Court Opinion

ID: 2994357
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:14:13.198309+00
Date Added: 2024-06-11T09:57:21.954515
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 99-3456

Estate of Jose E. Alvarez, by Zulma Prieto,
Personal Representative, Ana L. Alvarez
and Jose R. Alvarez, by his natural parent
Ana Luisa Alvarez,

Plaintiffs-Appellees,

v.

Donaldson Company, Inc.,

Defendant-Appellant.

Appeal from the United States District Court
for the Northern District of Indiana, South Bend
Division.
No. 3:99-CV-194 RM--Robert L. Miller, Jr., Judge.

Argued April 3, 2000--Decided May 30, 2000

  Before Bauer, Flaum, and Williams, Circuit
Judges.

  Bauer, Circuit Judge. On April 1, 1999,
the Estate of Jose Alvarez filed a
wrongful death action, stemming from an
explosion at an ethylene oxide packaging
facility in Elkhart, Indiana, against the
Donaldson Company. On the final day
within the applicable statute of
limitations, the Estate moved to amend
its complaint to add 48 additional
defendants, some of which destroy
complete diversity. This appeal arises
out of the district court’s decision to
grant the Estate’s motion and its
subsequent dismissal of the case for lack
of complete diversity.

  Donaldson argues that the district court
erred as a matter of law in dismissing
this case for lack of subject matter
jurisdiction. Donaldson contends that
because diversity was proper when the
action commenced it cannot be divested by
the subsequent addition of a nondiverse
party, citing the Supreme Court’s
decision in Freeport-McMoRAN, Inc. v. K N
Energy, 498 U.S. 426 (1991) (per curiam).
We review the dismissal for lack of
subject matter jurisdiction de novo.
Sapperstein v. Hager, 188 F.3d 852, 855
(7th Cir. 1999).

  Donaldson tries to broaden the holding
in Freeport-McMoRan by stating that once
jurisdiction is established it cannot be
destroyed. Freeport-McMoRan, however,
looked at a limited part of diversity in
which there was a substitution of
parties. McMoRan, in a business
transaction unrelated to the litigation,
transferred its interest in the contract
to FMP Operating Company. Freeport-
McMoRan, 498 U.S. at 428. Because FMPO
"was not an ’indispensable’ party at the
time the complaint was filed (in fact, it
had no interest whatsoever in the outcome
of the litigation until sometime after
suit was commenced) diversity was not
destroyed." Id. The Supreme Court
determined that once jurisdiction is
established it cannot be defeated by the
addition of a nondiverse party to the
action. Id.

  In this case, however, the district
court was not confronted by the
substitution of parties but the addition
of 48 parties. Therefore the court found
that Freeport-McMoRan did not apply.
Other circuits have also held that
Freeport-McMoRan is limited to the
substitution of parties under Rule 25.
See Cobb v. Delta Exports Inc., 186 F.3d
675 (5th Cir. 1999); Ingram v. CSX, 146
F.3d 858 (11th Cir. 1998); see also Casas
Office Machines, Inc. v. Mita Copystar of
Am., Inc., 42 F.3d 668 (1st Cir. 1994);
Burka v. Aetna Life Ins. Co., 87 F.3d 478
(D.C. Cir. 1996). Further, the Supreme
Court in Freeport-McMoRan specifically
held that it was not overruling Owen
Equipment & Erection Co. v. Kroger, 437
U.S. 365, 375 (1978), which held that a
plaintiff may not bypass the jurisdiction
requirements by suing only the diverse
defendants and waiting for them to
implead the nondiverse defendants.

  The Estate amended the complaint to
include the 48 additional defendants only
after Donaldson identified them as
possible nonparties that may have been at
fault under the Indiana Comparative Fault
Act. Donaldson provided the names just
six days before the end of the statute of
limitations. This was clearly an addition
of parties, not a substitution. The
district court followed the rule of Owen
when it dismissed this case for lack of
jurisdiction stating, "requiring complete
diversity does not require constant
inquiry into the parties’ changing
citizenship; it simply requires
plaintiffs to establish diversity as part
of an amended complaint just as they did
for the original complaint."

  Donaldson further argues that the court
abused its discretion in granting the
Estate leave to amend the complaint. Rule
15(a) of the Federal Rules of Civil
Procedure provides that leave to amend
"shall be freely given when justice so
requires." Id. The amendment however
amounted to joinder under Fed.R.Civ.P.
19.

  Rule 19 of the Federal Rules of Civil
Procedure sets forth the procedure for
joining a party to a pending case.
Because Rule 19(a) only allows joinder if
it will not deprive the court of
jurisdiction, we must turn our analysis
to Rule 19(b). Kreuger v. Cartwright, 996
F.2d 928, 932 (7th Cir. 1993). Section
19(b) provides:

Determination by Court Whenever Joinder
not Feasible. If a person as described in
subdivision (a)(1)-(2) hereof cannot be
made a party, the court shall determine
whether in equity and good conscience the
action should proceed among the parties
before it, or should be dismissed, the
absent person being thus regarded as
indispensable. The factors to be
considered by the court include: first,
to what extent a judgment rendered in the
person’s absence might be prejudicial to
the person or those already parties;
second, the extent to which, by
protective provisions in the judgment, by
the shaping of relief, or other measures,
the prejudice can be lessened or avoided;
third, whether a judgment rendered in the
person’s absence will be adequate;
fourth, whether the plaintiff will have
an adequate remedy if the action is
dismissed for nonjoinder. Fed.R.Civ.P.
19(b).

Further, Fed.R.Civ.P. 21 provides that
misjoinder is not grounds for dismissal.

  The factors of 19(b) were clearly met.
First, the absence of the 48 additional
parties would have been prejudicial to
the Estate. Under the Indiana Comparative
Fault Act, nonparties are assessed fault
but not liability. If fault were found
the Estate would be unable to recover
damages from them, requiring the Estate
to follow up in state court. Second, this
prejudice could not be lessened. Third,
the judgment without the additional
parties would not be adequate because the
Estate would have to relitigate in State
court to obtain any recovery from the
nonparties. Finally, the Estate can file
suit in state court against Donaldson and
all the nonparties in the Elkhart Circuit
Court.

  The district court correctly joined the
additional defendants as indispensable
parties and then dismissed the case for
lack of subject matter jurisdiction. The
district court is affirmed.