LJH, Ltd. v. Comerica Incorporated et al

Filing 25

MEMORANDUM OPINION AND ORDER - DENYING 12 MOTION to Remand filed by LJH, Ltd., 23 Supplemental MOTION to Remand and/or Motion for Leave to Add a Non-Diverse Party filed by LJH, Ltd. Signed by Judge Amos L. Mazzant, III on 1/6/2016. (baf, )

United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

LJH, LTD.

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V.
COMERICA INCORPORATED, IRA J.
JAFFE, and JAFFE, RAITT, HEUER &
WEISS, P.C.

CASE NO. 4:15-CV-639
Judge Mazzant

MEMORANDUM OPINION AND ORDER
Pending before the Court is LJH, Ltd.’s Motion to Remand (Dkt. #12) and LJH, Ltd.’s
Supplement to Motion to Remand and/or Motion for Leave to Add a Non-Diverse Party (Dkt.
#23). After reviewing the relevant pleadings, the Court finds that the motions should be denied.
BACKGROUND
On August 4, 2015, Plaintiff LJH, Ltd. filed its Original Petition in the 15th Judicial
District Court of Grayson County, Texas, against Comerica Incorporated (“Comerica, Inc.”), Ira
J. Jaffe (“Jaffe”), and Jaffe, Raitt, Heuer & Weiss, P.C. (collectively with Jaffe, the “Jaffe
Defendants”) (Dkt. #3). On September 18, 2015, the Jaffe Defendants removed the case to this
Court alleging diversity jurisdiction under 28 U.S.C. § 1332 and removal pursuant to 28 U.S.C. §
1441 (Dkt. #1). Additionally, the Jaffe Defendants alleged that removal was proper as Comerica,
Inc. had been improperly joined (Dkt. #23 at p. 2; see Dkt. #1 at pp. 4-5).1 Also on September
18, 2015, Plaintiff submitted its First Amended Petition, which sought to substitute Comerica
Bank for Comerica Inc., as Plaintiff had learned that Comerica Inc. was distinguishable from
Comerica Bank, the entity that allegedly “held the money at issue.” (Dkt. #23 at p. 2). However,

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The parties both contend that Comerica Inc. is not the proper party for the present suit. Therefore, the Court will
not address the fraudulent joinder arguments of the Jaffe Defendants. Because the parties agree that Comerica Inc.
is not a proper party in the present suit, the Court finds that Comerica Inc. should be dismissed without prejudice.

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Plaintiff’s filing was accepted by the Grayson County District Clerk at 3:02 p.m., six minutes
after the Jaffe Defendants removed the case to this Court (Dkt. #23 at p. 2).
On October 6, 2015, Plaintiff filed its First Amended Complaint, in which it sought to
add Comerica Bank as a defendant in the lawsuit (Dkt. #10). On October 13, 2015, Plaintiff
filed its Motion to Remand (Dkt. #12). On November 10, 2015, the Jaffe Defendants filed their
response (Dkt. #17). On November 19, 2015, Plaintiff filed its reply (Dkt. #20). During a
scheduling conference, the Court discussed Plaintiff’s Motion to Remand, whereby the Court
ordered that the parties supplement Plaintiff’s Motion to Remand by December 4, 2015 (Dkt.
#22). On December 3, 2015, Plaintiff filed its Supplement to Motion to Remand and/or Motion
for Leave to Add a Non-Diverse Party (Dkt. #23). On December 4, 2015, the Jaffe Defendants
filed their supplemental response (Dkt. #24).
LEGAL STANDARD
Federal Rule of Civil Procedure 15(a) allows a party to amend its pleading within a
timely manner. See FED. R. CIV. P. 15(a). “A court must scrutinize an amendment that would
add a non-diverse party more closely than an ordinary amendment under Rule 15(a).” Short v.
Ford Motor Co., 21 F.3d 1107, No. 93-8626, 1994 WL 171416, at *5 (5th Cir. Apr. 19, 1994);
see Hensgens v. Deere & Co., 833 F.2d 1179, 1182 (5th Cir. 1987). 28 U.S.C. § 1447(e)
provides as follows: “[i]f after removal the plaintiff seeks to join additional defendants whose
joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder
and remand the action to the [s]tate court.” “‘[A] party may not employ Rule 15(a) to interpose
an amendment that would deprive the district court of jurisdiction over a removed action.’”
Whitworth v. TNT Bestway Transp. Inc., 914 F. Supp. 1434, 1435 (E.D. Tex. 1996) (quoting 6
Wright, Miller & Kane, Federal Practice & Procedure, Civil § 1447 at 562 (2d ed. 1990)).
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“When an amendment would destroy jurisdiction, most authorities agree that leave should be
denied unless there exists strong equities in its favor.” Id.; see, e.g., Hensgens, 833 F.2d at 1182.
In deciding whether to allow a post-removal joinder, the Court should examine the facts
set out in Hensgens v. Deere & Co., 833 F.2d 1179. In Hensgens, the Fifth Circuit stated that in
balancing the original defendant’s interest in maintaining the federal forum against the
competing interest in avoiding multiple and parallel proceedings, the Court should consider the
following: (1) the extent to which the purpose of the amendment is to defeat federal jurisdiction;
(2) whether the plaintiff has been dilatory in asking for an amendment; (3) whether the plaintiff
will be significantly injured if the amendment is not allowed; and (4) any other factors bearing
on the equities. Id. at 1182; In re Norplant Contraceptive Prods. Liab. Litig., 898 F. Supp. 429,
431 (E.D. Tex. 1995). The balancing of these interests does not hinge on “a rigid distinction of
whether the proposed added party is an indispensible or permissive party.” Hensgens, 833 F.2d
at 1182.
ANALYSIS
Plaintiff seeks to join Comerica Bank as a defendant in the present case. Comerica Bank
is a Texas resident; and therefore, its joinder would destroy complete diversity.

