Mopaz Diamonds v. Institute of London Underwriters

• Decision Date: 01 June 1993
• Docket Number: No. 92 Civ. 8375 (RWS).,92 Civ. 8375 (RWS).
• Citation: Mopaz Diamonds v. Institute of London Underwriters, 822 F.Supp. 1053 (S.D. N.Y. 1993)
• Parties: MOPAZ DIAMONDS, INC., Plaintiff, v. The INSTITUTE OF LONDON UNDERWRITERS, Defendant.
• Court: U.S. District Court — Southern District of New York

822 F. Supp. 1053

MOPAZ DIAMONDS, INC., Plaintiff, v.The INSTITUTE OF LONDON UNDERWRITERS, Defendant.

No. 92 Civ. 8375 (RWS).

United States District Court, S.D. New York.

June 1, 1993.

Smith Campbell & Paduano by Anthony Paduano, of counsel, New York City, for plaintiff.

White, Fleischner, Fino & Wade by John Mulcahy, of counsel, New York City, for defendant.

OPINION

SWEET, District Judge.

PlaintiffMopaz Diamonds, Inc.("Mopaz") has moved pursuant to 28 U.S.C. § 1447(c) to remand this action to the New York Supreme Court and for an order pursuant to Rule 11, Fed.R.Civ.P.and28 U.S.C. § 1927 awarding Mopaz attorneys' fees and expenses incurred in connection with this motion.

For the reasons set forth below, the motion is granted.

The Parties

Mopaz is a corporation duly organized and existing under the laws of the State of New York with its principal place of business in New York City.

The defendant, The Institute of London Underwriters ("Lloyds"), is a corporation organized and existing under the laws of the United Kingdom and transacts business in the United States.

Facts and Prior Proceedings

This is a diversity action on a jeweler's block insurance policy for the loss of diamonds resulting from an alleged burglary at Atlas Diamonds, Inc.("Atlas") on the night of June 24-25, 1991.Mopaz consigned diamonds valued at $44,000 to Bon Almaz, Ltd., which, in turn, entrusted them to Atlas for safekeeping.The diamonds belonging to Mopaz and various other consignors were among those allegedly lost in the burglary.

After an investigation of the loss, Lloyds denied Mopaz coverage with respect to the loss, alleging that the burglary had been staged by the principals of Atlas and others acting in conspiracy with them as part of a scheme to defraud their insurers.The specific basis for Lloyds' denial of the claims was the dishonest entrustment provision contained in Mopaz's policy.

Following Lloyds' denial of the claim, Mopaz filed suit against Lloyds' in the Supreme Court, County of New York, asserting a cause of action for breach of contract arising out of Lloyds' failure to provide coverage to Mopaz pursuant to the terms of the policy.It is undisputed that the amount at issue in this action is $44,000 in lost diamonds.

On November 17, 1992, Lloyds filed a Notice of Removal ("Notice") to remove this action from the state court to federal court in an attempt to have it consolidated with actions brought by other consignors against Atlas and their insurers which are pending before this Court.The Notice of Assignment assigning this action to this Court was filed on December 9, 1992.

Discussion

I.This Action Was Improperly Removed and Remand is Mandatory

A.The Legal Standards Governing Removal and Remand

Motions to remand venue from a federal district court to a state court are governed by 28 U.S.C. § 1447(c).The statute provides inter alia that:

If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.

Furthermore, as the Second Circuit has stated:

The right to remove a state court action to federal court on diversity grounds is statutory, and must therefore be invoked in strict conformity with statutory requirements.In light of the congressional intent to restrict federal court jurisdiction, as well as the importance of preserving the independence of state governments, federal courts construe the removal statute narrowly, resolving any doubts against removability.

Somlyo v. J. Lu-Rob Enterprises, Inc.,932 F.2d 1043, 1047(2d Cir.1991)(citations omitted).

Because there is no federal question involved in this action, which would give rise to original jurisdiction under § 1331, the question presented is whether this Court has subject matter jurisdiction over this action despite the fact that the undisputed amount at issue falls short of the $50,000 jurisdictional amount requirement set forth in 28 U.S.C. § 1332.

"Removal is proper only if the court had original jurisdiction of the matter,"Glen 6 Assoc., Inc. v. Dedaj,770 F.Supp. 225, 227(S.D.N.Y.1991), and whether removal was proper in this case turns on whether this Court would have original jurisdiction under the criteria of § 1332, seeInternational Tin Council v. Amalgamet Inc.,645 F.Supp. 879, 880(S.D.N.Y.1986).The jurisdictional amount requirement of § 1332 states that "the district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $50,000, exclusive of the interest and costs."28 U.S.C. § 1332(a).

