RAD Manufacturing, L.L.C. et al v. Advanced Fabrication Services, Inc.
MEMORANDUM (Order to follow as separate docket entry) re 8 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM, MOTION to Dismiss for Lack of Jurisdiction filed by Advanced Fabrication Services, Inc. Signed by Honorable Malachy E Mannion on 6/20/17. (bs)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
RAD MANUFACTURING, L.L.C.,
formerly known as RAD Wood
Work Company, et al.,
CIVIL ACTION NO. 3:16-2138
SERVICES, INC. t/d/b/a AFS
Before the court is the defendant’s motion to dismiss. (Doc. 8). The
defendant seeks to dismiss the plaintiffs’ amended complaint. (Doc. 5). For the
foregoing reasons, the defendant’s motion is GRANTED.
The plaintiff RAD Manufacturing, L.L.C. (“RAD”) is an owner and
operator of a wood floor manufacturing facility incorporated in Delaware with
its principle place of business in Pennsylvania. The defendant Advanced
Fabrication Services, Inc. (“AFS”) is in the business of designing,
troubleshooting, installing, maintaining, servicing, and repairing boilers and
boiler control systems. AFS is incorporated in Pennsylvania and has its
principle place of business in Pennsylvania. The plaintiff Indiana Lumbermens
Mutual Insurance Company (“Lumbermens”) insures and acts as subrogee to
RAD. Lumbermens is incorporated in Indiana with its principle place of
business in Indiana. The plaintiff The Travelers Indemnity Company
(“Travelers”) reinsures and acts as subrogee to Lumbermens. Travelers is
incorporated in Connecticut and has its principle place of business in
Prior to November 2014, RAD hired and contracted with AFS to design,
fabricate, construct, program, assemble, install, inspect, test, maintain, repair,
and service a boiler control system on RAD’s premises. On November 2, 2014,
the boiler dry fired causing damage to RAD’s real property. The boiler control
system was supposed to prevent dry fires by monitoring the level of cooling
water in the boiler and shutting off the boiler if the level of water was below
predetermined levels. The boiler control system did not operate as intended,
leading to the dry fire. RAD submitted a claim to Lumbermens following the
real property loss. Lumbersmens and Travelers have paid and may continue
to pay in excess of two million dollars as compensation for that loss. RAD also
suffered additional property losses of approximately $431,000.00 not covered
by any insurance, which RAD seeks to recover. (Doc. 21 at 3).
On October 24, 2016, the plaintiffs filed a complaint in this court. (Doc.
1). The plaintiffs filed an amended complaint on November 4, 2016 as a matter
of right. (Doc. 5). The plaintiffs’ amended complaint alleged four claims against
the defendant: (1) negligence—Count I; (2) strict liability—Count II; (3) breach
of warranty—Count III; and (4) breach of contract—Count IV. RAD also
commenced a civil action against the defendant in the Luzerne County Court
of Common Pleas by filing a praecipe for writ of summons. RAD Mfg. LLC v.
AFS Energy Systems, No. 201600589 (Ct. Com. Pl. 2016). No complaint has
On November 23, 2016, the defendant filed the current motion to dismiss
the plaintiffs’ claims. (Doc. 8). A brief is support was filed on December 6,
2016. (Doc. 9). The defendant’s motion seeks dismissal of the plaintiffs’
amended complaint primarily based on the court’s alleged lack of subject
matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). In the
alternative, the defendant seeks dismissal of the plaintiffs’ strict liability claim
(Count II) and breach of warranty claim (Count III) based on Federal Rule of
Civil Procedure 12(b)(6) and the plaintiffs’ failure to state a claim. The
defendant also moves for a more definitive statement with respect to the
negligence claim (Count I) pursuant to Federal Rule of Civil Procedure 12(e),
also in the alternative. The plaintiffs filed a proper brief in opposition on
December 27, 2016. (Doc. 13).
On February 9, 2017, the court ordered the parties to submit
supplemental briefs to aid the court’s resolution of the jurisdictional issue.
