Mave Hotel Investors LLC v. Certain Underwriters at Lloyds London et al
Filing
192
OPINION AND ORDER: For the reasons stated above, the Court GRANTS Plaintiff MAve Hotel Investors LLC d/b/a The MAve Hotel leave to amend the Complaint, dropping the Non-Diverse Syndicates comprising Defendant Certain Underwriters at Lloyd's, L ondon and adding a claim seeking a declaratory judgement against U.S. Bank Trust Company, National Association (as Successor-In-Interest to U.S. Bank National Association), as Trustee, for the Benefit of the Holders of COMM 2013-CCRE12 Mortgage Tr ust Commercial Mortgage Pass-Through Certificates. The Court also GRANTS Plaintiff-Intervenor leave to amend its Complaint in Intervention to drop the Non-Diverse Syndicates and add MAve as a defendant. Plaintiffs Amended Complaint and Plaintiff-In tervenor's Amended Complaint in Intervention are due by June 14, 2024. The parties are ORDERED to submit a joint letter to the Court, by no later than June 14, 2024, providing a list of available dates for trial in August and September of 2024. SO ORDERED. ( Amended Pleadings due by 6/14/2024.) (Signed by Judge Jessica G. L. Clarke on 6/3/2024) (tg)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
MAVE HOTEL INVESTORS LLC d/b/a THE
MAVE HOTEL,
Plaintiff,
-andU.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION (AS SUCCESSOR-ININTEREST TO U.S. BANK NATIONAL
ASSOCIATION), AS TRUSTEE, FOR THE
BENEFIT OF THE HOLDERS OF COMM
2013-CCRE12 MORTGAGE TRUST
COMMERCIAL MORTGAGE PASSTHROUGH CERTIFICATES, by and through
its special servicer, LNR PARTNERS, LLC,
21-CV-8743 (JGLC)
OPINION AND ORDER
Plaintiff-Intervenor,
-againstCERTAIN UNDERWRITERS AT LLOYD’S,
LONDON, and HDI GLOBAL SPECIALTY
SE, individually and severally subscribed to
Commercial Property Insurance Policy No.
DCESP01372-02,
Defendants.
JESSICA G. L. CLARKE, United States District Judge:
Plaintiff MAve Hotel Investors LLC d/b/a The MAve Hotel (“MAve”) commenced this
action on October 26, 2021, asserting subject matter jurisdiction based on diversity of
citizenship. Earlier this year, near the eve of trial, Plaintiff discovered that the parties are not
completely diverse. Per the Court’s instruction, see ECF No. 182, the parties submitted briefs
addressing the Court’s ability to cure defective diversity jurisdiction at this stage in the litigation.
For the reasons explained below, the Court grants Plaintiff and Plaintiff-Intervenor leave to file
Amended Complaints dismissing the non-diverse, dispensable parties from this action, thus
preserving the Court’s diversity jurisdiction.
BACKGROUND
The Court assumes familiarity with the facts of this case and repeats only the relevant
facts here. Plaintiff seeks coverage for damage to a hotel it owns pursuant a commercial property
insurance policy (the “Policy”) issued by Defendants Certain Underwriters at Lloyd’s, London
(“Underwriters”) and HDI Global Specialty (“HDI”) (collectively, “Defendants”). ECF No. 8 ¶
1. The Policy contains a “Service of Suit Clause,” which states that “in any suit instituted against
any one of [the syndicates comprising Underwriters] upon this contract, Underwriters will abide
by the final decision of such Court or of any Appellate Court in the event of an appeal.” ECF No.
130-6 at 81.
During a conference on August 8, 2023, the Court scheduled a trial in this matter to
commence on January 29, 2024. See August 8, 2023 Minute Entry. On January 11, 2024, counsel
for Plaintiff filed a letter alerting the Court that it may lack subject matter jurisdiction over this
case as a review of MAve’s organizational chart indicates complete diversity may be lacking. See
ECF No. 168 at 2. Counsel indicated that the parties were investigating their respective
citizenships. Id. at 1–2. Based on counsel’s representations, the Court adjourned the trial sine die.
ECF No. 178.
