Various plaintiffs (Baclaan plaintiffs) filed a motion to remand and/or abstain and a motion for leave to name a new party defendant. Other groups of plaintiffs (Toro plaintiffs and Hopkins plaintiffs) filed similar motions in their respective cases. Defendant Arter & Hadden LLP (A&H) filed a joint memorandum in opposition to all three motions, to which all three groups of plaintiffs replied. The court granted all the motions and remanded all cases to state court.
Baclaan and Toro plaintiffs are class actions and Hopkins is an individual action, all originally filed in state court in December 2002. All alleged they were induced to settle for nuisance value with Combustion Engineering, and after settlement discovered false responses to interrogatories. The plaintiffs alleged that defendants The Travelers Insurance Company and The Travelers Indemnity Company (Travelers defendants) designed a scheme implemented by their attorneys to withhold information to induce nuisance settlements. Beginning in 2003, Travelers defendants removed these cases at different times based upon various jurisdictional bases. After a number of procedural occurrences, the Baclaan plaintiffs filed these motions in 2016.
First, the Baclaan plaintiffs argued that diversity jurisdiction did not exist at the time of removal because defendant C.-P. Char, an attorney, was a Hawaii resident, and his unforeseen death after the filing of their complaint did not extinguish their claims against him. Second, the “related-to” jurisdiction did not exist at the time of removal because there was not enough of a connection between their claims and Combustion Engineering’s bankruptcy proceeding. Third, since neither diversity nor related-to jurisdiction existed, there was no basis for supplemental jurisdiction over the state law claims.
Regarding diversity, Travelers defendants argued that Char’s citizenship had to be disregarded because he died prior to removal. The court found that that under Hawaiian law personal actions died with the person. Thus at the time of removal, there was complete diversity amongst the parties.
After removal the Baclaan and Toro plaintiffs attempted to join the law firm of Char Hamilton, a Hawaii corporation and non-diverse defendant which allegedly was part of the conspiracy to induce the plaintiffs to accept artificially low settlement amounts. Under Section 1447(e), courts examine six factors in determining whether to allow the addition of a non-diverse defendant. The following factors weighed in favor of joinder: no unexplained delay; timely joinder; validity of claims. Although “the issue of whether the intent behind the joinder of Char Hamilton was to defeat diversity jurisdiction is a close one,” the death of Char was unforeseen; thus the court could not find that the joinder of Char Hamilton was solely to defeat federal jurisdiction. Since four of the six factors weighed in favor of allowing joinder, the court allowed the joinder of Char Hamilton, which defeated diversity jurisdiction.
The court also analyzed “related-to” jurisdiction; although this existed, the court remanded based upon equitable factors. The court declined to exercise supplemental jurisdiction.