(Doc. 20). On February 23, 2017, the parties submitted their supplemental
briefs per the court’s order. (Docs. 21–22). The defendant’s motion is now fully
ripe for review.
STANDARD OF REVIEW
Rule 12(b)(1) provides for the dismissal of a complaint based on a “lack
of subject-matter jurisdiction.” FED. R. CIV. P. 12(b)(1). “A motion to dismiss
under Rule 12(b)(1) challenges the jurisdiction of the court to address the
merits of the plaintiff’s complaint.” Vieth v. Pennsylvania, 188 F. Supp. 2d 532,
537 (M.D. Pa. 2002). Because the district court is a court of limited
jurisdiction, the burden of establishing subject matter jurisdiction always rests
upon the party asserting it. See Kokkonen v. Guardian Life. Ins. Co. of
America, 511 U.S. 375, 377 (1994). Generally, however, district courts “enjoy
substantial flexibility in handling Rule 12(b)(1) motions.” McCann v. Newmann
Irrevocable Trust, 458 F.3d 281, 290 (3d Cir. 2006).
An attack on the court’s jurisdiction may be either “facial” or “factual” and
the “distinction determines how the pleading must be reviewed.” Const. Party
of Pa. v. Aichele, 757 F.3d 347, 357 (3d Cir. 2014). A facial attack tests the
sufficiency of the pleadings, while a factual attack challenges whether a
plaintiff’s claims fail to comport factually with jurisdictional prerequisites. Id. at
358; see also S.D. v. Haddon Heights Bd. of Educ., 833 F.3d 389, 394 n. 5
(3d Cir. 2016). If the defendant brings a factual attack, the district court may
look outside the pleadings to ascertain facts needed to determine whether
jurisdiction exists, which is distinct from a facial attack. Id. If there are factual
deficiencies, the court’s jurisdictional determination may require a hearing,
particularly where the disputed facts are material to finding jurisdiction.
McCann, 458 F.3d at 290. Here, the defendant complains of factual
deficiencies. The plaintiffs do not dispute these facts and, instead, argue that
jurisdiction is proper despite these deficiencies as a matter of law. The court
The district court is a court of “limited jurisdiction.” Exxon Mobile Corp.
v. Allapattah Servs., Inc., 545 U.S. 546, 552 (2005) (Kokkonen v. Guardian Life
Ins. Co. of Am., 511 U.S. 375, 377 (1994)). It “possess[es] only that power
authorized by Constitution and statute.” Id. “[A] federal court always has
jurisdiction to determine its jurisdiction.” Zambelli Fireworks Mfg. Co., Inc. v.
Wood, 592 F.3d 412, 418 (3d Cir. 2010). When the court’s jurisdiction is at
issue, however, “it is incumbent upon the courts to resolve such doubts . . .
before proceeding to a disposition on the merits.” Id. (quoting Carlsberg Res.
Corpo. v. Cambria Sav. & Loan Ass’n, 554 F.2d 1254, 1256 (3d Cir. 1977)).
District courts have original jurisdiction over federal question
cases—those involving the Constitution, federal law, or treaties of the United
States. 28 U.S.C. §1331. The district court also has original jurisdiction and
serves as neutral forum for disputes between citizens of different states,
between U.S. citizens and foreign citizens, and between U.S. citizens and
foreign states where the amount in controversy exceeds $75,000.00—i.e.,
diversity cases. 28 U.S.C. §1332. A district court may also exercise
supplemental jurisdiction over claims “so related to claims in the action within
[the court’s] original jurisdiction that they form part of the same case or
controversy under Article III of the United States Constitution.” 28 U.S.C.
§1367(a). Because the plaintiffs’ claims present no federal question, this
court’s jurisdiction must be premised on either diversity of citizenship or
supplemental jurisdiction. Neither form of jurisdiction is appropriate here.
Further, the court cannot cure the jurisdictional defect.
The Court Lacks Diversity and Supplemental Jurisdiction.
