Nocelli v. Kaiser Gypsum Co.
| Decision Date | 15 January 2020 |
| Docket Number | No. 19-CV-1980 (RA),19-CV-1980 (RA) |
| Parties | ANNA NOCELLI AND GUIDO NOCELLI, Plaintiffs, v. KAISER GYPSUM COMPANY, INC., et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Plaintiffs Anna Nocelli and Guido Nocelli filed this action in the Supreme Court of New York. Defendant Kaiser Gypsum Company, Inc. ("Kaiser") removed the action to federal court on the grounds of diversity jurisdiction. Before the Court is Plaintiffs' motion to remand. For the reasons that follow, Plaintiffs' motion is GRANTED.
On November 29, 2016, Plaintiffs, both citizens of New York, filed this action in the Supreme Court of New York alleging eleven causes of action related to Plaintiff Anna Nocelli's alleged asbestos-related disease. The initial complaint named defendants, including Union Carbide Corporation, that were citizens of New York. Plaintiffs allege they were legally barred from naming Kaiser as a defendant in the initial complaint because Kaiser filed for Chapter 11 bankruptcy protection in the Bankruptcy Court for the Western District of North Carolina two months before Plaintiffs filed the action, leading to an automatic bankruptcy stay pursuant to 11 U.S.C. § 362. See Voluntary Petition for Non-Individuals Filing for Bankruptcy, In re Kaiser Gypsum Company, Inc., No. 16-31602 (JCW) (Bankr. W.D.N.C. Sept. 30, 2016). But for Kaiser's pending bankruptcy petition, Plaintiffs allege they would have named Kaiser as a defendant in the case from its inception.
On August 9, 2018, the Bankruptcy Court issued an order lifting the automatic stay as to certain asbestos-related personal injury claims. See Order Lifting the Automatic Stay Pursuant to 11 U.S.C. § 362 as to Certain Asbestos Personal Injury Claims, In re Kaiser Gypsum Company, Inc., No. 16-31602 (JCW) (Bankr. W.D.N.C. Aug. 9, 2018). The order set an effective date of October 29, 2018. Id. at 3.
In the interim, Plaintiffs engaged in settlement negotiations with the defendants named in the initial complaint. On the eve of the October 9, 2018 trial, Plaintiffs resolved their claims against the initial defendants. On October 9, 2018, the Supreme Court of New York marked the case "disposed" and "settled before trial." Dkt. 8 Exs. D, E. The parties, however, never filed a stipulation or proposed order discontinuing the action against the initial defendants.
On November 1, 2018, three days after the effective date of the order lifting the bankruptcy stay, Plaintiffs filed a Third Amended Complaint in the Supreme Court of New York naming Kaiser. Kaiser was incorporated in North Carolina and maintains its principal place of business in California. On January 31, 2019, Plaintiffs served Kaiser with the Third Amended Complaint. On March 1, 2019, Kaiser removed the action to federal court on the grounds of diversity jurisdiction. On March 22, 2019, Plaintiffs filed the instant motion to remand.
"A party seeking removal bears the burden of showing that federal jurisdiction is proper." Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321, 327 (2d Cir. 2011). "Where, as here, jurisdiction is asserted by a defendant in a removal petition, it follows that the defendant has the burden of establishing that removal is proper." United Food & Commercial WorkersUnion, Local 919, AFL-CIO v. CenterMark Props. Meriden Square, Inc., 30 F.3d 298, 301 (2d Cir. 1994). "[R]emoval statutes are to be strictly construed against removal and all doubts should be resolved in favor of remand." Am. Standard, Inc. v. Oakfahco, Inc., 498 F. Supp. 2d 711, 715 (S.D.N.Y. 2007) (citations omitted); see also Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941). This principle ensures "respect for the independence of state courts." Hill v. Delta Int'l Mach. Corp., 386 F. Supp. 2d 427, 429 (S.D.N.Y. 2005) (citations omitted).
DISCUSSION
"[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). "A civil action otherwise removable solely on the basis of [diversity jurisdiction pursuant to 28 U.S.C. § 1332] may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." 28 U.S.C. § 1441(b)(2).
