Summary
granting leave to amend notice of removal to cure defective allegations of citizenship and advising that "if Defendant lacks sufficient information to assert those allegations, it may seek leave from this Court to conduct jurisdictional discovery to ascertain the citizenship of Plaintiff's members"
Summary of this case from Zurich Am. Ins. Co. v. Tangiers Int'l LLCOpinion
1:17–CV–00182 EAW
12-18-2017
250 LAKE AVENUE ASSOCIATES, LLC, Plaintiff, v. ERIE INSURANCE COMPANY, Defendant.
Charles C. Ritter, Jr., Christopher M. Berloth, Duke, Holzman, Photiadis & Gresens, LLP, Buffalo, NY, for Plaintiff. Eric T. Boron, Mura & Storm, PLLC, Buffalo, NY, for Defendant.
Charles C. Ritter, Jr., Christopher M. Berloth, Duke, Holzman, Photiadis & Gresens, LLP, Buffalo, NY, for Plaintiff.
Eric T. Boron, Mura & Storm, PLLC, Buffalo, NY, for Defendant.
DECISION AND ORDER
ELIZABETH A. WOLFORD, United States District Judge
INTRODUCTION
On or about August 25, 2016, plaintiff 250 Lake Avenue Associates, LLC ("Plaintiff") filed a summons and complaint in New York State Supreme Court, Erie County, against Erie Insurance Company ("Defendant"), Erie Insurance Group ("EIG"), and Erie Insurance Company of New York ("EICNY"). (Dkt. 1–1 at 2–10). Plaintiff alleged that it was the holder of an insurance policy that covered certain losses to its premises and business property, and that on or about August 28, 2014, Plaintiff's premises and business property suffered fire damage, resulting in the loss of hundreds of thousands of dollars. (Id. at 5; see id. at 13). Plaintiff sought to compel an appraisal of damages, to enforce that appraisal against Defendant, EIG, and EICNY, and to recover damages for breach of contract. (Id. at 6–9). On January 31, 2017, Plaintiff filed and executed a stipulation of partial discontinuance, voluntarily dismissing the action as against EIG and EICNY. (Id. at 20). On February 28, 2017, Defendant removed this action to federal court by filing a notice of removal to the United States District Court for the Western District of New York. (Dkt. 1).
Presently before this Court is Plaintiff's motion to remand, which argues that Defendant's removal to federal court was untimely. (Dkt. 2; see Dkt. 4). Defendant opposes this motion, and argues that it filed the notice of removal within the statutorily proscribed period. (Dkt. 7). For the reasons set forth below, Plaintiff's motion is denied, and Defendant is granted leave to file an amended notice of removal or, alternatively, to request jurisdictional discovery in accordance with this Decision and Order.
The following facts are taken from Plaintiff's amended complaint unless otherwise indicated. (Dkt. 1–1 at 12–18).
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On or about August 28, 2014, Plaintiff's premises and business property suffered fire damage. (Dkt. 1–1 at 13). Plaintiff reported the loss to Defendant, EIG, and EICNY under an insurance policy covering property losses related to fire events. (Id. ). Plaintiff hired National Fire Adjustment Co. ("NFA") to perform an appraisal of the property damage, which assessed over $800,000 in losses. (Id. ). However, Defendant, EIG, and EICNY did not agree with NFA's assessment of damages (id. at 14), and they "refused to proceed to appraisal" (id. at 15).
On or about August 25, 2016, Plaintiff filed its initial complaint in New York State Supreme Court, Erie County, naming Defendant, EIG, and EICNY as defendants. (Id. at 2–10). Plaintiff sought a judgment compelling Defendant, EIG, and EICNY to proceed with an appraisal of damages, enforcing the appraisal of said damages, and determining that Defendant, EIG, and EICNY had breached their contract with Plaintiff. (Id. at 6–9). On or about September 20, 2016, Plaintiff filed an amended complaint, adjusting the amount of damages assessed from over $700,000 to over $800,000. (Id. at 13; see id. at 12–18).
In support of its motion to remand, Plaintiff submitted an attorney declaration in which Plaintiff's counsel avers that on January 25, 2017, Defendant's counsel spoke with him by telephone and requested that Plaintiff voluntarily dismiss the action as against EIG and EICNY. (Dkt. 3 at ¶ 7). Plaintiff agreed to do so. (Id. at ¶ 8). At that time, Defendant's counsel also indicated that he intended to remove the case to federal court after Plaintiff executed and filed the stipulation of partial discontinuance. (Id. at ¶ 9).
