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David Lifschultz v. Lawrence Lifschultz

June 20, 2012


The opinion of the court was delivered by: Ramos, D.J.:


On March 13, 2012, Defendant pro se Lawrence Lifschultz ("Lawrence") removed this action from New York State Supreme Court, Westchester County, to this Court pursuant to 28 U.S.C. § 1332, on the basis of diversity of citizenship. On April 2, 2012, Defendant Michael Stanton, Esq. ("Stanton") filed a notice of "Consent to Removal Subject to Motion to Sever & Remand." All parties appeared before this Court on April 11, 2012, and were subsequently instructed to submit briefing to address whether the removal of the instant action was proper. On April 18, 2012, Plaintiff David Lifschultz ("Plaintiff" or "David") filed a motion to remand this action to New York State Supreme Court. Defendants Stanton and Lawrence filed separate oppositions to David's motion on April 25, 2012, and April 26, 2012, respectively. For the reasons set forth below, Plaintiff's motion to remand to New York State Supreme Court, Westchester County is GRANTED.

I. Background and Procedural History

Plaintiff David and Defendant Lawrence Lifschultz are brothers. This action stems from an agreement that Plaintiff and Defendants entered into before the Surrogate's Court of the County of Westchester (the "Agreement"). (Pl.'s Mem., Ex. A ¶ 5.) The Agreement resolved a dispute regarding the disposition of the Estate of Sidney B. Lifschultz ("the Estate"), the father of Plaintiff David and Defendant Lawrence. (Id.) Pursuant to the Agreement, Defendant Stanton, as co-escrow agent with Defendant Puccio,*fn1 were to arrange for the sale of certain property belonging to the Estate. (Id. ¶ 6.) The Defendant escrow agents were to use the proceeds of the property sales to make payments to various creditors of the Estate. (Id.) Once all such obligations to those creditors had been fulfilled, the co-escrow agents were to make a payment to Defendant Lawrence in the sum of $1,000,000.00. (Id.) If, however, the proceeds of the sale of the Estate's property proved to be insufficient to satisfy the creditors' and Lawrence's interest, Plaintiff David was obligated to pay the remaining balance in the form of a promissory note secured by a second mortgage on real property owned by the Estate known as Beaumere, and the pledge of 6,000,000 shares of stock in a company named GENOIL. (Id.) David was required to pay any remaining balance to creditors of the Estate and to Lawrence no later than February 15, 2012. (Id.)

Plaintiff David brought suit in New York State Supreme Court on February 13, 2012, alleging that the Defendant escrow agents had purposefully delayed and failed to meet their obligations under the Agreement to effectuate the sale of the Estate properties, and as a result the creditors were not paid and Lawrence's interest in the Estate was not satisfied. (Id. ¶ 9.) David alleged that his obligation to pay Lawrence and the Estate's creditors was triggered only because of the failure of the escrow agents to fulfill their duties. (Id. ¶ 10.) Accordingly, David brought suit against Stanton and Puccio, naming Stanton in his individual capacity in four counts alleging breach of contract, fraud, breach of fiduciary duty, and negligence, respectively.*fn2 (Id. ¶¶ 7-11, 32-48.)

David also alleged several causes of action against Defendant Lawrence in the same suit. (Id. ¶¶ 12-31.) First, David alleged that all parties to the Agreement were bound to exercise good faith in its implementation, meaning that a party would be in violation of the Agreement if he were to take "steps, by way of comments or statements, to affect the assets, subject to the terms of this agreement." (Id. ¶ 6.) He asserted that Lawrence violated this duty by accusing David of money laundering and tax evasion, which caused David to be removed as a member of the Board of Lifschultz Terminal and Leasing Inc., an entity that owned nearly 6,000,000 shares of GENOIL stock, and caused assets subject to the Agreement to be adversely affected. (Id. ¶¶ 15-18.) Second, David alleged that Lawrence's statements were defamatory. (Id. ¶¶ 27-30.) Finally, David asserted that Lawrence had been unjustly enriched by hiding property belonging to the Estate and subject to the Agreement that was to be sold in order to satisfy obligations to the Estate's creditors. (Id. ¶¶ 21-25.)

On the same day that he brought suit, Plaintiff David filed an order to show cause for a temporary restraining order in New York State Supreme Court to prevent the enforcement of the promissory note. (Pl.'s Mem., Ex. B.) The Honorable Lester B. Adler of the New York State Supreme Court granted Plaintiff the relief he requested, pending a subsequent motion for a preliminary injunction. (Id., Ex. C.) On March 13, 2012, before the preliminary injunction hearing occurred, Defendant Lawrence removed the action to this Court. (Notice of Removal; Pl.'s Mem., Ex. D.) On April 2, 2012, Stanton filed a notice of consent to removal, styled "Consesnt to Removal Subject to Motion to Sever and Remand," expressly reserving the right to serve a motion to sever and remand all claims against him as co-escrow agent of the Estate to the Surrogate's Court of the County of Westchester. (Def. Stanton's Mem. at 2.) Stanton asserted that he was entitled to severance and remand of all claims asserted against him pursuant to the so-called "probate exception" to diversity jurisdiction. (Id.)

