When insurance lawyers know of a defendant who could be named in a lawsuit, they need to sue that defendant immediately. Waiting until after a non-diverse defendant has removed the case to Federal Court may be waiting too long. This is illustrated in the Southern District of Texas, Houston Division, opinion styled, Ali Duhaly v. The Cincinnati Insurance Company.
Duhaly sued Cincinnati in State Court alleging Cincinnati was liable for injuries incurred in a car wreck with Broderick Williams. But, in the lawsuit Duhaly did not sue Williams until after the case was removed to Federal Court. Cincinnati alleges the attempt to sue Williams after removal is only an attempt to defeat diversity jurisdiction.
Federal Rule of Civil Procedure 15(a) states that the court should freely give leave to amend when justice so requires. But this is not automatic. The Fifth Circuit has said that when a party seeks to amend to add a new, non-diverse party, the amendment should be closely scrutinized.
The Court should look to four factors:
- the extent to which the purpose of the amendment is to defeat federal court jurisdiction;
- whether the suing party has been dilatory in seeking the amendment;
- whether the suing party will be significantly injured if the amendment is denied; and
- other equitable factors.
Here, as to the first factor, Duhaly knew of Williams when he filed the State Court lawsuit. Williams is mentioned and it is stated that Williams was negligent.
In situations where the plaintiff has waited two months after the filing of the original complaint or almost thirty days after removal, the Court has found the plaintiff to be dilatory. Here, six months had passed.
In this case, Cincinnati can satisfy any adverse judgment and thus, there appears to be no injury to Duhaly by the absence of Williams.
Finally, Duhaly had sent a letter to Cincinnati attempting to settle the case and in the letter stated Duhaly’s intent to sue Williams in an attempt to have the case remanded to State Court.
Duhaly’s motion to remand was denied.