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LEWIS v. WORLD BOXING COUNCIL

February 15, 1996

LENNOX LEWIS, ET ALS., PLAINTIFFS,
v.
WORLD BOXING COUNCIL and WORLD BOXING COUNCIL, INC., DEFENDANTS.



The opinion of the court was delivered by: LIFLAND

 LIFLAND, District Judge

 Presently before the Court are two motions bearing on the propriety of the Court's consideration of the merits of this case. The first is plaintiffs' motion to remand the action to state court for lack of diversity jurisdiction. The other is defendant's motion to dismiss, arguing that the action is barred by the doctrines of comity and judicial estoppel.

 Plaintiffs are Lennox Lewis, a citizen of England and a professional boxer, and his promoters: Panix Productions, a British corporation with its principal place of business in England, and New Jersey Sports Productions, Inc. d/b/a Main Events, a New Jersey corporation with its principal place of business in New Jersey. The Amended Complaint names the World Boxing Council (the "WBC") as the defendant or defendants, as explained below. The WBC sponsors worldwide boxing competitions and names "WBC Champions" and "WBC World Champions."

 The original complaint in this action was filed in New Jersey state court naming the WBC, a nonprofit corporation, as the sole defendant. Plaintiffs amended the complaint on November 17, 1995, adding as a defendant the WBC as an unincorporated association. The true organizational status of the WBC is in dispute. Without knowledge of the filing of the amended complaint, defendant removed the action to this Court on the basis of the pleadings in the original complaint, which established diversity jurisdiction.

 Shortly before the New Jersey filing, the British High Court of Justice (Chancery Division) had dismissed a related action by Lewis and others against the WBC and Franklin Roy Bruno, ruling in the alternative that it did not have personal jurisdiction over the WBC and/or that, under the rules of the WBC, the parties were required to mediate the dispute in Dallas, Texas.

 In summary, the Amended Complaint alleges that the World Boxing Council, at its convention held in Seville, Spain in late October and early November 1994, promised that Lennox Lewis would have the first opportunity to fight Oliver McCall for the WBC-declared heavyweight championship, so long as Lewis prevailed at an elimination bout between himself and the then-highest available contender. The complaint further alleges that Lewis was assured that his right to the first title bout would not be compromised even if Mike Tyson were released from prison and attained "number 1 contender" status. Plaintiffs further allege that Lewis did win the elimination bout, and that Mike Tyson was released from prison and did become the number 1 contender.

 Plaintiffs claim that in violation of its promises and rules, the WBC sanctioned the first title bout between McCall and Tyson, with Lewis slated to challenge the winner of that fight. Counsel for plaintiffs has represented that this fight is currently scheduled for the 16th of March, 1996. In their complaint, plaintiffs further allege that they relied to their detriment on the WBC's promise by promoting and participating in the elimination bout between Lewis and Lionel Butler. The complaint seeks declaratory relief that Lewis is entitled to the next WBC Heavyweight Title Bout, injunctive relief preventing the WBC or its agents from sanctioning or furthering a Title Bout in which Lewis is not a participant, specific performance, damages, and punitive damages.

 Discussion

 Plaintiffs argue that the Court should remand the case to state court, where plaintiffs originally filed it, because the WBC is a non-diverse defendant. In particular, plaintiffs argue that although the WBC incorporated in 1991, it has failed to observe corporate formalities, and thus the WBC as an unincorporated association continues to exist despite the formation of a WBC corporate shell. This unincorporated association, plaintiffs argue, has members in New Jersey and in England and therefore is not "diverse" for purposes of jurisdiction. See United Steelworkers of America, AFL-CIO v. R.H. Bouligny, Inc., 382 U.S. 145, 15 L. Ed. 2d 217, 86 S. Ct. 272 (1965); Lovell Mfg. v. Export-Import Bank of the United States, 843 F.2d 725, 729, n. 5 (3d Cir. 1988) (diversity between plaintiffs and defendants must be complete).

 Congress has determined that "if at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. ยง 1447(c). When a non-diverse party has been joined as a defendant, then in the absence of a substantial federal question, the removing defendant may avoid remand "only by demonstrating that the non-diverse party was fraudulently joined." Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 (3d Cir. 1992). The burden of proving that federal jurisdiction exists rests with the defendant, the party urging jurisdiction upon the Court. See Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990), cert. denied, 498 U.S. 1085, 112 L. Ed. 2d 1046, 111 S. Ct. 959 (1991). Furthermore, the removal statutes "are to be strictly construed against removal and all doubts should be resolved in favor of remand." Boyer, 913 F.2d at 111, citing, Steel Valley Auth. v. Union Switch and Signal Div., 809 F.2d 1006, 1010 (3d Cir. 1987), cert. dismissed, 484 U.S. 1021 (1988). The defendant carries a "heavy burden of persuasion" that the non-diverse party was fraudulently joined. Id., citing, Steel Valley, 809 F.2d at 1012, n.6.

 In order to prove that plaintiffs' joinder of the WBC as an unincorporated association was fraudulent, defendant must prove that "there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendants or seek a joint judgment." Batoff, 977 F.2d at 851; Boyer, 913 F.2d at 111. "If there is even a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants, the federal court must find that joinder was proper and remand the case to state court." Batoff, 977 F.2d at 851, Boyer, 913 F.2d at 111.

 The Third Circuit has directed that, in evaluating joinder for alleged fraud, a district court must "focus on the plaintiff's complaint at the time the petition for removal was filed. In so ruling, the district court must assume as true all relevant factual allegations of the complaint." Batoff, 977 F.2d 848 at 851, quoting, Steel Valley, 809 F.2d at 1010 (citations omitted). The Court of Appeals has specifically warned that the standard to be applied is not the standard applicable to a motion to dismiss for failure to state a claim, but rather, is even less searching, amounting to a determination of whether the claims asserted against the non-diverse defendant are "wholly insubstantial and frivolous." See Batoff, 977 F.2d at 852.


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