United States District Court, S.D. New York
October 19, 2004.
PHOENIX GLOBAL VENTURES, LLC, Plaintiff,
PHOENIX HOTEL ASSOCIATES, LTD., CONDOR INVESTMENT GROUP, PHOENIX HOTEL ASSOCIATES, and CENTRAL & ADAMS MANAGEMENT CO., Defendants.
The opinion of the court was delivered by: RICHARD HOLWELL, District Judge
MEMORANDUM OPINION AND ORDER
This action arises out of the alleged failure to pay a
promissory note owed by defendants Phoenix Hotel Associates, Ltd.
("PHAL"), Condor Investment Group ("Condor"), Phoenix Hotel
Associates ("PHA") and Central & Adams Management Co. ("Central &
Adams") (collectively "defendants") to Phoenix Global Ventures,
LLC ("Phoenix Global"). PHAL, Condor and PHA filed a notice of
removal from state court pursuant to 28 U.S.C. § 1441. Phoenix
Global now moves to remand this action back to state court
pursuant to 28 U.S.C. § 1447. For the reasons set forth below,
the Court grants Phoenix Global's motion and remands this action
to state court.
Plaintiff Phoenix Global is a Connecticut limited liability
corporation with two members who reside in New York. (Aff. of
Michael Milea ¶ 3.) PHAL is a California partnership that
includes three general partners Condor, PHA, and Central &
Adams and has its principal place of business located in
Arizona. (Pl.'s Mem. in Supp. of Mot. to Remand at 2.) Condor is a Delaware corporation with its
principal place of business in Arizona; PHA is a Nevada
corporation with its principal place of business in Arizona; and
Central & Adams is a California corporation with its principal
place of business also in California. (Id.)
Defendants executed a note on November 17, 1999, originally
promising to pay $12,000,000 to Reciprocal Capital Services.
(Defs.' Notice of Removal, Ex. A at 1.) Reciprocal Capital
Services then assigned the rights, title, interest and payments
owed thereunder to Phoenix Global on September 24, 2003, in an
agreement signed by defendants, Phoenix Global and Reciprocal
Capital. (Id., Ex. B at 2; Affirmation of John P. Gulino, Ex. 2
at 2.) Phoenix Global alleges that defendants failed to make the
payments due on the promissory note, and that on February 27,
2004, plaintiff sent notice of default, as well as the
acceleration of the debt, to each defendant by certified mail.
(Aff. of Michael Milea ¶ 4.)
On May 11, 2004, Phoenix Global initiated a lawsuit against
defendants to recover $15,600,000 owed on the note in the Supreme
Court of the State of New York, County of New York in an action
entitled Phoenix Global Ventures, LLC v. Phoenix Hotel
Associates, Ltd., Condor Investment Group, Phoenix Hotel
Associates Limited, and Central & Adams Mgmt. Co., Index No.
107236/04. (Id. at 1.) In so doing, Phoenix Global served
Condor and Central & Adams a Summons of Notice of Motion for
Summary Judgment in Lieu of Complaint on May 21, 2004.
(Affirmation of John P. Gulino ¶ 2.) The remaining defendants
were served through their authorized and registered agents by
June 1, 2004. (Id.) PHAL, Condor and PHA then filed a notice of removal on June 25,
2004, seeking to remove the action from state court to the United
States District Court of the Southern District of New York
pursuant to the federal removal statute, 28 U.S.C. § 1441, and
the federal diversity statute, 28 U.S.C. § 1332. In response,
Phoenix Global's counsel, John P. Gulino ("Gulino"), prepared a
motion to remand back to state court, which he alleges was ready
to serve and file on July 25, 2004 a day before the motion was
due. (Reply Affirmation of John P. Gulino ¶ 3.)
Unfortunately, Gulino had never been involved in a case using
the electronic case filing ("ECF") system and was therefore "not
familiar with the computer procedures involved." (Id.) As such,
he was "wholly ignorant of the process or procedures" of using
the ECF system. (Id.) Upon obtaining the passwords and programs
in a timely manner, Gulino nevertheless discovered that the
exhibits accompanying the prepared motion to remand were
unacceptable for filing. (Id.) In effect, Gulino alleges, the
"program that scanned the exhibits and converted [them] to [PDF]
format created files much too large." (Id.)
