Commercial Litigation and Arbitration

Is a New York State Court Summons with Notice (without Complaint) an “Initial Pleading” Removable to Federal Court? May the Federal Court Consider Later-Filed Proposed Complaint?

From MBIA Ins. Corp. v. Royal Bank of Canada, 2009 U.S. Dist. LEXIS 126910 (S.D.N.Y. Dec. 30, 2009):

Plaintiffs argue that removal was improper under Section 1446(b) because the Summons with Notice was not an initial pleading. *** Specifically, Plaintiffs believe that removability was not ascertainable from the face of the Summons with Notice because it listed RBCCMC, a non-diverse Defendant, on its face. *** Furthermore, Plaintiffs argue that removability was not ascertainable because no amount in controversy was provided in the Summons with Notice. *** Defendants, on the other hand, argue that removability was ascertainable on the face of the Summons with Notice, making it an initial pleading subject to removal. *** Specifically, Defendants claim that the Summons with Notice provided all the information needed to reasonably ascertain removability, referencing the specific addresses of both Defendants, Plaintiffs' principal places of business, and the specific contracts alleged to have been breached. *** Additionally, Defendants argue that Plaintiffs cannot "credibly deny" that they seek damages greater than the jurisdictionally required amount.***

In Whitaker v. American Telecasting, Inc., 261 F.3d 196 (2d Cir. 2001), the Second Circuit held that a summons with notice filed in accordance with New York State law "may constitute an initial pleading for purposes of the federal removal statute," because New York law requires "the summons to provide notice stating the nature of the action and the relief sought--that is, information from which a defendant can ascertain removability." *** In Whitaker, the court further explained that "[a] case is removable when the initial pleading enables the defendant to intelligently ascertain removability from the face of such pleading, so that in its petition for removal[, the] defendant can make a short and plain statement of the grounds for removal as required [by] 28 U.S.C. § 1446(a)." ***[see] also Pinson v. Knoll, Inc., No. 07-CV-1739, 2007 U.S. Dist. LEXIS 44201, 2007 WL 1771554, at *2 (S.D.N.Y. June 18, 2007) (explaining that an "initial pleading" is defined as '"any pleading (and not necessarily the complaint) containing sufficient information to enable the defendant to intelligently ascertain the basis for removal'".... "A pleading enables a defendant to intelligently ascertain removability when it provides the necessary facts to support" removal; for diversity cases, the facts required include the parties' addresses and the amount in controversy. Whitaker, 261 F.3d at 206 (internal quotation marks omitted).

[Footnote 3] N.Y. C.P.L.R. § 305(b) provides that "[i]f the complaint is not served with the summons, the summons shall contain or have attached thereto a notice stating the nature of the action and the relief sought, and, except in an action for medical malpractice, the sum of money for which judgment may be taken in case of default." N.Y. C.P.L.R. § 305(b).

[Footnote 4] The Whitaker court noted that in Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 349-56, 119 S. Ct. 1322, 143 L. Ed. 2d 448 (1999), the Supreme Court held that "the removal period could only be triggered by formal service of process," but did not address "whether a pleading other than a complaint can constitute the initial pleading under section 1446(b))." ***

The Court sees no reason why a summons with notice, which may be an initial pleading under Whitaker, should be treated differently than a complaint for the purpose of analyzing removal based on a fraudulent joinder claim. In Moran v. Continental Casualty Co., No. 01-CV-1008, 2001 U.S. Dist. LEXIS 18718, 2001 WL 1717214 (N.D.N.Y. Nov. 16, 2001), a case similar to the instant action, the plaintiff filed a summons with notice in New York state court that, on its face, pled non-diverse parties. *** The defendants removed the case to federal court, claiming fraudulent joinder of a non-diverse party.... The court applied the usual fraudulent joinder analysis to the summons with notice, stating that "[w]here . . . a plaintiff challenges removal on the ground that the presence of non-diverse parties defeats federal jurisdiction, a defendant may show that the non-diverse parties have no real connection with the controversy and were 'fraudulently joined' for the sole purpose of destroying diversity." ***

