United States District Court, D. South Dakota, Southern Division
ORDER GRANTING PLAINTIFF'S MOTION TO AMEND FIRST
AMENDED COMPLAINT AND REMAND CASE TO STATE COURT
E. SCHREIER UNITED STATES DISTRICT JUDGE
Consumer Supply Distributing, LLC (CSD), brings this action
against defendants, Ted M. Brands and Larry Steinkamp. CSD
alleges seven counts against Brands and Steinkamp in its
amended complaint: misappropriation of trade secrets, breach
of fiduciary duty and duty of loyalty, conversion, unjust
enrichment, tortious interference with contracts and business
relationships, and unfair competition. CSD moves to amend the
amended complaint to add Jeff Reinders and NewStar Sourcing
and Services, LLC as additional parties and to remand the
case back to the Circuit Court of Union County, South Dakota.
Brands and Steinkamp resist CSD's motion to amend. For
the reasons stated below, the court grants CSD's motion.
facts alleged by CSD in its proposed second amended complaint
are as follows:
manufactures, develops, sells, and distributes agricultural
feed products throughout the United States. Docket 11-1 at 3.
Brands, Steinkamp, and Reinders were all employees of CSD.
Id. at 3-4. Brands, Steinkamp, and Reinders had
access to confidential information including stock status
reports, sales reports, customer lists, volume orders, key
venders, key suppliers, and pricing information. Id.
Due to the time and resources used to assemble this
information, CSD considers this data important. Id.
at 4. CSD limits its employees' access to this
information to those that need it. Id. This
information is not public information. Id. Keeping
this information confidential is important to prevent a
competitor from gaining an unfair advantage. Id.
about January 15, 2017, Brands resigned from his role as
Business Development Manager without giving notice to CSD.
Id. at 5. Several other members of CSD's sales
team resigned and became employed by NewStar including Greg
Lawfer, Keith Prohaska, Richard Pearl, Bill McPherson, Ron
Roering, and Keith Snyder. Id.
resigned without notice as a distribution salesperson for
CSD, on or about March 9, 2017, and Reinders resigned on
December 15, 2016. Id. at 2. After Brands and
Steinkamp resigned, they took confidential, proprietary, and
trade secret information, including customer lists.
Id. at 5. When all three employees resigned, they
accepted positions or developed a business relationship with
NewStar, another company that sells agricultural feed
products. Id. at 5-6.
commenced this action against Brands and Steinkamp in state
court on March 7, 2017. Docket 1-1. The first amended
complaint was dated March 15, 2017. Id. Brands and
Steinkamp filed a notice of removal on April 11, 2017.
Id. Removal was based on diversity jurisdiction.
Id. CSD is a corporation with its principal place of
business in North Sioux City, South Dakota, and is
incorporated under the laws of Minnesota. Docket 11-1 at 1.
Brands resides in Oakland, Nebraska, and Steinkamp resides in
Lake View, Iowa. Id. CSD now moves to amend its
amended complaint to add parties and claims. Docket 11. One
of the defendants CSD seeks to add is Reinders, a South
Dakota resident. Id. Because Reinders is from
Pickstown, South Dakota, and CSD's principal place of
business is South Dakota, diversity jurisdiction would be
destroyed if the motion to amend is granted.
moves to amend its complaint for a second time, arguing that
there are additional defendants subject to similar claims.
“A party may amend its pleading once as a matter of
course within . . . 21 days after serving it.”
Fed.R.Civ.P. 15(a)(1)(A). “In all other cases, a party
may amend its pleading only with the opposing party's
written consent or the court's leave.” Fed.R.Civ.P.
motions to amend are freely granted when justice so requires.
Fed.R.Civ.P. 15(a). This standard changes, however, when the
plaintiff seeks to amend its complaint and the amendment
would destroy the court's subject matter jurisdiction. In
this situation, the Eighth Circuit Court of Appeals has
adopted the rationale of the Fifth Circuit Court of Appeals
in Hensgens v. Deere & Co., 833 F.2d 1179, 1182
(5th Cir. 1987):
‘The district court, when faced with an amended
pleading naming a new nondiverse defendant in a removed case,
should scrutinize that amendment more closely than an
ordinary amendment. . . . In this situation, justice requires
that the district court consider a number of factors to
balance the defendant's interests in maintaining the
federal forum with the competing interests of not having
parallel lawsuits.' Bailey v. Bayer CropScience
L.P., 563 F.3d 302, 309 (8th Cir. 2009) (quoting
Hensgens, 833 F.2d at 1182).
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). If the plaintiff can show that the new
parties are indispensable, joinder is required. Fed.R.Civ.P.
19. When the potential defendant is dispensable, the district
court may ...