Filing 65

DECISION AND ORDER denying 39 Motion to Amend or Correct; adopting Report and Recommendations re 56 Report and Recommendations.; granting 16 Motion to Remand. It is ordered that this proceeding is remanded to State Court. (Clerk to close case.) Signed by Hon. Michael A. Telesca on 5/4/17.. Signed by Hon. Michael A. Telesca on 5/4/17. (JMC)-CLERK TO FOLLOW UP-

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK

BUFFALO STATE ALUMNI ASSOCIATION,
INC., BUFFALO STATE COLLEGE
FOUNDATION HOUSING CORPORATION,
LPCIMINELLI, INC., and
LPCIMINELLI CONSTRUCTION CORP.,

DECISION and ORDER
No. 1:14-cv-383(MAT)(JJM)

Plaintiffs,
-vsTHE CINCINNATI INSURANCE COMPANY,
ACADIA INSURANCE COMPANY,
SELECTIVE WAY INSURANCE COMPANY,
and HUBER CONSTRUCTION, INC.,
Defendants.

INTRODUCTION
This

matter

Recommendation

is

(Dkt

before
#56),

the

dated

Court

upon

the

November

4,

2014,

Report and
issued

by

United States Magistrate Judge Jeremiah J. McCarthy (“the R&R”).
The R&R recommended (1) granting the motion (Dkt #16) of Buffalo
State Alumni Association, Inc., Buffalo State College Foundation
Housing

Corporation,

LPCiminelli,

Inc.,

and

LPCiminelli

Construction Corp.1 (collectively, “Plaintiffs”) to remand the
action to State of New York, Supreme Court, County of Erie due to
lack of diversity jurisdiction; and (2) denying the motion (Dkt
#39)

of

defendant

realignment

of

the

Acadia
parties

Insurance
in

order

Company
to

(“Acadia”)

preserve

for

diversity.

1

LPCiminelli, Inc. and LPCiminelli Construction Corp. are collectively
referred to as “LPCiminelli.”

Defendant The Cincinnati Insurance Company (“Cincinnati”) filed
objections (Dkt #57-2) to the R&R, as well as a reply (Dkt #62) in
response

to

Plaintiff’s

response

(Dkt

#60)

to

Cincinnati’s

objections. Huber Construction Company (“Huber”) filed a letter
(Dkt #61) indicating that it was not filing any pleadings in regard
to the R&R. Defendant Acadia and defendant Selective Way Insurance
Company (“Selective Way”) filed affirmations (Dkt ##58, 63) joining
in Cincinnati’s objections to the R&R.2 The matter was transferred
(Dkt #64) to the undersigned on May 1, 2017.
The

Court

assumes

the

parties’

familiarity

with

Judge McCarthy’s R&R and the fairly complex factual background of
the instant proceeding. For the reasons discussed herein, the Court
adopts Judge McCarthy’s recommendations that realignment of the
parties be denied, and that this matter be remanded to state court.
STANDARD OF REVIEW
To preserve a claim for review by the district court, the
party must make sufficiently specific objections to the R&R. E.g.,
Mario v. P & C Food Mkts., Inc., 313 F.3d 758, 766 (2d Cir. 2002).
“To accept the report and recommendation of a magistrate, to which
no timely objection has been made, a district court need only
satisfy itself that there is no clear error on the face of the
record.” Nelson v. Smith, 618 F. Supp. 1186, 1189 (S.D.N.Y. 1985)
(citing FED. R. CIV. P. 72(b), Advisory Comm. Notes (when a party
2

Acadia, Selective Way, and Cincinnati are collectively referred to herein
as the “Defendant Insurers.”

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makes no objection, or only general objections to a portion of an
R&R, the district judge reviews it for clear error or manifest
injustice); further citation omitted). When timely objection has
been made to a portion or portions of a magistrate judge’s report,
the district judge must “make a de novo determination” of “any
portion

of

the

.

.

