People Of The State Of New York, By Letitia James v. Doyle

Background

In 2017, James Doyle loaned $3 million to the American Irish Historical Society after the organization faced foreclosure of its Fifth Avenue townhouse. Doyle was a member of the Historical Society’s board of directors, but the opinion states that he did not disclose to the board before the loan was approved that he was the lender. The loan was secured by a mortgage on the townhouse.

The Historical Society later defaulted on the loan. Doyle filed a foreclosure action in New York state court in August 2023. The New York Attorney General investigated the transaction and moved to intervene in that foreclosure action, asserting that the related-party transaction violated provisions of New York’s Not-for-Profit Corporation Law. The state court allowed the intervention. The Attorney General then filed a complaint seeking to void and rescind the loan and mortgage.

Doyle removed the Attorney General’s complaint-in-intervention to the Southern District of New York, claiming federal diversity jurisdiction. The Attorney General moved to remand, meaning to return the action to state court.

Removal analysis

The court granted the motion to remand. It first held that Doyle was not a “defendant” entitled to remove the action under 28 U.S.C. § 1441(a). Doyle had initiated the original foreclosure action and therefore was the original plaintiff in that state case. The court explained that calling him a “defendant” in the complaint-in-intervention did not change his status for purposes of the federal removal statute.

The court also held that the complaint-in-intervention did not begin a separate case. It had been filed in and consolidated with the state foreclosure action, and it had never been severed from that action. The court further concluded that federal law permits removal of a civil action, not removal of an individual claim from a larger state action. The Attorney General’s claim also was not qualitatively different from the foreclosure action because both concerned the same related-party loan transaction.

Diversity jurisdiction

The court gave an additional reason why removal could not be sustained. Diversity jurisdiction generally requires the parties to be citizens of different states and requires more than $75,000 to be in dispute. The court did not decide the amount-in-controversy issue because it found that Doyle had not established the required diversity of citizenship.

The opinion states that Doyle was a citizen of Georgia. It also explains that a state is not a “citizen” for purposes of diversity jurisdiction. Because the Attorney General was acting for New York, the court examined whether New York was the real party in interest—the party with its own substantial stake in the dispute. The court found that New York was the real party in interest because it had an independent interest in enforcing its not-for-profit laws and preventing unauthorized or unlawful related-party transactions. The Attorney General therefore was not a “citizen” for diversity-jurisdiction purposes.

Disposition

Judge Edgardo Ramos granted the Attorney General’s motion to remand. The Clerk was directed to terminate the motion and remand the action to the Supreme Court of New York, New York County. The opinion did not decide whether the loan and mortgage should ultimately be voided or rescinded.