Court Opinion

ID: 2734199
Source: CourtListenerOpinion
Date Created: 2014-09-18 17:00:08.917586+00
Date Added: 2024-06-11T10:03:29.076055
License: Public Domain

NOT PRECEDENTIAL

           UNITED STATES COURT OF APPEALS
                FOR THE THIRD CIRCUIT
                     ___________

                         No. 13-4523
                         ___________

                    DANA HAYDEN, and;
                 DAN HAYDEN, Individually,
                   and as husband and wife,
                                        Appellants

                               v.

            WESTFIELD INSURANCE COMPANY
           ____________________________________

         On Appeal from the United States District Court
            for the Western District of Pennsylvania
             (D.C. Civil Action No. 2-12-cv-00390)
           District Judge: Honorable Mark R. Hornak
          ____________________________________

           Submitted under Third Circuit LAR 34.1(a)
                     on September 8, 2014

Before: RENDELL, GREENAWAY, JR. and KRAUSE, Circuit Judges

              (Opinion filed: September 18, 2014)
                                      OPINION

KRAUSE, Circuit Judge:

      Appellants Dan and Dana Hayden (“the Haydens”) appeal from three orders of the

District Court: one denying their motion to join an additional defendant; one denying

their motion to amend their complaint; and one denying their motion to voluntarily

dismiss their complaint. For the reasons set forth below, we affirm.

      I.     Background

      Because we write primarily for the parties, we set forth only those facts and

procedural history relevant to our conclusion.

      This matter stems from an insurance dispute following a “hail and windstorm

event” in Western Pennsylvania. The storm allegedly caused damage to the Haydens’

roof, which allowed water to enter their home and damage the attic and interior

bedrooms. At the time of the storm, the Haydens had a homeowner’s insurance policy

with Appellee Westfield Insurance Company (“Westfield”).

      The storm occurred on March 23, 2011, but the Haydens did not report any

damage to Westfield until nearly six months later. Before anyone from Westfield

inspected their home, the Haydens removed plaster and carpeting from their attic and

from rooms on the second and third floors of their home. After a Westfield adjuster

visited the property, Westfield decided that the Haydens’ claim was better treated as two
                                            2
individual claims: one for the hail damage to the roof and one for the resulting water

infiltration. Westfield then issued the Haydens a payment for the hail damage totaling

$741.63 (after a $1,000 deductible), but continued its investigation of the water

infiltration claim.

       On March 1, 2012, the Haydens filed suit against Westfield in the Court of

Common Pleas of Westmoreland County, asserting claims of breach of contract, statutory

insurance bad faith, and violations of the Pennsylvania Unfair Trade Practices and

Consumer Protection Law (“CPL”). Westfield removed the action to the United States

District Court for the Western District of Pennsylvania on diversity grounds.

       Ten months later, the Haydens filed a motion to join two additional defendants:

Lisa Brown and Duncan Insurance Agency, the insurance agent and agency through

which the Haydens filed their insurance claim.1 Soon after, Westfield filed a motion to

compel discovery from the Haydens. The District Court ruled on both motions on

February 13, 2013. First, it denied the Haydens’ motion for joinder, noting “the

sparseness of [the Haydens’] Motion and supporting papers, and their complete failure to

cite to or rely upon any applicable legal authority in support of their Motion.” App. 32.

The Court found that denial of joinder was proper for several reasons, including the effect

of joinder on the Court’s subject matter jurisdiction pursuant to 28 U.S.C. § 1447(e).

1
  The Haydens alleged that Ms. Brown, an employee of Duncan Insurance Agency, gave
false information about the Haydens’ insurance claim to Westfield. Following joinder,
the Haydens intended to move to have the case remanded to state court, as joinder would
have destroyed diversity.
                                           3
Second, the District Court granted Westfield’s motion to compel discovery, although the

Haydens did not comply before the close of discovery in February 2013.

       As litigation continued, Westfield arranged to have an engineer inspect the

Haydens’ roof. The Haydens later alleged that during this process, Westfield hired

Disaster Restoration Services (“DRS”) to replace a tarp on the Haydens’ roof and DRS

negligently replaced the tarp with an underlayment, which required an excessive amount

of nails. This allegedly caused enough damage to force the Haydens to install a new roof.

