Court Opinion

ID: 768856
Source: CourtListenerOpinion
Date Created: 2012-04-18 09:16:23+00
Date Added: 2024-06-11T08:52:47.706842
License: Public Domain

213 F.3d 993 (7th Cir. 2000)
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.
No. 99-3456
In the  United States Court of Appeals  For the Seventh Circuit
Argued April 3, 2000
Decided May 30, 2000

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.
Before Bauer, Flaum, and Williams, Circuit  Judges.
Bauer, Circuit Judge.

1
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.

2
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).

3
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.

4
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.

5
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."

6
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.

7
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:

8
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).

9
Further, Fed.R.Civ.P. 21 provides that  misjoinder is not grounds for dismissal.

10
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.

11
The district court correctly joined the  additional defendants as indispensable  parties and then dismissed the case for  lack of subject matter jurisdiction.

12
The  district court is affirmed.