United States District Court, S.D. New York
RICHARD A. ARSENEAULT and SHERYL A. ARSENEAULT, Plaintiffs,
CONGOLEUM CORPORATION, EMPIRE ACE INSULATION MFG. CORP., RAPID AMERICAN CORPORATION, SEQUOIA VENTURES INC. f/k/a BECHTEL CORPORATION and WORTHINGTON CORPORATION, Defendants.
March 26, 2002.
RICHARD A. ARSENEAULT, SHERYL A. ARSENEAULT, plaintiffs:
Charles M. Ferguson, Weitz & Luxenberg, P.C., New York, NY.
CONGOLEUM CORPORATION, defendant: Thomas A. Rhatigan,
Costello, Shea & Gaffney, L.L.P., New York, NY.
EMPIRE ACE INSULATION MFG. CORP., defendant: Steve Kevelson,
RAPID AMERICAN CORPORATION, defendant: Joel Slowatsky, Rubin,
Baum, Levin, Constant & Friedman, New York, NY.
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.
WORTHINGTON CORPORATION, defendant: Robert J. Brener, Edwards
& Angell, L.L.P., New York, NY.
MEMORANDUM AND ORDER
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. Â§ 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. Â§ 1447(c).
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 Â¶ 26; Pl.
Mem. at 1; Gordon Decl. Â¶ 2; Polonsky Aff. Â¶ 2.) Plaintiffs
suggest that an expedited liability trial could occur in the
very near future, if the case is remanded. (Pl. Reply Mem. at
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).)
alleges that this action was commenced in October of 2000
(Notice of Removal Â¶ 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. Â¶ 3), that plaintiffs at all
relevant times have been citizens of Connecticut
(id. Â¶ 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. Â¶ 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. Â¶ 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. Â¶Â¶ 10, 11.)
claims that this case is removable under the provisions of
the second paragraph of 28 U.S.C. Â§ 1446(b).  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. Â¶ 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
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.
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
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
Somlyo v. J. Lu-Rob Ents., Inc., 932 F.2d 1043,
1045-46 (2d Cir. 1991) (citations omitted).
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. Â§ 1441(b). Vasura, 84 F.Supp.2d at
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. Â§ 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 ...