judgment and dismissing the complaint; (2) for an order, pursuant
to 28 U.S.C. § 1447(c), requiring Defendants to pay Kunica costs
and attorneys' fees incurred in this action from May 23, 1997;
and (3) to remand this case to the Supreme Court of New York,
County of New York. Defendant St. Jean has moved, pursuant to
Fed. R.Civ.P. 59(e) for an order amending the judgment to dismiss
and remand Kunica's state court claims against defendant Rogers.
For the reasons set forth below, St. Jean's motion is granted,
and Kunica's motions are denied.
Kunica is a Canadian resident.
St. Jean is a Delaware corporation with a registered address in
Wilmington, Delaware, and principal places of business in New
York, New York and London, England.
According to the complaint, Rogers is a New York resident and
was at all relevant times Director of St. Jean.
Prior Proceedings and Facts
The facts and prior proceedings of this action are set forth in
the prior opinions of the Court, familiarity with which is
assumed. See Kunica v. St. Jean Financial, Inc., 233 B.R. 46
(S.D.N.Y. 1999); Kunica v. St. Jean Financial, Inc., 1998 WL
437153 (S.D.N.Y. August 3, 1998). Those facts and prior
proceedings relevant to the instant motion are set forth below.
Kunica commenced this action in the Supreme Court of the State
of New York, County of New York, by filing a Summons with Notice
on March 27, 1997. On May 23, 1997, the Defendants removed the
case to this Court on diversity grounds. Kunica filed the
Complaint on October 31, 1997.
Defendants filed a motion to dismiss on December 22, 1997.
Kunica then filed an amended complaint (the "First Amended
Complaint") on January 30, 1998, and Defendants withdrew their
motion to dismiss on February 23, 1998 by stipulation.
On March 6, 1998, Defendants filed a motion to dismiss this
action, and to dismiss Kunica's claim for punitive damages. By
Opinion and Order dated August 3, 1998, the Court granted the
motion to dismiss plaintiff's claims as to breach of oral
agreement, fraud and tortious interference with business
relations, and dismissed Kunica's claim for punitive damages.
Plaintiff's claims for breach of written agreement and promissory
estoppel were sustained. See Kunica, 1998 WL 437153.
Defendants filed their motion for summary judgment on October
27, 1998. On April 22, 1999, the Court issued the Opinion
granting summary judgment and dismissing the complaint.
Kunica filed the instant motions on May 17, 1999, and St. Jean
filed its motion to amend the judgment on May 26, 1999.
Submissions were received through June 23, 1999, at which time
the motions were deemed fully submitted.
I. Kunica's Motion for Reconsideration is Denied
A. Standard for Reconsideration
Kunica brings this motion for reconsideration pursuant to
Federal Rule of Civil Procedure 59(e) and Local Rule 6.3. The
standards governing Rule 59(e) and Local Rule 6.3 are the same.
See Candelaria v. Coughlin, 155 F.R.D. 486, 490 (S.D.N Y
1994); Morser v. A.T. & T. Information Systems, 715 F. Supp. 516,
517 (S.D.N.Y. 1989).
Local Rule 6.3 provides in pertinent part: "There shall be
served with the notice of motion a memorandum setting forth
concisely the matters or controlling decisions which counsel
believes the court has overlooked." Thus, to be entitled to
reargument, Plaintiffs must demonstrate that the Court overlooked
controlling decisions or factual matters that were put before it
on the underlying motion. See Ameritrust Co. Nat'l Ass'n v.
F.R.D. 237 (S.D.N.Y. 1993); Fulani v. Brady, 149 F.R.D. 501,
503 (S.D.N.Y. 1993); East Coast Novelty Co. v. City of New
York, 141 F.R.D. 245, 245 (S.D.N.Y. 1992); B.N.E. Swedbank,
S.A. v. Banker, 791 F. Supp. 1002, 1008 (S.D.N.Y. 1992); Novak
v. National Broadcasting Co., 760 F. Supp. 47, 48 (S.D.N Y
1991); Ashley Meadows Farm Inc. v. American Horse Shows Ass'n,
624 F. Supp. 856, 857 (S.D.N.Y. 1985).
Local Rule 6.3 is to be narrowly construed and strictly applied
so as to avoid repetitive arguments on issues that have been
considered fully by the court. See Caleb & Co. v. E.I. Du Pont
De Nemours & Co., 624 F. Supp. 747, 748 (S.D.N.Y. 1985). In
deciding a Local Rule 6.3 motion, the court must not allow a
party to use the motion to reargue as a substitute for appealing
from a final judgment. See Morser, 715 F. Supp. at 517; Korwek
v. Hunt, 649 F. Supp. 1547, 1548 (S.D.N.Y. 1986). Therefore, a
party in its motion for reargument "may not advance new facts,
issues or arguments not previously presented to the court."
