United States District Court, E.D. Tennessee, Greeneville Division
MEMORANDUM OPINION AND ORDER
Clifton L. Corker United States Magistrate Judge.
matter is before the Court, with the consent of the parties
and order of reference pursuant to 28 U.S.C. § 636 [Doc.
11, Order of Reference]. Defendants Jim Sharp
(“Sharp”) and Sharp Troubleshooting
(“Troubleshooting”) have filed a motion to
dismiss for lack of jurisdiction. [Doc. 16]. Plaintiffs have
filed a response in opposition. [Doc. 21]. Oral arguments on
this motion were heard on February 9, 2017. The matter is now
ripe for resolution.
who are Tennessee residents, initially sued
Lauderdale-Hamilton, Inc., a Mississippi corporation, in
federal court under diversity jurisdiction pursuant to 28
U.S.C. § 1332 for the death of Jeffery Chad Hensley,
alleging state tort claims of negligence relating to the
design and manufacturer of both a table saw and lift table.
Plaintiffs subsequently amended their complaint adding Sharp
and Troubleshooting as additional parties, alleging, among
other things, negligent installation of the lift table [Doc.
13]. Sharp is a Tennessee resident, and Troubleshooting is a
sole proprietorship owned by Sharp with its principal place
of business in Tennessee. As a result of the amended
complaint, Defendants aver that complete diversity no longer
exists, thus destroying the Court's
States Code Title 28 section 1332(a) provides that
“[t]he district courts shall have original jurisdiction
of all civil actions where the matter in controversy exceeds
the sum or value of $75, 000, exclusive of interest and
costs, and is between-(1) citizens of different States . . .
.” It is well-established that for purposes of
diversity jurisdiction, complete diversity amongst the
parties must exist. See Owen Equip. & Erection Co. v.
Kroger, 437 U.S. 365, 373-74 (1978). Generally,
“‘jurisdiction of the court depends upon the
state of things at the time of the action
brought.'” Grupo Dataflux v. Atlas Global Grp.,
L.P., 541 U.S. 567, 570 (2004) (quoting Mollan v.
Torrance, 9 Wheat. 537, 539 (1824)). “Like most
general principles, however, this one is susceptible to
exceptions. . . .” Newman-Green, Inc. v.
Alfonzo-Lopez, 490 U.S. 826, 830 (1989). The Supreme
Court noted in Owen Equipment & Erection Co. v.
Kroger that “[w]hatever may have been the original
purposes of diversity-of-citizenship jurisdiction, [the]
subsequent [congressional] history clearly demonstrates a
congressional mandate that diversity jurisdiction is not to
be available when any plaintiff is a citizen of the same
State as any defendant.” Owen Equip. & Erection
Co., 437 U.S. at 373-74.
Owen Equipment & Erection Co., the plaintiff, an
Iowa resident, sued a Nebraska company, Omaha Public Power
District (“OPPD”), based solely on diversity
jurisdiction under 28 U.S.C. § 1332. Id. at
369. OPPD then filed a third-party complaint against Owen
Equipment & Erection Co. (“Owen”)
Id. Subsequently, the plaintiff amended her
complaint to add Owen as a defendant as well. Id. at
368. OPPD was dismissed on summary judgment, leaving only
Owen to proceed to trial. During trial, it was discovered
that Owen was, in fact, actually based in Iowa, the same
state as the plaintiff, making them nondiverse parties.
Id. at 368. Owen moved for dismissal for lack of
jurisdiction, which the district court denied. Id.
The Court of Appeals for the Eighth affirmed, finding that
the district court properly exercised its pendent
jurisdiction over the claim. Id. The Supreme Court
reversed, holding that the district court did not possess
subject matter jurisdiction over the case as it lacked
complete diversity of the parties. Id. at 375.
Court explained that the amended complaint brought an
independent action against Owen, which was not reliant in any
part upon the resolution of the original claim. Id.
at 376. Owen's liability was wholly separate from the
liability of OPDD, the original defendant. Id.
“A plaintiff cannot complain if ancillary jurisdiction
does not encompass all of his possible claims in a case such
as this one, since it is he who has chosen federal rather
than the state forum and must thus accept its
limitations.” Id. The Court held that
Congress's requirement of complete diversity would be
“evaded completely” if the plaintiff were
permitted to proceed with a state-based lawsuit against a
nondiverse defendant in federal court in this sort of
scenario. Id. at 375.
case, Plaintiffs concede that after they amended their
complaint, complete diversity between the parties no longer
exists. They, however, assert that diversity is assessed at
the time the action is filed, and that no subsequent events
can divest jurisdiction once it is established. Plaintiffs
highlight Freeport-McMoRan, Inc. v. K N Energy,
Inc., 498 U.S. 426, 428 (1991), where the Supreme Court
held that the addition of a nondiverse party through an
amended complaint did not destroy the court's diversity
jurisdiction. They assert that Freeport-McMoRan is
controlling precedent because in the instant matter, only one
cause of action exists that requires the addition of the
nondiverse Defendants for purposes of comparative fault.
