United States District Court, Northern District of New York
April 16, 2001
JOHN MCCLELLAND, INDIVIDUALLY AND DERIVATIVELY ON BEHALF OF JAF PARTNERS, INC., LANDEX INC., ANDERSON STREET REALTY CORPORATION, EAST MAIN, INC., AND NEW ROCHELLE MEDICAL BUILDING, PLAINTIFFS,
FRANK LONGHITANO, ANTHONY LONGHITANO, 7-11 SOUTH BROADWAY REALTY CORPORATION, 1-15 HUGUENOT REALTY CORPORATION, 255 MAIN STREET REALTY CORPORATION, LONG-NEWRO ENTERPRISES CORPORATION, 426 MAMARONECK AVENUE REALTY CORPORATION, 515 HUDSON STREET CORPORATION, NAILATI DEVELOPMENT CORPORATION, LIM REALTY CORPORATION, 277 DAVENPORT REALTY CORPORATION, 75 SURREY DRIVE CORPORATION, 466 MAIN STREET REALTY CORPORATION, JOHN DOE CORPORATION, AND JANE DOE CORPORATION, DEFENDANTS.
The opinion of the court was delivered by: Kahn, District Judge.
MEMORANDUM — DECISION AND ORDER
Presently before the Court is Plaintiffs' motion for remand.
For the following reasons Plaintiffs' motion is GRANTED.
Plaintiffs originally filed the above captioned complaint
against Defendants on November 23, 1998 in New York State Supreme
Court in Ulster County. The heart of their complaint is that
Anthony Longhitano and Frank Longhitano, the individual
defendants, were improperly using corporate properties to secure
financing for other projects without granting any interest to
plaintiff McClelland.*fn1 Plaintiffs' complaint asserts claims
against Defendants for an accounting, constructive trust, fraud,
conversion, breach of fiduciary duty, usurpation of corporate
opportunity, and breach of contract.
In response, Defendants filed counterclaims against Plaintiff
McClelland asserting that he illegally converted and appropriated
corporate property from them for his own personal use,
transferred corporate properties owned jointly by each to a new
corporation owned solely by Plaintiff McClelland, failed to pay
them proper dividends owed and was thereby unjustly enriched,
must pay them restitution for his illegal use of corporate
property, violated fiduciary duties owed them, must provide them
an accounting, and violated 18 U.S.C. § 1961-1968 by engaging in
racketeering and other fraudulent activity causing Defendants
injury. Despite heated discovery disputes, not summarized here,
Defendants sought to transfer venue of the instant litigation
over a period of approximately fifteen months to New York State
Supreme Court in Westchester County. In June 2000, the Ulster
County State Supreme Court ruled that venue in Ulster County was
Failing in their attempt to have the instant matter transferred
to Westchester County, Defendants filed a federal case against
Plaintiffs on February 7, 2001, docketed as 01-CV-183, alleging
claims similar to their state court counterclaims. Concurrent
with the filing of their federal action, Defendants also filed a
notice of removal of the above captioned matter, pursuant to
28 U.S.C. § 1367, alleging that the Court had supplemental
jurisdiction over it because it was related to the federal
action. Plaintiffs now seek to remand the above captioned state
matter back to the Ulster County Supreme Court.