       On April 1, 2013, Westfield filed a motion for summary judgment. The Haydens

opposed summary judgment on their breach of contract and bad faith claims, but not on

their CPL claim. Furthermore, the Haydens did not dispute any of the facts Westfield

asserted in its Concise Statement of Material Facts, leading the District Court to treat

those facts as admitted.2

       With Westfield’s summary judgment motion pending before the District Court, the

Haydens filed two motions on May 23, 2013. First, the Haydens moved to join DRS, a

Pennsylvania corporation, as an additional defendant (“Motion to Join DRS”). Second,

they moved for leave to amend their complaint to add a negligence claim against DRS—

but not Westfield—and to add allegations about the damage DRS allegedly caused to

2
 The Haydens failed to comply with Western District of Pennsylvania Local Civil Rule
56(E), which requires a party opposing summary judgment to file a Responsive Concise
Statement of Material Facts. Under that rule, a district court will treat facts that are not
specifically denied or otherwise controverted in a Responsive Concise Statement as
admitted. W.D. Pa. Local Civ. R. 56(E); see also Fed. R. Civ. P. 56(e)(2).
                                            4
their roof to their breach of contract and bad faith claims against Westfield (“Motion to

Amend”).

       The District Court denied those motions on July 11, 2013. The Court held:

       Because the claims to be asserted against such proposed Additional
       Defendant (1) are not otherwise within the jurisdiction of this Court, (2) are
       not part of a common nucleus of operative fact with the original claims, (3)
       the denial of joinder will not prejudice the Plaintiffs’ ability to assert them
       in state court, (4) the Additional Defendant to be joined by amendment has
       not been alleged to have had anything to do with the breach of contract/bad
       faith claims central to the original action, and (5) the Motions come late in
       the process of this case with no imperative reason that they be asserted in
       this civil action, the Motions for Joinder of Additional Defendant and for
       Leave to Amend, are therefore, denied.

App. 4-5. A month later, with the motion for summary judgment still pending, the

Haydens filed a new lawsuit against Westfield and DRS in the Court of Common Pleas of

Allegheny County and then filed a motion to voluntarily dismiss their federal complaint

(“Motion to Dismiss”).

       The District Court denied the Haydens’ Motion to Dismiss on October 25, 2013,

finding that allowing the Haydens to “press the eject button and dismiss their motion at

this late juncture would markedly prejudice Westfield,” and that the motion “evidence[d]

a backdoor attempt to shop for . . . a more favorable forum in state court.” App. 10, 12.

The District Court also granted Westfield’s motion for summary judgment.3

       The District Court had jurisdiction pursuant to 28 U.S.C. §§ 1332 and 1441. We

have jurisdiction under 28 U.S.C. § 1291.

3
 The Haydens have not raised any arguments regarding the District Court’s decision to
grant summary judgment. Thus, any such arguments on that issue are deemed waived.
                                         5
       II.    Standard of Review

       We review each of the District Court’s orders for abuse of discretion. See Hagan

v. Rogers, 570 F.3d 146, 152 (3d Cir. 2009); Elkadrawy v. Vanguard Grp., Inc., 584 F.3d
169, 172 (3d Cir. 2009); Garvin v. City of Phila., 354 F.3d 215, 219 (3d Cir. 2003); In re

Paoli R.R. Yard P.C.B. Litig., 916 F.2d 829, 863 (3d Cir. 1990).

       III.   Discussion

              a. Reviewability of the July 11 Orders

       As a threshold matter, we must determine whether review of the District Court’s

July 11, 2013 orders denying the Haydens’ Motion to Join DRS and Motion to Amend

(the “July 11 orders”) is proper. Westfield contends that the Haydens waived any right to

review the July 11 orders because the Haydens included only the order issued on October

25, 2013 (the “October 25 order”), in their Notice of Appeal. We disagree.

       Although Federal Rule of Appellate Procedure 3(c) states that a notice of appeal

must “designate the judgment, order or part thereof appealed from,” Fed. R. App. P. 3(c),

we “liberally construe the requirements of Rule 3(c),” Pacitti v. Macy’s, 193 F.3d 766,

777 (3d Cir. 1999) (citing Drinkwater v. Union Carbide Corp., 904 F.2d 853, 858 (3d

Cir. 1990); Williams v. Guzzardi, 875 F.2d 46, 49-50 (3d Cir. 1989)). Accordingly, we

have held review of orders not specified in the notice of appeal is appropriate where: “(1)

there is a connection between the specified and unspecified order, (2) the intention to

appeal the unspecified order is apparent, and (3) the opposing party is not prejudiced and

has a full opportunity to brief the issues.” Pacitti, 193 F.3d at 777 (citing Polonski v.
                                              6
Trump Taj Mahal Assocs., 137 F.3d 139, 144 (3d Cir. 1998); Tabron v. Grace, 6 F.3d
147, 153 n.2 (3d Cir. 1993)).