By the end of the afternoon on July 26, 2004, Gulino was
"assured that all the files had been accepted and the motion was
filed" before leaving his office. (Id.) However, although the
ECF system had accepted all of the documents, it ultimately
rejected the filing because an unacceptable hearing date had been
entered. (Id.) Gulino did not discover this error until the
next morning, at which point he entered a valid date into the
system and the documents were accepted on July 27, 2004. (Id.)
Presently, the threshold issue is whether defendants properly
removed this action from state court to federal court. The
secondary issue is whether Phoenix Global waived its right to remand this action to state court by filing its
motion to remand in an untimely fashion. The Court now turns to
the merits of these questions.
I. Motion to Remand
A. Standard of Review
A civil action initially brought in state court may be removed
by the defendant to federal court, provided that the "district
courts of the United States have original jurisdiction."
238 U.S.C. § 1441(a). In order for "removal to be considered proper,
the removing party must demonstrate that this Court is endowed
with the requisite subject matter jurisdiction." Frontier
Insurance Co. v. MTN Owner Trust, 111 F. Supp. 2d 376, 378
(S.D.N.Y. 2000) (citation omitted). Indeed, it is well settled
that "the party seeking to preserve the district court's removal
jurisdiction, typically the defendant, not the party moving for
remand to state court, typically the plaintiff," bears the burden
of showing that removal is appropriate in the first instance.
Charles Alan Wright, Arthur R. Miller, Edward H. Cooper, Federal
Practice and Procedure, § 3739 at 424 (3d Ed. 1998); Ryan v. Dow
Chemical Corp., 781 F. Supp. 934, 939 (E.D.N.Y. 1992). Moreover,
removal statutes are to be "strictly construed." State of N.Y.
v. Lutheran Center for Aging, Inc., 957 F. Supp. 393, 397
(E.D.N.Y. 1997) (citing cases). If there is any doubt as to
whether removal is appropriate, the case should be remanded.
Wilds v. United Parcel Service, Inc., 262 F. Supp. 2d 163,
176-77 (S.D.N.Y. 2003); State of N.Y., 957 F. Supp. at 397;
Truglia v. KFC Corp., 692 F. Supp. 271, 275 (S.D.N.Y. 1988)
(allegations must be construed in light most favorable to plaintiff in evaluating
motion to remand); Lance Int'l Inc. v. Aetna Cas. & Sur. Co.,
264 F.Supp. 349, 356 (S.D.N.Y. 1967).
B. Propriety of Defendants' Removal
Defendants filed a notice of removal premised on the federal
diversity statute which authorizes original jurisdiction over
actions "where the matter in controversy exceeds the sum or value
of $75,000, and is between . . . citizens of different States."
28 U.S.C. § 1332(a). As an initial matter, the Court has an
independent obligation to address, sua sponte, the propriety of
subject matter jurisdiction even if Phoenix Global has not
challenged defendants' assertion of subject matter jurisdiction.
Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186, 193 (2d
Cir. 2003) ("[f]ailure of subject matter jurisdiction, of course,
is not waivable and may be raised at any time by a party or by
the court sua sponte"). A case "falls within the federal
district court's `original' diversity `jurisdiction' only if
diversity of citizenship among the parties is complete, i.e.,
only if there is no plaintiff and no defendant who are citizens
of the same State." Wisconsin Dep't of Corr. v. Schact,
524 U.S. 381, 388 (1998). In this case, it is undisputed that
plaintiff is a Connecticut limited liability corporation, and
defendants are located in California, Delaware, Arizona and
Nevada.*fn1 Given that the parties are completely diverse,
the Court concludes that subject matter jurisdiction is proper in
Phoenix Global challenges two apparent defects in defendants'
removal procedure, arguing that (1) the filing was untimely, and
(2) all defendants did not join in the notice of removal. (Pl.'s
Mem. in Supp. of Mot. to Remand at 3.) Section 1446(b) provides that the notice of removal "shall be filed within thirty
days after receipt by defendant, through service or otherwise, of
a copy of the initial pleading setting forth the claim for relief
upon which such action or proceeding is based."