Litton Indus., Inc. v. Lehman Bros. Kuhn Loeb, Inc., No. 86
Civ. 6447, 1989 WL 162315, at * 3 (S.D.N.Y. 1989). The decision
to grant or deny a motion for reargument is within the sound
discretion of the district court. See Schaffer v. Soros, No. 92
Civ. 1233, 1994 WL 592891 (S.D.N.Y. Oct. 31, 1994).
The crux of Kunica's motion is that this Court lacked subject
matter jurisdiction over this case at the time of final judgment
and thus, the judgment must be vacated and this case remanded to
state court. However, Kunica's assertion that the Opinion relies
on "clear errors" of fact and law will be addressed briefly.
B. The Court Did Not Overlook Factual Matters or Controlling
1. Factual Matters
Kunica asserts that the Opinion contains four "errors of fact."
First, Kunica claims that Sci-O-Tech, Inc. ("Sci-O-Tech") was not
aware of its potential claims against Defendants at the time it
filed its Schedules of Assets and Liabilities (the "Schedules")
with the bankruptcy court at the outset of its bankruptcy case in
September, 1994.*fn1 According to Kunica, all the persons who
had knowledge of the claims and the letter agreement dated May 7,
1994, had left Sci-O-Tech and were not in any way responsible for
the preparation or content of the bankruptcy schedules. Thus,
Kunica concludes that his knowledge should not be imputed to the
new owners and operations of Sci-O-Tech, and that "[I]ntentional
concealment of the claims by [Sci-O-Tech's president] Tyler
Scheuler and [Sci-O-Tech's controller] Kenneth Chubb has not been
shown by the Defendants." (Plaintiff's Brief at 8).
This argument was not advanced on the underlying motion.
Rather, Kunica's position was that the potential claims against
Defendants (the "Claims") were adequately disclosed. Further,
while Kenneth Chubb may have signed the Schedules, he did so on
behalf of Sci-O-Tech, which as evidenced by the May 7 letter
agreement, knew about and intended to pursue the Claims.
Moreover, even if Kunica's knowledge of the claims was not
imputed to the "new management" at the time the Schedules were
filed, by plaintiff's own admission the claims "were openly
fully disclosed" to Tyler Scheuler ("Scheuler") on February 25,
1995, prior to the bankruptcy court hearing on Sci-O-Tech's
Original Disclosure Statement. (Plaintiff's Memorandum of Law in
Opposition to Defendants' Motion for Summary Judgment at 3).
Thus, Scheuler, the individual who Kunica avers controlled
Sci-O-Tech, had knowledge of the Claims at least as early as
February, 1995, but failed to disclose them to Sci-O-Tech's
creditors, the bankruptcy court, or the U.S. Trustee at any time
Second, Kunica submits that the Court wrongly concluded that
Sci-O-Tech's failure to disclose its assignment of the Claims to
plaintiff did not violate Bankruptcy Rules 2002(a)(2) or 9019(a)
because the assignment was not effectuated until after
Sci-O-Tech's bankruptcy case was dismissed. The Opinion states
that even if the Claims, and Sci-O-Tech's agreement to assign
them to Kunica, were disclosed to counsel for the unsecured
creditors committee, such disclosure "is not valid and adequate
disclosure to the creditors at large." Kunica, 233 B.R. at 57.
While the Court also noted that such nondisclosure (also)
violated Bankruptcy Rules 2002(a) and 9019(a), it was
Sci-O-Tech's failure to disclose the Claims to creditors, and not
any other Bankruptcy Rule violation, that formed the basis of the
Third, Kunica contends that he has "newly discovered evidence"
demonstrating that counsel for the unsecured creditor's committee
received a schedule disclosing Sci-O-Tech's Claims the day before
the bankruptcy court approved Sci-O-Tech's sale of its assets to
Lumex Bed Systems, Inc. Even assuming this fact is true, however,
it is legally irrelevant as the Court has already held that
disclosure to counsel for the creditors' committee does not
constitute disclosure to the creditors at large. See id.
Moreover, Kunica has conceded that the schedule was never
provided to the bankruptcy court or the U.S. Trustee, and, as
noted in the Opinion, there is no evidence that the schedule was
submitted to Sci-O-Tech's creditors at large. See id. At 57.
Fourth, based on the allegations contained in an affidavit
first submitted in connection with plaintiff's instant motion for
reconsideration,*fn3 Kunica urges that he is a third-party
beneficiary of Sci-O-Tech's claims. A motion for reconsideration
is not the proper avenue for the submission of new material.