       Each of these criteria is satisfied here. First, although Westfield argues that the

July 11 orders were not connected to the October 25 order, the motions denied in each

order were the means by which the Haydens sought to achieve the same end: pursuing

claims against both Westfield and DRS in one forum. Had the District Court granted the

Haydens’ Motion to Join DRS and Motion to Amend, it is doubtful the Haydens would

have filed their Motion to Dismiss.4 The District Court recognized this, describing the

three motions as part of a “daisy chain” of filings stretching back to the Haydens’ first

failed motion for joinder, all of which had the apparent goal of defeating federal

jurisdiction. App. 10 n.2. Whether or not that was the goal, there is a connection

between the specified and unspecified orders. Second, the Haydens’ intent to appeal the

July 11 orders is apparent from their opening brief. See Pacitti, 193 F.3d at 777 (finding

sufficient intent to appeal a discovery order from plaintiffs’ notice of appeal from

summary judgment order and arguments in plaintiffs’ opening appellate brief); Polonski,
137 F.3d at 144 (finding that “the appellate proceedings clearly manifest an intent to

appeal”). And third, Westfield evidently had a full opportunity to brief the issues and

does not argue that it was prejudiced. Therefore, review of the July 11 orders is

appropriate.

4
  This is especially true because, as discussed below, the District Court would have had to
remand the case to state court if it had joined DRS as a defendant.
                                               7
              b. Denial of the Haydens’ Motion to Join DRS

       The Haydens argue that the District Court abused its discretion by denying their

Motion to Join DRS. A plaintiff generally may join defendants in an action if the

plaintiff (1) asserts a right to relief arising out of the same transaction or occurrence, and

(2) “any question of law or fact common to all defendants will arise in the action.” Fed.

R. Civ. P. 20(a)(2)(A)-(B). The Haydens contend that Rule 20’s requirements were

satisfied because Westfield hired DRS to replace the tarp on the Haydens’ roof so

Westfield’s expert could inspect the roof, making their claims against DRS part of the

same transaction or occurrence that gave rise to the Haydens’ complaint against

Westfield. The District Court, on the other hand, denied joinder because it found the

matter wholly “distinct and distant from the insurance contract interpretation issues at the

center of this case.” App. 4.

       We cannot say the District Court’s denial was an abuse of discretion. The

Haydens’ breach of contract and statutory bad faith claims against Westfield arose out of

Westfield’s refusal to pay the Haydens’ insurance claim as of March 2012. In contrast,

the Haydens’ proposed negligence claim against DRS arose out of DRS’s installation of

an underlayment to their roof nearly a year later in February 2013—a claim they did not

allege against Westfield. These claims are notably distinct in both time and subject

matter. Thus, the District Court’s denial of joinder under Rule 20 was well within its

discretion.
                                               8
        Moreover, the District Court properly determined that it lacked subject matter

jurisdiction over the Haydens’ claims against DRS because adding DRS, a Pennsylvania

citizen, as a defendant would have destroyed diversity. See 28 U.S.C. § 1332. The

Haydens argue that the District Court could have proceeded under 28 U.S.C. § 1367,

which allows district courts to exercise supplemental jurisdiction over “all other claims

that are so related to claims in the action within [the district court’s] original jurisdiction

that they form part of the same case or controversy.” 28 U.S.C. § 1367(a). But

supplemental jurisdiction requires a “common nucleus of operative facts.” Lyon v.

Whisman, 45 F.3d 758, 760 (3d Cir. 1995). In light of the differences in time and subject

matter between the Haydens’ claims against Westfield and their claims against DRS

discussed above, the District Court did not abuse its discretion in holding that the claims

lacked a common nucleus of operative facts.5

       Because the District Court would have lacked subject matter jurisdiction over the

Haydens’ claims against DRS, the Court had the option either to deny joinder or to permit

joinder and remand the action to state court. See 28 U.S.C. § 1447(e).6 While we have

5
  Even if the Haydens could satisfy the common nucleus of operative facts requirement,
the District Court would have lacked jurisdiction over the Haydens’ claims against DRS
in any event because DRS would have been a party joined under Rule 20, and § 1367(b)
precludes district courts from exercising supplemental jurisdiction over “claims by
plaintiffs against persons made parties under Rule 14, 19, 20, or 24 of the Federal Rules
of Civil Procedure . . . when exercising supplemental jurisdiction over such claims would
be inconsistent with the jurisdictional requirements of section 1332.” 28 U.S.C. §
1367(b); see also 13D Charles Alan Wright et al., Federal Practice and Procedure §
3567.2 (3d ed. 2014).
6
  Section 1447(e) provides: “If after removal the plaintiff seeks to join additional
                                              9
not yet addressed the appropriate analytical approach to § 1447(e) (and need not do so

here), the Fifth Circuit has instructed that when a district court is “faced with an amended

pleading naming a new nondiverse defendant in a removed case, [it] should scrutinize

that amendment more closely than an ordinary amendment,” and should consider “the

extent to which the purpose of the amendment is to defeat federal jurisdiction, whether