As an exhibit to his attorney declaration, Plaintiff's counsel attached a letter, dated January 26, 2017, in which Defendant's counsel referenced the January 25, 2017, telephone call and indicated that neither EIG nor EICNY had issued the insurance policy at issue in this case. (Dkt. 3–3 at 2). Defendant's counsel then requested that Plaintiff "acknowledge that [it] will voluntarily discontinue without prejudice the action against [EIG] and [EICNY] ... by executing and filing the enclosed Stipulation of Partial Discontinuance." (Id. ). Plaintiff received this letter on January 30, 2017, and executed and filed the stipulation on January 31, 2017. (Id.; see Dkt. 1–1 at 20).
On or about February 28, 2017, Defendant filed a notice of removal to this Court. (Dkt. 1). On March 27, 2017, Plaintiff filed the pending motion to remand on the ground that the notice of removal was untimely filed. (Dkt. 2; Dkt. 4). Defendant opposed this motion, arguing that the notice of removal was timely filed after the execution of the stipulation of partial discontinuance. (Dkt. 7).
DISCUSSION
I. Subject Matter Jurisdiction
A. Legal Standard
"Diversity jurisdiction exists where the parties are citizens of different states and the amount in controversy exceeds $75,000." Ceglia v. Zuckerberg , 772 F.Supp.2d 453, 455 (W.D.N.Y. 2011). " ‘[C]itizens of different States’ means that there must be complete diversity, i.e., that each plaintiff's citizenship must be different from the citizenship of each defendant." Hallingby v. Hallingby , 574 F.3d 51, 56 (2d Cir. 2009) ; see Doctor's Assocs., Inc. v. Distajo , 66 F.3d 438, 445 (2d Cir. 1995) ("It is a long-settled rule that in order to invoke diversity jurisdiction, the petitioner must show ‘complete diversity’—that is, that it does not share citizenship with any defendant."). "A person's citizenship for purposes of diversity is based upon his domicile." Ceglia , 772 F.Supp.2d at 455. "For purposes of determining diversity, 28 U.S.C. § 1332(c) provides that ‘a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business.’ " Sty–Lite Co. v. Eminent Sportswear Inc. , 115 F.Supp.2d 394, 398 (S.D.N.Y. 2000). A court will "generally evaluate a defendant's right to remove a case to federal court at the time the removal notice is filed." Vera v. Saks & Co. , 335 F.3d 109, 119 n.2 (2d Cir. 2003).
B. Timeliness of Removal
The requirements for a timely notice of removal are set forth in 28 U.S.C. § 1446(b).
The notice of removal of a civil action or proceeding shall be filed within 30 days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based .... [I]f the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.
28 U.S.C. § 1446(b) (emphasis added). "A case is removable when the initial pleading enables the defendant to ‘intelligently ascertain’ removability from the face of such pleading, so that in its petition for removal[, the] defendant can make a short and plain statement of the grounds for removal as required [by] 28 U.S.C. § 1446(a)." Whitaker v. Am. Telecasting, Inc. , 261 F.3d 196, 205–06 (2d Cir. 2001) (internal quotation marks and citation omitted). "However, defendants have no independent duty to investigate whether a case is removable. If removability is not apparent from the allegations of an initial pleading or subsequent document, the 30–day clocks of 28 U.S.C. §§ 1446(b)(1) and (b)(3) are not triggered." Cutrone v. Mortg. Elec. Registration Sys., Inc. , 749 F.3d 137, 143 (2d Cir. 2014).
1. The Voluntary–Involuntary Rule
"To determine which cases are removable, the Second Circuit has adopted the voluntary-involuntary rule as it was interpreted in Weems v. Louis Dreyfus Corp. , 380 F.2d 545, 546–48 (5th Cir. 1967). Traditionally, under the voluntary-involuntary rule, if a plaintiff's dismissal of non-diverse parties was voluntary, removal was permitted." Lopez v. Wells , No. 07 CIV. 10707 (PKL), 2008 WL 2662018, at *3 (S.D.N.Y. July 7, 2008) (citation omitted); see Quinn v. Aetna Life & Cas. Co. , 616 F.2d 38, 40 n.2 (2d Cir. 1980). As explained by the Second Circuit:
[This rule] protect[s] against the possibility that a party might secure a reversal on appeal in state court of the non-diverse party's dismissal, producing renewed lack of complete diversity in the state court action, a result repugnant to the requirement in 28 U.S.C. § 1441 that an action, in order to be removable, be one which could have been brought in federal court in the first instance.
Quinn , 616 F.2d at 40 n.2. "[T]hat danger does not arise where a plaintiff voluntarily drops a resident defendant since appeal then is not available, and the elimination of the resident defendant from the case is final." Weems , 380 F.2d at 546. "The reasoning of the Weems decision ... indicates that the finality of the dismissal, not the plaintiff's participation in it, is the factor that determines removability." LGP Gem Ltd. v. Cohen , 636 F.Supp. 881, 883 (S.D.N.Y. 1986).
