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City of Schenectady v. American Tax Funding, LLC

United States District Court, N.D. New York

July 2, 2014

CITY OF SCHENECTADY, Plaintiff,
v.
AMERICAN TAX FUNDING, LLC, et al., Defendant.

JOHN R. POLSTER, ESQ., CITY OF SCHENECTADY CORPORATION COUNSEL, Schenectady, New York, Attorneys for Plaintiff.

JOSEPH A. CAMARDO, JR., ESQ., CAMARDO LAW FIRM, P.C., Auburn, New York, Attorneys for Defendant, American Tax Funding, LLC.

MEMORANDUM-DECISION AND ORDER

MAE A. D'AGOSTINO, District Judge.

I. INTRODUCTION

This action for the foreclosure of certain tax liens was initially brought by the City of Schenectady ("City") in New York State Supreme Court, Schenectady County. On June 25, 2012, American Tax Funding, LLC ("ATF") removed this action to federal court, asserting diversity jurisdiction pursuant to 28 U.S.C. § 1332. See Dkt. No. 1. Presently before the Court is the City's second motion to remand the action to New York State Supreme Court. See Dkt. No. 16.

II. BACKGROUND[1]

Following ATF's removal of this action, the City filed a motion to remand in July 2012, arguing that there was a lack of complete diversity and that ATF's notice of removal was procedurally defective for failure to obtain the unanimous consent of all defendants as required under 28 U.S.C. § 1446. On March 22, 2013, this Court denied the City's first motion to remand, finding that "[b]ased upon the record herein, the Court cannot conclude that the non-diverse defendants were properly served." Dkt. No. 15 at 9.[2] As such, it appeared that "defendant filed its removal petition prior to plaintiff properly serving the remaining defendants. Thus, defendant was not required to obtain the non-diverse defendants' consent for removal." Id. at 10. Nevertheless, in light of "the general disfavor' towards removal" in the federal courts, the Court permitted the City to renew the motion to remand within thirty days with proof of proper service upon the non-diverse defendants. Id. Thereafter, on April 21, 2013, the City timely filed its second motion to remand. See Dkt. No. 16. On February 7, 2014, Magistrate Judge Randolf F. Treece issued an order staying this case pending settlement discussions between the parties. See Dkt. No. 32. On May 13, 2014, that stay was lifted as a result of the inability of the parties to reach a settlement See Dkt. No. 38.

III. DISCUSSION

Federal district courts are courts of limited jurisdiction. Under 28 U.S.C. § 1332(a), a federal court has jurisdiction over the subject matter of a civil action where the amount in controversy exceeds the sum or value of $75, 000, exclusive of interests and costs, and is between citizens of different states. See 28 U.S.C. § 1332(a). A defendant may remove to federal court "any civil action brought in a State court of which the district courts of the United States have original jurisdiction.'" Shapiro v. Logistec USA Inc., 412 F.3d 307, 309-10 (2d Cir. 2005) (quoting 28 U.S.C. § 1441(a)).

Once a case has been removed, however, it must be remanded "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction.'" Id. at 310 (quoting 28 U.S.C. § 1447(c)). "Where, as here, jurisdiction is asserted by a defendant in a removal petition, the defendant bears the burden of establishing that removal is proper." United Food & Commercial Workers Union, Local 919 v. CenterMark Props. Meriden Square, Inc., 30 F.3d 298, 301 (2d Cir. 1994). If there are any doubts as to removability, they are resolved against removability "out of respect for the limited jurisdiction of the federal courts and the rights of the states." In re Methyl Tertiary Butyl Ether Prods. Liab. Litig., 488 F.3d 112, 124 (2d Cir. 2007) (citation omitted). Although there is a presumption that the court has jurisdiction when the matter is brought in federal court in the first instance, "[a] defendant removing a case to federal court encounters instead the general principle that removal is disfavored and remand favored." Pollock v. Trustmark Ins. Co., 367 F.Supp.2d 293, 296-97 (E.D.N.Y. 2005) (citation omitted).

It is well settled that to invoke diversity jurisdiction under 28 U.S.C. § 1332, there must be complete diversity of citizenship. See Lincoln Prop. Co. v. Roche, 546 U.S. 81, 89 (2005). In other words, the court lacks diversity jurisdiction if any plaintiff is a citizen of the same state as any defendant. See, e.g., St. Paul Fire & Marine Ins. Co. v. Universal Builders Supply, 409 F.3d 73, 80 (2d Cir. 2005). In addition, 28 U.S.C. § 1441(b) provides, "that an action is not removable if the district court's original jurisdiction is based on diversity of citizenship and any of the defendants is a citizen of the State in which such action is brought.'" Shapiro, 412 F.3d at 310 (quoting 28 U.S.C. § 1441(b)). In cases where there are multiple defendants, the rule of unanimity requires that "all named defendants over whom the state court acquired jurisdiction must join in the removal petition for removal to be proper." Sleight v. Ford Motor Co., No. 10 Civ. 3629, 2010 WL 3528533, *1 (E.D.N.Y. Sept. 3, 2010) (citations omitted); see also 28 U.S.C. § 1446(b).

As noted above, the City's first motion to remand was denied on the basis that the City had not produced sufficient evidence to demonstrate that at least one non-diverse defendant (i.e., a citizen of New York) had been properly served. Thus, the sole issue before the Court on the instant motion is whether any New York state resident is a party to this action. If so, remand is warranted pursuant to 28 U.S.C. § 1332(a).

ATF contends that "the issue is the timing of the service (i.e. Was service complete at the time of removal?)." Dkt. No. 30 ¶ 3. According to ATF, the record "clearly shows that service was not effectuated at the time that ATF filed its Notice of Removal" on June 25, 2012. Recognizing that the rule of unanimity set forth in 28 U.S.C. § 1446(b)(2)(A) requires the unanimous consent to removal of all properly served defendants, ATF argues that since no non-diverse defendant was properly served at the time of removal, removal was proper and the second motion to remand should be denied.

Contrary to ATF's assertion, the rule of unanimity is not dispositive of the instant motion. ATF appears to conflate the rule of unanimity at the time of removal with the requirement that there be complete diversity for this Court to have subject matter jurisdiction. The rule of unanimity is relevant only to the availability of statutory removal - that is, whether a defendant's removal was procedurally proper by virtue of the unanimous consent of all defendants who were properly served at the time of removal. See 28 U.S.C. § 1446(b)(2)(A) ("When a civil action is ...


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