MARTIN, Circuit Judge:
Thermoset Corporation ("Thermoset"), a roofing contractor, brought this product liability action in Florida state court against Building Materials Corporation ("GAF") and Roofing Supply Group Orlando ("RSGO"), a manufacturer and a distributor of roofing materials (collectively, "the defendants"). GAF removed the case to federal court based on diversity jurisdiction, and the District Court granted summary judgment to the defendants. Thermoset appealed. Shortly afterwards, it became apparent that RSGO was not a diverse party at the time of removal. In light of this jurisdictional defect, Thermoset asks us to remand the entire case back to state court. After careful consideration, and with the benefit of oral argument, we vacate the District Court's summary judgment order and remand with instructions to send this case back to the state court for further proceedings.
Thermoset is a roofing contractor organized under Florida law with its principal place of business in Florida. In 2005, Thermoset entered into a "Master Select Roofing Contractor Agreement" with GAF, a manufacturer of roofing products and systems incorporated in Delaware with a principal place of business in New Jersey. This agreement enabled Thermoset to use GAF's products on various jobs, and over time, Thermoset developed a working relationship with GAF's representatives.
Thermoset and its affiliates were hired to install a roof system at Lynden Pindling International Airport in Nassau, Bahamas. The system had to satisfy certain project requirements because of the Bahamian climate.
Thermoset began work on the project in March 2010. However, portions of the TPO system's outer membrane soon became detached from the insulation in several places. The same thing happened when Tropical Storm Nicole struck Nassau, even though those winds were weaker than the wind velocities that the roofing system was required by the specifications to withstand. Thermoset notified GAF and RSGO of the TPO system's malfunction. Although RSGO issued an $82,000 credit to Thermoset for return of the H2O adhesive and certain replacement materials, Thermoset says this amount didn't fully compensate for its damages. Thus, it continued to make demands from GAF and RSGO for compensation and assistance with repairs, but to no avail.
Thermoset says it incurred losses upwards of $1 million. To recover these losses, it filed suit in Florida state court against the defendants on December 31, 2013. Thermoset made claims for breach of the implied warranty of merchantability; breach of implied warranty of fitness for a particular purpose; breach of express warranty; negligent misrepresentation; and violation of Florida's Deceptive and Unfair Trade Practices Act, Fla. Stat. §§ 501.201-213. On February 3, 2014, GAF removed the case to federal court. Specifically, it invoked the District Court's diversity jurisdiction. After the parties conducted discovery, the defendants jointly moved for summary judgment. The District Court granted summary judgment to the defendants. Thermoset appealed.
After Thermoset filed its notice of appeal, this Court noticed that the pleadings below did not sufficiently allege the citizenship of RSGO, as is required to invoke the District Court's diversity jurisdiction.
The threshold issue now before us is therefore whether we have diversity jurisdiction.
Federal courts are courts of limited subject-matter jurisdiction.
In order for a district court to properly exercise diversity jurisdiction over a case, the action must be between "citizens of different States." 28 U.S.C. § 1332(a)(1). Also, "diversity jurisdiction is determined at the time of filing the complaint or, if the case has been removed, at the time of removal."
Yet we are mindful that federal courts "must disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy."
This Court has acknowledged "there is no bright-line rule" for distinguishing between real and nominal parties.
Under this test, RSGO is more than just a nominal defendant. At the time this case was removed to federal court,
The defendants argue RSGO may be categorized as a nominal party because GAF agreed to defend and fully indemnify RSGO for any losses resulting from an adverse judgment. But if RSGO is not present at trial, so as to have its name appear on the verdict form, the jury would have no opportunity to assess its liability in the first place. Without such a jury finding, Thermoset could not be sure of identifying, much less recovering, RSGO's share of any damages owed in this action. Thus with RSGO absent from the case, a promise of indemnification by GAF does nothing to ensure adequate relief for Thermoset.
The defendants also say RSGO is a nominal party because it played "no active role in the alleged warranty, design, or manufacture" of the roof system, and was merely a middleman. We take this as an argument that RSGO's absence could not have put Thermoset at risk of receiving incomplete relief because RSGO could not have been held liable for any portion of Thermoset's damages as a mere middleman. However, Thermoset has pointed to evidence indicating that RSGO was more than a just a go-between insofar as Robert Vitale, an employee of RSGO, made roofing material recommendations to Thermoset.
Because RSGO is a real party in interest, its non-diverse citizenship destroys federal jurisdiction for this case. However, Federal Rule of Civil Procedure 21 gives us the power to dismiss a non-diverse party like RSGO in order to preserve jurisdiction over the rest of the case and "rescue an otherwise valid judgment."
