PATRICIA MINALDI, District Judge.
Before the court is the non-party Insurance Company of the State of Pennsylvania's (ICSP) Motion to Dismiss, Without Prejudice, or Remand to State Court for Failure to Join a Necessary and Indispensable Party [Doc. 89]. The defendants Ecolab, Inc. (Ecolab), and Kay Chemical Company (Kay Chemical) filed a Memorandum in Opposition [Doc. 95]. The defendant Qualawash Holdings, L.L.C. (Qualawash) also filed a Memorandum in Opposition [Doc. 96]. ICSP timely filed a Reply Memorandum [Doc. 107]. On November 18, 2013, leave was granted to Ecolab, Kay Chemical, and Qualawash (defendants) to file a Supplemental Memorandum in Opposition to ICSP's Motion.
Following the filing of ICSP's Motion to Dismiss or Remand [Doc. 89], Qualawash filed a Motion to Strike [Doc. 92] ICSP's Motion, essentially arguing that, as a non-party to the litigation, ICSP has no standing to bring a 12(b) Motion.
Mr. Johnson was employed by Enterprise Products Transportation Company, L.L.C., (Enterprise) as a tank trailer delivery
Qualawash removed the case to federal court on April 13, 2012, pursuant to 28 U.S.C. § 1332, on the basis of diversity jurisdiction.
On December 10, 2012, the plaintiffs filed a Proposed Amended Motion to Remand [Doc. 53], arguing for remand (somewhat prematurely) based on ICSP's New York citizenship and Qualawash's New York citizenship effectively destroying diversity.
ICSP then filed a Motion to Intervene on January 29, 2013 [Doc. 72]. Citing
Qualawash then appealed the Magistrate Judge Decision to the undersigned [Doc. 76], which the court granted.
The court applied Rule 24 of the Federal Rules of Civil Procedure in assessing whether intervention by ICSP was appropriate. In so doing, the court stated that it was irrelevant to the instant analysis whether or not the intervention was one of right or a permissive intervention, as such diversity-destroying interventions are explicitly precluded under 28 U.S.C. § 1367(b).
As previously stated, the first matter to be addressed is the Motion to Strike [Doc. 92] filed by Qualawash, seeking to strike ICSP's Motion to Dismiss or Remand [Doc. 89]. In order to correctly decide the matter of Qualawash's Motion to Strike [Doc. 92], reference must be made to the substance of ICSP's Motion to Dismiss or Remand [Doc. 89], which requests the court to "dismiss or remand this case to state court pursuant to Rule 12(b)(7) of the Federal Rules of Civil Procedure on grounds that ICSP is an indispensable party within the meaning of Rule 19(b) of the Federal Rules of Civil Procedure."
Qualawash's Motion to Strike takes issue with the fact that ICSP, a non-party seeking intervention, seeks to bring its Motion [Doc. 89] pursuant to Rule 12(b)(7).
The plaintiffs have filed a Memorandum in Opposition to Qualawash's Motion to Strike [Doc. 93]. The plaintiffs argue that ICSP is not employing "failure to join a party" as a "defense" to a claim, but rather as relief that will ultimately permit ICSP
ICSP also filed a Memorandum in Opposition to Qualawash's Motion to Strike. [Doc. 104], arguing that ICSP is, in fact, a party, pursuant to Rule 17 of the Federal Rules of Civil Procedure.
As to ICSP's argument that it is already a party pursuant to Rule 17, the court must disagree. First,
See also Kint v. Terrain King Corp., 79 F.R.D. 10, 11 (M.D.Pa.1977). Thus, Rule 17 is not a broad based invitation for parties to substitute themselves into and out of the litigation of others because they find themselves to have an interest in the outcome of a suit. Rather, its plain intent is simply that parties prosecute their claims for themselves and on their own behalves. This is clear from the language of the exceptions found in Rule 17(a)(1)(A-G), which allow executors, administrators, trustees and other legal representatives to sue in their own names, even though suing on the behalf of others, without the requirement of joining the person for whose benefit the action is brought. FED. R. CIV. PRO. 17(a)(1). ICSP's interpretation of Rule 17, on the other hand, would seem to dictate that any time a non-party has an interest in ongoing litigation that that entity is somehow automatically made a party to said litigation by operation of law. With this, the court cannot agree, and ICSP cites no authority directly on point which would persuade the court otherwise.