Because

complete diversity would be destroyed, Plaintiff requests that the Court remand the proceedings
to state court for further proceedings.
The first Hensgens factor for the Court to consider is “whether the plaintiff[] knew or
should have known the identity of the non-diverse defendant when the state court complaint was
filed.” Tomlinson v. Allstate Indem. Co.¸ No. 06-0617, 2006 WL 1331541, at *3 (E.D. La. May
12, 2006) (citation omitted); see Irigoyen v. State Farm Lloyds, No. 03-0324, 2004 WL 398553,
at *3 (S.D. Tex. Jan. 5, 2004).

Courts have concluded that failing to join a non-diverse
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defendant prior to removal, when a plaintiff was aware of the non-diverse defendant’s identity,
“suggests that the purpose of the amendment is to destroy diversity.” Tomlinson, 2006 WL
1331541, at *3; see In re Norplant, 898 F. Supp. at 435.
For example, in O’Conner v. Auto. Ins. Co. of Hartford, Conn., 846 F. Supp. 39, 40 (E.D.
Tex. 1994), the plaintiff sued the defendants for their failure to pay insurance proceeds. After
the defendant insurance companies removed the case to federal court based upon the complete
diversity of the parties, the plaintiff tried to add the non-diverse insurance agency from which
plaintiff purchased the policy. Id. The court refused to allow plaintiff to file an amended
complaint because it felt that plaintiff had chosen to add the non-diverse insurance agency as a
defendant solely for the purpose of defeating diversity jurisdiction. Id. at 41.
However, “when a plaintiff discovers the nondiverse party’s activities at some time after
the cause of action is removed to federal court, then a district court has held that a later
amendment adding that party as a defendant was not done for the express purpose of defeating
diversity jurisdiction.” In re Norplant, 898 F. Supp. at 435; see Horton v. Scripto-Tokai Corp.,
878 F. Supp. 902, 908-909 (S.D. Miss. 1995). In Horton, the plaintiff brought a products
liability action against defendants; and soon after filing the suit in state court, defendants
removed the suit to federal court. Horton, 878 F. Supp. at 904. However, after filing the suit,
the plaintiff discovered that a non-diverse party was actually the distributor of lighter, rather than
one of the named defendants. Id. Therefore, the plaintiff sought to amend the complaint,
naming the non-diverse distributor as a defendant. Id. The court held that the plaintiff did not
add the non-diverse defendant to destroy diversity jurisdiction; and therefore, allowed plaintiff to
make her amendment. Id. at 909.

