Loiacono et al v. Geidel et al
Filing
19
DECISION AND ORDER GRANTING Plaintiffs' 8 Motion to Remand to the extent stated; DENYING Defendants' 14 Motion to Dismiss as moot; DIRECTING the Clerk of the Court to transfer this case to the New York State Supreme Court, County of Erie; DIRECTING the Clerk of the Court to close this case. Signed by William M. Skretny, Chief Judge on 8/11/2014. (MEAL) - CLERK TO FOLLOW UP -
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
JOHN LOIACONO, CONCORD ELECTRIC
CORPORATION, CERDA GROUP CORP., and
715 MAPLE STREET LLC, a/k/a 705 MAPLE
STREET CORP LLC,
DECISION AND ORDER
13-CV-091S
Plaintiffs,
v.
TIMOTHY J. GEIDEL, GEORGETOWN
CAPITAL GROUP, INC., and ROYAL ALLIANCE
ASSOCIATES, INC.,
Defendants.
I. INTRODUCTION
The present action is one for money damages resulting from a fraudulent financial
scheme for which Defendant Timothy Geidel was criminally convicted in April 2012. 1 On
August 29, 2012, Plaintiffs filed a summons with notice in New York State Supreme Court,
Erie County. Defendants Georgetown Capital Group, Inc. (“Georgetown”) and Royal
Alliance Associates (“Royal Alliance”) were served with the summons and notice
approximately four months later. 2 The summons and notice states that the nature of the
action was:
[A] claim for money damages arising from monies received by the
Defendant, Timothy J. Geidel, from the Plaintiffs in exchange for fraudulent
investments / securities / certificates of deposit / promissory notes, during a
time when Defendant, Timothy J. Geidel, was employed by, licensed, or
1
See United States v. Geidel, 11-CR-12S.
There is no indication in this record that Defendant Geidel, who is currently incarcerated, was ever served
in this matter.
2
1
otherwise affiliated with and / or an agent of Defendant Georgetown Capital
Group, Inc. and Royal Alliance Associates, Inc.
(Docket No. 1 at 8.) As a result, the notice alleges that Defendants are liable for “fraud,
unjust enrichment, deceptive business practice, actual authority, apparent authority,
Respondeat Superior, negligence and vicarious liability.” (Id. at 9.)
All three Defendants jointly removed the matter to this Court on January 28, 2013.
(Docket No. 1.) Defendants asserted in their notice of removal that federal question
jurisdiction exists because Plaintiffs’ claims, upon information and belief, would be the
same or similar as those raised in previously filed federal civil actions against the same
Defendants. (Docket No. 1 ¶ 1.) The complaints in those actions alleged violations of the
Securities and Exchange Act of 1934 as well as state law claims of fraud, unjust
enrichment, and conversion. (See Forti v. Geidel et al., No. 10-CV-793A(F), Docket No. 1;
DiRosa v. Geidel et al., No. 11-CV-49S(F), Docket No. 1.) Accordingly, Defendants
argued that Plaintiffs’ claims in the instant action “appear to involve the same federal
securities statutes at issue in the Forti and DiRosa litigation, including whether
Georgetown and Royal Alliance Associates, Inc., are liable as ‘controlling persons’ under
15 U.S.C. § 78t.” (Docket No. 1 ¶ 7.) As a result, jurisdiction was asserted based on both
28 U.S.C. § 1331 (federal question) and § 1337 (action arising under Act of Congress
regulating commerce).
No action was taken by Plaintiffs following removal for six months, prompting this
Court to order Plaintiffs to show cause why the case should not be dismissed. (Docket No.
6.) Plaintiffs’ counsel averred that he believed the matter was being held in abeyance
due to the Court’s automatic referral of this matter to mediation and the pending
2
resolution of certain issues in Forti and DiRosa. (Morse Aff ¶¶ 6-13, Docket No. 7.) The
case was permitted to proceed, and Plaintiffs moved to remand the matter back to state
court. (Docket Nos. 8, 9.) Defendants Georgetown and Royal Alliance each opposed the
motion to remand, and jointly moved to dismiss the case pursuant to Rule 4(m) of the
Federal Rules of Civil Procedure for the failure to timely serve a complaint. (Docket Nos.
13, 14.)
Both motions are now fully briefed, and the Court finds oral argument
unnecessary.
