Council of unit of Fireside Condominium v. The Bank of New York Mellon
Filing
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MEMORANDUM OPINION. Signed by Judge Alexander Williams, Jr on 05/29/2013. (bas, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
SOUTHERN DIVISION
COUNCIL OF UNIT OWNERS OF
FIRESIDE CONDOMINIUM,
Plaintiff,
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v.
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Case No. 13-cv-0420-AW
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THE BANK OF NEW YORK MELLON,
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Defendant.
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MEMORANDUM OPINION
Plaintiff Council of Unit Owners of Fireside Condominium (Fireside) filed suit against
Defendant The Bank of New York Mellon (BONY) amid a dispute over a Deed of Trust BONY
holds on a piece of property owned by Fireside. Pending before the Court are Plaintiff’s Motion
to Remand, Defendant’s Motion for Leave to Amend Notice of Removal, Defendant’s Motion
for Leave to File a Surreply, and Defendant’s Motion for Expedited Jurisdictional Discovery.
Doc. Nos. 8, 11, 13, and 14. The Court has reviewed the parties’ briefs and concludes that no
hearing is necessary. See Loc. R. 105.6 (D. Md. 2011). For the reasons articulated below,
Plaintiff’s Motion to Remand will be GRANTED and Defendant’s Motion for Leave to Amend
Notice of Removal and Motion for Expedited Jurisdictional Discovery will be DENIED. The
remaining motions in the case will be DENIED as moot.
I.
FACTUAL AND PROCEDURAL BACKGROUND
Fireside filed suit against BONY in the Circuit Court for Montgomery County, Maryland
on or about December 21, 2012. Doc. No. 1 at 2. Fireside is an unincorporated association of
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condominium owners, each of whom owns a unit on a property in Montgomery County. Doc.
No. 2 at 2. BONY filed a notice of removal on February 7th, 2013, within the 30-day period for
removal specified by 28 U.S.C. § 1446. Doc. No. 1. In doing so, BONY improperly relied upon
28 U.S.C. § 1332(d)(10) as a basis for diversity jurisdiction. The removal notice stated:
Upon information and belief, Plaintiff is an unincorporated condominium association
located in the State of Maryland and subject to the laws of the State of Maryland. See
generally Compl., Ex. A, ¶ 2. An unincorporated association is considered a citizen of
the State where it has its principal place of business and the State under whose laws it is
organized. 28 U.S.C. § 1332(d)(10). Here, Plaintiff is a citizen of Maryland.
Doc. No. 1 at 4. Section 1332(d)(10) is part of the Class Action Fairness Act, and both parties
agree that it does not apply to the instant dispute. Doc. No. 8-1 at 4; Doc. No. 11-1 at 2. Instead,
the parties agree that the proper standard to determine Fireside’s citizenship is the citizenship of
each of its members, the owners of the individual condominium units. Doc. No. 8-1 at 4; Doc.
No. 11-1 at 2.
Based on this error, Fireside filed a motion to remand on February 28, 2013.1 Doc. No. 8.
On March 14, 2013, after the 30-day period for removal had elapsed, BONY filed a motion for
leave to file an amended removal notice. Doc. No. 11. The relevant portion of the proposed
amended removal notice reads:
Upon information and belief, Plaintiff is an unincorporated condominium association
located in the State of Maryland and subject to the laws of the State of Maryland. See
generally Compl., Ex. A, ¶ 2. An unincorporated association is considered a citizen of the
State of which its members are citizens. Ferrell v. Express Check Advance of SC LLC,
591 F.3d 698, 703 (4th Cir. 2010). Upon information and belief, the members of Plaintiff
are citizens of Maryland, and therefore, Plaintiff is a citizen of Maryland.
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Prior to Fireside’s Motion to Remand, BONY filed a Motion to Dismiss for Failure to State a Claim. Doc. No. 6.
The parties agreed that briefing on the Motion to Dismiss would be completed after the court resolves the Motion to
Remand.
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Doc. No. 11-2 at 4. BONY has not identified the names or citizenships of any individual
members of Fireside. Doc. No. 1. BONY’s removal notice stated multiple times that complete
diversity exists between BONY and Fireside, even though the allegations BONY used to support
that assertion were improper. Doc. No. 1 at 1-2, 4. Additionally, the complaint filed by Fireside
specifies that Fireside is “an unincorporated condominium association located in the State of
Maryland and subject to the laws of the State of Maryland.” Doc. No. 2 at 2. Finally, BONY’s
civil cover sheet marked “diversity” as the basis for jurisdiction and Fireside as a “citizen of this
state.” Doc. No. 1-2.
