United States District Court, E.D. Wisconsin
STATE OF WISCONSIN LOCAL GOVERNMENT PROPERTY INSURANCE FUND, Plaintiff,
LEXINGTON INSURANCE COMPANY, THE CINCINNATI INSURANCE COMPANY, and MILWAUKEE COUNTY, Defendants.
Stadtmueller U.S. District Judge.
action was filed by Plaintiff State of Wisconsin Local
Government Property Insurance Fund (the “Fund”)
in Milwaukee County Circuit Court. (Docket #1-2 at 4-24). The
Fund's complaint named each of the current defendants.
Id. Defendant Lexington Insurance Company
(“Lexington”) removed the case to this Court on
February 4, 2015, solely on the basis of diversity
jurisdiction. (Docket #1). This is facially questionable; the
Fund and Defendant Milwaukee County (the
“County”) are both citizens of Wisconsin.
Lexington's notice of removal argued that the Fund sought
no relief from the County in its complaint-none of the counts
are expressly directed at the County-and that this case was
purely a dispute between the three insurance carriers.
Id. The County was, in Lexington's view,
fraudulently joined to this action by the Fund for purposes
of defeating diversity jurisdiction and ensuring that the
matter would stay in state court. Id.
Fund apparently disputed this-it filed a motion to remand
just a few weeks later. (Docket #14). After briefing on the
motion proceeded for a month, however, the Fund withdrew the
motion. (Docket #25). As Lexington noted in its notice of
removal and response to the remand motion, a fraudulently
joined party like the County should be treated as a
“nominal” defendant, whose presence has no effect
on the Court's jurisdiction. TI Investors of Wis.,
LLC v. XFPG, LLC, No. 13-CV-520-JPS, 2013 WL 3731756, at
*2 (E.D. Wis. July 15, 2013). With the withdrawal of the
remand motion, and without further motion practice from the
parties or a ruling from the Court, the County continued in
this action in limbo: is it, or is it not, a nominal
question should have been addressed long ago. As the Seventh
[w]hen joinder of a nondiverse party would destroy subject
matter jurisdiction, 28 U.S.C. § 1447(e) applies and
provides the district court two options: (1) deny joinder, or
(2) permit joinder and remand the action to state court.
These are the only options; the district court may not permit
joinder of a nondiverse defendant and retain jurisdiction.
Schur v. L.A. Weight Loss Centers, Inc., 577 F.3d
752, 759 (7th Cir. 2009) (citation omitted). This nettlesome
issue is again before the court in the form of the
County's short motion filed on June 15, 2017, for
judgment on the pleadings, on the basis that no party
asserted any claims against it. (Docket #100). The Fund
opposed that motion, asserting that it did have a valid claim
as to the County. (Docket #115).
addition, the Fund filed an expedited motion to amend its
complaint to add an explicit count seeking relief against the
County. (Docket #116). Lexington responded to the motion on
July 12, 2017. (Docket #118). Lexington first argues that
allowing amendment at this stage is overly prejudicial.
Second, it notes the problem that the Court has just
explained: if the County has viable claims against it,
diversity in this case is destroyed and remand is required.
Fund certainly should not be lauded for leaving its claims in
an uncertain state for so long. However, even with the
withdrawal of the remand motion, all parties with an interest
in the issue should have addressed the matter of the
County's “nominal” status. The Court itself
is not without blame, for it too is obliged to police issues
of subject matter jurisdiction even without prompting by
litigants. Evergreen Square of Cudahy v. Wis. Housing and
Econ. Dev. Auth., 776 F.3d 463, 465 (7th Cir. 2015).
delay, in turn, bears on the propriety of amendment at this
juncture. Federal Rule of Civil Procedure 15 provides that
leave to amend a pleading should be freely given when justice
requires it. Fed.R.Civ.P. 15(a)(2). However, “the court
need not allow an amendment when there is undue delay [or]
undue prejudice to the opposing party[.]” Bell v.
Taylor, 827 F.3d 699, 705 (7th Cir. 2016) (quotation
omitted). Again, all parties are responsible for the
“undue delay” in addressing this issue. Further,
the Court finds that the prejudice to Defendants is more
limited than it may appear. The parties' discovery
efforts thus far can be applied equally to this litigation
whether it is in federal or state court, and dispositive
motions are not yet fully briefed. In light of the liberal
standard for amendment of pleadings, the Court finds that the
Fund should be granted leave to do so.
the Court will not issue a final ruling on the Fund's
motion. It leaves the following choice to the Fund. If the
Fund genuinely desires to assert a claim against the County
and wishes to maintain it in this litigation, the Court will
grant the motion for leave to amend and the case will be
remanded back to the Milwaukee County Circuit Court. On the
other hand, if the Fund declines to advance its putative
claim against the County in this case, the motion for leave
to amend will be denied and the County's motion for
judgment on the pleadings will be granted forthwith. The Fund
will be granted leave to make this election and so advise the
court in a written submission which must be filed before 2:00
p.m. on Monday July 17, 2017.
IT IS ORDERED that Plaintiff State of Wisconsin Local
Government Property Insurance Fund shall submit its election
on its putative claim against Defendant Milwaukee County in
accordance with the terms of this Order no later than Monday,
July 17, 2017 at 2:00 p.m.
The Fund further notes that the parties
were on notice of its claim against the County from the
outset in light of the motion to remand. While true, this is
yet another reason why the County's ...