II. DISCUSSION
A.
Defendants’ Motion to Dismiss
Defendants request that the issue of dismissal for lack of service pursuant to Rule
4(m) of the Federal Rules of Civil Service be resolved prior to consideration of Plaintiffs’
motion to remand.
Generally, a court should consider the issue of subject matter
jurisdiction first because, if dismissal is warranted on this ground, any additional defenses
or objections become moot. Rhulen Agency, Inc. v. Alabama Ins. Guar. Ass'n, 896 F.2d
674, 678 (2d Cir. 1990).
As such, this Court declines to address the asserted
insufficiency of service, which even if meritorious would not necessarily warrant
dismissal, prior to determining subject matter jurisdiction. See Fed. R. Civ. P. 4(m)
(following untimely service, a court may either dismiss the complaint without prejudice or
impose a deadline for completion). Further, because this Court finds that remand is
warranted for the reasons discussed below, the motion to dismiss is denied as moot.
3
B.
Plaintiffs’ Motion to Remand
“Where, as here, jurisdiction is asserted by a defendant in a removal petition, it
follows that the defendant has the burden of establishing that removal is proper.” United
Food & Comm. Workers Union v. CenterMark Props. Meriden Square, 30 F.3d 298, 301
(2d Cir. 1994). Removal jurisdiction is strictly construed in light of the limited jurisdiction
of federal courts and out of respect for states' rights, with all doubts resolved against
removal. In re Methyl Tertiary Butyl Ether (“MTBE”) Prods. Liab. Litig., 488 F.3d 112, 124
(2d Cir. 2007).
Defendants assert that this Court has subject matter jurisdiction over the present
action based on the existence of a substantial federal question. Generally, 28 U.S.C. §
1331 3 invests in a district court “original jurisdiction of all civil actions arising under the
Constitution, laws, or treaties of the United States.”
As a result, federal question
jurisdiction is most commonly found where a plaintiff pleads a cause of action created by
federal law. Grable & Sons Metal Products v. Darue Engineering & Mfg., 545 U.S. 308,
312, 125 S. Ct. 2363, 162 L. Ed. 2d 257 (2005). If no such claim is alleged, federal
question jurisdiction may nevertheless still exist: “(1) when Congress expressly so
provides; (2) when a federal statute wholly displaces the state-law cause of action
through complete preemption; and (3) where an element of the plaintiff's state law claim
turns on a substantial federal question and exercising jurisdiction would not disrupt the
balance intended by Congress between state and federal courts.” Citigroup, Inc. v.
3
Although cited in their notice of removal, Defendants do not reference in their opposition to remand 28
U.S.C. § 1337, which recognizes a district court’s jurisdiction over “any civil action or proceeding arising
under any Act of Congress regulating commerce or protecting trade and commerce against restraints and
monopolies.”
4
Wachovia Corp., 613 F. Supp. 2d 485, 490 (S.D.N.Y. 2009) (internal quotation marks and
footnotes omitted); see Grable & Sons Metal Products, 545 U.S. at 312; Beneficial Nat’l
Bank v. Anderson, 539 U.S. 1, 8, 123 S. Ct. 2058, 156 L. Ed. 2d 1 (2003).
“To determine whether the claim arises under federal law, a court examines the
‘well-pleaded’ allegations of the complaint and ignores potential defenses.” Citigroup,
Inc., 613 F. Supp. 2d at 490 (citing Beneficial Nat’l Bank, 539 U.S. at 6). Thus, “the
plaintiff is the master of the claim; he or she may avoid federal jurisdiction by exclusive
reliance on state law.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S. Ct. 2425, 96
L. Ed. 2d 318 (1987).
Further, the appropriateness of removal is evaluated by the pleadings as they
existed at the time the petition for removal was filed. Blockbuster, Inc. v. Galeno, 472
F.3d 53, 57-58 (2d Cir.2006); Vera v. Saks & Co., 335 F.3d 109, 116 n. 2 (2d Cir. 2003).
