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PCM Designs, Inc. v. Acuity Insurance Co.

United States District Court, N.D. Indiana, Hammond Division

May 7, 2015



PAUL R. CHERRY, Magistrate Judge.

This matter is before the Court on Plaintiffs' First Motion for Leave of Court to Amend Complaint Adding Additional Necessary Parties [DE 12], filed by Plaintiff PCM Designs, Inc. d/b/a ScreenMe Printing ("PCM Designs") on March 31, 2015. The Court set an April 14, 2015 response deadline and an April 21, 2015 reply deadline. Defendant Acuity Insurance Company ("Acuity") filed its response brief on April 13, 2015. PCM Designs did not file its reply brief until April 24, 2015, three days late.[1] In the interests of justice, the Court considers the reply brief.


This lawsuit arises out of a fire that occurred on the premises of 8004 Tyler Street, in Merrillville, Indiana, on January 29, 2014. At the time of the fire, the premises were owned by Tyler Street, LLC, and Plaintiff PCM Designs leased a unit from Tyler Street, LLC. Carl Gasaway is the sole member of Tyler Street, LLC. Gasaway, who resides in Crown Point, Indiana, is a citizen of Indiana for purposes of diversity jurisdiction. Gasaway operated his own business in another unit within the 8004 Tyler Street property immediately adjacent to PCM Designs' unit at the time of the fire.

Prior to the fire, PCM Designs purchased a property and general liability insurance policy from Defendant Acuity that was in effect at the time of the fire. After the fire, Acuity conducted a presuit investigation, including taking a deposition and polygraph examination of PCM Designs' principal as well as obtaining documents from PCM Designs that included all business and personal banking records from Paul McKamey and PCM Designs, Inc. As of the filing date of PCM Designs's reply brief, Acuity had not paid PCM Designs any money under the insurance policy.

After receiving the formal denial of all claims, PCM Designs filed a Complaint against Acuity in the Lake County, Indiana, Circuit Court on December 9, 2014, alleging bad faith, breach of contract, and defamation. The defamation claim contains allegations that Acuity wrote a letter to PCM Designs accusing PCM Designs of intentionally setting the fire. On February 5, 2015, Acuity removed the matter to this Court. On February 26, 2015, after the case was removed and when the Lake Circuit Court no longer had jurisdiction over the case, PCM Designs filed an Amended Complaint in the Lake Circuit Court. Acuity filed a motion to strike the Amended Complaint in the state proceeding.

On March 31, 2015, PCM Designs filed the instant Motion for Leave to Amend Complaint, which is now fully briefed. On April 2, 2015, the Court held a preliminary pretrial conference and set all dates through trial in this case.


In the instant motion, PCM Designs seeks leave to join two new defendants: Carl Gasaway and Tyler Street, LLC. In the proposed amended complaint, PCM Designs asserts a claim of arson against Gasaway, alleging that he did "knowingly, intentionally, or recklessly cause the Premises to burn, causing direct economic harm to Plaintiff." (Pl. Mot. Ex. 1, p. 5). Therein, PCM Designs also alleges claims of negligence against Gasaway and Tyler Street LLC on the basis that each breached its duty of reasonable care to prevent harm to the "Premises" by failing to have in place certain fire prevention measures, security measures, and/or fire mitigation systems. In the motion, PCM Designs asserts that Tyler Street, LLC is a necessary party because it was the true owner and lessor of the premises located at 8004 Tyler Street, Merrillville, Indiana, and because it allegedly negligently, recklessly, or intentionally caused the fire. Similarly, PCM Designs argues that Gasaway is a necessary party because he occupied the adjacent premises and because he allegedly negligently, recklessly, or intentionally caused the fire. Acuity opposes the addition of Gasaway and Tyler Street, LLC as defendants, arguing that PCM Designs is attempting to join them post-removal in order to destroy diversity, as both are citizens of Indiana like PCM Designs, which would result in the case being remanded to state court.

In its motion, PCM Designs cites only the standard for amendment of pleadings under Federal Rule of Civil Procedure 15. However, the proper standard for determining whether to allow post-removal joinder of a defendant whose addition would destroy diversity jurisdiction is governed by 28 U.S.C. § 1447(e). See Papachristos v. Hilton Mgmt., LLC, No. 14 CV 5501, 2015 WL 1094852, at *2 (N.D. Ill. Mar. 10, 2015) (citing Roppo v. Travelers Ins. Co., No. 13 CV 5569, 2014 WL 3810580, at *3 (N.D. Ill. Aug. 1, 2014) ("[W]hen a party has been joined after the case has been removed to federal court, the court should apply 28 U.S.C. § 1447-which addresses post-removal procedures-in lieu of Rule 15." (internal quotations and citation omitted)); Sparrow v. Menard, Inc., No. 11 CV 608, 2011 WL 4833116, at *1 (S.D. Ind. Oct. 12, 2011) (same)).

Pursuant to § 1447(e), "[i]f after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court." 28 U.S.C. § 1447(e). The Seventh Circuit Court of Appeals has identified a four-factor test to determine whether post-removal joinder of a nondiverse party is appropriate. Schur v. L.A. Weight Loss Cntrs., Inc., 577 F.3d 752, 759 (7th Cir. 2009). The Court considers: "(1) the plaintiff's motive for seeking joinder, particularly whether the purpose is to defeat federal jurisdiction; (2) the timeliness of the request to amend; (3) whether the plaintiff will be significantly injured if joinder is not allowed; and (4) any other relevant equitable considerations." Id. It is within the Court's discretion to grant or deny joinder and the court should balance certain equities to make this determination. Id.

1. PCM Designs' Motive for Seeking Joinder

The Court first considers PCM Designs' motive for seeking joinder, particularly whether its purpose was solely to defeat federal jurisdiction.

Although the doctrine of fraudulent joinder does not control in questions of post-removal joinder and is not coextensive with the question of motive, the Seventh Circuit Court of Appeals has held that fraudulent joinder, when argued by a defendant, can be a relative factor in determining whether to permit joinder under § 1447(e). Schur, 577 F.3d at 764. To establish fraudulent joinder, a notably difficult task, a defendant must demonstrate that, "after resolving all issues of fact and law in favor of the plaintiff, the plaintiff cannot establish a cause of action against the in-state defendant.'" Id. (quoting Poulos v. Naas Foods, Inc., 959 F.2d 69, 73 (7th Cir. 1992)). In ...

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