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American Ins. Co. v. St. Jude Medical, Inc.: US District Court : CIVIL PROCEDURE - motion to amend to add party not futile; de novo review; granted

Civil No. 08-13(DSD/JJG)
American Insurance Company,
St. Jude Medical, Inc.,
Bethany K. Culp, Esq., Michelle D. Mitchell, Esq.,
Paulette S. Sarp, Esq., and Hinshaw & Culbertson, 333
South Seventh Street, Minneapolis, MN 55402, counsel for
Jonathan M. Bye, Esq., Thomas C. Mielenhausen, Esq.,
Christopher L. Lynch, Esq., Meghan M. Elliott, Esq. and
Lindquist & Vennum, 4200 IDS Center, 80 South Eighth
Street, Minneapolis, MN 55402, counsel for defendant.
This matter is before the court on defendant St. Jude Medical,
Inc.s (St. Jude) appeal of Magistrate Judge Jeanne J. Grahams
November 4, 2008, order denying St. Judes motion to add a party.
Based on a review of the record herein, the court grants St. Judes
Plaintiff American Insurance Company (AIC) brought this
action on January 2, 2008, seeking a declaration that an insurance
policy (Policy) procured by St. Jude does not require AIC to
1 This action is based on diversity jurisdiction. See 28
U.S.C. 1332. AIC is a Nebraska corporation with its principal
place of business in California. St. Jude is a Minnesota
corporation with its principal place of business in Minnesota.
2 Willis, formerly known as Willis Corroon Corporation of
Minnesota, is a Minnesota corporation with its principal place of
business in Minnesota.
defend or indemnify St. Jude in certain disputes arising out of
allegedly defective heart valves (Products Litigation).1 The
Policy was the seventh of eight layers of insurance and provided
for million in coverage. The Products Litigation exhausted the
first six layers of coverage and AIC denied coverage on the seventh
layer. (Def. Appeal [Doc. No. 79] at 3.)
St. Jude counterclaimed against AIC on February 20, 2008,
asserting breach of contract and seeking a declaration that the
Policy requires AIC to defend the Products Litigation and indemnify
associated costs and damages. On September 22, 2008, St. Jude
moved pursuant to Federal Rules of Civil Procedure 19, 20 and 21 to
add its former insurance broker, Willis of Minnesota, Inc.
(Willis),2 as a party, and to assert claims against Willis for
negligence, negligent misrepresentation and breach of fiduciary
duty related to the Policys procurement. The magistrate judge
denied St. Judes motion on November 4, 2008, and St. Jude timely
A district court ordinarily reviews a magistrate judges order
with respect to a nondispositive motion under an extremely
deferential clearly erroneous or contrary to law standard. Reko
v. Creative Promotions, Inc. 70 F. Supp. 1005, 1007 (D. Minn.
1999); see 28 U.S.C. 636(b)(1)(A); Fed. R. Civ. P. 72(a); D.
Minn. L.R. 72.2(a). A motion denied as futile, however, is
reviewed de novo. Cf. United States ex rel. Gaudineer & Comito,
L.L.P. v. Iowa, 269 F.3d 932, 936 (8th Cir. 2001) (district courts
denial of leave to amend based on futility reviewed de novo on
I. Required Joinder
St. Jude argues that the magistrate judge erred by not joining
Willis as a required party pursuant to Federal Rule of Civil
Procedure 19(a)(1). Joinder of any person subject to service of
process whose presence will not destroy a courts subject matter
jurisdiction is required if:
(B) that person claims an interest relating to the
subject of the action and is so situated that disposing
of the action in the persons absence may:
(I) as a practical matter impair or impede the
persons ability to protect the interest; or
(ii) leave an existing party subject to a
substantial risk of incurring double,
multiple, or otherwise inconsistent
obligations because of the interest.
Fed. R. Civ. P. 19(a)(1).
As an initial matter, the plain language of Rule 19(a)(1)(B)
requires that a person not only have an interest related to the
subject of the action, but that person must affirmatively claim[]
an interest. See, e.g., United States v. Bowen, 172 F.3d 682, 689
(9th Cir. 1999); Peregrine Myanmar Ltd. v. Segal, 89 F.3d 41, 49
(2d Cir. 1996). Willis has claimed no interest in the pending
litigation and is thus not a required party. Even if Willis
claimed an interest, however, St. Judes motion under Rule 19 would
St. Jude first argues that Willis has an interest in avoiding
a determination that the Policy does not cover the Products
Litigation. An absent person has an interest in avoiding negative
precedent. Bremer Bank, N.A. v. John Hancock Life Ins. Co., Civ.
