Lawrence Moskowitz CLU Ltd. v. Alp, Inc.

Background

Lawrence Moskowitz and Lawrence Moskowitz CLU Ltd. sued ALP, Inc. for breach of contract, anticipatory breach of contract, declaratory judgment, rescission, quantum meruit, restitution, and unjust enrichment. The dispute concerned agreements relating to the parties’ business relationship.

ALP moved to dismiss under Federal Rule of Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction and under the Colorado River abstention doctrine. ALP also moved under Rule 12(b)(6) for failure to state a claim. The court addressed the Rule 12(b)(1) issues first because a failure-to-state-a-claim ruling would be a decision on the merits requiring jurisdiction.

Diversity Jurisdiction

The court explained that diversity jurisdiction requires the amount in controversy to exceed $75,000 and complete diversity, meaning that no opposing parties may be citizens of the same state. Citizenship for this purpose is based on domicile—the person’s true, fixed home and principal establishment, together with an intent to return there.

The complaint alleged that Moskowitz was a citizen of the U.S. Virgin Islands and that Moskowitz CLU was also a citizen of the U.S. Virgin Islands. The parties agreed that ALP was a New York citizen. Plaintiffs argued that Moskowitz had established his permanent domicile in St. John, U.S. Virgin Islands, or alternatively in California. They pointed to his time in the U.S. Virgin Islands, his synagogue and community involvement there, his business and licensing ties, taxes, bank accounts, and stated intent to return after Hurricane Irma.

ALP presented evidence of Moskowitz’s continuing New York ties, including his New York home, New York driver’s license, two cars leased in New York, New York office, New York bank account, New York tax filings, New York telephone numbers, and children living in New York. The court found that Moskowitz had not shown by clear and convincing evidence that he had abandoned his New York domicile and acquired a domicile in the U.S. Virgin Islands or California. It therefore concluded that Moskowitz and ALP were both New York citizens, defeating complete diversity. The court also noted that California could not be Moskowitz’s domicile because he stated that he intended to leave California.

Because the plaintiffs identified no other basis for federal jurisdiction, the court granted ALP’s Rule 12(b)(1) motion for lack of subject-matter jurisdiction.

Colorado River Abstention

The court separately held that Colorado River abstention provided an independent basis for dismissal even if Moskowitz had established U.S. Virgin Islands citizenship. Abstention is a doctrine under which a federal court may decline to exercise jurisdiction in exceptional circumstances when a parallel state-court proceeding is underway.

The court found that this case and ALP’s state-court action were parallel because they involved substantially the same parties, agreements, factual issues, and legal issues. Although Moskowitz CLU was not a named party in the state case and the plaintiffs had not asserted counterclaims there, the court held that exact identity of parties and perfect symmetry were not required because the parties’ interests were congruent and the state case was likely to resolve the federal claims.

Of the six Colorado River factors, the court found that the absence of property in dispute and the equal convenience of the two Manhattan courts weighed against abstention or favored retaining jurisdiction. The order of filing and relative progress of the cases was neutral. The court found that avoiding piecemeal litigation, the fact that the claims involved state law, and the adequacy of state procedures favored abstention. The court also considered the federal action’s allegedly reactive nature as an additional factor favoring abstention.

Balancing the factors, the court concluded that abstention was warranted because the state case substantially overlapped with the federal case and could avoid inconsistent outcomes. The court therefore stated that the Colorado River doctrine independently supported dismissal.

Disposition

Judge Edgardo Ramos granted ALP’s motion to dismiss. The court found that it lacked subject-matter jurisdiction and, alternatively, that Colorado River abstention supported dismissal. It declined to rule on ALP’s Rule 12(b)(6) motion for failure to state a claim. The clerk was directed to terminate the motions and close the case. The court separately denied the plaintiffs’ request for oral argument as moot.