properties owned by the defendants in the Texas Action. On July
20, 1999, Pate brought an application in Texas federal court
seeking a "turnover" of the Texas Defendants' non-exempt
property, or, in the alternative, for a judicial foreclosure of
Pate's collateral (the "Texas Application").
On July 27, 1999, Plaintiffs filed papers in the Texas Action
opposing Pate's requested relief, contending that Pate's security
interest was invalid and that plaintiff (in this action)
Briarpatch had superior rights to the properties at issue. The
Texas district court judge presiding over the action scheduled a
hearing on the application for September 17, 1999, expressing a
willingness to decide the question of priority. Plaintiffs were
unwilling to consent to the Texas court's jurisdiction, however.
Meanwhile, Plaintiffs had filed this action in New York State
Supreme Court, New York County, on July 9, 1999, seeking a
declaration that Pate did not have any valid interest in the
properties at issue in the Texas Action, because the Texas
Defendants were not authorized to grant any such interest.
However, the limited partnership agreement of Briarpatch Ltd.,
L.P. gave the General Partners (who were among, or controlled by,
the Texas Defendants) the "unrestricted right to sell or assign,
and to pledge, mortgage or otherwise hypothecate, any Project,
either in whole or in part, without obtaining the consent of
Rubin." (Goldin Aff. Exh. 1 Attach. 1 ¶¶ 3.1-3.2.) Rubin also
acknowledged in the agreement that "he does not and shall not
have any right, title or interest of any kind whatsoever in or to
any Project (including, without limitation, any copyrights or any
income derived therefrom)" and agreed that the general partners
of the partnership could register its copyrights in "such party
as Briarpatch in its sole business discretion may determine
proper." (Id. ¶¶ 4.1-4.2.)
The Briarpatch Ltd., L.P. partnership agreement also contained
a broad arbitration clause, under which "[a]ny controversy,
claim, dispute or question arising out of, or in connection with,
or in relation to, the validity, interpretation, performance or
nonperformance of this Agreement, or any breach thereof, shall be
determined and settled by arbitration in New York before a single
arbitrator." (Id. ¶ 16.)
On July 22, 1999, Plaintiffs filed an amended complaint in this
action, adding citations to the July 12 New York State Court
On August 16, 1999, Pate removed this action to this Court on
the basis of diversity of citizenship.
On August 28, 1999, Plaintiffs filed the instant motion,
seeking to add six corporations as defendants: the five General
Partners, and Geisler Roberdeau, Inc. (the "New Defendants").
Geisler Roberdeau, Inc., is, like each of the General Partners, a
dissolved corporation under New York law.
Plaintiffs also seek to add two new claims for relief:
Conspiracy to Convert Rights and Interests, and Conspiracy to
Breach Fiduciary Duty. In their proposed Second Amended
Complaint, Plaintiffs allege that by July 17, 1999, Pate had been
informed and was aware of the March 1, 1999 Injunction and the
July 12, 1999 Decision of the New York State Supreme Court in the
1998 New York Action. Plaintiffs further allege that Pate and the
other Defendants, through and with the assistance of their
representatives Geisler and Roberdeau, entered into an
understanding, agreement, and scheme, whereby Pate would attempt
to obtain and foreclose upon rights in and to "The Thin Red
Line," "The English Speaker," "The White Hotel," and "Sansho the
Bailiff." Geisler and Roberdeau and their affiliates would not
oppose those efforts of Pate to foreclose, and, with respect to
"The White Hotel," "The English Speaker," and "Sansho the
Bailiff," Pate, after acquiring title thereto, would permit
Geisler and Roberdeau to manage and produce those properties.
