Martinez v. Duke Energy Corp. , 130 F. App'x 629 ( 2005 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 03-2192
EMMANUEL MARTINEZ; DONALD WEYGANT; SANDRA
WEYGANT,
Plaintiffs - Appellants,
and
CAMP, DRESSER & MCKEE; ANTHONY CRANE RENTAL,
L.P.,
Plaintiffs - Appellees,
versus
DUKE ENERGY CORPORATION; TEREX CORPORATION,
Defendants - Appellees,
versus
THALLE CONSTRUCTION COMPANY, INCORPORATED,
Third Party Defendant - Appellee.
Appeal from the United States District Court for the District of
South Carolina, at Greenville. Henry M. Herlong, Jr., District
Judge. (CA-03-49-6-20)
Argued: February 4, 2005 Decided: May 2, 2005
Before MOTZ, TRAXLER, and GREGORY, Circuit Judges.
Affirmed in part, reversed in part, and remanded by unpublished per
curiam opinion.
ARGUED: Karen Creech, Eugene Clark Covington, Jr., COVINGTON,
PATRICK, HAGINS, STERN & LEWIS, P.A., Greenville, South Carolina;
John Daniel Kassel, Columbia, South Carolina, for Appellants.
Michael Burton T. Wilkes, Spartanburg, South Carolina; Christopher
Thomas Byrd, WEINBERG, WHEELER, HUDGINS, GUNN & DIAL, Atlanta,
Georgia, for Appellees. ON BRIEF: Earl W. Gunn, Ashley P. Nichols,
WEINBERG, WHEELER, HUDGINS, GUNN & DIAL, Atlanta, Georgia; Pope D.
Johnson, III, MCCUTCHEN, BLANTON, RHODES & JOHNSON, Columbia, South
Carolina, for Appellee Anthony Crane Rental, L.P. Kevin A. Dunlap,
PARKER, POE, ADAMS & BERNSTEIN, L.L.P., Spartanburg, South
Carolina, for Appellee Duke Energy Corporation. Robert Watson
Foster, Jr., NELSON, MULLINS, RILEY & SCARBOROUGH, L.L.P.,
Columbia, South Carolina, for Appellee Terex Corporation. C.
William McGee, GALLIVAN, WHITE & BOYD, P.A., Greenville, South
Carolina, for Appellee Thalle Construction Company, Incorporated.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
2
PER CURIAM:
Appellants Emmanuel Martinez, Donald Weygant, and Sandra
Weygant appeal the district court’s dismissal of their personal
injury action for lack of complete diversity and denial of their
motion to dismiss the jurisdiction-spoiling defendant.1 We affirm
in part, reverse in part, and remand.
I.
On March 6, 2000, Emmanuel Martinez and Donald Weygant,
employees of Thalle Construction Company (“Thalle Construction”),
were working on a sewer construction project in Greenville, South
Carolina. While Martinez was handling a pump being lifted by a
crane, the crane either contacted or came too close to an overhead
power line. The crane and pump became energized, and Martinez was
severely shocked and burned. Weygant, who was nearby, was also
severely shocked and burned when he attempted to aid Martinez.2
1
After briefing, Appellee Anthony Crane Rental, L.P., filed a
bankruptcy petition and the case was stayed as to it. Prior to
oral argument, however, the bankruptcy court granted Appellants
relief from the automatic stay, allowing this action to proceed to
a resolution as to all parties.
2
No one disputes that the injuries sustained by the men were
catastrophic. According to the pleadings, Emmanuel Martinez
underwent the amputation of one arm, one finger on the remaining
arm, repeated amputations of his legs which ultimately ended with
the amputation of his entire lower body from the naval down,
several plastic surgeries, and repeated scar revisions. He has
catheters and colostomy units for the elimination of bodily waste.
Donald Weygant sustained a partial loss of use of both hands,
disfigurement, pain, and post-traumatic stress. Medical expenses
exceed $2.6 million for Martinez and $730,000 for Weygant.
3
On January 6, 2003, Appellants filed a complaint asserting
state law claims of negligence, strict liability, and breach of
implied warranty against five corporate defendants: Duke Energy
Corporation, the owner and operator of the power line; Camp Dresser
& McKee, the engineering firm for the sewer project; Anthony Crane
Rental and Maxim Crane Works, the lessor of the crane; and Terex
Corporation, the manufacturer of the crane. Federal jurisdiction
was based upon complete diversity of citizenship. See 28 U.S.C.A.