"[I]f the case stated by the initial pleading is not removable" because of the involvement of a non-diverse defendant but later becomes removable, the removal statute provides for two discrete time requirements. 28 U.S.C. § 1446(b)(3). First, the notice of removal must be filed "within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable." Id. The parties do not dispute that Kaiser complied with this first requirement. Second, "[a] case may not be removed . . . on the basis of [diversity jurisdiction] more than 1 year after commencement of the action, unless the district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removingthe action." 28 U.S.C. § 1446(c)(1). Congress introduced this "bad faith" exception to the one-year limit on removal of diversity cases in 2011 to clarify that the one-year limit on removal is procedural, not jurisdictional, and therefore does not act as an absolute bar on removal. See Federal Courts Jurisdiction and Venue Clarification Act of 2011, Pub. L. No. 112-63, 125 Stat. 758 (2011); H.R.Rep. No. 112-10 at 15; see also Ehrenreich v. Black, 994 F. Supp. 2d 284, 288 (E.D.N.Y. 2014).
Plaintiffs argue that remand is warranted for two reasons. First, Plaintiffs argue that removal was untimely under 28 U.S.C. § 1446(c)(1) because Kaiser filed its notice of removal more than one year after the commencement of the action even though Plaintiffs did not act in bad faith to prevent Kaiser from removing the action.1 Second, Plaintiffs argue that removal is improper under 28 U.S.C. § 1441(b)(2) because complete diversity does not exist between the parties in interest.
In response, Kaiser argues first that Plaintiffs did act in bad faith to prevent removal by naming Kaiser as a defendant in their Third Amended Complaint after settling their claims against all non-diverse defendants. Second, Kaiser argues that the bankruptcy stay tolled the one-year time limit under 28 U.S.C. § 1446(c)(1). Finally, Kaiser argues that this Court has diversity jurisdiction over the action because Plaintiffs have settled their claims with all non-diverse parties and that this Court has bankruptcy jurisdiction.
For the reasons that follow, the Court holds that it does have diversity jurisdiction over the action. It further finds, however, that Kaiser's notice of removal was untimely and that Kaiser has failed to establish that Plaintiffs acted in bad faith to prevent removal. Finally, theCourt concludes that the automatic bankruptcy stay did not toll the one-year limit on removal. Accordingly, the Court grants Plaintiffs' motion to remand. It declines, however, to award Plaintiffs attorneys' fees.
The Court will consider the jurisdictional issue first because it must have jurisdiction over the action to even reach the timeliness questions under 28 U.S.C. § 1446(c). See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94 (1998). Plaintiffs argue that removal was improper because at least one Defendant, Union Carbide Corporation, is a New York citizen, and that this Court therefore lacks diversity jurisdiction. Although it is undisputed that Plaintiffs had settled their claims against Union Carbide Corporation prior to removal, Plaintiffs argue that Union Carbide Corporation remains a party to the action under New York law because the parties never filed a stipulation and the court never entered an order of discontinuance. See N.Y. C.P.L.R. § 3217 (). Plaintiffs contend that under New York law, Union Carbide Corporation is a settled defendant but not a discontinued defendant, and therefore remains a party to the action. By contrast, Kaiser argues that complete diversity exists because Plaintiffs resolved their claims against all non-diverse defendants on October 9, 2018, and the Supreme Court of New York thereafter marked the case "disposed" and "settled before trial."
"In a case not originally removable, a defendant who receives a pleading or other paper indicating the postcommencement satisfaction of federal jurisdictional requirements—for example, by reason of the dismissal of a nondiverse party—may remove the case to federalcourt." Caterpillar Inc. v. Lewis, 519 U.S. 61, 68-69 (1996). Whether this Court has diversity jurisdiction over this action depends on whether the settlement with the non-diverse defendants "has taken the [non-diverse] defendants out of the case, so as to leave a controversy wholly between the plaintiff and the [diverse] defendant." Am. Car & Foundry Co. v. Kettelhake, 236 U.S. 311, 316 (1915).
Federal courts are divided on whether complete diversity exists when, prior to a diverse defendant's removal, a plaintiff has settled with all non-diverse defendants yet neither the plaintiff nor the court has entered a formal stipulation of discontinuance or order of dismissal. Compare Fernando Garcia v. MVT Servs., Inc., 589 F. Supp. 2d 797, 803-04 (W.D. Tex. 2008) (...
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