Diversity jurisdiction requires complete diversity between the parties in
the action. Otherwise stated, “presence in the action of a single plaintiff from
the same State as a single defendant deprives the district court of original
jurisdiction over the entire action.” Exxon Mobile, 545 U.S. at 553. Complete
diversity is an essential component of jurisdiction. Without it, the principle
reason for conferring jurisdiction—to serve as a neutral forum and not favor
home-state litigants—is eliminated. Id. at 553–54.
RAD’s presence in this action destroys complete diversity in this action.
For jurisdictional purposes, a corporation is deemed to be a citizen of its place
of incorporation and its principle place of business. 28 U.S.C. §1332(c)(1).
Based on allegations within the amended complaint, RAD is incorporated in
Delaware, but has its principle place of business in Pennsylvania. Thus, RAD
is deemed a citizen of both Delaware and Pennsylvania. Also based on
allegations in the amended complaint, AFS is incorporated in and has its
principle place of business in Pennsylvania and is, therefore, also deemed a
citizen of Pennsylvania. Because both corporations are deemed citizens of the
same state, one plaintiff and the sole defendant, complete diversity is lacking.
Supplemental jurisdiction is also not appropriate. This means of
conferring jurisdiction is premised on the existence of at least one claim where
the court has original jurisdiction and relatedness to that claim. See Exxon
Mobile, 545 U.S. at 558–59. Typically, supplemental jurisdiction is used to
confer jurisdiction over a state law claim where diversity jurisdiction is lacking
and there is at least one federal claim in the action. In that instance, the court
may exercise supplemental jurisdiction if three requirements are satisfied: (1)
the federal claim has sufficient substance to confer jurisdiction; (2) the state
and federal claims derive from a common nucleus of operative fact; and (3) the
claims are such that a plaintiff would expect to try all the claims in one
proceeding. Pryzbowski v. U.S. Healthcare, Inc., 245 F.3d 266, 275 (3d Cir.
2001). In addition, a court may exercise supplemental jurisdiction over claims
against otherwise diverse citizens who do not satisfy the amount in controversy
requirement so long as at least one plaintiff satisfies the requirement and the
remaining claims are part of the same case or controversy. Exxon Mobile, 545
U.S. at 549. Here, there is no federal claim to which supplemental jurisdiction
can attach, nor does the rule regarding the amount in controversy requirement
Supplemental jurisdiction cannot be used, however, “when exercising
jurisdiction over such claims would be inconsistent with the jurisdictional
requirements of section 1332.” 28 U.S.C. §1367(b). Unlike the amount in
controversy requirement, it is not an appropriate means of conferring
jurisdiction where there is incomplete diversity because without complete
diversity a principle reason for conferring jurisdiction is eliminated. See Exxon
Mobile, 545 U.S. at 553–54. There is no need for a neutral forum; the state will
have citizens to protect on both sides of the aisle. See id. Therefore,
“[i]ncomplete diversity destroys original jurisdiction with respect to all claims,
. . . [leaving] nothing to which supplemental jurisdiction can attach.” Id. at 554.
The plaintiffs do not argue that the complaint allegations regarding
citizenship were made in error, a mere facial deficiency. Instead, the plaintiffs
posit that supplemental jurisdiction is proper despite incomplete diversity. This
is clear error. It has been clear within this circuit since 1972 that the doctrines
of pendent or ancillary jurisdiction, now labeled supplemental jurisdiction by
statute without distinction, are not applicable where complete diversity is
lacking. See Seyler v. Steuben Motors, Inc., 462 F.2d 181 (1972). Without a
federal question and without complete diversity there is no claim to which
supplemental jurisdiction can attach. Exxon Mobile, 545 U.S. at 554. Any case
prior to or contrary to that proposition does not correctly state the current law.
