Janvey v. Proskauer Rose, LLP

• Decision Date: 24 July 2014
• Docket Number: Civil Action No. 12–155 CKK
• Citation: 59 F.Supp.3d 1
• Parties: Ralph S. Janvey, et al., Plaintiffs, v. Proskauer Rose, LLP, et al., Defendants.
• Court: U.S. District Court — District of Columbia

59 F.Supp.3d 1

Ralph S. Janvey, et al., Plaintiffs

v.Proskauer Rose, LLP, et al., Defendants.

Civil Action No. 12–155 CKK

United States District Court, District of Columbia.

(Signed July 24, 2014)

John D. Heffner, Strasburger & Price, LLP, Washington, DC, for Plaintiffs.

Jesse Solomon, Davis, Polk & Wardwell, Craig Aaron Benson, Paul Weiss Rifkind Wharton & Garrison LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION

(July 24, 2014)

COLLEEN KOLLAR–KOTELLY, UNITED STATES DISTRICT JUDGE

Presently before the Court is Plaintiffs' [15] Motion to Transfer Case to the United States District Court for the Northern District of Texas. In response, Defendants filed a [29] Cross–Motion to Dismiss for Lack of Jurisdiction. Upon consideration of the pleadings,¹ the relevant legal authorities, and the record as a whole, the Court finds that transferring this case to the United States District Court for the Northern District of Texas is not in the interest of justice. Accordingly, Plaintiffs' [15] Motion is DENIED and Defendants' [29] Cross–Motion is GRANTED and this case is DISMISSED.²

I. BACKGROUND

This case arises from the Ponzi scheme of Allen Stanford, who controlled Stanford International Bank (“SIB”) which sold billions of dollars in fraudulent certificates of deposit to more than 50,000 people over a period of more than two decades. Pl.s' Mot. ¶ 2. Plaintiff Ralph S. Janvey was appointed by the United States District Court for the Northern District of Texas, Dallas Division, to serve as the Receiver for the Stanford Receivership Estate. Compl. ¶ 2. In his capacity as Court–Appointed Receiver, Janvey filed suit on behalf of the Stanford Receivership Estate and the Official Stanford Investors Committee (collectively, “Plaintiffs”) against Proskauer Rose, LLP, Chadbourne & Parke, LLP, and Thomas V. Sjoblom (collectively, “Defendants”) on January 27, 2012, asserting negligence, aiding and abetting in breaches of fiduciary duties, and aiding and abetting in a fraudulent scheme, among other claims, by assisting SIB in evading regulatory oversight and obstructing the government investigation. Id. at ¶¶ 209–221; Pl.s' Mot., ¶ 3. Although Plaintiffs filed sixty-one lawsuits on behalf of the Stanford Receivership Estate in the United States District Court for the Northern District of Texas, Plaintiffs filed the present cause of action in this Court. See Def.s' Opp'n. at 1–2; Rouhandeh Decl., ECF No. [31–1].

On February 16, 2012, Defendants filed a Notice of Potential Tag–Along Action with the United States Panel on Multidistrict Litigation, seeking transfer of this case to the United States District Court for the Northern District of Texas. See Remand Order (Dec. 23, 2013), ECF No. [14]. Subsequently, on March 2, 2012, this case was transferred to the United States District Court for the Northern District of Texas by the Panel on Multidistrict Litigation pursuant to 28 U.S.C. § 1407, which provides that civil actions that involve one or more common questions of fact and are pending in different districts may be transferred to any district for coordinated or consolidated pretrial proceedings. The Clerk of the Panel entered a conditional order transferring the case to the Northern District of Texas. See Conditional Transfer Order (Mar. 1, 2012), ECF No. [11].

On October 24, 2012, Defendants filed Motions to Dismiss for Lack of Jurisdiction in the Northern District of Texas. See N.D. Tex. (Dallas), ECF Nos. [49], [50], [53]. Defendants argued that the Northern District of Texas did not have subject matter jurisdiction because the parties were not diverse due to the “statelessness” of Defendants Proskauer Rose and Chadbourne & Parke. Def.s' Mot. to Dismiss, N.D. Tex. (Dallas), ECF No. [49], at 13–23. Additionally, Defendants contended that, because Plaintiffs originally chose to file in the District of Columbia, they could not assert jurisdiction in the Northern District of Texas pursuant to 28 U.S.C. § 754 and must instead establish an independent ground for federal subject matter jurisdiction, which they failed to do. Id. at 23–26. On December 12, 2012, Plaintiffs moved for a recommendation of remand of the case to the District of Columbia, arguing that the District of Columbia court could cure any jurisdictional defects by ordering a 28 U.S.C. § 1631 transfer in the “interest of justice” to a court with jurisdiction. See Pl.s' Mot. for Recommendation of Remand, N.D. Tex. (Dallas), ECF No. [55]. On August 21, 2013, the United States District Court of the Northern District of Texas issued an order denying Defendants' motions to dismiss and recommending that the United States Judicial Panel on Multidistrict Litigation remand the case back to the United States District Court for the District of Columbia to determine Plaintiff's § 1631 transfer request. See Order (Aug. 21, 2013), N.D. Tex. (Dallas), ECF No. [71]. On December 23, 2013, a Remand Order was issued by the Judicial Panel on Multidistrict Litigation directing remand of the case from the U.S. District Court for the Northern District of Texas to the U.S. District Court for the District of Columbia. See Remand Order (Dec. 23, 2013), ECF No. [14]. The Panel gave weight to the Northern District of Texas' determination that remand was necessary to provide Plaintiffs “the opportunity to present to the District of Columbia court evidence and argument that a transfer to this Court [the Northern District of Texas] would be in the interest of justice.” Id. at 3.

