SCG MiMa Towers LLC v. Noble

Background

SCG MiMa Towers LLC filed a New York state-court nonpayment-of-rent proceeding against Kenneth Noble, Jansen Salsich, John Doe, and Jane Doe. The petition sought a money judgment for $100,000 in unpaid rent and eviction if the judgment was not paid. Noble, with the consent of the defendants and while representing himself, removed the case to the U.S. District Court for the Southern District of New York.

Noble later filed an answer asserting a counterclaim for a “setoff” of the unpaid rent. The counterclaim was based on amounts Noble allegedly was owed for certain foreign sovereign bonds. The court ordered the defendants to explain why the case should not be returned to state court for lack of subject-matter jurisdiction. SCG MiMa Towers later also requested remand.

Jurisdictional analysis

The court explained that a defendant may remove a state-court case only when the federal court has jurisdiction over the action, and that the party removing the case bears the burden of establishing jurisdiction. Federal-question jurisdiction generally depends on the claims appearing in the plaintiff’s well-pleaded complaint. Here, the eviction petition raised a state-law landlord-tenant dispute and did not present a federal question.

The court held that the defendants’ federal counterclaim could not create federal-question jurisdiction. A counterclaim appears in the defendant’s answer, not in the plaintiff’s complaint, and therefore cannot establish the required federal-law basis for removal.

The court also addressed other asserted jurisdictional grounds. Diversity jurisdiction was not a proper basis for removal because Noble had been properly served in the state-court action and appeared to be a citizen of New York, the forum state. The court further rejected reliance on the Foreign Sovereign Immunities Act. It explained that the statute providing federal jurisdiction over claims against a foreign state applies to an action against a foreign state, not an action brought by a foreign state. Even if the counterclaim fit an exception to foreign sovereign immunity, a federal counterclaim still could not support removal of the state-law eviction proceeding.

The court also concluded that the Foreign Sovereign Immunities Act’s removal provision did not apply because it authorizes removal by a foreign state, not by other defendants. SCG MiMa Towers’s claimed status as a foreign state therefore did not permit the defendants to remove the case, particularly because SCG MiMa Towers itself sought remand. The court declined to express an opinion on whether the counterclaim otherwise fit an exception under the Act.

Disposition

Judge Vernon S. Broderick concluded that the defendants had not shown a valid basis for federal subject-matter jurisdiction. He ordered that the case be remanded to the Civil Court for the City of New York, New York County, Housing Part. The order did not decide the merits of the eviction claim or the bond-related setoff claim. It stated that the defendants could litigate the setoff claim in the related action, but not in this case.