Newmark & Company Real Estate, Inc. d/b/a Newmark v. KS 50 Sussex Avenue LP

Background

The case was filed on May 9, 2023. Defendants had represented in joint letters that diversity jurisdiction existed because their limited partners were New Jersey citizens, while Newmark was a New York corporation. After defendants retained new counsel in March 2024, counsel disclosed that one defendant had an undisclosed partner that was a limited liability company with New York-citizen members. Newmark conceded that the court lacked subject-matter jurisdiction, meaning the court lacked authority to decide the case on the merits. The court dismissed the case but retained jurisdiction over a possible sanctions motion.

Newmark moved for sanctions under 28 U.S.C. § 1919 and the court’s inherent power. The court also issued an order requiring the parties to explain why particular conduct had not violated Federal Rule of Civil Procedure 11.

Legal standards

Section 1919 allows a court to award “just costs” when an action is dismissed for lack of jurisdiction. The statute does not authorize attorney’s fees. The court’s inherent power may permit costs and attorney’s fees when a party or attorney acts in bad faith, vexatiously, wantonly, or for oppressive reasons, but the party seeking relief must make a specific showing supported by clear evidence. Rule 11 permits sanctions for certain litigation misconduct; when the court initiates the process itself, sanctions require a finding of subjective bad faith.

Court’s analysis

The court awarded Newmark $6,479.15 in costs under Section 1919. It found that defendants’ repeated misstatements about their citizenship wasted time and resources. Although defendants argued that they did not understand the importance of accurately identifying their partners and that their prior counsel bore more responsibility, the court concluded that defendants still had some responsibility for the accuracy of factual information in their filings.

The court also found that the requested amount was justified. Filing and serving the complaint had produced costs that were wasted. The remaining costs involved depositions. Although defendants argued that the depositions could be used in a future state-court action, their refusal to limit that action created a meaningful risk that witnesses would need to be deposed again. The court therefore found it fair to award all of Newmark’s requested costs.

The court denied attorney’s fees under its inherent power and Rule 11. Newmark had not shown that defendants acted in bad faith. The failure to disclose all limited partners did not by itself establish an intent to conceal the lack of diversity jurisdiction. The court also found that defendants’ complaints about discovery delays, objections, and other conduct were not sufficiently unusual or egregious to show bad faith. Finally, defendants’ prompt disclosure of the jurisdictional problem after retaining new counsel was consistent with an oversight rather than intentional misconduct.

Disposition

Newmark’s motion for sanctions was GRANTED IN PART AND DENIED IN PART. The court ordered defendants to pay Newmark $6,479.15 in costs and denied the motion in all other respects. The Clerk of Court was directed to close docket entry 62.