Law School Case Brief
Nxivm Corp. v. Ross - No. 09-CV-338S, 2009 U.S. Dist. LEXIS 52373 (W.D.N.Y. June 19, 2009)
When a plaintiff files a complaint in state court that could have been filed in federal court, Congress allows the defendant or defendants to remove the action from state to federal court pursuant to 28 U.S.C. sections 1441 and 1446. Section 1441 sets forth the jurisdictional basis for removal, while section 1446 sets forth the procedural requirements for removal to federal court.
Plaintiff NXIVM is a New York corporation with its principal place of business in Niagara Falls, New York. According to the complaint, NXIVM's business includes "training, coaching and ethics programs designed primarily for leaders, teachers, executives, organization heads, concerned citizens, decision makers and others who value ethical, humanitarian performance." Defendants Morris and Rochelle Sutton ("Suttons") are married, and have a son, Michael Sutton. The Sutton family owns Defendant Lollytogs Ltd. ("Lollytogs"), a clothing manufacturing business. Michael Sutton worked at Lollytogs, and held the position of partner and vice president. Suttons hired Defendant Rick Ross ("Ross"), an individual, who claims to be an expert in the field of "destructive cults, controversial groups and movements," for the purpose of persuading Michael to leave NXIVM.
NXIVM commenced this case by filing a Summons and Complaint in the Supreme Court for the State of New York, Niagara County, alleging 14 claims against defendants Ross, Morris and Rochelle Sutton and Lollytogs. Before NXIVM had formally served any defendant with the summons and complaint, three of the four named defendants (Morris and Rochelle Sutton and Lollytog) received a copy of the complaint, and removed the case to the United States District Court for the Western District of New York based on federal diversity jurisdiction. NXIVM's filed a motion to remand on four separate grounds. Opposed to the motion, defendants argued that complete diversity exists because the three individual Defendants -- Morris Sutton, Rochelle Sutton, and Ross -- all reside in New Jersey, and Lollytogs, a New York corporation, was fraudulently joined for the purpose of defeating diversity jurisdiction. Further, defendants note that the amount in controversy exceeds $ 75,000.
Did the defendants prematurely remove the action from state court to federal court because none of them had been formally served with the summons or complaint prior to, or at the time, they removed this case?
Addressing plaintiff's premature removal argument, the District Court found that there was no statutory requirement that defendants be formally served with the summons or complaint prior to removal. Rather, 28 U.S.C. § 1446(b) provides that a notice of removal must be filed within 30 days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading. Here, defendants received a copy of the initial pleading after plaintiff commenced this action in state court, yet prior to plaintiff formally serving it upon them. Next, the District Court found that plaintiff's standing argument was essentially a continuation of its argument that removal was premature. Defendants argued that Lollytogs, a New York corporation, was fraudulently joined in an effort to frustrate federal diversity jurisdiction. Based upon all of the allegations contained in the complaint, and all other evidence in the record construed in the light most favorable to plaintiff, the District Court found that defendants clearly and convincingly demonstrated there is no possibility that plaintiff can state a claim against Lollytogs under New York law for conspiracy to commit any of the alleged tortious conduct. Because all three of plaintiff's claims against Lollytogs involve an alleged civil conspiracy, there is no possibility plaintiff can state even one of its three claims against Lollytogs. For instance, Plaintiff has not alleged any of the four elements for a civil conspiracy as to Lollytogs. There are no allegations in the complaint, nor is there any indication elsewhere in the record, that Lollytogs entered into a corrupt agreement, took any overt act in furtherance of the agreement, or intentionally participated in such. Accordingly, the District Court denied plaintiff's motion to remand.
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