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August 1, 1995

PAUL S. BURKA, et al., Plaintiffs,
AETNA LIFE INSURANCE CO., et al., Defendants.

The opinion of the court was delivered by: CHARLES R. RICHEY



 On July 26, 1995, the Court held a hearing on the following four Motions now pending before it: (1) the Defendant's Motion to Substitute; (2) the Plaintiffs' Motion to Join the American University as an Indispensable Party Defendant and to Amend the Complaint to Reflect Such Joinder and Seek Other and Further Relief or, alternatively, to Remand Matter to D.C. Superior Court or Dismiss Without Prejudice; (3) Defendant's Motion to Strike Jury Demand; and (4) Motion of American University to Amend and Supplement Answer. After hearing from counsel for the Plaintiffs, counsel for the Defendant Aetna, and counsel for American University, the Court took the matter under advisement.

 Upon careful consideration of the pleadings extant, the relevant law, and the entire record herein, the Court has determined that the Defendant's Motion to Substitute American University as a party defendant under Rule 25(c) of the Federal Rules of Civil Procedure shall be granted. The Court shall also allow the filing of the Plaintiffs' Amended Complaint and Defendant American University's amended and supplemented Answer.


 The key question presented by the instant pleadings is how, as a matter of procedure, American University should become a part of this case. All parties, including American University ("AU"), agree that AU should be a defendant in this suit because it now owns the subject property. However, the Plaintiffs quarrel with Aetna and AU over whether the proper vehicle for accomplishing this objective is Rule 25(c) or, as the Plaintiffs urge, Rule 19 of the Federal Rules of Civil Procedure.

 It is obvious that the reason why the Plaintiffs argue for joinder under Rule 19 is that, under 28 U.S.C. § 1447(e), the Court could remand the case to Superior Court if such joinder would destroy diversity. More specifically, that provision states that "if after removal the plaintiff seeks to join additional plaintiffs 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 option of remanding the case is evidently not available to the Court if AU is substituted in as a party defendant pursuant to Rule 25(c). Because all parties agree that AU is a proper party to this case (and the Plaintiffs' argument is solely designed to change the forum in which this case is heard), and because Rule 25(c) properly applies to this case on its face, the Court disagrees with the Plaintiffs that joinder under Rule 19 followed by remand to the Superior Court is the appropriate course.

 Rule 25(c) of the Federal Rules of Civil Procedure provides that "in the case of any transfer of interest, the action may be continued by or against the original party, unless the court upon motion directs the person to whom the interest is transferred to be substituted in the action or joined with the original party." The Supreme Court held in Freeport-McMoRan, Inc. v. K N Energy, Inc., 498 U.S. 426, 112 L. Ed. 2d 951, 111, 111 S. Ct. 858 S. Ct. 858 (1991), that the addition of a nondiverse party under Rule 25(c) does not divest the court of jurisdiction. In Freeport-McMoRan, the plaintiff, like Defendant Aetna in the instant case, transferred its interest in the contract at issue to another entity for business reasons unrelated to the litigation after the suit was filed. Observing that "diversity of citizenship is assessed at the time the action is filed," the Supreme Court held that "diversity jurisdiction, once established, is not defeated by the addition of a nondiverse party to the action." Id. at 428.

 The Plaintiffs do not contest this principle, but argue rather that this Court never had subject matter jurisdiction over the instant case because AU was an indispensable party at the onset of the litigation. The Plaintiffs further submit, however, that they do not seek retroactive application of their jurisdictional argument. In other words, the Plaintiffs represent that they will live with the unfavorable rulings of this Court and the Court of Appeals -- even though they were made by courts purportedly lacking jurisdiction over this case -- but that the absence of jurisdiction now demands remand to the Superior Court, pursuant to 28 U.S.C. § 1447(e), for resolution of the remaining issues in the suit.

 As an initial matter, the Court finds that Rule 25(c) and Freeport-McMoRan plainly apply to the instant suit. Aetna transferred its interest in the subject property to AU for business reasons unrelated to this litigation and, because diversity of citizenship existed as between the Plaintiffs and Aetna with the filing of the Complaint, the addition of a non-diverse party (AU) at this juncture cannot and does not destroy subject matter jurisdiction. As all parties agree that AU should be a party defendant in this case, and as Rule 25(c) neatly applies to accomplish this uncontested end, the Court sees no reason why the Defendant's Motion to Substitute should not be granted. *fn1"

 In turn, the Court finds without merit the Plaintiffs' argument that the American University should be joined as an indispensable party defendant and the case remanded to Superior Court. "Whether to permit joinder [under § 1447(e)] is clearly within the sound discretion of the court." Buttons v. National Broadcasting Co., 858 F. Supp. 1025, 1026 (C.D. Cal. 1994). See also Morze v. Southland Corp., 816 F. Supp. 369, 370 (E.D. Pa. 1993) ("[Section 1447(e)] compels courts to exercise discretion when deciding whether to remand a case to state court by balancing the equities involved and weighing the interests and prejudices to each party involved."). The Plaintiffs, however, cast their argument in jurisdictional terms. That is, the Plaintiffs assert that if AU was a necessary and indispensable party at the time of the filing of the Complaint, the Court -- irrespective of the whether joinder is granted -- lacks subject matter jurisdiction over this litigation.

 However, this argument is foreclosed by the law of this Circuit. In particular, the Court of Appeals has made clear that "failure to join a party, even one determined, after the requisite careful, practically-oriented analysis, to be needed for just adjudication, indeed even one so needed as to attract the conclusion-reporting label 'indispensable,' never strips a tribunal of its subject matter jurisdiction or of its authority over the persons before it." Ford Motor Co. v. Interstate Commerce Commission, 230 U.S. App. D.C. 92, 714 F.2d 1157, 1160 (D.C. Cir. 1983) (emphasis added; footnote omitted). Rather, the "'jurisdiction' fallacy" or "'heresy'" entertained by the Plaintiffs "'has been rejected over and over again by authoritative cases.'" Id. at 1161 (quoting Fed. R. Civ. P. advisory committee notes on the 1966 amendments (internal quotation marks omitted); C. Wright, Law of Federal Courts 465 (4th ed. 1983)). See also Ente Nazionale Idrocarburi v. Prudential Securities Group, Inc., 744 F. Supp. 450, 456 (S.D.N.Y. 1990) ("The concept of indispensability does not concern the Court's subject matter jurisdiction as much as it deals with the ability or right of the Court to make an equitable adjudication. The major question is whether the court can render a decision which will not impair the rights of the absent party."). Thus, it is the joinder of a non-diverse party under Rule 19 -- and not the mere purported existence of a "necessary and indispensable" party -- that destroys subject matter jurisdiction. The Court therefore finds the Plaintiffs' argument that the Court lacks subject matter jurisdiction over this case completely misplaced.

 In any event, courts have held that the tests for determining whether parties are "necessary" or "indispensable" under Rule 19 do not apply to an inquiry under 28 U.S.C. § 1447(e), which invokes a discretionary standard. See Pasco Int'l (London) Ltd. v. Stenograph Corp., 637 F.2d 496, 500 (7th Cir. 1980); Wyant v. National R.R. ...

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