See Local Rule 6.3 (in connection with a motion for
reconsideration, "[n]o affidavits may be filed by any party
unless directed by the court."); First Amer. Corp. v. Price
Waterhouse LLP, No. M8-85, 1999 WL 148460 (S.D.N.Y. March 18,
1999). Accordingly, the affidavit will not be considered
2. Controlling Decisions
Kunica claims that the Court's finding that ". . . independent
research has not revealed any authority dealing with the effect
of dismissal on non-disclosed claims," see Kunica, 233 B.R. at
54, is incorrect and urges the Court to follow the approach
adopted by the court in Central Jersey Freightliner, Inc. v.
Freightliner Corp., 987 F. Supp. 289 (D.N.J.) which held that
"[a]bsent confirmation of a plan, there
is no definitive proof that a debtor would not have disclosed its
causes of action before an order of confirmation. . . ." These
principles, when applied to the case at bar, militate against
dismissal of the nondisclosed claims. As noted in the Opinion, on
the underlying motion neither party cited any authority dealing
with non-disclosure in the context of a dismissal prior to
confirmation. As Central Jersey Freightliner was not put before
the Court on the underlying motion for summary judgment, it will
not be considered.*fn5 See Mina Investment Holdings Ltd. v.
Lefkowitz, 184 F.R.D. 245, 251 (S.D.N.Y. 1999).
Kunica also posits that the Court "ignored" Sections 349 and
363 of the Bankruptcy Code and improperly relied instead on
Sections 727(a) and 1141(d) which provide that liquidating
corporations cannot get a discharge under Chapter 7 and Chapter
11, respectively. In fact, the Court held that:
Given the critical importance of full and candid
disclosure in Chapter 11 proceedings, it cannot be
that the requirement of adequate disclosure
evaporates because a reversion of property is
obtained by dismissal, under § 349, as opposed to
abandonment under § 554. To hold otherwise would be
to encourage a procedural end-run around the
disclosure requirements, thereby rewarding parties
that fail to comply with the directive of § 1125.
Thus, a bankruptcy discharge is not a prerequisite to
a finding that a debtor lacks standing to assert
undisclosed claims post-bankruptcy.
Kunica, 233 B.R. at 54-55. The Opinion then goes on to state
that "[a] number of factors particular to the present action
militate in favor of this conclusion," See id. at 55. One such
factor is that Sci-O-Tech's sale of substantially all of its
assets combined with its lack of any continuing operations,
"suggests that even if a plan were confirmed, Sci-O-Tech could
not have obtained a discharge [pursuant to Sections 727(a) and
Finally, Kunica asserts that informal communications to an
attorney for the Creditor's Committee constitutes formal notice
to all parties in interest, the U.S. Trustee and the bankruptcy
court. This matter was raised and briefed on the underlying
motion and addressed in the Opinion. See id. at 57. Rejection
of a party's assessment of the law is not a proper ground on
which to seek reconsideration. See Mina, 184 F.R.D. at 250;
Farkas v. Ellis, 783 F. Supp. 830, 833 (S.D.N.Y.), aff'd,
979 F.2d 845 (2d Cir. 1992); see also Lehmuller v. Incorporated
Village of Sag Harbor, 982 F. Supp. 132, 135 (E.D.N.Y. 1997)
(noting that "courts have reiterated that a Rule 6.3 motion is
not a motion to reargue those issues already considered when a
party does not like the way the original motion was resolved").
II. Subject Matter Jurisdiction
Kunica submits that the conclusion on page one of the Opinion,
taken from the complaint, that "Rogers is a New York resident" is
incorrect. In his Answer, Rogers denies that he maintains a
residence at 500 Park Avenue, Suite 25B, New York, New York
10022. In his Notice of Removal of Civil Action ("Notice of
Removal"), Rogers states that he is "an individual residing in
London, England." (Notice of Removal ¶ 4). In paragraph 5 of the
Notice of Removal, Rogers asserts that complete diversity exists
in this matter bringing this litigation within 28 U.S.C. § 1332
and qualifying it for removal to this Court under
28 U.S.C. § 1441(a). However, Rogers apparently denies the allegations of
diversity jurisdiction contained in the Amended Complaint. (See
Answer to Amended Complaint at ¶ 2). These conflicting
admissions and denials raise the issue of whether the Court has
diversity jurisdiction pursuant to 28 U.S.C. § 1332. See, e.g.,
Shahmoon Industries, Inc. v. Imperato, 338 F.2d 449 (3rd Cir.
1964) (where record casts doubt as to jurisdiction, trial court
must determine whether there are adequate grounds to sustain its
jurisdiction over subject matter).
