IMS Fund, Inc. v. Second Phase, Inc.
- Jesse Furman
- 1:20-cv-04463
- U.S. District Court · Southern District of New York
- 2
In IMS Fund v. Second Phase, Judge Furman ordered defendants to correct the removal notice’s citizenship allegations or face remand to state court.
The defendants had to supply additional citizenship information or face remand of the action to New York state court; the plaintiff’s counsel also had to file a notice of appearance.
What happened
IMS Fund, Inc. v. Second Phase, Inc. was removed from New York state court by the defendants, who said federal jurisdiction existed because the parties were citizens of different states. The notice identified the plaintiff as a New York citizen and the defendants as citizens of New Jersey and Texas.
The court explained that an LLC is treated as a citizen of every state where its members are citizens. The removal notice did not identify the citizenship of the people or entities making up the plaintiff LLC, including required information about any corporate members.
Judge Jesse M. Furman ordered the defendants to amend the removal notice by June 22, 2020, and to provide proof that they served the order on the plaintiff. If they could not truthfully allege complete diversity, the action would be sent back to New York state court.
The detailed version
- IMS Fund, Inc. v. Second Phase, Inc. · No. 1:20-cv-04463
- Jesse Furman
- June 15, 2020
Background
The defendants removed this action from the Supreme Court of New York, New York County, to the U.S. District Court for the Southern District of New York. They asserted diversity jurisdiction under 28 U.S.C. § 1332, which permits federal jurisdiction when the parties are citizens of different states. The removal notice alleged that the plaintiff was a citizen of New York and that the defendants were citizens of New Jersey and Texas.
Jurisdictional issue
The court explained that a limited liability company is a citizen of every state in which its members are citizens. Therefore, a notice of removal based on diversity jurisdiction must identify the citizenship of each person or entity that is a member of the LLC. If a member is a corporation, the notice must also identify the corporation’s state of incorporation and principal place of business.
The court found that the defendants’ notice of removal did not provide this information for the entities and people comprising the plaintiff LLC. The court therefore required the defendants to amend the notice rather than immediately remanding the action.
Order and effect
The court ordered the defendants to amend the notice of removal by June 22, 2020, to truthfully allege the citizenship of each constituent person or entity comprising the plaintiff LLC, including the required information for any corporate entity member. If the defendants could not truthfully allege complete diversity, the court stated that it would remand the action to the New York state court without further notice. The court also ordered the defendants to serve the plaintiff with the order within two business days and file proof of service. The plaintiff’s counsel had to file a notice of appearance within two business days after that service. The order did not itself remand the case or decide the underlying claims.
Read the full 2-page opinion on CourtListener, the free public archive maintained by the Free Law Project.