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Mintz & Gold LLP v. Daibes

United States District Court, S.D. New York

May 6, 2015

MINTZ & GOLD LLP, Plaintiff,
FRED A. DAIBES, Defendant.


PAUL A. ENGELMAYER, District Judge.

Plaintiff Mintz & Gold LLP ("M&G"), a law firm, filed this lawsuit four years ago in New York state court against its former client, defendant Fred A. Daibes, bringing state-law claims and seeking $81, 049.65 in unpaid legal fees, plus interest, in damages. In February 2015, a state appellate court ordered that summary judgment be entered for M&G on a key claim. Two days later, Daibes removed the case to this Court, pursuant to 28 U.S.C. §§ 1441 and 1446. M&G now moves to remand the case, on the ground that the removal was untimely. For the reasons set forth below, the Court grants the motion to remand, and awards M&G its out-of-pocket costs, but, because M&G proceeded pro se and therefore did not pay any attorneys' fees, does not award such fees. M&G also seeks sanctions pursuant to Federal Rule of Civil Procedure 11, on the ground that Daibes's removal, nearly four years out of time, was frivolous. The Court imposes such sanctions, in the amount of $10, 000, on Daibes's counsel, Richard J. Abrahamsen, Esq., for frivolously removing this case.

I. Background[1]

A. M&G's Lawsuit in New York State Court Against Daibes

On December 8, 2009, M&G and Daibes, a real-estate developer, entered into a written retainer agreement. Under it, M&G was to provide legal services to Daibes and affiliated companies, arising out of disputes that Daibes was then having with environmental regulators in New Jersey. M&G claims that it provided such services, with Daibes's consent, and sent invoices to Daibes, listing the work performed on his behalf. According to M&G, however, Daibes, apart from paying an initial retainer, did not pay M&G the money it was due.

In August 2010, M&G sued Daibes in New York State Supreme Court in Manhattan to collect its outstanding fees. M&G represented itself in that litigation; Daibes was represented by by Nicholas G. Sekas, Esq., then of Sekas & Associates, LLC. On April 15, 2011, that lawsuit was dismissed, without prejudice and with leave to replead, based on M&G's failure to comply with New York's pleading requirements, N.Y. Comp. Codes R. & Regs., 22 § 137.0 (2001). Lawler Decl. Remand, Ex. 5.

On April 19, 2011, M&G again sued Daibes in New York State Supreme Court in Manhattan to collect its outstanding fees. The lawsuit was substantially the same as the prior lawsuit, but corrected the pleading defect. M&G's claims included breach of contract, quantum meruit, account stated, and unjust enrichment. M&G's complaint sought damages of $81, 049.65, the amount of unpaid legal fees, plus interest. M&G again represented itself, and Daibes was again represented by Sekas and his law firm. In May 2011, Sekas joined a new law firm, Sekas & Abrahamsen LLC, and continued his representation of Daibes through that firm. In December 2013, Sekas and his law partner, Richard J. Abrahamsen, Esq., had a falling out. Daibes thereafter was represented by Abrahamsen, his current counsel.

The parties litigated extensively in state court, ultimately leading both sides to move for summary judgment. On December 19, 2013, the state Supreme Court denied M&G's motion for summary judgment on its account stated claim, which sought payment of M&G's unpaid invoices to Daibes. M&G appealed. On February 17, 2015, the Appellate Division, First Department, reversed, directing the lower court to enter summary judgment in M&G's favor on that claim.

B. Daibes's Notice of Removal

Two days later, on February 19, 2015, Daibes filed a notice of removal in this Court. Dkt. 1. Daibes asserted that this Court had subject-matter jurisdiction based both on diversity and on the presence of a federal question. As to diversity jurisdiction, the notice of removal stated, M&G is a New York limited liability partnership ("LLP"); Daibes is a citizen of New Jersey; and M&G sought damages in excess of $75, 000. As to federal question jurisdiction, the notice of removal stated, Daibes's defense implicated a constitutional question: Daibes claimed that he did not have minimum contacts with the forum state, New York, so as to satisfy due process. Daibes also claimed that the notice of removal was timely filed pursuant to 28 U.S.C. § 1446(c)(1) because of "plaintiff's bad faith." Separately, on March 4, 2015, Daibes filed a motion in this Court to dismiss M&G's complaint, Dkt. 7-8, for want of personal jurisdiction.

C. M&G's Response and Motion for Rule 11 Sanctions

On March 6, 2015, M&G filed a letter, arguing that the notice of removal was time-barred and frivolous. Dkt. 13. M&G also reported that on February 27, 2015, it had served Daibes with a motion for Rule 11 sanctions, in connection with Daibes's notice of removal, pursuant to Federal Rule of Civil Procedure 11(c). Id. M&G requested a conference with the Court regarding the next steps in this case. Id. On March 10, 2015, Daibes responded, reiterating that removal was justified and dismissal was merited. Dkt. 14.

