Health Care Navigator, LLC v. Quintairos, Prieto, Wood & Boyer, P.A.

Background

Health Care Navigator, LLC asked the court to return this case to New York State Supreme Court, New York County. It sought a declaration that it was not required to pay legal fees that QPWB had billed to Health Care Navigator’s affiliate, Gulf Coast Health Care, LLC. Health Care Navigator also requested attorneys’ fees and costs arising from QPWB’s removal of the case to federal court.

Gulf Coast had retained QPWB to provide legal services in 2012. Gulf Coast later filed for bankruptcy, and Health Care Navigator alleged that QPWB had issued Gulf Coast invoices for approximately $628,000 in unpaid legal fees and expenses. Gulf Coast listed QPWB as an unsecured creditor in the bankruptcy case.

QPWB removed the case to federal court on two grounds. First, it claimed diversity jurisdiction, which can allow a federal court to hear a case involving citizens of different states when more than $75,000 is at stake. Second, it claimed “related to” jurisdiction under the federal bankruptcy statutes because the outcome might affect Gulf Coast’s bankruptcy estate.

Diversity Jurisdiction

For a limited liability company, citizenship is based on the citizenship of each member. The parties agreed that QPWB was a Florida citizen and that Health Care Navigator’s other members were not Florida citizens. They disputed the citizenship of the Schwartzberg Descendants Trust, one of Health Care Navigator’s members.

The court determined that the trust’s trustees, Albert and Florence Schwartzberg, were Florida citizens when the case was filed and when QPWB removed it. The court relied on evidence including the Schwartzbergs’ Florida home, tax filings, property-tax records, and voter-registration information. Because Health Care Navigator was therefore also a Florida citizen, the parties were not completely diverse. The court held that removal could not be based on diversity jurisdiction.

Bankruptcy-Related Jurisdiction

The court also rejected QPWB’s alternative argument that the case was sufficiently related to Gulf Coast’s bankruptcy. A case qualifies under this standard when its outcome might have any conceivable effect on the bankruptcy estate, such as changing the property available to creditors or how that property is distributed.

QPWB argued that the case would determine whether, and to what extent, it could recover legal fees from Gulf Coast’s bankruptcy estate or from Health Care Navigator. The court disagreed. It reasoned that QPWB would have the same claim for legal fees against Gulf Coast’s bankruptcy estate regardless of whether Health Care Navigator ultimately obtained the requested declaration. Whether QPWB could later seek payment from Health Care Navigator for fees not paid through the bankruptcy estate therefore had no conceivable effect on the estate.

Attorneys’ Fees and Costs

A court may award fees and costs caused by removal, but generally should not do so when the removing party had an objectively reasonable basis for seeking removal. The court found that QPWB’s removal was not so objectively unreasonable as to justify an award.

The court noted that QPWB had evidence supporting its understanding that the Schwartzbergs were not Florida citizens, Health Care Navigator’s complaint did not identify the citizenship of its members, and the initial declaration submitted by Florence Schwartzberg was unsupported. The court therefore denied Health Care Navigator’s request for attorneys’ fees and costs.

Disposition

Judge Naomi Reice Buchwald granted Health Care Navigator’s motion to remand and directed the Clerk of Court to return the case to New York State Supreme Court, New York County. The court denied Health Care Navigator’s request for attorneys’ fees and costs. The opinion addressed federal jurisdiction and removal; it did not decide whether Health Care Navigator ultimately owed QPWB the disputed legal fees.