On January 22, 2024, Plaintiff’s counsel filed a letter with the Court confirming that
Plaintiff and certain Defendants are not fully diverse. ECF No. 181 at 1. The letter explains that
MAve is “owned by 2 New York corporations whose principal place of business is in New York,
a citizen of New York, a citizen of Texas, Mexican citizens, a Venezuelan citizen, and an
Australian citizen,” and that Underwriters is made up of a group of syndicates, some of which
“have members who are citizens only of England and Wales,” and others of which have members
“who are U.S. citizens who are not diverse with MAve and numerous members whose
citizenship has not yet been determined” (collectively, the “Non-Diverse Syndicates”). Id. The
letter then offers two potential solutions to cure the jurisdictional deficiencies. Under the first
proposal, Plaintiff would amend its Complaint to drop the Non-Diverse Syndicates from
Defendant Underwriters and add a claim seeking a declaratory judgement against U.S. Bank
Trust Company, National Association (as Successor-In-Interest to U.S. Bank National
Association), as Trustee, for the Benefit of the Holders of COMM 2013-CCRE12 Mortgage
Trust Commercial Mortgage Pass-Through Certificates (“USBTC”). Id. at 2. As a result, the
Complaint would have citizens of different states and foreign citizens on both sides of the
dispute. Under the second proposal, USBTC would amend its Complaint in Intervention (ECF
No. 82) to be the sole plaintiff in the case, remove the Non-Diverse Syndicates from
Underwriters, and name MAve as a defendant. ECF No. 183 at 12–13. MAve would then file a
cross-claim against the other Defendants. In that scenario, there would be citizens of different
states on both sides of the dispute and foreign entities on the defendant side of the Complaint in
Intervention. ECF No. 181 at 2.
On January 30, 2024, the Court ordered Plaintiff, and any other party seeking to be heard,
to submit a brief addressing whether the Court has the authority to cure the defective diversity
jurisdiction in this case per Plaintiff’s proposals. ECF No. 182 at 2. MAve, USBTC, and
Defendants filed briefs. See ECF No. 183–85. All parties agree that the Court has the authority to
cure subject matter jurisdiction and that Plaintiff’s proposals would preserve jurisdiction in this
case. USBTC requested that the Court “proceed with both proposals.” ECF No. 185 at 1. None of
the parties objected.
LEGAL STANDARD
The Second Circuit has made clear that “[e]ven if complete diversity – and thus
jurisdiction – is lacking at a case’s inception, rather than dismiss the case as a nullity, the court
may drop any dispensable parties that are obnoxious to its jurisdiction.” Fund Liquidation
Holdings LLC v. Bank of Am. Corp., 991 F.3d 370, 390 (2d Cir. 2021); see also E.R. Squibb &
Sons, Inc. v. Lloyd’s & Companies, 241 F.3d 154, 163 (2d Cir. 2001) (“[O]nce subject matter
jurisdiction is ‘cured’ by an amendment, courts regularly have treated the defect as having been
eliminated from the outset of the action.”); LeBlanc v. Cleveland, 248 F.3d 95, 99 (2d Cir. 2001)
(“Once a party has been dropped under Rule 21, we read the complaint as if he had never been
included.”).
“Federal Rule of Civil Procedure 21 allows a court to drop a nondiverse party at any time
to preserve diversity jurisdiction, provided the nondiverse party is not ‘indispensable’ under Rule
19(b).” CP Sols. PTE, Ltd. v. Gen. Elec. Co., 553 F.3d 156, 159 (2d Cir. 2009) (internal citations
omitted). Courts in the Second Circuit consider four factors in determining whether a party is
indispensable under Rule 19(b):
(1) whether a judgment rendered in a person's absence might prejudice that person
or parties to the action, (2) the extent to which any prejudice could be alleviated,
(3) whether a judgment in the person's absence would be adequate, and (4)
whether the plaintiff would have an adequate remedy if the court dismissed the
suit.
Id. “The Circuit has further held that the district court should take a flexible approach under
Rule 19(b) when deciding whether parties are indispensable . . . .” Tutor Perini Bldg. Corp. v.
New York City Reg’l Ctr., LLC, 525 F. Supp. 3d 482, 497 (S.D.N.Y. 2021) (quoting Universal
Reinsurance Co. v. St. Paul Fire & Marine Ins. Co., 312 F.3d 82, 87 (2d Cir. 2002)) (cleaned up).
DISCUSSION
The Court finds that the Non-Diverse Syndicates are not indispensable parties and thus
may be dropped from this action under Rule 19(b) to preserve jurisdiction. As such, the Court
authorizes MAve and USBTC to proceed with both proposals.
First, the parties agree that there would be little or no prejudice to any party if the action
continues without the Non-Diverse Syndicates. See ECF No. 183 at 6–7; ECF No. 184 at 2; ECF
No. 185 at 3. Pursuant to the Policy’s Service of Suit Clause, each syndicate is required to abide
by a final decision by this Court against any of the syndicates. ECF No. 130-6 at 81.
