United States District Court, D. New Mexico
Bergh Samuel C. Wolf Jones Snead Wertheim & Clifford,
P.A. Santa Fe, New Mexico Attorneys for the Plaintiffs
Melanie B. Stambaugh Rodey Dickason Sloan Akin & Robb,
P.A. Albuquerque, New Mexico Attorneys for the Defendants
Mark Peters and MD Peters Appraisals, Inc.
Elizabeth M. Drantell Rose L Brand & Associates, P.C.
Albuquerque, New Mexico Attorneys for the Defendant HSBC
Mortgage Services, Inc.
MEMORANDUM OPINION AND ORDER
MATTER comes before the Court on: (i) the Plaintiffs'
Motion to Remand, filed November 9, 2018 (Doc.
10)(“MTR”); and (ii) the Defendants MD Peters
Appraisals, Inc. (“Peters Appraisals”) and Mark
Peters' Motion to Dismiss First Amended Complaint for
Damages, filed November 21, 2018 (Doc.
16)(“MTD”). The Court held a hearing on January
10, 2019. See Clerk's Minutes at 1, filed
January 10, 2019 (Doc. 26). The primary issue is whether the
Court should remand to the County of Santa Fe, First Judicial
District Court, State of New Mexico Plaintiffs Loren Haynes
and Dani Haynes' suit, when the Haynes -- New Mexico
citizens -- filed their First Amended Complaint for Damages,
filed October 31, 2018 (Doc. 6)(“Amended
Complaint”), which added, as a Defendant, Defendant MD
Peters Appraisals, Inc. (“Peters
Appraisals”) -- also a New Mexico citizen -- twenty-one
days after Defendant Mark Peters filed the Notice of Removal,
filed October 10, 2018 (Doc. 1), in which he alleges the
Court has diversity jurisdiction pursuant to 28 U.S.C. §
1332, and before Peters filed the Defendant Mark Peters'
Answer to Complaint for Damages, filed October 31, 2018 (Doc.
7)(“Answer”). The Court concludes that, because
adding Peters Appraisals as a Defendant destroys the complete
diversity of citizenship between the parties, the Court will
remand the case to New Mexico state court. Accordingly, the
Court will grant the MTR and deny the MTD.
Court takes its facts from the Complaint for Damages, filed
in state court August 24, 2018, filed in federal court
October 10, 2018 (Doc. 1-1)(“Complaint”). The
Court provides these facts for background. It does not adopt
them as the truth, and it recognizes that these facts are
largely the Haynes version of events.
matter arises from an allegedly inaccurate appraisal that
Peters performed for the Haynes on their property at 55
Camino Don Patron, Santa Fe, New Mexico, 87506 (“Santa
Fe Property”). See Complaint ¶ 8, at 2;
id. ¶¶ 10, 14-23, at 3. The Haynes planned
to use the Santa Fe Property as collateral for a loan from
Defendant HSBC Mortgage Services, Inc. (“HSBC
Mortgage”), and Peters' appraisal caused HSBC
Mortgage to deny the Haynes' desired loan. See
Complaint ¶¶ 7-8, at 2; id. ¶ 25, at
4. The Haynes intended to use the loan to fund renovations on
a property in the State of California. See Complaint
¶ 7, at 2.
Complaint, the Haynes allege that: (i) Peters acted
negligently when he provided the allegedly inaccurate
appraisal; (ii) Peters and HSBC Mortgage intentionally or
negligently interfered with contractual relations when they
prevented the Haynes from fulfilling their obligations for
renovations on their California property; (iii) Peters'
appraisal comprised a fraudulent or negligent
misrepresentation to the Haynes and HSBC Mortgage; and (iv)
Peters and HSBC Mortgage acted negligently when they refused
to correct Peters' appraisal. See Complaint
¶¶ 31-55, at 5-7. Peters removed the case to the
United States District Court for the District of New Mexico
on October 10, 2018. See Notice of Removal at 5.
Peters removed the case under diversity jurisdiction, noting
that: (i) the Haynes “are citizens of Santa Fe County,
New Mexico, ” Notice of Removal ¶ 3, at 2 (citing
Complaint ¶ 1, at 1); (ii) HSBC “is a foreign
for-profit corporation, ” without “consumer
financial services in the United States, ” Removal
¶ 5, at 2 (citing Complaint ¶ 3, at 1; HSBC Notice,
filed October 10, 2018 (Doc. 1-1)); and (iii) Peters is a
citizen of California, having “resided in the State of
California since October 2017, and is domiciled there,
” Notice of Removal ¶ 6, at 2 (citing generally
Declaration of Mark Peters (executed October 10, 2018), filed
October 10, 2018 (Doc. 1-1)). The amount in controversy
exceeds $75, 000.00. See Notice of Removal
¶¶ 8-10, at 3-4. On October 31, 2018, the Haynes
filed the Amended Complaint, adding Peters Appraisals as a
Defendant, and inserting its name into the Complaint's
allegations and claims against Peters. See Amended
Complaint at 1; id. ¶¶ 33-57, at 5-7. No.
scheduling order has been filed in this case.
