TOMEI v. RIFE & ASSOCIATES MANAGEMENT CONSULTING, LLC et al
Filing
30
OPINION. Signed by Judge Noel L. Hillman on 4/20/2018. (rtm, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
THOMAS R TOMEI,
individually and derivatively
on behalf of H&H
Manufacturing Company, Inc.,
1:17-cv-06490-NLH-KMW
OPINION
Plaintiffs,
v.
RIFE & ASSOCIATES MANAGEMENT
CONSULTING, LLC, KEVIN RIFE,
MOMENTUM ADVISORS SERVICES,
LLC, STEPHEN JUDGE, JOSEPH
ZAKORCHEMNY, PATRICK STEWART,
Defendants.
APPEARANCES:
LARS J. E. LEDERER
OBERMAYER REBMANN MAXWELL & HIPPEL LLP
CENTRE SQUARE WEST - SUITE 3400
1500 MARKET STREET
PHILADELPHIA, PA 19102
MATTHEW ADAM GREEN
OBERMAYER REBMANN MAXWELL & HIPPELL LLP
200 LAKE DRIVE EAST - SUITE 110
CHERRY HILL, NJ 08002
On behalf of Plaintiffs
LAWRENCE M. KELLY
MINTZER, SAROWITZ, ZERIS, LEDVA & MEYERS
2070 SPRINGDALE ROAD - SUITE 400
CHERRY HILL, NJ 08003
JOSEPH B. SILVERSTEIN
GREEN, SILVERSTEIN & GROFF, LLC
215 SOUTH BROAD STREET - SUITE 500
PHILADELPHIA, PA 19107
On behalf of Defendants
HILLMAN, District Judge
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,
1
The removal statute provides, “A civil action otherwise
removable solely on the basis of the jurisdiction under section
1332(a) of this title may not be removed if any of the parties
in interest properly joined and served as defendants is a
citizen of the State in which such action is brought.” 28
U.S.C. § 1441(b)(2). The removal statutes “are to be strictly
construed against removal and all doubts should be resolved in
favor of remand,” and “a party who urges jurisdiction on a
federal court bears the burden of proving that jurisdiction
exists.” Boyer v. Snap-on Tools Corp., 913 F.2d 108, 111 (3d
Cir. 1990) (citation omitted).
2
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
2
The citizenship of a corporation is its state of incorporation
and its principal place of business. See 28 U.S.C. § 1332(c)(1)
(“a corporation shall be deemed to be a citizen of every State
and foreign state by which it has been incorporated and of the
State or foreign state where it has its principal place of
business . . . .”); S. Freedman & Co., Inc. v. Raab, 180 F.
App’x 316, 320 (3d Cir. 2006) (explaining that “[i]n order to
adequately establish diversity jurisdiction, a complaint must
set forth with specificity a corporate party’s state of
incorporation and its principal place of business,” and
affirming dismissal of complaint alleging that corporation
maintained “a principal place of business,” rather than “its
principal place of business”). Even though the complaint states
“a” principal place of business instead of “its” principal place
of business, the parties do not dispute that H&H has its
principal place of business in Pennsylvania.
3
The citizenship of an LLC is determined by the citizenship of
each of its members, not where it has a principal place of
business, or under which state’s law it is established. See
Zambelli Fireworks Mfg. Co., Inc. v. Wood, 592 F.3d 412, 418 (3d
Cir. 2010).
3
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,
4
Neither side filed oppositions to the motion to dismiss or the
motion to remand.
4
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.”).
5
The Court understands that Defendants’ agreement to remand the
matter is based on the averments in Plaintiff’s amended
complaint, and their recognition that diversity jurisdiction is
lacking based on the face of the amended complaint.
5
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
6
A federal court has jurisdiction to consider its own
jurisdiction. Employers Ins. of Wausau v. Crown Cork & Seal
Co., Inc., 905 F.2d 42, 45 (3d Cir. 1990).
6
corporation.”
1995).
Ono v. Itoyama, 884 F. Supp. 892, 900 (D.N.J.