The plaintiffs also cite to a case in this district, Westra Construction, Inc.
v. United States Fidelity & Guaranty Co., 546 F. Supp. 2d 194 (M.D. Pa. 2008),
as support for the position that supplemental jurisdiction is proper over a
nondiverse party’s claims. The plaintiffs’ reliance on this case is misplaced. In
Westra, the court asserted supplemental jurisdiction over the claim of a nonparty seeking to intervene in the action whose presence would destroy
complete diversity. Westra, 546 F. Supp. 2d at 200. The court held that
supplemental jurisdiction could attach to a nondiverse intervenor’s claim so
long as the intervenor was not an indispensable party under Federal Rule of
Civil Procedure 19 and the intervenor’s claim formed part of the same case or
controversy of the underlying claims. Id. at 199–200. The court’s holding and
analysis of the supplemental jurisdiction statute in Westra was informed by the
long-standing, common law rule that “if jurisdiction exists at the time the action
is commenced, such jurisdiction may not be divested by subsequent events[,]”
including the intervention of parties. Id. at 199 (quoting Freeport-McMoRan,
Inc. v. K N Energy, Inc., 498 U.S. 426, 428 (1991)). The statute did not
abrogate or upset “the long-established judge-made rule that the presence of
a nondiverse and not indispensable  intervenor does not destroy complete
diversity.” Mattel, Inc. v. Bryant, 446 F.3d 1011, 1014 (9th Cir. 2006).
The reasoning in Westra is not directly applicable here. RAD is not an
intervenor, but an original plaintiff in the action. There is no long-standing rule
incorporated into the current jurisdictional statute to save the deficiency here.
Moreover, the rules relied upon in Westra could not be applied here because,
as the court will explain, RAD is not a dispensable party. Thus, incomplete
diversity, when coupled with a lack of a federal question, is fatal to the
plaintiffs’ request for this court to exercise supplemental jurisdiction over
RAD is an Indispensable Party Under Rule 19.
The fact that complete diversity is lacking does not end the court’s
inquiry. Next, the court must determine if RAD can be dismissed from the
action pursuant to Federal Rule of Civil Procedure 21 to allow the remaining
plaintiffs to proceed in RAD’s absence, curing the jurisdictional defect. Having
reviewed the parties’ supplemental briefs on this issue, the court finds that
RAD, the insured, is an indispensable party that cannot be dropped from the
action to allow the remaining plaintiffs to proceed. Therefore, the plaintiffs’
action must be dismissed.
Although diversity is established at the time of filing, it is long-established
that a court may make an exception to this rule and drop the offending party,
so long as that party is dispensable to the action. Grupo Dataflux v. Atlas
Global Grp., L.P., 541 U.S. 567, 570 (2004). Specifically, Rule 21 provides that
“[o]n motion or on its own motion, the court may at any time, on just terms, add
or drop a party.” FED. R. CIV. P. 21. “Rule 21 invests district courts with
authority to allow a dispensable nondiverse party to be dropped at any time[,]”
therein curing the jurisdictional spoiler. Newman-Green, Inc. v. Alfonzo-Larrain,
490 U.S. 826, 832 (1989); see also Zambelli, 592 F.3d at 420–21. Thus, the
court may dismiss RAD and proceed with this action so long as RAD is not
indispensable to the action pursuant to Rule 19. Id. at 422.
Rule 19(a) explains what parties must be joined in the action as
“necessary” or “required” parties if joinder is feasible. Huber v. Taylor, 532 F.3d
237, 247 (3d Cir. 2008).1 If a party “should be joined under Rule 19(a) but
joinder is not feasible because it would destroy the court’s diversity jurisdiction,
then the court must determine whether the absent party is ‘indispensable’
under Rule 19(b).” Id. As the rule states, “the court must determine whether,
in equity and good conscience, the action should proceed among existing
parties or should be dismissed.” FED. R. CIV. P. 19(b). If the action must be
dismissed under the factors listed in Rule 19 then the party is indispensable.
Huber, 532 F.3d at 247. If the nondiverse party is dispensable then, pursuant
to Rule 21, that party may be dropped to allow the remaining plaintiffs to
proceed with their action. See Zambelli, 592 F.3d at 421.