§ 1332 (West 1993 & Supp. 2004). Appellants alleged that Martinez
was a resident of Georgia, that the Weygants were residents of
Texas, and that they were diverse in citizenship from each of the
five corporate defendants.
On February 3, 2003, after obtaining an extension of time to
answer on behalf of defendants Anthony Crane Rental and Maxim Crane
Works, attorney Pope Johnson advised Appellants by letter that the
complaint had erroneously named these two entities as the lessors
of the crane.3 Attached to the letter was a copy of the cover page
of the Equipment Rental Agreement and a letter from Mark Coulson,
“outside counsel to Anthony Crane Rental, L.P. d/b/a Maxim Crane
Works,” dated January 31, 2003. J.A. 302.
3
In July 2001, well in advance of the filing of the lawsuit,
Johnson advised Appellants’ counsel that he “ha[d] been retained .
. . to represent the interests of Anthony Crane Rental with respect
to any claims arising out of the accident of March 6, 2000,” and
instructed Appellants’ counsel to “direct any further inquiries
regarding this matter and Anthony Crane Rental to [his] attention.”
J.A. 165.
4
The Equipment Rental Agreement listed five affiliated Anthony
companies: Anthony Crane Rental, Inc.; Anthony Crane Rental of
Texas, Inc.; Anthony Crane Rental of Georgia, Inc.; Anthony Crane
Rental of Florida, Inc.; and Anthony Equipment Corporation. The
body of the Rental Agreement, however, indicated that Thalle
Construction had leased the crane for the project two months prior
to the accident from “Anthony Crane Rental, L.P.,” a company not
listed in the heading. J.A. 111. Coulson’s letter advised that:
[t]he entity doing business in South Carolina is Anthony
Crane Rental, L.P., a Pennsylvania limited partnership.
Anthony Crane Rental, L.P. has a d/b/a of Maxim Crane
Works, and has filed ficticious name registrations in
many states, including . . . South Carolina. . . .
. . .
My understanding is that Anthony Crane Rental, Inc. is no
longer in existence. If it does exist, it is owned by
the former controlling owner of Anthony Crane Rental,
L.P., and not Anthony Crane Rental, L.P., and does not
have anything to do with this case. . . . We do not
represent Anthony Crane Rental, Inc., and Anthony Crane
Rental, L.P. cannot accept service on its behalf.
J.A. 302-03. Appellants were further advised that “[t]he sole
general partner of Anthony Crane Rental, L.P. is ACR Management,
L.L.C., a Delaware limited liability company” and that Anthony
Crane Rental, L.P. had four limited partners:
ACR/Dunn Acquisition, Inc. - Delaware corporation;
Husky Crane, Inc. - California corporation;
Thompson & Rich Crane Service, Inc. - California
corporation; and
5
Sacramento Valley Crane Services Inc. - California
corporation.
J.A. 302. Counsel requested that Appellants review the information
“and let me know if you will amend the Complaint and substitute
Anthony Crane Rental, L.P. as the defendant in place of Anthony
Crane Rental and Maxim Crane Works.” J.A. 301.
On February 14, 2003, Appellants filed an Amended Complaint
which eliminated Anthony Crane Rental and Maxim Crane Works as
defendants and asserted a claim against Anthony Crane Rental, L.P.
instead. Anthony Crane Rental, L.P. and Camp Dresser answered and
filed cross-claims against Thalle Construction for contractual
indemnity, and each ultimately obtained an entry of default against
Thalle Construction.
On March 6, 2003, the South Carolina statute of limitations
for filing suit expired. Four months later, on July 11, 2003, the
district court sua sponte issued an order requiring all defendants
“to inform the court of their state of incorporation and their
principal place of business” within ten days. J.A. 121. Duke
Energy, Camp Dresser, and Terex all responded, with no indication
of a jurisdictional problem. Anthony Crane Rental, L.P., responded
that it was “a limited partnership formed in the State of
Pennsylvania and its principal place of business is Pittsburgh,
Pennsylvania.” J.A. 126. Attached was a memorandum from attorney
Coulson, providing a list of seventeen affiliates of Anthony Crane
Rental, L.P. d/b/a Maxim Crane Works, and a chart listing owners of
6
two of the seventeen affiliates -- Anthony Crane Rental Holdings,
L.P. and ACR Management, L.L.C.4
On August 26, 2003, however, Anthony Crane Rental, L.P. filed
a supplemental response, representing that its sole general partner
was ACR Management, L.L.C. (as it had in February 2003), but now
representing that Anthony Crane Rental, L.P. had five, instead of
the originally identified four, limited partners. An attached
chart indicated that the additional partner, Anthony Crane Rental
Holdings, L.P., was comprised of one general partner, three limited
partner entities, and nineteen individual limited partners -- two
of which were residents of the same states (Texas and Georgia) as
the Appellants. There was no representation as to the exact date
that this ownership existed, nor any explanation as to why Anthony
Crane Rental Holdings, L.P. had not been listed as a limited
partner when Appellants were asked to amend the complaint and add
Anthony Crane Rental, L.P. as the proper defendant.
