Opinion
02 Civ. 0425 (LAK)
March 7, 2002
ORDER
Plaintiff's motion to remand this action to the state court, from which it had been removed by the defendants, was supported by an affirmation in which his counsel, David A. Zelman, Esq., asserted that "the parties are not completely diverse." The Court directed Mr. Zelman to show cause why he should not be sanctioned, pursuant to Fed.R.Civ.P. 11(b)(3)-(4), on the ground that this allegation was not made after inquiry reasonable under the circumstances and was unsupported, and unlikely to be supported, by any evidence. The Court explained the basis for this concern as follows:
"[P]laintiff's actions on this motion are very troublesome. Certainly he never noticed the defect noted by the Court. Rather, he simply relied on the allegations of the defendants' citizenship from his own complaint, allegations that appear to be entirely baseless. It is virtually inconceivable that plaintiff responsibly could allege that NASD is an unincorporated association in view of the fact that its name, as set forth in the complaint, contains the abbreviation for "incorporated" that is used by corporations. Indeed, a simple search on the public web site of the New York Department of State would have yielded the information that NASD is a foreign not-for-profit corporation organized in Delaware. Nor can the Court see any possible basis for his allegation that either defendant is a New York corporation with its principal place of business here."
Mr. Zelman now has responded with affidavits executed by himself and a law student who assisted him with the matter. He contends that he based the allegation of incomplete diversity on his belief that the NASD was a citizen of New York, and therefore of the same state as the plaintiff, by virtue of the alleged location here of its principal place of business. Zelman Aff. ¶ 3. He contends that his understanding regarding the location of its principal place of business was based on reasonable inquiry. Id. ¶¶ 3-7. Thus, he implicitly asserts that he knew very well that the complaint's allegation that the NASD was an unincorporated association was inaccurate and that it in fact is a corporation.
This only makes matters worse. It was entirely inappropriate to have served a complaint asserting that the NASD is an unincorporated association when in fact counsel believed it was a corporation, as indeed it is. Nevertheless, the complaint, having been filed in state court, was not subject to Rule 11. Only the affidavit in support of the motion to remand was. And as the Court accepts that Mr. Zelman had a good faith basis for asserting that the NASD has its principal place of business in New York which, given his (correct) belief that it is a corporation, would have made it a citizen of New York and therefore not of citizenship diverse from that of the plaintiff. In consequence, as improper as counsel's actions were here, the Court finds that there was no violation of Rule 11 given that the Rule did not apply to the proper paper.
The order to show cause is discharged.
SO ORDERED.