BONY argues that there is no actual dispute about Fireside’s citizenship, but that does
not appear to be the case: Fireside is comprised of over 200 unit owners, some of whom are
investors and lenders who may not be citizens of Maryland. Doc. No. 12-1 at 4. In an attempt to
make the appropriate determination of Fireside’s citizenship, BONY now files a motion for
expedited jurisdictional discovery. Doc. No. 14.
II.
ANALYSIS
“On a motion to remand, a court must ‘strictly construe the removal statute and resolve
all doubts in favor of remanding the case to state court.’” Receivership of Mann Bracken, LLP v.
Cline, No. RWT 12cv292, 2012 WL 2921355, *2 (D. Md. 2011) (citing Stephens v. Kaiser
Found. Health Plan of the Mid-Atl. States, Inc., 807 F. Supp. 2d 375, 378 (D. Md. 2011)). “The
burden of establishing federal jurisdiction is placed upon the party seeking removal. . . . Because
removal jurisdiction raises significant federalism concerns, we must strictly construe removal
jurisdiction. . . . If federal jurisdiction is doubtful, a remand is necessary.” Mulcahey v. Columbia
Organic Chems. Co., Inc., 29 F.3d 148, 151 (4th Cir. 1994) (citations omitted). While a strict
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construction of the removal statute is required, district courts should be cautious about denying
defendants access to a federal forum because the decision to remand is effectively unreviewable.
Semtek Int’l, Inc. v. Lockheed Martin Corp., 988 F. Supp. 913, 914-15 (D. Md. 1997).
Amendments to a removal notice are permitted by 28 U.S.C. § 1653, which states, in its
entirety: “Defective allegations of jurisdiction may be amended, upon terms, in the trial or
appellate courts.” District courts in the Fourth Circuit have defined the interaction between
§ 1653 and the time limits for removal established in 28 U.S.C. § 1446 in two ways:
For issues of imperfect jurisdictional allegations, there appears to be a “liberal”
and “strict constructionist” view of 28 U.S.C. § 1446(b)'s 30-day limitation
period. The liberal approach generally allows for amendment that perfects a
technically defective jurisdictional allegation after the 30 day removal period. The
strict constructionist approach provides for a strict application of 28 U.S.C. §
1653, allowing amendment after 28 U.S.C. § 1446(b)’s thirty-day statutory period
for removal has elapsed only for the purpose of setting forth more specifically
grounds for removal which had been imperfectly stated in the original petition;
missing allegations may not be supplied nor new allegations furnished.
Mann Bracken, 2012 WL 2921355, at *6 (citations omitted) (internal quotations omitted). In
Mann Bracken, Judge Titus set forth a number of reasons why “strict construction” is the more
appropriate of the two views:
[T]he factors that support a strict application of the 30 day removal period
include: “(1) preventing federal court infringement upon the rightful
independence and sovereignty of state courts,” “(2) ensuring that judgments
obtained in a federal forum are not vacated on appeal due to improvident
removal,” “(3) reducing uncertainty as to the court’s jurisdiction in the marginal
cases, which a more liberal construction of the removal statute would promote,”
“(4) allowing amendment of the notice of removal under § 1653 after the thirty
day time limit for removal specified in § 1446(b) would “substantially eviscerate”
the specific time provision enacted by Congress,” and “(5) conceding that the
traditional justification for diversity jurisdiction—state court hostility toward
nonresident defendants—has been significantly reduced since the time diversity
jurisdiction was created.”
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Id. (quoting Barnhill v. Ins. Co. of N. Am., 130 F.R.D. 46, 50-51 (D.S.C. 1990)).
BONY argues that the strict approach taken in Mann Bracken should be viewed in light
of Mann Bracken’s factual circumstances. It maintains that the court only used a strict
construction approach given that six months had elapsed since removal. In doing so, BONY
relies on a single sentence from Mann Bracken,2 ignoring the court’s overarching policy
rationale. In addition, basing the standard used in remand determinations on time elapsed
between the removal notice and the motion to amend that removal notice creates a perverse
incentive for plaintiffs to wait an exceedingly long period of time without filing a motion to
remand. Since few defendants would choose to amend their removal notice unless there is a
motion to remand pending before the court, Plaintiffs could choose to wait for months before
filing a motion to remand, forcing the Court to use the stricter standard. This inevitably slows
down the litigation process. Hence, that there was a longer time elapsed in Mann Bracken than
there is in the instant action should not be dispositive in determining whether a liberal or strict
construction is used.
BONY further argues that other factors distinguish the present case from Mann Bracken.
