CAPANNA v. KLINE et al
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE MITCHELL S. GOLDBERG ON 9/27/17. 9/27/17 ENTERED AND COPIES MAILED TO PRO SE AND E-MAILED.(mbh, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
ROBERT M. KLINE, ESQ. and
FRANCIS J. MARTIN,
September 27, 2017
Currently pending in this case is Plaintiff’s Motion to Remand for lack of subject-matter
jurisdiction. As Defendants have failed to set forth any basis on which I can exercise jurisdiction,
I will grant Plaintiff’s Motion and remand the case back to state court.
FACTUAL AND PROCEDURAL BACKGROUND
On November 11, 2016, Plaintiff John Capanna initiated the instant action by way of a
Complaint filed in the Court of Common Pleas of Philadelphia County, Pennsylvania.
Complaint alleged the following facts:
After receipt of a personal injury settlement resulting from a refinery accident, Plaintiff
faced significant financial and psychological demands that caused him to enter into Chapter 11
Bankruptcy in the Bankruptcy Court for the District of New Jersey. (Compl. ¶¶ 7—8.) On
September 9, 1997, Plaintiff filed a Plan of Reorganization with Bankruptcy Court, which
appointed Defendant Francis J. Martin, Plaintiff’s cousin and a licensed Pennsylvania attorney, as
disbursing agent. (Id ¶ 9.) Shortly after the initiation of the Bankruptcy case, Plaintiff opened a
Debtor-in-Possession bank account for which Martin had sole and exclusive signatory authority.
(Id. ¶ 10.) Martin allegedly made numerous money transfers from the Debtor-in-Possession
account to his own account, totaling $527,249.56, without authorization from either Plaintiff or the
Bankruptcy Court. (Id. ¶ 11.)
In October 2003, Plaintiff discovered Martin’s conduct and filed a complaint against him
in the United States Bankruptcy Court alleging misappropriation of funds and improper actions
with respect to his duties. (Id. ¶ 12.) As Martin never answered Plaintiff’s Complaint, the
Bankruptcy Court entered a default judgment against him in the amount of $527,249.56. (Id. ¶13.)
Plaintiff registered the judgment in the Eastern District of Pennsylvania. (Id. ¶ 14.) To avoid the
need for entry of judgment, Plaintiff and Martin entered into a Release and Settlement Agreement
(“RSA”) on December 22, 2009, which provided that Martin was to make initial payments of
$30,000 and $150,000, as well as structured payments of $2,250 on the first of each month. (Id.
¶¶ 15–16.) The RSA further provided that Martin’s failure to make any payments would render
him in default of the agreement and result in the Court’s entry of judgment against him in the full
amount. (Id. ¶ 17.) Finally, the RSA mandated that Martin make a good faith effort to sell his
home and that a failure to do so could render him in default of the agreement. (Id. ¶ 18.)
To date, $125,000 of the judgment against Martin remains outstanding. (Id. ¶ 19.) The
Complaint alleges that, between February 2004 and the present, Martin sold several properties
allowing him to acquire sufficient funds to pay the judgment in full. (Id. ¶ 20.) Nonetheless, he
has not paid the judgment and, on January 28, 2014, Plaintiff commenced action against him in the
Philadelphia Court of Common Pleas seeking a writ of execution for the remaining $125,000. (Id.
¶ 22.) On June 1, 2016, Martin testified at a deposition in aid of execution that he had no assets in
his name to satisfy the judgment. (Id. ¶ 23.) He further testified that, with regard to one of the
sold properties, he provided all funds for the original acquisition of the property and that, when it
was sold, his portion of the proceeds were distributed via wire transfer into the lawyer trust
account of Defendant Robert M. Kline. (Id. ¶ 26.) He explained that he periodically received
transfers from Kline’s lawyer trust account to pay for his living expenses. (Id. ¶ 27.)
Plaintiff commenced an action in the Philadelphia County Court of Common Pleas against
both Kline and Martin, alleging that they colluded to secret monies obtained by Martin through
real estate and business dealings in Kline’s escrow account so as to thwart Plaintiff’s efforts to
collect monies owed to him. (Id. ¶ 28.) The state court complaint set forth a single cause of action
under Pennsylvania’s Uniform Fraudulent Transfer Act (“PUFTA”), 51 Pa.C.S. § 5101, et seq.
Following their receipt of a Notice of Default in the state court action, Defendants moved
to remove the lawsuit to federal court. On February 3, 2017, Plaintiff filed the instant Motion to
Remand the matter back to state court and Defendants responded on February 17, 2017.
STANDARD OF REVIEW
Under 28 U.S.C. § 1441(a), a defendant may remove a civil action filed in a state court if
the federal court would have had original jurisdiction over the action. 28 U.S.C. § 1441(a). A
defendant seeking removal of an action must file a petition for removal with the district court
within thirty days of plaintiff’s service of the complaint upon defendant. See 28 U.S.C. § 1446(b).
The defendants bear the burden of establishing removal jurisdiction and compliance with all
pertinent procedural requirements. Boyer v. Snap–On Tools Corp., 913 F.2d 108, 111 (3d Cir.
