Citizens Bank v. Plasticware, LLC, Civil No. 11–219–GFVT.

• Decision Date: 17 November 2011
• Docket Number: Civil No. 11–219–GFVT.
• Citation: 830 F.Supp.2d 321
• Court: U.S. District Court — Eastern District of Kentucky
• Parties: CITIZENS BANK, Plaintiff, v. PLASTICWARE, LLC, Sanford Samuel Meth, individually, Mordachai Neustein, individually, Shefa Industries, LLC, Adel Assets, LLC, Shifra Holdings, LLC, Philmet Capital Group, LLC, Duncan Machinery Movers, Inc., B & R Electrical, Inc., Walsh Industrial Piping, LLC, Southeast Kentucky Economic Development Corp., Kentucky Highlands Investment Corp., Appalachian Investment Corp., Rockcastle County, Kentucky, Mueller Roofing Distributors, Inc., Mark One Machinery Sales, Ltd., MVP Industries, LLC, United States of America, Small Business Administration, Defendants.

830 F.Supp.2d 321

CITIZENS BANK, Plaintiff,

v.PLASTICWARE, LLC, Sanford Samuel Meth, individually, Mordachai Neustein, individually, Shefa Industries, LLC, Adel Assets, LLC, Shifra Holdings, LLC, Philmet Capital Group, LLC, Duncan Machinery Movers, Inc., B & R Electrical, Inc., Walsh Industrial Piping, LLC, Southeast Kentucky Economic Development Corp., Kentucky Highlands Investment Corp., Appalachian Investment Corp., Rockcastle County, Kentucky, Mueller Roofing Distributors, Inc., Mark One Machinery Sales, Ltd., MVP Industries, LLC, United States of America, Small Business Administration, Defendants.

Civil No. 11–219–GFVT.

United States District Court, E.D. Kentucky,Southern Divisionat London.

Nov. 17, 2011.

Bart L. Greenwald, Frost Brown Todd LLC, Louisville, KY, John D. Ford, Coffey & Ford, P.S.C., Mt. Vernon, KY, for Plaintiff.

Benjamin Cadden Fultz, Jennifer Metzger Stinnett, Fultz, Maddox, Hovious & Dickens, PLC, Ayala Golding, Ruby D. Fenton–Iler, Barowitz & Goldsmith, PLC, Louisville, KY, Brendan R. Yates, Jon A. Woodall, McBrayer, McGinnis, Leslie & Kirkland, PLLC, David E. Middleton, U.S. Attorney's Office, Lexington, KY, Scott A. Bachert, Harned Bachert & McGehee, Bowling Green, KY, D. Duane Cook, Georgetown, KY, Jennie Y. Haymond, Rodney Garrett Davis, Davis Law, PSC, Richmond, KY, William D. Reynolds, Jeffrey T. Burdette Law Offices, Mt. Vernon, KY, Julie Anna Neuroth, Thomas R. Yocum, Benjamin, Yocum & Heather LLC, Cincinnati, OH, for Defendants.

MEMORANDUM OPINION & ORDER

GREGORY F. VAN TATENHOVE, District Judge.

This matter is before the Court on Plaintiff's Motion to Remand. [R. 14.] Defendants Appalachian Investment Corporation and Kentucky Highlands Investment Corporation each subsequently filed independent motions to remand. [R. 31; R. 40.] Defendant Plasticware's Notice of Removal [R. 1] claimed this Court has diversity jurisdiction, while acknowledging that Kentucky citizens are on both sides of this action. This invocation of diversity jurisdiction is not well-founded. Because the “Kentucky Defendants” (as labeled by Plasticware) are properly aligned as defendants and are real parties in interest, their citizenship is considered when diversity is calculated. This results in the absence of complete diversity. Furthermore, the rule of unanimity in removal was violated because the Kentucky Defendants are real parties in interest. Consequently, the motions to remand will be GRANTED.

I.

This action was filed in Rockcastle Circuit Court on June 30, 2011. [R. 1 at 1.] Plaintiff, Citizens Bank, complained that Plasticware defaulted in the repayment of two commercial loans worth over $2 million secured by mortgages on two parcels of real property. [R. 1, Attach. 6 at 8–18.] Citizens Bank sought an order directing the sale of the parcels and anointing it as the superior claimant for proceeds from the sale. [ Id. at 24–25.] The notes were also secured by guarantee agreements signed by some of the defendants. [R. 1 at 2–3.] Note one was guaranteed by Shefa Industries, LLC, Adel Assets, LLC, Shifra Holdings, LLC, and Philmet Capital Group, LLC. [ Id.] Note two was secured by guarantee agreements with Mordachai Neustein, Shefa Industries, Adel Assets, Philmet Capital, and Samuel Meth. [ Id. at 3.] The Kentucky Defendants were included in this action because they either have liens or mortgages on the real property at issue. [R. 14 at 1–2.]

Defendant Plasticware filed a timely Notice of Removal on August 3, 2011, and Samuel Meth, Shefa Industries, Adel Assets, Shifra Holdings, Philmet Capital joined in this procedural maneuver. [R. 1 at 3, 7.] Plasticware alleges that those defendants, plus Mordachai Neustein (who had yet to be served as of the filing of the notice of removal), constitute the “Actual Defendants.” ¹ [R. 1 at 3.] Plasticware's removal is premised on 28 U.S.C. § 1332 diversity jurisdiction. [R. 1 at 5–7.] The amount in controversy Plasticware alleges is $83,621.80, clearly surpassing the required $75,000 threshold. [R. 1 at 7.] Plaintiff expressed the amount in controversy by reference to the amount that is due on each of the two notes—$2,313,217.87 on note one and $244,299.81 on note two. [R. 1, Attach 4, at 14, 18.] Regardless of how the precise debt is presented, no party contests that the amount in controversy exceeds $75,000.

