Source: https://www.schlamstone.com/edny/
Timestamp: 2019-04-26 05:47:33+00:00

Document:
Two rulings on the same day by District Judges Sterling Johnson and Sandra J. Feuerstein highlight the jurisdictional difficulties that can arise when removing personal injury cases to federal court on diversity grounds. Rita Alvarado v. New England Motor Freight, Inc. et al., 18 CV 2027 (E.D.N.Y. Aug. 24, 2018) (SJ) (RML). Mekhi v. Area Storage & Transfer, Inc. et al., 18-cv-4654 (E.D.N.Y. Aug. 24, 2018) (SJF) (AYS).
In the ruling by Judge Feuerstein, the Court sua sponte remanded the case back to state court because defendant jumped the gun by removing the case before the amount in controversy threshold was established. Mekhi v. Area Storage & Transfer, Inc. et al., 18-cv-4654 (E.D.N.Y. Aug. 24, 2018) (SJF) (AYS). In the ruling by Judge Johnson, the Court denied plaintiff’s motion to remand the case to state court where plaintiff argued that defendants waited too long before removing the case to federal court. Rita Alvarado v. New England Motor Freight, Inc. et al., 18 CV 2027 (E.D.N.Y. Aug. 24, 2018) (SJ) (RML).
Some background: Most attorneys are aware that removal based on diversity jurisdiction is only available if the amount at issue is more than $75,000. But New York CPLR 3017(c) prohibits personal injury plaintiffs from stating an amount of damages in the complaint – meaning the complaint will usually not establish the jurisdictional minimum of $75,000.
Timing is also an issue. The removal statute (U.S.C. § 1446) provides that defendant has 30 days from the date of service to remove the case. However, where the complaint does not evident the existence of diversity jurisdiction, defendant has 30 days “from which it may first be ascertained” that diversity jurisdiction exists to remove the case to federal court. In any event, the ability to remove to federal court normally ends one year after commencement of the action.
In Mekhi, one of defendants removed the case soon after it was served with the complaint, asserting that “there is a ‘reasonable probability’ that Plaintiff’s claim is in excess of the jurisdictional limit of $75,000, exclusive of interest and costs.” Judge Feuerstein sua sponte determined that defendant failed to establish that the amount in controversy exceeds $75,000.
The complaint here does not specify the damages sought since New York law prohibits statements regarding “the amount of damages to which the pleader deems himself entitled” in a personal injury action. N.Y. C.P.L.R. §3107(c). . . . [Defendant] notes that since Plaintiff has alleged “serious injury” within the meaning of New York Insurance Law §§5102(a) and 5104(a), she is seeking damages in excess of $50,000 for economic loss, plus pain and suffering. Notice ¶11. Coupling this threshold economic loss with Plaintiff’s generalized allegation of pain and suffering, Area Storage summarily concludes that “[c]onsequently, there is a reasonable probability” that the amount in controversy exceeds $75,000. Id. ¶13. The Court disagrees.
[Defendant’s] arguments are speculative and are extrapolated from boilerplate allegations of injury. In considering whether remand is appropriate, “boilerplate pleadings do not suffice to establish that this action involves an amount in controversy adequate to support federal diversity jurisdiction.” [citations omitted] . . . Defendant has provided no other basis upon which the Court can conclude that the jurisdictional limit has been met. Given its conclusory assertions and the lack of any detail regarding Plaintiff’s specific damages, there is simply insufficient information to “intelligently ascertain removability.” DeMarco v. MGM Transp., Inc., No. CV 06-0307, 2006 WL 463504, at *1 (E.D.N.Y. Feb. 24, 2006) (quotation marks and citations omitted). As this Court lacks subject matter jurisdiction, remand is required.