2. Defendant's Notice of Removal Was Timely
Here, Plaintiff contends that Defendant's notice of removal was untimely. Plaintiff argues that Defendant could have discerned that the action was removable from the face of the complaint after Plaintiff's counsel and Defendant's counsel spoke on January 25, 2017. (Dkt. 4 at 4–5). The Court disagrees. Removability was not ascertainable from the face of the original or amended pleadings where Plaintiff, EIG, and EICNY were all alleged to be citizens of New York for diversity purposes. (Dkt. 1–1 at 4, 12). As such, complete diversity was not established by the allegations in either the initial or the amended complaint. See generally Hallingby, 574 F.3d at 56.
Furthermore, Plaintiff incorrectly relies upon Defendant's counsel's statement that he would remove the action to federal court after Plaintiff discontinued the lawsuit as against EIG and EICNY because "[a]n oral assertion is insufficient to start the 30–day clock for a defendant's removal petition ...." Callen v. Callen , 827 F.Supp.2d 214, 216 (S.D.N.Y. 2011) (quotation and citation omitted); see also Artists Rights Enf't Corp. v. Jones , 257 F.Supp.3d 592, 595 (S.D.N.Y. 2017) ("A defendant's subjective knowledge is not sufficient to start the removal clock.").
Plaintiff also points to the January 26, 2017, letter as evidence of Defendant's awareness of the possibility for removal. It is worth acknowledging that courts in other circuits have found that "many forms of notice establish complete diversity for removal purposes." Lopez , 2008 WL 2662018, at *3 n.4 ; see, e.g., Eyal Lior v. Sit , 913 F.Supp. 868, 877–78 (D.N.J. 1996) ; Brooks v. Solomon Co. , 542 F.Supp. 1229, 1230 (N.D. Ala. 1982) ; Heniford v. Am. Motors Sales Corp. , 471 F.Supp. 328, 333 (D.S.C. 1979), app dismissed , 622 F.2d 584 (4th Cir. 1980). However, "[t]his is not the Second Circuit's approach." Lopez , 2008 WL 2662018, at *3 n.4. As previously stated, "[c]ourts in this Circuit also focus on the finality aspect of the voluntary-involuntary rule." LGP Gem Ltd. , 636 F.Supp. at 883 (citing Quinn , 616 F.2d at 40 n.2 ); Deming v. Nationwide Mut. Ins. Co. , No. CIV.A. 3:03CV1225 (CF), 2004 WL 332741, at *3 (D. Conn. Feb. 14, 2004) ; Atlanta Shipping Corp. v. Int'l Modular Hous., Inc. , 547 F.Supp. 1356, 1360 n.8 (S.D.N.Y. 1982).
Defendant's intention to remove this action was contingent upon Plaintiff's execution and filing of the stipulation of partial discontinuance. Indeed, nothing in the record suggests that Plaintiff was unable to refuse to file the partial stipulation of discontinuance provided by Defendant upon further reflection. Quinn and Weem emphasize the importance of finality when analyzing the timeliness of a litigant's notice of removal, and require the factors that once defeated diversity to become incapable of revival before removal is deemed appropriate. In this case, that point in time occurred on January 31, 2017, when the stipulation of partial discontinuance was executed and filed and the non-diverse parties were voluntarily dismissed. It was only then that the elimination of the non-diverse parties from this action became final. See Quinn , 616 F.2d at 40 n.2 ; Weems , 380 F.2d at 546 ; LGP Gem Ltd. , 636 F.Supp. at 883 ; accord McDonough v. UGL UNICCO , 766 F.Supp.2d 544, 546 (E.D. Pa. 2011) ("Under 28 U.S.C. § 1446(b), where a case is not initially removable, a defendant may timely remove only after receiving a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable—not one that may become removable. And a proposed amended complaint that on its face would provide a basis for subject matter jurisdiction does not become removable until it becomes the operative complaint in the case. Where leave to amend is required, an amended complaint cannot be operative until that leave has been granted. Simply put, in federal court, there is simply no such thing as contingent subject matter jurisdiction." (quotation marks and footnotes omitted)).
Therefore, Defendant's notice of removal, which was filed on February 28, 2017, was timely filed within the 30–day statutory period.
C. Citizenship of Limited Liability Companies
"A limited liability company takes the citizenship of its members." Avant Capital Partners, LLC v. W108 Dev. LLC , No. 16 CIV. 3359 (LLS), ––– F.Supp.3d ––––, ––––, 2016 WL 3660756, at *1 (S.D.N.Y. June 30, 2016) (citing Bayerische Landesbank, N.Y. Branch v. Aladdin Capital Mgmt. LLC , 692 F.3d 42, 49 (2d Cir. 2012) ). "A complaint premised upon diversity of citizenship must allege the citizenship of natural persons who are members of a limited liability company and the place of incorporation and principal place of business of any corporate entities who are members of the limited liability company." New Millennium Capital Partners, III, LLC v. Juniper Grp. Inc. , No. 10 CIV. 46(PKC), 2010 WL 1257325, at *1 (S.D.N.Y. Mar. 26, 2010).