In MasterCard Int'l, Inc. v. Visa Int'l Serv. Ass'n, 471 F.3d 377 (2nd Cir. 2006), the Second Circuit Court of Appeals assessed whether a non-party movant could be permitted to move to dismiss the underlying action by arguing that it was a necessary and indispensable party under Rule 19. Id. at 379. That same non-party also moved to intervene under Rule 24. Id. There, the court stated that there was "nothing in the text or notes to Rule 19 that would indicate strangers to an action may file motions to dismiss under that rule." Id. at 382. Nevertheless, the court therein went on to note that that was "not to say, however, that the district court was prohibited from considering the issue of whether [the movant] was an indispensable party to the underlying litigation. Because Rule 19 protects the rights of an absentee party, both trial courts and appellate courts may consider this issue sua sponte even if it is not raised by the parties to the action." Id. at 382-83 (citing Manning v. Energy Conversion Devices, Inc., 13 F.3d 606, 609 (2nd Cir.1994)). See
Further, even though Rule 24 is, strictly speaking, the proper vehicle for a non-party to insert itself into ongoing litigation, federal courts are within their authority to construe motions by a non-party that are improperly predicated on Rule 19 as motions to intervene. See Estate of McFarlin v. City of Storm Lake, 277 F.R.D. 384 (N.D.Iowa 2011) (stating that "[w]here an interested person has improperly filed a Rule 19 motion, the court must treat it as a motion to intervene pursuant to Rule 24"). See also Herb Reed Enters. v. Bennett, No. 2:10-cv-1981, 2012 WL 5989632, at *5, 2012 U.S. Dist. LEXIS 169720, at *13 (D.Nev. Nov. 29, 2012) (stating that "federal courts generally construe improper nonparty Rule 19 motions as a motion to intervene under Rule 24"). See also Rancheria v. Salazar, No. C-07-02681, 2011 WL 4407425, at *2 n. 4, 2011 U.S. Dist. LEXIS 108271, at *11 n. 4 (N.D.Cal. Sept. 22, 2011) (citations omitted) (stating that "[t]he Court may treat a non-party's motion improperly brought under Rule 19 as a motion to intervene under Rule 24"). Thus, there exist multiple mechanisms which would permit the court to consider the substance of ICSP's Motion.
Here, given that there has been nearly eighteen months of extensive and convoluted filings by all parties, and at least one non-party, to this action concerning whether or not ICSP may be a party herein, the court now seeks to exercise its authority to consider the matter. Moreover, the court stated in denying ICSP's original attempt at intervention that the parties had provided no briefing on the applicability of Rule 19, and, as such, no record then existed "to determine whether Rule 19 would mandate dismissal because ICSP is an indispensable party."
ICSP, a non-party to this case, seeks dismissal or remand of this action on the grounds that it is an indispensable party pursuant to Rule 19.
As noted in the court's prior ruling in this matter, 28 U.S.C. § 1367(b) prohibits the court from exercising jurisdiction over a matter where a non-diverse plaintiff is made a party under Rule 24.
Rule 19(a) provides that one whose joinder will not destroy subject matter jurisdiction and who is also subject to service of process must be joined (thus, is a required party) if
FED. R. CIV. PRO. 19(a)(1)(B).
As already discussed, ICSP's joinder will destroy this court's subject matter jurisdiction. As such, if ICSP is a required party, we turn to Rule 19(b), which states that where there is a required party whose joinder is not feasible (i.e. will destroy the court's subject matter jurisdiction), the court must determine whether the litigation should continue with the remaining parties or whether to dismiss the litigation outright. FED. R. CIV. PRO. 19(b). In so deciding, a court shall consider
FED.R. CIV. PRO. 19(b).