The following day, the district court dismissed the action in
its entirety, stating as follows:
Because it appears from Anthony Crane Rental, L.P.’s
supplemental response to the court’s July 11, 2003, Order
that the court lacks subject matter jurisdiction, this
case is dismissed. Specifically, the court finds that
4
Coulson represented that he had no “information above these
levels.” J.A. 129. He further advised that “a number of the
persons on the[] lists are former employees, and other than their
last forwarding address, Maxim would not have any direct knowledge
as to the domicile of these persons.” J.A. 129.
7
the requirement of diversity of citizenship has not been
satisfied.
J.A. 140; see Carden v. Arkoma Assocs., 494 U.S. 185, 195-96 (1990)
(holding that the citizenship of a limited partnership is deemed to
be that of all of its limited and general partners). Appellants
were provided no opportunity to address the court regarding the
supplemental response and whether it was fatal to their action, nor
any opportunity to conduct discovery into the representations made
by Anthony Crane Rental, L.P. regarding its ownership.
Appellants filed a motion to alter or amend the judgment under
Rule 59(e) of the Federal Rules of Civil Procedure, asserting that
the amendment of the complaint to add Anthony Crane Rental, L.P.,
even if nondiverse, did not divest the court of jurisdiction
because diversity jurisdiction existed when the original complaint
was filed. In the alternative, Appellants requested an opportunity
to conduct discovery into the issue of jurisdiction. If Anthony
Crane Rental, L.P. was nondiverse, Appellants requested that the
district court merely dismiss Anthony Crane Rental, L.P., without
prejudice, pursuant to Rule 21 of the Federal Rules of Civil
Procedure, in order to preserve diversity jurisdiction over the
other defendants.
In response to Appellants’ motion, Anthony Crane Rental, L.P.
submitted an affidavit of Arthur J. Innamorato, Jr., the president
of its general partner, ACR Management, L.L.C. The affidavit
stated that Anthony Crane Rental Holdings, L.P., was a limited
8
partner of Anthony Crane Rental, L.P., as of January 6, 2003, when
the original complaint was filed, but made no representation as to
whether it was a limited partner on January 31, 2003, the date of
Coulsen’s letter indicating to the contrary, or on February 14,
2003, the date the amended complaint naming Anthony Crane Rental,
L.P. as a defendant was filed.
On October 31, 2003, without conducting a hearing on the
matter, the district court denied Appellants’ Rule 59(e) motion.
The district court held that diversity jurisdiction never existed
because Anthony Crane Rental, L.P. was, at all times, the proper
party to be named in the action. The district court ruled that
discovery was unnecessary because it had no reason to question
Anthony Crane Rental, L.P.’s responses to its July 11 inquiry or
the evidence submitted in response to the Appellants’ Rule 59(e)
motion.5 And, the district court ruled that, although it had the
5
Although noting that “the information submitted to the court
by Anthony Crane Rental, L.P. regarding its citizenship . . . was
different from information submitted to the plaintiffs on an
earlier occasion by” its counsel, the district court ruled that it
“has no reason to believe that the information submitted by Anthony
Crane Rental, L.P. to the court [in its supplemental response] is
not accurate.” J.A. 345. Pointing to the Innamorato affidavit,
stating “that the information submitted to the court contains the
names of the general and limited partners as of the filing of the
plaintiffs’ summons and complaint,” the court simply found “that
additional discovery is unnecessary.” Id.The discrepancy recognized, however, does not appear to be the
only one. Although both responses filed by Anthony Crane Rental,
L.P. to the court’s order included nondiverse individuals, the
first response listed 25 individual limited partners, whereas the
supplemental response listed 19 individual limited partners.
9
authority to dismiss Anthony Crane Rental, L.P. in order to
preserve jurisdiction over the other defendants named in the
amended complaint, it declined to do so. This appeal followed.
II.