Plaintiffs further allege that Pate,
Geisler, and Roberdeau plan to share in the profits from these
projects to the exclusion of Rubin and Briarpatch. Furthermore,
Pate is allegedly improperly attempting to acquire rights to
"Sansho the Bailiff," to which he had never been granted a
As part of the scheme, Pate allegedly did not disclose to the
Texas Court either the March 1, 1999 Injunction or the July 12,
1999 Decision nor give any indication that the rights to the
Projects might be the property of the Plaintiffs in this action,
nor did Pate notify Plaintiffs of the Turnover Application. In
all of these proceedings, Geisler and Roberdeau are alleged to
have assisted Pate in his attempt to obtain turnover.
Plaintiffs also allege that not later than mid-July 1997, Pate,
the General Partners, Geisler Roberdeau, Inc., and Geisler and
Roberdeau conspired to breach the fiduciary duties which the
General Partners, Geisler Roberdeau, Inc., and Geisler and
Roberdeau owed to the Partnership by attempting to deprive the
Partnership of the rights to "The Thin Red Line," "The White
Hotel," "The English Speaker," and "Sansho the Bailiff."
In a supplemental affirmation filed by Plaintiffs' counsel,
counsel states that it did not become aware of the conspiracy
until after the filing of the First Amended Complaint, through
phone conversations with Pate's local counsel in Texas, who
revealed the plan under which Pate would turn over the properties
to Geisler and Roberdeau to manage in return for profit-sharing.
The instant motion, to permit the filing of a Second Amended
Complaint, containing the allegations described above regarding
the conspiracy and seeking to add the New Defendants, and to
remand the action to New York Supreme Court, was filed on August
28, 1999. Answer and reply papers were received through September
22, 1999, at which time oral argument on the motion was heard.
On November 17, 1999, an evidentiary hearing was held at which
it was preliminarily established that plaintiff Rubin was, for
diversity purposes, domiciled in New York. Documents subsequently
submitted to the Court — principally Rubin's W-2 statements from
recent years, which show a New York address — have buttressed
Oral argument on the motion to dismiss for lack of personal
jurisdiction was heard on November 24, 1999.
If the Second Amended Complaint is permitted to be filed, the
original basis for removal, diversity jurisdiction, will be
destroyed, because plaintiff Rubin has been determined to be a
New York domiciliary and there is no dispute that the New
Defendants are, likewise, New York domiciliaries. Pate, however,
opposes remand on several grounds. First, he maintains that the
addition of the New Defendants constitutes fraudulent joinder in
an attempt to defeat diversity. Second, he maintains that the
Court nevertheless retains jurisdiction over this action because
federal copyright law provides an independent basis for
jurisdiction.*fn3 These points will be addressed in turn.
I. Fraudulent Joinder
Section 1447(e) of Title 28 of the United States Code provides:
If after removal the plaintiff seeks to join
additional defendants whose joinder would destroy
subject matter jurisdiction, the court may deny
permit joinder and remand the action to the State
28 U.S.C. § 1447(e).
The decision whether to admit the new parties is within the
sound discretion of the trial court. See Wyant v. National R.R.
Passenger Corp., 881 F. Supp. 919, 921 (S.D.N.Y. 1995). District
courts in this circuit have generally agreed that in exercising
the discretion whether to admit new parties, "courts first
consider whether joinder would be appropriate under Rule 20 [of
the Federal Rules of Civil Procedure] and then proceed to weigh
the competing interests in efficient adjudication and the need to
protect diversity jurisdiction from manipulation." Id. at 922;
see also Juliano v. Toyota Motor Sales, U.S.A., Inc.,
20 F. Supp.2d 573, 575 (S.D.N.Y. 1998); Mammano v. American Honda
Motor Co., 941 F. Supp. 323, 324-25 (W.D.N.Y. 1996).
Rule 20 provides, in relevant part:
All persons . . . may be joined in one action as
defendants if there is asserted against them jointly,
severally, or in the alternative, any right to relief
in respect of or arising out of the same transaction,
occurrence, or series of transactions or occurrences
and if any question of law or fact common to all
defendants will arise in the action. . . .