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Errant Gene Therapeutics, LLC v. Sloan-Kettering Institute for Cancer Research

United States District Court, S.D. New York

January 18, 2017

Errant Gene Therapeutics, LLC, Plaintiff,
v.
Sloan-Kettering Institute for Cancer Research, Defendant.

          MEMORANDUM AND ORDER

          ALISON J. NATHAN, District Judge

         Plaintiff Errant Gene Therapeutics, LLC ("Errant Gene") initiated this action, which arises out of a licensing agreement for gene therapy patent rights, on March 18, 2015. Following approximately 19 months of litigation, including motion to dismiss practice and substantial discovery overseen by Magistrate Judge Ellis, Errant Gene now moves pursuant to Federal Rule of Civil Procedure 41(a)(2) to dismiss this action without prejudice for lack of subject matter jurisdiction, asserting that it intends to refile its claims in state court. For the reasons that follow, Errant Gene's motion is GRANTED.

         I. Background

         It is undisputed that the sole basis for the Court's subject matter jurisdiction over this lawsuit, as alleged by Errant Gene, is diversity of citizenship pursuant to 28 U.S.C. § 1332. See Amended Verified Complaint, Dkt. No. 16, ¶ 11. In light of that fact and pursuant to Rule 4.C. of this Court's Individual Practices in Civil Cases, Errant Gene submitted a letter on April 7, 2016, in advance of the initial pretrial conference, advising the Court of the following facts relevant to its allegations of jurisdiction:

Plaintiff is a Delaware limited liability company that maintains its principal place of business in Illinois. None of the members of Plaintiff are New York citizens. The Manager of Plaintiff is a Delaware corporation with its principal place of business in Illinois. The individual members of Plaintiff are domiciled in Illinois, Minnesota, California, Delaware, New Jersey, Connecticut, and Florida. With respect to members of Plaintiff that are limited liability companies, none of their members are domiciled in New York. With respect to the member of Plaintiff that is [a] corporation, the corporation was organized in Connecticut and has a principal place of business in Connecticut.

Dkt. No. 47 at 1 (emphasis added). On the basis of those representations, the Court continued to exercise subject matter jurisdiction over this action.

         On October 28, 2016, nearing the original deadline for the completion of fact discovery, [1]Errant Gene abruptly submitted a motion to dismiss. In support of its motion, it summarily asserted that "[o]ne of its 68 members is a limited liability company whose members include citizens of New York, " and, as such, its representations to the contrary in the April 7, 2016 letter were "inaccurate" and "diversity jurisdiction does not exist." Dkt. No. 99 ¶ 1.

         Defendant Sloan-Kettering Institute for Cancer Research ("SKI") opposed the motion. See Dkt. No. 107. It characterized the timing as "suspect, " citing both Errant Gene's purported failures to provide repeatedly requested disclosures concerning its membership and ownership as well as the motion's filing at a time when Errant Gene purportedly knew that a sanctions motion by SKI alleging violations of a protective order entered by Judge Ellis was forthcoming. See Dkt. No. 107 at 2-3.[2] SKI urged the Court to deny Errant Gene's dismissal application for failure to comply with Local Rule 7.1(a)'s requirement that all motions be accompanied by supporting memoranda of law and factual submissions, specifically highlighting the absence from Errant Gene's perfunctory papers "of any information concerning the timing and circumstances of [Errant Gene's] purported discovery that the Court lacks jurisdiction." Id. at 3-4. Alternatively, SKI sought denial on the merits, noting, correctly, that diversity of citizenship jurisdiction depends upon the citizenship of the parties at the time an action is commenced, and arguing that Errant Gene's representations in support of its motion addressed only its citizenship as of the time of the motion itself. Id. at 4. Finally, SKI requested that the Court order Errant Gene and its counsel to show cause why sanctions should not be imposed pursuant to Federal Rule of Civil Procedure 11(c) for certifying to the Court that diversity jurisdiction existed without (purportedly) conducting the requisite reasonable inquiry. Id. at 5.