.

disposition

to

which

specific

written

objection has been made. . . .” FED. R. CIV. P. 72(b). The district
judge may then accept, reject or modify, in whole or in part, the
magistrate judge’s proposed findings and recommendations. 28 U.S.C.
§ 636(b)(1).
DISCUSSION
The

R&R

recommended

granting

the

remand

motion

for

the

following reasons: (1) realigning Huber from being a defendant to
a

plaintiff

is

improper

because

Huber

and

LPCiminelli

have

divergent interests (see R&R, pp. 4-5); (2) Huber is a proper
party, and even if it were not a proper party, the fraudulent
joinder doctrine is inapplicable to this removed action (see R&R,
p. 5); (3) the statutory language of 28 U.S.C. § 1447(e) renders it
inapplicable to amendments as a matter of course under FED. R. CIV.
P. 15(a)(1), since Cincinnati added Huber pursuant to its right to
amend as a matter of course (see R&R, pp., 8, 10); (4) notions of
fundamental fairness were not offended by LPCiminelli’s addition of
Huber, notwithstanding the effect of Huber’s joinder on diversity
of citizenship (see R&R, p. 11); (5) FED. R. CIV. P. 21 may not be
used by the Court to drop Huber as a party so as to restore
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diversity jurisdiction because Huber’s presence deprives the Court
of subject matter jurisdiction to act pursuant to FED. R. CIV. P. 21
(see R&R, pp. 12-13); and (6) Title 28 U.S.C., Section 1447(c)
requires immediate remand of the action to state court (see R&R,
pp. 12-13). Judge McCarthy reached these conclusions after a
scholarly and thorough analysis, and expressly recognized that his
position was against the weight of the contrary authority.
Cincinnati has asserted a number of specific objections to the
R&R focusing on its disagreement with Judge McCarthy’s refusal to
follow the authority on which it relies, in particular, the R&R’s
finding that Section 1447(e) is inapplicable because Huber was
added pursuant to Rule 15(a)(1). Primarily, Cincinnati urges this
Court to apply 28 U.S.C. § 1447(e) as controlling. Section 1447(e)
provides that “[i]f[,] after removal[,] the plaintiff seeks to join
additional defendants whose joinder would destroy subject matter
jurisdiction, the [district] court may deny joinder, or permit
joinder and remand the action to the State court.” 28 U.S.C.
§ 1447(e). Cincinnati faults the R&R for declining to follow
Masters v. Erie Ins. Co., 1:13-cv-00694-WMS-HBS (W.D.N.Y. Mar. 31,
2014), which noted that “‘every federal court that has considered
the issue,’ has determined that the ‘the discretionary decision
called for by § 1447(e) is appropriate even when [the] plaintiff
has amended as a matter of course under Rule 15(a).’” Decision and
Order (Dkt #28 in 1:13-cv-00694-WMS-HBS) at 2 (quoting McGee v.
State Farm Mut. Auto. Ins. Co., 684 F. Supp.2d 258, 261 (E.D.N.Y.
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2009); emphasis in original). According to Cincinnati, due to the
R&R’s allegedly erroneous conclusion that Section 1447(e) does not
apply here, it failed to conduct the “fundamental fairness” inquiry
required under that statutory section. Cincinnati contends that if
such an analysis were performed, the result would be the dismissal
of Huber as a party, the denial of Plaintiffs’ motion to remand,
and the Court’s retention of jurisdiction over this action.
For purposes of resolving the pending motions, the Court has
assumed arguendo that the discretionary decision called for by
28 U.S.C. § 1447(e) is appropriate even where, as here, Plaintiffs
have amended as a matter of course under FED. R. CIV. P. 15(a)(1).
As discussed further below, the endpoint of the Court’s Section
1447(e) analysis is same as that reached by Judge McCarthy: remand
of this proceeding to state court.
In order to determine whether to permit joinder and remand a
case pursuant to 28 U.S.C. § 1447(e), the Court engages in a
two-part

analysis.

See,

e.g.,

Abraham

Nat.

Foods

Corp.

v.

Mt. Vernon Fire Ins. Co., 576 F. Supp.2d 421, 424 (E.D.N.Y. 2008)
(“The determination as to whether joinder of non-diverse parties in
this situation is proper is

based on a two-step showing that

‘joinder [is] merely permissible under Rule 20 of the Federal Rules
of Civil Procedure, and that the balancing of certain relevant
considerations weighs in favor of joinder and its necessarily
attendant remand.’”) (quoting Gursky v. Northwestern Mut. Life Ins.
Co.,

139

F.R.D.

279,

281–82

(E.D.N.Y.
-5-

1991);

alteration

in

original).