On March 12, 2015, the Court scheduled a conference to address these issues, and suspended the deadlines for M&G to move to remand and to oppose Daibes's motion to dismiss. Dkt. 17. On March 25, 2015, the Court held a conference, directed M&G to file concurrently its motions to remand and for Rule 11 sanctions, and set a schedule for such filings. Dkt. 19, 30.

On April 3, 2015, M&G filed a motion for remand and just costs and fees, Dkt. 20, and a separate motion for Rule 11 sanctions, Dkt. 23, along with supporting briefs, Dkt. 21 ("Pl. Br. Remand"), 24 ("Pl. Br. Sanctions"). On April 10, 2015, Daibes submitted his opposition to the motions. Dkt. 26 ("Def. Br. Remand"), 28 ("Def. Br. Sanctions"). On April 15, 2015, M&G filed replies for both motions. Dkt. 32 ("Pl. Reply Br. Remand"), 34 ("Pl. Reply Br. Sanctions"). On April 27, 2015, the Court heard argument.

II. The Motion for Remand

The Court first considers M&G's motion for remand.

A. Applicable Legal Standards

"[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). District courts have original jurisdiction over cases where there is diversity jurisdiction, which exists when a lawsuit is between parties of diverse state citizenship and exceeds the required jurisdictional amount, $75, 000, or federal question jurisdiction, which exists where a plaintiff has pleaded a colorable claim "arising under" the Constitution or laws of the United States. See U.S. Const. art. III, § 2; 28 U.S.C. § 1332(a); Da Silva v. Kinsho Int'l Corp., 229 F.3d 358, 363 (2d Cir. 2000).

Strict rules govern the timing of notices of removal. Where a case is removable based on the initial pleadings, a defendant must file a notice of removal within 30 days of "the receipt by the defendant, through service or otherwise, of a copy of the initial pleading." 28 U.S.C. § 1446(b)(1). Where an action is not removable based on the initial pleadings, "a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable." Id. § 1446(b)(3). This provision, known as the "revival" exception, governs cases where a later development first provides a basis for removal - for example, the filing of an amended pleading that drops a non-diverse party or seeks, for the first time, more than $75, 000 in damages. See Frontier Park Co., LLC v. Contreras, 35 F.Supp. 3d 264, 268 (E.D.N.Y. 2014); In re Methyl Tertiary Butyl Ether ("MBTE") Prods. Liab. Litig., No. 1:00-1898, MDL 1358 (SAS), M 21-88, 2006 WL 1004725, at *3 (S.D.N.Y. Apr. 17, 2006) (citing Wilson v. Intercollegiate (Big Ten) Conf. Athletic Ass'n, 668 F.2d 962, 965 (7th Cir. 1982)). Under § 1446(c)(1), "[a] case may not be removed under [the revival exception] more than 1 year after commencement of the action, unless the district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action."

On a motion to remand, "the defendant bears the burden of demonstrating the propriety of removal." Cal. Pub. Emps.' Ret. Sys. v. Worldcom, Inc., 368 F.3d 86, 100 (2d Cir. 2004) (citation omitted).

B. Discussion

The sole disputed issue with respect to Daibes's removal is whether it was timely. Both parties agree that, based on M&G's initial pleadings in 2011, the case could have been removed based on diversity jurisdiction, inasmuch as M&G pled that it was a New York limited liability partnership, [2] that Daibes is a resident of New Jersey, and that the amount in controversy was $81, 049.65, plus interest. Dkt. 1; Pl. Br. Remand 6.[3]

Under § 1446(b)(1), Daibes's notice of removal was untimely - by close to four years. Daibes was obliged to file any notice of removal within 30 days of the receipt by the defendant of M&G's initial complaint, which disclosed the existence of diversity jurisdiction. See Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, 205-06 (2d Cir. 2001); Burr ex rel. Burr v. Toyota Motor Credit Co., 478 F.Supp.2d 432, 436-37 (S.D.N.Y. 2006).[4] The initial complaint was filed on April 19, 2011, and was served on Sekas, Daibes's counsel, that same day. Sekas accepted service on his client's behalf. See Klein Decl., Exs. 2-4. Accordingly, under § 1446(b)(1), Daibes' notice of removal was due by May 19, 2011. Daibes's failure to file a notice of removal until February 19, 2015, some 45 months later, made his removal untimely.

In the face of this, Daibes makes one argument. He asserts that because he was never personally served with M&G's complaint, but instead was served through his counsel, Sekas, the 30-day clock for removal under § 1446(b)(1) never began to run. Therefore, Daibes argues, he was at liberty at all times thereafter to remove the case, regardless of how far it had progressed in state court, ...

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