Under 28 U.S.C. § 1441, a Defendant in a state court action may
remove the action to federal court if the state court action
could have been originally filed in federal court and the
defendant files a notice of removal with the federal court within
thirty days after service of the state court complaint. See
28 U.S.C. § 1441(a); 28 U.S.C. § 1446. The parties do not dispute
that Defendants could not have removed the instant case from
state court under these statutes. Rather, Defendants argue that
removal is justified under 28 U.S.C. § 1367(a). That statute
[I]n any civil action of which the district courts
have original jurisdiction, the district courts
shall have supplemental jurisdiction over all other
claims that are so related to claims in the action
within which such original jurisdiction that they
form part of the same case or
controversy under Article III of the United States
28 U.S.C. § 1367(a) (emphasis added).
According to Defendants, because the state court action is so
related to the existing federal court action, removal was proper
and this Court may consolidate them. Although Defendants'
approach does have the benefit of efficiency and avoids the
possibility of inconsistent adjudications of similar, if not
identical, issues, their argument incorrectly attempts to turn
28 U.S.C. § 1367(a) into an independent source of removal
jurisdiction. See In re Estate of Tabas, 879 F. Supp. 464, 467
(E.D.Pa. 1995). If the Court condoned such an approach, the
statutory and jurisdiction mandates Congress carefully crafted
for removing state cases to federal courts under 28 U.S.C. § 1441
would be rendered a nullity as state court defendants seeking to
avoid those mandates and contrive federal jurisdiction could, as
here, file an independent federal suit based on similar claims to
those contained in the state law suit and then seek to remove the
otherwise unremovable state law case to federal court. Such an
interpretation of § 1367 would also be in conflict with the
well-established rule that "a plaintiff may avoid federal
jurisdiction by pleading only state law claims, even when federal
claims are also available, and even if there is a federal
defense." Fax Telecommunicaciones Inc. v. AT & T, 138 F.3d 479,
486 (2d Cir. 1998) (citing Caterpillar Inc. v. Williams,
482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987)); see also
Wallace v. Wiedenbeck, 985 F. Supp. 288, 290 (N.D.N.Y. 1998)
(same applies to federal counterclaims); Memorial Hosp. for
Cancer & Allied Diseases v. Empire Blue Cross & Blue Shield, No.
93 CIV. 6682, 1994 WL 132151, at *5 (S.D.N.Y. April 12, 1994)
(same); 14B Charles Alan Wright, Arthur R. Miller, & Edward H.
Cooper, Federal Practice and Procedure § 3722 (1998).
Almost every single authority to address this issue has
concluded that the supplemental jurisdiction statute cannot be
used in this manner. See Ahearn v. Charter Township of
Bloomfield, 100 F.3d 451, 456 (6th Cir. 1996); Fabricius v.
Freeman, 466 F.2d 689, 693 (7th Cir. 1972); Keene v. Auto
Owners Ins. Co., 78 F. Supp.2d 1270, 1274 (S.D.Ala. 1999) (noting
"that a defendant may not invoke the supplemental jurisdiction
statute to bootstrap an otherwise unremovable action into federal
court."); Pacific Bell v. Covad Comms. Co., No. 99-1491, 1999
WL 390840, *3, 1999 U.S. Dist LEXIS 8846, at *10 (N.D. Cal. June
9, 1999) (citations omitted); Tafuri v. Jeppesen Sanderson,
Inc., 25 F. Supp.2d 1364, 1369 (S.D.Fla. 1998); New York State
Constr. Auth. v. Bedell Assocs., No. 97 CV 4159, 1997 U.S. Dist.
LEXIS 15597, at *13 (E.D.N.Y. Sept. 12, 1997); George v. Borden
Chem. & Plastics Operating Ltd., 960 F. Supp. 92, 95 (M.D.La.
1997); Sebring Homes Corp. v. T.R. Arnold Assocs. Inc.,
927 F. Supp. 1098, 1101-02 (N.D.Ind. 1995); In re Estate of Tabas,
879 F. Supp. at 467; 13B Charles Alan Wright & Arthur R. Miller,
Federal Practice and Procedure § 3567.3 (2000). On its face,
28 U.S.C. § 1367 distinguishes between actions and claims, allowing
plaintiffs to bring federal claims in federal court even though
combined with state law claims that would otherwise not be within
a federal court's jurisdiction. See In re Estate of Tabas, 879
F. Supp. at 467. Nowhere does it indicate that it overrides the
removal requirements contained in 28 U.S.C. § 1441 or changes the
long standing rule that "[o]nly state-court actions that
originally could have been filed in federal court may be removed
to federal court by the defendant." Caterpillar, 482 U.S. at
391, 107 S.Ct. 2425. Furthermore, Congress never implied nor
indicated that the supplemental jurisdiction provisions contained
in 28 U.S.C. § 1367 somehow bestow an independent
source of removal jurisdiction on this court for the benefit of
state court litigants unhappy with the outcome of proceedings
there. See In re Estate of Tabas, 879 F. Supp. at 467.
Defendants' reliance on Cohen v. Reed, 868 F. Supp. 489, 494
(E.D.N.Y. 1994) to support their arguments concerning the
propriety of removal here is unavailing. First, the Reed
Court's blanket holding that it may properly assert supplemental
jurisdiction over a related state law complaint does not in any
way bind this court. Second, the Court notes that the veracity of
the Reed Court's holding is cast in serious doubt not only by
the fact that each of the cases cited above failed to follow its
holding but by the additional fact that one of those cases was
from the very same district as Reed. See New York State Constr.
Auth., 1997 U.S. Dist. LEXIS 15597, at *13. Finally, because the
Reed Court failed to provide any analysis to explain its
otherwise untenable conclusion this Court declines to follow
Accordingly, it is hereby
ORDERED that Plaintiffs' motion for remand is GRANTED; and it
ORDERED that the above captioned case is REMANDED to the
Supreme Court of New York for the County of Ulster; and it is
ORDERED that Plaintiffs request for fees and costs in having
the case remanded is DENIED; and it is further
ORDERED that the Clerk of the Court serve a copy of this order
on all parties by regular mail.
IT IS SO ORDERED.