Pattern Energy Group LP v. Perillo

Background

Pattern Energy Group LP sued Michael Perillo and Kelly Perillo in New York state court. Pattern asserted claims for fraudulent inducement based on statements made before the parties’ agreement, fraud based on statements made afterward, and breach of contract based on alleged violations of the Membership Interest Purchase Agreement through which Pattern purchased the defendants’ interest in Dynamic Energy Solutions, LLC.

The Perillos removed the case to federal court, relying only on diversity jurisdiction under 28 U.S.C. § 1332. They initially asserted that the parties had different state citizenships and later amended their notice of removal after Pattern identified an indirect Canadian member of Pattern’s ownership structure. The amended notice asserted that Pattern was a citizen of several U.S. states and Canada, while the Perillos were citizens of Utah.

Pattern moved to remand the case to state court. The Perillos separately moved to stay the case while arbitration between the parties continued.

Diversity Jurisdiction

Federal diversity jurisdiction generally requires the parties to be completely diverse. Because Pattern is a limited partnership, the court determined its citizenship by examining the citizenship of all of its general and limited partners, tracing through any entities among those partners. Based on that analysis, Pattern was a citizen of New York, California, Texas, Washington, and Canada. The Perillos were citizens of Utah because they were domiciled there.

The court rejected the Perillos’ argument that 28 U.S.C. § 1332(a)(2) supplied jurisdiction. That provision covers actions between citizens of a U.S. state and citizens or subjects of a foreign state. The court held that it does not apply when one party, such as Pattern, is both a citizen of foreign countries and a citizen of U.S. states, because U.S. citizens appear on both sides of the case.

The court also rejected jurisdiction under § 1332(a)(1), which covers disputes between citizens of different states, because Pattern was additionally a citizen of a foreign state. Section 1332(a)(3), which can apply when foreign citizens are additional parties, also did not provide jurisdiction. The court held that Pattern’s partners could not be separated from Pattern and treated as additional parties for this purpose.

The court further rejected combining parts of different jurisdictional provisions to create jurisdiction. It concluded that the citizenship of a single limited partnership could not be divided among different statutory categories to make the case fit federal jurisdiction.

Attorney Fees and Costs

Pattern requested attorney fees and costs under 28 U.S.C. § 1447(c), arguing that the Perillos lacked an objectively reasonable basis for removing the case. The court declined to award fees and costs. Although the Perillos’ jurisdictional argument was unsuccessful, the court found that it was not frivolous or so unreasonable as to justify an award.

Disposition

The court found that it lacked subject matter jurisdiction and granted Pattern’s motion to remand. The case was remanded to the Supreme Court of New York, County of New York. The court denied as moot the Perillos’ motion to stay the proceedings pending arbitration and directed the Clerk of Court to terminate the relevant motions.