Int'l Paper Co. v. Denkmann Assocs., No. 96-512, 1996 WL 225019, at *5, 1996 U.S.
ICSP's primary argument is that it must be permitted to join in the lawsuit because, if it were not so permitted, it would be barred from ever recovering directly from a third-party tortfeasor or the plaintiff.
Louisiana worker's compensation law provides that an injured employee may sue a third party tortfeasor despite having received worker's compensation benefits from an employer or an employer's insurance carrier. LA.REV.STAT. ANN. art. 23:1101(A) (2005). The same statute also permits an employer (such as Enterprise) or an insurer (such as ICSP) to file suit against the third party tortfeasor to recover any payments made to the employee. LA.REV.STAT. ANN. art. 23:1101(B) (2005). The key argument, essential to the success of ICSP's motion, is derived from Houston Gen. Ins. Co. v. Commercial Union, 649 So.2d 776 (La.Ct.App.1994), a case from the Louisiana First Circuit, which states that
Id. at 782 (citing Roche v. Big Moose Oil Field Truck Service, 381 So.2d 396, 400 (La.1980)). Thus, on the basis of this jurisprudence, as well as ICSP's assertion that Louisiana law provides no mechanism which would permit an insurer to obtain reimbursement directly from an employee who has recovered damages from a third party tortfeasor,
Ecolab and Kay Chemical counter by noting that ICSP's interest in the litigation consists entirely of a right to be reimbursed for payments made, and that, as such, ICSP will not be presenting evidence, participating in the employee's main demand, or otherwise participating in the litigation.
"[T]he party advocating joinder has the initial burden of demonstrating that a missing party is necessary." Hood ex rel. Mississippi v. City of Memphis, 570 F.3d 625, 628 (5th Cir.2009). ICSP has attempted to carry this burden by asserting that its only possible remedy — reimbursement — necessarily requires its inclusion in the suit. Much reliance in this regard has been placed on the court's opinion in Dushane. In Dushane, the court had a similar, but not identical, scenario before it. The plaintiff, an employee of General Motors Corporation (GM), filed suit against several third party tortfeasors, and GM sought to intervene to recover workers' compensation payments already made, or to be made, by GM to the plaintiff therein. Dushane, 2005 WL 1959151, at *1. As GM's intervention would have destroyed diversity, and thus the court's subject matter jurisdiction, it bears some close similarity to the instant case. Id. The court was quite clear in its interpretation of Louisiana worker's compensation law in stating that "[o]nly by intervening in the employee's lawsuit will the employer's right to reimbursement of benefits already paid be preserved and protected." Id. at *2 (emphasis in original). As is the case here with ICSP, GM's complaint of intervention did not assert any affirmative claims for relief against the defendants; rather, the complaint provided that "[i]n the event that there is a judgment herein in favor of plaintiffs, there should be judgment herein in favor of intervenor against plaintiffs and defendants, apportioning the proceeds of the Judgment in accordance with La. R.S. 23:1101 et seq...." Id. at *5. Ultimately, the court, applying Rule 19, found that the case could not proceed in GM's absence. Id. at *7.
The instant case, however, can be distinguished from the facts in Dushane, as pointed out by Qualawash, because the plaintiff's employer, Enterprise, is already a party. However, this does not end the inquiry, because Enterprise's inclusion in the suit does not in and of itself protect ICSP's interest unless ICSP has some legal recourse to recover from Enterprise in the event of a judgment in favor of the plaintiffs. This is problematic, because the contract in question provides only for subrogation, not for reimbursement.
"The words of a contract must be given their generally prevailing meaning." LA. CIV.CODE. ANN. art. 2047 (1984). "An insurance contract, however, should not be interpreted in an unreasonable or strained manner under the guise of contractual interpretation to enlarge or to restrict its provisions beyond what is reasonably contemplated by unambiguous terms." Cadwallader v. Allstate Ins. Co., 848 So.2d 577, 580 (La.2003).
