CP Solutions PTE, LTD. v. Gen. Elec. Co., No. 07-3444 (2d Cir. 2009)

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07-3444-cv CP Solutions PTE, LTD. v. Gen. Elec. Co. 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 -------- 4 August Term, 2008 5 6 (Argued: December 1, 2008 Decided: January 6, 2009) 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Docket No. 07-3444-cv -----------------------------------------------------------X CP SOLUTIONS PTE, LTD., Plaintiff-Appellant, - v. GENERAL ELECTRIC CO., GE INDUSTRIAL SYSTEMS, GE MULTILIN POWER MGMT LENTRONICS, GE FANUC AUTOMATION NA and GE METER, Defendants-Appellees. -----------------------------------------------------------X Before: McLAUGHLIN, B.D. PARKER, Circuit Judges, and KOELTL, District Judge.* Plaintiff appeals the dismissal of its complaint for lack of 26 subject matter jurisdiction by the United States District Court 27 for the District of Connecticut (Arterton, J.). 28 REVERSED AND REMANDED. * The Honorable John G. Koeltl of the United States District Court for the Southern District of New York, sitting by designation. 1 2 3 4 5 6 7 8 9 10 11 12 13 ROBERT K. KRY, Baker Botts LLP, Washington, D.C. (Michael S. Goldberg, Jeffrey A. Lamken, Alexandra M. Walsh, Baker Botts LLP, Washington, D.C.; Elizabeth Acee, Tyler Cooper, New Haven, Connecticut, on the brief), for Plaintiff-Appellant. THOMAS J. DONLON, Robinson & Cole, LLP, Stamford, Connecticut, for DefendantsAppellees. PER CURIAM: Plaintiff CP Solutions PTE, LTD. ( CP Solutions ) appeals 14 from a judgment of the United States District Court for the 15 District of Connecticut (Arterton, J.) dismissing its complaint 16 for lack of diversity jurisdiction. 17 dismiss because both CP Solutions and defendant GE Multilin Power 18 Management Lentronics ( GE Multilin ) were foreign citizens. 19 district court held that GE Multilin was indispensable and 20 therefore could not be dropped as a party, leaving the court 21 without subject matter jurisdiction. 22 Multilin was not an indispensable party, we REVERSE the district 23 court s judgment and REMAND. 24 25 The defendants moved to The Because we conclude that GE BACKGROUND CP Solutions alleged the following in its complaint. In 26 December 2002, CP Solutions, a Singapore corporation, contracted 27 with a Malaysian entity called Tru-Tech Electronics ( Tru-Tech ). 28 CP Solutions agreed to procure parts that Tru-Tech needed in 29 order to assemble electrical products under agreements with 2 1 various General Electric ( GE ) companies, including GE Multilin. 2 As part of the GE companies arrangement with Tru-Tech, they 3 furnished Tru-Tech with circuits to be integrated into the 4 electrical products. 5 circuits, ran up a large debt to the GE companies. 6 set-off clause in their contracts, the GE companies were 7 permitted to deduct any amount that Tru-Tech owed them from the 8 amount payable to Tru-Tech for the electrical products. 9 Tru-Tech, which was required to pay for the Pursuant to a Because of the debt, CP Solutions refused to procure parts 10 for Tru-Tech without assurance from the GE companies that they 11 would not claim a set-off against payments owed to CP Solutions. 12 In January 2003, the GE companies orally agreed either to pay CP 13 Solutions directly or to guarantee payment, and not to claim a 14 set-off against monies due CP Solutions. 15 made similar statements in writing. 16 GE companies denied that they had a contract with CP Solutions 17 and claimed a set-off for the amount Tru-Tech owed them against 18 payments due CP Solutions. 19 The GE companies later In July 2003, however, the In April 2004, CP Solutions sued GE Co., GE Industrial 20 Systems, GE Fanuc Automation North America, GE Meter, and GE 21 Multilin in the Central District of California, seeking damages 22 for breach of contract, fraud, and other causes of action. 23 complaint alleged that GE Multilin was a business entity, form 24 unknown, with its principal place of business in 3 The 1 . . . Ontario, Canada. 2 the defendants, but instead alleged that the GE employees whose 3 actions were central to the claims bound all of the defendants 4 and that the defendants were agents of one another. 5 was based on diversity of citizenship. 