Bates v. Offit Kurman Attorneys at Law LLP
| Decision Date | 20 December 2019 |
| Docket Number | 19 Civ. 2814 (KPF) |
| Parties | ROBERT BATES, ADAM RADLY, and ACL COMPUTERS AND SOFTWARE INC., Plaintiffs, v. OFFIT KURMAN ATTORNEYS AT LAW LLP, THEODORE P. STEIN, and LEGAL MALPRACTICE INSURANCE COMPANY JOHN DOE, Defendants. |
| Court | U.S. District Court — Southern District of New York |
ACL Computers and Software Inc. ("ACL") retained Offit Kurman Attorneys at Law LLP ("Offit Kurman") to represent the company in a matter in Maryland state court. ACL, along with two of its officers, Robert Bates and Adam Radly (together with ACL, "Plaintiffs"), now claim that Offit Kurman and one of its attorneys, Theodore P. Stein (together, "Defendants"),1 committed legal malpractice in that representation. Plaintiffs' Complaint asserts causes of action for "negligent failure," breach of fiduciary duty, and breach of contract.
Defendants now move to dismiss the Complaint in its entirety on several bases, including lack of subject matter and/or personal jurisdiction. As set forth herein, the Court concludes that it lacks subject matter jurisdiction over the action and dismisses the Complaint.
In 2016, ACL, a company incorporated in Maryland (Anesh Decl., Ex. C, D), entered into a retainer agreement with Offit Kurman, a law office incorporated in Maryland and with its principal place of business in Maryland (id. at Ex. E, F). The agreement provided that Offit Kurman would represent ACL in an action that ACL had filed in Maryland state court. (Compl. ¶ 9). Theodore P. Stein, an attorney employed by Offit Kurman who resides in Maryland (Stein Decl. ¶ 2), was assigned to be lead attorney in that action (Compl. ¶ 30). The agreement between Offit Kurman and ACL recited that all disputes arising out of the representation would be filed in Maryland state courts. . ACL ultimately paid Offit Kurman $177,000 for its legal services. (Compl. ¶ 9).
Offit Kurman's representation of ACL included opposing a motion for summary judgment filed in the state court action. (Compl. ¶ 10). ACL provided Offit Kurman with documents to incorporate into the opposition papers but, it is alleged, Offit Kurman failed to include them. (Id.). The Maryland state court granted the motion for summary judgment against ACL, and ACL's suit was dismissed. (Id. at ¶¶ 2, 11, 16). That decision was appealed to the Court of Special Appeals of Maryland, and it was ultimately affirmed. (Id.).
According to the Complaint, ACL "closed its offices in 2016 and is no longer operational or open, most of its assets have been liqu[idated]." (Compl. ¶ 25). Robert Bates served as the CFO of ACL and resides in California. (Id. at ¶ 22). Adam Radley served as the CEO of ACL and resides in and is a citizen of Australia. (Id.).
Plaintiffs filed the Complaint on April 1, 2019. (Dkt. #6). On April 25, 2019, Defendants applied for leave to file a motion to dismiss the Complaint. (Dkt. #15). The Court held a pre-motion conference concerning Defendants' anticipated motion to dismiss on May 21, 2019, in which it granted Defendants leave to file a motion to dismiss. (Dkt. #26 (transcript of proceedings)).3 Defendants filed their motion to dismiss on July 12, 2019. (Dkt. #28, 29, 30, 31). Plaintiffs filed an opposition brief on August 9, 2019. (Dkt. #32, 33). This motion became fully briefed when Defendants filed their reply brief on August 30, 2019. (Dkt. #35).
Defendants move to dismiss the Complaint on a variety of grounds: (i) lack of subject matter jurisdiction; (ii) lack of personal jurisdiction; (iii) improper service; (iv) forum non conveniens; and (v) failure to state a plausible claim for relief. The Court concludes that it lacks subject matter jurisdiction over the suit, and, accordingly, dismisses the Complaint without considering the remaining arguments. See Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999) ().
"[A] district court may properly dismiss a case for lack of subject matter jurisdiction under Rule 12(b)(1) if it lacks the statutory or constitutional power to adjudicate it." Aurecchione v. Schoolman Transp. Sys., Inc., 426 F.3d 635, 638 (2d Cir. 2005) (internal quotation marks omitted); accord Sokolowski v. Metro. Transp. Auth., 723 F.3d 187, 190 (2d Cir. 2013). A "plaintiff asserting subject matter jurisdiction has the burden of proving by a preponderance of the evidence that it exists." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000).