"Subrogation is the substitution of one person to the rights of another." LA. CIV.CODE. ANN. art. 1825 (1984). "[S]ubrogation clauses are a common part of insurance policies issue[d] by private insurers." United States v. Parish of St. Bernard, No. 81-1808, 1983 U.S. Dist. LEXIS 15571 (E.D.La. Jul. 8, 1983). While it is true that "subrogation has as its primary object reimbursement of the subrogee for payments made by it," Durham Life Ins. Co. v. Lee, 625 So.2d 706, 709 (La.Ct.App.1993), such clauses do not in and of themselves give rise to separate causes of action in favor of the subrogee
The contract herein provides for rights of subrogation only, not of reimbursement. The insurance contract provides that, "We [ICSP] have your [Enterprise's] rights, and the rights of persons entitled to the benefits of this insurance, to recover our payments from anyone liable for the injury. You will do everything necessary to protect those rights for us and to help us enforce them."
In sum, ICSP cannot intervene in the suit without destroying diversity and this court's subject matter jurisdiction along with it. However, ICSP has already made payments to the plaintiff in this matter pursuant to its policy of insurance with Enterprise, the plaintiff's employer. Under Louisiana law, if ICSP does not intervene in this suit, it loses its right to recover from any third party tortfeasors under Louisiana's workers' compensation scheme. A good argument could be made that ICSP would not be considered an indispensable party under Rule 19 if it had some other means of recovery — for instance, if there was a reimbursement clause in its contract of insurance with Enterprise. However, that contract provides only for subrogation rights, subrogating ICSP to only the rights of Enterprise against third party tortfeasors. As a result, the only mechanism which would allow ICSP to recoup payments already made is its inclusion in the suit.
Ecolab and Kay Chemical point out that ICSP and Enterprise are represented by the same counsel.
Applying the framework of Rule 19 to this scenario, ICSP is a required party in that it claims an interest in this litigation, and its exclusion from this case would "as a practical matter impair or impede [its] ability to protect the interest." FED. R. CIV. PRO. 19(a). In deciding whether to
A judgment rendered in ICSP's absence would prejudice it greatly because it would have the ultimate effect of depriving them of any mechanism with which to recoup payments made to their insured that resulted from the acts of third party tortfeasors. See FED. R. CIV. PRO. 19(b)(1). Further, the court has limited options available to it to lessen or avoid that prejudice. See FED. R. CIV. PRO. 19(b)(2). While there is very limited case law indicating that, in similar situations, some courts have expressed a willingness to "entertain" motions requesting the court to condition a plaintiff's award on their subsequent satisfaction of an employers' lien interest, see, e.g., O'Brien v. Tri-State Oil Tool Industries, Inc., 566 F.Supp. 1119, 1124 (S.D.W.Va.1983), such holdings are rare, and the court does not relish the prospect of judicially ordering a portion of a damages award to a non-party to the litigation, particularly when that non-party could be made a party in state court. However, a judgment rendered in ICSP's absence would be adequate in the sense that the plaintiff would have the opportunity to be made whole, thus weighing against dismissal. FED. R. CIV. PRO. 19(b)(3). Nevertheless, applying the fourth factor, the plaintiff would still have a perfectly adequate remedy in state court should the action be dismissed for nonjoinder. FED. R. CIV. PRO. 19(b)(d).
Having found ICSP to be a required party, and pursuant to Federal Rule of Civil Procedure 19, it is incumbent upon the court to "determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed." As the foregoing shows, ICSP's interest cannot be properly protected without their inclusion in the suit. As a result, this action cannot proceed in their absence.
It is never desirous to dismiss an action in this manner after over a year of litigation, much of which has focused primarily on the plaintiffs' and ICSP's attempts to have this action remanded to state court. Nevertheless, the application of Rule 19 is concerned with both pragmatism and the balancing of the competing interests of parties and non-parties, alike. See AT & T Communications v. BellSouth Telecommunications, Inc., 238 F.3d 636, 658-59 (5th Cir.2001).
28 U.S.C. § 1367(b) (emphasis added).
Memo. Order [Doc. 87], at 8 (citing Dushane, 2005 WL 1959151, at *6).