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Hefton v. Viscern Holding Corp.

April 7, 2008

CARL W. HEFTON INDIVIDUALLY, AND ON BEHALF OF DOUG TURNER, TROY FIELDS, RICHARD BLACKMON, BOB CARTER, DALE KESLER, RICHARD CAPERTON, DAN CONWAY, AND ELLIOT S. OSHRY, AND BEN. G. GILL INDIVIDUALLY AND ON BEHALF OF BRIAR TREE, LTD. PLAINTIFFS,
v.
VISCERN HOLDING CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Robert P. Patterson, Jr., U.S.D.J.

OPINION AND ORDER

Plaintiffs, Carl Hefton and Ben Gill ("Plaintiffs") commenced this action on September 24, 2007 in New York State Supreme Court, New York County. On October 26, 2007, Defendant Viscern Holding Corporation ("Defendant"), filed a timely Notice and Petition of Removal to the United States District Court for the Southern District of New York based on the diversity of the parties, pursuant to 28 U.S.C. § 1332, § 1441, and § 1446. On November 19, 2007, Plaintiffs filed a timely Motion to Remand to State Court on the grounds that this Court lacks subject matter jurisdiction. For the following reasons, Plaintiffs' Motion to Remand is denied.

BACKGROUND

On or about September 24, 2007, Plaintiffs filed the Summons and Complaint in this action against the Defendant in New York State Supreme Court, New York County. The Complaint contains two causes of action. The first cause of action alleges that the Defendant violated an agreement dated December 30, 2005 between Viscern Holding Corporation, Investors, and Management Stockholders ("the Stockholders' Agreement") by 1) removing Mr. Hefton from the Board of Directors ("Board") of the Defendant; 2) preventing Mr. Hefton from attending Board meetings; 3) failing to provide Mr. Hefton with notice of Board meetings; 4) failing to provide Mr. Hefton with documents used, circulated, and/or discussed at Board meetings; and 5) failing to take any and all necessary actions to restore Mr. Hefton to his rightful position as Board member. (Compl. ¶ 12; Notice of Removal, Ex. A.) The second cause of action alleges that the Defendant violated an Escrow Agreement, between Viscern Holding Corporation as purchaser and Plaintiffs as sellers, by claiming $533,450 in escrow, thereby causing the escrow agent to refuse to pay such sum to the Plaintiffs. (Id. at ¶¶ 19-24.)

On October 15, 2007 Defendant was served with a copy of the Summons and Complaint. (Defendant's Notice of Removal at ¶¶ 3-4.) On October 26, 2007, Defendant filed a Notice and Petition of Removal to this Court. On November 19, 2007, Plaintiffs filed a Motion to Remand to State Court arguing that this Court lacks subject matter jurisdiction.

A. The Stockholders' Agreement

Section 7.3 of the Stockholders' Agreement, entitled Governing Law; Consent to Jurisdiction and Venue; and Waiver of Jury Trial, states as follows:

Any action or proceeding against the parties relating in any way to this agreement may be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, to the extent subject matter jurisdiction exists therefore, and the Parties irrevocably submit to the jurisdiction of both such courts in respect of any such action or proceeding. Each of the parties irrevocably waive, to the fullest extent permitted by law, any objection that they may now or hereafter have to the laying of venue of any such action or proceeding in the courts of the State of New York located in New York County or the Southern District of New York and any claim that any such action or proceeding brought in any such court has been brought in any inconvenient forum. Any Judgment may be entered in any court having jurisdiction thereof. Id. at 29-30. (emphasis omitted.)

B. The Escrow Agreement

In the "Escrow Agreement," with JPMorgan Chase Bank, N.A., as escrow agent, the Plaintiffs agreed to sell stock to the Viscern Holding Corporation, with $2,550,000, held in an escrow account until the completion of an audit of the company to be paid to the sellers pro rata or returned to the purchaser. Section 9(e) of the Escrow Agreement states as follows:

Each party irrevocably submits to the exclusive jurisdiction of (i) the Supreme Court of the State of New York, New York County, and (ii) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each party agrees to commence any such action, suit or proceeding either in the Unites States District Court for the Southern District of New York or if such suit, action, or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County...[e]ach party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (A) the Supreme Court of the State of New York, New York County, or (B) the United States District Court for the Southern District of New York, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit, or proceeding brought in such court has been brought in any such court has been brought in an inconvenient forum.

Escrow Agreement (Notice of Motion to Remand, Ex. C) at 10.) (emphasis added.)

DISCUSSION

It is well settled that when a deciding a motion for remand, "the defendant bears the burden of demonstrating the propriety of removal." Cal. Pub. Emples. Ret. Sys. v. Worldcom, Inc., 368 F.3d 86, 100 (2d Cir. 2004). See also Linardos v. Fortuna, 157 F.3d 945, 947 (2d Cir. 1998) (citing 13 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3522, at 62-65 (2d ed. 1984) (it is "hornbook law that the party invoking federal jurisdiction bears the burden of proving facts to establish that jurisdiction."); United Food & Commercial Workers Union, Local 919 v. Centermark Properties Meriden Square, 30 F.3d 298, 301 (2d Cir. 1994) (citing McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 187 (1936)) ...


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