28 U.S.C. § 1446(b). Section 1446(b) further requires that all defendants
submit to removal through unambiguous written consent within the
thirty-day period. See Smith v. Kinkead, No. 03 Civ. 10283,
2004 WL 728542, at *2-3 (S.D.N.Y. April 5, 2004) (citing cases);
Payne v. Overhead Door Corp., 172 F. Supp. 2d 475, 476-77
(S.D.N.Y. 2001). This "rule of unanimity" advances "the
congressional purpose of giving deference to a plaintiff's choice
of a state forum and resolving doubts against removal in favor of
remand" Smith, 2004 WL 728542, at *2 (quotations omitted). If
defendants fail to file written consent to removal before the
thirty-day period expires, the notice of removal is ineffective,
and remand is appropriate. See Forum Ins. Co. v. Texarkoma Crude
and Gas Co., No. 92 Civ. 8602, 1993 WL 228023, at *2 (S.D.N.Y.
June 22, 1993).
Phoenix Global served a Summons of Notice of Motion for Summary
Judgment in Lieu of Complaint on Condor and Central & Adams on
May 21, 2004. This initial pleading triggered the thirty-day
period, which expired on June 21, 2004.*fn2 See Yang v.
ELRAC, No. 03 Civ. 9224, 2004 WL 235208, at *1 (S.D.N.Y. Feb. 6,
2004) (thirty-day period runs from receipt of initial pleading by
the first defendant). However, PHAL, Condor, and PHA filed a notice of removal on June 25, 2004, that
in addition to being late, did not include Central & Adams. It
further appears from the face of the pleadings that Central &
Adams has never submitted written consent to removal.*fn3
Both of these errors are independently fatal to defendants'
notice of removal. Allstate Ins. Co. v. Zhigun, No. 03 Civ.
10302, 2004 WL 187147, at *2 (S.D.N.Y. Jan. 30, 2004) (failure to
provide written consent of other defendants warranted sua
sponte remand); Yang, 2004 WL 235208, at * 1 (remanded where
defendants filed a day after thirty-day period expired); Payne,
172 F. Supp. 2d at 476 (remanded where defendants failed to join
notice of remand and also failed to file in timely fashion).
Accordingly, the Court finds that although the basis for removing
was proper, defendants' failure to comply with the statutory
requirements of Section 1446 renders their motion unperfected.
C. Timeliness of Phoenix Global's Motion to Remand
Defendants nevertheless assert that Phoenix Global waived these
procedural defects by filing an untimely motion to remand A
motion to remand the action "on the basis of anything other than
lack of subject matter jurisdiction must be made within 30 days
after the filing of the notice of removal under section 1446(a)."
28 U.S.C. § 1447(c). Motions to remand based on procedural
defects such as is the case here must "be made within 30 days
after removal or they are waived." Hamilton v. Aetna Life and
Cas. Co., 5 F.3d 642, 643 (2d Cir. 1993).
The circumstances surrounding Phoenix Global's ill-fated
attempts to file its motion remind the Court that the legal
profession is caught in an awkward phase between the old world of typewriters and hand deliveries and the new
world of ECF. In recognition that computers, like humans, are not
foolproof, the Southern District of New York adopted Model Rule
11, drafted by the 2001 Judicial Conference of the United States,
that provides: "A Filing User whose filing is made untimely as a
result of technical failure may seek appropriate relief from the
court." This rule was intended to address situations where the
filing user is unable to access the court's web site or the
user's system itself has malfunctioned. In re Mezvinsky, No. 00
Civ. 11767, 2001 WL 1403525, at *4 (Bankr. E.D.Pa. Oct. 5, 2001).
In light of this rule, a court "is not required to excuse the
filing deadline but rather has the discretion to grant or deny
relief in light of the circumstances." Id., 2001 WL 1403525, at
The allegations here reveal that it would be unduly harsh to
penalize Phoenix Global for the electronic communications that
apparently broke down while processing the motion and its
accompanying documents. To be considered timely, Phoenix Global
should have filed its motion to remand by July 26, 2004.