No. 06-1534, 2007 U.S. Dist. LEXIS 26007, at *17 (D. Minn. April 9,
2007) (citing Pulitzer-Polster v. Pulitzer, 784 F.2d 1305, 1310
(5th Cir. 1986)). If an existing party adequately represents the
absent persons position, however, this interest is given little
weight. See Gwartz v. Jefferson Meml Hosp. Assn, 23 F.3d 1426,
1429-30 (8th Cir. 1994). Here, Willis may have a stronger
incentive to establish the Policys coverage of the Products
Litigation in order to avoid potential tort liability. As St. Jude
has acknowledged, however, Williss defense against St. Judes
claims will [presumably] mirror St. Judes defense against AIC.
(Def. Mem. Supp. [Doc. No. 45] at 8.) Therefore, although the
interests of St. Jude and Willis may eventually diverge, they
presently share a strong interest in obtaining a declaration that
the Policy covers the Products Litigation. Accordingly, the court
determines that Williss interest in avoiding negative precedent
will not be impaired or impeded by its absence.
St. Jude also maintains that if Willis is not joined, St. Jude
may be subject to inconsistent obligations because this court could
determine that the Policy does not cover the Products Litigation
and a court in a separate action brought by St. Jude against Willis
could reach the opposite conclusion. These inconsistent results
would leave St. Jude with a million gap in insurance coverage.
Inconsistent obligations, however, are distinct from inconsistent
adjudications or results. Obligations are inconsistent if a party
is unable to comply with one court's order without breaching
another court's order concerning the same incident. Inconsistent
adjudications or results, by contrast, occur when a defendant
successfully defends a claim in one forum, yet loses on another
claim arising from the same incident in another forum. Delgado v.
Plaza Las Americas, Inc., 139 F.3d 1, 3 (1st Cir. 1998). Rule
19(a)(1)(B)(ii) is not concerned with inconsistent adjudications.
See Sykes v. Hengel, 220 F.R.D. 593, 597 (S.D. Iowa 2004); see also
RPR & Assocs. v. OBrien/Atkins Assocs., 921 F. Supp. 1457, 1464
(M.D.N.C. 1995) (Rule 19 is not triggered by the possibility of a
subsequent adjudication that may result in a judgment that is
inconsistent as a matter of logic.). Therefore, Willis is not a
required party under Rule 19, and the magistrate judges order with
respect to this issue was not clearly erroneous or contrary to law.
II. Permissive Joinder
A. Futility of Amendment
Rather than assess whether permissive joinder was warranted
under Rule 20, the magistrate judge noted that joinder of Willis
would require amending the pleadings pursuant to Rule 15(a)(2).
(Mag. Order at 9.) The magistrate judge then denied St. Judes
motion as futile because the claims against Willis are not ripe for
adjudication until it is determined that the Policy does not cover
the Products Litigation. (Id. at 10-11.) St. Jude argues that
this was error.
Leave to amend a pleading is freely given when justice so
requires. Fed. R. Civ. P. 15(a)(2). Denial of a motion to amend
is appropriate if amendment would be futile. Becker v. Univ. of
Neb., 191 F.3d 904, 907-08 (8th Cir. 1999) (citations and
quotations omitted). Amendment is futile if the proposed amended
complaint does not establish a courts subject matter jurisdiction
over the action. See Longie v. Spirit Lake Tribe, 400 F.3d 586,
588 n.3 (8th Cir. 2005); Schepers v. County of Hennepin, 70 Fed.
Appx. 911, 912 (8th Cir. 2003). A court lacks subject matter
3 Such alternative pleading is expressly sanctioned by the
Federal Rules of Civil Procedure. See Fed. R. Civ. P. 20(a)(2)
(contemplating assertion of alternative rights to relief against
different parties); see also 7 Charles Alan Wright, Arthur R.
jurisdiction over an action if the action is not ripe for
resolution. See Dakota, Minn. & R.R. Corp. v. South Dakota, 362
F.3d 512, 520 (8th Cir. 2004) (citation omitted).
The ripeness doctrine derives from Article IIIs cases and
controversies requirement and prudential considerations for
refusing to exercise jurisdiction. Paraquad, Inc. v. St. Louis
Hous. Auth., 259 F.3d 956, 958 (8th Cir. 2001) (quotation omitted).
The doctrine prevent[s] the courts, through avoidance of premature
adjudication, from entangling themselves in abstract
disagreements. Abbott Labs. v. Gardner, 387 U.S. 136, 148 (1967).
In assessing ripeness, a court evaluates both the fitness of the
issues for judicial decision and the hardship to the parties of
withholding court consideration. Id. at 149; Neb. Pub. Power
Dist. v. MidAm. Energy Co., 234 F.3d 1032, 1038 (8th Cir. 2000)
(citing Abbott Labs., 387 U.S. at 149). The touchstone of a
ripeness inquiry is whether the harm asserted has matured enough
to warrant judicial intervention. Vogel v. Foth & Van Dyke
Assocs., 266 F.3d 838, 840 (8th Cir. 2001) (quoting Paraquad, 259
F.3d at 958).
