(This article originally appeared in The Bulletin, the official publication of the Bar Association of Erie County. It is reprinted here with permission.)
In Iqbal v. Normandin Transit, Inc., No. 15-CV-746A (July 1, 2016), plaintiff commenced an action in state court to recover damages allegedly resulting from a motor vehicle accident. Upon removal, plaintiff moved to remand, arguing that removal was untimely because it took place more than one year after commencement of the state court action. In opposition, defendants claimed that plaintiff acted in bad faith by maintaining the state lawsuit against two non-diverse municipal defendants, which prevented them from removing the action earlier. After noting that an alternate basis for remand was likely available to plaintiff (for failing to remove within 30 days of receiving a state court pleading from which it was ascertainable that the case had become removable), the Court found that, while defendants established “some conduct of plaintiff consistent with bad faith,” they had not carried their “heavy burden” to establish bad faith by “clear and convincing evidence.” As a result, the case was remanded.
Diversity of Citizenship
In Greenwood Group, LLC v. Brooklands, Inc., No. 1:15-CV-0851(EAW) (July 12, 2016), an action removed from state court, one of the defendants initially moved to dismiss based on lack of personal jurisdiction. After the Court reserved decision and ordered limited jurisdictional discovery, plaintiff filed a notice of voluntary dismissal as to that defendant, as well as a motion to amend its complaint and for remand to state court. In its proposed amended complaint, plaintiff sought to add another defendant and claimed that diversity was thereby destroyed because that defendant is a limited liability company, of which plaintiff itself is a member.
Defendants opposed remand, arguing that diversity remained because the defendant that plaintiff sought to add is a corporation incorporated in Ireland with a principal place of business there. In granting the motion to amend and for remand, the Court held that defendants failed to meet their burden to establish diversity, observing that their own submission in opposition provided that the proposed defendant is a limited liability company. And, because the citizenship of a foreign limited liability company is determined by the citizenship of its members (of which plaintiff was one), diversity would be destroyed once the complaint was amended.
Necessary and Indispensable Party
In Lovell, et al. v. GEICO General Insurance Company, et al., No. 12-CV-546V (July 13, 2016), two plaintiffs commenced one lawsuit and a third plaintiff commenced a second lawsuit, both in state court against the same defendants seeking supplemental uninsured/underinsured motorist (“SUM”) coverage under the same insurance policies, after all three plaintiffs were injured while riding in one vehicle and had recovered the maximum coverage afforded by the policy of the driver of the other vehicle. Following removal of both lawsuits on diversity grounds, the Court questioned whether plaintiffs were necessary and indispensable parties to each other’s claims under Rule 19 and, if so, whether joinder would defeat complete diversity and deprive the Court of subject matter jurisdiction. The Court eventually held that remand was not warranted.
First, plaintiffs were not necessary to each other’s actions under Rule 19(a)(1) because multiple parties hurt in a single accident do not have legally protected interests in each other’s claims, even when the defendant has limited means to pay those claims. Second, even if plaintiffs had been necessary to each other’s actions, their joinder would not have deprived the Court of subject matter jurisdiction because, in order to avoid the “drastic” remedy of dismissal, the Court could treat them as “nominal” defendants, it could add them as co-plaintiffs instead, or it simply could consolidate the cases. Third, even if plaintiffs were necessary and could not be joined without defeating diversity, Rule 19(b) nevertheless would permit the case to proceed because the Court could shape the relief to avoid any prejudice, either by coordinating the actions and considering them together or by ordering the parties to present any proposed settlement to the Court before any payment was made from the SUM fund.
In Scofero, et al. v. Zucker, No. 16-CV-6125(MAT) (July 25, 2016), plaintiffs, on behalf of themselves and a putative class of New York State Medicaid beneficiaries, sued the Commissioner of the New York State Department of Health under the Medicaid Act, the Americans With Disabilities Act (“ADA”), and Section 504 of the Rehabilitation Act, and moved for a preliminary injunction seeking to require defendant to supply two plaintiffs with 24 hour in-home care services. n each case, defendant, through its conflict-free assessor, determined plaintiffs were eligible for in-home care services, but the managed long-term care plans, which were administered by local social services districts, had refused to authorize that care. Plaintiffs, however, had not named those local social services districts as defendants in the lawsuit.