It is well settled that, in order to maintain an action in
federal district court based upon diversity jurisdiction, complete
diversity between the plaintiffs and the defendants must exist at
the time the complaint is filed. See 28 U.S.C.A. § 1332; Grupo
Dataflux v. Atlas Global Group, L.P., 124 S. Ct. 1920, 1924 (2004)
(noting that the long-settled “time-of-filing” rule governs the
jurisdiction of the court, “regardless of the costs it imposes”).
The party asserting jurisdiction bears the burden of
“demonstrat[ing] that jurisdiction does, in fact, exist,” and “a
federal court is obliged to dismiss a case whenever it appears the
court lacks subject matter jurisdiction.” Lovern v. Edwards, 190
F.3d 648, 654 (4th Cir. 1999). “[T]he absence of jurisdiction may
be raised at any time during the case, and may be based on the
court’s review of the evidence.” Id.; see Gibbs v. Buck, 307 U.S.
Consequently, even if we thought it proper to accept the responses
at face value, we would remain unable to discern with any
confidence the exact ownership that existed when the complaint and
amended complaint were filed. We also note that the district court
issued its order denying the Appellants’ motion to reconsider four
days after the Innamorato affidavit was filed and one day short of
the five days normally provided for replies under the District of
South Carolina’s Local Rule 7.07.
10
66, 72 (1939). “Determining the question of subject matter
jurisdiction at the outset of the litigation is often the most
efficient procedure.” Lovern, 190 F.3d at 654. The “district court
may address its lack of subject matter jurisdiction in two ways.”
Id. It “may find insufficient allegations in the pleadings,
viewing the alleged facts in the light most favorable to the
plaintiff, similar to an evaluation pursuant to Rule 12(b)(6),” or,
“after an evidentiary hearing, the court may weigh the evidence in
determining whether the facts support the jurisdictional
allegations.” Id. (internal citations omitted); see Adams v. Bain,
697 F.2d 1213, 1219 (4th Cir. 1982) (same).
A.
We begin with Appellants’ contention that the addition of
Anthony Crane Rental, L.P. as a defendant, even if nondiverse, did
not divest the federal court of jurisdiction because diversity
jurisdiction existed at the time the original complaint was filed.
We disagree.
In Owen Equipment & Erection Company v. Kroger, 437 U.S. 365(1978), after a diverse defendant filed a third-party complaint
against a nondiverse defendant, the plaintiff amended the complaint
in order to assert a direct claim against the nondiverse defendant
as well. The Supreme Court held that this destroyed complete
diversity. Otherwise, the “plaintiff could defeat the statutory
requirement of complete diversity by the simple expedient of suing
11
only those defendants who were of diverse citizenship and waiting
for them to implead nondiverse defendants.” Id. at 374. “To allow
the requirement of complete diversity to be circumvented as it was
in this case would simply flout the congressional command.” Id. at
377.
Relying upon the Court’s subsequent decision in Freeport-
McMoRan, Inc. v. KN Energy, Inc., 498 U.S. 426 (1991) (per curiam),
however, Appellants argue that the district court erred in
dismissing their case. In Freeport, the Supreme Court was
presented with a substitution of parties under Rule 25(c) of the
Federal Rules of Civil Procedure, which was requested after the
original plaintiff transferred its interest to a nondiverse company
while the action was pending. See F. R. Civ. P 25(c) (“In case of
any transfer of interest, the action may be continued by or against
the original party, unless the court upon motion directs the person
to whom the interest is transferred to be substituted in the action
or joined with the original party.”). In such circumstances, the
Supreme Court held that the substitution did not destroy diversity
jurisdiction, which attached and was proper when the complaint was
originally filed.
Appellants assert that because diversity jurisdiction existed
at the time its original complaint was filed, diversity
jurisdiction was not destroyed by their amended complaint. We are
unpersuaded. Unlike the case of Freeport, this case does not
12
involve the substitution of a party under Rule 25(c) resulting from
a transfer of interest while the litigation was pending, but rather
an amended complaint that dropped the erroneously named Anthony
entities and added the Anthony entity that did lease the crane to
Thalle Construction. See State of Alvarez v. Donaldson Co., 213
F.3d 993, 995 (7th Cir. 2000) (rejecting plaintiff’s contention
that an amended complaint adding nondiverse defendants did not
divest the district court of diversity jurisdiction and noting that
Freeport is limited to the substitution of parties pursuant to Rule
25). Were we to accept Appellants’ view of the breadth of the
holding in Freeport, plaintiffs would be free to circumvent the
requirement of complete diversity simply by suing one or more
diverse joint tortfeasors and then adding by amended complaint any
and all nondiverse joint tortfeasors. We think this result is
plainly unacceptable under a fair reading of the Owens decision.
