Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_07-cv-00441/USCOURTS-azd-2_07-cv-00441-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1330 Breach of Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Eaton Veterinary Laboratories, Inc., an

Arizona corporation, 

Plaintiff, 

vs.

Wells Fargo Merchant Services, LLC, a

Delaware limited liability company; First

Data Merchant Services Corporation, a

Florida corporation; Wells Fargo Bank,

NA, a national banking association, 

Defendants. 

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No. CV 07-441-PHX-JAT

ORDER

Pending before the Court is Plaintiff's Motion for Leave to Amend Complaint and

Motion to Remand (Doc. # 33). Plaintiff moves the Court to grant it leave to amend its

Complaint to assert claims for conversion and fraud against its former employee, Emily

Hoover. Also, because the Court's jurisdiction is based on diversity under 28 U.S.C. § 1332

and Ms. Hoover is an Arizona citizen, Plaintiff moves to remand this action to the Superior

Court of Maricopa County if leave to amend is granted.

I. Discussion 

"If 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 State court." 28 U.S.C. § 1447(e). As the Ninth Circuit has found, "[t]he

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language of § 1447(e) is couched in permissive terms and it clearly gives the district court

the discretion to deny joinder." Newcombe v. Adolf Coors Company, 157 F.3d 686, 691 (9th

Cir. 1998). In exercising its discretion, the Court may consider:

(1) whether the would-be-defendants are necessary for just

adjudication of the controversy, (2) whether the plaintiff still

could bring an action in state court against the putative

defendants, (3) whether there has been any unexplained delay in

joinder, (4) whether it appears the plaintiff is seeking to destroy

diversity, (5) the apparent merit of the claims against the new

parties, and (6) whether plaintiff would suffer prejudice without

the joinder of the defendants.

Bonner v. Fuji Photo Film, 461 F.Supp.2d 1112, 1119-20 (N.D.Cal. 2006) (citations

omitted); see also Hensgens v. Deere & Company, 833 F.2d 1179,1182 (5th Cir. 1987)

(stating that "the court should consider the extent to which the purpose of the amendment is

to defeat federal jurisdiction, whether plaintiff has been dilatory in asking for amendment,

whether plaintiff will be significantly injured if amendment is not allowed, and any other

factors bearing on the equities."). 

Utilizing some of the foregoing factors, Defendants oppose the motion. First,

Defendants argue that leave to amend is sought only to destroy diversity and that it is an

improper attempt to manipulate the forum and gain a procedural advantage. The Court

disagrees. The fact that the motion for leave to amend was filed after the Court struck

Plaintiff's jury demand, which jury demand might be revived in state court, does not indicate

that the motion was filed only to destroy diversity and gain a procedural advantage. As

discussed below, the Court finds that Plaintiff has adequately explained the timing of the

proposed amendment. Further, the Court notes that Defendants mistakenly argue that

Plaintiff unsuccessfully sought remand in the past. It was the Court, on its own initiative,

that directed Defendants to show cause why the case should not be remanded for failing to

properly allege the citizenship of Wells Fargo Member Service, LLC. See Doc. # 11. 

Second, Defendants argue that Ms. Hoover is unnecessary to the adjudication of this

matter. Again, the Court disagrees. As the Ninth Circuit has stated:

Necessary parties have been described generally, however, as

those "[p]ersons having an interest in the controversy, and who

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ought to be made parties, in order that the court may act on that

rule which requires it to decide on, and finally determine the

entire controversy, and do complete justice, by adjusting all the

rights involved in it."

CP Nat'l Corp. v. Bonneville Power Admin., 928 F.2d 905, 912 (9th Cir. 1991) (quoting

Shields v. Barrow, 58 U.S. 130, 139 (1854)). Should Plaintiff's proposed amendment be

denied, presumably Plaintiff would file another lawsuit in state court the basis of which

would involve the same subject matter as this case. This risk of multiple litigation involving

the same subject matter is one of the risks joinder is designed to avoid. Id.; see also Palestini

v. General Dynamics Corp., 193 F.R.D. 654, 658 (S.D. Cal. 2000). 

 Third, Defendants argue that Plaintiff could still bring a separate action against Ms.

Hoover in state court. While this might be true, the Court finds that such a result would

conflict with the foregoing policy against multiple litigation and declines to adopt it as a sole

basis for denying Plaintiff's motion. 

Finally, Defendants argue that the proposed amendment is untimely because Plaintiff

knew of the potential claims against Ms. Hoover prior to filing the present lawsuit. While

Plaintiff had such prior knowledge, Plaintiff has fully and satisfactorily explained the reasons

behind its failure to name Ms. Hoover as a defendant in the original Complaint. Specifically,

Plaintiff states it was awaiting the conclusion of the criminal prosecution against Ms. Hoover

to avoid potential invocation of Fifth Amendment rights when eliciting testimony from Ms.

Hoover in this action. However, once it became apparent that the criminal prosecution was

stalled, Plaintiff determined that pursuing civil claims against Ms. Hoover was necessary at

this time and filed the instant motion seeking to amend its Complaint. The Court also notes

that Plaintiff filed the motion to amend prior to the August 15, 2007, deadline set forth in the

Rule 16 Scheduling Order.

The Court finds that the foregoing factors weigh in favor of granting Plaintiff's motion

to amend its Complaint to assert claims for conversion and fraud against its former employee,

Emily Hoover. As for Defendants’ argument that remand is not required if leave to amend

is granted, the Court finds the case cited in support thereof, Spencer v. U.S. District Court

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for Northern District of California, 393 F.3d 867 (9th Cir. 2004), to be inapposite. Instead,

as the Advisory Committee noted, 28 U.S.C. § 1447(e), which applies when a plaintiff seeks

to join an additional defendant whose joinder would destroy subject matter jurisdiction,

"gives the court only two options: (1) deny the motion, or (2) grant it and remand the case."

28 U.S.C. § 1447 advisory committee's note. The Advisory Committee continued: "A middle

ground that Congress had been considering, which would have allowed the joinder and at the

same time allowed the court in its discretion to keep the case and decide it on its merits, was

rejected." Id. Accordingly, because the Court has granted Plaintiff's amendment, which

destroys complete diversity of citizenship, the Court must remand this action to the state

court. 

II. Conclusion

For the foregoing reasons,

IT IS ORDERED that Plaintiff's Motion for Leave to Amend Complaint and Motion

to Remand (Doc. # 33) is GRANTED;

IT IS FURTHER ORDERED that the Clerk of Court shall file into the record the

First Amended Complaint lodged as Exhibit 1 to Doc. # 42; 

IT IS FURTHER ORDERED that the First Amended Complaint lodged at Doc. #

34 is stricken;

IT IS FURTHER ORDERED that this action is remanded to the Maricopa County

Superior Court for the State of Arizona.

DATED this 4th day of October, 2007.

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