MTR, the Haynes request that the Court remand the case to New
Mexico state court, because they added Peters Appraisals to
the Amended Complaint. See MTR at 2. The Haynes
explain that Peters Appraisals “is an active domestic
for-profit New Mexico corporation with its registered agent
at 29 Sobradora Drive, Santa Fe, New Mexico, 87508, ”
and that, while performing appraisals, Peters used Peters
Appraisals. MTR at 2, 5. The Haynes contend that, because
they and Peters Appraisals are Santa Fe County residents,
complete diversity no longer exists between the plaintiffs
and the defendants. See MTR at 2. According to the
Haynes, the Court should, therefore, remand, because 28
U.S.C. § 1332(a) requires complete diversity.
See MTR at 2-3.
Haynes note that they filed their Amended Complaint before
twenty-one days after Peters filed an answer and that the
amendment relates back to the Complaint. See MTR at
4 (citing Fed.R.Civ.P. 15(a), (c)). The Haynes explain that
Peters “uses or used [Peters Appraisals] in connection
with his appraisal work, ” and, so, when the Haynes
served Peters the Complaint, Peters should have known that
the Haynes should have sued Peters Appraisals. MTR at 4
(citing Fed.R.Civ.P. 15(c)). The Haynes add that, even if
they did not timely file the Amended Complaint, the Court
should permit the amendment. See MTR at 5 (citing 28
U.S.C. § 1447(e)).
The MTR Response and MTD.
and Peters Appraisals (“the Peters Defendants”)
respond in the Defendants Peters Appraisals and Mark
Peters' Response to Plaintiffs' Motion to Remand,
filed November 21, 2018 (Doc. 15)(“MTR
Response”). The Peters Defendants contend that the
Court should deny the MTR, because the Haynes seek to
“divest . . . this Court of subject matter
jurisdiction.” MTR Response at 1. The Peters Defendants
ask that the Court analyze the Amended Complaint as if the
Amended Complaint were a proposed amendment, and they cite
Pacely v. Lockett, No. CIV 12:0152 MCA/SMV, 2013 WL
12136690, at *3 (D.N.M. March 30, 2013)(Armijo, J.), for the
proposition that, when an amended complaint would destroy
diversity, a plaintiff in a removal case can file such a
complaint only with the court's leave. See MTR
Response at 5.
Peters Defendants argue that, in deciding whether to permit
the Haynes to join Peters Appraisals, the Court should apply
“the discretionary Rule 20 [of the Federal Rules of
Civil Procedure] analysis” that the Court employed in
Hernandez v. Chevron United States of America,
Inc., No. CIV 17-1083 JB/GBW, 2018 WL 4188458, at
*30 (D.N.M. Aug. 30, 2018)(Browning,
‘whether the amendment will result in undue
prejudice,' (2) ‘whether the request was unduly and
inexplicably delayed,' and (3) ‘whether [the
request] was offered in good faith.'” MTR Response
at 4-5 (quoting Hernandez, 2018 WL 4188458, at *30).
The Peters Defendants contend that, in Hernandez,
the Court permitted joinder of a non-diverse defendant,
because the plaintiff did not know that the party “was
a viable defendant until shortly before it filed its motion
to amend.” MTR Response at 6. The Peters Defendants
differentiate their situation from the facts in
Hernandez. See MTR Response at 6. The
Peters Defendants indicate that, unlike in
Hernandez, if the Court remanded this case, they
would “los[e] their chosen federal forum, ” and,
according to the Peters Defendants, they have already filed
motions to dismiss “relying upon federal pleading
standards.” MTR Response at 7. The Peters Defendants
question the Haynes' motivation for adding Peters
Appraisals, because: (i) the Haynes sent Peters Appraisals a
demand letter “over three years ago”; (ii) the
Haynes did not name Peters Appraisals in the Complaint; (iii)
the Haynes did not add Peters Appraisals between filing the
Complaint and receiving the Notice of Removal; and (iv) the
Haynes added Peters Appraisals only after Peters removed the
case. MTR Response at 7. The Peters Defendants conclude that
the Haynes added Peters Appraisals only to defeat the
Court's federal jurisdiction. See MTR Response
footnote, the Peters Defendants ask that the Court consider
the MTD interdependent with the MTR Response. See
MTR Response at 6 n.1. In the MTD, the Peters Defendants ask
that the Court dismiss the Amended Complaint and then
consider permitting the Haynes to join Peters Appraisals.