Although Rule 19 speaks of “required” parties due to 1966
amendments, courts still refer to the joinder of “necessary” parties, referencing
pre-amendment terminology and case law that has carried over to the current
and less formalized rule. See, e.g., Disabled in Action of Pa. v. Se. Pa. Transp.
Auth., 635 F.3d 87, 97 (3d Cir. 2011); Gen. Refractories Co. v. First State Ins.
Co., 500 F.3d 306, 312 (3d Cir. 2007); Golden Gate Nat’l Seniorcare, LLC v.
Lane, No. 3:CV-14-1957, 2015 WL 926432, at *2–3 (M.D. Pa. Mar. 4, 2015).
RAD is a necessary party to this action.
A party is a necessary or required party if “in that person’s absence, the
court cannot accord complete relief among existing parties.” FED. R. CIV. P.
19(a)(1)(A). A party is also deemed necessary if the party has an interest in the
action such that disposing of the interest in the party’s absence might (1)
“impair or impede the person’s ability to protect the interest” or (2) “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)(1)(B)(i)–(ii). RAD is clearly a necessary party to this action.
RAD, Travelers, and Lumbermens are all real parties in interest in this
partially subrogated action, with all entitled to sue and seek recovery for their
losses. United States v. Aetna Cas. & Sur. Co., 338 U.S. 366, 380–81 (1949);
Universal Underwriters Ins. Co. v. Tony DePaul & Sons, Inc., No. Civ.A. 010631, 2001 WL 1175146, at *2 (E.D. Pa. July 25, 2001); Hancotte v. Sears,
Roebuck & Co., 93 F.R.D. 845, 846 (E.D. Pa. 1984). However, the court is
particularly concerned with RAD’s ability to protect its interest in the state court
action if this court reaches judgment before the state court action. The
decisions of this court are likely to have res judicata effects on RAD’s separate
action. Without RAD present here, RAD cannot fully protect its interest.
Res judicata or claim preclusion “prohibits parties involved in prior,
concluded litigation from subsequently asserting claims in a later action that
were raised, or could have been raised, in the previous adjudication.” Wilkes
ex rel. Mason v. Phoenix Home Life Mut. Ins. Co., 902 A.2d 366, 376 (Pa.
2006).2 It acts as a shield from the burdens of “re-litigating a claim with the
same parties, or a party in privity with an original litigant, and to protect the
judiciary from the corresponding inefficiency and confusion that re-litigation of
a claim would breed.” Id. (emphasis added). Here, the salient issue is whether
or not RAD, the insured subrogor, can be deemed to be in privity with
Lumbermens and Travelers, the insurer subrogees.
In general, under Pennsylvania law, an insurer is in privity with its
insured. Greenway Ctr., Inc. v. Essex Ins. Co., 475 F.3d 139, 149 (3d Cir.
2007) (citing Dally v. Pa. Threshermen & Farmers’ Mut. Cas. Ins. Co., 97 A.2d
795 (Pa. 1953)). Chief Justice Saylor of the Pennsylvania Supreme Court, in
a recent dissent, confirmed this general rule by indicating that a subrogee and
subrogor would be deemed to be in privity for purposes of res judicata. Liberty
Mut. Ins. Co. v. Domtar Paper Co., 113 A.3d 1230, 1241–42 & n. 1 (Pa. 2015).
There are exceptions to this general rule. There is an exception where the
insurer’s interests conflict with those of its insured. Greenway Ctr., 475 F.3d
The res judicata effect of a judgment from this court would be the same
as the res judicata effect of a judgment from the state court. Although federal
common law governs the preclusive effect of a federal court judgment, federal
law instructs federal courts to turn to the substantive law of the state where the
court sits when the court’s jurisdiction is founded solely on diversity. Chavez
v. Dole Food Co., Inc., 836 F.3d 205, 225 (3d Cir. 2016) (explaining the rule
elaborated in Semtek Int’l Inc. Lockheed Martin Corp., 531 U.S. 497 (2001)).