1990); Dietz v. Avco Corp., 168 F. Supp. 3d 747 (E.D. Pa. 2016) (“As the party asserting
jurisdiction, the defendants have the burden of showing at all stages of the litigation that the case
is properly before the federal court.”) (quoting Frederico v. Home Depot, 507 F.3d 188, 193 (3d
Once an action is removed, a plaintiff may challenge removal by moving to remand the
case back to state court. 28 U.S.C. § 1447(c); see also Boggs v. Harris, 226 F. Supp. 3d 475, 480–
81 (W.D. Pa. 2016). Remand to the state court is appropriate for “(1) lack of district court subject
matter jurisdiction or (2) a defect in the removal procedure.” PAS v. Travelers Ins. Co., 7 F.3d
349, 352 (3d Cir. 1993). Remand is mandatory and can occur at any time during the litigation if
the court determines that it lacks federal subject matter jurisdiction. Bromwell v. Mich. Mut. Ins.
Co., 115 F.3d 208 (3d Cir. 1997). On a motion to remand, it is always the removing party’s
burden to prove the propriety of removal, and any doubts about the existence of federal
jurisdiction must be resolved in favor of remand. Batoff v. State Farm Ins. Co., 977 F.2d 848, 851
(3d Cir. 1992); see also Boyer, 913 F.2d at 111 (holding that the removal statutes “are to be
strictly construed against removal and all doubts should be resolved in favor of remand”) (quoting
Steel Valley Auth. v. Union Switch & Signal Div., 809 F.2d 1006, 1010 (3d Cir. 1987)).
“Federal courts are courts of limited jurisdiction. They possess only that power authorized
by Constitution and statute, which is not to be expanded by judicial decree.” Kokkonen v.
Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (internal citations omitted). “Without
jurisdiction the court cannot proceed at all in any cause. Jurisdiction is power to declare the law,
and when it ceases to exist, the only function remaining to the court is that of announcing the fact
and dismissing the cause.” Ex parte McCardle, 74 U.S. 506, 514 (1868). This rule “‘springs from
the nature and limits of the judicial power of the United States’ and ‘is inflexible and without
Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94–95 (1998) (quoting
Mansfield, C. & L. M. Ry. Co. v. Swan, 111 U.S. 379, 382 (1884)). “[T]he burden of establishing
the [existence of subject-matter jurisdiction] rests upon the party asserting jurisdiction.”
Kokkonen, 511 U.S. at 377 (internal citations omitted).
“The basic statutory grants of federal-court subject matter jurisdiction are contained in 28
U.S.C. §§ 1331 and 1332.” Arbaugh v. Y & H Corp., 126 S. Ct. 1235, 1244 (2006).
1331 provides for “federal question” jurisdiction. 28 U.S.C. § 1331. Federal courts have subject
matter jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the
United States.” 28 U.S.C. § 1331. Such jurisdiction only exists “when a federal claim appears in
the complaint.” Levine v. United Healthcare Corp., 402 F.3d 156, 162 (3d Cir. 2005) (citation
omitted). Section 1332, on the other hand, allows for jurisdiction to be premised on “diversity of
citizenship.” 28 U.S.C. § 1332. For a federal court to exercise diversity jurisdiction over an
action, the parties must be citizens of different states and the amount in controversy must exceed
$75,000. 28 U.S.C. § 1332(a)(1). Citizenship of a natural person is determined by the state of his
or her domicile. See Swiger v. Allegheny Energy, Inc., 540 F.3d 179, 182 (3d Cir. 2008).
Neither of these provisions applies to this case.
As the sole cause of action in the
Complaint is a claim under Pennsylvania’s Uniform Fraudulent Transfer Act, there is no “federal
question.” Moreover, as Plaintiff’s Complaint explicitly alleges that he, Martin, and Kline are all
citizens of Pennsylvania, (Compl. ¶¶ 2–4), diversity of citizenship does not exist.
Tacitly acknowledging the absence of either of these bases for subject matter jurisdiction,
Defendants argue that “[p]ursuant to Kokkonen v. Guardian Life Ins. Co. v. Am., 511 U.S. 375
(1994), a court may retain jurisdiction for purposes of enforcing the terms of a settlement
agreement.” (Defs.’ Mem. Supp. Opp’n Mot. to Remand 3.) They contend that Plaintiff’s state
court action is nothing more than a continuing attempt to collect a judgment that resulted from a
settlement agreement entered into by this Court. As this Court retained jurisdiction for any and all
issues related to the agreement and as the claims in this case are factually interdependent with the
prior federal court actions, Defendants assert that the case is properly removed to this Court
pursuant to the retention of jurisdiction as contained in the RSA.
Defendants’ argument disregards the well-established principle that federal courts “possess
only that power authorized by Constitution and statute, which is not to be expanded by judicial
decree.” Kokkonen, 511 U.S. at 377. “Enforcement of [a] settlement agreement . . . is more than
just a continuation or renewal of the dismissed suit, and hence requires its own basis for
jurisdiction.” Id. “[A] district court does not have continuing jurisdiction over disputes about its
orders merely because it had jurisdiction over the original dispute.” Washington Hosp. v. White,
889 F.2d 1294, 1298-99 (3d Cir. 2004). Indeed, regardless of whether both parties wish for the
federal court to retain indefinite jurisdiction to enforce their settlement agreement, “parties may
not confer subject matter jurisdiction by consent.” Samuel–Bassett v. KIA Motors Am., Inc., 357
F.3d 392, 396 (3d Cir. 2004) (citations omitted).
Here, the mere fact that this action is factually related to the RSA does not confer subject
matter jurisdiction on this Court. Indeed, Plaintiff is not suing to enforce either the RSA or any
judgment from the Bankruptcy Court, but rather is separately challenging, under PUFTA, alleged
fraudulent conveyances between the two Defendants. As such, Defendants must establish that one
of the independent bases of federal jurisdiction set forth above is present. Because they have
failed to do so, I must remand this case to state court.
An appropriate Order follows.
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