See MTD at 5. According to the Peters Defendants, if
the Court then permits the joinder, the Court can remand the
suit. See MTD at 5. The Peters Defendants argue that
the Haynes should have asked for leave to amend the
Complaint, because, in the Amended Complaint, they join
another defendant, whose presence destroys the Court's
diversity jurisdiction. See MTD at 1, 3 (citing
Pfeiffer v. Hartford Fire Ins., 929 F.2d 1484, 1488
(10th Cir. 1991); Pacely v. Lockett, 2013 WL
12136690, at *3). The Peters Defendants argue that the
requirement for leave from the court exists, because allowing
amendment without leave would deprive “the Court of its
statutory right to exercise discretion about whether joinder
of the non-diverse defendant is proper in the first
instance.” MTD at 4.
The MTR Reply and the MTD Response.
Haynes reiterate their arguments from the MTR and
additionally contend that diversity jurisdiction's
purpose, which is “to protect out-of-state defendants
from local prejudice in state courts, ” supports their
MTR, because, at all times during the alleged events giving
rise to this action, Peters was a New Mexico citizen and
Peters Appraisals continues to be incorporated in New Mexico,
see Plaintiffs' Reply to Defendants MD Peters
Appraisals Inc. and Mark Peters' Response to
Plaintiffs' Motion to Remand at 2, filed December 10,
2018 (Doc. 19)(“MTR Reply”)(internal quotation
marks omitted)(quoting Winningham v. N. Am. Res.
Corp., 809 F.Supp. 546, 551 (S.D. Ohio 1992)(Spiegel,
J.). Accordingly, in the Haynes' view, remand would not
prejudice Peters. See MTR Reply at 2.
Haynes disagree that tension exists between rule 15(a) of the
Federal Rules of Civil Procedure and 28 U.S.C. §
1447(e), because § 1447(e) “does not mandate that
Plaintiffs seek leave of the Court to join a defendant just
because the case has been removed when Plaintiffs are within
the timeframe allowing amendment as a matter of course under
Rule 15(a).” MTR Reply at 3. According to the Haynes,
“[u]ltimately, Defendants' position comes down to a
minor procedural question, easily resolved: the Amended
Complaint should be permitted, either as a matter of right or
because there is no good reason not to permit Plaintiffs to
amend their complaint.” MTR Reply at 4. The Haynes
argue that, in Pacely v. Lockett, even though the
filing time for the plaintiff's amendments raised
suspicions, the Honorable M. Christina Armijo, then-Chief
United States District Judge for the United States District
Court for the District of New Mexico, upheld the
plaintiff's amended complaint, because the plaintiff
might “‘suffer significant injury if his claim
[against the joined defendant] is not allowed to proceed and
there is a risk of parallel state and federal actions that
will be avoided if the amended complaint is allowed, and the
case is remanded back to state court.'” MTR Reply
at 4 (alteration in MTR Reply)(quoting Pacely v.
Lockett, 2013 WL 12136690, at *3). The Haynes contend
that, similarly, here, they timely filed their Amended
Complaint, and they have a valid claim against Peters
Appraisals. See MTR Reply at 5. The Haynes contend
that, if they need to seek the Court's leave to amend,
the Court should grant that leave, because the “time
frame” in which they filed the Amended Complaint --
within rule 15(a)'s allotted time -- “does not show
undue delay, bad faith, dilatory motive, or undue prejudice
to Defendants.” MTR Reply at 3.
Plaintiffs' Response to Defendants Peters Appraisals,
Inc. and Mark Peters' Motion to Dismiss First Amended
Complaint for Damages, filed December 10, 2018 (Doc.
20)(“MTD Response”), the Haynes incorporate their
MTR Reply. See MTD Response at 1. The Haynes repeat
their arguments from the MTR Reply -- that they timely filed
the Amended Complaint and that the Amended Complaint does not
prejudice the Peters Defendants. See MTD Response at
Peters Defendants replied to the MTD Response. See
Defendants MD Peters Appraisals, Inc. and Mark Peters'
Reply in Support of Motion to Dismiss First Amended Complaint
for Damages, filed December 19, 2018 (Doc. 22)(“MTD
Reply”). The Peters Defendants emphasize that the
“question at issue . . . is whether Plaintiffs may
avail themselves of Rule 15(a) in light of that rule's
conflict with 28 U.S.C. § 1447(e).” MTD Reply at
1. The Peters Defendants contend that the Haynes cite no
authority for their contentions that they need not seek leave
to join Peters Appraisal. See MTD Reply at 1. The
Peters Defendants again ask that, as the Court did in
Hernandez, the Court consider the factors from rule
20 of the Federal Rules of Civil Procedure. See MTD
Reply at 2. The Peters Defendants note that the Haynes do not
contend that they will suffer prejudice from litigating in
federal court. See MTD Reply at 2. The Peters
Defendants further stress that the Haynes do not explain the
suspicious timeframe in which they filed the Amended
Complaint. See MTD Reply at 3.
hearing, the Haynes began by noting the parties'
agreements that Peters Appraisals is a “proper party
and proper defendant, ” Draft Transcript of Hearing at
3:11-12 (taken January 10, 2019)(Wolf)(“Tr.”),
that the Haynes filed the Amended Complaint within rule
15(a)'s timeframe, see Tr. at 3:15-20 (Wolf).