Thus, Pennsylvania law applies to the effect of a judgment from this court as
it would apply to the effect of judgment from a Pennsylvania court.
at 149. In addition, the insured will not be in privity where the insured was
unaware of and did not authorize the suit brought by the insurer. Stahl v.
Hilderhoff, 247 A.2d 582, 584 (Pa. 1968); see also Harner v. Dougherty
Funeral Home, Inc., 752 F. Supp. 690, 691–92 (E.D. Pa. 1990).
Here, the court can see no exception that would save RAD from the res
judicata effects of a judgment in this action. At this stage, the interests of RAD,
Travelers, and Lumbermens all align. They all seek to hold the defendant liable
for the loss caused by the dry fire. In addition, it is clear that RAD, the insured,
has authorized this suit, having joined in the action from the beginning. The
interests of RAD and its insurers are all represented by the same attorney. The
amount sought covers both the subrogated loss and the additional loss
sustained by RAD that remains uninsured. Thus, this is not a situation where
the insured is unaware of the action, is not represented by the insurer’s
attorney, and did not authorize suit to recover the loss sustained. Compare
Stahl, 247 A.2d at 584 (holding the insurer’s prior claim for property damages
did not bar the insured’s later claim for personal injury damages), with Spinelli
v. Maxwell, 243 A.2d 425 (Pa. 1968) (holding the insurer’s prior claim in
trespass barred the insured’s later action in trespass). Thus, in this case the
general rule of privity applies.
In light of the likely res judicata effects of a judgment in this court, RAD’s
ability to fully protect its interest in the second action is highly suspect. RAD is
clearly a necessary party to this action in light of these considerations. Cf.
Aetna, 338 U.S. at 381–82 (1949) (finding a partially subrogated insured to be
a necessary party in tort actions brought against the United States); GeneraliU.S. Branch v. Ransdell, No. 13-2113-CIV, 2013 WL 5230032, at *2 (S.D. Fl.
Sept. 16, 2013) (same in private action brought in federal court on the basis
of diversity); Axis Ins. Co. v. Hall, 287 F.R.D. 110, 114 (D.Me. 2012) (same);
Universal Underwriters, 2001 WL 1175146, at *2 (same).
RAD is an indispensable party to this action.
RAD is also an indispensable party to this action. A party is
indispensable if “in the circumstances of the case [they] must be before the
court.” Zambelli, 592 F.3d at 421 (quoting Steel Valley Auth. v. Union Switch
& Signal Div., 809 F.2d 1006, 1011 (3d Cir. 1987)). Rule 19 provides four
factors for a court to consider in determining whether or not a required party
is indispensable as follows:
the extend to which a judgement rendered in the
person’s absence might prejudice that person or
the extent to which any prejudice could be
lessened or avoided by: (A) protective
provisions in the judgment; (B) shaping the
relief; or (C) other measures;
whether a judgment rendered in the person’s
absence would be adequate; and
whether the plaintiff would have an adequate
remedy if the action were dismissed for
FED. R. CIV. P. 19)b). These factors favor dismissal in the absence of RAD.
The first factor “overlaps considerably with the Rule 19(a) analysis.” Gen.
Refractories Co. v. First State, 500 F.3d 306, 320 (3d Cir. 2007) (quoting
Gardiner v. V.I. Water & Power Auth., 145 F.3d 635, 641 n. 4 (3d Cir. 1998)).
Generally, if preclusion principles could be used to impair the absent party’s
interest, that party is required in light of the first factor. See Janney
Montgomery Scott, Inc. v. Shephard Niles, Inc., 11 F.3d 399, 410 (3d Cir.
1993). The first factor weighs highly in favor of dismissal to allow the state
action to proceed on behalf of all plaintiffs. The preclusive effects of a
judgment in this court would impair RAD’s ability to protect its interest in its
uninsured loss in the state action.
With respect to the second factor, the court can see no way to ward
against the potential prejudice to RAD, nor have the parties offered an option
for the court’s review. There is no remedy this court can fashion in advance.