[Defendant] is not without recourse. Although New York law prohibits inclusion of an ad damnum clause in a personal injury complaint, it also allows a defendant to “at any time request a supplemental demand setting forth the total damages to which the pleader deems himself entitled.” N.Y. C.P.L.R. § 3017(c). A plaintiff is required to provide the supplemental demand within fifteen (15) days of the request, and may be compelled by the court to comply. Id. The Second Circuit, recognizing a defendant’s dilemma where the complaint fails to specify the amount of damages sought has held that “the removal clock does not start to run until the plaintiff serves the defendant with a paper that explicitly specifies the amount of money damages sought.” Moltner v. Starbucks Coffee Co., 624 F.3d 34, 38 (2d Cir. 2010) (per curiam). Defendant should have availed itself of the supplemental demand procedure rather than prematurely removing the action to this court.
Mekhi v. Area Storage & Transfer, Inc. et al., 18-cv-4654 (E.D.N.Y. Aug. 24, 2018) (SJF) (AYS).
In Alvarado, defendants almost waited too long to remove. The action was commenced on January 19, 2018. Plaintiff served a bill of particulars identifying $44,140 in special damages plus pain and suffering. On March 9, 2018, Plaintiff served a statement of damages alleging $1 million in damages. Defendants removed on April 5, 2018 – less than 30 days after the statement of damages but more than 30 days from the bill of particulars.
Plaintiff moved to remand the case back to state court, arguing that the removal was untimely because had Defendant used a “reasonable amount of intelligence” the bill of particulars would have evidenced the existence of diversity jurisdiction.
Plaintiff argues that Defendants’ removal was untimely and that the notice of removal failed to show complete diversity of the parties. Plaintiff contends that the first paper from which removability could be ascertained was Plaintiff’s bill of particulars, served on Defendants on February 16, 2018, which contains allegations referencing special damages in an amount not less than $44,140.00, and an unspecified amount of damages for pain and suffering. . . Defendants contend that the first paper from which removability could be ascertained was Plaintiff’s statement of damages, served on Defendants on or about March 9, 2018. If Plaintiff’s statement of damages is the “motion, order or other paper from which it [might] first be ascertained that the case is one which is or has become removable,” then removal was timely. See 28 U.S.C. § 1446(b)(3). The issue, therefore, is whether the case was removable on February 16, 2018.
In determining whether the thirty-day removal clock has begun to run, courts in this circuit have declined to impose on defendants an affirmative duty to investigate the possible federal features of a poorly drafted pleading. See Soto v. Apple Towing, 111 F. Supp. 2d 222, 224–26 (E.D.N.Y. 2000). But defendants may not willfully ignore grounds for removal that can be “intelligently ascertain[ed].” Id. at 226. “‘[A]scertained’ as used in section 1446(b) means a statement that should not be ambiguous or one which requires an extensive investigation to determine the truth.” Id. (quotation marks and internal citation omitted). Further, “the facts warranting removability” must be “explicit,” and “the elements of removability must be specifically indicated in official papers.” Id. at 225 (quoting Riggs v. Cont’l Baking Co., 678 F. Supp. 236, 238 (N.D. Cal. 1988). Put another way, a “defendant need not guess as to whether the Plaintiff’s claim reaches the $75,000 threshold for . . . diversity jurisdiction purposes, and may wait to file a notice of removal until the Plaintiff provides specific information about the amount in controversy.” Moltner v. Starbucks Coffee Co., 2009 WL 510879, at *1 (S.D.N.Y. June 18, 2007).
In the bill of particulars, Plaintiff specifies damages that are less than the jurisdictional threshold, but argues that its unspecified request for compensatory damages related to pain and suffering put Defendants on notice that the amount of Plaintiff’s claim exceeds $75,000. But Plaintiff’s position that Defendants could have utilized a “reasonable amount of intelligence” to ascertain that its claim for pain and suffering exceeds the jurisdictional threshold asks this Court to impose upon Defendants a duty to speculate as to the amount of those unspecified damages. This heightened standard would require Defendants to risk remand by removing an action where the amount in controversy has not been clearly established. As Defendants are not authorized to prematurely remove an action, such a result would effectively allow Plaintiff to have it both ways. . . . Accordingly, the Court finds that the action was not removable based on Plaintiff’s bill of particulars.