[the] plaintiff has been dilatory in asking for amendment, whether [the] plaintiff will be

significantly injured if amendment is not allowed, and any other factors bearing on the

equities.” Hensgens v. Deere & Co., 833 F.2d 1179, 1182 (5th Cir. 1987); see also City

of Perth Amboy v. Safeco Ins. Co. of Am., 539 F. Supp. 2d 742, 746 (D.N.J. 2008) (noting

that district courts within the Third Circuit have adopted the Hensgens approach).

       Given these considerations, the District Court’s decision to deny joinder, rather

than permit joinder and remand the case, was a proper exercise of its discretion. The

Haydens’ Motion to Join DRS came well after the close of discovery and the briefing of

dispositive motions. In fact, by the time the Haydens moved to join DRS, the Haydens

had failed to respond to discovery, despite the District Court’s order to compel, and they

had already attempted to join two entirely different defendants whose joinder also would

have destroyed federal jurisdiction. Further, as the District Court noted, the Haydens

could have “easily and timely” filed suit against DRS in state court. App. 4. Thus, the

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).

                                             10
District Court’s denial of joinder was not an abuse of discretion under either Rule 20 or §

1447(e).

              c. Denial of the Haydens’ Motion to Amend

       The Haydens also argue that the District Court abused its discretion by denying

their Motion to Amend, contending that the District Court “focused almost exclusively on

why the joinder of an additional defendant was improper, while paying little notice to

how the Haydens’ new allegations would affect or aid their bad faith case.” Appellant’s

Br. 13. We disagree.

       The District Court denied the Haydens’ Motion to Amend for the reasons set forth

in its order denying the Motion to Join DRS, which, in turn, referenced the Haydens’

delay, lack of subject matter jurisdiction, and distinctions between the new allegations

and the original allegations against Westfield. Thus, although delay alone would not be a

sufficient basis to deny a motion to amend, Cureton v. Nat’l Collegiate Athletic Ass’n,

252 F.3d 267, 273 (3d Cir. 2001); Cornell & Co. v. Occupational Safety & Health Review

Comm’n, 573 F.2d 820, 823 (3d Cir. 1978), the record here amply supports the District

Court’s decision.

       Indeed, as to the proposed allegations against DRS, the record demonstrates that in

addition to the rationale articulated by the District Court, any amendment would have

been futile. Leave to amend may be denied for futility if “the complaint, as amended,

would fail to state a claim upon which relief could be granted,” Shane v. Fauver, 213
F.3d 113, 115 (3d Cir. 2000); In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410,
                                            11
1434 (3d Cir. 1997), or where a federal court would lack subject matter jurisdiction over

the amended complaint, see Miklavic v. USAir Inc., 21 F.3d 551, 557-58 (3d Cir. 1994).

Futility is apparent here because DRS had not been joined as a defendant and the District

Court lacked subject matter jurisdiction over the Haydens’ proposed claim against DRS.

       Furthermore, as to the proposed allegations against Westfield, the record reflects

that allowing an amendment at such a late stage would have been prejudicial to

Westfield. “A district court may deny leave to amend a complaint if a plaintiff’s delay in

seeking amendment is undue, motivated by bad faith, or prejudicial to the opposing

party.” Cureton, 252 F.3d at 272-73 (citing Foman v. Davis, 371 U.S. 178, 182 (1962)).

Factors to consider include “whether allowing an amendment would result in additional

discovery, cost, and preparation to defend against new facts or new theories.” Cureton,
252 F.3d at 273.

       Here, the new allegations the Haydens sought to raise against Westfield arose out

of a distinct event—the February 2013 repairs to their roof—and would have subjected

Westfield to a new wave of discovery despite the Haydens’ failure to comply with the

District Court’s order to compel. Moreover, the Haydens filed their Motion to Amend on

May 23, 2013, after full briefing on Westfield’s motion for summary judgment, so that

adding new allegations would have required a new round of dispositive motions.