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In the present case, it does not appear that Plaintiff knew the identity of Comerica Bank
at the time of filing suit. At the time of filing, Plaintiff believed that it had included the proper
party, Comerica Inc. When Plaintiff found out that the correct identity was that of Comerica
Bank, it immediately sought to join Comerica Bank. Therefore, the Court finds that there is no
real indication that Plaintiff is seeking to add Comerica Bank as a defendant primarily for the
purpose of defeating federal jurisdiction, but rather it sought to add Comerica Bank once its
involvement in the suit was made clear to Plaintiff.
The Court also looks at whether there is a valid claim against Comerica Bank. See
Anzures v. Prologis Tex. I LLC, 886 F. Supp. 2d 555, 564 (W.D. Tex. 2012) (“[i]ntertwined with
[the first Hensgens] inquiry is the viability of plaintiff’s claim against the proposed defendants”).
Plaintiff seeks to add the following claims against Comerica Bank:

(1) Negligent

Misrepresentation and Fraud, (2) Conversion, (3) Constructive Trust, (4) Unjust Enrichment, (5)
Money Had and Received, (6) Conspiracy and Agency, and (7) Declaratory Judgment. The Jaffe
Defendants assert that Plaintiff’s claim are “completely baseless” and fail for a “complete lack of
merit” because Comerica Bank did not owe Plaintiff a duty to disclose. (See Dkt. #24 at pp. 23).

The Court cannot determine whether Plaintiff seeks to assert plausible claims against

Comerica Bank. Therefore, the Court finds that based upon the relevant pleadings, Plaintiff has
not presented a viable claim against Comerica Bank.
Although this would lead the Court to find that the first Hensgens factor weights in favor
of denial of leave to amend, it does not appear that Plaintiff is seeking to add Comerica Bank
simply to defeat federal jurisdiction. Therefore, the Court finds that the first Hensgens factor is
neutral.

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The second Hensgens factor is whether Plaintiff was dilatory in seeking a leave to amend.
See Hensgens, 833 F.2d at 1182; see also Irigoyen, 2004 WL 398553, at *4. “In analyzing the
second Hensgens factor, courts consider the amount of time that has passed between the
plaintiff’s motion to amend and the filing of the original petition and notice of removal.”
Anzures, 886 F. Supp. 2d at 565 (citing Mia Reed & Co., Ltd. v. United Fire & Cas. Co., No. H10-4440, 2012 WL 2499932, at *9 (S.D. Tex. June 27, 2012)). In such a circumstance, “[a]
delay of two months after the filing of the original complaint or almost thirty days after the
notice of removal has been found dilatory,” especially when a plaintiff knew of the potential
defendant’s role prior to filing the case in state court. Anzures, 886 F. Supp. 2d at 565; see
Irigoyen, 2004 WL 398553, at *4; see also Phillips v. Delta Airlines, Inc., 192 F. Supp. 2d 727,
729 (E.D. Tex. 2001). “Courts also consider the procedural posture of the case, particularly
whether ‘trial or pre-trial dates were scheduled,’ or [whether] any ‘significant activity beyond the
pleading stage has occurred.’” Anzures, 886 F. Supp. 2d at 565 (citing Arthur v. Stern, No. H07-3742, 2008 WL 2620116, at *5 (S.D. Tex. June 26, 2008)). In the present case, Plaintiff
attempted to add Comerica Bank as a defendant six minutes after the Jaffe Defendants’ filed
their Notice of Removal (Dkt. #23 at p. 5). This attempt was ten days after Comerica Inc. filed
its answer and motion to transfer venue in state court, which asserted that Comerica Bank was
the actual entity that held Plaintiff’s money (Dkt. #23 at p. 5). Therefore, the Court finds that
Plaintiff was not dilatory in asserting its rights, and the second Hensgens factor favors allowing
the joinder of Comerica Bank to the present action.
The third Hensgens factor is whether Plaintiff would be prejudiced by denying leave to
amend. See Hensgens, 833 F.2d at 1182; see also Irigoyen, 2004 WL 398553, at *5. “In
determining prejudice to a plaintiff under the third Hensgens factor, courts consider ‘whether a
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plaintiff can be afforded complete relief in the absence of the amendment.’” Anzures, 886 F.
Supp. 2d at 565 (quoting Lowe v. Singh, No. H-10-1811, 2010 WL 3359525, at *3 (S.D. Tex.
Aug. 23, 2010)).

