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Arseneault v. Congoleum Corp.

United States District Court, S.D. New York

March 25, 2002


          Filed: March 26, 2002.


          For RICHARD A. ARSENEAULT, SHERYL A. ARSENEAULT, plaintiffs: Charles M. Ferguson, Weitz & Luxenberg, P.C., New York, NY.

          For CONGOLEUM CORPORATION, defendant: Thomas A. Rhatigan, Costello, Shea & Gaffney, L.L.P., New York, NY.

          For EMPIRE ACE INSULATION MFG. CORP., defendant: Steve Kevelson, Brooklyn, NY.

          For RAPID AMERICAN CORPORATION, defendant: Joel Slowatsky, Rubin, Baum, Levin, Constant & Friedman, New York, NY.

          For SEQUOIA VENTURES INC., defendant: Jonathan E. Polonsky, Ayanna S Young, Thelen, Reid & Priest, L.L.P., Mark S. Landman, Landman, Corsi, Ballaine & Ford, P.C., New York, NY.

          For WORTHINGTON CORPORATION, defendant: Robert J. Brener, Edwards & Angell, L.L.P., New York, NY.


          McKENNA, D.J.

         The above action, which alleges damages resulting from exposure to materials containing asbestos, and was commenced in the Supreme Court of the State of New York, New York County, was removed to this Court by the filing of a Notice of Removal by defendant Sequoia Ventures Inc., formerly known as Bechtel Corporation ("Sequoia"), on November 27, 2001. Defendant Worthington Corporation ("Worthington") has consented to and joins in the Notice of Removal, and defendant Congoleum Corporation ("Congoleum") consents to it. (Notice of Removal Ex. D.) Sequoia premises federal subject matter jurisdiction on 28 U.S.C. § 1332 (diversity) only. There is no dispute that the matter in controversy exceeds $ 75,000, exclusive of interest and costs. Plaintiffs move to remand pursuant to id. § 1447(c). [1]

          Prior to removal, in June and July of 2001, a bifurcated jury trial, as to damages only, was held in the present case together with a number of others on the New York County Supreme Court's In re: New York City Asbestos Litigation (Index No. 88-40000) in extremis docket, which resulted in a sealed verdict on July 5, 2001. (Notice of Removal ¶ 26; Pl. Mem. at 1; Gordon Decl. ¶ 2; Polonsky Aff. ¶ 2.) Plaintiffs suggest that an expedited liability trial could occur in the very near future, if the case is remanded. (Pl. Reply Mem. at 1-2.)

         Some understanding of plaintiffs' counsel's pleading practices in the New York County Supreme Court is required for an understanding of the parties' arguments. According to plaintiffs' counsel:

It has been [their] practice over the many years of this consolidated litigation in New York Supreme Court, which has involved thousand[s] of asbestos personal injury suits, to file a Standard Asbestos Complaint against a general list of numerous (currently approximately 100) defendants, which have been identified as making, selling, using, incorporating, installing, or providing premises with asbestos or asbestos products. The causes of action in the complaint are stated generally and jointly against all the defendants: "During the course of [plaintiff's] employment, plaintiff was exposed to the defendants' asbestos and asbestos containing materials to which exposure directly and proximately caused him to develop an asbestos related disease."

* * *

As discovery proceeds, including interrogatories, document requests, and the depositions of Plaintiffs and other witnesses, many defendants are dismissed out of each case through various procedures. Some of the defendants are not served with the complaint, some are "stipulated out" of the case, and some file motions to dismiss or for summary judgment, which are either opposed or not opposed by the Plaintiff. When the motions are opposed by Plaintiff, an order typically is issued by the court granting or denying the motion.

(Pl. Mem. at 3 (quoting Standard Asbestos Complaint).)

