Appellate Law

CA1: standard of review in joinder and supplemental jurisdiction in an insurance-coverage diversity case

By S. COTUS

Picciotto v. Continental Casualty, No. 06-2685.  The First starts of 2008 with my favorite kind of case: insurance coverage.  Or at least I say this is my favorite kind of case.  This litigation has been ongoing from some time, and seems to currently involve collateral litigation against an attorney?s malpractice carrier and claims for fees by said attorneys.  There is a state-law case pending against the lawyer.  But, this case is between the original plaintiffs and the insurance carriers, based on diversity jurisdiction ? i.e. 28 U.S.C. § 1332 ? , and alleging  civil conspiracy to interfere tortiously with the contractual relations between the Picciottos and their attorneys.  The insurers claim that the federal suits is really an attempt to obtain discovery in a state-court suit against the lawyers, and the lawyers are really a ?necessary and an indispensable? under FRCP 19.  Of course, joinder wouldn?t be feasible since it would destroy complete diversity.  The District Court concluded that the lawyers were necessary and indispensable, and therefore, the case must be dismissed.

Read on.  I mean it.

The First, as a matter of first impression holds that the standard of review in reviewing a determination that a party is "indispensable" under Rule 19(b) for abuse of discretion party is "mecessary" under Rule 19(b) is ?abuse of discretion.?  The First just looks at other circuits, but doesn?t provide any real analysis of this issue.  Look at Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546 (2005), the First concludes that the ?new? statute does not provide any affirmative grants of jurisdiction.

The First does some interesting analysis and concludes that, yes, there are important interests of the lawyer-defendant to be protected, namely, that she needs to ?maximizing her available coverage by protecting her current insurance coverage and insurance-paid defense.?  So, she is a necessary party.  Applying the factors in 19(b), the First finds that it was not an abuse of discretion to find that it would be ?difficult if not impossible? to shape relief in a way that would implicate the lawyer?s interests.  Anyway, you can read it to see the way they analyze the FRCP 19(b) factors, which essentially comes down to the fact that the insurance companies could be joined in the state-court lawsuits, even if the statute of limitations has passed (but the First says it probably hasn?t.)

The plaintiffs had argued that  the adoption of the supplemental jurisdiction statute, 28 U.S.C. § 1367, in 1990, changes things, and now the supplemental jurisdiction statute means that, even in diversity cases, the joinder of nondiverse parties, when no claims are asserted against them, is now "feasible."

Full post as published by Appellate Law and Practice on January 07, 2008 (boomark / email).