Syl Consulting LLC v. Community USA II LLC

Background

The first case, 23 Civ. 1377, was filed in this court by Syl Consulting LLC and Nicholas Sangros against Community USA II LLC. The second case, 23 Civ. 2494, was initially filed by Community USA II LLC in New York State Supreme Court and later removed to this court. The second case involved Community USA as plaintiff and Syl Consulting LLC, Nicholas Sangros, and 250 East 40 Realty LLC as defendants. The court described the second case as the converse of the first. Both cases were assigned to Judge Colleen McMahon, with Magistrate Judge Katherine A. Parker assigned in both.

Pending Motions

Community USA moved to remand Case No. 2 to state court. It also moved to dismiss or stay Case No. 1 in favor of the first-filed Case No. 2 and sought a temporary stay of discovery. The opinion later refers to the dismissal-or-stay motion as concerning Case No. 2 and identifies it as Docket No. 7 in 23 Civ. 2494; the discovery request was filed at Docket No. 19 in that case.

Diversity Jurisdiction

Community USA argued that there was no diversity of citizenship because Sangros was a New York citizen. The court explained that an individual’s citizenship depends on domicile—the person’s fixed home and the place to which the person intends to return. It also explained that a limited liability company has the citizenship of each of its members, rather than only the state of incorporation or principal place of business.

The court found that Sangros and his wife, Ms. Rachart, were citizens of Wyoming. The opinion relied on evidence that they lived with their three daughters in a home they owned in Jackson, Wyoming; had Wyoming driver’s licenses and vehicle registrations; that Ms. Rachart worked in Jackson; that their daughter attended high school there; and that their insurance policies listed their Wyoming address. The court also noted their assertion that Wyoming had been their home for at least ten years. Sangros’s furnished New York apartment, provided under Community’s contractual obligation, did not establish a change in domicile. The court therefore found complete diversity of citizenship.

Contractual Jurisdiction Provision

Community USA alternatively argued that the contract required the case to remain in New York State Supreme Court. The court rejected that argument. It held that the provision stating that the parties “shall subject themselves to the authority of the courts of New York City, State of New York” was a consent-to-jurisdiction provision, not a forum-selection provision requiring suit in a particular court.

The court further held that consent to jurisdiction did not waive the right to remove the case from state court to federal court. It interpreted the reference to the “courts of New York City, State of New York” as encompassing both state and federal courts located in New York City. The provision therefore supplied no basis for remand.

Rulings and Consolidation

Judge McMahon denied the motion to remand Case No. 2. Because the denial of remand meant that the state-court action was no longer pending there, the court denied as moot the motion to dismiss or stay and denied as moot the letter motion to stay discovery.

The court consolidated the two cases for all purposes under the earlier-filed number, 23 Civ. 1377, and directed the Clerk to mark the motion at Docket No. 5 in 23 Civ. 2494 as “DENIED” and close that case. The complaint in Case No. 1 was deemed the complaint in the consolidated action, while the complaint in Case No. 2 was deemed the answer and counterclaim. The court also directed Community USA to file a reply to the counterclaims, if needed, within ten business days and directed the parties to meet and confer about case management.