Apparently, a technical snafu prevented the entire motion from
being properly processed although the individual files initially
appeared to have been accepted. As Gulino himself admits, he had
never handled a case involving ECF and was therefore "wholly
ignorant of the [ECF] process or procedures."*fn4 (Reply
Affirmation of John P. Gulino ¶ 3.) Indeed, he felt assured that
the motion had been accepted, and but for the entry of an
unacceptable hearing date, that motion would have been accepted
by ECF on July 26, 2004. The Court further observes that had Gulino filed the motion in
person at the Clerk's Office, the Clerk would have been required
to accept the motion on the date of its submission regardless of
that hearing date error. See Fed.R. Civ. P. 5(e) ("[t]he clerk
shall not refuse to accept for filing any paper presented for
that purpose solely because it is not presented in paper form as
required by these rules or any local rules or practices"); see
also Blanco v. Snyder's of Hanover, No. 03 Civ. 385, 2003 WL
21939707, at *3 (S.D.N.Y. Aug, 12, 2003) (excusing late filing of
"formal" motion because plaintiff had expressed desire to
remand before the time limit expired through other submissions.)
Although it is unclear whether a "technical failure," as
contemplated by Rule 11, prevented the timely submission of this
motion, the Court resolves all doubts in favor of Phoenix Global,
the party seeking remand Wilds, 262 F.Supp. 2d at 176-77.
Accordingly, Phoenix Global's motion to remand is deemed filed on
July 26, 2004, and is therefore timely for the purposes of
Even assuming, however, that Phoenix Global's motion was filed
a day late, the Court has the power to equitably toll the
thirty-day deadline imposed by Section 1446(a). To be sure,
district courts do not have "carte blanche authority" in
"revis[ing] the federal statutes governing removal by remanding
cases on grounds that seem justifiable to them but which are
not recognized by the controlling statute." Thermtron Products
v. Hermansdorfer, 423 U.S. 336, 351 (1976) (emphasis added).
This limitation, however, is aimed at preventing district courts
from remanding cases for reasons not articulated in Sections
1441, et seq., by authorizing appellate review over those
remand orders, which is inapplicable here since Phoenix Global
identified two statutorily-recognized procedural defects in
defendants' removal. Id. at 351 (district court's order
remanding case because of overcrowded docket subject to appellate review); Pierpoint v.
Barnes, 94 F.3d 813, 816 (2d Cir. 1996) (the "reviewability of
the remand order depends on the district court's basis for
granting it"). Contrary to what defendants suggest, these cases
speak to the authority of the Second Circuit in exercising
appellate review over remand orders, rather than to the authority
of this Court in excusing or tolling the deadline to file motions
Indeed, several courts have excused late filings where the
party either misread the electronic docket or relied on a mistake
contained in the electronic docket. Hollins v. Dep't of Corr.,
191 F.3d 1324, 1328-29 (11th Cir. 1999) (excusing untimely filing
of appeal where party relied on docket error in electronic case
filing system); Lush v. Terri and Ruth F/V, 309 F.Supp. 2d 131,
133 (D. Me. 2004) (excusable neglect where counsel misread
entries on electronic docket). Other courts have held that
equitable tolling is possible where defendants delay giving
formal notice of removal to plaintiffs, such that plaintiffs have
too little time in preparing a motion to remand See Byfield v.
Niaz, No. 00 Civ. 6572, 2001 WL 25705, at *2 (S.D.N.Y. Jan. 10,
2001) (tolling where defendant delayed giving notice of removal);
Doyle v. Staples, No. 99 Civ. 6062, 2000 WL 195685, at *2
(E.D.N.Y. Feb. 18, 2000). Given that Phoenix Global's failure to
file its formal motion on July 26, 2004 was due to an
understandable error, the unusual facts of this case present a
situation where the Court may equitably toll the deadline imposed
by Section 1446(a). Accordingly, the Court deems it proper to
accept Phoenix Global's motion to remand as timely
filed.*fn5 D. Phoenix Global's Motion to Remand Based on the
Phoenix Global further argues that the forum-selection clause
contained in an assignment agreement signed by all parties
justifies remanding this action to state court. In attacking the
clause primarily on the basis of waiver, defendants have failed
to contest its underlying substance or validity.