Complete diversity of parties is required in order that
diversity jurisdiction obtain. "The presence of a nondiverse
party automatically destroys original jurisdiction: No party need
assert the defect. No party can waive the defect, or consent to
jurisdiction." Wisconsin Dept. of Corrections v. Schacht,
524 U.S. 381, 118 S.Ct. 2047, 141 L.Ed.2d 364 (1998) (citing
Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee,
456 U.S. 694, 702, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982)).
To be a citizen of a state within the meaning of the diversity
provision a natural person must be both (1) a citizen of the
United States, or a permanent resident alien, and (2) a
domiciliary of that state. Domicile normally requires the
concurrence of physical presence in a state and the intent to
make such a state one's home. See Moore's Federal Practice and
Procedure, Vol. 1 § 5.06. Rogers does not appear to satisfy
either of these conditions, as he is an alien, a British citizen
residing in London, England.
It is uncontroverted that Kunica is also an alien, a Canadian
citizen domiciled in Georgetown, Ontario, Canada. The presence of
aliens on two sides of a case destroys diversity jurisdiction.
See Corporacion Venezolana de Fomento v. Vintero Sales
Corporation, 629 F.2d 786, 790 (2d Cir. 1980). Thus, the Court
lacks subject matter jurisdiction over this action. Cf. Kaufman
& Broad, Inc. v. Gootrad, 397 F. Supp. 1054 (S.D.N.Y. 1975);
Lloyds Bank PLC v. Norkin, 817 F. Supp. 414 (S.D.N.Y. 1993).
While it is true that objections to improper removal may be
waived, see Mackay v. Uinta Dev. Co., 229 U.S. 173, 33 S.Ct.
638, 57 L.Ed. 1138 (1913), it is equally true that the parties to
litigation cannot confer jurisdiction by consent or waiver. See
id. at 176, 33 S.Ct. 638. A case will be remanded to the state
court unless the district court had jurisdiction at the time of
final judgment. See Grubbs v. General Electric Credit Corp.,
405 U.S. 699, 92 S.Ct. 1344, 31 L.Ed.2d 612 (1972); Fax
Telecommunicaciones, Inc. v. AT & T, 138 F.3d 479, 488 (2d Cir.
1998). In the present case, the Court lacked subject matter
jurisdiction over this case at the time of final judgment.
Accordingly, Kunica urges that the judgment must be vacated and
the case remanded to state court.
Defendants concede that Rogers' presence destroys the diversity
jurisdiction of this Court,*fn6 but maintain that the proper
remedy is not to remand the entire case, but rather only
plaintiff's claims against Rogers, "thereby preserving the
Court's jurisdiction and the integrity of its prior decisions."
(Defendants' Brief at 1).
Pursuant to Rule 21 of the Federal Rules of Civil Procedure,
"[p]arties may be dropped or added by order of the court on
motion of any party or of its own initiative at any stage of the
action and on such terms that are just." Fed.R.Civ.P. 21; see
also Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 834,
109 S.Ct. 2218, 104 L.Ed.2d 893 (1989) ("it is well settled that
Rule 21 invests district courts with authority to allow a
dispensable nondiverse party to be dropped at any time, even
after judgment has been rendered."); Curley v. Brignoli, Curley
& Roberts Assocs.,
915 F.2d 81 (2d Cir. 1990); Jaser v. New York Property
Ins. Underwriting Ass'n, 815 F.2d 240, 242 (2d Cir. 1987).
"Unless it appears that a nondiverse defendant cannot be dropped
from an action without prejudice to the remaining defendants . .
. failure to do so is an abuse of discretion." Samaha v.
Presbyterian Hosp., 757 F.2d 529, 531 (2d Cir. 1985); Varley v.
Tampax, Inc., 855 F.2d 696, 700 (10th Cir. 1988). The Supreme
Court has determined that resort to Rule 21 is particularly
appropriate where the parties have proceeded through summary
judgment or trial before the jurisdictional defect is detected.
See Newman-Green, 490 U.S. at 836, 109 S.Ct. 2218; cf.
Caterpillar Inc. v. Lewis, 519 U.S. 61, 75, 117 S.Ct. 467, 136
L.Ed.2d 437 ("[o]nce a diversity court case has been tried in
federal court . . . consideration of finality, efficiency, and
economy become overwhelming.").
A court's discretion to dismiss a party pursuant to Rule 21 is
circumscribed only by the "equity and good conscience test" of
Fed.R.Civ.P. 19(b). See Curley, 915 F.2d at 90. The Second
Circuit has held that:
[a]s an alternative to dismissal, a court should take
a flexible approach when deciding what parties need
to be present for a just resolution of the suit. The
phrase "good conscience" implies a careful and
constructive consideration of those parties that are
necessary to the litigation. As a consequence, very
few cases should be terminated due to the absence of
non-diverse parties unless there has been a reasoned
determination that their non-joinder makes just
resolution of the action impossible.
Jaser, 815 F.2d at 242 (citing Provident Tradesmens Bank &
Trust Co. v. Patterson,