Accordingly, we hold that the Appellants’ addition of Anthony Crane
Rental, L.P. as a named defendant in the Amended Complaint did
destroy the requisite complete diversity among the parties and
affirm the district court’s rejection of Appellants’ claim that
diversity jurisdiction was not destroyed by the addition of Anthony
Crane Rental, L.P.6
6
At oral argument, Appellants abandoned the claim that the
district court erred in denying them an opportunity to challenge
Anthony Crane Rental, L.P.’s representations regarding its
ownership, either through discovery or an evidentiary hearing.
Accordingly, we now assume that Anthony Crane Rental, L.P. was not
13
B.
Appellants next contend that the district court erred in
denying their request that Anthony Crane Rental, L.P. be dismissed
from the lawsuit under Federal Rule of Civil Procedure 21, in order
to preserve diversity jurisdiction over the remaining defendants.7
1.
Rule 21 provides that “[p]arties may be dropped or added by
order of the court on motion of any party or of its own initiative
at any stage of the action and on such terms as are just.” Fed. R.
Civ. P. 21; see Koehler v. Dodwell, 152 F.3d 304, 308 (4th Cir.
1998). We will reverse the district court’s refusal to dismiss a
nondiverse defendant to preserve diversity jurisdiction where the
decision “was based upon misconceptions of law” or constitutes “a
clear abuse” of the discretion vested in the district court.
Weaver v. Marcus, 165 F.2d 862, 864 (4th Cir. 1948).
Here, the district court recognized that Rule 21 vested it
“with authority to allow a dispensable nondiverse party to be
dropped at any time,” Newman-Green, Inc. v. Alfonzo-Larrain, 490
U.S. 826, 832 (1989), but apparently believed from the outset of
diverse in citizenship from the Appellants when the Complaint and
Amended Complaint were filed.
7
Appellee Anthony Crane Rental, L.P., filed a brief in support
of Appellants’ argument that the district court should have
dismissed it under Rule 21 instead of dismissing the entire action
against all Appellees. Accordingly, our references to Appellees in
this section do not include Anthony Crane Rental, L.P.
14
the inquiry that “such authority should be exercised sparingly,”
id. at 837 (emphasis added). The district court ruled as follows:
[Camp Dresser] and Thalle argue they will be prejudiced
if Anthony Crane Rental, L.P. is dismissed by the court.
These defendants have provided a number of compelling
arguments in this regard. The court agrees that certain
tactical advantages as well as issues of judicial economy
counsel against dismissing Anthony Crane Rental, L.P.
from this case. Therefore, to the extent the court has
discretion to dismiss Anthony Crane Rental, L.P. from the
case, the court declines to do so. As such, the court
finds that the plaintiffs assert no new law or evidence
and will not suffer a manifest injustice as a result of
the court’s August Order. Furthermore, the August Order
was not a clear error of law.
J.A. 346. This was error.
In Newman-Green, the Supreme Court held that, like district
courts, courts of appeals also have the authority “to dismiss a
dispensable party whose presence spoils statutory diversity
jurisdiction.” 490 U.S. at 827. Before the issue reached the
Supreme Court, a panel of the United States Court of Appeals for
the Seventh Circuit granted the plaintiffs’ “motion, which it had
invited, to amend the complaint to drop [a non-diverse defendant]
as a party, thereby producing complete diversity under
§ 1332(a)(2).” Id. at 829. The en banc court reversed, holding
that Rule 21 did not empower federal appellate courts to dismiss a
nondiverse party in order to preserve diversity jurisdiction, and
remanded the case to the district court to make that decision in
the first instance. The Supreme Court reversed, relying on the
appellate court’s inherent power as well as the power to remedy
15
defects in jurisdiction under Rule 21. In doing so, however, the
Court stated:
Although we hold that the courts of appeals have the
authority to dismiss a dispensable nondiverse party, we
emphasize that such authority should be exercised
sparingly. In each case, the appellate court should
carefully consider whether the dismissal of a nondiverse
party will prejudice any of the parties in the
litigation. It may be that the presence of the
nondiverse party produced a tactical advantage for one
party or another. If factual disputes arise, it might be
appropriate to remand the case to the district court,
which would be in a better position to make the prejudice
determination. But we decline to erect a per se rule
that the district court must first make such a
determination in every case.
Id. at 837-38 (emphasis added).