Plaintiffs seek a different result, arguing that Defendants prematurely removed because they relied on facts beyond the Summons and Notice to ascertain the basis for removal. ***[I]f a bare-bones summons with notice fails to provide enough information to allow a defendant applying a "reasonable amount of intelligence [to] ascertain[] removability," but a subsequently filed complaint does provide such information, the defendant may remove within thirty days of service of the complaint, not the Summons with Notice. See Whitaker, 261 F.3d at 206. But, courts apply this rule to decide whether a particular pleading provided sufficient information regarding removability to trigger the thirty-day time limit on removal.***

As Defendants point out, the reasonably ascertainable rule protects defendants from losing their right to remove when the jurisdictional details are omitted or misstated in a pleading. ***

Here, the Summons with Notice sets out the parties, lists Defendants' addresses, and states that Plaintiffs' principal places of business are in Westchester. The Summons with Notice also describes the nature of the action, the events at issue, and the contracts alleged to have been breached. Defendants were therefore able to intelligently ascertain from the face of the pleading the parties, the citizenship of each party, and the nature of the action. No independent investigation was necessary when Defendants were informed of the parties' identities and believed, based on the face of the pleading, that the only non-diverse party was fraudulently joined. Accordingly, Defendants are not barred from asserting removal because the facts regarding diversity are facially evident from the pleading.

[Footnote 5] U.S.E. Prods., Ltd. v. Marvel Entm't, Inc., 314 F. Supp. 2d 213 (S.D.N.Y. 2004), which Plaintiffs rely on heavily, is distinguishable. In U.S.E., the plaintiffs filed a summons with notice asserting breach of contract, without any specification as to what contract was at issue. *** The court stated that the defendant "apparently ha[d] some idea of the nature of th[e] lawsuit because its petition for removal identifies the contract which it believes is" at issue. *** The court then held that the summons with notice was not an initial pleading and that the defendant's removal, based on a fraudulent joinder claim, was premature. *** As Defendants point out, unlike the Summons with Notice here, the summons with notice in U.S.E. did not specify a contract so as to allow the defendants to ascertain the relevant signatories to the contract. Without that information, the defendants in U.S.E. could not have ascertained whether the non-diverse party was fraudulently joined. In contrast, the Summons with Notice in this case clearly identifies the relevant contracts, allowing Defendants to intelligently ascertain the relevant signatories, and to ascertain whether a party might have been fraudulently joined. ***

Here, Defendants have shown by a preponderance of evidence that the amount in controversy requirement is met. Plaintiffs stated in the Summons with Notice that the action is "to enforce three credit default swap contracts made between" the Plaintiffs and the Defendants, which "reference, respectively, three collateralized debt obligations." *** Based upon alleged breaches of those contracts, Plaintiffs seek, inter alia, enforcement of the contracts and "damages in an amount to be determined." *** Despite the lack of a specified damages amount, Defendants were able to intelligently ascertain that the amount in controversy exceeded $ 75,000 when they knew that the contracts identified in the Summons with Notice were worth billions of dollars. *** Indeed, Defendants faced the possibility of losing their ability to remove if a court found that the amount in controversy was ascertainable from the face of the Summons with Notice and Defendants waited more than thirty days from service of the Summons with Notice to remove. ***

Moreover, *** the Court may look to the Proposed Complaint in considering the amount in controversy because Plaintiffs' pleading is inconclusive. [Citations omitted.] The Proposed Complaint states that the three contracts have a collective "face value of $ 4,425 billion." ***

As an initial matter, the Court must decide whether it may only consider the claims asserted in Plaintiffs' Summons with Notice, or whether it may also consider the Proposed Complaint. ***

Courts "generally evaluate a defendant's right to remove a case to federal court at the time the removal notice" was filed. ***

However, "[i]n making [a fraudulent joinder] inquiry, courts can look beyond the pleadings to determine if the pleadings can state a cause of action." *** In fraudulent joinder cases, "[p]ost-removal filings may not be considered, however, when or to the extent that they present new causes of action or theories not raised in the controlling petition filed in state court." ***In other words, documents outside the pleadings may be considered "only to the extent that the factual allegations . . . clarify or amplify the claims actually alleged." ***

Thus, the Court will consider the Proposed Complaint and the other submitted documents only to evaluate the specific contract claims alleged in the Summons with Notice, but the Court notes that the result would be the same even if it did not consider the Proposed Complaint. The Court, however, will not consider any new causes of action not alleged in the Summons with Notice, such as the promissory estoppel or fraud claims.

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