The Court first noted that, unlike a preliminary injunction that seeks to prohibit conduct and maintain the status quo, a preliminary injunction such as the one sought by plaintiffs, that seeks to alter the status quo by mandating specific conduct, is subject to a more stringent standard that requires a “substantial,” and not just mere, likelihood of success on the merits in addition to the other elements of the standard. The Court then denied the motion, holding that plaintiffs had not satisfied even the less stringent standard for obtaining a prohibitory injunction.
With regard to their Medicaid, plaintiffs had not demonstrated a likelihood of success because the statute required defendant only to pay for the services, but the provision of services had been denied by the local social service districts, not by defendant. For that same reason, plaintiffs’ claim for due process violations also was not likely to succeed because plaintiffs had failed to establish that the failure to act by these local social service districts constituted an action by the state. Plaintiffs also failed to demonstrate a likelihood of success with the ADA and Rehabilitation discrimination claims because the absent social service districts arguably were necessary for the relief to be afforded, and because plaintiffs had not made the required showing that the provision of these community-based services could reasonably be accommodated taking into account the resources available to the State and the needs of other disabled individuals.
In U.S. v. Acquest Transit LLC, No. 09-CV-55S(F) (June 29, 2016), an action commenced under the Clean Water Act, plaintiff obtained a preliminary injunction prohibiting defendants from performing any earthmoving work on their property. After plaintiff discovered apparent violations of the injunction, the Court held a two-day hearing and determined that defendants violated the injunction. As a result, the Court awarded sanctions of $25,000, as well as attorneys’ fees and costs incurred by plaintiff in obtaining that relief. In opposition to plaintiff’s fee application, defendant argued that the Court should defer making any award until after their “jurisdictional” defense to the underlying action was adjudicated.
The Court noted first that defendants were not disputing that they had willfully violated the injunction, but instead were suggesting that their conduct should be excused if it is ultimately determined that their property was not within the purview of the Clean Water Act. The Court then rejected this “fundamental misunderstanding of the nature and purpose of preliminary injunctive relief” because, under Second Circuit precedent, “injunctions and restraining orders must be obeyed until overturned, and failure to do so is punishable as contempt even though the order is later overturned.” Finally, the Court held that accepting defendants’ argument might encourage a defendant to risk violating an injunction in hopes of ultimately prevailing on the merits, which is “contrary to well-established tenets” and “cannot be allowed.”
In Roth v. 2810026 Canada Limited LTD., et al., No. 13-CV-901A(F) (July 18, 2016), a personal injury action commenced in state court and removed based on diversity, plaintiff moved to compel defendants’ depositions. In opposition, defendants argued that they should not be deposed until after plaintiff’s deposition was completed, because plaintiff’s deposition had been noticed first but could not be completed until plaintiff fully complied with a prior court order requiring production of documents relating to the alleged damages. According to defendants, they were entitled to such priority under New York law. The Court granted plaintiff’s motion, citing Rule 26(d)(3)(A) which provides that, absent stipulation or court order, the “method of discovery may be used in any sequence.” State procedural law does not apply after removal, said the Court, and any claim that plaintiff had not complied with an order should be resolved by motion, but did not justify defendants’ refusal to comply with plaintiff’s deposition notice.
Kevin M. Hogan is a partner with Phillips Lytle LLP where he concentrates his practice in litigation, intellectual property and environmental law. He can be reached at [email protected] or (716) 847-8331. Sean C. McPhee is a partner with Phillips Lytle LLP where he focuses his practice on civil litigation, primarily in the area of commercial litigation. He can be reached at [email protected] or (716) 504-5749.