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Darnell v. Hoelscher Inc.

August 4, 2010

ROBERT DARNELL, INDIVIDUALLY, AND AS REPRESENTATIVE OF DECEASED, WILLIAM DARNELL, PLAINTIFF,
v.
HOELSCHER INC., A CORPORATION, AND F.B. MCAFOOS & COMPANY, DEFENDANTS, AND HOELSCHER INC., A CORPORATION, THIRD-PARTY PLAINTIFF,
v.
WRC FARMS, LLC, WRC THOROUGHBREDS, INC., AND F.B. MCAFOOS & COMPANY, THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: Judge J. Phil Gilbert

MEMORANDUM AND ORDER

This matter comes before the Court on plaintiff Robert Darnell's motion to remand this case to the Circuit Court for the Second Judicial Circuit, Franklin County, Illinois (Doc. 82). Defendants Hoelscher, Inc. ("Hoelscher") (Doc. 88) and F.B. McAfoos & Company ("McAfoos") (Doc. 92) and third-party defendant WRC Thoroughbreds, Inc. (Doc. 94) have responded to the motion. Darnell has replied to Hoelscher's response (Doc. 93).

I. Background

This case arose after William Darnell, the plaintiff's decedent, died while operating the Hoelscher Model 1000 Hay Accumulator with serial number #04816 ("the Accumulator"), a piece of farm equipment designed, manufactured and distributed by defendant Hoelscher. McAfoos sold the Accumulator to the decedent as an agent of the decedent's employer, WRC Farms, LLC. The plaintiff believes that, since the time it left Hoelscher's control, the Accumulator was defective because it was unreasonably dangerous in five specific ways, which he lists in the complaint. The alleged defects relate to the Accumulator's hydraulic loading mechanism. As a result of the defects, the Accumulator jammed, then moved without activation and injured the decedent, ultimately causing his death. The plaintiff also believes McAfoos was negligent in assembling the Accumulator before selling it and in failing to provide the decedent with adequate instructions about how to safely operate it.

In January 2009, the plaintiff, who is the administrator of the decedent's estate, brought a lawsuit in the Circuit Court for the Second Judicial Circuit in Franklin County, Illinois, seeking to recover from Hoelscher on a strict products liability theory. Hoelscher removed the case to federal court relying on the Court's original diversity jurisdiction, see 28 U.S.C. § 1332(a). Darnell is a citizen of Illinois, the decedent's state of citizenship prior to his death, and Hoelscher is a citizen of Kansas, so complete diversity existed. In addition, Darnell clearly claims more than $75,000, exclusive of interest and costs. Thus, the Court had original diversity jurisdiction over this case.

In September 2009, Hoelscher filed a third-party complaint against McAfoos and other parties alleging that they share in any liability to Darnell. McAfoos is a citizen of Illinois, but since it was only a third-party defendant its common citizenship with Darnell did not destroy diversity jurisdiction, and the Court had supplemental jurisdiction under 28 U.S.C. § 1367(a) to hear Hoelscher's third-party claim against McAfoos. See Abbott Labs. v. CVS Pharmacy, Inc., 290 F.3d 854, 858 (7th Cir. 2002).

The current jurisdictional controversy arose when Darnell sought and was granted leave to amend his complaint to allege a negligence claim directly against McAfoos. Because Darnell and McAfoos were both citizens of Illinois, the amendment would destroy diversity jurisdiction. Despite knowing of McAfoos' potential liability for the decedent's death since at least September 2009, when Hoelscher brought it into the case, Darnell did not seek leave to amend his complaint until May 11, 2010, shortly before an expert witness disclosure deadline that could have been avoided with a prompt remand. In his motion for leave to amend the complaint, Darnell did not alert the Court that granting leave to add McAfoos as a defendant would destroy complete diversity between the plaintiff and defendants. For its part, Hoelscher did not file a response objecting to the motion or noting the jurisdictional problem that would result if leave to amend were granted. Magistrate Judge Clifford J. Proud granted the motion on May 27, 2010, without acknowledging the jurisdictional implications of his order. Hoelscher did not object to Magistrate Judge Proud's order as being clearly erroneous or contrary to law as it could have done under Federal Rule of Civil Procedure 72(a) and Local Rule 73.1(a).

Days after he filed his amended complaint, Darnell filed a motion to remand this case to state court pursuant to 28 U.S.C. § 1447(e) because the plaintiff is no longer completely diverse from the defendants. In his motion, Darnell also seeks to bolster Magistrate Judge Proud's decision to allow the addition of McAfoos as a defendant. Hoelscher, McAfoos and WRC Thoroughbreds, Inc. argue in response that Magistrate Judge Proud's decision was wrong.

II. Analysis

No party seriously disputes that, in a case removed under 28 U.S.C. § 1441(a) that relies on original diversity jurisdiction under 28 U.S.C. § 1332(a), the Court must remand the case pursuant to 28 U.S.C. § 1447(e) when a plaintiff is permitted to amend his pleading to join a nondiverse defendant. Schur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 759 (7th Cir. 2009). Joinder of the nondiverse defendant destroys the complete diversity required by 28 U.S.C. § 1332(a) and divests the Court of subject matter jurisdiction. Id. Thus, if Darnell was properly permitted to add McAfoos as a defendant, the Court must remand this case for lack of jurisdiction. The parties do not dispute this "if-then" proposition.

The real issue in this case is whether Magistrate Judge Proud's decision to allow Darnell to amend his complaint to join McAfoos as a defendant was proper. Although no party has objected to that order, the Court may sua sponte review it for clear factual or legal error under 28 U.S.C. § 636(a)(1)(A) and Local Rule 73.1(a). Id. at 760-61. Furthermore, the fact that a magistrate judge's order would ultimately result in the loss of jurisdiction does not deprive an Article III judge of jurisdiction to re-examine that order. Id. at 761-62. Reexamination of a magistrate judge's decision to allow joinder of a nondiverse party is especially appropriate where the magistrate judge did not conduct the analysis required by 28 U.S.C. § 1447(e) or acknowledge the jurisdictional implications of his order. See id.

Because Magistrate Judge Proud did not reference 28 U.S.C. § 1447(e) or acknowledge the jurisdictional consequences when he allowed Darnell to amend his complaint to add McAfoos as a defendant, the Court will sua sponte review his order under 28 U.S.C. § 636(a)(1)(A) and Local Rule 73.1(a). A district court reviewing a magistrate judge's decision on nondispositive issues should only modify or set aside that decision if it is clearly erroneous or contrary to law. See 28 U.S.C. § 636(b)(1)(A); Local Rule 73.1(a). Accordingly, the Court will affirm Magistrate Judge Proud's decision unless his factual findings are clearly erroneous or his legal conclusions are contrary to law. Id.

Magistrate Judge Proud's decision to allow Darnell to join McAfoos as a defendant was not clearly erroneous or contrary to law.

The Court begins its review with Schur v. L.A. Weight Loss Centers, which is remarkably similar to this case in all relevant respects. Schur also relied on removal jurisdiction based on original diversity jurisdiction and examined the propriety of a magistrate judge's decision to allow the plaintiff to amend her complaint to join nondiverse defendants. Id. at 756-57. There, the plaintiff had known about the nondiverse defendants for nearly a year before seeking to add them to the case. Id. at 757. Shortly after filing her amended complaint, the plaintiff moved to remand the case to state court, but the district court denied the motion, finding that the nondiverse defendants were fraudulently ...


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