         In response, Errant Gene filed a "corrected" notice of motion to dismiss, accompanied by a brief memorandum of law in support and declarations by two of its counsel, including lead trial counsel. Dkt. Nos. 108-109. Although light on specifics and hardly models of clarity, the supporting submissions, taken together, appear to aver that counsel to Errant Gene learned in late October 2016 (under unspecified circumstances) that at least one member of one or more of the limited liability company members of Errant Gene was a citizen of New York at the time this action was initiated. Dkt. Nos. 108-1, 108-2. The inaccurate jurisdictional representations contained in Errant Gene's April 7, 2016 letter were, according to a declaration submitted by the letter's drafter, "mistake[s]" based on counsel's review of Errant Gene's membership list as of March 2015 (the month the original complaint was filed), which incorrectly listed at least one individual member of a limited liability company member of Errant Gene as residing in Delaware, when he in fact resided - and continues to reside - in New York. Dkt. No. 108-1.

         SKI renewed its opposition in response to Errant Gene's "corrected" motion papers, arguing that the papers (i) failed to definitively clarify whether the pertinent individuals were domiciliaries (as opposed to merely "residents") of New York as would be required to nullify diversity jurisdiction, (ii) lacked declarations with specific statements by persons with direct knowledge of the relevant underlying facts, and (iii) included insufficient particulars regarding Errant Gene's original inquiry into its own citizenship and subsequent discovery of the purported jurisdictional defect. See Dkt. No. 117.

         On reply, Errant Gene proffers additional detail. Critically, it submits, among other things, a declaration from Charles Columbus, an individual member of Errant Gene itself since 2009 as well as a member of two limited liability company members of Errant Gene since 2008 and 2014, respectively. Dkt. No. 119. Mr. Columbus' declaration explains, with supporting detail, that he is a citizen of New York and has been so since 1980. Id. Errant Gene also represents - and Mr. Columbus confirms - that the error in Errant Gene's original assessment of its citizenship derived from the fact that Mr. Columbus was listed in Errant Gene's company records as residing in Delaware, where he received tax-related correspondence and other mail at a business office maintained by one of the other two limited liability companies with which he is affiliated. Id. at 1-2; Dkt. No. 120 at 2-3.

         II. Discussion

         "Diversity jurisdiction requires that all of the adverse parties in a suit be completely diverse with regard to citizenship." Handelsman v. Bedford Village Assocs. Ltd. P'ship, 213 F.3d 48, 51 (2d Cir. 2000) (internal quotation marks and ellipsis omitted); see also Wisconsin Dep't of Corrs. v. Schacht, 524 U.S. 381, 388 (1998) ("A case falls within the federal district court's 'original' diversity 'jurisdiction' only if diversity of citizenship among the parties is complete, i.e., only if there is no plaintiff and no defendant who are citizens of the same State."). SKI is undisputedly a citizen of New York for purposes of diversity jurisdiction. The citizenship of Errant Gene, a limited liability company, "depends on the citizenship of all its members." Quantlab Fin., LLC, Quantlab Techs. Ltd. (BVI) v. Tower Research Capital, LLC, 715 F.Supp.2d 542, 547 (S.D.N.Y. 2010); see also Bayerische Landesbank, N.Y. Branch v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 49 (2d Cir. 2012) (noting that defendant, as a limited liability company, "takes the citizenship of each of its members").

         Crediting the representations of counsel and - equally or more important - of Mr. Columbus, all made upon penalty or perjury, Errant Gene had at least one individual member (Mr. Columbus) who was a citizen of New York at the time this action was commenced and at least two limited liability company members that, by virtue of the citizenship of at least one of their own individual members (Mr. Columbus), were citizens of New York at the time this action was commenced. Accordingly, Errant Gene, by extension, was a citizen of New York at the time this action was commenced, and the Court lacked diversity jurisdiction. ...


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