"Subject-matter jurisdiction is a threshold issue that must be addressed prior to the merits." Allen v. N.Y.C. Hous. Auth., No. 15 Civ. 173 (ALC), 2016 WL 722186, at *4 (S.D.N.Y. Feb. 19, 2016). Federal courts have original jurisdiction over civil actions in which the parties have diversity of citizenship and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a). This is known as diversity jurisdiction, as contrasted with jurisdiction based on the existence of a federal question. See 28 U.S.C. § 1331. Diversity jurisdiction requires complete diversity between the parties, meaning that no plaintiff has the same citizenship as any defendant. Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553 (2005).
On a Rule 12(b)(1) motion, the challenge to subject matter jurisdiction may be facial or fact-based. Carter, 822 F.3d at 55. When considering a facial challenge, a court must determine whether the pleading "allege[s] facts that affirmatively and plausibly suggest that" subject matter jurisdiction exists. Id. (quoting Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011)). For purposes of a Rule 12(b)(1) facial challenge, a court accepts all factual allegations as true and draws all reasonable inferences in favor of the plaintiff asserting jurisdiction. Id. (citing W.R. Huff Asset Mgmt. Co., LLC v. Deloitte & Touche LLP, 549 F.3d 100, 106 (2d Cir. 2008); Lunney v. United States, 319 F.3d 550, 554 (2d Cir. 2003)). In contrast, to support a fact-based Rule 12(b)(1) challenge, a defendant may proffer evidence beyond the pleadings. Id. (citing Amidax, 671 F.3d at 145). To oppose such a motion, a plaintiff must present controverting evidence "if the affidavits submitted on a 12(b)(1) motion ... reveal the existence of factual problems" with respect to jurisdiction. Id. (quoting Exchange Nat'l Bank of Chi. v. Touche Ross & Co., 544 F.2d 1126, 1131 (2d Cir. 1976)).
Plaintiffs argue that the Court has subject matter jurisdiction over the claims raised in the Complaint based on diversity, as established in 28 U.S.C. § 1332. As noted, this statute requires "'complete diversity,' i.e.[,] all plaintiffs must be citizens of states diverse from those of all defendants." Pa. Pub. Sch. Emps.' Ret. Sys. v. Morgan Stanley & Co., Inc., 772 F.3d 111, 117-18 (2d Cir. 2014). "An individual's citizenship, within the meaning of the diversity statute, is determined by his domicile ... [in other words] the place where a person has his true fixed home and principal establishment, and to which, whenever he is absent, he has the intention of returning." Van Buskirk v. United Grp. of Cos., Inc., 935 F.3d 49, 53 (2d Cir. 2019) (quoting Palazzo ex rel. Delmage v. Corio, 232 F.3d 38, 42 (2d Cir. 2000)). A corporation is a resident of every state by which it has been incorporated, and of any state where it has its principal place of business. 28 U.S.C. § 1332(c); see also Sty-Lite Co. v. Eminent Sportswear Inc., 115 F. Supp. 2d 394, 398 (S.D.N.Y. 2000) ().
The Complaint alleges that Plaintiff Bates is domiciled in California, and that Plaintiff Radly is an Australian citizen who resides in Melbourne, Australia. (Compl. ¶ 22). According to the Complaint, ACL had its offices in Bethesda, Maryland, but its offices have since closed. (Id. at ¶ 25). Further, the Complaint claims that Offit Kurman "resides" in New York because its main office is in New York. (Compl. ¶¶ 19-21, 29). The Complaint makes no allegation concerning the state of which Defendant Stein is a citizen. (See generally Complaint). Thus, even if the Court accepted as true the factual allegations that were actually pleaded in the Complaint, Plaintiffs still would have failed to meet their burden of demonstrating complete diversity between and among all Plaintiffs and all Defendants. Makarova, 201 F.3d at 113.
In point of fact, this is a burden Plaintiffs cannot meet. Defendants have provided the Court with information that is extrinsic to the Complaint concerning the citizenship of certain parties. (See Def. Br. 5-9; Anesh Decl., Ex. C, D, E, F, G, H; Stein Decl.). In so doing, Defendants make clear that they are mounting a fact-based Rule 12(b)(1) challenge to subject matter jurisdiction, so that the Court may consider evidence beyond the pleadings. Defendants provide evidence that:
This evidence establishes that complete diversity does not and cannot exist, because one of the Plaintiffs, ACL, is a citizen of the same state as Defendants.
In opposing Defendants' fact-based motion, Plaintiffs must present controverting evidence, inasmuch as "the affidavits submitted [] reveal the existence of factual problems" with respect to jurisdiction. Carter, 822 F.3d at 57 (internal quotations and citations omitted). To begin, Plaintiffs concede that "Defendant has Maryland...
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