There

is

no

dispute

that

joinder

of

Huber

is

“permissible” under FED. R. CIV. P. 20(a)(2); indispensability of
Huber as a party is not required. See Gursky, 139 F.R.D. at 282
(“Courts in this circuit have comported with Hensgens[ v. Deere &
Co., 833 F.2d 1179, 1182 n. 1 (5th Cir.

1987), cert. denied, 493

U.S. 851 (1989)] in holding that additional non-diverse parties
need not be indispensable to be joined. The courts in the cases
cited have instead required that joinder be merely permissible
under Rule 20 of the Federal Rules of Civil Procedure. . . .”)
(internal citations and footnote omitted). LPCiminelli’s claim
against Huber is related to the claims made against the defendant
insurance

companies,

and

arises

out

of

the

same

factual

circumstances.
The

Court

accordingly

turns

to

the

second

step,

which

requires a “fundamental fairness” analysis in order to “ascertain
whether the balancing of certain relevant considerations weighs in
favor of joinder and its necessarily attendant remand.” Roll On
Express,

Inc.

v.

Travelers

Indem.

Co.

of

Connecticut,

No. 09–CV–213, 2009 WL 1940731, at *1 (E.D.N.Y. July 2, 2009)
(citing Abraham, 576 F. Supp.2d at 424-25). In so doing, the Court
“must

consider

the

totality

of

the

circumstances

and,

in

particular, must weigh four factors: ‘(1) any delay, and its
reasons, in moving to amend; (2) any resulting prejudice to the
defendants; (3) the likelihood of multiple litigations; and (4) the

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plaintiff’s motivation in moving to amend.’” Id. (quoting Abraham,
576 F. Supp.2d at 425 (citing Gursky, 139 F.R.D. at 282)).
As to the first factor, there was no apparent delay in
LPCiminelli’s amending of the complaint to add Huber as a party.
The motion to amend was made 15 days after Cincinnati filed its
answer with affirmative defenses, well within the 21-day period
permitted under FED. R. CIV. P. 15(a)(1)(B). This factor weighs in
favor of joinder.
With regard to the prejudice factor, the Court notes that this
case, albeit several years old, is still in its nascency. See,
e.g., Grogan v. Babson Bros. Co. of Illinois, 101 F.R.D. 697, 700
(N.D.N.Y. 1984) (“[G]ranting the motion [to remand] will not
prejudice

the

defendant

because

both

lawsuits

are

in

their

infancy.”). Indeed, “the potential for additional discovery alone
is not sufficient to constitute prejudice[.]” Roll On Express Inc.,
2009 WL 1940731, at *4 (citing Gursky, 139 F.R.D. at 283). Here,
discovery has not yet even commenced. The Court cannot discern any
appreciable prejudice to the parties opposing joinder. See Gursky,
139 F.R.D. at 283 (“[T]he Court fails to see how NML will be
prejudiced as a result of the proposed amendment. The need to
conduct additional discovery is standard fare when pleadings are
amended, and the Court finds nothing prejudicial in having to
defend this action in state court.”).
With regard to whether Huber’s inclusion as a party will
potentially help avoid the proliferation of multiple litigations,
-7-

Plaintiffs argue that separate trials concerning the issue of
whether Huber failed to procure the proper insurance coverage could
arise

if

the

Insurer

Defendants

are

successful

in

defeating

coverage. In such case, and absent joinder, LPCiminelli would be
required to litigate its claims separately against Huber in state
court. Specifically, LPCiminelli notes, if Huber is dismissed from
this action, and the case against the Insurers results in a finding
that no coverage is owed, there is the possibility that Huber, in
a later proceeding, could still assert the argument that it did not
violate its duty to procure proper coverage for Plaintiffs, thereby
exposing LPCiminelli to a second trial with the possibility of a
different result. Huber could be prejudiced by dismissal, as well.
Huber argued in support of the remand motion that it would be
“significantly prejudiced” if joinder were denied, because
then [LPCiminelli] would commence yet another action to
pursue [its] claim for damages against Huber. Huber would
then be forced to appear and defend another action, and
to implead Cincinnati to assert its cross-claims against
Cincinnati for breach of its obligations to defend and
indemnify Huber under the insurance policies.
(Huber’s Memorandum of Law (Dkt #35-2) at 11). The Court finds that
judicial economy will be furthered by preventing the proliferation
of multiple litigations. This factor therefore weighs in favor of
joinder. See Gursky, 139 F.R.D. at 283 (“[R]emand of the present
action will

avoid

wasting

judicial

resources

as

well

as

the

inherent dangers of inconsistent results, both of which are at risk
when parallel state and federal actions proceed simultaneously.”);
-8-

