Commercial Litigation and Arbitration

Defendant Real-Party-in-Interest May Remove without Filing Appearance in State Court — “The Defendant” in 28 U.S.C. § 1441 = Defendant Real-Party-in-Interest

La Russo v. St. George’s Univ. Sch. of Med., 747 F.3d 90 (2d Cir. 2014) (Question:  Is the following analysis consistent with the holding of Lincoln Property Co. v. Roche, 546 U.S. 81 (2005)?):

This appeal primarily concerns a narrow issue of federal procedural law and an equally narrow issue of New York procedural law. The federal law issue is whether a real party defendant in interest that owns and operates a non-juridical entity that was improperly sued in state court may remove a diversity case to federal court without filing an appearance in the state court prior to attempting removal. The state law issue is whether New York's rule tolling a limitations period because of a plaintiff's insanity, N.Y. C.P.L.R. § 208 (McKinney  [**2] 2013), applies to the facts of this case. These issues arise on an appeal by Plaintiff-Appellant Dr. Maria La Russo, as attorney in fact for her son, A. Matthew De Lucia, from the March 28, 2013, judgment of the United States District Court for the Southern District of New York (Edgardo Ramos, District Judge). The judgment, entered after the District Court denied La Russo's challenge to removal, granted a motion by Defendant-Appellee St. George's University, Ltd. ("SGU Ltd.") to dismiss because La Russo's complaint was time-barred. See La Russo v. St. George's University School of Medicine, 936 F. Supp. 2d 288 (S.D.N.Y. 2013) ("Dist. Ct. Op."). The complaint asserted medical malpractice, breach of contract, and negligence claims based on alleged failures by St. George's University School of Medicine ("SGU Med." or "the School") to appropriately treat De Lucia's mental illness.

We conclude that the case was properly removed and that the complaint was properly  [*93]  dismissed as time-barred. We therefore affirm.


La Russo's lawsuit was filed on November 15, 2011. The notice and summons named "St. George's University School of Medicine" as the sole  [**8] defendant and was amended to add ten "Doe" defendants. La Russo served a copy of the summons and notice on the New York Secretary of State, mailed a copy by certified mail to SGU Med. in Grenada, and also served the summons and notice on St. George's University, LLC, but not SGU Ltd.

On March 7, 2012, La Russo sought an Order to Show Cause seeking permission to file a supplemental summons adding SGU Ltd., SGU LLC, USS LLC, and Stanley as defendants, and seeking a ruling that the claims against the additional defendants related back to the time the initial summons was filed. The Order to Show cause was issued on March 12, 2012. On April 19, 2012, one day before the Order to Show Cause was returnable, SGU Ltd., asserting that it was the entity that owns and operates the non-juridical named  [*95]  defendant in the caption, filed a notice of removal to the District Court.

La Russo moved to dismiss for lack of subject matter jurisdiction, arguing that because SGU Ltd. had never formally intervened in the action or been joined as a defendant, removal was improper. The District Court denied the motion to dismiss and granted the Defendants' motion to dismiss under Rule 12(b)(6) because the medical  [**9] malpractice claim was time-barred and the contract and negligence claims were duplicative of the malpractice claim.


I. Removal

La Russo first contends that SGU Ltd. had no authority to remove this case to the District Court. She argues that if SGU Ltd. believed that SGU Med. lacked capacity to be sued, it should have moved to dismiss the case in state court. La Russo further contends that under New York General Associations Law § 13, she may sue SGU Med. as an unincorporated association. SGU Ltd. replies that "where, as here, a legally non-existent entity is named as a defendant, the only logical 'defendant' vested with authority to remove is the real defendant in interest, which here is SGU Ltd."

Initially we note that La Russo's attempt to sue SGU Med. was ineffective. Rule 17(b) of the Federal Rules of Civil Procedure provides, with an exception not relevant to this case, that state law governs whether a party has the capacity to be sued. Fed. R. Civ. P. 17(b) ("Capacity to sue or be sued is determined as follows: . . . (3) for all other parties [other than an individual or corporation], by the law of the state where the court is located . . . ."). Under New York law, an  [**10] action against an unincorporated association can be brought only "against the president or treasurer." N.Y. Gen. Ass'ns Law § 13 (McKinney 2013). See, e.g., Fairfield Lease Corp. v. Empire Employees Sunshine Club, 74 Misc. 2d 328, 329, 345 N.Y.S.2d 305, 308 (N.Y. Dist. Ct. 1973) ("The fatal defect in the plaintiff's contention is that this action, if it is to be maintained, must be against the president of the association."); League of Mutual Taxi Owners v. United Const. Workers, Local 35, 90 N.Y.S.2d 288, 288-89 (N.Y. Sup. 1949) ("[Defendant] is described in the complaint as an unincorporated association . . . . As such, it is not considered a legal entity, but section 13 of the General Associations Law provides for the maintenance of actions against the president or treasurer of the association . . . ."). La Russo did not sue either the president or the treasurer of SGU Med. SGU Med. itself was not an entity with capacity to be sued under state law.

We next turn to the issue whether SGU Ltd. was entitled to remove the case to the District Court. SGU Ltd. asserts it was entitled to remove because, as the owner  [*96]  and operator of the non-juridical entity that La Russo attempted to sue, it is the "real defendant in interest." Br. for SGU Ltd. at 17. Although the quoted phrase appears to describe accurately the status of SGU Ltd. in this litigation, we pause to consider it because it does not appear in the Federal Rules of  [**12] Civil Procedure, including Rule 17, or in the removal statute, 28 U.S.C. § 1441.