Unlike in Mann Bracken, the defendant’s error in this case only pertained to the citizenship of
the plaintiff, not the defendant itself. Additionally, the defendant here has actually filed a motion
to amend its removal notice. There is nothing in Mann Bracken to suggest that either of these
factors were relevant in the court’s application of a strict constructionist standard. Mann
Bracken, 2012 WL 2921355, at *6. Hence, as Judge Titus did in Mann Bracken, the Court will
apply such a standard to grant the Plaintiff’s motion to remand.
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“Policy reasons favor adopting the strict constructionist approach in this context, especially in light of the six
months that have elapsed since the Defendants filed their Notice of Removal without seeking leave to amend.”
Mann Bracken, 2012 WL 2921355, at *6.
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Contrary to Defendant’s arguments, that BONY is unclear about the citizenship of
Fireside’s members counsels against granting its motion for leave to amend the removal notice.
BONY cites Muhlenbeck v. KI, LLC, 304 F. Supp. 2d 797 (E.D. Va. 2004), in support of the
proposition that courts ought to resolve motions for leave to amend a removal notice in favor of
the defendant when the initial removal notice lists a partnership’s principal place of business
instead of the citizenship of its partners. While the Muhlenbeck court allowed the defendant to
amend its removal notice, it also noted that:
In cases where permitting amendment will result in a factual dispute requiring additional
litigation, it may be sensible not to permit the defendant to amend the removal petition,
because one of the purposes of the thirty-day removal period of 28 U.S.C. § 1446(b) is to
ensure that litigation is not unduly delayed by uncertainty as to subject matter
jurisdiction.
Muhlenbeck, 304 F. Supp. 2d at 801 (citing Iceland Seafood Corp. v. Nat’l Consumer Coop.
Bank, 285 F. Supp. 2d 719, 727 (E.D. Va. 2003)).
Here, permitting amendment would inevitably result in a “factual dispute requiring
additional litigation.” Muhlenbeck, 304 F. Supp. 2d at 801. When a defendant makes an error in
the identification of its own citizenship, as in Muhlenbeck, the defect in the removal notice is
very easily cured as the defendant can usually ascertain the requisite information with ease. Here,
however, litigation has already begun with respect to Defendant’s attempt to ascertain the
citizenship of Plaintiff’s members. Defendant has filed a motion for expedited jurisdictional
discovery, seeking to serve Plaintiff with interrogatories designed solely to reveal Plaintiff’s
citizenship. Doc. No. 14. While BONY maintains that there is no dispute over actual citizenship,
Fireside points out that it is comprised of over 200 unit owners, many of whom live outside of
Maryland. Hence, the present case creates a “factual dispute requiring additional litigation” in a
way the facts in Muhlenbeck did not. Muhlenbeck, 304 F. Supp. 2d at 801.
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Indeed, that there is an actual dispute about the Plaintiff’s citizenship cuts to the core of
the distinction the court made between Johnson v. Nutrex Research Inc., 429 F. Supp. 2d 723 (D.
Md. 2006) and Molnar-Szilasi v. Sears Roebuck & Co., 429 F. Supp. 2d 728 (D. Md. 2006).
These cases were decided by Judge Titus on consecutive days. Both involved a defendant whose
removal notice listed the plaintiff’s place of “residence” rather than their state of citizenship. In
Johnson, the court denied the motion for leave to amend the removal notice, whereas in MolnarSzilasi, the court granted it. In distinguishing the two cases, Judge Titus explained:
In Johnson, the defendants candidly admitted that they were entirely unsure of
and could not establish plaintiff's citizenship. In contrast, here there are no serious
questions regarding Molnar–Szilasi's Maryland citizenship. Her complaint states
that: (1) she resides in Montgomery Village in Montgomery County, Maryland;
(2) her boyfriend purchased a garden tractor/riding lawnmower in Montgomery
County, Maryland over ten years ago; and (3) she was injured while operating the
garden tractor in Montgomery County, Maryland at the residence of her boyfriend
almost four years ago. These allegations leave little doubt that the Plaintiff is a
citizen of Montgomery County, Maryland.
Molnar-Szilasi, 429 F. Supp. 2d at 731. Here, there is a “serious question” regarding Fireside’s
citizenship. Molnar-Szilasi featured a single plaintiff whose citizenship could easily be
extrapolated from documents submitted to the court. Id. The Court can make no such
extrapolation in the present case. That a condominium building is located in Maryland does not
permit the inference that all unit owners are Maryland citizens. Even if all of the unit owners
actually lived on the property, Johnson and Molnar-Szilasi exemplify the accepted proposition
that courts do not equate “residency” and “citizenship.” Johnson, 429 F. Supp. 2d at 725;
Molnar-Szilasi, 429 F. Supp. 2d at 731. BONY needs more than a mere allegation of “complete
diversity” and a declaration of Fireside’s principal place of business to permit the court to grant
its motion for leave to amend based on the “obviousness of the citizenship of the parties on the
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face of the pleadings.” Bd. of Educ. of Charles Cnty., Md. v. Travelers Indem. Co., 486 F. Supp.