Thus, the second factor also favors dismissal.
The third factor also favors dismissal. This factor “allows the court to
consider whether the relief it grants will prove an adequate remedy for the
plaintiff.” Gen. Refractories, 500 F.3d at 320–21. However, it also “refer[s] to
[the] public stake in settling disputes by wholes” and the need for “complete,
consistent, and efficient settlement of controversies.” Patterson, 390 U.S. at
111. Where the insured is seeking only a small loss, the actual risk of
duplicative litigation will be low, a factor the court may consider. See Axis, 287
F.R.D. at 116 (finding that the third factor weighed in favor of allowing the
action to proceed without the insured where the insured was only seeking a
$5,000.00 uninsured loss).
Here, any judgment, while satisfactory to the remaining plaintiffs if they
were to succeed, would not resolve the whole dispute, nor would be an
efficient use judicial resources by any means. In addition, RAD has already
initiated an action in state court and it is highly likely that RAD will continue that
action if this court were to drop RAD as a party. RAD’s uninsured loss is over
$400,000.00, a substantial loss. At this early stage, dismissal to resolve the
entire dispute in one forum as opposed to two would lead to a more adequate
judgment with respect to all parties interested in recovery.
With respect to the fourth factor, RAD has already initiated a state court
action, though a complaint has not been filed. The filing of the state court
action has tolled the statute of limitations. See Lamp v. Heyman, 366 A.2d 882,
885–86 (Pa. 1976). Upon filing of a complaint, the insurers might be included
in the state action even though it is in the name of the insured alone. See
Green v. Daimler Benz, AG, 157 F.R.D. 340, 342 (E.D. Pa. 1994) (explaining
that under Pennsylvania Rule of Civil Procedure 2002 the insurer may sue in
the name of the insured); Wolf v. Allegheny Cty., 281 A.2d 82, 85 (Pa.
Commw. Ct. 1971) (same). Thus, the plaintiffs are not left without a remedy if
the court deems RAD indispensable and this action is dismissed. The fourth
factor favors dismissal. Thus, all four factors in Rule 19(b) favor dismissal. In
light of this, the court finds that RAD is indispensable to this action and that it
cannot proceed in RAD’s absence.
The plaintiff cites and relies upon United States v. Aetna Casualty &
Surety Co. (“Aetna”), 338 U.S. 366 (1949) for the proposition that a partially
subrogated insured is never an indispensable party. In Aetna, the Supreme
Court of the United States stated that a partially subrogated insured was a
necessary party under the version of Rule 19 in effect at the time. 338 U.S. at
381. The Court also explained that neither the insured or insurer were
indispensable parties under the common law test stated in Shield v. Barrow,
58 U.S. (17 How.) 130 (1854). Id. at 382 n. 19. In line with this conclusion, the
Court also stated that a court could proceed with litigation even if the insured
and insurer could not be joined. Id. at 383.
Although Aetna supports the plaintiffs’ position, as courts have noted,
this case is no longer dispositive on the issue of joinder based on the 1966
amendments to the rule. See Generali-U.S. Branch, 2013 WL 5230032, at *2;
Axis, 287 F.R.D. at 114; State Farm Fire & Cas. Co. v. Elextrolux Home Prod.,
Inc., No. 11 C 8946, 2012 WL 1287698, at *2 (N.D. Ill. April 16, 2012); Allwaste
Env. Servs./N. Atl., Inc. v. Pastore, 911 F. Supp. 29, 32 (D. Me. 1996);
Potomac Elec. Power. Co. v. Babcock & Wilcox Co., 54 F.R.D. 486, 492–93
(D.Md. 1972). Moreover, the facts in Aetna are not identical to the facts here
and it holds less persuasive weight than the plaintiffs suggest in their brief.