In this case, St. Judes proposed claims against Willis are
mutually exclusive to its counterclaims against AIC.3 In other
Miller & Mary Kay Kane, Federal Practice and Procedure 1654 (3d
ed. 2001) (The need for alternative joinder of defendants
typically arises when the substance of plaintiffs claim indicates
that plaintiff is entitled to relief from someone, but the
plaintiff does not know which of two or more defendants is liable
under the circumstances set forth in the complaint.)
words, a determination that the Policy covers the Products
Litigation would be a complete defense to St. Judes proposed
claims and Willis would not be liable for damages. The possibility
that St. Jude will not obtain damages from Willis, however, is
irrelevant to the ripeness inquiry. Rather, the issue is whether
St. Jude has suffered harm as a result of Williss alleged wrongful
conduct. AICs refusal to defend and indemnify the Products
Litigation provides the requisite harm. Therefore, the court
determines that St. Judes proposed claims against Willis are ripe
for judicial resolution, and amendment to assert claims against
Willis would not be futile.
B. Counterclaim Joinder
Rule 20 permits persons to be joined as defendants if:
(A) any right to relief is asserted against them jointly,
severally, or in the alternative with respect to or
arising out of the same transaction, occurrence, or
series of transactions or occurrences; and
(B) any question of law or fact common to all defendants
will arise in the action.
Fed. R. Civ. P. 20(a)(2)(A); see also Fed. R. Civ. P. 13(h) (Rules
19 and 20 govern the addition of a person as a party to a
counterclaim or crossclaim.). The purpose of [Rule 20] is to
promote trial convenience and expedite the final determination of
disputes, thereby preventing multiple lawsuits. Mosley v. Gen.
Motors Co., 497 F.2d 1330, 1332 (8th Cir. 1974) (citation omitted).
Thus, Rule 20 permits all reasonably related claims against
different parties to be tried in a single proceeding. Id. A
court assesses whether claims are reasonably related on a case by
case basis. Id. In addition, not all questions of law and fact
raised by the dispute [need] be in common. Id. at 1334 (emphasis
in original). Rather, common questions may be found in a a widerange
of context. Id.
St. Jude seeks to assert alternative counter-claims against
AIC and Willis. Each claim arises out of the Policys formation
and requires a judicial determination of the Policys coverage.
Such a determination necessarily involves common questions of law
and fact, and joinder of Willis would promote the just, speedy,
and inexpensive determination of all issues related to this
action. Fed. R. Civ. P. 1; see Travelers Ins. Co. v. Intraco,
Inc., 163 F.R.D. 554, 556 (S.D. Iowa 1995). Therefore, joinder of
4 The pretrial scheduling orders original deadline to add
parties was July 21, 2008. On September 16, 2008, the magistrate
judge granted from the bench St. Judes motion to amend that
deadline to allow its motion to add Willis. AIC now argues that
St. Jude misrepresented to the magistrate judge its justification
for not complying with the original scheduling order and that St.
Judes delay in moving to add Willis provides an independent basis
to deny the motion. AIC, however, did not appeal the magistrate
judges decision and the issue is not properly before the court.
If AIC believes St. Jude misrepresented facts to the magistrate
judge, Rule 11 provides the appropriate vehicle for relief.
5 Although AIC does not challenge the courts diversity
jurisdiction over St. Judes proposed counterclaim against Willis,
the court briefly addresses the issue. A federal court exercising
diversity jurisdiction does not have supplemental jurisdiction
pursuant to 28 U.S.C. 1367(a) over claims by plaintiffs against
persons made parties under Rule 14, 19, 20 or 24 of the Federal
Rules of Civil Procedure . . . when exercising supplemental
jurisdiction over such claims would be inconsistent with the
jurisdictional requirements of section 1332. 28 U.S.C. 1367(b).
This limitation does not apply when a counterclaimant asserts a
claim against a non-diverse counterdefendant. See Travelers Indem.
Co. of Am. v. Holtzman, Civ. No. 4:08-351, 2008 U.S. Dist. LEXIS
63966, at *7-14 (E.D. Mo. Aug. 21, 2008) (issue not decided by
Eighth Circuit but other circuits hold non-diverse counterclaim
defendant does not destroy diversity jurisdiction). Therefore,
Williss addition as a counterclaim defendant does not affect the
courts subject matter jurisdiction.
Willis as a defendant in St. Judes counterclaim is warranted,4 and
the court grants St. Judes motion.5
Accordingly, IT IS HEREBY ORDERED that:
1. St. Judes appeal [Doc. No. 79] of the magistrate judges
order [Doc. No. 76] is granted; and
2. St. Jude is granted leave to file an amended answer and
counterclaim against Willis.
Dated: January 7, 2009
s/David S. Doty
David S. Doty, Judge
United States District Court


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