Rapid Anesthesia Solutions, P.C. v. John H. Hajjar, Sovereign Health Sys., & Monarch Anesthesia, Inc.

• Decision Date: 18 January 2019
• Docket Number: 17-CV-4705 (KAM)(LB)
• Parties: RAPID ANESTHESIA SOLUTIONS, P.C. and CHARLES STARKE, M.D., Plaintiffs, v. JOHN H. HAJJAR, SOVEREIGN HEALTH SYSTEM, and MONARCH ANESTHESIA, INC., also known as Monarch Anesthesia of Jersey City, LLC, Defendants.
• Court: U.S. District Court — Eastern District of New York

RAPID ANESTHESIA SOLUTIONS, P.C. and CHARLES STARKE, M.D., Plaintiffs, v. JOHN H. HAJJAR, SOVEREIGN HEALTH SYSTEM, and MONARCH ANESTHESIA, INC.,also known as Monarch Anesthesia of Jersey City, LLC, Defendants.

17-CV-4705 (KAM)(LB)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

January 18, 2019

ORDER ADOPTING REPORT AND RECOMMENDATION

MATSUMOTO, United States District Judge:

On August 10, 2017, plaintiffs Dr. Charles Starke and Rapid Anesthesia Solutions, P.C., initiated this action against defendants Dr. John Hajjar, Sovereign Health System, and Monarch Anesthesia, Inc., regarding payments allegedly owed for anesthesiological services and the sale of a medical services contract. (ECF No. 1, Complaint.) The plaintiffs later filed an amended complaint on January 19, 2018, bringing actions for: (1) declaratory judgment; (2) breach of contract; (3) breach of covenant of good faith; (4) conversion; and (5) unjust enrichment. (ECF No. 12, Amended Complaint ("Am. Compl.).) The defendants subsequently moved to dismiss, and the plaintiffs opposed their motion. (See generally ECF Nos. 14-17.) The court referred the motion to dismiss to the Honorable Lois Bloom, United States Magistrate Judge, on October 12, 2018.

Presently before the court is a report and recommendation issued on December 19, 2018 by Judge Bloom, recommending that the court forgo adjudicating the pending motion to dismiss, and instead dismiss this action for lack of subject matter jurisdiction due to plaintiffs' failure to adequately plead citizenship. (ECF No. 19, Report and Recommendation ("R&R")). Plaintiffs timely objected to Judge Bloom's R&R. (ECF No. 20, Plaintiffs' Written Objections to Report and Recommendations ("R&R Objections")). For the reasons set forth below, the court adopts Judge Bloom's R&R with a minor modification and orders that within thirty days of entry of this Order, plaintiffs provide affidavits or sworn declarations from individuals with knowledge establishing the existence of diversity jurisdiction.

LEGAL STANDARD

I. Review of R&R

A district court may refer a dispositive motion to a magistrate judge for a report and recommendation. See 28 U.S.C. § 636(b)(1). When a magistrate judge issues a report and recommendation, "any party may serve and file written objections." Id.; accord Fed. R. Civ. P. 72(b) ("[A] party may serve and file specific written objections to the proposedfindings and recommendations.") (emphasis added). The district court shall then review the portions of the report and recommendation to which a party has timely objected under a de novo review standard, and "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." Id. However, "[g]eneral or conclusory objections, or objections which merely recite the same arguments presented to the magistrate judge, are reviewed for clear error." New York City Dist. Council of Carpenters v. Allied Design & Constr., LLC, 335 F. Supp. 3d 349, 351 (E.D.N.Y. 2018) (citations omitted); see also Mario v. P & C Food Markets, Inc., 313 F.3d 758, 766 (2d Cir. 2002) ("[M]erely referring the court to previously filed papers or arguments does not constitute an adequate objection under . . . Fed. R. Civ. P. 72(b) . . . ."). The court also may adopt "those portions of a report and recommendation to which no timely objections have been made, provided no clear error is apparent from the face of the record." DiMartino v. Berryhill, 327 F. Supp. 3d 533, 535 (E.D.N.Y. 2018).

II. Subject Matter Jurisdiction

"'It is a fundamental precept that federal courts are courts of limited jurisdiction' and lack the power to disregard such limits as have been imposed by the Constitution or Congress." Durant, Nichols, Houston, Hodgson & Cortese-CostaP.C. v. Dupont, 565 F.3d 56, 62 (2d Cir. 2009) (citing Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 374 (1978)). By statute, district courts have original jurisdiction over "all civil actions where the matter in controversy exceeds the sum or value of $75,000 . . . and is between . . . citizens of different States[.]" 28 U.S.C. § 1332(a). "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). "[T]he party invoking federal jurisdiction . . . must allege a proper basis for jurisdiction in his pleadings and must support those allegations with 'competent proof' if . . . the court sua sponte raises the question[.]" Linardos v. Fortuna, 157 F.3d 945, 947 (2d Cir. 1998) (citations omitted).