Here, the only document filed in state court at the time of removal was the summons and
sparsely-worded notice. Despite this, Defendants removed the matter to federal court,
without first making a demand for a complaint pursuant to N.Y. C.P.L.R. § 3012(b), upon
the belief that the asserted claims would ultimately be the same as or similar to those
raised in previously filed federal civil actions against the same Defendants. (Docket No. 1
¶1.) The complaints in those previously filed actions, however, alleged violations of
federal securities law, specifically the Securities and Exchange Act of 1934, in addition to
state law claims identical to those asserted by Plaintiffs in their notice here, such as
common law fraud, unjust enrichment, and the liability of Defendants Georgetown Capital
and Royal Alliance under theories of respondeat superior and actual and apparent
authority. (See Forti v. Geidel et al., No. 10-CV-793A(F), Docket No. 1; DiRosa v. Geidel
5
et al., No. 11-CV-49S(F), Docket No. 1.) Further, there is no dispute that Plaintiffs’ notice
contained no reference to federal law. Accordingly, Defendants cannot be said to have
met their burden of establishing that the pleadings filed at the time of removal support the
assertion of federal question jurisdiction. See Vera, 335 F.3d at 116 n. 2.
Moreover, even if the proposed complaint, which as of this date has still not been
filed or served on Defendants, were appropriately considered, remand would still be
warranted. Defendants argue that “although couched in state law vernacular, Plaintiffs’
claims . . . arise out of their potential liability as ‘control persons’ under §20(a) of the
Securities and Exchange Act of 1934,” and therefore resolution of these claims
“necessarily implicates determinations driven by securities laws.” (Georgetown Mem of
Law in Opp’n at 5, Docket No. 13.)
This argument is undeveloped, inasmuch as
Defendants do not appear to argue that Plaintiffs’ state law claims are preempted by
federal securities law. In any event, such an argument would be without merit here.
See 15 U.S.C. § 78bb(a)(2),(f) (with the exception of certain class actions, the rights and
remedies afforded by the Securities and Exchange Act of 1934 “shall be in addition to any
and all other rights and remedies that may exist at law or in equity”). Similarly, resolution
of Plaintiffs’ claims as alleged will not require consideration of federal securities law with
respect to “control persons” under 15 U.S.C. §78t, as this statute provides a theory of
liability distinct from and in some respects broader than that found under common law.
See generally In re Atlantic Fin. Mgmt., 784 F.2d 29, 30-31 (1st Cir. 1986), cert denied,
481 U.S. 1072 (1987); Marbury Mgmt. v. Kohn, 629 F.2d 705, 716 (2d Cir. 1980), cert
denied, 449 U.S. 1011 (1980).
Finally, unlike D’Alessio v. New York Stock Exchange, on which Defendants rely,
6
here there are no allegations in the proposed complaint that Defendants “conspired to
violate the federal securities laws” or failed to perform a statutory duty created under
federal law raising a substantial question of federal law. 258 F.3d 93, 101-02 (2d Cir.
2001), cert denied, 534 U.S. 1066 (2001). Plaintiffs have therefore purposefully limited
their action to state law claims, and Defendants may not base federal jurisdiction on a
theory that Plaintiffs have not advanced. See Merrell Dow Pharm. Inc. v. Thompson, 478
U.S. 804, 810 n. 6, 106 S. Ct. 3229, 92 L. Ed. 2d 650 (1986).
Plaintiffs’ motion to remand is therefore granted. The request pursuant to 28
U.S.C. § 1447(c) for costs and fees associated with the motion to remand is, however,
denied.
Although Defendants acted prematurely and ultimately without grounds,
Plaintiffs compounded the delay by failing to take any action for over six months and, as of
this date, the complaint still has not been filed or served on Defendants.
III. CONCLUSION
Defendants failed to meet their burden of establishing that federal subject matter
jurisdiction exists in this case. Plaintiffs’ motion to remand is therefore granted with the
exception of their request for related costs and attorneys’ fees, and Defendants’ motion to
dismiss is denied as moot.
IV. ORDERS
IT HEREBY IS ORDERED, that Plaintiffs’ Motion to Remand (Docket No. 8) is
GRANTED to the extent stated above;
FURTHER, that Defendants’ Motion to Dismiss (Docket No. 14) is DENIED as
7
moot;
FURTHER, that the Clerk of the Court is directed to transfer this case to the New
York State Supreme Court, County of Erie;
FURTHER, that the Clerk of Court is directed to take such steps as necessary to
close this case.
SO ORDERED.
Dated:
August 11, 2014
Buffalo, New York
s/William M. Skretny
WILLIAM M. SKRETNY
Chief Judge
United States District Court
8
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?