The opinion of the court was delivered by: Trager, J.
Plaintiff DNJ Logistic Group, Inc. ("DNJ") brings this action against DHL Express (USA), Inc. ("DHL") and Anthony N. Catapano ("Catapano"), DHL's Director of Business Development, for claims surrounding a failed contract between the two shipping companies. Plaintiff originally brought this action in New York Supreme Court. Defendants removed on the ground that federal jurisdiction under 28 U.S.C. § 1332 would exist in this case, but for the fraudulent joinder of defendant Catapano. Plaintiff moved to remand to state court, arguing that Catapano was a proper defendant who defeated diversity. Although the issue of whether diversity jurisdiction existed was originally rendered moot by plaintiff's addition of a federal claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), this claim has since been dismissed. Accordingly, the question of whether this action -- which now consists entirely of state law claims -- should be remanded is again before the Court. It is undisputed that although DHL is not a New York resident, both Catapano and DNJ are, such that there is a lack of complete diversity in this case if Catapano is a proper defendant. Thus, the determination of whether this case should be remanded to state court turns upon whether Catapano has been fraudulently joined. For the reasons explained below, it is determined that DNJ has set forth a possible claim against Catapano, and, therefore, this case will be remanded to state court.
For reasons explained infra, it is the contents of plaintiff's original complaint, as of the time of removal, that must be evaluated to determine whether fraudulent joinder is present. Accordingly, the facts set forth below come from this original complaint ("Orig. Compl.") and, for purposes of this analysis, are presumed to be true.
DNJ's original complaint explains that it is a subcontractor for major domestic and international delivery and logistics companies. Orig. Compl. ¶¶ 5-6. In 2007, DNJ began negotiations with defendant DHL to obtain work as a subcontractor. Id. ¶ 7. DNJ representatives negotiated the contract primarily with Anthony Catapano, DHL's Director of Business Development. Id. ¶¶ 4, 7. These negotiations culminated in a contract signed June 19, 2007, the details of which are not set forth in the complaint. Id. ¶ 10.
Both before and after the contract was signed, Catapano made promises to DNJ of large volumes of business from DHL. Id. ¶ 12. DNJ relied upon these promised volumes in entering into the DHL contract and in canceling a major contract with a DHL rival, which had grossed DNJ $40,000,000 between 2002 and 2007. Id. ¶¶ 13-15. Specifically, Catapano promised that plaintiff would receive four to five times more revenue with DHL than with its competitor, and that DHL would compete with and take many customers from the priority international program plaintiff was handling for DHL's rival. Id. ¶¶ 15-16. On the basis of these representations, and at DHL's insistence that its vendor be based in Florida, plaintiff's principal*fn1 also established a residence and set up a shipping location in Florida. Id. ¶ 20.
Performance under the contract apparently began sometime in summer 2007. In August 2007, plaintiff contacted Catapano to express dissatisfaction with the volumes of shipments that had been achieved, and Catapano responded that he believed the volumes would substantially increase shortly. Id. ¶ 21. However, the original complaint explains that, in fact, it became clear to DNJ -- through conversations with Catapano -- that the contract was not a valid DHL vendor agreement, and that "Catapano... misrepresented the validity of the Agreement to Plaintiff." Id. ¶ 23. As evidence of the invalidity of the agreement, the original complaint recites that the "vendor #" it was assigned was in actuality the number for another vendor of DHL. Id. ¶ 22.
Based on these facts, the original complaint alleged
(1) fraud against Catapano and DHL; (2) vicarious liability against DHL for Catapano's tortious or fraudulent acts; and
(3) interference with DNJ's contractual/business relationship with DHL's rival, against Catapano and DHL.
Plaintiff first brought this action by filing the above-detailed original complaint in New York Supreme Court on or about June 10, 2008. Defendants responded by removing the case to federal court in July 2008, on the ground that diversity jurisdiction would exist but for plaintiff's fraudulent joinder of Catapano as a defendant. Although plaintiff originally filed a motion to remand, it later withdrew this motion and instead filed a second amended complaint ("SAC") on September 26, 2008, which contained federal law RICO claims that made federal jurisdiction proper under 28 U.S.C. § 1331. In addition to its RICO claims, DNJ's second amended complaint also set forth state law claims of (1) fraud and deceit; (2) breach of contract; (3) specific performance; (4) fraudulent inducement; (5) respondeat superior; (6) negligent supervision; (7) negligent hiring and retention of employee; (8) punitive damages; (9) interference with business relationship/economic advantage; (10) negligent misrepresentation; and (11) individual liability for breach of contract on the part of Catapano.
Defendants subsequently moved to dismiss all of plaintiff's claims except for its breach of contract claim. Plaintiff's response included a cross-motion for leave to file a third amended complaint, which eliminated some causes of action and added additional facts.
Defendant's motion to dismiss was granted only with respect to plaintiff's RICO claims on February 18, 2010, and plaintiff's cross-motion to amend its RICO claim was denied. See DNJ Logistic Group, Inc. v. DHL Express (USA), Inc., No. CV-08-2789, 2010 WL 625364, at *8 (E.D.N.Y. Feb. 19, 2010) ("DNJ v. DHL I"). Consequently, as DNJ v. DHL I explained, normally this case would have been remanded to state court for consideration of the state law claims. Id. at *10; see generally 28 U.S.C. § 1367(c)(3). However, remand is impermissible if defendants' original contention, that diversity jurisdiction is present, is correct. The parties were thus directed to brief the issue of whether Catapano was fraudulently joined, which would determine whether diversity jurisdiction exists in this case.
(1) Standards Governing Removal for ...