DISCUSSION

Judge Bloom recommended that the court dismiss this action for lack of subject matter jurisdiction and forgo adjudicating the motion to dismiss. (ECF No. 19 at 9, R&R.) The R&R concluded that the plaintiffs failed to meet the diversity requirement because the plaintiffs did not establish the citizenship of the defendants or identify all entities whose citizenship was at issue. (Id. at 5-6, 8.) Plaintiffs disagree with this conclusion, referring to several statements in their past filings as information sufficient to establish diversityand subject matter jurisdiction. (ECF No. 20, R&R Objections.) Because plaintiffs' objections are general,¹ refer to past filings, or repeat facts from those filings, the court need only review the report and recommendation for clear error, but also reviews the R&R de novo. Having reviewed the R&R, the court finds no clear error, and further finds on de novo review that the court lacks subject matter jurisdiction. Judge Bloom's report and recommendation is adopted in its entirety. The court addresses the plaintiffs' objections below solely for the sake of clarity.

I. Plaintiffs' Objections

A. Citizenship of the Parties

Plaintiffs raise only a few objections regarding citizenship. They claim that the amended complaint "states more than the bare statement of residency." (ECF No. 20 at 3, R&R Objections.) The R&R Objections do not specifically identify any statements regarding the citizenship of the individual parties in the complaint, but state that "paragraph 4, 5 and 6 spell out the diversity of the [corporate] parties." (Id.) Finally, the Objection also cite a letter the plaintiffs previously filed in support of their case. (ECF No. 20 at 4,R&R Objections.) That letter states that the court "has jurisdiction over this case because of the diversity of the residence of the Plaintiffs, not Defendants . . . ." (ECF No. 10, Pre-motion Conference Response Letter ("PMC letter").)

Plaintiffs fail to establish the citizenship of either plaintiff Dr. Starke or defendant Dr. Hajjar. "[I]t is well-established that allegations of residency alone cannot establish citizenship." Canedy v. Liberty Mut. Ins. Co., 126 F.3d 100, 103 (2d Cir. 1997). "An individual's citizenship, within the meaning of the diversity statute, is determined by his domicile." Palazzo ex rel. Delmage v. Corio, 232 F.3d 38, 42 (2d Cir. 2000). Statements regarding residency are "relevant only to the extent [they] assist[] in establishing domicile." Chigirinskiy v. Panchenkova, 252 F. Supp. 3d 379, 381 (S.D.N.Y. 2017). As the Report and Recommendation correctly states, the amended complaint refers only to the residency of Dr. Starke and Dr. Hajjar. (ECF No. 19 at 5-6, R&R.) Notably, the Objections themselves also refer only to residency, rather than domicile² or citizenship. (ECF No. 20 at 3, R&R Objections ("Dr. Starke, a resident of New York . . .").)

Plaintiffs' PMC letter fails to help save their case for two reasons. The first is that, as with the plaintiffs' other filings, the letter merely refers to residence, rather than domicile or citizenship. (ECF. No. 10 at 1, PMC letter.) The second is that the letter incorrectly states the law, suggesting that diversity between the plaintiffs is key. (See id.) But diversity jurisdiction requires "complete diversity so that each plaintiff's citizenship must be different from the citizenship of each defendant." Briarpatch Ltd., L.P v. Phoenix Pictures, Inc., 373 F.3d 296, 302 (2d Cir. 2004).

Plaintiffs also fail to establish the citizenship of the corporate parties. Plaintiffs do not state the state(s) of incorporation, headquarters, or the principal place of business for any of the corporate entities, instead referring to the states where entities are "licensed" or "authorized" to conduct business. (See ECF No. 12 ¶¶ 1-3, Am. Compl.) The R&R also notes an additional problem regarding defendant Monarch. (See ECF No. 19 at 7-8, R&R.) Plaintiffs refer to Monarch as an LLC with multiple members, but do not identify those members or the citizenship of those members. Defendant Dr. Hajjar stated in his declaration that he is, and at all relevant times has been, the sole shareholder of Monarch. (See ECF No. 14-1 ¶ 6, Declaration of John Hajjar.) Although the plaintiff bears the burden of establishing that subject matter jurisdiction exists,the court may refer to evidence outside the pleadings in resolving a motion to dismiss for lack of subject matter jurisdiction. Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). But because plaintiffs have not established Dr. Hajjar's citizenship, the court still cannot determine Monarch's citizenship. Absent the information described above, the plaintiffs cannot establish that there is diversity between plaintiffs and defendants.

Furthermore, if one of the defendants is a joint venture, the plaintiffs must also establish the joint venture's citizenship. Plaintiffs allege that the ambulatory center "was intended to be a joint venture" and that plaintiff Dr. Starke "received shares of stock in the ambulatory center." (ECF No. 12 ¶ 5, Am. Compl.) It is unclear from the complaint whether one of the named defendants is a joint venture. Plaintiffs suggest that they are entitled to "their proper share of profit . . . from Monarch." (Id.) However, the plaintiffs also state that Monarch was created...