Reches v. Nike USA, Inc.

Background

Shalitel Reches brought this action in the Supreme Court of the State of New York, County of New York. Nike USA, Inc. removed the case to the Southern District of New York and asserted that federal subject-matter jurisdiction existed based on diversity of citizenship.

For an action based on diversity jurisdiction, the removing party must provide sufficient information about the citizenship of all relevant parties. For a limited liability company, that includes the citizenship of its members and, when applicable, the citizenship of members that are themselves business entities. The removing party also must satisfy the federal requirements for removal, including obtaining the consent of all properly joined and served defendants.

Court’s Analysis

The Court ordered Nike to explain why the case should not be sent back to state court. Nike represented that at least one member of 529 Broadway Holdings, LLC was a New York resident and that Reches had filed proof of service concerning an entity the opinion identifies as “520 Broadway Holdings, LLC.” Nike did not represent whether 529 Broadway Holdings, LLC had consented to removal. Nike argued that 529 Broadway Holdings, LLC was only a nominal defendant and therefore should not affect jurisdiction.

The Court rejected that argument. It explained that a removing party bears the burden of establishing federal subject-matter jurisdiction and must prove by clear and convincing evidence that the citizenship of a defendant should be disregarded. The Court could disregard the company only if Reches had fraudulently named it or if there were no possibility, based on the pleadings, that she could state a claim against it in state court. The Court was required to resolve factual and legal issues concerning that possibility in Reches’s favor.

Reches alleged that 529 Broadway Holdings, LLC was the landlord of the premises where she was injured, had a legal duty to maintain the premises, created the condition that caused the accident, and had actual or constructive notice of that condition. The Court held that these allegations showed a possibility that the company was connected to the controversy, regardless of whether Reches could later prove them.

The Court also found that Nike had not established complete diversity. Nike had identified at least one New York member of the LLC, which implicated the forum-defendant rule, and had not stated whether that person was the only member or whether other members were citizens of Oregon or were not United States citizens.

Disposition

The Court ordered that the matter be REMANDED to the Supreme Court of the State of New York, County of New York. The order resolved the removal and federal-jurisdiction issues and did not decide the merits of Reches’s underlying injury claims.