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Civil Practice – Diversity Jurisdiction – Fraudulent Joinder – Necessary Party – Remand

By: S.C. Lawyers Weekly staff//May 7, 2012

Civil Practice – Diversity Jurisdiction – Fraudulent Joinder – Necessary Party – Remand

By: S.C. Lawyers Weekly staff//May 7, 2012

Essex Homes Southeast, Inc. v. CommunityOne Bank, N.A. (Lawyers Weekly No. 002-081-12, 7 pp.) (Cameron McGowan Currie, J.) 0:12-cv-00426; D.S.C.

Holding: Even though plaintiff’s original complaint failed to state any claim against the only S.C. defendant named therein, plaintiff timely amended its complaint and added an S.C. defendant against which it does appear to have a claim.

The defendant-bank’s motion to strike the amended complaint is denied. Plaintiff’s motion to remand to state court is granted.

The only S.C. defendant named in the original complaint was a homeowners’ association (HOA). The complaint sought an equitable lien on unsold lots in the HOA’s subdivision. However, because the complaint did not directly seek priority over any lien which the HOA might have had on the unsold lots, there was no allegation which directly affected any HOA lien. Nor was there any allegation that the HOA, in fact, holds liens against the unsold lots (as opposed to having the right to assert a lien under certain unspecified circumstances).

There is no possibility that plaintiff will be able to establish this cause of action against the HOA pursuant to the original complaint. Thus, removal to federal court was proper.

Even if one purpose of plaintiff’s amended complaint was to defeat federal jurisdiction, some of the information supporting the new allegations was unknown to plaintiff until after the original complaint was filed. Although it may be difficult or even impossible to collect a judgment from the new defendant-contractor, this does not mean that claims asserted against the contractor are fraudulent or otherwise asserted for an improper purpose. There may be a variety of legitimate reasons for pursuing judgment against an apparently judgment-proof entity. Including the contractor may offer certain strategic advantages, particularly if, as suggested by its motion to dismiss, the bank intends to argue that the contractor bears sole responsibility for any alleged wrongs.

Plaintiff was not dilatory in filing its amended complaint.

If the amendment is not allowed, the matter might proceed without necessary parties or necessitate multiple parallel proceedings in different courts.

The court finds that one or more of the claims asserted against the S.C. contractor are facially valid such that this defendant has not been fraudulently joined.


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