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Altissima Limited v. One Niagara LLC

September 2, 2010

ALTISSIMA LIMITED, PLAINTIFF,
v.
ONE NIAGARA LLC, ET AL., DEFENDANTS.



The opinion of the court was delivered by: William M. Skretny United States District Judge

DECISION AND ORDER

I. INTRODUCTION

This case was referred to United States Magistrate Judge Jeremiah J. McCarthy pursuant to 28 U.S.C. § 636(b)(1)(A) and (B). On February 8, 2010, Magistrate Judge McCarthy issued a Report and Recommendation on numerous motions. He recommends that Defendants' motion for summary judgment dismissing this action for lack of subject matter jurisdiction (Docket No. 151) be granted, that Plaintiff Altissima's cross-motion to dismiss one defendant and one claim from the case (Docket No. 161) be denied, and that Altissima's motions for sanctions and an order of contempt (Docket Nos. 65, 119, 143) be denied.

Presently before this Court are Altissima's objections to the Report and Recommendation. (Docket No. 181.) Defendants have responded by stating their intent to rely on their prior filings. (Docket No. 184.) Thus, the objections are fully briefed, and the matter is now before this Court for review.

II. BACKGROUND

Familiarity with the facts and procedural background of this case is presumed and will be discussed only to the extent necessary to address Altissima's objections.

Altissima commenced this action on October 10, 2008, seeking relief in the form of rescission, declaratory judgment, breach of contract, conversion, and waste relating to a parcel of real property located at 360 Rainbow Boulevard South, Niagara Falls, New York ("the Property"). (Docket No. 1.) Defendant One Niagara LLC ("One Niagara") is fee owner of the Property. (Docket Nos. 1 ¶ 24; 89 ¶ 29.)

On June 16, 2009, Altissima sought leave to amend its Complaint to add a cause of action for foreclosure. (Docket Nos. 59 and 61 ¶ 8.) Altissima acknowledged it could have sought foreclosure via a separate action, but sought to amend its complaint in this case in the interest of judicial economy. (Docket No. 61 ¶ 11.) The motion to amend was granted, and Altissima filed its Amended Complaint on July 31, 2009. (Docket No. 89.)

Defendants moved for summary judgment on November 30, 2009. Among other things, they argued that complete diversity is lacking because Altissima and One Niagara are both citizens of the British Virgin Islands. In response to that motion, Altissima urged that complete diversity exists. Alternatively, it cross-moved to dismiss from the case both One Niagara and the foreclosure cause of action to which One Niagara is indispensable, pursuant to Rules 15(a) and 21 of the Federal Rules of Civil Procedure.

In his Report and Recommendation, Magistrate Judge McCarthy concluded that: (1) for purposes of diversity of citizenship, a limited liability company has the citizenship of its membership and, therefore, complete diversity is lacking between Altissima and One Niagara, (2) where diversity jurisdiction is lacking, district courts may not resort to Rule 21 to drop a dispensable nondiverse party to establish jurisdiction, (3) even if the prior conclusion were otherwise, One Niagara is an indispensable party and the court is without power to drop One Niagara or to permit an amendment for that purpose, and (4) even if the court had the power to grant an amendment for that purpose, Altissima has not established good cause for its untimely request to amend. The Magistrate Judge went on to question the Court's authority to impose sanctions in the absence of subject matter jurisdiction and, in any event, declined to recommend sanctions in favor of Altissima on the ground that it knew or reasonably should have known from the outset that diversity jurisdiction was lacking.

Plaintiff objects to each recommendation. The objections are discussed below to the extent necessary.

III. DISCUSSION

A. Standard of Review

A district court reviews those portions of a report and recommendation to which a party has timely objected under a de novo standard of review. 28 U.S.C. § 636(b)(1)(C). The district court may adopt those portions of a report and recommendation to which no objections have been made, as long as no clear error is apparent from the face of the record. United States v. Singleton, 608 F. Supp. 2d 397, 401 (W.D.N.Y. 2009) (citing ...


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