6 CP Solutions did not differentiate among Jurisdiction In December 2004, the district court in California 7 transferred the case to the District of Connecticut. The parties 8 proceeded to discovery. 9 after the case was filed, the defendants moved to dismiss the In November 2006, more than two years 10 suit for lack of subject matter jurisdiction. 11 diversity of citizenship did not exist because both CP Solutions 12 and GE Multilin were foreign citizens. 13 maintained that GE Multilin was an indispensable party and 14 therefore could not be dropped to preserve jurisdiction. 15 They argued that The defendants also CP Solutions opposed the motion to dismiss on the grounds 16 that: (1) GE Multilin Power Management Lentronics, the party 17 named in the complaint, never existed; (2) a Canadian subsidiary 18 of GE Co. named GE Multilin, Inc. existed until it was dissolved 19 in February 2004, with its assets and liabilities passing to 20 another GE company; and (3) a nonexistent or dissolved entity is 21 not an indispensable party pursuant to Federal Rule of Civil 22 Procedure 19. 23 to omit GE Multilin and to allege that only GE Co. breached the 24 contract. CP Solutions also proposed to amend the complaint 4 1 In January 2007, the district court granted the defendants 2 motion to dismiss. The court recognized that a nondiverse party 3 can be dropped from a suit to preserve diversity jurisdiction, 4 but held that GE Multilin (which it construed to be GE Multilin, 5 Inc.) could not be omitted because it was indispensable to CP 6 Solutions s breach-of-contract claim. 7 [a] party to a contract which is the subject of the lawsuit is 8 the paradigm of an indispensable party. CP Solutions PTE, LTD. 9 v. Gen. Elec. Co., 470 F. Supp. 2d 151, 157 (D. Conn. 2007) The court reasoned that 10 (quoting Travelers Indem. Co. v. Household Int l, Inc., 775 F. 11 Supp. 518, 527 (D. Conn. 1991)). 12 CP Solutions to file its amended pleading. 13 The court also refused to allow CP Solutions moved for reconsideration. In July 2007, the 14 district court adhered to its ruling. 15 factors relevant to determining whether a party is indispensable 16 and found that: (1) a judgment rendered without GE Multilin as a 17 party might deprive CP Solutions of the opportunity to recover 18 all of its damages, (2) the court could not conceive of a way to 19 minimize this prejudice, (3) omitting GE Multilin would likely 20 lead to piecemeal litigation, and (4) CP Solutions could sue all 21 of the defendants in state court. 22 CP Solutions now appeals. 5 The court applied four 1 DISCUSSION 2 We review a district court s decision as to whether a party 3 is indispensable for abuse of discretion. 4 v. St. Paul Fire & Marine Ins. Co., 312 F.3d 82, 87 (2d Cir. 5 2002). 6 error of law or a clearly erroneous factual finding, or cannot be 7 located within the range of permissible choices. 8 Verizon N.Y., Inc., 252 F.3d 163, 169 (2d Cir. 2001). 9 Universal Reins. Co. A court abuses its discretion if its decision rests on an Zervos v. District courts possess original jurisdiction over actions 10 between citizens of a State and citizens or subjects of a 11 foreign state, and between citizens of different States and in 12 which citizens of a foreign state are additional parties. 13 U.S.C. § 1332(a)(2), (3). 14 however, where on one side there are citizens [of a State] and 15 aliens and on the opposite side there are only aliens. 16 Universal Licensing Corp. v. Paola del Lungo S.p.A., 293 F.3d 17 579, 581 (2d Cir. 2002). 18 GE Multilin are both foreign citizens and that therefore 19 diversity is lacking unless CP Solutions can amend the complaint 20 to omit GE Multilin.1 28 Diversity jurisdiction does not exist, The parties agree that CP Solutions and 21 Federal Rule of Civil Procedure 21 allows a court to drop a 22 nondiverse party at any time to preserve diversity jurisdiction, 1 CP Solutions does not challenge the district court s conclusion that, by naming GE Multilin as a defendant, it intended to sue GE Multilin, Inc., the Canadian corporation dissolved in 2004. We therefore accept that conclusion for purposes of this appeal. 6 1 Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 832 (1989), 2 provided the nondiverse party is not indispensable under Rule 3 19(b),2 see Curley v. Brignoli, Curley & Roberts Assocs., 915 4 F.2d 81, 89 (2d Cir. 1990). 