United States District Court, D. New Mexico
MEMORANDUM OPINION AND ORDER GRANTING LEAVE TO AMEND
C. YARBROUGH UNITED STATES MAGISTRATE JUDGE
MATTER comes before the Court on Plaintiffs'
Motion For Leave To File Amended Complaint, filed May 8,
2018. Doc. 20. Defendant Sentinel Insurance Company
(Sentinel) filed a response in opposition on June 1, 2018.
Doc. 22. Plaintiffs filed a reply on June 15, 2018. Doc. 24.
The Court orders that Plaintiffs' Motion be
GRANTED for the reasons explained below.
23, 2017, Plaintiffs filed the present lawsuit in state court
bringing claims for breach of fiduciary duty, breach of
contract, and bad faith. Doc. 1-1 at 2-3. According to
Plaintiffs, they operated a business in Taos, New Mexico
called Graham's Grille. Doc. 1-1 at 5. Due to
“difficulties with the municipal sewer system that
served the restaurant, the business was forced to close in
September 2013.” Doc. 1-1 at 7. Plaintiffs had
purchased “Business Interruption insurance” from
Defendants for the restaurant in 2006, so they made a claim
for damages due to being forced to shut down. Doc. 1-1 at
6-7. As of the date of the filing of the lawsuit, Defendants
had neither paid nor denied the claim. Doc. 1-1 at 7.
30, 2017, also in state court, Plaintiffs filed a First
Amended Complaint, asserting claims for Breach of Contract,
Insurance Bad Faith, Violation of Insurance Code, Violation
of Unfair Practices Act, and Punitive Damages. Doc. 1-1 at
5-10. Defendant Sentinel represents that it was served on
September 27, 2017. Doc. 1 at 9. On October 20, 2017,
Sentinel removed this case to federal court, alleging the
existence of subject matter jurisdiction based on diversity
of citizenship due to the fraudulent joinder of the sole
defendant who is a citizen of New Mexico—Craig Beaudry,
who allegedly sold the insurance policy in question. Doc. 1
at 3-5. Plaintiffs did not file a motion to remand.
filed a motion to dismiss on November 10, 2017. Doc. 6. In
that motion, Sentinel argued that Plaintiffs' claim for
lost business income is excluded by the applicable insurance
policy and, furthermore, is untimely. Id. Also on
November 10, Defendant Hartford Financial Services Group
(HFSG) moved to dismiss all claims against it for lack of
personal jurisdiction. Doc. 7. Plaintiffs did not oppose that
motion. Doc. 13.
8, 2018, Plaintiffs moved for leave to file a Second Amended
Complaint. Doc. 20. Plaintiffs wish to add more detail to
their factual allegations regarding the defects with the Taos
municipal sewer system, and regarding Plaintiffs' claim
against Defendant Beaudry. Doc. 20 at 2. Defendant
Sentinel filed an opposition, arguing that the proposed
amendment about the sewer system would be futile because the
Second Amended Complaint would still fail to state a claim
against Sentinel. Doc. 22. No other defendant filed a
the Court always has a sua sponte duty to ensure it
has subject-matter jurisdiction, the Court carefully examined
the Notice of Removal filed Defendants filed. See Image
Software, Inc. v. Reynolds & Reynolds Co., 459 F.3d
1044, 1048 (10th Cir. 2006) (“Federal courts have an
independent obligation to determine whether subject-matter
jurisdiction exists, even in the absence of a challenge from
any party . . . .”).
forth above, the Notice of Removal contends that Defendant
Beaudry was fraudulently joined. The Court does not
necessarily agree. “‘The defendant seeking
removal bears a heavy burden of proving fraudulent joinder,
and all factual and legal issues must be resolved in favor of
the plaintiff.'” Dutcher v. Matheson, 733
F.3d 980, 988 (10th Cir. 2013) (quoting Pampillonia v.
RJR Nabisco, Inc., 138 F.3d 459, 461 (2d Cir. 1998)). To
succeed on fraudulent joinder, removing defendants must clear
a “high hurdle.” Id. at 989. The
question of fraudulent joinder is not to be confused with
whether “plaintiffs have stated a valid claim”
against the allegedly fraudulently joined parties.
Id. In sum, the argument that “conclusory
allegations” against Defendant Beaudry should be
disregarded simply will not satisfy this standard.
Cf. Doc. 1 at 5. Statute-of-limitations arguments,
if they are factually complicated, will likewise fail to
satisfy this standard. See, e.g., Riverdale
Baptist Church v. Certainteed Corp., 349 F.Supp.2d 943,
950 (D. Md. 2004).
even if Defendant Beaudry is not fraudulently joined, the
Notice of Removal does adequately allege facts supporting the
Court's original jurisdiction, pursuant to the alienage
provision of 28 U.S.C. § 1332(a)(2) and a sufficient
amount in controversy. See Doc. 1 at 2-3 (Plaintiffs
are citizens of Mexico; Defendants are citizens of
Connecticut, Arizona, New Mexico, and Delaware). To be sure,
the First Amended Complaint alleges that Plaintiffs are
residents of Mexico. First Am. Compl. ¶ 1. But
“[a]n individual's residence is not equivalent to
his domicile and it is domicile that is relevant for
determining citizenship.” Siloam Springs Hotel,
L.L.C. v. Century Sur. Co., 781 F.3d 1233, 1238 (10th
Cir. 2015). Plaintiffs should promptly inform the Court if
the Notice of Removal's allegations are incorrect.
original jurisdiction is established by the allegations in
the Notice of Removal, the Court may not sua sponte
remand to state court. Feichko v. Denver & Rio Grande
W. R. Co., 213 F.3d 586, 591 (10th Cir. 2000)
(“[R]emoval in violation of a statutory provision does
not deprive a federal district court of subject matter
jurisdiction so long as the court would have had original
jurisdiction over the case had it been filed there in the
first instance.”). To the extent there are any
procedural or statutory defects in removal due to
Defendants' potentially incorrect fraudulent joinder
assertions, Plaintiffs have waived them by failing to move to
remand the case to state court within 30 days. 28 U.S.C.
§ 1447(c). Sua sponte remand to state court
would therefore be inappropriate. City of Albuquerque v.
Soto Enters., Inc., 864 F.3d 1089, 1093 (10th Cir.
2017). The Court will proceed to the merits of
Rule of Civil Procedure 15 permits a plaintiff to amend a
complaint as of right within 21 days after serving it or 21
days after service of a Rule 12(b) motion. Fed.R.Civ.P.
15(a)(1). “In all other cases, a party may amend its
pleading only with the opposing party's written consent
or the court's leave.” Fed.R.Civ.P. 15(a)(2).
Plaintiffs here have already amended their complaint once as
a matter of right and so must now seek leave of court.
argues that Plaintiffs should not get a third bite at the
apple, having failed to state viable claims in their first
two complaints. Doc. 20 at 1. The Court does not necessarily
agree that Plaintiffs are precluded from amending simply
because they have amended previously. “The court should
freely give leave [to amend] when justice so requires.”
Fed.R.Civ.P. 15(a)(2). “[T]his mandate is to be
heeded.” Foman v. Davis, 371 U.S. 178, 182
(1962). “In the absence of any apparent or declared
reason—such as undue delay, bad faith or dilatory
motive on the part of the movant, repeated failure to cure
deficiencies by ...