The opinion of the court was delivered by: P. Kevin Castel, District Judge
The plaintiffs in this action are owners by purchase and assignment of debenture notes issued by Sons of Gwalia, Ltd. ("SOG"), an Australian mining company. On or about November 20, 2006, plaintiffs commenced an action in New York Supreme Court, New York County, against JP Morgan Chase & Co. ("Chase & Co."), Chase Securities, Inc. ("Chase Securities"), and several individual employees, directors or officers of various Chase corporations, as defendants. On December 11, 2006, JP Morgan Chase, N.A. ("Chase N.A.")-a non-party-served and filed a notice of removal of the case to this Court pursuant to the Edge Act, 12 U.S.C. § 611, et seq., and 28 U.S.C. § 1441. Chase N.A. served and filed an amended notice of removal on the same basis on December 19, 2006. Plaintiffs now move to remand the case to state court on the grounds that non-party Chase N.A. may not remove under the Edge Act.
Chase N.A. concedes that it is not a named party and it is not explicitly referred to in the body of the complaint. It argues that removal is proper because the complaint has "errantly" named Chase & Co. as a defendant when in fact the allegations in the complaint describe actions attributable to Chase N.A.*fn1 It is incontrovertible that Chase & Co. is a separately organized, distinct and publicly-held entity that has filed its own consent to removal. (Docket No. 19; see also Docket No. 2, Local Civil Rule 7.1 Disclosure Statement by Chase N.A.) Chase & Co. was served with process in this action. (Docket No. 1, Notice of Removal at ¶ 1) Non-party Chase N.A. urges that it is a "real party in interest" in this action, and that it is therefore authorized to remove the case under section 632 of the Edge Act.
I have considered the facts alleged in the complaint, together with the affidavits and the concessions made by the parties in connection with the removal and this motion to remand. I conclude that the Edge Act does not confer federal subject matter jurisdiction over this case. As there is no alternative basis for subject matter jurisdiction, plaintiffs' motion to remand is granted. Plaintiffs' further application that Chase N.A. and defendants be ordered to pay costs and expenses in connection with the removal and the motion to remand is denied.
As noted above, the complaint in this action has named two corporate entities- Chase Securities and Chase & Co.-and several individuals as defendants alleging that they defrauded American investors in a private placement of debenture notes for SOG. The five common law causes of action alleged against each defendant are for fraud, negligent misrepresentations, aiding and abetting fraud, aiding and abetting a breach of fiduciary duty, and civil conspiracy.
The complaint consciously avoids delineating the roles of the two named Chase entities in the conduct alleged in the complaint. Plaintiffs explain that
[i]n its extensive dealings with SOG, Chase functioned as a consolidated and unified entity. Thus, each of the Chase entities is a mere instrumentality and/or alter ego of the others and is liable for the acts of the others. References made herein collectively to Chase, affiliates and business units of Chase, will be to "Chase" (unless otherwise indicated). (Id. ¶ 23). Consistent with this statement, the complaint makes allegations against "Chase" but does not distinguish between Chase & Co. and Chase Securities. Only once is either Chase Securities or Chase & Co. specifically identified in the complaint, and that is only to note that an allegedly misleading private placement memorandum bore the name "Chase Securities, Inc." on each page. (Id. ¶ 51)
The parties agree that at least some references to "Chase" in the complaint relate most directly to Chase N.A., and not Chase Securities or Chase & Co. Specifically, the complaint repeatedly refers to "Chase's" historical relationship with SOG, and "Chase's" financial stake in the company. (E.g. Compl. ¶¶ 98, 119) These statements apparently refer to the fact that Chase N.A. has served as a counterparty in futures contracts with SOG, and is a substantial creditor of SOG. (See Eckstein Decl. ¶ 4) The facts relating to Chase N.A.'s prior interactions with SOG fit into the theory of plaintiffs' case. "Chase" allegedly knew that SOG was a failing company and induced investments in SOG in order to mitigate its own exposure to losses.
The complaint is silent on the relationship between these various Chase entities. The submissions on this motion, however, make clear that Chase & Co. is a holding company incorporated under the laws of Delaware, and is the parent company of Chase N.A., which is a bank organized under the laws of the United States. The specific relationship of Chase Securities, which is a Delaware corporation, to the other Chase companies is not clear.
All of the individually named defendants are or were employees, officers or directors of various Chase corporations. Terry Martin was employed by Chase Securities and its predecessor companies from 1992 through 2002. (DePuy Decl. ¶ 4) Christopher Janes was employed by various Chase corporations from October 1, 1997 through 2002, including Chase N.A. for a period of just over 7 months. (Id. ¶ 5) Damian Berry was employed by various Chase corporations from February 25, 1998 until March 1, 2002, including Chase N.A. for a period of just over 2 months. (Id. at ¶ 6)
A. Removal Under the Edge Act
The general rule is that when a defendant seeks to remove a case to federal court, the removing party bears the burden of establishing subject matter jurisdiction. See Grimo v. Blue Cross/Blue Shield of Vermont, 34 F.3d 148, 151 (2d Cir. 1994); see also In re Currency Conversion Fee Antitrust Litig., 2003 WL 22097502, at *1 (S.D.N.Y. Sept. 10, 2003) (applying rule in the context of an Edge ...