         Sequoia alleges that this action was commenced in October of 2000 (Notice of Removal ¶ 2), that Sequoia (by its counsel) received the summons and complaint on October 12, 2000 and Worthington on October 13, 2000 (id.), that Congoleum was added as a defendant in a third amended complaint dated February 22, 2001 which was served on it on March 6, 2001 (id. ¶ 3), that plaintiffs at all relevant times have been citizens of Connecticut (id. ¶ 5), that the only remaining defendants in the case are Sequoia, Worthington, Congoleum, Empire Ace Insulation Mfg. Co. ("Empire") and Rapid American Corporation ("Rapid") (id. ¶ 5), that Sequoia is a Delaware corporation with its principal place of business in California, Worthington a Delaware corporation with its principal place of business in Texas, and Congoleum a Delaware corporation with its principal place of business in New Jersey (id. ¶ 6), and that Empire is a New York corporation with its principal place of business in New York and Rapid a Delaware corporation with its principal place of business in New York (id. P 7) and that Empire and Rapid are fraudulently joined. (Id. ¶¶ 10, 11.)

         Sequoia claims that this case is removable under the provisions of the second paragraph of 28 U.S.C. § 1446(b). [2] It says that it was only upon receipt by Sequoia of a list of remaining defendants dated October 30, 2001 (the "October List") that it "knew or reasonably should have known that there were no remaining defendants in this action that were citizens of either Connecticut or New York, other than the two remaining fraudulently joined defendants [i.e., Empire and Rapid]" and that "the October Notice was the first notice Sequoia . . . had from Plaintiffs from which it could reasonably determine that this action was removable." (Id. ¶ 13.) The removing defendants further claim that "it was only upon receiving the October List and the contemporaneous list of co-defendants (dated October 27, 2001 and received on or about October 29, 2001) who were voluntarily dismissed from the action by plaintiffs (and as to whom there is no reasonable basis for liability) (the 'Stipped Out List') that Sequoia . . . learned of the extent of the fraudulent joinder in this action." (Id.)

          Plaintiffs argue that this case was not removable on three grounds: (1) that the Notice of Removal, filed on November 27, 2001, was not timely, since Sequoia had become aware more than 30 days prior to the filing of the Notice of Removal of the facts on which the removal is premised; (2) that in order to remove on diversity grounds the removing party must show that diversity existed not only at the time of removal, but at the time the action was commenced, as well, which Sequoia cannot do; and (3) that Sequoia cannot sustain its burden of showing that either Empire or Rapid was fraudulently joined. [3]

The party asserting jurisdiction bears the burden of proving that the case is properly in federal court and that party may not "be relieved of [its] burden by any formal procedure." Thus, "if [the averring party's] allegations of jurisdictional facts are challenged by [its] adversary in any appropriate manner, [the averring party] must support them by competent proof." Where . . . jurisdiction is asserted by a defendant in a removal petition, it follows that the defendant has the burden of establishing that removal is proper.

United Food & Commercial Workers Union v. CenterMark Props. Meriden Square, Inc., 30 F.3d 298, 301 (2d Cir. 1994) (quoting McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 80 L.Ed. 1135, 56 S.Ct. 780 (1936) (emphasis added; other citations omitted)).

The right to remove a state court action to federal court on diversity grounds is statutory, and must therefore be invoked in strict conformity with statutory requirements. In light of the congressional intent to restrict federal court jurisdiction, as well as the importance of preserving the independence of state governments, federal courts construe the removal statute narrowly, resolving any doubts against removability.

Somlyo v. J. Lu-Rob Ents., Inc., 932 F.2d 1043, 1045-46 (2d Cir. 1991) (citations omitted).

         Under the removal statute, even if diversity jurisdiction is demonstrated, the action "shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." 28 U.S.C. § 1441(b). Vasura, 84 F.Supp.2d at 538.

         The general rule is that "where removal is premised on diversity jurisdiction, . . . complete diversity must exist both at the time the action is commenced and at the time of removal." Pepsico, Inc. v. Wendy's Int'l, Inc.,118 F.R.D. 38, 40 (S.D.N.Y. 1987). However, an exception to that general rule, under 28 U.S.C. § 1446(b) and Powers v. Chesapeake & Ohio Ry. Co., 169 U.S. 92, 42 L.Ed. 673, 18 S.Ct. 264 (1898), occurs "where the plaintiff after instituting the action create[s] complete diversity by voluntarily ...

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