The jurisdictional amount requirement must be set forth either in the complaint to be removed or in the removal notice itself.SeeRosenberg v. GWV Travel, Inc.,480 F.Supp. 95, 96(S.D.N.Y.1979).The "general federal rule has long been to decide what the amount in controversy is from the complaint itself, unless it appears or is in some way shown that the amount state in the complaint is not claimed `in good faith.'"Horton v. Liberty Mutual Ins. Co.,367 U.S. 348, 353, 81 S.Ct. 1570, 1573, 6 L.Ed.2d 890(1961)(quotingSt. Paul Mercury Indem. Co. v. Red Cab Co.,303 U.S. 283, 288, 58 S.Ct. 586, 590, 82 L.Ed. 845(1938));see alsoRed Cab,303 U.S. at 289, 58 S.Ct. at 590(to justify dismissal or remand for want of jurisdiction, "it must appear to a legal certainty that the claim is really for less than the jurisdictional amount").

"If a case is improperly removed, because original jurisdiction was lacking, the case must be remanded to the state court from which it was removed."Amalgamet,645 F.Supp. at 880.Thus when an action fails to satisfy the jurisdictional amount requirement, its removal is inappropriate, and a motion to remand the matter to the state court must be granted.See, e.g., New York ex rel. Larson v. Holy Spirit Ass'n for World Unification,464 F.Supp. 196, 198(S.D.N.Y.1979)(remanding action for failure to satisfy jurisdictional amount requirement);J.W. Petroleum, Inc. v. Lange,787 F.Supp. 975, 977(D.Kan.1992)(removal required when plaintiff alleged damages of only $23,000);Maki v. Keller Indus., Inc.,761 F.Supp. 66, 68(N.D.Ill.1991)(allegation that damages "substantially exceed state court minimum jurisdictional amount" fails to satisfy § 1332(a) jurisdictional amount requirement).

B.The Inadequacy of Lloyds' Proofs

Lloyds asserts that Mopaz's motion must be denied because the latter has failed "to provide any compelling reason why this claim should be heard in state court rather than in the federal court and why this case should not be considered in conjunction with the actions which are pending in the federal court."MulcahyAff. ¶ 9.However, the burden rests on Lloyds to show why this action should not be remanded.SeeSomlyo,932 F.2d at 1047.

It is a well-settled principle of law that the party seeking removal has the burden of establishing diversity of citizenship together with the requisite jurisdictional amount.SeeMcNutt v. General Motors Acceptance Corp.,298 U.S. 178, 183, 56 S.Ct. 780, 782, 80 L.Ed. 1135(1936);Rosenberg,480 F.Supp. at 96;see alsoIsaacs v. Group Health, Inc.,668 F.Supp. 306, 311(S.D.N.Y.1987)(on motion to remand, removing party bears burden of establishing that the case is within federal court's removal jurisdiction);Crazy Eddie, Inc. v. Cotter,666 F.Supp. 503, 508(S.D.N.Y.1987)(same);Nannuzzi v. King,660 F.Supp. 1445, 1447(S.D.N.Y.1987)(same);Irving Trust Co. v. Century Export & Import, S.A.,464 F.Supp. 1232, 1236(S.D.N.Y.1979)(same).

Lloyds' Notice explicitly acknowledges that the $44,000 in this action falls short of the jurisdictional amount requirement: "While there is diversity in this matter, the amount in controversy does not exceed $50,000."Notice¶ 5.Lloyds asserts, however, that this Court"has original jurisdiction of this action under 28 U.S.C. § 1332 and is one which may be removed to this Court by the petitionerdefendant pursuant to the provisions of 28 U.S.C. § 1441."Notice¶ 5.The assertion seeks to eliminate the amount in controversy requirement of § 1332, but Lloyds cites no authority for the proposition which is rejected.

Lloyds also implies that because Mopaz Diamonds could allegedly intervene in related actions pending before this Court pursuant to Rule 24(b), Fed.R.Civ.P., this Court has subject matter jurisdiction over this action.Again, no supporting authority or further analysis is offered to establish a relationship between permissive intervention and the original jurisdiction this Court has over diversity actions that fail to satisfy the jurisdictional amount requirement of § 1332.

First, Mopaz has not invoked Rule 24(b) by applying to intervene in any action pending before this Court and has explicitly denied any intention to do so.In addition, Rule 24(b) requires that a party moving to intervene must "show an independent ground of jurisdiction to support its permissive intervention."Cook v. Pan Am. World Airways, Inc.,636 F.Supp. 693, 696(S.D.N.Y.1986).Mopaz has demonstrated that such a showing is impossible in light of the undisputed amount at issue in this action.

Lloyds has asserted further that the jurisdictional amount requirement is satisfied by the fact that it is a member of a "de facto class," consisting of the various parties whose cases have been consolidated before this Court, the members of which have made claims exceeding $3,000,000 in value.MulcahyAff. ¶ 10.However, district courts generally, and this Court in particular, cannot assert and have not asserted subject matter jurisdiction over an action in the de facto manner suggested by Lloyds.Cf.Rosenberg,480 F.Supp. at 96(remanding action because "it has yet to be certified as a class action, and the sum total of the plaintiff's individual claims ... fall far below the jurisdictional threshold.")

Lloyds also has claimed that it would suffer extreme prejudice if this action were...