Clearly, Newman-Green directs that courts of appeals should
exercise their authority to dismiss nondiverse defendants in the
first instance “sparingly,” particularly where factual disputes
exist. But it is equally clear that Newman-Green does not direct
district courts to “sparingly” exercise their authority to do so.
On the contrary, the Court has noted that:
the question always is, or should be, when objection is
taken to the jurisdiction of the court by reason of the
citizenship of some of the parties, whether to a decree
authorized by the case presented, they are indispensable
parties, for if their interests are severable and a
decree without prejudice to their rights can be made, the
jurisdiction of the court should be retained and the suit
dismissed as to them.
Newman-Green, 490 U.S. at 835 (quoting Horn v. Lockhart, 84 U.S.
570, 579 (1873) (footnote omitted) (emphasis added)); Grupo
Dataflux, 124 S. Ct. at 1925 (noting that the dismissal of a party
16
under Rule 21 to cure a jurisdictional defect “ha[s] long been an
exception to the time-of-filing rule”).
We, too, have held to this view of preserving jurisdiction
where possible. See Koehler, 152 F.3d at 308 (recognizing the
well-settled rule that “a [dispensable] party . . . whose presence
deprives the court of jurisdiction may be dropped or severed from
the action” to preserve jurisdiction and that motions to do so may
be made even after judgment has been entered); Caperton v. Beatrice
Pocahontas Coal Co., 585 F.2d 683, 691-92 (4th Cir. 1978) (same);
cf. National Union Fire Ins. Co. v. Rite Aid of South Carolina, 210
F.3d 246, 250 (4th Cir. 2000) (noting that, although we must affirm
dismissal of a case if we agree that a nondiverse party is
necessary and indispensable, “[d]ismissal of a case is a drastic
remedy . . . which should be employed only sparingly” (internal
quotation marks omitted)).
In sum, we hold that the district court denied Appellants’
Rule 21 motion to dismiss Anthony Crane Rental, L.P. under the
mistaken assumption that its authority to do so upon the
examination of any alleged prejudice must be exercised “sparingly.”
See Weaver, 165 F.2d at 864-66 (reversing the denial by the
district court of Rule 21 relief when that denial was based upon a
misconception of law). Moreover, we conclude that this is an
appropriate case for us to exercise our authority as an appellate
panel to decide the motion in lieu of remanding it to the district
17
court. Appellants have abandoned their request to conduct
discovery into the ownership of Anthony Crane Rental, L.P., all
parties have fully briefed and argued the prejudice question to us,
and there are no longer any factual disputes which bear upon the
jurisdictional question, rendering a remand unnecessary. See
Newman-Green, 490 U.S. at 838.
2.
In determining whether Anthony Crane Rental, L.P. should be
dismissed, we first examine whether it is an indispensable party
under Rule 19. See Newman-Green, 490 U.S. at 837-38; cf. Samaha v.
Presbyterian Hosp., 757 F.2d 529, 531 (2d Cir. 1985) (per curiam)
(“[I]n cases where leave is sought to eliminate a defendant in
order to preserve diversity jurisdiction, ‘unless it appears that
a non-diverse defendant cannot be dropped from an action without
prejudice to the remaining defendants, the Rule 15(a) motion should
be granted and a failure to do so is an abuse of discretion.’ The
prejudice that matters is the same as that which determines whether
a party is indispensable.”) (per curiam) (quoting Kerr v. Compagnie
de Ultramar, 250 F.2d 860, 864 (2d Cir. 1958) (internal alteration
omitted)). Here, there is no dispute. Appellees agree that
Anthony Crane Rental, L.P. is not an indispensable party, and that
Appellants could have maintained the action from the outset against
them without Anthony Crane Rental, L.P. ever being named as a
defendant.
18
We next turn to the question of whether Appellees’ claims of
prejudice might otherwise be sufficient to prevent us from
exercising our authority to dismiss Anthony Crane Rental, L.P. and
allow the action to proceed as to the diverse defendants. We
conclude that they are not.
Appellees first claim that a dismissal of Anthony Crane
Rental, L.P. will prejudice them because it is a potentially
responsible party that will provide an “additional voice” in
discovery and at trial, could deflect blame and attention from its
co-defendants, and could share in the satisfaction of any judgment
rendered against them. Even if this is true, however, we can say
the same about any personal injury action brought against joint
tortfeasors.
