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JS Barkats PLLC v. Blue Sphere Corp.

United States District Court, S.D. New York

July 10, 2017

JS BARKATS PLLC, Plaintiff,
v.
BLUE SPHERE CORP. and SHLOMO PALAS, Defendants.

          OPINION & ORDER

          RONNIE ABRAMS, United States District Judge.

         Plaintiff JS Barkats PLLC brings this action against Defendants Blue Sphere Corporation and Shlomo Palas, asserting claims for quantum meruit and tortious interference with contract under New York law. Before the Court is Plaintiffs motion to remand the action to state court. For the reasons set forth below, the motion is granted, and this action is remanded.

         BACKGROUND[1]

         Plaintiff JS Barkats PLLC ("JSB") is a law firm organized as a professional limited liability company in New York. See Compl. ¶ 1; Barkats Decl. ¶ 1. JSB's sole member, Sunny J. Barkats, is a dual citizen of France and Israel. See Barkats Decl. ¶ 1. Defendant Shlomo Palas is the Chief Executive Officer of Blue Sphere Corporation ("Blue Sphere") and a citizen of Israel. See Daniel Aff. ¶ 4; Am. Notice of Removal ¶ 5. According to the complaint, Palas "resides in and conducts [Blue Sphere's] business from Israel." Compl. ¶ 3.

         Defendant Blue Sphere is a corporation engaged in the clean energy production and waste-to-energy markets. See Barkats Decl. Ex. 1 at 2. JSB's complaint alleges that Blue Sphere is "a foreign corporation organized in Nevada, with a principal place of business in America in North Carolina, and with a principal place of business outside America in Israel." Compl. ¶ 2. The complaint further alleges that Blue Sphere is "Israeli-headquartered." Id. ¶ 4. According to Blue Sphere's Chief Financial Officer, Ran Daniel, Blue Sphere is "a Nevada corporation, with a principal place of business in North Carolina." Daniel Aff. ¶ 3.

         In support of its motion to remand, JSB has submitted three SEC filings. First, JSB submitted a Form 424B3 investment prospectus, which Blue Sphere filed on September 16, 2016. See Barkats Decl. Ex. 1. This prospectus states that Blue Sphere is "a Nevada corporation" whose "principal executive offices" are located in Charlotte, North Carolina. See Id. at 3. The prospectus further states that "although [its] principal executive office is in the United States, a substantial part of [its] business and management is based in Israel." Id. at 8. Under a section titled "Properties, " the prospectus states that Blue Sphere's "principal executive office is located in North Carolina, " where the company leases office space, and that Blue Sphere also has "office space located at 35 Asuta St. Even Yehuda, Israel 40500." Id. at 29.

         Second, JSB submitted a Schedule 13G form, which was filed by Dr. Borenstein, Ltd. on February 6, 2017. See PL's Letter to Ct. Ex. 1 (Feb. 8, 2017). In this form, Dr. Borenstein, Ltd. reported that it is the beneficial owner of 6.4 percent of Blue Sphere's common stock. See Id. at 1-2. The form lists "35 Asuta St. Even Yehuda, Israel 40500" as the address of Blue Sphere's "principal executive offices." See id.

         Third, JSB submitted excerpts of an Amendment to a Form S-l registration statement, which Blue Sphere filed on April 3, 2012. See PL's Letter to Ct. Ex. 1 at 60 (Feb. 12, 2017). The cover page of the registration statement lists "35 Asuta Street, Even Yehuda, Israel 40500" as the address of Blue Sphere's "Principal Executive Offices." Id. at 1. The registration statement provides the same Israeli address for Blue Sphere's Chairman, Joshua Shoham, Chief Executive Officer and Director, Shlomo Palas, and Chief Carbon Officer and General Counsel, Mark Radom. See Id. at 36, 46.

         On October 23, 2016, JSB filed a complaint against Blue Sphere and Palas in the Supreme Court of New York. See Compl. The complaint alleges, inter alia, that Blue Sphere terminated JSB without paying for its legal services. See Id. ¶¶ 5-18. The complaint asserts one claim against Blue Sphere for quantum meruit damages and one claim against Palas for tortious interference with contract. See Id. ¶¶ 19-22. The complaint seeks $652, 000 in damages. See Id. at 6.

         On October 31, 2016, Defendants filed an amended notice of removal, asserting diversity jurisdiction under 28 U.S.C. § 1332(a). See Am. Notice of Removal ¶ 7. On December 6, 2016, JSB moved to remand this case to state court. See PL's Mot. to Remand (Dkt. 13). On December 20, 2016, Defendants filed an opposition, see Defs.' Opp'n Mem. (Dkt. 23), to which JSB replied on December 23, 2016, see PL's Reply Mem. (Dkt. 28).

         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). Under 28 U.S.C. § 1332(a), district courts have original jurisdiction over cases between "citizens of a State and citizens or subjects of a foreign state" and between "citizens of different States and in which citizens or subjects of a foreign state are additional parties. Id. § 1332(a)(2), (3). "[D]iversity is lacking within the meaning of these sections where the only parties are foreign entities, or where on one side there are citizens and aliens and on the opposite side there are only aliens." Universal Licensing Corp. v. Paola del Lungo S.p.A., 293 F.3d 579, 581 (2d Cir. 2002); accord F5 Capital v. Pappas, 856 F.3d 61, 75 (2d Cir. 2017). "The citizenship requirement for diversity jurisdiction has been interpreted to mean complete diversity so that each plaintiffs citizenship must be different from the citizenship of each defendant." Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 302 (2d Cir. 2004) (citing Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996)). "The rule of complete diversity-that no plaintiff and no defendant may be a citizen of the same state-applies to alienage cases as well as to ordinary diversity cases." F. & H.R. Farman-Farmaian Consulting Eng'rs Firm v. Harza Eng'g Co., 882 F.2d 281, 284 (7th Cir. 1989); accord Ergowerxlnt'l, LLC v. Maxell Corp. of Am., 18 F.Supp.3d 453, 455 (S.D.N.Y.2014), aff'd, 615 F.App'x 689 (Fed. Cir. 2015).

         "The defendant, as the party seeking removal and asserting federal jurisdiction, bears the burden of demonstrating that the district court has original jurisdiction." McCulloch Orthopaedic Surgical Servs., PLLC v. Aetna Inc., 857 F.3d 141, 145 (2d Cir. 2017); accord Linardos v. Fortuna,157 F.3d 945, 947 (2d Cir. 1998) ("It is ... horn book law that the party invoking federal jurisdiction bears the burden of proving facts to establish that jurisdiction."). In addition, "statutory procedures for removal are to be strictly construed, and . . . out of respect for the limited jurisdiction of the federal courts and the rights of states, [federal courts] must resolve any doubts against removability." In re MBTE Prod. Liab. Litig.,488 F.3d 112, 124 (2d Cir. 2007) (alterations, internal citations, and quotation marks omitted); accord For de v. Hornblower N.Y., LLC, No. 16-CV-4028 (AJN), 2017 WL 1078585, at *2 (S.D.N.Y. Mar. 20, 2017) ("In light of federalism concerns, federal courts construe the removal statute narrowly and resolve any doubts against removability."). Where, as here, "subject matter jurisdiction is contested, courts are permitted to ...


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