Whereas Westfield would have been prejudiced by the introduction of new allegations

after eighteen months of litigation, the Haydens were not prejudiced by the denial of their

motion, as they could still assert their new claims in a future action, and, indeed, have
                                             12
since done so in state court. Under these circumstances, denial of the Motion to Amend

was proper.7

               d. Denial of the Haydens’ Motion to Voluntarily Dismiss Their Complaint

       Finally, the Haydens argue the District Court abused its discretion by denying

their Motion to Dismiss. After a summary judgment motion has been filed, “an action

may be dismissed at the plaintiff’s request only by court order, on terms that the court

considers proper,” Fed. R. Civ. P. 41(a)(2), and the decision to allow voluntary dismissal

is left to the sound discretion of the district court, Ferguson v. Eakle, 492 F.2d 26, 29 (3d

Cir. 1974); Ockert v. Union Barge Line Corp., 190 F.2d 303, 304 (3d Cir. 1951). That

said, “Rule 41 motions should be allowed unless [the] defendant will suffer some

prejudice other than the mere prospect of a second lawsuit.” In re Paoli R.R. Yard P.C.B.

Litig., 916 F.2d at 863 (internal quotation marks omitted).

7
  The Haydens argue that “[t]he continuing conduct on the part of the insurer is directly
relevant to [their] bad faith claim against Westfield,” relying on W.V. Realty, Inc. v.
Northern Insurance Co., 334 F.3d 306, 314 (3d Cir. 2003) (“W.V. Realty”). Appellant’s
Br. 11. Plaintiffs’ reliance on W.V. Realty is misplaced. W.V. Realty recognized certain
circumstances where courts have permitted bad faith claims to survive motions to dismiss
based on conduct that occurred after the insured filed suit, including where insurers made
misrepresentations to the court, filed baseless or abusive motions, or engaged in other
conduct “beyond a discovery violation[] suggesting that the conduct was intended to
evade the insurer’s obligations under the insurance contract.” 334 F.3d at 314. Neither
the Haydens’ Motion to Amend nor their proposed Second Amended Complaint alleged
sufficient facts to illustrate how Westfield’s conduct in hiring DRS to replace the tarp on
the Haydens’ roof constituted continuing bad faith. Rather, the Haydens simply alleged
that DRS was negligent in replacing the tarp and that Westfield was responsible. In any
event, this argument does not change our holding that denial of amendment was
appropriate because of prejudice to Westfield.
                                              13
       We conclude, however, that there was sufficient prejudice to warrant denial of

dismissal here. Chief among the factors to consider in determining whether a defendant

will suffer prejudice are the extent to which litigation has progressed and the extent to

which the defendant will be exposed to new litigation in another forum. See Ferguson,
492 F.2d at 28-29; Ockert, 190 F.2d at 304 (noting that voluntary dismissal is “an

increasingly burdensome matter to one’s opponent” after an answer is filed and case

preparation progresses).

       Our decision in Ferguson is instructive. There, we determined that the district

court abused its discretion in permitting the plaintiffs’ voluntary dismissal because of the

prejudice to the defendants who were “ordered to defend anew” in state court “[f]ourteen

months after they became defendants in one case . . . and at least two months after they

had expected that all discovery had been completed.” Ferguson, 492 F.2d at 29.

Recognizing that the plaintiffs were primarily motivated by a desire to combine the

action with a suit against a different defendant in state court (one whose joinder in the

federal action would have destroyed diversity), we held that their desire to “kill two birds

with one stone” was not a compelling reason to dismiss at such a late date, and we

“express[ed] extreme doubt that these circumstances would have been persuasive” even if

the motion to dismiss had been presented prior to the close of discovery. Id. at 29 & n.8.

       Those same considerations apply with even more force here. The Haydens’

Motion to Dismiss came seventeen months after the start of litigation and six months

after the close of discovery, and as the District Court noted, it is apparent that their
                                              14
primary, if not only, reason for dismissal was to litigate against both Westfield and DRS

in state court, i.e., to “kill two birds with one stone.” The Haydens contend that

Westfield will suffer little prejudice because it can use the same arguments, depositions,

testimony, and documents in state court as it did in federal court, but Westfield’s ability

to recycle its federal court litigation materials is little consolation, particularly when

Westfield evidently never received much of the discovery it sought from the Haydens,

even after its successful motion to compel. Under these circumstances, the District Court

did not abuse its discretion in denying the Haydens’ Motion to Dismiss.

       IV.    Conclusion

       The District Court acted well within its discretion when it denied the Haydens’

Motion to Join DRS, Motion to Amend, and Motion to Dismiss. We therefore affirm.

                                              15