Unless a particular defendant is indispensable, plaintiffs are
generally entitled to choose whom they want to sue. In the case of
joint tortfeasors, those who are sued and who believe they have a
claim against an absent joint tortfeasor may implead the tortfeasor
defendant and assert a claim against it or, at the conclusion of
the case, file an action against the absent tortfeasor for
indemnity or contribution. Appellants, however, were under no
obligation to sue Anthony Crane Rental, L.P. from the outset or add
it as a defendant by amended complaint, nor could they be forced to
do so. See Weaver, 165 F.2d at 866 (“[A] defendant cannot compel
the plaintiff, who has sued him, to sue also a third party whom the
19
plaintiff does not wish to sue. And this is certainly true where
the effect of the joinder of the third party defendant would be to
oust the court of jurisdiction.” (internal quotation marks and
alterations omitted)). Appellees’ claims of prejudice “amount[] to
nothing more than the fact that the nondiverse defendant[] [is]
alleged to be [a] joint tortfeasor[],” Samaha, 757 F.2d at 531, and
are insufficient to warrant the drastic remedy of dismissal of the
entire case against all defendants. “[T]heir claimed prejudice is
no[] greater than that involved whenever a plaintiff chooses to sue
some, but not all, of those who might be found jointly and
severally liable.” Id.Appellees next assert that they will be prejudiced because
Anthony Crane Rental, L.P., as the lessor of the crane, had direct
contact with Thalle Construction, the lessee, concerning the
crane’s capabilities and limitations and is the party best situated
to challenge Thalle’s knowledge and use of the crane. This rather
conclusory assertion of prejudice, however, is also an insufficient
basis upon which to deny the Rule 21 request. The lawsuit was
barely underway when the district court entered its order
dismissing this case, and Appellees are free to conduct discovery,
issue subpoenas, take depositions, and call as witnesses those
persons with Anthony Crane Rental, L.P. who possess any such unique
knowledge. Appellees have not pointed to any concrete way in which
they might be denied a full opportunity to present any relevant
20
evidence they wish to present. And, in any event, the dismissal of
Anthony Crane Rental, L.P. places the Appellees in no worse
position in this regard than they would have been had Appellants
never amended their complaint to add the nondiverse defendant.
Finally, Appellees claim that the dismissal of Anthony Crane
Rental, L.P. will unduly prejudice them because they will lose the
benefit of the default judgment that Anthony Crane Rental, L.P.
obtained on its cross-claim against Thalle Construction under their
Indemnity Agreement. Specifically, Appellees claim that they will
be stripped of a tactical advantage because the default judgment
would have allowed them to deflect blame on Thalle Construction and
because the default judgment would have allowed Anthony Crane
Rental, L.P. to recover a portion of any ultimate judgment from
Thalle Construction.8
As an initial matter we note that the court never had subject
matter jurisdiction over Appellants’ claim against Anthony Crane
Rental, L.P., which would certainly bring into question the
validity of the default judgment. But, even if the default
judgment remained in effect and valid, Appellees have not
demonstrated how they could have used that judgment to argue that
8
We also reject Appellees’ assertion that they are prejudiced
because Anthony Crane Rental, L.P. would have been able to obtain
a set-off for Thalle’s workers’ compensation benefits lien under.
S.C. Code Ann. § 42-1-580. See Gordon v. Phillips Utilities, Inc.,
608 S.E.2d 425, 427 (S.C. 2005) (holding § 42-1-580 “inapplicable
in a trial brought by the employee against a third party”).
21
Anthony Crane Rental, L.P. is to blame for the accident. According
to the allegations of the third-party complaint filed by Anthony
Crane Rental, L.P. against Thalle Construction, Thalle Construction
agreed to “indemnify, hold harmless, and defend [Anthony Crane
Rental] . . . from and against any and all liability for any claim
. . . by reason of any injury . . . to persons . . . arising out
of, connected with or resulting from the selection, acceptance,
delivery, maintenance, use, operation and/or control of the
equipment by [Thalle Construction and its employees], including,
but not limited to, any such liability arising out of [Thalle
Construction’s acts or failures].” J.A. 60. But there is no
allegation in the third-party complaint that Thalle Construction
was negligent or otherwise to blame for the accident, which could
be deemed “admitted” by their failure to answer. At best, there is
merely an allegation that Thalle Construction contractually agreed
to indemnify and defend Anthony Crane Rental, L.P. from the
specified personal injury claims regardless of fault.
Moreover, even if Appellees could have used the default
judgment to argue that Thalle Construction was to blame for the
accident, the dismissal of Anthony Crane Rental, L.P. does not
strip them of this purported tactical advantage. Camp Dresser, who
remains a diverse defendant, also obtained a default judgment
against Thalle Construction for contractual indemnity. Thus, any
benefit to Appellees remains intact.