The Haynes summarize that the parties debate two issues: (i)
whether the Haynes could, under rule 15(a), join Peters
Appraisals as a Defendant, see Tr. at 4:6-7 (Wolf);
and (ii) whether the Haynes “should be barred from
adding that defendant, ” Tr. at 4:10-11 (Wolf). On the
first issue, the Haynes dispute the Peters Defendants'
description that, if the Court tolerates the Amended
Complaint as an amended complaint, the Court loses
jurisdiction to decide the second issue. See Tr. at
4:17-21 (Wolf). The Haynes argue that the Court can decide
the MTR, “considering the same factors that would have
been address[ed] had we [sought] leave to amend the complaint
and join the defendant.” Tr. at 4:25-5:2 (Wolf).
According to the Haynes, in making this determination, the
Court should apply the rule 20(a) factors, as it did in
Hernandez. See Tr. at 5:8:12 (Wolf). The
Court asked the Haynes to recap Hernandez'
facts, and the Haynes confirmed for the Court that, in that
case, the plaintiff “sought leave to add a
defendant.” Tr. at 5:16 (Court). See id. at
5:13-19 (Court, Wolf). According to the Haynes, in
Hernandez, the Court analyzed whether to bar the
amendment. See Tr. at 5:21-24 (Wolf). Although the
Haynes conceded that “some courts have seen . . . a
tension between rule 15(a) [and] 1447[(e)], ” Tr. at
6:2-3 (Wolf), the Haynes requested that, regardless the
procedure for amendment, the Court “determine whether
or not the addition . . . of MD Peters Appraisals” and
remand are “proper, ” Tr. at 6:10-12 (Wolf).
According to the Haynes, even when a party amends under rule
15(a), the Court “gets to make the decision as to
whether or not that amendment and the joinder . . . is
proper.” Tr. at 7:3-7 (Wolf).
to the second issue, the Court asked the Haynes about
Peters' relationship to MD Peters Appraisals.
See Tr. at 7:8-10 (Court). The Haynes identified
Peters as “the principal of that corporate
entity.” Tr. at 7:11-12 (Wolf). The Court then inquired
why the Haynes joined MD Peters Appraisals, and the Haynes
explained that they anticipated that: (i) Peters might cite
Peters Appraisals to downplay his personal liability; (ii)
HSBC Mortgage might contend that it contracted with Peters
Appraisals and not with Peters; and (iii) an insurance policy
might cover Peters Appraisals rather than Peters.
See Tr. at 8:24-9:24 (Wolf). The Haynes confirmed
for the Court that Peters Appraisals might be liable for
Peters' -- it's agent's -- actions or that Peters
Appraisals might face liability under other theories.
See Tr. at 9:25-10:11 (Court, Wolf). The Haynes
summarized the rule 20(a) factors that counsel permitting
joinder: (i) the Haynes timely filed the Amended Complaint;
(ii) joinder threatens no prejudice for the Peters
Defendants, as the Haynes gave both Peters and Peters
Appraisals notice of the suit, and neither party has
commenced discovery; (iii) denying joinder would prejudice
the Haynes, because Peters might avoid personal liability;
and (iv) the Haynes do not act in bad faith, because they
join a corporate entity against which they have valid claims.
See Tr. at 10:23-13:12 (Wolf). The Haynes repeated
their contention that, here, removal's purposes are not
served, because Peters Appraisals is a New Mexico entity,
and, at the time of the disputed events, Peters was also a
New Mexico citizen. See Tr. at 14:10-19 (Wolf).
HSBC Mortgage took no position on the MTR, the Court turned
to the Peters Defendants. See Tr. at 14:21-25
(Court, Dranttel). The Peters Defendants averred that,
traditionally, in professional malpractice and similar suits,
a plaintiff could not sue an entity -- like Peters Appraisals
-- without suing the agent -- like Peters, but that a
plaintiff could sue an agent without suing an entity.
See Tr. at 15:6-16 (Stambaugh). The Peters
Defendants, however, conceded that often plaintiffs sue both
the entity and the agent, and that the Peters ...