Generally, a forum-selection clause will not bar litigation in
a federal forum in the absence of further language indicating the
parties' intent to establish exclusive jurisdiction in state
court. John Boutari & Son, Wines and Spirits, S.A. v. Attiki
Importers and Distributors Incorp., 22 F.3d 51, 52-53 (2d Cir.
1994). Here, the forum-selection clause provides that:
This agreement, and its interpretation, shall be
governed exclusively by its terms and by the laws of
the State of New York (other than its conflict of law
rules.) In the event of litigation or any other legal
proceeding arising from or in connection with this
agreement the non-prevailing party shall be
responsible for payment of all of its own legal fees
as well as all of the reasonable attorneys' fees and
expenses of the prevailing party. Any proceedings
shall be initiated in the courts of the State of New
York, New York County, and the undersigned parties
consent to the jurisdiction of those courts and
submit to the full and complete jurisdiction of those
courts including but not limited to in personam
jurisdiction and service of process. No party to this agreement shall raise as a
defense that any party or parties to any litigation
or other legal proceeding may not be or has not
qualified to do business in the State of New York.
(Affirmation of John P. Gulino ¶ 7 (emphasis added).) The
language, "[a]ny proceeding shall be initiated in the courts of
the State of New York," clearly establishes exclusive
jurisdiction in New York state courts.*fn6
See Karl Koch
Erecting Co., Inc. v. New York Convention Ctr. Dev. Corp.,
838 F.2d 656
, 659 (2d Cir. 1998) (clause stating "[n]o action or
proceeding shall be commenced . . . except in the Supreme Court
of the State of New York" established exclusive jurisdiction in
state court); Mercury West A.G., Inc. v. R.J. Reynolds Tobacco
Co., 03 Civ. 5262, 2004 WL 421793, at *2 (S.D.N.Y. March 5,
2004) (dismissing action in federal court based on clause stating
"any action . . . shall be litigated only" in Superior Court);
U.S. Fire Ins. Co. v. Jesco Const. Corp., 03 Civ. 2906, 2003 WL
21689654, at *3 (S.D.N.Y. July 16, 2003) (forum-selection clause
stating that any action "shall be litigated" created exclusive
jurisdiction in state court). Moreover, the Second Circuit has
interpreted forum-selection clauses that preclude parties from
"commenc[ing]" cases in federal courts as further precluding
parties from removing those cases to federal courts. Karl Koch
Erecting Co., Inc., 838 F.2d at 659. In so doing, the Second
Circuit reasoned that such a forum-selection clause would bar the
non-removing party from asserting counterclaims and therefore
force that party to initiate those claims in state court. Id.
at 659. In effect, "[t]hat kind of bifurcation of litigation
seems plainly at odds with the obvious purpose of the forum-selection clause,
as well as with the purpose of [Rule 13]." Id. at 659.
Accordingly, the forum-selection clause contained in the
assignment agreement*fn7 between plaintiff and defendants
effectively bars litigating any claims arising from the
underlying promissory agreement in any forum outside New York
state courts.*fn8 The forum-selection clause is an
additional basis for remanding this action to the state courts of
II. Phoenix Global's Request for Attorneys' Fees and Costs
Phoenix Global requests $2,100 in attorneys' fees incurred in
connection with its motion to remand this action to state court.
Section 1447(c) provides that "[a]n order remanding the case may
require payment of just costs and any actual expenses, including
attorney fees, incurred as a result of the removal."
28 U.S.C. 1447(c). However, the granting of costs and fees against the
removing defendants is "within the discretion of the court."
Caribbean Fertilizers Group, Ltd. v. Fersan Fertilizantes Santo
Domingo, No. 02 Civ. 9919, 2003 WL 21961124, at *4 (S.D.N.Y.
Aug. 18, 2003) (citing Morgan Guar. Trust Co. v. Republic of
Palau, 971 F.2d 917, 924 (2d Cir. 1994)). The Court exercises its discretion to decline to award attorneys' fees or costs to
The Court grants Phoenix Global's motion to remand  this
action to state court, but denies its request for attorneys' fees
and related costs.