Here is a 2020, case wherein the Court allowed a petition to be amended and the result being that diversity jurisdiction was defeated. The opinion is from the Southern District of Texas, Houston Division. It is styled, Robert Jones v. State Farm Mutual Automobile Insurance Co.
State Farm provides uninsured motorist (UIM) coverage to Jones. Tho Thi Le struck Jones. Jones sued State Farm in State Court seeking UIM coverage on September 26, 2019. Le is uninsured. State Farm removed the case to this Federal Court on October 31 after filing its answer on the 25th. Le is a resident of Texas and State Farm is not.
Jones sought permission to amend his pleadings on November 8, seeking to add Le as a defendant.
Federal Rule 15(a)(1) allows a party to amend its original pleading as a matter of course within 21 days of service. After that, permission of the Court is required. Usually, a court will freely give leave to amend when justice so requires, however, the 5th Circuit commands that a district court “must scrutinize an amended pleading that would add a non-diverse party more closely than an ordinary amendment. The factors to consider are:
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 plaintiff will be significantly injured if amendment is not allowed; and
any other factors bearing on the equities.
The Court must “use its discretion in deciding whether to allow that party to be added.
Jones argues that the purpose of amending his complaint is to obtain a more complete recovery, while avoiding litigation of claims against Le in state court separately from this action. He explains that leaving Le off the original complaint was simply a mistake. State Farm argues that Le is not a “necessary party” to an uninsured motorist claim. And it argues that it is “suspicious” that Jones left Le off in the first instance—but without indication of what strategic advantage Jones pursued by doing so. When determining whether the purpose of amendment is to destroy diversity, other courts “consider whether the plaintiffs knew or should have known the identity of the non-diverse defendant when the state court complaint was filed.” Jones did refer to Le in his complaint. This demonstrates knowledge of Le’s identity at the time of the state court filing.
When analyzing the injury to plaintiff, courts of this district consider two things:
whether the already named diverse defendant would be unable to satisfy a future judgment; and
whether a separate state court proceeding would lead to inefficient parallel proceedings or place a financial burden on the plaintiff.
Jones notes that State Farm alone cannot fully satisfy his claim, where he seeks a monetary judgment in excess of one million dollars—far above the policy limit of one hundred thousand dollars. At hearing, Jones stated that he believes Le to be solvent and intends to pursue the claim. He argues that he will necessarily have to bring a separate state suit to recover against Le if his motion is denied, with attendant expenses and duplication of effort.
State Farm argues that nothing indicates it would not satisfy any judgment rendered against it. But that in no way addresses the gap between the policy limits and the entire amount of monetary relief at issue.
This Court found that this factor weighs in favor of allowing amendment.