5 (1) whether a judgment rendered in a person s absence might 6 prejudice that person or parties to the action, (2) the extent to 7 which any prejudice could be alleviated, (3) whether a judgment 8 in the person s absence would be adequate, and (4) whether the 9 plaintiff would have an adequate remedy if the court dismissed 10 the suit. 11 Rule 19(b) specifies four factors: Fed. R. Civ. P. 19(b). In its initial decision, the district court did not apply 12 these factors but instead adopted a bright-line rule that all 13 parties to a contract are indispensable. 14 inconsistent with Rule 19(b) s flexible standard. 15 Reins., 312 F.3d at 87 (noting the flexible nature of [the] Rule 16 19(b) analysis ); Jaser v. N.Y. Prop. Ins. Underwriting Ass n, 17 815 F.2d 240, 242 (2d Cir. 1987) ( [A] court should take a 18 flexible approach when deciding what parties need to be present 19 for a just resolution of the suit. ). 2 Such a rule is See Universal Indeed, we have previously Effective December 1, 2007, Rule 19(b) no longer uses the term indispensable. See Fed. R. Civ. P. 19 Advisory Committee s note to 2007 amendment ( [ Indispensable ] has been discarded as redundant. ). We use the term here for the sake of convenience. In all other respects, we cite the present version of Rule 19. There is no substantive difference between the present rule and the rule as applied by the district court prior to the 2007 amendment. See Republic of Philippines v. Pimentel, 128 S. Ct. 2180, 2184 (2008). 7 1 rejected a party s attempt to rely on the same argument that the 2 defendants assert here. 3 Energy, Inc., 500 F.3d 171, 180 (2d Cir. 2007). 4 demonstrates the frailties of so rigid a rule. 5 See Merrill Lynch & Co. v. Allegheny This case amply Although the district court in its decision on 6 reconsideration identified the correct Rule 19(b) factors, it 7 abused its discretion in applying the factors. 8 two factors, the district court improperly relied on prejudice to 9 CP Solutions. As to the first Whatever prejudice to CP Solutions there might be, 10 it is prejudice the plaintiff is willing to bear and therefore 11 should not have troubled the district court. 12 caused by GE Multilin s absence is considerably less than the 13 prejudice to CP Solutions from dismissal after more than two 14 years of litigation. 15 And any prejudice The relevant question is whether the defendants will be 16 prejudiced if GE Multilin is dropped. See, e.g., Universal 17 Reins., 312 F.3d at 88 (evaluating prejudice to parties arguing 18 that joinder was required). 19 that they will be prejudiced because a judgment for CP Solutions 20 might hold them accountable for GE Multilin s wrongdoing. 21 also argue that a judgment for CP Solutions without GE Multilin 22 might impair GE Multilin s ability to defend itself in a later 23 action. The other GE defendants maintain We find no merit in these contentions. 8 They 1 Given the absence from the complaint of any action 2 attributable only to GE Multilin, the chance that GE Multilin s 3 actions were the sole or primary cause of CP Solutions s damages 4 appears remote. 5 complaint to allege that only GE Co. breached the contract. 6 amendment would ensure that only GE Co. would be subject to 7 liability, and only by virtue of its own duties and actions. 8 Fed. R. Civ. P. 19(b)(2) (requiring courts to consider possible 9 methods to avoid prejudice). In addition, CP Solutions offered to amend the This See Even if this were not the case, the 10 other GE defendants could seek to bring a claim against GE 11 Multilin or its successor company. 12 Inc. v. Shepard Niles, Inc., 11 F.3d 399, 412 (3d Cir. 1993) 13 (rejecting argument that defendant would unfairly bear all of the 14 plaintiff s losses on breach-of-contract claim due to non-joinder 15 because defendant could bring indemnity or contribution action 16 against absent person). 17 See Janney Montgomery Scott, The potential prejudice to GE Multilin also fails to support 18 the district court s conclusion. GE Multilin is dissolved and 19 has no assets. 20 chance to procure blood from a stone. 21 finding to the contrary is unsupported by anything in the record. 