The Court finds that the statement of damages is the first paper from which removability could be ascertained, as it claimed an amount in controversy above the jurisdictional threshold. Defendant’s removal on April 5, 2018 was therefore timely.
Rita Alvarado v. New England Motor Freight, Inc. et al., 18 CV 2027 (E.D.N.Y. Aug. 24, 2018) (SJ) (RML).
District Judge Nicholas G. Garaufis denied an insurer’s motion to dismiss a lawsuit brought directly by a plaintiff against the insurer of a vehicle that belonged to the Principality of Monaco. The Court ruled that the lawsuit was proper under the Diplomatic Relations Act of 1978, despite the fact that plaintiffs typically may not bring a direct lawsuit against the insurer of an alleged tortfeasor. Green v. First Liberty Insurance Corporation, 17-cv-6975 (E.D.N.Y May 8, 2018) (NGG)(CLP).
Plaintiff in this case alleged injuries resulting from a traffic accident that involved a jeep owned by Monaco and alleged driven by a member of the Monegasque mission. Plaintiff sued the jeep’s insurer directly in order to bypass the diplomatic immunities available to the registrant and driver of the jeep. Defendant moved to dismiss, arguing that plaintiff improperly brought a direct action against the insurer. The Court denied the motion – explaining the history of the Diplomatic Relations Act and holding that it provided for a direct action against the insurer in this case.
Under the common law, a tort victim had no right of action against a tortfeasor’s liability insurer, because the two were not in privity of contract. Lang v. Hanover Ins. Co., 820 N.E.2d 855, 857 (N.Y. 2004); 7A Steven Plitt et al., Couch on Insurance § 104:2 (3d ed. updated 2017). Consistent with this common-law rule, most states prohibit a party injured in a traffic accident from bringing suit solely and directly against the alleged tortfeasor’s liability insurer. 13F Charles A. Wright et al., Federal Practice and Procedure § 3629, at 186 n.4 (3d ed. 2009). Some states—among them New York—have softened this prohibition on direct actions by permitting a tort victim to sue the alleged tortfeasor’s liability insurer, provided that, among other things, the victim first obtains a judgment against the tortfeasor. N.Y. Ins. Law § 3420; see also, e.g., Md. Code., Ins. § 19-102(b)(2); Va. Code § 38.2-2200(2).
These rules had unfortunate consequences for Americans injured in domestic traffic accidents with foreign diplomats. After such accidents, these victims were often left without legal recourse. As a diplomat, the actual tortfeasor could claim immunity from suit. See Windsor v. State Farm Ins. Co., 509 F. Supp. 342, 344 (D.D.C. 1981); Diplomatic Privileges and Immunities: Hearings Before the Subcomm. on Int’l Operations of the House Comm. on Int’l Relations, 95th Cong, 1st Sess., at 3, 5-6 (1977) (hereinafter Diplomatic Privileges Hearings) (statement of Rep. Fisher). Even if the plaintiff could bring a direct action against the diplomat’s liability insurer, the insurer could escape liability by asserting the insured’s diplomatic immunity as a defense to the suit. S. Rep. 95-1108, at 3 (1978) (statement of Sen. Mathias).