Rule 19 establishes a two-step inquiry for deciding whether RSGO is indispensable. First, we must consider whether RSGO is a "required party" under clause (a)(1). If RSGO is "required," then we move to a second step and ask whether "in equity and good conscience, the action should proceed" without RSGO under subsection (b). And if we conclude that the case should not continue without RSGO, then RSGO is an indispensable party and we must dismiss the entire case.
Under Rule 19's two-step inquiry, we conclude RSGO is an indispensable party. First, RSGO is a "required party" under clause (a)(1) because "the court cannot accord complete relief among existing parties" in RSGO's absence. Fed. R. Civ. P. 19(a)(1)(A). As we described above, RSGO's absence would put Thermoset at risk of receiving incomplete relief because Florida is not a joint-and-several liability state. There are also other plausible ways in which RSGO's absence could prevent Thermoset from receiving complete relief (or any relief at all). For example, a jury might find that no implied warranties existed between GAF and Thermoset because there was no privity between them.
Second, under subsection (b) of Rule 19, we cannot conclude "in equity and good conscience" that the suit should continue without RSGO. Subsection (b) instructs us to consider four factors to make this determination: (1) the extent to which a judgment rendered in RSGO's absence might prejudice RSGO or the other parties; (2) "the extent to which any prejudice could be lessened or avoided by" "protective provisions in the judgment," "shaping the relief," or "other measures"; (3) whether a judgment rendered in [RSGO's] absence would be adequate; and (4) whether Thermoset would have an adequate remedy if we dismissed the entire case. Fed. R. Civ. P. 19(b)(1)-(4). These factors "are not intended to exclude other considerations which may be applicable in particular situations," so we may incorporate other factors into our analysis if they are relevant.
The third factor listed in subsection (b) (whether a judgment rendered in RSGO's absence would be adequate) closely parallels the "required party" test in clause (a)(1) (whether such a judgment can accord complete relief among existing parties). Thus, the "required party" analysis applies here: RSGO's absence would create a significant risk of inadequate relief for Thermoset because (1) Florida is not a joint-and-several liability state; and (2) there are other plausible scenarios in which RSGO's absence from this action could prevent Thermoset from recovering all of its lawful damages. The third subsection (b) factor therefore weighs against continuing this action without RSGO as a party.
The second subsection (b) factor (whether there are any available measures for lessening or avoiding the prejudicial effects of rendering a judgment in RSGO's absence) "meshes" with the third factor. Fed. R. Civ. P. 19 advisory committee's note to 1966 amendment. The defendants do not identify any measures that any party or the court could take to mitigate the risk of inadequate relief that RSGO's absence would create. As we have explained, GAF's indemnification agreement with RSGO would not lessen this risk. This factor therefore also militates against finding that this case can and should proceed without RSGO.
In contrast, the first factor in subsection (b) (the extent to which a judgment rendered in RSGO's absence might prejudice RSGO or the existing parties) does not weigh against dismissing RSGO to retain jurisdiction over the rest of the case. This factor considers whether RSGO would be adversely affected if it were dismissed from the action, and whether a judgment rendered in RSGO's absence would have collateral consequences on GAF or Thermoset. Fed. R. Civ. P. 19 advisory committee's note to 1966 amendment. For this factor, neither Thermoset nor the defendants argue that dismissing RSGO would prejudice RSGO or have adverse collateral consequences on GAF or Thermoset. This factor therefore bears little weight in our decision.
The fourth and last subsection (b) factor strongly weighs against proceeding without RSGO. This factor asks whether Thermoset would have an adequate remedy if we dismissed the entire action. Upon our dismissal of the case, Thermoset could continue its action against
One more factor that weighs against dismissing RSGO to preserve jurisdiction over the rest of the action is the fact that GAF invoked the District Court's diversity jurisdiction. Had Thermoset initiated its action in federal district court, we might have reason to think that sending the entire case back to state court would unfairly benefit Thermoset and conflict with "equity and good conscience." Fed. R. Civ. P. 19(b). But this is not what happened here. GAF removed this case from state court to federal court. This meant it was GAF's burden to prove diversity jurisdiction.
The defendants raise another equitable consideration to argue against dismissal of the entire action. This is, of course, the fact that this case has already been litigated to a final judgment. In support, they draw attention to the Supreme Court's statement that "[o]nce a diversity case has been tried in federal court ... considerations of finality, efficiency, and economy become overwhelming."
Because RSGO is not a nominal party, its non-diverse citizenship cannot be ignored for jurisdictional purposes. And because RSGO is an indispensable party under Rule 19, we cannot preserve jurisdiction over the rest of the case by dismissing RSGO. As a result, we vacate the District Court's summary judgment order and send this case back to the District Court with instructions to remand it to the Florida state court for further proceedings.