Here, the notice of removal alleges that complete diversity exists between the parties and that the amount in controversy is not less than $700,000. (Dkt. 1 at 2). Defendant, a "foreign corporation," alleges that it maintains its principal place of business in the State of Pennsylvania, and is also incorporated under the laws of the State of Pennsylvania. ( Id. ). Therefore, Defendant, as a corporation, is a citizen of the State of Pennsylvania for purposes of determining diversity jurisdiction. 28 U.S.C. § 1332(c)(1) ; Sty–Lite Co. , 115 F.Supp.2d at 398.
However, despite Defendant's allusion to Plaintiff's state court summons and complaint, Defendant fails to allege the citizenship of Plaintiff as a limited liability company. The notice of removal does not allege the citizenship of Plaintiff, and simply concludes that complete diversity exists in this action. (Dkt. 1 at 2). The notice of removal also attaches Plaintiff's amended complaint filed in state court, but this pleading alleges only that "Plaintiff is an LLC with its principal place of business located in the State of New York, County of Erie." (Dkt. 1–1 at 12). Whether or not Plaintiff maintains its principal place of business in New York State is irrelevant to the diversity inquiry for an LLC. See Alvarez & Marshal Glob. Forensic & Dispute Servs., LLC v. Cohen–Cole , No. 14 CIV. 290 JPO, 2014 WL 641440, at *2 (S.D.N.Y. Feb. 19, 2014) ("[T]he facts that the LLC is ‘organized under the laws of Delaware’ and has ‘its principal place of business in New York’ are irrelevant to jurisdiction: they say nothing about an LLC's citizenship for purposes of 28 U.S.C. § 1332."); N.K.T. Land Acquisitions, Inc. v. Chase Manhattan Mortg. Corp. , No. 07-CV-790 (GLS/RFT), 2007 WL 4324109, at *1 (N.D.N.Y. Dec. 7, 2007) ("The state of an LLC's organization and principal place of business is irrelevant in determining its citizenship for diversity purposes.").
Since Plaintiff is an LLC, the proper inquiry for determining the existence of complete diversity is whether Defendant is diverse from all of Plaintiff's members "because an LLC has the citizenship of each of its members for diversity jurisdiction purposes." Alvarez & Marshal Glob. Forensic & Dispute Servs., LLC , 2014 WL 641440, at *2 ; see Arabesque v. Capacity LLC , No. 07 CIV. 2042 (TPG), 2008 WL 681459, at *2 (S.D.N.Y. Mar. 10, 2008) ("Second Circuit precedent clearly holds that for LLCs, citizenship is determined based on the individual members of the LLC."). If, for example, any one of Plaintiff's members is a citizen of the State of Pennsylvania, complete diversity would not exist in this action, and the Court would lack subject matter jurisdiction. See, e.g., Linium, LLC v. Bernhoit , No. 17-CV-0200 (LEK)(CFH), 2017 WL 2599944, at *3 (N.D.N.Y. June 15, 2017).
Therefore, Defendant's notice of removal is defective because it does not include sufficient allegations of the citizenship of Plaintiff's members. Nevertheless, "[w]hen diversity is not absent from a notice of removal but is defectively alleged, courts typically permit the removing party to amend its notice of removal." Id. (quotations omitted) (collecting cases). Here, Defendant's notice of removal alleges that diversity jurisdiction exists, but fails to sufficiently state Plaintiff's citizenship as an LLC. As such, the Court grants Defendant leave to amend its notice of removal to properly state Plaintiff's citizenship. Alternatively, if Defendant lacks sufficient information to assert those allegations, it may seek leave from this Court to conduct jurisdictional discovery to ascertain the citizenship of Plaintiff's members within fourteen (14) days of the filing of this Decision and Order.
CONCLUSION
For the foregoing reasons, Plaintiff's motion to remand (Dkt. 2) is denied, and Defendant is granted leave to file an amended notice of removal within fourteen (14) days of the filing of this Decision and Order, which properly sets forth the citizenship of Plaintiff's individual members. If the citizenship of Plaintiff's members is unknown, Defendant is alternatively granted leave to file a motion for jurisdictional discovery within fourteen (14) days of the filing of this Decision and Order. Defendant's failure to comply with these deadlines will result in the remand of this case to New York State Supreme Court, Erie County, without further order of the Court.
SO ORDERED.