Accordingly, Defendants and the Non-Diverse Syndicates will not be prejudiced if the NonDiverse Syndicates are dropped from this action. See E.R. Squibb & Sons, 241 F.3d at 162
(determining that “no prejudice results if we allow the suit” against an underwriter of a Lloyd’s
policy “to be recast” against a different Lloyd’s underwriter because “[a]s a matter of contract,
each of the underwriters of the policy will be bound by an individual judgment against” the
underwriter against whom the suit is recast). As a result, as to the second factor, there is little to
no prejudice to mitigate.
The third factor, whether a judgment in the absence of the Non-Diverse Syndicates would
be adequate, “concerns the social interest in the efficient administration of justice and the
avoidance of multiple litigation.” CP Sols. PTE, Ltd., 553 F.3d at 160 (quoting Republic of
Philippines v. Pimentel, 553 U.S. 851, 870 (2008) (internal quotation marks omitted)). Here, it is
clearly more efficient to allow the parties to finish litigating this case in federal court rather than
“send the parties to state court for a do-over.” Id. This case has been active for over two and a
half years, during which the parties completed discovery, the Court decided summary judgment,
and the parties filed motions in limine in preparation for an impending trial. Accordingly, “[i]t
would make little sense to require [the parties] to start over in state court . . . .” CP Sols. PTE,
Ltd., 553 F.3d at 160.
Regarding the fourth factor, although MAve would have an adequate remedy if this Court
dismissed the suit because it could proceed against the Defendants in state court, “that
consideration is far outweighed by the . . . harm to judicial economy resulting from dismissal.”
Id. at 161. Weighing the four Rule 19(b) factors, the Court finds that the Non-Diverse Syndicates
are not indispensable parties and therefore may be dismissed from this action.
Accordingly, and because all parties consent to MAve’s proposed jurisdictional remedies,
MAve is granted leave to amend its Complaint in accordance with the first proposal and USBTC
is granted leave to amend its Complaint in Intervention in accordance with the second proposal.
See Fed. R. Civ. P. 15(a)(2) (“The court should freely give leave [to amend] when justice so
requires.”).
The Court’s jurisdiction is preserved under both proposals. Regarding the first proposal,
in which Plaintiff amends its Complaint to drop the Non-Diverse Syndicates from Defendant
Underwriters and add a claim seeking a declaratory judgement against USBTC, in the absence of
the Non-Diverse Syndicates, the parties are completely diverse. See Bank of New York v. Bank of
Am., 861 F. Supp. 225, 228 (S.D.N.Y. 1994) (collecting cases) (“[W]here there are citizens and
aliens on both sides of a case, jurisdiction exists under § 1332(a)(3) so long as there is complete
diversity among the citizen parties and the citizen parties are legitimately involved in the
underlying controversy and not present merely to establish federal jurisdiction.”); Tango Music,
LLC v. DeadQuick Music, Inc., 348 F.3d 244, 245 (7th Cir. 2003) (“We have held in previous
cases that the presence of foreigners on both sides of a diversity case does not destroy
diversity.”); Dresser Indus., Inc. v. Underwriters at Lloyd’s of London, 106 F.3d 494, 497–98 (3d
Cir. 1997) (collecting cases) (“Our holding is consistent with the circuits that have squarely
addressed this issue and have uniformally [sic] concluded that jurisdiction exists when diverse
citizens are joined with aliens even if they appear on both sides of the dispute.”).
Under the second proposal, in which USBTC amends its Complaint in Intervention to
remove the Non-Diverse Syndicates from Defendant Underwriters and name MAve as a
defendant, the parties are completely diverse because USBTC is citizen of a different state, both
domestic and foreign, from each party on the Defendants’ side of the dispute. See 28 U.S.C. §
1332(a)(3).
CONCLUSION
For the reasons stated above, the Court GRANTS Plaintiff MAve Hotel Investors LLC
d/b/a The MAve Hotel leave to amend the Complaint, dropping the Non-Diverse Syndicates
comprising Defendant Certain Underwriters at Lloyd’s, London and adding a claim seeking a
declaratory judgement against U.S. Bank Trust Company, National Association (as Successor-InInterest to U.S. Bank National Association), as Trustee, for the Benefit of the Holders of COMM
2013-CCRE12 Mortgage Trust Commercial Mortgage Pass-Through Certificates. The Court also
GRANTS Plaintiff-Intervenor leave to amend its Complaint in Intervention to drop the NonDiverse Syndicates and add MAve as a defendant. Plaintiff’s Amended Complaint and PlaintiffIntervenor’s Amended Complaint in Intervention are due by June 14, 2024.
The parties are ORDERED to submit a joint letter to the Court, by no later than June 14,
2024, providing a list of available dates for trial in August and September of 2024.
Dated: June 3, 2024
New York, New York
SO ORDERED.
JESSICA G. L. CLARKE
United States District Judge
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