Chaganti v. Fifth Third Bank

Background

Naren Chaganti filed this lawsuit in the Santa Clara County Superior Court against Fifth Third Bank and Edward F. “Ted” Luby. The complaint asserted state-law claims against Fifth Third Bank involving two business trust accounts opened for Whispering Oaks RCF Management Co. Inc. Chaganti alleged that his secretary, Amanda Palazzolo, withdrew $9,000 without authorization and that the bank did not timely investigate. The claims against the bank included breach of contract, negligence, violation of the “Uniform Fiduciaries Law,” fraud, conspiracy to commit injury, and aiding and abetting.

Chaganti also sued Luby, who had represented him in an earlier Missouri lawsuit involving the withdrawals. Chaganti alleged that Luby failed to understand the facts and law, withdrew while a summary-judgment motion was pending, filed false papers about his withdrawal, failed to respond to inquiries, and conspired with the bank’s lawyer. The claims against Luby included legal malpractice, fraud and deceit, and conspiracy to commit injury.

Luby removed the case to federal court based on diversity jurisdiction, which allows federal courts to hear certain disputes involving parties from different states when more than $75,000 is in controversy. Chaganti filed two motions asking the court to send the case back to state court.

The consent-to-removal issue

Chaganti argued that removal was defective because Fifth Third Bank had not filed a separate written consent. The court applied the rule that all defendants must join in removal. It held that Luby’s notice of removal stated that he had conferred with Fifth Third Bank and that the bank consented to removal. Because the notice was signed by an attorney of record, the court found that statement sufficient to satisfy the rule.

The court therefore denied Chaganti’s motion to remand based on the alleged failure to obtain written consent, docket number 24.

The amount-in-controversy issue

Luby argued that the amount in controversy likely exceeded $75,000 based on the alleged $9,000 withdrawal, possible attorney’s fees, and possible punitive damages. He estimated at least $47,000 in attorney’s fees and relied on a Missouri jury verdict to estimate that punitive damages could reach $25,000.

The court found that this evidence did not establish, more likely than not, that the amount in controversy exceeded $75,000. Luby had not authenticated the account rules that he relied on or shown that those rules applied to the trust account at issue. The court also found the Missouri jury verdict irrelevant because it involved a different state and awarded punitive damages under a Missouri merchandising statute, not for a fraud-based claim.

Disposition

The court granted Chaganti’s motion to remand, docket number 16, and directed the Clerk of Court to remand the action to Santa Clara County Superior Court. The order therefore denied the consent-based remand motion but granted the alternative remand motion based on the insufficient showing of the amount in controversy. Judge Edward J. Davila signed the order.