Liberty Mutual Ins. Co. v. Harvey Gerstman Assocs. Inc.
U.S. DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
Judge Sandra Feuerstein
Insurer Liberty Mutual sued the Gerstman parties under the court's diversity jurisdiction. After Liberty Mutual voluntarily withdrew its claims all that remained were the Gerstman parties' counterclaims and their third-party action charging USI Holdings Corp. with negligent misrepresentation, fraud in the inducement, contribution and indemnification. Adopting a magistrate judge's Sept. 12, 2012, report and recommendationsto which no party objecteddistrict court dismissed the Gerstman parties' counterclaims, such that only the third-party claims against USI remained. The third-party complaint was dismissed without prejudice pursuant to 28 USC §1367(c). Despite having jurisdiction over the original action on the basis of diversity of citizenship between Liberty Mutual and the Gerstman parties, the court lacked original jurisdiction over the third-party complaint given that upon commencement the Gerstman parties were all New York citizens as was Delaware incorporated USI, whose principal place of business was New York. In declining to exercise its supplemental jurisdiction over the third-party complaint, district court noted that the third-party complaint was filed less than a year ago, USI's answer thereto was filed less than nine months ago, and that there had been neither formal discovery proceedings nor entry of a discovery schedule.