Broadwall Management Corp. v. Federal Insurance Company
- Jesse Furman
- 1:22-cv-01506
- U.S. District Court · Southern District of New York
- 2
In Broadwall Management v. Federal Insurance, Judge Furman ordered FIC to support diversity jurisdiction before allowing discovery or keeping the case in federal court.
Federal Insurance Company must amend its removal notice or face remand to state court; its request for jurisdictional discovery was denied without prejudice, and its answer deadline was extended. The plaintiffs’ counsel were required to file notices of appearance after receiving the order.
What happened
Broadwall Management Corp. and other plaintiffs sued Federal Insurance Company in New York state court, and Federal Insurance Company removed the action to federal court based on diversity jurisdiction. Some plaintiffs were limited liability companies, whose citizenship depends on the citizenship of their members.
The removal notice did not identify the members of those limited liability companies or their citizenship. Federal Insurance Company instead said it had no reason to believe diversity jurisdiction was improper and asked for limited discovery if needed to determine the members’ citizenship.
Judge Jesse M. Furman ordered Federal Insurance Company to amend its removal notice by March 17, 2022, to allege a good-faith basis for diversity jurisdiction. He denied the request for jurisdictional discovery without prejudice to renewal after an amended notice, stated that the case would be sent back to state court if no adequate amended notice was filed, and extended the answer deadline.
The detailed version
- Broadwall Management Corp. v. Federal Insurance Company · No. 1:22-cv-01506
- Jesse Furman
- Mar. 3, 2022
Background
Federal Insurance Company ("FIC") 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. FIC relied on federal diversity jurisdiction, which generally requires complete diversity of citizenship between the parties and the required amount in controversy.
The court explained that a limited liability company is treated as a citizen of every state in which any of its members is a citizen. Therefore, a removal notice based on diversity jurisdiction must identify the citizenship of the individuals who are members of an LLC and, for corporate members, the corporation’s state of incorporation and principal place of business.
Jurisdictional Deficiency
Some of the plaintiffs were LLCs. FIC’s notice of removal did not allege the citizenship of those LLCs’ members. Instead, it stated that FIC had “no reason to believe” that removal based on diversity jurisdiction was improper. FIC also asked for limited jurisdictional discovery—information gathering about the facts needed to establish the court’s jurisdiction—if the diversity requirements were not met.
The court stated that jurisdictional discovery generally requires an initial factual basis supporting a plausible, or “colorable,” claim that federal jurisdiction exists. The court found that FIC had not presented facts supporting such a claim. It therefore required FIC to amend its notice of removal before the court would consider ordering jurisdictional discovery.
Order and Effect
The court ordered FIC to amend its notice of removal by March 17, 2022, to allege a good-faith basis for diversity jurisdiction. If FIC could not file an adequate amended notice by that date, the action would be remanded—sent back—to the Supreme Court of New York, New York County, without further notice.
The court denied FIC’s request for jurisdictional discovery without prejudice to renewal after FIC filed an amended notice of removal. It extended FIC’s deadline to answer until two weeks after any amended notice was filed. FIC also had to serve the order on the plaintiffs within two business days and file proof of service; the plaintiffs’ counsel had to file a notice of appearance within two business days after receiving the order. Judge Jesse M. Furman signed the order.
Read the full 2-page opinion on CourtListener, the free public archive maintained by the Free Law Project.