Because, however, a “real collision in interests” is
required, “the final alignment of the parties should reflect the
actual antagonisms between the plaintiffs, the corporation, and
the directors.”
Id. (quoting Smith v. Sperling, 354 U.S. 91, 97
(1957), Liddy v. Urbanek, 707 F.2d 1222, 1224 (11th Cir. 1983)).
“[I]f the complaint in a derivative action alleges that the
controlling shareholders or dominant officials of the
corporation are guilty of fraud or malfeasance, then antagonism
is clearly evident and the corporation remains a defendant.”
Liddy, 707 F.2d at 1224 (citing Swanson, 354 U.S. 114).
“On the
other hand, if the individual plaintiff is the majority
stockholder or a controlling officer, then the corporation
cannot be deemed antagonistic to the suit and it should be
realigned as a plaintiff.”
Id. (citation omitted).
Here, it is clear that Plaintiff’s complaint asserts
allegations by the majority shareholder for the benefit of,
rather than antagonistic to, the corporation.
Plaintiff Tomei
claims that he is the 95% shareholder in H&H, and alleges that
Defendant Rife & Associates, the receiver for H&H appointed by a
Pennsylvania judge, 7 improperly delegated its duties to Defendant
7
Plaintiff’s complaint relates that he and H&H instituted suit
against the 5% shareholder, Vincent Tomei, and requested the
appointment of a receiver, because he was concerned about
Vincent Tomei’s erratic actions taken regarding H&H’s finances.
7
Momentum Advisors Services, LLC, which was comprised of the
individual Defendants who were employees of Rife & Associates,
and those Defendants committed various violations, including
improperly and fraudulently funneling money to themselves
directly from H&H.
Plaintiff Tomei and H&H have independent
grounds for their claims, and H&H specifically asserts at least
one cause of action on its own behalf separate from Plaintiff
Tomei for unjust enrichment.
Additionally, New Jersey and
Pennsylvania law requires that in order for a shareholder to
bring a lawsuit in the name of a company derivatively, the
shareholder must first make demand upon the company to bring the
lawsuit, and the complaint relates that Plaintiff Tomei made
demand upon the receiver and Vincent Tomei, who owns the
remaining 5% in H&H, to bring suit against Defendants, and that
both refused.
(Docket No. 1-1 at 12.)
Thus, accepting Plaintiff’s allegations as true, H&H is
properly aligned as a plaintiff because the action is brought
for the benefit of H&H, and any judgment favorable to Plaintiff
Tomei will inure to the benefit of H&H.
Accordingly, the
citizenship of H&H must be considered at the time Defendants
removed the action.
It is undisputed that H&H is a citizen of
Pennsylvania, and was a citizen of Pennsylvania at the time of
(Docket No. 1-1 at 5.)
case.
Vincent Tomei is not a defendant in this
8
removal.
It is undisputed that at least one, and in fact most,
Defendants are also citizens of Pennsylvania.
In sum, the Court declines to sign the stipulation signed
by the parties which the Court understands to be predicated upon
the amended complaint and events subsequent to the Removal
Petition.
The stipulation appears to presume that the Court has
jurisdiction to consider the amended complaint and thereby
exercise jurisdiction after removal.
that the opposite is true.
The Court is of the view
It appears to this Court that the
originally asserted basis for removal was legally insufficient
at the time the Petition for Removal was filed in that H&H
should have been aligned as a plaintiff defeating diversity
jurisdiction.
This Court never had jurisdiction and cannot
exercise it now.
Consequently, the Court will issue an Order to
Show Cause as to why the matter should not be remanded for lack
of subject matter jurisdiction because diversity of citizenship
was lacking when Defendants removed the case to this Court.
28 U.S.C. § 1447(c) (“If at any time before final judgment it
See
appears that the district court lacks subject matter
jurisdiction, the case shall be remanded.”).
An appropriate Order will be entered.
Date:
April 20, 2018
At Camden, New Jersey
s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.
9
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?