Some courts analyze whether the possibility of a separate state court

proceeding weighs against denying the proposed amendment because of the inefficiency of
parallel proceedings, or because such proceedings would place a financial burden on the
plaintiff. See Bienaime v. Kitzman, Nos. 00-0284, 00-0473, 2000 WL 381932, at *5 (E.D. La.
Apr. 12, 2000). In Hensgens, the Fifth Circuit recognized the competing interests presented
when determining if prejudice would exist by denying leave to amend:
On one hand, there is the danger of parallel federal/state proceedings with the
inherent dangers of inconsistent results and the waste of judicial resources. On
the other side, the diverse defendant has an interest in retaining the federal forum.
Indeed, the removal statutes are predicated on giving the diverse defendants a
choice of a state or federal forum. We concluded that the balancing of these
competing interests is not served by a rigid distinction of whether the proposed
added party is an indispensible or permissive party. Instead, the district court,
when confronted with an amendment to add a nondiverse nondispensible party,
should use its discretion in deciding whether to allow that party to be added.
833 F.2d at 1182. There is no indication that the Jaffe Defendants would be unable to satisfy a
judgment. Therefore, the Court can see no prejudice to Plaintiff in denying leave to amend.
Although Plaintiff could file a separate action against Comerica Bank in state court, based upon
the allegations in this case, the Court does not believe that there would be a good faith basis to do
so against Comerica Bank. Thus, the Court does not see a likelihood of a parallel proceeding,
since Plaintiff has pleaded insufficient factual allegations against Comerica Bank. Therefore, the
Court finds that the third Hensgens factor weighs slightly in favor of the denial of Plaintiff’s
motion for leave to amend.
The final Hensgens factor requires the Court to analyze other equitable factors. See
Hensgens, 833 F.2d at 1182; see also Irigoyen, 2004 WL 398553, at *5. Equitable factors
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include whether granting leave to amend would deprive a defendant of a properly invoked
federal forum, and whether denying leave to amend would result in a parallel state court
proceeding. See Gallegos v. Safeco Ins. Co. of Ind., No. H-09-2777, 2009 WL 4730570, at *5
(S.D. Tex. Dec. 7, 2009); see also Smith v. Robin Am., Inc., No. H-08-3565, 2009 WL 2485589,
at *6 (S.D. Tex. Aug. 7, 2009); see also Tomlinson, 2006 WL 1331541, at *6. The Jaffe
Defendants argue that “[t]he addition of Comerica Bank would deprive the Jaffe Defendants of
their right to a federal forum and would have them litigating in a lightly populated county against
a party whose principal, Lacy Harber, is undoubtedly a well-known and influential figure…”
(Dkt. #24 at p. 5). The Supreme Court has stated in Guar. Tr. Co. of N.Y. v. York, 326 U.S. 99,
111 (1945), “[d]iversity jurisdiction is founded on [the] assurance to non-resident litigants of
courts free from susceptibility to potential local bias.” Therefore, the Court finds that the fourth
Hensgens factor favors the denial of Plaintiff’s motion for leave to amend.
The Court finds that the second Hensgens factor favors the joinder of Texas resident
Comerica Bank, the third and fourth Hensgens factors favor disallowing the joinder of Comerica
Bank, and the first Hensgens factor is neutral. Therefore, the Court finds that leave should not be
granted to add the non-diverse defendant, Comerica Bank, and Plaintiff’s motion for leave to
amend should be denied. Because the Court has denied Plaintiff’s motion for leave to amend to
add Comerica Bank, diversity jurisdiction is not destroyed, and the Court will retain its
jurisdiction in the present case. Therefore, the motion to remand is denied.
CONCLUSION
It is therefore ORDERED that LJH, Ltd.’s Motion to Remand (Dkt. #12) is hereby
DENIED, and LJH, Ltd.’s Supplement to Motion to Remand and/or Motion for Leave to Add a
Non-Diverse Party (Dkt. #23) is hereby DENIED.
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It is further ORDERED that Comerica Incorporated and Comerica Bank are hereby
DISMISSED without prejudice.
SIGNED this 6th day of January, 2016.

___________________________________
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

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