Partly to address “the inequities associated with the immunity of members of diplomatic missions in civil court proceedings, “Congress enacted the Diplomatic Relations Act, which substantially revised the law of diplomatic immunity. Rodriguez v. Hanover Ins. Co., No. 14- CV-1478 (GJH), 2014 WL 3405258, at *3 (D. Md. July 9,2014) (internal quotation marks and citation omitted); see also Windsor, 509 F. Supp. at 343; S. Rep. No. 95-958, at 1 (1978). Three provisions of the Diplomatic Relations Act are relevant to this lawsuit. See Rodriguez, 2014 WL 3405258, at *3. The first, Section 5 (codified at 22 U.S.C. § 254d), “continues the long-standing concept of diplomatic immunity by providing for the dismissal of any action or proceedings brought against an individual entitled to such protection” under the Vienna Convention on Diplomatic Relations of April 18,1961, 23 U.S.T. 3227 (entered into force with respect to the U.S. Dec. 13,1972), the Diplomatic Relations Act itself, or any other laws extending diplomatic immunity or privileges. Windsor, 509 F. Supp. at 344. The second. Section 6 (codified at 22 U.S.C. § 254e), requires diplomatic missions in the United States, members of those missions, and members’ families to maintain adequate liability insurance against the risks of bodily injury, death, and property damage arising from their use of motor vehicles, vessels, or aircraft in the United States. See generally 22 C.F.R. §§ 151.11-151.11 (implementing this provision). The third. Section 7 (codified at 28 U.S.C. § 1364), provides that someone injured by certain diplomatic personnel—namely, a member of a diplomatic mission, a senior United Nations official, or a family member of either—can sue the alleged tortfeasor’s liability insurer directly in federal court, and that such a suit is tried without a jury and is not subject to the defense that the insured is protected by diplomatic immunity. By requiring individuals who are likely to be entitled to diplomatic immunity to maintain liability insurance and permitting tort victims to bring direct actions against those individuals’ insurers. Sections 6 and 7 of the Diplomatic Relations Act provide an effective remedy for Americans injured by foreign diplomatic personnel. Windsor, 509 F. Supp. at 345.
The district courts shall have original and exclusive jurisdiction, without regard to the amount in controversy, of any civil action commenced by any person against an insurer who by contract has insured an individual, who is, or was at the time of the tortious act or omission, a member of a mission (within the meaning of section 2(3) of the Diplomatic Relations Act (22 U.S.C. [§] 254a(3))) or a member of the family of such a member of a mission, or an individual described in section 19 of the Convention on Privileges and Immunities of the United Nations of February .13,1946, against liability for personal injury, death, or damage to property.
Green v. First Liberty Insurance Corporation, 17-cv-6975 (E.D.N.Y May 8, 2018) (NGG)(CLP).
District Judge Denis R. Hurley sua sponte dismissed two cases in as many days where plaintiffs failed to properly allege diversity jurisdiction in cases involving LLCs. Courtyard Apartments Property 1, LLC, v. Rosenblum, 17-cv-2909 (E.D.N.Y April 3, 2018) (DRH) (SIL); Sienna Ventures, LLC v. Halley Equipment Leasing, LLC, 18-cv-201 (E.D.N.Y April 2, 2018) (DRH) (GRB).
A bit of background: Establishing diversity jurisdiction for an LLC can be tricky because the citizenship of an LLC is determined by the citizenship of all of its members. (Indeed, LLCs with sizeable membership interests will often be ineligible for diversity jurisdiction.) Problem is, many attorneys instinctively think of citizenship in terms of principal place of business and state of organization of the LLC, which are not relevant – unlike traditional incorporated entities where place of business and incorporation determine citizenship. This has led to no shortage of “oops” cases where the parties or the courts realize deep into litigation that there is no subject matter jurisdiction.
Diligent federal judges and clerks have tackled the issue by proactively reviewing jurisdictional pleadings involving LLCs and sua sponte directing litigants to address jurisdictional defects at the outset of the case. Judge Hurley recently dismissed two such cases.