22 Nor is there any indication that CP Solutions would want to 23 pursue the GE subsidiary that acquired GE Multilin s assets and 24 liabilities, especially in light of the proposed amended We doubt that CP Solutions would be eager for the 9 The district court s 1 complaint attributing wrongdoing only to GE Co. 2 hypotheticals are insufficient to establish the prejudice that 3 Rule 19(b) contemplates. 4 Committee s note to 1966 amendment (noting that courts should 5 consider whether the prejudice would be immediate and serious, 6 or remote and minor ). 7 Such farfetched See Fed. R. Civ. P. 19(b) Advisory Moreover, even if GE Multilin s conduct remained relevant 8 after it was dropped as a party, GE Co. could champion its 9 interest. See Pujol v. Shearson/Am. Exp., Inc., 877 F.2d 132, 10 135 (1st Cir. 1989) (Breyer, J.) (finding no prejudice to dropped 11 subsidiary in part because parent company would adequately 12 represent its interests). 13 by the same counsel, and the defendants have not alerted us to 14 any evidence that suggests GE Co. s and GE Multilin s interests 15 are adverse. 16 552 F.2d 493, 497 (2d Cir. 1977) (finding no prejudice to dropped 17 parties because counsel for those remaining in the case will be 18 no less vigorous in their advocacy because they represent two 19 fewer persons ). 20 GE Co. and GE Multilin are represented See, e.g., Prescription Plan Serv. Corp. v. Franco, As to the third Rule 19(b) factor, a judgment in GE 21 Multilin s absence would be adequate. [A]dequacy refers to the 22 public stake in settling disputes by wholes, whenever 23 possible. 24 Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, Republic of Philippines, 128 S. Ct. at 2193 (quoting 10 1 111 (1968)). 2 the efficient administration of justice and the avoidance of 3 multiple litigation. Id. (quoting Ill. Brick Co. v. Illinois, 4 431 U.S. 720, 738 (1977)). As we have explained, piecemeal 5 litigation is improbable. In contrast, it would be far more 6 efficient to bring the case to final judgment in federal court 7 than to send the parties to state court for a do-over. 8 9 Thus, this factor concerns the social interest in In evaluating this factor, [w]e are influenced by the procedural posture in which this case comes to us. Merrill 10 Lynch, 500 F.3d at 180. Although the case has not yet been 11 tried, the parties have litigated for over two years, including 12 conducting discovery. 13 to start over in state court simply because an asset-less, 14 dissolved subsidiary of a diverse defendant cannot be joined in 15 federal court. 16 when a defect in diversity jurisdiction can be corrected, 17 requiring dismissal after years of litigation would impose 18 unnecessary and wasteful burdens on the parties, judges, and 19 other litigants waiting for judicial attention ). It would make little sense to require them See Newman-Green, 490 U.S. at 836 (holding that 20 Finally, although CP Solutions might be able to sue GE 21 Multilin together with the other defendants in state court, that 22 consideration is far outweighed by the unfairness to CP Solutions 23 and the harm to judicial economy resulting from dismissal. 24 have said, when federal diversity jurisdiction will exist if 11 As we 1 nondiverse parties are dropped, the bare fact that a state court 2 forum is available does not, by itself, make it appropriate to 3 dismiss the federal action. 4 City of N.Y., 757 F.2d 529, 531 (2d Cir. 1985) (per curiam). Samaha v. Presbyterian Hosp. in 5 Because the question of indispensability is a matter 6 committed to the district court s discretion, Universal Reins., 7 312 F.3d at 87, ordinarily we might vacate the judgment and 8 remand for reconsideration. 9 believe it would be within the permissible range of choices to In this case, however, we do not 10 conclude that GE Multilin is indispensable. 11 at 169. 12 remand with instructions to allow the case to proceed without GE 13 Multilin. We therefore reverse the district court s decision and 14 15 See Zervos, 252 F.3d CONCLUSION For the foregoing reasons, we REVERSE the judgment of 16 dismissal and REMAND the case to the district court with 17 instructions to allow CP Solutions to amend the complaint to drop 18 GE Multilin as a party. 12

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