129, 130 (D. Md. 1980).
The present case is similar to Johnson, where the defendants freely admitted that “at this
stage of the litigation, defendants are unable to prove plaintiff's ‘citizenship.’” Johnson, 429 F.
Supp. 2d at 726. Here, BONY has filed a motion seeking expedited jurisdictional discovery. In
doing so, Defendant explained that “BONY agrees that the citizenship of Plaintiff is based on the
citizenship of the members that make up the Plaintiff—information that is not publicly available
or information that Plaintiff has not transmitted to BONY.” Doc. No. 14 ¶ 6. Hence, Defendant
in the instant action, much like the defendants in Johnson, is unable to assert any proof of its
claim of complete diversity. This requires remand.
In an attempt to gather the requisite knowledge of Fireside’s citizenship, BONY now,
more than two months after removal, moves for expedited jurisdictional discovery. Although
BONY claims it had no other way to access the relevant citizenship information, granting its
motion for discovery would be misguided. “To remove a civil action brought in state court, a
defendant or defendants must file in the district court a notice of removal signed pursuant to Rule
11 of the Federal Rules of Civil Procedure and containing a short and plain statement of the
grounds for removal.” Johnson, 429 F. Supp. 2d at 726 (internal quotations omitted). The
Eleventh Circuit has expounded further upon the interaction between Rule 11 and removal
jurisdiction, in a case where the removing party’s allegations regarding the amount in
controversy were defective because they lacked factual support:
Just as a plaintiff bringing an original action is bound to assert jurisdictional bases
under Rule 8(a), a removing defendant must also allege the factual bases for
federal jurisdiction in its notice of removal under § 1446(a). Though the
defendant in a diversity case, unlike the plaintiff, may have no actual knowledge
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of the value of the claims, the defendant is not excused from the duty to show by
fact, and not mere conclusory allegation, that federal jurisdiction exists. Indeed,
the defendant, by removing the action, has represented to the court that the case
belongs before it. Having made this representation, the defendant is no less
subject to Rule 11 than a plaintiff who files a claim originally. Thus, a defendant
that files a notice of removal prior to receiving clear evidence that the action
satisfies the jurisdictional requirements, and then later faces a motion to remand,
is in the same position as a plaintiff in an original action facing a motion to
dismiss.
Lowery v. Ala. Power Co., 483 F.3d 1184, 1217 (11th Cir. 2007) (footnotes omitted). To deny
Fireside’s remand motion is to invite removal even when there is a dearth of evidence that a
federal court would have subject matter jurisdiction. The Lowery court portends that such a
ruling would create “fishing expeditions,” where defendants remove without proof of
jurisdiction, and then seek jurisdictional discovery in an attempt to ascertain such proof. Id. That
is precisely what is happening in the instant action. The defendant removed lacking the requisite
proof of jurisdiction, and then, more than two months after removal, moved for expedited
jurisdictional discovery. Remand is the necessary course if the court is to avoid “encouraging
defendants to remove, at best, prematurely, and at worst, in cases in which they will never be
able to establish jurisdiction.” Lowery, 483 F.3d at 1217. Indeed, this is precisely the danger the
Muhlenbeck court warned of in declaring that courts must be wary of granting leave to amend a
removal notice when the amendment would cause the litigation to be “unduly delayed by
uncertainty as to subject matter jurisdiction.” Muhlenbeck, 304 F. Supp. 2d at 801.
As in Lowery, “the defendants here asked that the district court reserve ruling on the
motion to remand so that they could conduct discovery to obtain information from the plaintiffs
that would establish that the court has jurisdiction.” Lowery, 483 F.3d at 1217. The court
declines to do so, for “[t]he defendant[‘s] request for discovery is tantamount to an admission
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that the defendant[] do[es] not have a factual basis for believing that jurisdiction exists. The
natural consequence of such an admission is remand to state court.” Id. at 1217-18.
III.
CONCLUSION
For the foregoing reasons, Plaintiff’s Motion for Remand will be GRANTED,
Defendant’s Motion for Leave to Amend the Notice of Removal will be DENIED, and
Defendant’s Motion for Expedited Jurisdictional Discovery will be DENIED. The remaining
motions will be DENIED as moot. A separate Order will follow.
___May 29, 2013__
Date
/s/
Alexander Williams, Jr.
United States District Judge
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