Rule 17(a), captioned, "Real Party in Interest," provides: "An action must be prosecuted in the name of the real party in interest." Fed. R. Civ. P. 17(a)(1). In terms, the rule appears to apply to the party initiating an action, not a defendant resisting a claim. That is the view of a leading treatise. "By its very nature, Rule 17(a) applies only to those who are asserting a claim and thus is of most importance with regard to plaintiffs," 6A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1543 (4th ed. 2007), and flatly declares, "Rule 17(a) is limited to plaintiffs," id. § 1542.

The phrase "real party defendant in interest" appears to have entered federal jurisprudence in 1886 in the syllabus to an opinion ruling that the wife of an executor was the real party defendant in interest whose assets would be diminished by the lawsuit. See Witters v. Sowles, 28 F. 121 (C.C. Vt. 1886). The phrase has been used mostly by district courts, occasionally by courts of appeals, and once by the Supreme Court, see Lumbermen's Mutual Casualty Co. v. Elbert, 348 U.S. 48, 51, 75 S. Ct. 151, 99 L. Ed. 59 (1954).

The first decision  [**13] to use the phrase in the context of a challenged removal is the opinion of District Judge Charles S. Haight, Jr. in M.E. Aslett Corp. v. Crosfield Electronics, Inc., No. 86 CIV. 3549, 1987 U.S. Dist. LEXIS 1088, 1987 WL 7023 (S.D.N.Y. Feb. 11, 1987). Crosfield Electronics (U.S.A.) Ltd. removed to the district court a case filed in a state court against an entity identified as "Crosfield Electronics, Inc." The plaintiff sought a remand to the state court on the ground that removal could be achieved only by the party named as a defendant in the complaint, i.e., Crosfield Electronics, Inc. Affidavits established that "Crosfield Electronics, Inc." was a trade name of Crosfield Electronics (U.S.A.) Ltd. and had no legal existence or the capacity to be sued.

Acknowledging that 28 U.S.C. § 1441(a) permits "the defendant" to remove a case over which a district court has jurisdiction, Judge Haight declined to read "the defendant" as the entity named as a defendant in the complaint, and instead read the phrase to mean "the real party defendant in interest." M.E. Aslett, 1987 U.S. Dist. LEXIS 1088, 1987 WL 7023, at *2. As he explained, "Removal cannot be denied to this defendant merely because plaintiff improperly sued its fictitious trade name." Id.  [**14] Removal by the real party defendant in interest was subsequently approved by other district courts. See Hillberry v. Wal-Mart Stores East, L.P., No. Civ.A.3:05CV-63-H, 2005 U.S. Dist. LEXIS 15942, 2005 WL 1862087 (W.D. Ky. Aug. 3, 2005) (named defendant was non-existent entity); Pioneer Exploration, Ltd. v. Kansas Gas Service Co., No. 04-1335, 2004 U.S. Dist. LEXIS 25458, 2004 WL 2931403 (D. Kan. Dec. 17, 2004) (named defendant existed only to license trade name).

The real party defendant in interest is not only entitled to remove, but, if it seeks removal, it must act promptly because the 30-day interval in which it is permitted to do so, see 28 U.S.C. § 1446(b) (2013), begins when it is "on notice that the wrong company defendant has been named." Hillberry, 2005 U.S. Dist. LEXIS 15942, 2005 WL 1862087, at *1; see Ware v. Wyndham Worldwide Inc., Civ. No. 09-6420, 2010 U.S. Dist. LEXIS 60734, 2010 WL 2545168, at *2 (D. N.J. June 18, 2010) (30-day interval started when real defendant accepted  [*97]  service of complaint, although complaint named non-existent entity).

The unstated premise of all of these decisions, with which we fully agree, is that the concept of a "real party defendant in interest" is not only entirely valid, it is an important aspect of removal jurisprudence, despite the absence of the  [**15] phrase from Rule 17 or elsewhere in the Federal Rules of Civil Procedure.

We next consider La Russo's contention that even if SGU Ltd. was entitled to remove, it failed to do so properly because it had not entered an appearance in the state court. La Russo makes this claim obliquely by pointing out that in all of the removal cases discussed above, the removing defendant had filed an appearance in the state court. The argument lacks merit. Nothing in sections 1441 or 1446 requires a removing defendant to have appeared in the state court proceeding prior to removal. Nor is there merit in La Russo's claim that removal was improper because SGU Ltd. was not served. Service of process upon a removing defendant is not a prerequisite to removal. See Delgado v. Shell Oil Co., 231 F.3d 165, 177 (5th Cir. 2000); City of Ann Arbor Employees' Retirement System v. Gecht, No. C-06-7453, 2007 U.S. Dist. LEXIS 21928, 2007 WL 760568, at *9 (N.D. Cal. Mar. 9, 2007).

Next, we consider La Russo's claim that, even if SGU Ltd. properly removed, the District Court lacked diversity jurisdiction. Contrary to her claim, diversity jurisdiction was not destroyed by the listing of SGU Med., alleged to be a New York resident, as a named defendant.  [**16] As a non-juridical entity that cannot be sued, its being named as a purported defendant does not destroy diversity jurisdiction. Furthermore, "[e]ven if a named defendant is [a non-diverse] citizen, however, it is appropriate for a federal court to dismiss such a defendant and retain diversity jurisdiction if the complaint shows there is no possibility that the plaintiff can establish any cause of action against that defendant." Tillman v. R.J. Reynolds Tobacco, 253 F.3d 1302, 1305 (11th Cir. 2001). Nor is there merit in La Russo's claim that diversity jurisdiction is lacking because SGU Ltd. is owned by St. George's University, LLC, a Delaware corporation that Plaintiff alleged has a "business presence" in New York. Diversity jurisdiction depends on the citizenship of a corporate defendant with capacity to be sued, see 28 U.S.C. § 1332(c)(1), not the citizenship of the corporate defendant's corporate owner.

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