On February 5, 2014, Plaintiffs filed in this Court a Motion to Transfer Case to the United States District Court for the Northern District of Texas pursuant to 28 U.S.C. § 1631. On February 20, 2014, Defendants filed a Cross–Motion to Dismiss for Lack of Jurisdiction and a Memorandum in Opposition to Plaintiffs' Motion to Transfer and in Support of Defendants' Cross–Motion to Dismiss. Plaintiffs concede that this court does not have jurisdiction over this action, but argue that this case should be transferred to the Northern District of Texas pursuant to § 1631 because Plaintiffs reasonably believed that diversity jurisdiction existed at the time of filing in this court and if transfer to a court of proper jurisdiction is denied, “there is a risk that the Receiver's negligence claims may be barred.” Pl.'s Mot. ¶ 14. Defendants contend that this action should be dismissed because Plaintiffs filed this action in this court in bad faith and thus it is not in the interest of justice to transfer the action. On March 27, 2014, Plaintiffs filed a Motion for Leave to Late–File Reply. See ECF No. [33]. The Court granted Plaintiffs' Motion on June 30, 2014, and Plaintiffs' Reply was subsequently docketed. Accordingly, this motion is now ripe for review.

II. LEGAL STANDARD

Pursuant to 28 U.S.C. § 1631, courts have authority to transfer a civil action filed in the wrong jurisdiction, “if it is in the interest of justice” to do so. When a case is transferred pursuant to 28 U.S.C. § 1631, it “proceed[s] as if it had been filed in ... the court to which it is transferred on the date upon which is was actually filed in ... the court from which it is transferred.” Id. “There are three elements to a section 1631 transfer: (1) there must be a lack of jurisdiction in the district court; (2) the transfer must be in the interest of justice; and (3) the transfer can be made only to a court in which the action could have been brought at the time it was filed or noticed.” Fasolyak v. The Cradle Soc'y, Inc., No. 06–1126, 2007 WL 2071644, at *11 (D.D.C. July 19, 2007) (quoting Ukiah Adventist Hosp. v. FTC, 981 F.2d 543, 549 (D.C.Cir.1992) ). As the party requesting transfer, Plaintiffs bear the burden of establishing that the elements of a § 1631 transfer have been met. See Osage Tribe of Indians of Okla. v. U.S., No. 04–283, 2005 WL 578171, at *2 (D.D.C. Mar. 9, 2005) (rejecting defendants' transfer request under § 1631 because defendants failed to make the necessary threshold showing that the court lacked subject matter jurisdiction). Pursuant to 28 U.S.C. § 1631, “federal courts [have the] authority to make a single decision upon concluding that it lacks jurisdiction—whether to dismiss the case ... or, in the interest of justice, to transfer it ....” Maxwell v. Lappin, No. 10–1613, 2011 WL 1897175, at *2 fn. 1 (D.D.C. May 18, 2011) (internal quotation marks omitted). The Court shall consider the three § 1631 requirements in turn.

III. DISCUSSION

A. Jurisdiction in the District of Columbia District Court

The first requirement of a § 1631 transfer—that the district court in which the action was originally filed lack jurisdiction—has clearly been met in this case, and both parties agree that this Court lacks jurisdiction. See Pl.s' Mot. Mem. ¶ 3 (“The parties agree that the District of Columbia district court did not and does not have diversity jurisdiction to hear this case.”); Def.s' Opp'n. at 8 (“[T]here is no dispute that this Court lacks federal subject-matter jurisdiction over this case.”). In their Complaint, Plaintiffs originally alleged that this Court had jurisdiction over this action under 28 U.S.C. § 1332(a)(1) because “Plaintiffs and Defendants are citizens of different states.” Compl. ¶ 7. However, both parties now concede that this Court lacks subject-matter jurisdiction over this case because some of the defendants are in fact “stateless” for the purposes of diversity jurisdiction. See Pl.s' Mot. Mem. ¶ 3 (“[T]he District of Columbia district court did not and does not have diversity jurisdiction ... Plaintiffs did not know the facts about the law firms ‘stateless partners' at the time.”); Def.s' Opp'n. at 7 (“[E]ach defendant law firm has at least one partner who is a ‘stateless' person, precluding diversity jurisdiction.”). Specifically, two of the defendants are law firms with partners who are American citizens domiciled abroad. See Def. Chadbourne & Parke, LLP's Mot. to Dismiss, N.D. Tex. (Dallas), Mecz Decl. and Greenwald Decl., ECF No. [...