Section 1332's requirement of complete diversity on both sides of the action is the point of contention. 28 U.S.C. § 1332(a)(1). Plasticware's Notice of Removal establishes that the citizenship of each of the Actual Defendants is in a state other than Kentucky. Plasticware notes that all the members of each LLC are citizens of states other than Kentucky. [R. 1 at 5–6.] Samuel Meth claimed personal citizenship in New York. [R. 1 at 5.] Mordachai Neustein's citizenship was not expressed, but he was identified as a resident of New York.² [ Id.] Citizens Bank, meanwhile, is a Kentucky corporation with a principal place of business in Kentucky. [R. 15 at 3.] Plasticware argues that only the citizenship of the aforementioned parties is relevant to the diversity jurisdiction analysis, and thus, complete diversity is present and federal court jurisdiction is achieved. [R. 1 at 6.]

Two alternative arguments are used to support Plasticware's claim that complete diversity is present, notwithstanding the fact that a Kentucky citizen is the plaintiff and Kentucky citizens are also defendants. First, the individual citizenships of the Kentucky Defendants'—at least some of which are indeed Kentucky ( [R. 15 at 3; R. 31 at 3; R. 40, Attach 2 at 1–2] )—should be disregarded because those defendants are “nominal.” [R. 1 at 6.] Second, Plasticware argues in its Response to the motions to remand, if the citizenships of the Kentucky Defendants are considered, those parties should be realigned for this analysis and examined as if they were plaintiffs. [R. 48 at 4–5.]

Citizens Bank's Motion to Remand addresses the nominal defendant argument and explains that the Kentucky Defendants are real parties in interest who have claims that will be extinguished if not raised in this action. [R. 15 at 4–9.] Appalachian Investment Corp.'s Motion to Remand [R. 31, Attach 1 at 3–8] and Kentucky Highlands Investment Corp.'s Motion to Remand [R. 40, Attach 2 at 2–4] make similar assertions on their own behalf. Citizens Bank was the only party to file a Reply and therefore to contest Plasticware's request for realignment of the parties. [R. 54 at 4–6.] Citizens Bank criticizes Plasticware's request because it fails to recognize that at different points during this action the Kentucky Defendants' interests may switch: they may be aligned with Plasticware against Citizens Bank at one point while being ambivalent towards Plasticware but opposing Citizens Bank at another. [R. 54 at 5–6.]

In addition to arguing against Plasticware's arguments, Citizens Bank also posits that Plasticware, LLC's citizenship provides an independent cause for remand. [R. 15 at 10–11.] Citizens Bank claims that Plasticware's principal place of business is in Kentucky, contrary to the facts Plasticware put forth in its Notice of Removal. [ Id.] Under that factual situation, even if the Actual Defendants' citizenships are the only ones considered, the case should still be remanded.

II.

A defendant may remove a civil action brought in state court to federal court only if the action is one over which the federal court could have exercised original jurisdiction. See 28 U.S.C. §§ 1441, 1446. This Court has original “diversity” jurisdiction over all civil actions when “the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and the dispute is between” parties who are “citizens of different states.” See 28 U.S.C. § 1332(a)(1). Because federal courts are courts of limited jurisdiction, any doubts regarding federal jurisdiction should be construed in favor of remanding the case to state court. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108–109, 61 S.Ct. 868, 85 L.Ed. 1214 (1941); Cole v. Great Atlantic & Pacific Tea Co., 728 F.Supp. 1305, 1307 (E.D.Ky.1990) (citations omitted). In determining the appropriateness of remand, a court must consider whether federal jurisdiction existed at the time the removing party filed the notice of removal. Ahearn v. Charter Twp. of Bloomfield, 100 F.3d 451, 453 (6th Cir.1996). Further, the defendant bears the burden of showing that removal was proper. Fenger v. Idexx Laboratories, 194 F.Supp.2d 601, 602 (E.D.Ky.2002) (citations omitted).

In order for diversity jurisdiction to attach, “ ‘all parties on one side of the litigation [must be] of a different citizenship from all parties to the other side of the litigation.’ ” Coyne v. Amer. Tobacco Co., 183 F.3d 488, 492 (6th Cir.1999) (citations omitted). When removal is based on diversity of the parties, “ ‘[a] defendant desiring to remove a case has the burden of proving the diversity requirements' by a preponderance of the evidence,” Everett v. Verizon Wireless, Inc., 460 F.3d 818, 829 (6th Cir.2006) (quotation omitted). Further, “complete diversity” of citizenship must exist both at the time the notice of removal is filed and at the time of commencement of the case. Jerome–Duncan, Inc. v. Auto–By–Tel, LLC, 176 F.3d 904, 907 (6th Cir.1999) (citations omitted). In multiple defendant cases in which removal is sought, “there is a rule of unanimity that has been derived from the statutory language” which requires all defendants to join in the notice of removal or submit a filing to the court consenting to the removal. Loftis v. United Parcel Service, Inc., 342 F.3d 509, 516 (6th Cir.2003) (citations omitted). “Failure to obtain unanimous consent forecloses the opportunity for removal under [28 U.S.C.] § 1446.” Id.

A.

Three arguments were put forth regarding remand-two by Plasticware and one by Citizens Bank. These arguments will be analyzed in reverse order from that in which they were...