SCX Holdings, LLC v. Gjoka

Background

SCX Holdings, LLC; Three Brothers and Associates LLC; and JX Holdings LLC sued Ermir Gjoka, Florian Gjoka, Arion Gjoka, Emirjeta S. Taipi, Three Brothers Design Inc., and Three Studio Architecture and Engineering D.P.C. The plaintiffs originally filed the case in New York state court. Their complaint asserted fourteen causes of action: twelve under New York law and two under the federal Racketeer Influenced and Corrupt Organizations Act, commonly called RICO.

The claims arose from alleged disputes involving the ownership and management of Three Brothers and Associates LLC, the use of company funds and assets, the formation and operation of an architecture business, and a lease of space owned by JX Holdings LLC. The plaintiffs alleged breach of contract, breach of fiduciary duty, fraud, conversion, unjust enrichment, misappropriation, accounting, and related claims. They relied on alleged state-law misconduct as the acts supporting their RICO claims.

Removal and Remand Arguments

The Design Defendants removed the case to the U.S. District Court for the Southern District of New York under 28 U.S.C. § 1441(a). They argued that the federal RICO claims gave the federal court original jurisdiction and that the related state-law claims fell within supplemental jurisdiction. Supplemental jurisdiction allows a federal court to hear state-law claims that are part of the same overall dispute as claims within its original jurisdiction.

The plaintiffs moved to remand, or return, the case to state court. They argued that state courts have concurrent jurisdiction over civil RICO claims and that the state-law claims substantially predominated. They also asked for leave to amend the complaint to withdraw the RICO claims, file another remand motion, and return the remaining claims to state court. The plaintiffs additionally sought attorney fees.

Court’s Analysis

The court held that removal was proper because the complaint expressly asserted two claims created by federal law: claims under 18 U.S.C. §§ 1962(a) and 1962(d). The court explained that removal depends on whether the federal district courts have original jurisdiction, not on whether state courts also have authority to hear the federal claims. The court therefore rejected the plaintiffs’ concurrent-jurisdiction argument.

The court also held that it had supplemental jurisdiction over the state-law claims. The court found that the federal and state claims arose from a common set of facts involving the commercial arrangements and contracts for the proposed architecture business. It further noted that the plaintiffs relied on their state-law allegations as the predicate acts supporting the RICO claims. The court concluded that the state-law claims did not substantially predominate merely because there were more state-law claims than federal claims. Hearing all the claims together, the court said, would be more efficient because the same factual disputes underlay them.

The court declined to allow the proposed amendment and another remand motion because that process would inefficiently use the parties’ and court’s time. The court stated that the plaintiffs may instead seek to voluntarily dismiss the action under Rule 41 and refile it in state court without the federal claims.

Disposition

The court denied the Motion to Remand, Amend, and for Attorneys’ Fees. It directed the Clerk of Court to terminate ECF Nos. 13-14 and 238 - 25. The opinion did not decide the underlying contract, fiduciary-duty, RICO, or other claims on their merits.