The opinion of the court was delivered by: POLLACK
The plaintiff, Sands, a citizen of New York has moved to remand this suit to the New York Supreme Court from whence it was removed as a diversity case on petition of the defendant Geller, a citizen of New Jersey. Webb, named as the other defendant herein, is a citizen of New York and plaintiff contends that there is incomplete diversity of citizenship as between the plaintiff on the one side and the defendants on the other. For the reasons hereafter stated, the motion to remand lacks legal merit and will be denied.
This action was commenced on January 15, 1971 for the dissolution of a law partnership and an accounting of its affairs. In January, 1970, pursuant to an oral agreement among the parties, Sands and Geller entered into a partnership for an indefinite term and Webb was employed by them on a salaried basis. They assumed and used the firm name of Sands, Geller & Webb. The arrangement continued until sometime in December, 1970, when differences arose and Geller declared the partnership to be terminated. About a month later, Sands, in connection with the inception of this suit, applied in the state court for a preliminary injunction against Geller to enjoin the latter from occupying the firm's premises or interfering with Sands, the firm, its employees, associated attorneys and clients.
On January 21, 1971, before the hearing of the merits on the application for the preliminary injunction, Geller filed his petition for removal of the suit to this Court together with the required undertaking and gave appropriate notice to the plaintiff and to the Clerk of the Supreme Court for the County of New York. Removal to a federal court halts all further proceedings in the state court, 28 U.S.C. § 1446(e), which thereupon loses jurisdiction unless and until the case is remanded. Lowe v. Jacobs, 243 F.2d 432 (5th Cir.), cert. denied, 355 U.S. 842, 78 S. Ct. 65, 2 L. Ed. 2d 52 (1957); Reines Distributors, Inc. v. Admiral Corp., 182 F. Supp. 226 (S.D.N.Y. 1960) (Metzner, J.), rev'd on other grounds, 319 F.2d 609 (2d Cir. 1963); Fire Ass'n v. General Handerkerchief Corp., 304 N.Y. 382, 107 N.E. 2d 499 (1952).
On January 26, 1971, a show cause order was duly signed by a Judge of this Court directing all parties to appear for a hearing on a motion to remand on January 27, 1971.
On the return day, the plaintiff claimed that prior to removal, his attorneys attempted to proceed in the suit by mailing a copy of the state court summons and complaint to the defendant Webb who, it is claimed, acquiesced in the manner of service and thereby became a party to the suit. In addition, plaintiff personally served defendant Webb with the order to show cause as directed by this Court. The defendant Webb appeared pro se in response to the order to show cause and denied that he was ever effectively served with process as a defendant or had agreed to waive proper service. The "service" on defendant Webb prior to removal was insufficient under New York law. New York CPLR § 308 (Supp. 1970). Jurisdiction was not conferred after removal by personal service of the order to show cause because the requirements of the Federal Rules of Civil Procedure were not met. Fed. R. Civ. P. 4(d); Allman v. Hanley, 302 F.2d 559 (5th Cir. 1962). Accordingly, any process "served" on defendant Webb is quashed.
Argument on the motion to remand was heard on the part of the parties to the suit and decision was reserved.
The complaint, verified by the plaintiff Sands, asserts that under the oral agreement of partnership the parties agreed from inception of the firm to use the offices then occupied by Sands and to use the equipment and facilities therein, but that title to such assets would remain with Sands. It was further agreed that all miscellaneous work in process as well as all cases then or thereafter designated as "Mutual Fund Security Cases" were to belong solely to Sands as if no partnership had been formed and to remain in the name of Sands individually or in conjunction with forwarding counsel. The proceeds or losses on all matters coming to either plaintiff or defendants after the formation of the partnership as well as the designated "Real Estate Securities Cases" and negligence cases on which retainers had been filed in the name of Geller individually, were to be shared between Sands and Geller on a 75%-25% ratio, respectively.
Sands and Geller were the sole contributors of initial working capital of the firm -- Sands $3,000 and Geller $1,000.
The oral agreement pleaded in the complaint defined the status of Webb in the firm:
Defendant Webb was designated as a "special partner", agreed to lend his name to the firm, was to receive no shares of profits nor suffer losses and was to receive a stipulated drawing in return for his services.
The complaint seeks no relief against Webb. The prayer of the plaintiff is for a "judgment against ...