II. Legal Standard

"[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). The Second Circuit has clearly explained that federal courts should construe this statute narrowly, resolving any doubts against removability, "[i]n light of the congressional intent to restrict federal court jurisdiction, as well as the importance of preserving the independence of state governments." Lupo v. Human Affairs Int'l, Inc., 28 F.3d 269, 274 (2d Cir. 1994) (citation omitted); see also Somlyo v. J. Lu-Rob Enterprises, Inc., 932 F.2d 1043, 1045-46 (2d Cir. 1991), superseded on other grounds by rule as stated in Contino v. United States, 535 F.3d 124, 127 (2d Cir. 2008). Such strict construction of the removal statute also aids in avoiding "litigation about matters peripheral to the merits of lawsuits." Payne v. Overhead Door Corp., 172 F. Supp. 2d 475, 477 (S.D.N.Y. 2001) (quoting Berrios v. Our Lady of Mercy Med. Ctr., 99 CIV. 21 (DLC), 1999 WL 92269, at *3 (S.D.N.Y. Feb. 19, 1999)).

At all times the party seeking removal bears the burden of proving that the jurisdictional and procedural requirements of removal have been met. Burr v. Toyota Motor Credit Co., 478 F. Supp. 2d 432, 436 (S.D.N.Y. 2006) (citing Mehlenbacher v. Akzo Nobel Salt, Inc., 216 F.3d 291, 296 (2d Cir. 2000)). Such an approach is "warranted because removal abridges the deference courts generally give to a plaintiff's choice of forum." Groman v. Cola, No. 07 CV 2635 (RPP), 2007 WL 3340922, at *3 (S.D.N.Y. Nov. 7, 2007) (quoting Frontier Ins. Co. v. MTN Owner Trust, 111 F. Supp. 2d 376, 378 (S.D.N.Y. 2000) (internal quotation marks omitted).

A defendant must file a notice of removal within thirty days "after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading . . . or within [thirty] days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter." *fn3

28 U.S.C. § 1446(b)(1). In the case of multiple defendants, "the removal statute has consistently been interpreted to require that all defendants consent to removal within the thirty day period." Payne, 172 F. Supp. 2d at 477. This is known as the rule of unanimity, which requires each defendant to an action to provide unambiguous, written consent to the court before the thirty-day period expires. Id. Consent among defendants is insufficient; "each defendant must notify the Court of its consent prior to the expiration of the thirty-day period for the removal petition to be timely." Berrios, 1999 WL 92269 at *2.

If any defect in the removal procedure occurs, courts are authorized to remand a case to the state court in which the action originated. 28 U.S.C. § 1447(c); see also LaFarge Coppee v. Venezolana De Cementos, S.A.C.A., 31 F.3d 70, 72 (2d Cir. 1994). While a procedural defect in removal does not deprive a federal court of jurisdiction, all doubts as to the procedural validity of removal will be resolved in favor of remand. Burr, 478 F. Supp. 2d at 437; see also Somlyo, 932 F.2d at 1046; see also Codapro Corp. v. Wilson, 997 F. Supp. 322, 325 (E.D.N.Y. 1998) (stating that"[t]here is nothing in the removal statute that suggests that a district court has 'discretion' to overlook or excuse prescribed procedures." (internal quotation marks and citation omitted)). As is true of sustaining a removal action generally, the removing party bears the burden of demonstrating that the removal was procedurally proper. Wilds v. United Parcel Serv., Inc., 262 F. Supp. 2d 163, 171 (S.D.N.Y. 2003) (citing Hodges v. Demchuk, 866 F. Supp. 730, 732 (S.D.N.Y. 1994)). If the removing party fails to meet this burden, the case must be remanded. Bellido-Sullivan v. Am. Int'l Group, Inc., 123 F. Supp. 2d 161, 163 (S.D.N.Y. 2000).

Thus, in a multi-defendant case where all defendants must provide the court with written, unambiguous consent to removal within the thirty-day period, a "[f]ailure to do so amounts to a procedural defect in the removal process and justifies a remand by the federal court." Thomas & Agnes Carvel Found. v. Carvel, 736 F. Supp. 2d 730, 740 (S.D.N.Y. 2010); see also Beatie & Osborn LLP v. Patriot Scientific Corp., 431 F. Supp. 2d 367, 383 (S.D.N.Y. 2006). The gravamen of the foregoing cases is that each removing defendant must provide the federal court with a clear, plain and timely statement of its intention ...

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