In accordance with its obligation to ensure that subject matter jurisdiction exists, on January 25, 2018, this Court ordered Plaintiffs to show cause in writing why the action should not be dismissed for lack of subject matter jurisdiction. On February 7, 2018, Plaintiffs filed an Amended Complaint, which again failed to address the citizenship of all of either Plaintiffs’ or Defendants’ members. In the Amended Complaint, Plaintiffs allege that Defendant Rosenblum “formed, and solely owned, or controlled as Managing Member” the corporate defendants. (Amended Complaint ¶ 12.) Plaintiffs make no other allegations concerning the citizenship of Defendants’ members, nor do Plaintiffs distinguish between which of the defendant corporations Rosenblum solely owned and which he just controlled.
The citizenship of a limited liability company (“LLC”) is determined by the citizenship of each of its members. See, e.g., Bayerische Landesbank, New York Branch v. Aladdin Capital Management LLC, 692 F.3d 42, 49 (2d Cir. 2012); Handelsman v. Bedford Vill. Assocs. Ltd P’ship, 213 F.3d 48, 51–52 (2d Cir. 2000). “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., 2010 WL 1257325, at *1 (S.D.N.Y. Mar. 26, 2010), (citing Handelsman, 213 F.3d at 51–52)); Bishop v. Toys “R” Us-NY LLC, 414 F. Supp.2d 385, 389 n.1 (S.D.N.Y. 2006), aff’d, 385 Fed. App’x 38 (2d Cir. 2010).
When viewed against the foregoing principles, diversity jurisdiction has not been properly pled in this case as there are numerous fatal shortcomings in the Amended Complaint that are neither adequately addressed nor remedied by the Response to the Order to Show Cause. First, Plaintiffs make a blanket statement that each of the sixteen Plaintiffs are limited liability companies “with its same natural citizen sole owner and same principal place of business and residential address  listed as follows[.]” (Amended Compl. ¶ 9.) The Court is unpersuaded that this is sufficient to allege citizenship of each of the members of the sixteen limited liability companies. Moreover, Plaintiffs have failed to even allege the members, let alone the members’ citizenship, of certain of the Plaintiffs such as those of the David J. Keudell Revocable Trust. See Amerigold Logistics, LLC v. ConAgra Foods, Inc., 136 S. Cit. 1012, 1016–17 (2016) (explaining that for purposes of diversity jurisdiction, a trust as an unincorporated entity “possesses the citizenship of all of its members”). This shortcoming alone is fatal to diversity jurisdiction, however, there are also significant issues with Plaintiffs’ allegations regarding the citizenship of all Defendants.
As noted above, Plaintiffs make no allegations concerning the citizenship of each of the Defendants’ members, relying on confusing statements about Defendant Rosenblum’s involvement in the companies. Reference is also made to other non-defendants who apparently have or had some stake in the Defendant companies at some point in time.
While Plaintiffs ask that the Court provide guidance or further directive as to its Order to Show Cause, the Court declines to do so here. Plaintiffs have had three proverbial “bites at the apple” to properly allege subject matter jurisdiction; in the Complaint, the Amended Complaint, and the Response to the Order to Show Cause. Plaintiffs have failed to do so on all occasions. It is not the Court’s responsibility to do research for Plaintiffs’ counsel on how to properly allege subject matter jurisdiction.
Similarly, in Sienna Ventures, LLC v. Halley Equipment Leasing, LLC, the court issued a sua sponte directive for the plaintiff to fill in the jurisdictional blanks or have the case dismissed. However, plaintiff’s response failed to identify the members of defendant’s LLC and their citizenship. The court dismissed the action.
Plaintiff responded to the Court’s order to show cause by letter, which alleges simply that “subject matter jurisdiction exists in this case as Sienna Ventures, LLC  is a New York Limited Liability Company and its sole member is a citizen and resident of New York, and Halley Equipment Leasing, LLC  is a Texas Limited Liability Company.” Plaintiff makes no other allegations concerning the residency or citizenship of Defendant’s members. Thus, as explained below, the case is dismissed for lack of subject matter jurisdiction.
Sienna Ventures, LLC v. Halley Equipment Leasing, LLC, 18-cv-201 (E.D.N.Y April 2, 2018) (DRH) (GRB).

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