The cases presented to the Court in Aetna for review involved the
following: (1) a case with a fully subrogated/assigned claim against the United
States; (2) a case with a partially subrogated claim where both the insured and
insurer had received a judgment in the same forum against the United States;
and (3) two cases with partially subrogated claims against the United States
where the subrogees sought recovery but not the insured subrogors. Aetna,
338 U.S. at 368–69. The exact question certified to the Court was whether or
not a subrogee/insurer could sue the United States under the then Federal Tort
Claims Act in light of an anti-assignment statute barring the recovery of
assigned claims. Id. at 367–68. The court answered that question in the
affirmative and proceeded to explain what parties were the real parties in
interest under Federal Rule of Civil Procedure 17(a). Id. at 380–81. After
explaining that the real parties in interest included the insured and insurer in
partially subrogated claims, the Court, in a footnote, explained that the insured
and insurer were “clearly not ‘indispensable’ parties.” Id. at 382 n. 19.
As an initial matter, much of the Court’s explanation of joinder and Rule
19 in Aetna is dicta. More importantly, the court was not dealing with a
jurisdictional issue or with diversity cases for that matter, but with claims
brought under the Federal Tort Claims Act. Its application to questions of
jurisdiction is, thus, highly suspect. Lastly, in none of the cases presented to
the court was an insured/subrogor actually seeking recovery in an alternative
forum, as is the case here.
There do remain courts, including the Court of Appeals for the Second
Circuit, who appear to apply the joinder statements in Aetna as a fixed rule, but
this application of Aetna is suspect. E.g., St. Paul Fire & Marine Ins. Co. v.
Universal Builders Supply, 409 F.3d 73, 81 (2d Cir. 2005), Travelers
Commercial Ins. Co. v. Hansen, No. 16-cv-01123-LB, 2016 WL 1745818, *4
(N.D. Cal. May 3, 2016); AGSC Marine Ins. Co. v. Spectrum Underground,
Inc., No. 8:12-cv-474-T-30TGW, 2012 WL 2087441, at *1 (M.D. Fl. June 8,
2012). The courts that do apply Aetna for Rule 19 purposes do not assess its
weight and hold little persuasive value for this reason. They do not engage in
any substantive analysis of the 1966 amendments to Rule 19 and subsequent
changes in the law, nor do they provide a thorough analysis of Rule 19 in its
current form. Those that recognize the 1966 amendments simply rely on the
recognition that the amendments did not alter the underlying pre-amendment
principles of Rule 19. See, e.g., Universal Builders Supply, 409 F.3d at 81
(citing Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102,
117 n. 12 (1968) (quoting the Advisory Committee Notes to Rule 19)). While
this is true, this reasoning does not account for the most important purpose of
the amendments which was to do away with the technical classifications of
“necessary” and “indispensable” parties and to, instead, require that the court
engage in practical considerations and a case-by-case analysis. See
Patterson, 390 U.S. at 117 n. 12. It is this approach that the court must adhere
to, not a rule regarding what parties are “indispensable” as a broad and
The court agrees with those courts that have found that Aetna is not
dispositive on the issue of whether or not a insured/subrogor is an
indispensable party under Rule 19. The amendments and the current rule
clearly require that a finding of indispensability be determined on a case-bycase basis using the factors set forth in the rule. Steel Valley Auth., 809 F.2d
at 1011; Axis, 287 F.R.D. at 114–15. It is these factors that guide the courts
analysis and lead to the conclusion that RAD is an indispensable party that
cannot be dropped pursuant to Rule 21. As such, the action cannot proceed
in RAD’s absence and the complaint must be dismissed.3
For the reasons set forth above, the defendant’s motion to dismiss, (Doc.
8), will be GRANTED. The plaintiffs’ complaint, (Doc. 5), will be DISMISSED
WITHOUT PREJUDICE. An appropriate order shall issue.
s/ Malachy E. Mannion
MALACHY E. MANNION
United States District Judge
DATED: June 20, 2017
O:\Mannion\shared\MEMORANDA - DJ\CIVIL MEMORANDA\2016 MEMORANDA\16-2138-01.wpd
The defendant’s remaining arguments will not be addressed as they are
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