during oral argument, Plaintiffs' counsel argued that the
holding in Freeport-McMoRan is not distinguishable
from the instant matter, and that historically, the Supreme
Court has consistently maintained, for purposes of actions
originally filed federally, courts are to determine
jurisdiction at the time of the original filing and never
reassess. Amended complaints, they argue, do not require the
courts to reevaluate jurisdiction unless it is a removal
case, citing in general to Rockwell Int'l Corp. v.
United States, 549 U.S. 457 (2007). While Plaintiffs
concede they could not have brought this action in federal
court against all of the currently-named Defendants, they
contend that there is no basis to reevaluate jurisdiction and
dismiss the case as it stands.
Freeport-McMoRan, during the course of litigation,
the plaintiff transferred its interest in the underlying
contract to a limited partnership, FMP Operating Company
(“FMPO”). Freeport-McMoRan, 498 U.S. at
427. Subsequently, the plaintiff sought leave to amend the
complaint to substitute FMPO as a plaintiff under
Fed.R.Civ.P. 25(c). Id. The motion was granted
despite the fact that substituting FMPO as the plaintiff
destroyed complete diversity. Id. The Supreme Court
found that subject matter jurisdiction still existed, noting
that “FMPO was not an ‘indispensable' party
at the time the complaint was filed.” Id. at
428. The Court emphasized that “[a] contrary ruling
could well have the effect of deterring normal business
transactions during the pendency of what might be a lengthy
litigation.” Id. Interestingly, it
specifically held that its holding did not overrule Owen
Equipment & Erection Co. Id. at 429.
the added defendant in Owen Equipment & Erection
Co., FMPO's involvement was premised on the interest
it acquired from the original plaintiff through the course of
an ordinary business transaction and was substituted as a
party per Rule 25(c). Fed.R.Civ.Pro. 25(c) provides
“[i]f an interest in transferred, the action may be
continued by or against the original party unless the court,
on motion orders the transferee to be substituted in the
action or joined with the original party.” As
indicated, a Rule 25 substitution is concerned with the
continuity of a case as opposed to the substantive rights of
the parties. See ELCA Enters., Inc. v. Sisco Equip.
Rental & Sales, Inc., 53 F.3d 186, 191 (8th Cir.
1995) (“The rule is ‘designed to allow an action
to continue unabated when an interest in a lawsuit changes
hands, ' rather than requiring the initiation of an
entirely new lawsuit.” (internal citations omitted));
The Charter Oak Fire Ins. Co. v. SSR, Inc., 2015 WL
10890126, at *4 (E.D. Ky. Jul. 13, 2016) (“Rule 25 is a
‘procedural device designed to facilitate the conduct
of a case, and does not affect the substantive rights of the
party or the transferee.'”) (internal citations
14, as well as Rules 19 and 20, conversely, are tools
plaintiffs may use to initiate independent claims against new
parties. As such, numerous courts have held that the
Freeport-McMoRan holding is limited to cases
involving amendments brought pursuant to Fed.R.Civ.Pro. 25.
See Ingram v. CSX Transp., Inc., 146 F.3d 858, 861
(11th Cir. 1998) (“Freeport does not stand for
the proposition that all additions of nondiverse
parties are permissible as long as complete diversity existed
at the time of commencement of the lawsuit. Instead, the
holding in Freeport relies upon the assignee's
having been substituted as a plaintiff under Fed.R.Civ.P.
25(c). In this case, the [new defendant]'s addition was
unrelated to rule 25. As a result, we find Freeport
to be inapplicable.”); see also Estate of Alvarez
v. Donaldson Co., Inc., 213 F.3d 993, 995 (7th Cir.
2000) (compiling cases from four circuit courts of appeal
holding that Freeport-McMoRan is limited to Rule 25
substitutions); Kujat v. Harbor Freight Tools USA,
Inc., 2010 WL 3463928, at *2 n.1 (E.D. Mich. Aug. 30,
2010) (finding Freeport-McMoRan does not apply to
the addition of parties pursuant to Rule 15).
the Sixth Circuit has yet to directly address this issue, the
Court is persuaded by the reasoning of the various other
circuits and finds that Freeport-McMoRan is limited
to the substitution of parties under Rule 25. Indeed, as the
Supreme Court has noted, permitting such amendments without
dismissal would allow plaintiffs to “defeat the
statutory requirement of complete diversity by the simple
expedient of suing only those defendants who were of diverse