22
In sum, we find Appellees’ claims of prejudice conclusory and
plainly insufficient to warrant the drastic remedy of dismissing
Appellants’ entire lawsuit. See Wall v. Chesapeake & Ohio Ry. Co.,
339 F.2d 434, 434-35 (4th Cir. 1964) (per curiam) (reversing the
denial by the district court of Rule 15 relief when the record
reflected no prejudice or unfairness that would have been caused to
the defendant had relief been granted).
We also note that the equities in this case favor the
dismissal of Anthony Crane Rental, L.P. under Rule 21. See
Koehler, 152 F.3d at 308-09 (finding an abuse of discretion by
district court for its failure to sever a derivative claim that
destroyed diversity from the suit in part because of “the equities
of th[e] case,” including “statute of limitations problems” in the
event the plaintiff sought to pursue the claims in the state
courts); cf. National Union, 210 F.3d at 250 (noting that “[i]n
determining whether to dismiss a complaint, a court must proceed
pragmatically, examining the facts of the particular controversy to
determine the potential for prejudice to all parties, including
those not before it”) (internal quotation marks and alterations
omitted)); C.L. Ritter Lumber Co. v. Consolidation Coal Co., 283
F.3d 226, 230 (4th Cir. 2002) (also noting that courts consider the
equities of the situation when reviewing a district court’s
decision to preserve jurisdiction).
23
Appellants timely filed their lawsuit, alleging complete
diversity of citizenship. However, counsel for Anthony Crane
Rental, L.P. advised Appellants that they had filed suit against
the wrong Anthony entities, and requested that they amend the
complaint and name Anthony Crane Rental, L.P. as the proper Anthony
entity. According to the information provided, Anthony Crane
Rental, L.P. consisted of four corporate partners, each of which
was diverse in citizenship from Appellants. The complaint was
amended, within the applicable statue of limitations period and in
the absence of any information that would signal a jurisdictional
problem.
After the statute of limitations period had run, Anthony Crane
Rental, L.P. advised the court that it was comprised of five
partners and that the partner omitted from the earlier
representation was a limited partner with individual partners who
were not diverse in citizenship from Appellants. Appellants were
afforded no opportunity to explore the discrepancies in the
representations, no opportunity to file a motion to dismiss the
alleged nondiverse defendant under Rule 21, and no opportunity to
file a second amended complaint to eliminate the nondiverse
defendant under Rule 15(a). Moreover, the single affidavit
submitted to support these new jurisdictional allegations was
attached to Anthony Crane Rental, L.P.’s response to plaintiffs’
motion to reconsider and offered no explanation as to why the
24
jurisdiction-spoiling partner was not disclosed along with the
other partners prior to the expiration of the statute of
limitations.
In sum, had Appellants been provided with accurate information
regarding the citizenship of Anthony Crane Rental, L.P. prior to
the expiration of the statute of limitations, they would have been
in a position to dismiss the federal suit in its entirety and sue
all defendants in state court within the statutorily required time
frame. Or, they could have chosen to dismiss the two corporate
Anthony entities sued in the original complaint, not file the
amended complaint adding Anthony Crane Rental, L.P. as a defendant,
and pursue a separate action against Anthony Crane Rental, L.P. in
state court within the statutorily required time frame. These
choices, which should have been available to them in February 2003
and which would have been available had accurate information been
provided, are those which we return to them today. In doing so,
the remaining Appellees are in no worse position than they would
have found themselves at that time.9
9
As noted above, because Appellants have abandoned their
request to conduct discovery, we must assume that the information
submitted with Anthony Crane Rental, L.P.’s supplemental response
and in the Innamorato affidavit is accurate, and can only assume
that Appellants have satisfied themselves during the pendency of
this appeal that they are indeed not diverse in citizenship from
Anthony Crane Rental, L.P. Unlike Appellees, however, Appellants
may not ultimately find themselves in as good a position. Although
Appellants immediately filed an action in state court against all
of the Appellees, including Anthony Crane Rental, L.P., when the
district court dismissed this action, they were not surprisingly
faced with an immediate claim that the state court action was
barred by the statute of limitations.
25
III.
For the foregoing reasons, we reverse the district court’s
order dismissing the amended complaint in its entirety and denying
Appellants’ motion for reconsideration, dismiss Anthony Crane
Rental, L.P. as a party pursuant to our independent authority to do
so, and remand the case to the district court for further
proceedings.
AFFIRMED IN PART,
REVERSED IN PART,
AND REMANDED
26