Wilson v. Famatex GmbH Fabrik, 726 F. Supp. 950, 952 (S.D.N.Y.
1989) (“If joinder is not permitted, a multiplicity of lawsuits may
ensue, resulting in extra expense to the parties, the waste of
judicial resources and the possibility of conflicting outcomes in
separate proceedings involving common questions of law and fact.”).
Finally, the Court turns to the question of motive. Cincinnati
urges that LPCiminelli’s sole motivation in adding Huber as a party
was to destroy diversity and force a remand. LPCiminelli argues
that its motion to amend to add Huber as of right was occasioned by
the

filing

of

Cincinnati’s

answer,

asserting

the

affirmative

defense that Plaintiffs had not named all of the necessary parties.
LPCiminelli

indicates

recognized

the

that

“potential

upon

further

necessity

and

consideration,
practical

sense

it
of

including the claims against Huber” and “elect[ed] to name Huber as
an additional defendant, in order to seek complete relief in this
case.” (Plaintiffs’ Memorandum of Law in Response to Cincinnati’s
Objections (Dkt #60) at 7).
It is true that “[j]oinder is not warranted where a plaintiff
seeks to add the non-diverse parties ‘solely’ to bring about a
remand to state court.” Roll On Express, Inc., 2009 WL 1940731, at
*5 (citing Gursky, 139 F.R.D. at 283). However, “when there is no
showing that the plaintiff seeks to join the additional defendants
solely to effectuate a remand, the better rule seems to be that ‘in
the exercise of . . . sound discretion the court may permit a new
party to be added, although his citizenship destroys diversity and
-9-

requires a remand.’” Shaw v. Munford, 526 F. Supp. 1209, 1213–14
(S.D.N.Y. 1981) (quoting 1A Moore’s Federal Practice, ¶0.161(1), at
209 (2d ed. 1981); ellipsis in Shaw; citing Desert Empire Bank v.
Insurance Co. of N. Am., 623 F.2d 1371, 1375 (9th Cir. 1980)
(plaintiff permitted to join additional defendant whose presence
destroyed diversity jurisdiction and necessitated a remand); Soam
Corp. v. Trane Co., 506 F. Supp. 302, 308-09 (S.D.N.Y. 1980)
(same); Miller v. Davis, 464 F. Supp. 458, 461 (D. D.C. 1978)
(same); other citations omitted); accord, e.g., Roll On Express,
Inc., 2009 WL 1940731, at *5; Grogan v. Babson Bros. Co., 101
F.R.D. 697, 700 (N.D.N.Y. 1984)). Such is the case here. The Court
finds that Plaintiffs’ proffered reasons for adding Huber are
legitimate, and that Cincinnati has not established, to this
Court’s satisfaction, that Plaintiffs moved to join Huber, a nondiverse party, “solely” to effectuate a remand to state court.
In summary, this Court’s review of the factors used to assess
fundamental
convincing

fairness
basis

to

under

28

overcome

U.S.C.
the

§

1447(e)

general policy

“provides
in

no

favor of

joinder.” Abraham, 576 F. Supp.2d at 426.
CONCLUSION
For

the

recommendations

foregoing
in

the

R&R

reasons,
(Dkt

the

#56)

Court

that

the

adopts the
motion

for

realignment (Dkt #39) be denied, and that the motion for remand
(Dkt #16) be granted. As discussed above, the Court finds that the
joinder of Huber was permissible under FED. R. CIV. P. 20, and that
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Huber’s joinder does not offend notions of fundamental fairness.
Having so decided, this Court is therefore bound by 28 U.S.C.
§ 1447(e) to conclude that the present action must be remanded to
state court. Accordingly, it is hereby
ORDERED that the motion for realignment (Dkt #39) is denied,
and it is further
ORDERED that Huber remains as a defendant in this proceeding,
and it is further
ORDERED that this motion for remand (Dkt #16) is granted, and
it is further
ORDERED that this proceeding is remanded to state court.
The Clerk of Court is directed to close this case.
SO ORDERED.
S/Michael A. Telesca

HONORABLE MICHAEL A. TELESCA
United States District Judge
DATED:

May 4, 2017
Rochester, New York

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