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Tomei v. Rife & Associates Management Consulting, LLC

United States District Court, D. New Jersey

April 20, 2018

THOMAS R TOMEI, individually and derivatively on behalf of H&H Manufacturing Company, Inc., Plaintiffs,
v.
RIFE & ASSOCIATES MANAGEMENT CONSULTING, LLC, KEVIN RIFE, MOMENTUM ADVISORS SERVICES, LLC, STEPHEN JUDGE, JOSEPH ZAKORCHEMNY, PATRICK STEWART, Defendants.

          LARS J. E. LEDERER OBERMAYER REBMANN MAXWELL & HIPPEL LLP MATTHEW ADAM GREEN On behalf of Plaintiffs

          LAWRENCE M. KELLY MINTZER, SAROWITZ, ZERIS, LEDVA & MEYERS JOSEPH B. SILVERSTEIN GREEN, SILVERSTEIN & GROFF, LLC On behalf of Defendants

          OPINION

          NOEL L. HILLMAN, U.S.D.J.

         On August 29, 2017, Defendants removed Plaintiff's case from New Jersey Superior Court to this Court, [1] and the purported basis for subject matter jurisdiction in Defendants' notice of removal was based on the diversity of citizenship of the parties and an amount in controversy in excess of $75, 000, exclusive of interests and costs, pursuant to 28 U.S.C. § 1332(a). On September 7, 2017, the Court issued an Order to Show Cause (Docket No. 4), which screened Defendants' notice of removal to determine whether subject matter jurisdiction had been properly averred.

         The complaint provided that Plaintiff, Thomas R. Tomei, who is a citizen of New Jersey, was asserting claims on his own behalf, and derivatively on behalf of H&H Manufacturing Company, Inc. (“H&H”), which “is a corporation incorporated under the laws of the Commonwealth of Pennsylvania with a principal business address of 2 Horne Drive, Folcroft Industrial Park, Folcroft, PA 19032, ” and of which Tomei holds 95% of the issued capital stock. Defendants' notice of removal did not, however, aver whether the citizenship of H&H should be considered in the jurisdictional analysis. That factor was important because H&H's citizenship is Pennsylvania[2] and all Defendants are citizens of Pennsylvania.

         In response to the Court's Order to Show Cause, Defendants filed an amended notice of removal (Docket No. 6), which cured the deficiencies in pleading the citizenship of the two limited liability company Defendants.[3] The notice also argued that the Court should not consider H&H's citizenship in determining subject matter jurisdiction. Around the same time, Defendants filed a motion to dismiss Plaintiff's complaint for lack of personal jurisdiction. (Docket No. 5.) Soon thereafter, Plaintiff filed a motion to remand, arguing that H&H's citizenship should be considered, and the Court therefore lacks subject matter jurisdiction over the matter. (Docket No. 8.) Plaintiff also sought attorney's fees and costs relative to the improvident removal of his case. Those motions are still pending.[4]

         On January 26, 2018, Plaintiff filed a motion for leave to amend his complaint. (Docket No. 21.) In his motion, Plaintiff related that he originally brought his action individually and derivatively on behalf of H&H because the dispute over the ownership of H&H was ongoing. On November 30, 2017, a Pennsylvania state court ruled in Plaintiff's favor by ending the receivership of H&H and placing H&H in Plaintiff's hands, and as a result, he no longer needed to act derivatively on H&H's behalf. Defendants, without waving any rights to substantively contest the amended complaint, did not object to its filing. (Docket No. 24.) The Magistrate Judge granted Plaintiff's motion to file an amended complaint on February 20, 2018. (Docket No. 25.)

         On February 28, 2018, Plaintiff filed an amended complaint, which names H&H as a stand-alone plaintiff, rather than a plaintiff derivatively. (Docket No. 28.) On March 19, 2018, the parties filed a “stipulation to remand and to extend time to file a response to complaint, ” which states “the above-captioned matter will be remanded to the New Jersey Superior Court, Camden County, ” and also includes agreements as to fees and costs and jurisdictional discovery.[5] (Docket No. 29.)

         The filing of Plaintiff's amended complaint does not defeat subject matter jurisdiction if such jurisdiction existed at the time Defendants removed Plaintiff's original complaint. It has been long and well-established that in determining whether a federal court may exercise jurisdiction based upon diversity of citizenship, the court must look to “the state of things at the time of the action brought.” Mollan v. Torrance, 22 U.S. 537, 539 (1824), quoted in Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 570 (2004); see also St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 294-95 (1938) (“It uniformly has been held that in a suit properly begun in the federal court the change of citizenship of a party does not oust the jurisdiction. The same rule governs a suit originally brought in a state court and removed to a federal court.”).

         In Grupo, the Supreme Court drove home the point:

This time-of-filing rule is hornbook law (quite literally) taught to first-year law students in any basic course on federal civil procedure. It measures all challenges to subject-matter jurisdiction premised upon diversity of citizenship against the state of facts that existed at the time of filing - whether the challenge be brought shortly after filing, after the trial, or even for the first time on appeal.

Grupo, 541 U.S. at 570-71.

         Thus, the Court must determine not whether diversity of citizenship exists by way of Plaintiff's amended complaint, but rather at the time Defendants removed Plaintiff's original complaint.[6]

         “Diversity jurisdiction cannot be conferred upon the federal courts by the parties' own determination of who are plaintiffs and who defendants. It is [a court's] duty to look beyond the pleadings and arrange the parties according to their sides in the dispute.” Swanson v. Traer, 354 U.S. 91, 99-100 (1957) (quotations and citations omitted). It is the “‘general rule' [] that the corporation in a derivative suit should be aligned as a plaintiff because the action is brought for the benefit of the corporation and any judgment favorable to the plaintiff shareholder will inure to the benefit of the corporation.” Ono v. Itoyama, 884 F.Supp. 892, 900 (D.N.J. 1995). Because, however, a “real collision in interests” is required, “the final alignment of the parties ...


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